The National Association of Home Builders (NAHB) yesterday addressed a letter to President Joe Biden urging the federal government to take immediate action in the face of a housing market “inflection point that threatens to derail the current housing and economic expansion.”
Written on behalf of the 140,000 members of NAHB, the letter was also signed individually by over 10,000 builders nationwide. While acknowledging that Biden has “moved aggressively to rein in inflation” and energy costs, the letter urges further action, specifically suspending tariffs on Canadian lumber and “seeking immediate remedies to lumber and building material supply chain bottlenecks.”
“Our members in every state across the land are clearly concerned that growing supply chain disruptions and worsening affordability conditions that are harming demand are weakening the housing market,” said NAHB Chairman Jerry Konter in a statement. “The industry believes these challenges will grow worse if meaningful steps are not taken to allow builders to increase the supply of affordable single-family and multifamily for-sale and for-rent housing.”
The letter cites a recent slowdown in the overall housing market and rising mortgage rates as “ominous” signs of a growing crisis and putting the overall market “under extreme duress.” Over the last ten months, an increase in lumber prices has raised the cost of building a “typical” single-family home by almost $20,000, according to the letter, which also singled out “burdensome regulations” as contributing to the cost of new home construction.
A previous study by NAHB found that close to a quarter of a new home’s sale price (23.8%) can be connected to regulatory costs—though that includes regulations at all levels of government. Though quantifying the cost of regulation is tricky and varies widely across geographic regions, other studies and analyses have found that strict regulation generally decreases supply and increases costs to both builders and consumers.
Ed Brady, president of the Home Builders Institute, told RISMedia late last year that specifically local restrictions on density and more government investment in basic infrastructure like sewers, streets and sidewalks would be needed in both the short and long term to alleviate the home-building crunch.
“When somebody said infrastructure isn’t housing, or housing isn’t infrastructure—whoever that is, they’re crazy,” Brady says. “The immediate fix is to get communities to invest in housing, frankly…in New Hampshire, the minimum lot is an acre. You can’t build an affordable house on an acre. And in the inner cities—you have land banks in inner cities, they should just give that land away, put it on the tax rolls by letting people build affordable houses on them. They could make a difference immediately.”
Rob Dietz, NAHB’s chief economist, also told RISMedia late last year many buyers were already being priced out by rising costs of construction. He predicted an increase in builders creating housing purely for rentals to offset tighter margins, which would create more “frustration” for first-time buyers. Some builders were also re-focusing on townhomes to combat both cost and land-use restrictions, he added.
“It’s about a lack of building lots; it’s about lumber and building material availability; and the skilled labor shortage…it’s going to persist, and be part of that inflation story. There’s just not enough available building materials,” he says.
In yesterday’s letter, NAHB urged the Biden administration to treat entry-level housing specifically as a foundation for the “wealth, health and stability of American communities.”
“Keeping housing in the national forefront and addressing these critical housing affordability issues will reduce the risk of recession and help the residential construction industry to lead the economy forward,” the letter urges.
Jesse Williams is RISMedia’s associate online editor. Email him your real estate news to jwillliams@rismedia.com.
