The housing affordability crisis is a reality: Lawmakers need to act, but responsibly
There is no doubt that America is facing a housing affordability crisis. Challenges are different from city to city and state to state, but facts are facts. According to the Census Bureau’s 2018 American Community Survey 47 percent of all renter households were rent burdened, while 54 percent of African American-led renter households and 55 percent of senior-headed renter households were also rent burdened. Wage stagnation, onerous regulatory hurdles, and, above all, housing supply not keeping up with demand have led the nation to this junction.
Research conducted by Hoyt Advisory Services found that through 2030, the U.S. will need to build an average of 328,000 apartments every year. We’ve only hit that mark three times since 1989. As much as anything else – this is the key reason why families across the country are facing housing challenges.
What has been produced is largely out of the price range that many working families can afford, in part because of overly costly regulatory burdens that make building affordable housing economically infeasible in most areas. A study by NMHC and NAHB found that regulations imposed by all levels of government account for an average of 32.1 percent of multifamily development costs.
For too long those in a position to deal with these problems have ignored this gathering storm by relying on outdated programs and not challenging antiquated views. Decades of policy failures and the assumption that proactive housing policy was not their responsibility have led us here. While much housing policy is crafted at the state and local level – that does not mean that lawmakers in Washington don’t have a role to play. Indeed, it is because they control the levers of the federal government that they have resources of sufficient magnitude to deal with this crisis, while working hand-in-hand with lawmakers on the ground and with the private sector.
Federal lawmakers have the ability to, and should, incentivize the development of sensible regulations that allow the building of a variety of types of housing at all price points. For example, the New York Times found that “it is illegal on 75 percent of the residential land in many American cities to build anything other than a detached single-family home.” Reform of outdated zoning rules such as this is key to developing housing that suits the needs of 21st century communities.
To this end, NMHC supported the recent passage through the House of the YIMBY Act. The YIMBY Act, sponsored by Reps. Denny Heck (D-Wash.) and Trey Hollingsworth (R-Ind.), aims to eliminate discriminatory land use policies and remove barriers by requiring Community Development Block Grant recipients to report on the extent to which they are removing discriminatory land use policies. There is no silver bullet to the housing affordability crisis, but prudent and practical bills like this, when used to complement more localized efforts, can have a significant and positive impact.
Just as federal lawmakers have the capacity to proactively deal with housing affordability challenges, missteps in other areas threaten to make the crisis far worse. The success of America’s housing industry starts and stops with the ability to access capital. Accordingly, GSE reform is critical. As discussions proceed with the administration, FHFA Director Mark Calabria and others on the future of the GSEs, it is imperative that any new structure maintains an explicit federal guarantee, recognizes unique multifamily risk management characteristics and retains successful components of the existing multifamily programs. Any discussion of housing finance reform is inherently a discussion of housing affordability and getting housing finance reform right is a critical component to addressing housing affordability.
Encouragingly, many members of Congress and administration leaders realize the breadth of the challenge and are acting accordingly. However, some are turning away from strategies that will actually solve the problem and instead supporting policies like national or state-based rent control. While the intent of rent control laws is to assist lower-income populations, history has shown that this flawed policy does just the opposite by unfairly benefiting higher-income households, raising housing costs, causing existing housing to deteriorate, shrinking the pool of available units and chilling investment in new construction in the communities most in need of more housing options.
The housing crisis is real. And there is no single solution. Lawmakers in Washington and communities across the country, in partnership with the private sector, need to surface real solutions that will meaningfully reduce housing costs. Anything short of an all-hands-on-deck approach is an abdication of the public’s trust and our responsibility as industry leaders.
David Schwartz is CEO, chairman & co-founder of Waterton and chair of the National Multifamily Housing Council (NMHC).