Darn near everyone is talking about housing these days. That’s a good thing. What’s not good, however, is that most of the talk is about how expensive it is. What’s even worse is that the public policy debate over housing is becoming increasingly stratified between those who believe the solution calls for more government involvement and regulations versus those who feel the exact opposite. The pending political impasse threatens to violate one of Winston Churchill’s infamous quotes: “Never let a good crisis go to waste.”

Indeed, housing is becoming the paramount issue of our time. As housing supplies shrink and prices soar, more than a few members of the media and candidates for public office have called access to decent, affordable housing a basic human right. But economists, advocates, professionals, elected officials, candidates, homeowners and would-be homeowners don’t agree on how to best address the problem.

The National Association of REALTORS^® (NAR) recently released statistics that quantify why we have a housing shortage. The reasons fall generally into two buckets: housing stock and housing demographics. Regarding housing stock, it’s aging. The median age of a house in the United States is nearly 40 years old, and as the housing stock ages, it needs to be renovated or replaced, which reduces inventory. New construction, or lack thereof, has made supply matters even worse. Post-recession housing starts are down because the cost and availability of labor, land and materials are up. Meanwhile, more homeowners are deciding to stay put — now a record average of 8.3 years, keeping those houses off the market as well. Investors also scooped up many foreclosed homes during the Great Recession and converted them to rentals, removing even more homes for sale, contributing to a 31 percent increase in single-family rentals between 2007 and 2016, according to NAR. Demographically, millennials have replaced baby boomers as the largest demographic cohort in the nation, and they now want into the housing market, further intensifying demand. When it’s all said and done, higher demand and lower supply mean prices will rise — and rise they have.

But policymakers are torn — mainly along political and ideological lines — as to what to do about the national housing crisis. Republicans generally favor cutting government regulations — for example, laws and rules they claim add to the cost of building and owning residential housing. Many also favor privatizing the mortgage finance industry to inspire lending competition and protect taxpayers from potential future bailouts of the mortgage lending industry. Democrats, on the other hand, generally favor increasing government regulations and housing-related subsidies to create “affordable housing,” if not for all, for most.

Consider the recent pronouncements by the Trump administration versus what some of the Democratic presidential candidates are saying about housing. Several weeks ago, President Trump signed an executive order focusing on the shortage of affordable housing and ways to increase supply by changing the “cost side of the equation,” as Housing and Urban Development (HUD) Secretary Ben Carson said. Trump’s executive order created the White House Council on Eliminating Barriers to Affordable Housing, to be chaired by Secretary Carson. The stated goal of the new council is to identify and remove obstacles to producing affordable housing by reducing burdensome government regulations. The National Association of Home

Builders has long claimed that a full quarter of the cost of new home construction is directly attributable to federal, state and local regulations that involve permitting, construction and land use rules and controls. The new council is charged with identifying policies that artificially increase the cost of developing affordable housing and the best practices for removing those policies. It’s also charged with identifying ways to minimize federal regulatory policies and recommend ways for state and local governments to reduce or streamline their regulations that inhibit the development of affordable housing. 

Identifying ways to reduce the cost of regulation on housing development is not new. Former President Barack Obama’s White House produced a Housing Development Toolkit in September 2016, which similarly identified local regulatory barriers to the development of affordable housing. That report identified barriers such as zoning, land use regulations and lengthy development approval processes as the cause for the housing industry’s inability to meet growing housing demand. 

By contrast, several Democratic presidential candidates have recently outlined their approach to increasing affordable housing, which focuses not on increasing supply but rather subsiding demand. Massachusetts Sen. Elizabeth Warren has called for spending $500 billion over a 10-year period on down payment assistance grants for first-time homebuyers living in areas that have experienced racial discrimination. She also called for changes in the Community Reinvestment Act to change lending standards for certain racial and ethnic applicants. New Jersey Sen. Cory Booker has focused on high rents, calling for a refundable tax credit for renters who spend 30 percent or more of the gross income on housing. And California Sen. Kamala Harris has called for a $100 billion plan aimed at reducing racial disparities by offering up to $25,000 in down payment and closing cost assistance to combat what she believes is long-time housing discrimination and unfair calculations of credit scores.

There’s no doubt America is now rightfully focused on housing as a national priority. Whether we address this “crisis” through more government regulation or less is yet to be determined. The elections of 2020 — for president, congress, state government or local government — will likely yield a vast variety of approaches. From an association standpoint, we need to play the role of facilitator and motivator. We need to encourage a range of appropriate policy responses, which will vary from state to state, from community to community, and from whoever occupies the Oval Office. But from an industry standpoint, we must ensure that our divided and politically heated government at all levels doesn’t waste the significant opportunities of this crisis. 

Michael Theo 
President and CEO