5 Key Supply-Side Headwinds Hurt Housing Supply, NAHB Tells Congress

Implementing policies to alleviate supply-side bottlenecks that are the main drivers of low housing supply and high home prices would help ease the nation’s housing affordability crisis and allow builders to increase the supply of attainable, affordable housing, the National Association of Home Builders (NAHB) told Congress today.

Testifying before the House Financial Services Subcommittee on Housing and Insurance, NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C., said the “United States is facing a fever-pitched housing affordability crisis. Nearly 77% of U.S. households cannot afford a median-priced new home.”

What is fueling this unaffordability is a shortage of more than 1.5 million housing units and construction costs that are rising at an unsustainable rate, which is making it increasingly difficult for builders to produce housing that is attainable for buyers and renters. Last year, NAHB released a 10-point housing plan that seeks to improve affordability by addressing these impediments to increasing the nation’s housing supply.

Hughes said the headwinds placing pressure on builders can be boiled down to the “5 Ls” – lending, labor, lumber, lots and laws. Each one of these factors contributes to the rising cost in new homes.

Solving all these problems is critical to bending the affordability curve as Hughes cited the following facts:

• Credit is tightening for development and construction loans, and builders also rely on several federal programs administered by federal agencies to help them supply new homes and apartments.
• The construction sector faces a persistent labor shortage, with more than 200,000 unfilled industry jobs.
• Due primarily to supply chain disruptions, construction material costs are up 34% since December of 2020, ultimately resulting in higher rents and home prices.
• Low lot supplies are due in large part to tighter rules regarding land use and zoning for housing and land development.
• Regulatory costs account for about a quarter of the purchase price of a new single-family home and even more for apartment buildings due to construction delay costs and zoning issues, and these regulatory burdens have made it very difficult to build entry-level housing for first-time home buyers.

To help address these issues, Hughes called on Congress to take the following actions:

• Preserve and strengthen key federal programs including the Low-Income Housing Tax Credit, the Department of Housing and Urban Development (HUD) Section 8 housing voucher programs, and HUD’s HOME Investment Partnership and Community Development Block Grant programs.
• Support workforce development programs such as Job Corps and pass the CONSTRUCTS Act, legislation pending in both chambers of Congress that will help prepare young adults for rewarding careers in construction and other essential trades.
• Responsibly boost the domestic supply of lumber and call on the Trump administration to negotiate a long-term softwood lumber agreement with Canada that will end lumber tariffs, help stabilize this volatile market and give builders greater price stability.
• Pass the Identifying Regulatory Barriers to Housing Supply Act, which will reduce minimum lot size requirements and allow more density on single-family zoned areas.
• Rein in excessive regulatory costs and reassert congressional authority over federal agencies’ rulemaking agendas. Lawmakers should also amend the Energy Independence and Security Act to clarify that HUD and the U.S. Department of Agriculture are not required to continue updating energy standards for related housing programs.