Early this year, the National Association of Home Builders (NAHB) outlined a 10-point plan to tame ‘shelter inflation’ in the industry. That is, the rise of average rent and homeownership costs. Inflation is adding to the complexity of affordable housing gaps across the country, which is of major concern to the residential home building industry.
Although some points in the NAHB plan are of obvious benefit to home builders, there are also tax remedies and policy recommendations that reduce barriers to affordable housing, according to NAHB.
As stated in the plan, it will require all levels of government to participate in reducing the cost burdens for renting and homeownership while strategically increasing housing supply. Currently, shelter inflation is showing a gradual decline compared to 2023, and the Federal Reserve Bank of San Francisco showed in its modeling that shelter inflation will decline to pre-pandemic averages of 3% by spring 2025.
However, a persistent, nationwide shortage of housing stock will continue to create challenges for renters and homeowners. In response, here is a summary of the NAHB’s 10-Point Plan:
Eliminate excessive regulations
Regulations add thousands of dollars to the final cost of single-family homes and multi-unit construction. From new standards to new building codes to fees for developing land, NAHB asks policymakers to review regulations that have risen beyond reason.
Promote careers in the skilled trades
NAHB reports a monthly shortage of 400,000 construction workers, which creates costly project delays and inability to add projects.
Fix building material supply chains and ease costs
Some building materials have increased in price up to 77% since 2020. NAHB is calling on Congress to fix the supply chain through more domestic production, easement on tariffs and additional appropriations for electrical distribution transformers.
Expand the LIHTC program
NAHB is calling on Congress to get behind bipartisan bills that expand the LIHTC and create new tax credits for affordable workforce rental housing for middle-income households.
Overturn inefficient local zoning rules
Minimizing lot sizes, allowing more accessory dwelling units (ADUs) on single-family lots and building more duplexes and townhomes could also help to alleviate housing shortages.
Alleviate permitting roadblocks
Permitting delays raise construction costs and block more homeowners from affordable housing each year. Bottlenecks at the local level as well as key federal permitting processes for land development are taking months to several years, according to the NAHB.
Adopt reasonable and cost-effective building codes
By increasing energy regulations on new homes, regulators are missing the 90% of homes in the U.S. built before 2010. NAHB advocates for updating older homes rather than placing the burden and costs on new homes.
Reduce local impact fees and other upfront taxes associated with housing construction
NAHB cites excessive impact fees, which provide public services to new proposed developments, as another unfair barrier to new home construction and ownership.
Make it easier for developers to finance new housing
Acquisition, Development & Construction (AD&C) lending has fallen as interest rates have increased and financial conditions tightened for lenders. The NAHB calls for a secondary market for AD&C financing.
Update employment policies to promote flexibility and opportunity
Complex worker classification, overtime pay and wage structures have made team consistency more difficult on large-scale housing projects, according to NAHB, which is calling for a simpler set of labor and pay policies.
You can learn more about each element of the plan at nahb.org/plan.
If you have any questions about affordable housing development, real estate investment or tax credits and incentives for development, contact LvHJ.
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