NAHB Chief Economist Robert Dietz told Massachusetts state policymakers today that growing affordability challenges for renters and home buyers stemming from years of underproduction and rising regulatory costs associated with land development and home building are having negative economic repercussions.
Testifying on behalf of the Home Builders and Remodelers Association of Massachusetts, Dietz told the Massachusetts Legislature’s Joint Committee on Housing there are several factors contributing to the housing affordability crisis.
Using national data, Dietz noted that job and population growth of local metro areas must be accompanied by construction of housing. Markets that do not keep pace will experience higher housing costs that cause households — particularly younger workers and families — to vote with their feet and relocate to more affordable markets. This, in turn, has long-run negative impacts for a city’s tax base and economic growth prospects.
The state panel asked Dietz what policies can be pursued at the state and local level to facilitate additional construction. He stressed the need to combat rising regulatory costs, such as inefficient zoning rules and costly impact fees, in order to improve housing affordability. Citing recent NAHB research, Dietz noted that approximately 25% of a typical single-family home’s price is due to regulatory burdens associated with lot development and construction, with one-third of the cost of a typical apartment due to the same factors.
Dietz said one way for builders and local communities to meet the growing demand for single-family housing — that is being fueled by solid economic growth, historically low unemployment and favorable demographics — is to focus on townhome construction, which posted a 14% gain in 2018. Townhomes and other forms of entry-level sale for housing offer an affordable ownership opportunity and a way to add inventory to the starter market. Markets that are able to provide such housing in the coming years will grow.