Courtesy NAHB

Inflation, elevated mortgage rates, and rising affordability concerns were among the major issues facing the housing industry in 2023. Builders also faced high regulatory costs, the impact of policy related to the Clean Water Act, and tight land use regulations. Throughout the year, the NAHB has worked on advocating on behalf of home builders and the housing industry across a variety of federal and regulatory channels.

BUILDER reached out to NAHB chairman Alicia Huey to learn more about the wins and losses for the NAHB in 2023, as well as to identify key issues for the organization in 2024.

What were the biggest challenges that faced the housing industry in 2023? How did the industry address these challenges?

The big story of 2023 was inflation and the Federal Reserve’s efforts to tame it. The result was the highest mortgage interest rates we’ve seen in 20 years. Rising mortgage rates, elevated construction costs, and limited existing inventory helped push housing affordability to its lowest level in more than a decade.

The 30-year, fixed-rate mortgage rate has cooled somewhat after reaching a high of 8% in October. The average is now near 7%. While the trend is good, rates remain more than double what they were two years ago.

Recent cooling of inflation is great news, and the Federal Reserve’s updated economic projections suggest three rate cuts [this] year. But despite the cooling, shelter costs continue to be a key driver of inflation, accounting for over 70% of the total increase in all items excluding food and energy. The policy tools the Fed uses to tame high inflation are not well suited to address increases in shelter costs, which are driven by a lack of affordable supply and increasing development costs. Additional housing supply is the most effective way to tame housing inflation.

NAHB has been vocal in pushing state and local lawmakers to adopt policies that reduce the regulatory burdens that drive up the costs of land development and home building. Sensible land use regulations and building laws can help the residential construction industry deliver more attainable housing. Regulatory costs now represent $93,870 for the typical new home. It is hard to deliver homes that are affordable to low- and moderate-income families when your starting point from government-imposed costs is so high. Lots of politicians now talk about housing affordability. NAHB is talking to city council members and county supervisors all over the country and suggesting tangible reforms that can make a difference in the cost of housing.

As an organization, what were the major wins for NAHB in 2023? Are there any initiatives that began last year that the organization is focused on in 2024?

In the policy arena, NAHB’s biggest win was the U.S. Supreme Court’s unanimous decision in the case of Sackett v. Environmental Protection Agency. The court ruled that for a wetland to be regulated under the Clean Water Act, it must have “a continuous surface connection to bodies that are ‘waters of the United States’ in their own right.” Of course, the legal victory is just another step in the ongoing fight over regulation of U.S. waters. But it is important to have the Supreme Court deliver a clearer definition.

Internally within NAHB [2023] was a big transition year.

We entered a new era when Jim Tobin took over leadership of the association as CEO. Following longtime CEO Jerry Howard’s storied career, Jim had some big shoes to fill. I’m pleased to say that Jim, along with the rest of the staff, rose to the challenge.

Jim took over in May, and he used the balance of the year to take stock of the association and to game plan and strategize for the future. Jim led a federation-wide effort to develop an ambitious strategic plan that will serve as the association’s GPS for the next three years. I am confident that the plan will help us fulfill our mission and aid in making our vision—affordable and desirable housing available for all—a reality.

Are there any initiatives that NAHB is planning to launch in 2024?

The NAHB federation includes 700 state and local home builder associations. We have committed to those partners that NAHB will offer more support for state and local advocacy. As I mentioned before, regulations at that level have a big impact on the cost of producing a home.

Land use regulations are a significant part of the problem. Most people strongly agree that all families should have access to quality housing they can afford. But when it comes time to build that new housing, existing neighbors often show up in big numbers to show their opposition. Local elected officials often understand the problem of outdated land use regulations, but they are beholden to an electorate that may not be particularly sympathetic.

A growing number of local governments are imposing architectural design requirements that have a significant impact on costs. Prohibition of vinyl siding has become a relatively common mandate. Others include requirements regarding the orientation of a garage, demands on materials used in fences, window shutter mandates, details on the square footage of window space, and dimensions of particular features down to a quarter of an inch.

Builders and developers must also deal with excessive delays in permitting, costly impact fees that fund gold-plated infrastructure, significant setbacks, and dedications of land for public use. All of these things sound like they’re no big deal, but, in the aggregate, they have a big effect on home prices.

NAHB has developed a wide range of policy ideas and draft legislation to address these problems. We are in regular contact with the National Association of Counties, the National League of Cities, the National Lieutenant Governors Association, the Western Governors’ Association, and other organizations that represent state and local elected officials. Many policymakers understand the effects of burdensome regulations on home prices. At this point it is equally important that we educate the voting public.

Were there any regulatory losses for home builders in 2023? How will the knock-on effects of these be experienced in 2024 and moving forward?

One of the big issues we saw in 2023 that we are likely to see again in 2024 is the threat of a government shutdown. In addition to the effects of a potential shutdown on the national economy, we are concerned because the federal government performs a number of functions that affect the housing industry. It would affect some aspects of the federal permitting process, cause delays in flood insurance applications, and possibly disrupt some federal housing-finance functions. Depending on the timing, a government shutdown could potentially disrupt processing of federal tax returns and refunds.

NAHB works hard to make sure federal lawmakers understand that a shutdown will have real consequences that hurt small businesses and families.

Another issue that remains unresolved from 2023 is future funding for Job Corps. The supply of skilled labor for our industry is one of our top priorities, and the Home Builders Institute (HBI), NAHB’s workforce development partner, is the nation’s largest provider of Job Corps training. HBI’s Job Corps programs are critical to our efforts to prepare the next generation of skilled trades. But some in Congress want to eliminate funding for Job Corps. NAHB is talking to members on both sides of the aisle to make sure they understand the importance of future funding for this important job training program.

Of course, there are many other issues that NAHB is working on, including energy codes, labor and environmental regulations, and supply chain concerns, such as the availability of distribution transformers.

What are the major issues surrounding housing that will be in play during the 2024 elections?

The cost and availability of housing is typically not a major issue in national elections, but housing costs have gotten so high that we’re likely to see this challenge get more attention. Polls suggest many Americans are concerned about the state of the economy, and housing is a big part of that. One recent survey found that roughly a third of Gen Z and millennials believe they’ll never be able to afford their dream home.

Since the onset of COVID-19, we’ve seen a significant shift in new-home construction toward the exurban areas—the counties on the edge of major metro areas. Some of that reflects a greater willingness of employers to let their people work from home more often. But much of it is simply people choosing to endure longer commutes in order to afford a home that meets their needs.

Every election cycle, NAHB offers candidates for federal office— including presidential candidates—guidance regarding policies that could help improve housing affordability. These policy recommendations touch on a wide range of topics, including regulations, housing finance, taxation, trade policy, government investment, and more.

We would like to see candidates for offices up and down the ballot talking about housing. The home each person returns to every evening is central to their life, and how much they pay for it affects their economic well-being. Government policies have a huge impact on the cost of housing. It’s time for politicians to talk about this issue that plays such an important role in people’s lives.