In the flurry of executive orders signed by President Donald Trump on his first day in office was one that called for all executive departments and agencies to deliver “emergency price relief” that would lower the cost of housing and expand the housing supply.
The order also requires agencies to eliminate unnecessary administrative expenses and “rent-seeking practices,” and cut counterproductive requirements that raise the costs of home appliances. The order maintains that regulatory requirements alone account for 25% of the cost of constructing a new home.
While the order has attracted attention, it lacks details on how it would accomplish this mission. However, housing and budget experts say the order may have an impact by just getting the executives of these agencies to focus on the issue.
Marc Goldwein, senior vice president and senior policy director at the non-partisan Committee for a Responsible Federal Budget, said on NPR’s Marketplace program Tuesday morning that these initial orders are the beginning of a process and that future orders that will offer actual plans and details.
“Does [this order] solve inflation, does it even reduce inflation? No,” Goldwein said. “But might it get somebody in some agency to think a little harder about not worsening price increases and to think about how to bring [prices] down? Perhaps, it could. Either way, it’s mainly sort of a statement of the administration’s priorities more than an actual change in policy.”
Carl Harris, chairman of the National Association of Homebuilders (NAHB), released a statement on Tuesday that commended Trump for using the executive order to make housing a national priority.
“President Trump understands that America is facing a housing affordability crisis and the only way out of this crisis is to remove barriers like unnecessary and costly regulations that are raising housing costs and preventing builders from building more attainable, affordable housing,” Harris said in the statement. “NAHB has released a 10-point housing plan to remove the impediments to increasing the nation’s housing supply and we look forward to working with the Trump administration and Congress to enact sound policies that will allow builders to boost housing production and affordability.”
As for what changes could be made, Peter Idziak, senior associate at the law firm of Polunsky Beitel Green who represents clients in all areas of residential mortgage lending, said that one place to start is the federal energy efficiency standards adopted by the government last year.
In fact, Idziak points out the statistic that 25% of new home construction is attributable to government regulation cited in the order was actually from the NAHB’s own plan. The association claims that part of those increased costs have come from the energy-efficiency standards placed on the construction of new single-family and multifamily homes last year by U.S. Department of Housing and Urban Development (HUD) and U.S. Department of Agriculture (USDA).
For HUD and USDA to insure mortgages for single-family homes, the homes must be built to specific energy standards. The NAHB and 15 Republican state attorneys general are currently challenging those standards in court.
“So, I expect these rules to be first on the chopping block under the order,” Idziak said. “NAHB believes the new standards can increase construction costs by $31,000, and the agencies, themselves, conceded that it would increase the costs of new construction by several thousand dollars. A rescission of the rules could result in significant cost savings for new homebuyers. However, the order itself doesn’t provide any specific actions executive agencies must take to ‘deliver emergency price relief,’ so it will be interesting to see what actions federal agencies end up taking.”