WASHINGTON, DC — Testifying at a Senate Finance Committee hearing regarding the role of tax incentives in affordable housing, National Association of Home Builders officials told Congress that the housing affordability crisis “is far-reaching and will require action on several fronts, not just the tax arena.”
“The housing affordability crisis is the result of failing to produce enough housing to match demand,” said NAHB Chairman Jerry Konter. “If we’re going to solve this crisis, we must drive down the cost to build, as well as the cost to own or rent. Well-structured housing tax incentives can help us achieve this, but Congress needs to take broader action as well.”
Supply-side challenges including building material production bottlenecks, excessive regulations and labor shortages coupled with rising inflation and increased mortgage rates have exacerbated the housing affordability crisis by raising construction and home costs, particularly as they relate to the entry-level market, NAHB representatives told Congress. Recent housing data indicate the affordability crisis is worsening, as the Commerce Dept. reported that single-family housing starts fell below a 1 million annual pace in June and registered the lowest production level in two years, according to the NAHB, which reported that builder confidence in the single-family housing market plunged 12 points in July, the largest single-month drop in the history of the HMI, except for the 42-point drop in April 2020.
Congressional leaders and the Biden Administration can take several steps to help reverse this trend, including reforms on the tax front and a suspension of tariffs on Canadian lumber imports into the U.S., NAHB officials said.
Other recommended government actions include a reduction of regulations that account for nearly 25% of the price of building a single-family home; assistance in easing a chronic construction labor shortage that is delaying home building projects and increasing construction costs by promoting and funding job training programs; and action to ease production bottlenecks that have contributed to home building material costs rising 19% year-over-year.