House prices are skyrocketing. To make housing affordable, build more houses.
About the Author: Chuck Fowke is President of the National Association of Home Builders.
Housing affordability is the key issue facing the home construction industry right now. More than half of all American households, or 63 million, cannot afford a $ 250,000 home. And 10.7 million American households pay more than 50% of their income in rent. Additionally, home prices are rising too quickly due to high demand, low inventories, and the US real estate market having more than one million single family homes below what is needed to meet the demand of the United States. country.
The rapid increase in prices for softwood lumber products that has occurred over the past 15 months is adding fuel to the fire. While lumber costs have fallen in recent weeks, the price of softwood plywood has risen more than 200% since April 2020 and the price of oriented strand board has climbed nearly 500%. Ultimately, the OSB-induced changes in softwood lumber prices that occurred between April 2020 and July 2021 added nearly $ 30,000 to the price of an average new single-family home and increased. the rental price of a new apartment over $ 90.
Rising house prices, apartment rents and construction costs pose real risks to housing affordability for potential buyers and tenants. With the nation in a housing affordability crisis, home builders are struggling to build more affordable homes. because they are grappling with:
Excessive regulations at local, state and federal government levels which account for almost 25% of the cost of a single family home and over 30% of the cost of a typical apartment development;
An acute shortage of construction workers, due in part to tighter restrictions on immigrant workers, which increases construction costs and house prices;
A limited supply of building land;
Rising material costs, which is exacerbated by tariffs on shipments of Canadian lumber to the United States which increase housing costs; and
Difficulty obtaining acquisition, development and construction loans.
The only way to solve the nation’s affordability crisis is to build more homes. Access to safe, decent and affordable housing is a basic need. And homeownership is the single biggest investment most American families will make. Lawmakers should recognize the importance of housing, one of the key industries that generates jobs and economic growth during the Covid-19 pandemic.
To help builders increase housing production, Congress and the Biden administration must put in place policies that promote support for housing and homeownership. Repairing the building material supply chain is key to building more homes and reducing the housing deficit. Regarding the current softwood lumber crisis, the United States must immediately engage with Canada to adopt a new softwood lumber agreement and end the imposition of damaging tariffs on timber Canadian work.
At the request of the National Association of Home Builders, the White House recently hosted a building materials summit with a diverse group of industry players, two Cabinet officials and President Biden’s top economic advisers. This was an important step forward as all participants recognized the need to address supply chain bottlenecks and the problem of rising material prices and supply shortages.
On the multi-family front, we must continue to improve the low-income housing tax credit, which is the most effective affordable rental housing program in history. Congress is to enact HR 2573, the Affordable Housing Credit Improvement Act. The bill would fund more than 2 million additional multi-family units over the next decade by increasing the amount of credit allocated to each state and increasing the number of affordable housing projects that can be built using bonds. private activity.
On housing tax incentives, recent tax changes have undermined the effectiveness of the mortgage interest deduction, leading to a decrease in the number of middle-class taxpayers and more incentives going to higher-income households. A shift from the mortgage interest deduction to a permanent homeownership tax credit that targets low- and middle-income Americans would make homeownership more accessible to hard-working American families. In addition, a permanent first-time home buyer tax credit would complement this change and may provide some relief to the challenge of accumulating a down payment.
To help bring more workers back into the industry, Congress should promote skills training programs to prepare individuals for careers in homebuilding and create a year-round, market-based guest worker program. which allows the construction sector to access qualified and temporary foreign labor. .
To maintain a strong housing market, lawmakers must enact meaningful housing finance reform that maintains an appropriate level of federal support to ensure sufficient mortgage liquidity for home ownership and rental housing opportunities. This will protect the 30-year fixed-rate mortgage, which has helped millions of Americans build wealth and financial security through homeownership.
At state and local levels, authorities must reverse costly impact fees, ineffective zoning rules, authorized roadblocks, and density and growth restrictions that limit the supply of land and increase housing costs. To further encourage the production of affordable housing, local governments need to streamline and advance development approvals; allow a range of housing types, including multi-family; accelerate approvals for affordable projects; and encourage public-private partnerships, including with non-profit organizations.
These policy initiatives, along with reducing damaging regulatory burdens at all levels of government, will increase housing supply and improve housing affordability for all Americans.
Guest comments like this are written by authors outside of the Barron’s and MarketWatch newsroom. They reflect the views and opinions of the authors. Submit comments and other comments to [email protected]