On Tuesday, Jerry Howard, CEO of the National Association of Home Builders (NAHB), addressed a room full of executives at the National Lumber and Building Material Dealers Association Spring Meeting and Legislative Conference in Washington D.C. He focused largely on the importance of housing affordability shortly before attendees were set to lobby their representatives on Capitol Hill later in the day.
Howard stated that the NAHB is focused on making houses affordable to the average American. “Six years ago, 80% of the homes on the market were affordable by the average American. Today, that number is under 60% and it’s continuing to decline. For the first time in 15 years housing affordability is a major, major problem.”
To be clear, housing affordability is measured by the average American’s ability to afford a mortgage for an average-priced house or rent for an average-priced apartment.
Howard stated there are three main factors that are making new homes financially unattainable for average Americans—regulation, the industry’s labor shortage, and cost of goods.
Housing Regulation
The problems associated with these high housing costs start with regulation, Howard stated. “Right now, up to 30% of the cost of a home is due to regulatory compliance. The worst-case scenario is San Diego County Calif, where over 40% of the cost of building a house is in regulatory compliance, Howard said.”
He describes a scenario that underscores how overregulation can harm the industry: “You have the far-left wing that wants to regulate the production of a house and increase the cost. Then, they want to tax the consumer of that house extra so that they can come back [with] a subsidy to lower the cost of the house. Now, that doesn’t make sense in any way, shape, or form if you’re running the country like a business. That’s one of the key points that we’re trying to make—overregulation is crushing us.”
Construction Labor Shortage
The NAHB is also working with legislators to resolve the industry’s labor shortage. “Right now, there are over 300,000 vacant jobs in the construction sector…and we’re not even in prime construction season, yet. We have to do something to increase our labor supply.”
NAHB recently hosted the Builders Show in Las Vegas. Howard stated that Nevada as a homeless veterans problem that is “second to none. So, we’re working with that state government to train veterans in the construction trades…and get them jobs with our members. By the way,…our members report that these veterans that are trained in the trades become the best employees that they have. They’re on time. They have the soft skills. They have a sense of responsibility, a sense of respect for what they are doing. They’re tremendous.”
The NAHB is also “doing a great deal of work with at-risk youth—the youth of America that either can’t get into or don’t want to go to a college. Sometimes the military is an option. Sometimes it’s not. Sometimes they end up on the street corner and oh, by the way, we have an opiate crisis in this country and…studies have indicated at-risk youth and youth that have no hope are the primary cause of the opiate problem,” Howard said.
To combat the problem, Howard stated that members of the NAHB are communicating with teachers and guidance counselors in high schools and middle schools in the United States to show them that “there are good paying jobs” that don’t require a college education.
“When we first started going into these places, we were basically laughed out,” Howard lamented. “We weren’t laughed out because the people were callous. We were laughed out because most high schools and all guidance counselors are graded by…the percentage of their students that go into four-year colleges. So, they are forcing these kids into colleges that don’t want to be there. The kids flunk out or drop out and there you have this sense of hopelessness. We’re working to change that mindset and, at the same time, train some of our at-risk youth.”
The Cost of Goods
The cost of building supplies is what Howard expected most attendees to focus on during their visits with legislators.
Howard touched on his concerns about the tariffs placed on Chinese imported products. He mentioned that the NAHB shared with the Trump administration that of the more than 1,200 products that are imported into the U.S. from China more than 500 of those products are regularly used in the construction of single-family houses. The response, he said, was that the administration is conducting ongoing negotiations to address the issue.
The next hot-button issue for the NAHB pertains to the Canada and U.S. softwood lumber dispute. U.S. tariffs imposed on imported Canadian softwood lumber, the NAHB and others in the construction supply industry suggest, is increasing the cost of building new homes to a point where they are no longer affordable to many would-be home buyers.
“We’ve been assured that, although they are focusing on the big Canada trade agreement right now, that there are conversations ongoing with respect to the Canadian Softwood Lumber Agreement," Howard said. "But, I will also tell you that it is the goal of the President and the administration to sort of wean ourselves away from Canadian lumber and to increase the domestic harvest in our national forests.”
One way to do that is to become more self-sufficient. “A healthy forest has about 100 trees per acre. In our national forests, right now, they average about 300 trees per acre. They’re diseased, they’re dying, they’re dead and we’re not allowed to harvest them. It doesn’t make any sense. So, the administration…is getting ready to put a significant push on that for two reasons: One, it will decrease our level of support on imported goods and, two, it creates jobs in rural America. … We can create American jobs. We can reduce the cost of lumber. We can reduce the costs of housing.”
Speaking to the politically engaged audience, Howard suggested that the issue of housing affordability will become more mainstream. “I believe that, for the first time in my career, you will see housing affordability be an issue in the 2020 presidential election. … If we can get this to be a subject of debate and discussion in the 2020 campaign, it doesn’t matter who wins the election from that perspective, what happens is we win.”
After his presentation, one attendee asked about the NAHB’s stance on immigration and the need for labor. “This country was built on the backs of immigrant labor,” Howard said. “We need to have immigrant labor.”
In meeting with President Trump, Howard stated, “What he said to me was, ‘We will have a merit-based immigration system before I leave office.’ Now, what I had followed up on that is merit-based traditionally hasn’t meant people who can work in the construction trades, or people who work in saw mills, or people who work in restaurants and he understands that. Our policy is that we need comprehensive immigration reform, that there should be a path to citizenship, and that skilled laborers in the construction trades should be considered just as skilled as computer programmers, computer engineers, and healthcare professionals.”
This article was originally published on BUILDER's sister site, ProSales.
