NCSHA Washington Report | June 29, 2018

From our Friends at NCSHA:

Federal Reserve Board staff and industry participants from around the country convened this week in Washington, DC, for a day-long symposium called "Housing Policies to Increase Supply: What’s Feasible?" The housing supply shortage has been "hiding in plain sight" (i.e., getting worse) for years, and Fed staff are interested in exploring potential solutions.

Annual single-family housing production is almost 25 percent below what it was 25 years ago when the U.S. population was 25 percent smaller, according to Census data. Rental apartment development has been in a sustained boom, but is still falling behind projected demand by more than 80,000 units every year, according to the National Multifamily Housing Council.

On a cumulative basis, the nation is short millions of for-sale and rental units relative to demand. The shortfalls are, of course, especially severe for moderately priced first-time homes and affordable apartments.

NCSHA’s data on HFA activity is consistent with this trend: The share of new homes supported by HFA single-family financing stands at around 10 percent, down from nearly 20 percent in 2009. The share of Housing Credit development that is new construction is 15 percent lower than a decade ago.

The most commonly cited reasons for the housing deficit are spiking land prices, worsening labor shortages, and increasing local regulation. The conventional wisdom is that the primary policy opportunities are local. As researchers with the Brookings Institution put it in a new paper: "Local governments broke their own housing markets, and they will have to fix them."

There is truth to this, and in my remarks at the Fed symposium I was asked to discuss some prior analysis for the Urban Land Institute on the real estate economics and policy considerations local communities could consider to spur new construction through regulatory relief, zoning changes, and development incentives.

I also highlighted the opportunities for state leadership on stimulating supply, through efforts of state legislatures as well as state HFAs. States as diverse as Connecticut, Texas, Utah, and Washington in recent years have authorized or augmented the ability of local communities to utilize their own tax base to provide market incentives for new housing development.

Forty-seven states, plus the District of Columbia, have state housing trust funds (which in more than half the states are run by the HFA), and almost all of them support new construction. The Housing Trust Fund Project reports Florida, Ohio, North Dakota, and Virginia are among states that made significant new investments in their trust funds in 2016 and 2017. Other states, such as Vermont, committed more bond authority.

The discouraging takeaway — which should be a call to action — from the Fed meeting was that current efforts at all levels of government and among private-industry leaders, while often admirable, are not nearly enough. New thinking, new partnerships, and new ways of doing business are the only way to solve the housing supply shortage.

Stockton Williams | Executive Director

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