American home builders have called upon Congress to take steps to address a tremendous shortage of affordable homes in the country through policy solutions.
Real estate experts have long cited a perceived decline in new home building in the U.S. that began in the wake of the Great Recession last decade. Zillow recently said there are around six million fewer homes than there should be throughout the country, due to this under building. This is believed to be one of the main reasons behind today’s housing shortage.
Last year, Freddie Mac said the U.S. needs to add at least 3.3 million new homes to its stock to plug the huge inventory gap and ensure enough units exist to meet demand.
Last week, the National Association of Home Builders joined the National Association of Realtors in urging Congress to take action to try and do that.
NAHB Chief Executive Jerry Howard testified before Congress, calling on lawmakers to enact a number of policy proposals he said would enable home builders to expand the supply of homes in the U.S. That would help to reduce today’s housing deficit, he said, and improve home affordability for all Americans.
“Over the past decade, the residential construction industry has underbuilt and not kept pace with demand due to several supply-side constraints,” Howard told Congress.
He elaborated, saying the under building has been caused by a lack of skilled labor and building lots, tight lending conditions that make it difficult for developers to secure financing, and the shortage and rising prices of key building materials. These are being exacerbated by what he termed “excessive regulatory burdens” on home builders that have added around 25% to the costs of building a single-family home, and 33% to the costs of constructing a multifamily unit.
“Progress must be made on all fronts to ease the supply-side challenges that are holding back housing production,” Howard told the lawmakers.
Howard went on to propose several steps that could be implemented in order to increase housing supply and expand access to it.
The most important first step is to fix the building materials supply chain and ensure lower costs for builders, he said. This means engaging with Canada and agreeing a new softwood lumber agreement and putting an end to “harmful tariffs” on Canadian lumber that push prices up.
“Commerce Secretary Gina Raimondo has committed to holding a summit of industry stakeholders to examine supply chain issues for lumber and other materials and to explore policy solutions,” Howard said. “We look forward to participating in that process.
Improvements to the Low-Income Housing Tax Credit would also help the situation, Howard explained. He told Congress that it needs to enact H.R. 2573, the Affordable Housing Credit Improvement Act. That bill would finance more than two million additional multifamily units over the next decade by allocating more credits to each state. In turn, that would expand the number of affordable housing projects that can be built using private activity bonds.
Howard further called on lawmakers to reformulate current homeownership tax incentives. He said recent tax changes have undermined the effectiveness of mortgage interest deductions, which has led to fewer middle class taxpayers itemizing. As a result, incentives have flowed to more high-income households instead, which doesn’t fix the problem, he said.
Howard suggested that lawmakers instead shift from the mortgage interest deduction to a permanent homeownership tax credit that’s targeted specifically at lower- and middle-income American families, saying that this would make homes more affordable for people in those groups. He added that this could be complemented by a permanent first-time hombuyer tax credit, providing relief to those who struggle to accumulate enough money for a down payment.
Howard’s testimony on behalf of home builders follows a similar call to action by the NAR last month. In a report to lawmakers, the NAR called for the removal of construction barriers to incentivize new housing developments and the adoption of new fiscal policy measures that aim to increase housing supply. Further, the NAR called for the reform of zoning laws in many U.S. cities to allow for more homes to be built.
NAR President Charlie Oppler said increasing home construction would not only provide more housing for Americans, but also provide a big economic boost to the country. He estimated the NAR’s recommendations could create around 2.8 million jobs and up to $50 billion in new, nationwide tax revenue.
“Additional public funding and policy incentives for construction will very clearly provide huge benefits to our nation’s economy, and our work to close this gap will be particularly impactful for lower-income households, households of color and millennials,” Oppler said.