Framed by the question of what the federal government can do to increase housing supply, industry stakeholders gathered at the National Housing Supply Summit in Washington, D.C., to exchange ideas covering topics ranging from policy to finance to construction.
The United States has long faced a housing supply deficit of millions of units. However, the issues that contribute to delays and prevent the industry from making significant progress toward closing the gap persist. Panelists and participants shared pain points, identified opportunities for efficiencies, and highlighted the role local, state, and federal government can play in alleviating the housing shortage and boosting housing supply.
Below are seven takeaways from the event.
No Silver Bullet
Myriad factors—from labor to legal and regulatory costs—are in part responsible for the U.S. housing supply deficit. Take labor: The average age of skilled laborers is rising, fewer younger people are entering the industry, and retiring workers are not being replaced. This doesn’t account for the future impacts that changes to immigration policy will likely play on the labor pool. The NAHB estimates approximately one-third of the construction workforce is non-native born. At the same time, data from the NAHB suggests regulatory costs contribute an average of $93,870 per home, or 23.8% of the sale price.
NAHB chief economist Rob Dietz cautioned that there is no one simple, scalable solution to the supply crisis. A hyper-focused approach on a single issue could provide some solutions but could exacerbate the contributions of other factors on the supply challenge. He said a combination of policy, innovation, and patience across the 5 Ls (labor, lots, lending, lumber, and legal/regulatory costs) will be needed to close the supply gap.
Zoning Is Forever
Mike Kingsella, CEO of Up for Growth, notes interest rates change, inflation rises and falls, and the housing market experiences seasonality and cyclicality. Zoning, however, is forever. He highlighted how several zoning codes were written decades ago for a different time and are outdated for the current environment.
Single-family housing, for example, is not a uniform category. A variety of product types, from detached to quadplex, fall under the single-family category. A direct effect of restrictive zoning practices is the suppression of housing supply, an increase in housing costs, and lost dollars in economic activity. While some municipalities and states have successfully reformed zoning to promote attainable housing and density, a greater focus on such solutions could significantly increase the supply of needed housing.
Simplification Does Not Mean Cookie-Cutter
Simplification does not have to mean sacrificing uniqueness. During a panel discussing building codes, Mark Lee, senior vice president at MiTek, shared that builders can still provide unique homes even if cutting back on the number of options offered. In a simple example, if 15 design options are available for selection, there are 1.3 trillion unique permutations that can be created.
During the session focused on building materials, William Jenkins, senior director of environment and sustainability for Clayton Homes, also discussed the importance of simplification from a production, timeline, and waste perspective.
“There is a lot of discipline in simplicity. It pays out from a cycle time and production standpoint, [and] a simplified product will generate less waste because you become more in tune with how you generate it,” he said. “A lot of options in home building continue to be focused on aesthetics. Aesthetics are important, but if your option scope has increased over time, that also probably waters down your purchasing power with specific suppliers. Having that discipline pays dividends when it comes to affordable housing.”
Unification of Codes
During a session on building codes, the panelists contrasted the regulations and requirements for cars and homes to illustrate the challenges facing the industry. A car can be manufactured to a unified standard, regardless of the state or county.
Conversely, Eric Schaefer, chief business development officer at Fading West Development, shared that in his home state of Colorado, there are approximately 300 different sets of building code regulations. Each set has its own ordinances and adoptions. For modular builders such as Fading West, the inefficiencies caused by having to adapt to different codes directly limit their ability to increase housing supply.
Making more uniform changes to code by climate zone or region could allow for greater efficiencies for not just modular builders, but any company with operations in more than one municipality. By leveraging common plans, builders can achieve significant cost savings that can be passed on to the end user, helping ease affordability challenges.
Outcomes Rather Than Checklists
“We heard from a couple of different panels that we need to have more of a focus on outcomes and performance rather than on process or prescriptions. This came through very clearly in the zoning, building codes, and building materials sessions,” Jenny Schuetz, vice president of housing for Arnold Ventures, said during a panel focused on opportunities for action. “We want to identify the outcomes that are good—energy-efficient housing, safe housing, housing that gets built within a reasonable time frame—rather than having a checklist that we go down.”
The panelists across the policy-focused sessions on zoning, building codes, and permitting all spoke to the importance of consistency and certainty for reducing timelines and costs. On building codes, Lee suggested a more regional approach with specific requirements for climate zones could allow for a more streamlined design process to help produce the volume needed to narrow the supply gap.
Vikas Enti, CEO of Reframe Systems, highlighted how codes may be enforced inconsistently across jurisdictions despite the same set of guidelines.
“We haven’t productized the inspection process or the permitting process. How do we get these groups to speak the same language? We’ve solved this for appliances, for automobiles, for other industries,” Enti said. “We’re all trying to achieve the same thing: homes built faster, safer, and cheaper.”
Insurance Crisis Needs To Be Solved
As the number of severe weather events continue to increase, insurance continues to play a more significant role in the conversation about housing supply and affordability. Severe weather events are no longer a regional issue. Instead, data suggests that in the past decade 90% of U.S. counties have experienced a federally declared weather disaster. This has directly contributed to rising insurance costs and certain carriers exiting areas. While weather volatility is difficult to budget for, solving the insurance crisis is an important element of solving the affordability crisis.
During the insurance panel, presenters highlighted the difficulty in solving current insurance-related challenges. Several potential solutions—including state rate regulations and federal insurance backstops—carry various costs and political consequences. Thom Amdur, senior vice president of Lincoln Avenue Communities, highlighted a potential risk mitigation practice: building stronger, more resilient structures that can withstand the potential weather events.
People as the Common Denominator
Whether enforcing a regulation, designing to a code, or swinging a hammer, none of the progress the housing industry needs can be achieved without people. The industry already faces a shortage of workers estimated in the hundreds of thousands. In order to produce the volume needed to close the supply gap, hundreds of thousands of additional laborers will be needed. At a time when the workforce is aging and retiring, the importance of skills training, recruiting, and developing talent is as vital as it has ever been.
Home Builders Institute president Ed Brady, Building Talent Foundation CEO Branka Minic, and Unidos senior vice president Laura Arce all stressed that now is not the time to divest attention and effort from workforce development. The investments needed are both monetary and advocacy, whether it be in training programs, communicating the value of the trades, providing opportunities for second-chance individuals and transitioning veterans, or highlighting the vital importance of immigration to the construction industry.
“Immigrants are not the cause of our housing supply crisis in this country, but they are an essential part of the solution,” Arce said.
Building on the conversations throughout the day about potential changes in codes, reforms to zoning, improvements to supply chains, and improving technologies, the panelists highlighted how people will be at the center of all these changes. Additionally, with all the potential changes, the skills required for laborers and the construction workforce will also need to evolve to change with the industry.
