Even during an economic renaissance, many of our nation’s teachers, nurses, construction workers, mechanics, police officers and firefighters struggle — or in some cases simply cannot afford — to live in or around the communities they serve.
For far too long, federal policy has focused solely on helping people through increasing spending on rental assistance. As a doctor, I can tell you: These are the symptoms of a patient who needs a different prescription — one that focuses on the reason housing costs are increasing.
Fortunately, President Trump signed an executive order this week that correctly diagnoses the source of America’s affordable-housing condition and issues a new prescription: This is a matter of supply and demand, and we have to increase the supply of affordable homes by changing the cost side of the equation.
The treatment plan put forth by the president establishes the White House Council on Eliminating Barriers to Affordable Housing, which I have the great honor to chair. The council will consist of members across eight federal agencies and engage with state, local and tribal leaders across the country to identify and remove the obstacles that impede the production of more affordable homes — namely, the enormous price tag of burdensome government regulations.
Research from the National Association of Home Builders indicates that about 25 percent of the cost of a new home is the direct result of federal, state and local regulations. For example, the National Multifamily Housing Council found that developers often are barred from using the entire lot when building a development, and this restriction accounts for about 4.3 percent of development cost.
For this reason, among many others, the construction of new multifamily and single-family dwellings in recent years has not kept pace with the formation of new households. Census Bureau data shows that for every 10 households formed between 2010 and 2016, only seven homes were built.
This shortage in housing supply contributes to an unsustainably high financial burden borne by low- and middle-income Americans; indeed, the largest portion of their paychecks goes to housing.
As a result, Americans have fewer housing opportunities, including the opportunity to achieve sustainable homeownership, which is the No. 1 builder of wealth for most U.S. families. The average net worth of a renter in 2016 was $5,200, while the average net worth of a homeowner was $231,400. That’s a nearly 45-fold difference.
The council established by this week’s executive order will be tasked with accomplishing the following items by January 2021:
●Work across agencies, states, and local and tribal governments — as well as private-sector stakeholders — to identify policies that artificially increase the cost of developing affordable housing and best practices for their removal.
●Report on the quantifiable effect that regulatory barriers at all levels of government have on affordable housing development and the economy.
●Work to minimize federal regulatory barriers that unnecessarily raise the costs of housing development.
●Recommend policies at each level of government that would reduce and streamline statutory, regulatory and administrative burdens that inhibit the development of affordable housing and encourage local actors to address them.
These efforts to identify and prioritize federal actions should be able to resolve issues faster and deliver results for millions of Americans still in pursuit of their homeownership dream. As we advance this critical mission, we will be soliciting feedback from home builders, homeowners, developers, creditors, real estate professionals, manufacturers, academic researchers and advocates — to make sure the American people are informing our insights and actions.
An ill patient will never be healthy until their sickness is correctly identified and a treatment plan prescribed. This week the president did both to set the U.S. housing market on course for a full recovery.