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The Single Family Housing Shortage Crisis

HOUSING INVENTORY

Let’s start with a bit of history. At the end of 2010 the US Census Bureau reported there were roughly 10 million single family vacant homes in America. Remember that 10 million number – we’re coming back to that below. You will remember the Great Recession from 2006-2013 developed primarily as a result of a housing bust. Those 10 million vacant single family homes were, in large part, a result of mortgage foreclosures or cities taking back property because of delinquent real estate taxes. Two years before the 2010 Census Bureau Report, the Banking Regulators decided to clamp down on Homebuilders to stop them from building the typical supply of new homes because of this massive supply of vacant property. Essentially, the Bank Regulators made the Banks double the capital and reserves on any loans made to Homebuilders to acquire land – develop the infrastructure needed to support housing (roads / water / sewer / etc.) - and forced each bank to force each builder to borrow less money and build fewer homes. Seemed prudent in 2008. But unfortunately, the Bank Regulators left these massive restrictions in place until just recently. 

Everybody in the building industry knows it takes builders 5-7 years to acquire land - complete the infrastructure - and build houses for occupancy. Unfortunately, it doesn’t appear that Policy Makers or the Bank Regulators were aware or paying attention. They were 5-7 years tardy in relaxing these terrible restrictions and that has created a whopping shortage of available new homes for sale. The National Association of Homebuilders (NAHB) reports that builders are nearly 5 million units behind the need generated by the new household formation in America over the past 10 years. Why? Primarily because the government policy change in 2008 put a stranglehold on builders and slowed down homebuilding for the past 12 years. While that was unfolding, the NAHB recently reported that the average Regulatory and Compliance cost for the average builder to build the average home on America has risen to $84,000 per house. Yes – PER HOUSE! How in the world can affordable homes be built if the builder knows they are going to experience $84,000 of Regulatory and Compliance cost before they put the shovel in the ground? They can’t. 

There is plenty more adding to the crisis. The skyrocketing cost of lumber mostly as a result of government imposed tariffs on Canada and the eyebrow raising environmental rules prohibiting the harvest of trees in the US adds fuel to the fire. But there is more…remember those 10 million single family vacant homes we mentioned above? During 2012, the America’s Homeowner Alliance took an impressive group of organizations in to see the Secretary of HUD and the FHA Commissioner to make an appeal that would have changed the trajectory of available home volume and turned millions of those 10 million homes into rehabilitated properties available for single family buyers. Those organizations included the National League of Cities; the National Association of Homebuilders; the three Diverse Segment Real Estate Groups; and two important Non-Profit Consumer Advocacy Groups. The Department of Housing and the FHA fumbled the ball – “stiff-armed” the request and essentially delayed a decision long enough for Institutional Investors to swoop in and buy many of those vacant homes to rent to the aspiring owner-occupant homeowners. What a shame. But it’s still happening today – and Policy Makers aren’t doing a thing about it. That issue can be fixed – but it takes intervention. 

The new home construction shortfall is a crisis – but so is the lack of available existing home inventory for sale. The number of single family homes for sale in America has been declining every month since December 2010. And again – Policy Makers don’t seem to be paying attention. 

During this past 10 years, the Federal Reserve and the US Treasury have been driving down mortgage rates to help stimulate the economy. In fact, over this past 18 months they’ve dropped to their lowest level ever recorded. But low rates drive homeownership demand. And unprecedented demand matched off against shortages of available homes for sale will absolutely exacerbate the crisis in two ways:

  1. It drives home prices higher by the month making homeownership increasingly harder for aspiring owner-occupants to achieve.

  2. It is a magnet for Institutional Investors to swoop in and purchase single family homes for cash and rent them to the aspiring homeowners. These investors have the aspiring homeowner pay rent as a return on their investment – and they enjoy the rampant property value appreciation.

Again, a crisis – and requires intervention. The America’s Homeowner Alliance is working on a number of solutions. We helped create the Affordable Homeownership Coalition in Washington DC (now up to more than 20 organizations) to draft proposals to remove the barriers to affordable housing. And second, the AHA is working on proposals to deliver to HUD and Policy Makers to change the paradigm and make more single family homes available for aspiring homeowners.

The only thing that will make Members of Congress and other Policy Makers pay attention is the voice of existing and aspiring homeowners. Because you vote! And you pay most of the taxes in America as well. We built the America’s Homeowner Alliance to offer you a voice in Washington. If you’re an existing or aspiring homeowner and you haven’t yet joined – please join now! Your lifetime membership will be FREE. 

We need you to help give us the strength to change these mounting bad government housing policy decisions.

America is recovering from the pandemic and the resulting economic fallout. But we won’t recover from these really bad crisis trends unless we bond together and take action. We’ve simply got to get more aggressive – and bold – and demanding or this crisis won’t get fixed.

Please join the America’s Homeowner Alliance today – use the browser on your phone to join at “aha.rocks” – or visit our website at www.myaha.com.