NAHB Spotlights Housing Affordability Issues at National and Local Level
Housing affordability remains a prominent issue, with the median home of a new home at roughly $460,000 and 70% of U.S. households unable to afford a $400,000 home. Tight inventory continues to push up prices for existing homes — which have surpassed the cost of new homes as home builders adapt to affordability challenges by building on smaller lots, constructing smaller homes and offering incentives.
Even with these adaptations, though, regulations tie in heavily to the cost of new homes and account for nearly 24% of the average final new home price. Permitting and building codes play a role in these costs, as does financing and interest rates.
“Our builders are often seeing a higher interest rate than what we’re seeing as consumers — usually about 2% to 5% more,” shared Andrea Smiley, legislative director for the Building Industry Association of Washington (BIAW), which highlights how risky home building can be. “Depending on the bank, it could be more than that. It just kind of depends on local market conditions.”
“In order to get those construction finance loans, our builders have to basically show that they’re making a certain percentage of profit so that the bank will actually underwrite it and offer them that loan,” she added. “And that’s really challenging when you look at all the added costs from regulations.”
NAHB and BIAW recently spotlighted these issues and more in a two-part series from TVW titled “Washington to Washington: The Housing Crisis.”
“We have to get the land-use process sped up, which means permitting times, permitting fees, land development processes — all of those start the delays at the front end, and they keep us from building housing faster,” NAHB CEO Jim Tobin stated.
“Let home builders build is the secret to doing it,” he added. “And we need lawmakers with courage to allow builders to build.”
See the episode featuring NAHB and BIAW below: