Glum news arrived on the homebuilding front this past summer. Housing starts took an unexpected tumble in July and builder sentiment fell to a 13-month low in August. These are frustrating headlines for a housing market that has suffered from a persistent lack of inventory.
The housing industry needs to overcome a number of obstacles before new-home construction activities can be jumpstarted, said Ken Gear, CEO of Leading Builders of America, a trade association representing some of the largest builders in the U.S. Gear cited overly burdensome regulations, escalating land and material costs, and a labor shortage as factors that are holding back builders. Gear spoke with Scotsman Guide about what can be done to build more homes, especially in the affordably priced range.
How much of a housing shortage is the U.S. facing?
It continues to be significant. According to the National Association of Realtors, we’re looking at somewhere between 5 and 6 million units short. That includes both rental and owner-occupied units.
What are the reasons for the lack of inventory?
The most significant is regulatory costs over the last 15 years, particularly with respect to getting raw land entitled and approved as buildable lots. That’s really driven up the price of land to the levels we’re seeing today. We have rising commodity costs and labor shortages, as well as land-use and density restrictions at the local level. All of those things add up to limited supply.
What legislative fixes need to be considered?
A lot of the decisionmaking is local. If you ask most mayors, housing affordability would be at the top of their list in terms of things they’d like to accomplish for their constituents, but very few are willing to do anything substantive about it. It’s about easing density restrictions, reducing fees and streamlining the process of getting approvals to build.
The Biden administration has proposed a program that would provide grants to local governments that reduce land-use restrictions. There’s legislation known as the YIMBY Act — the Yes In My Backyard Act. [The U.S. Department of Housing and Urban Development] would require local municipalities who receive a grant from the federal government to adopt policies to streamline the construction of affordable housing.
Maybe the biggest piece of the puzzle is the Biden administration is also considering a downpayment-assistance program. It doesn’t solve the supply problem, but it helps people — especially those at the margins — obtain access to credit.
Are some communities just running out of land?
Certainly, some urban areas are, but others just restrict what can be done with the land to a point where it makes it very difficult for builders to go into a community and build an attainable home. [Accessory dwelling units, or ADUs] are one tool. We need much bigger thinking on this issue and ADUs certainly help in communities where they’re allowed. Every little bit helps, but they’re not widespread enough to solve the problem.
Is the departure of construction workers from the industry after the housing crisis still an issue today?
We’re facing a shortage of workers in virtually every skill trade, in virtually every market in the country. There are fewer and fewer people going into the skilled trades — plumbers, electricians and the like. We’re starting to see a recognition of that, though, with student-loan costs being what they are. You can start right out of high school or even in high school, spending four years skilling yourself up and leading to a real lucrative career.
What about immigrant labor?
Certainly, there’s an argument to be made that many Americans don’t want to do certain jobs, and it’s not just construction. If we could discuss a seasonal, low-skills visa program for people to come during the building months, I think that’s something that’s worthy of consideration. We literally have thousands of open jobs right now that we certainly would prefer to go to U.S. citizens, but they’re not responding in the number needed. We need a multiple-prong approach here to really get to where we need to be to increase affordability. ●
