Federal Reserve Chairman Jerome H. Powell told the Senate Banking Committee today that the housing affordability crisis is due in part to the challenges home builders face with labor shortages and rising material prices.
When asked about the factors contributing to the rising costs to build single-family and multifamily housing, Powell responded with the concerns that he has heard from home builders:
"What you hear from builders is labor shortages, particularly skilled labor shortages ... You also hear higher materials costs, some of which are affected by tariffs, of course. You hear [builders] under tremendous cost pressure. That was flowing through into higher prices and that was making the affordability calculus a little bit more challenging for buyers, at the same time [interest] rates were going up ... I think altogether that picture slowed down housing construction in the last year or so."
During "The Semiannual Monetary Policy Report to Congress," Powell said that the cost of materials, lots and and labor are the most important factors in the price of a home. He noted the nation's immigration policy impacts the availability of labor in the construction industry. Powell also acknowledged that student debt is a barrier to homeownership for millennials.
You can listen to his testimony in the clip above.