In northern Virginia, the average price of a detached, single-family home exceeded $1 million in April 2022. In February of the same year, there were less than 900 homes for sale in the region, down from about 1,600 just one year prior.
The realities of supply and demand are clearly at work.
THE NEW GLOBAL VIRUS IS RUNAWAY GOVERNMENT SPENDING AND DEBT
Instead of simply throwing more taxpayer money at the problem, as some are already suggesting, it’s important to think through the long-term reforms needed to ensure that the housing industry is efficient and thriving. A great place to start would be to reform the permitting process for housing development and clear the way for more people to join the workforce.
In total, the United States was short a staggering 3.8 million homes in 2021. It would be easy to fall into the “if you build it, they will come” way of thinking since there is clearly high demand. But it’s just not that simple. A global pandemic, chronic supply-chain issues, and a worker shortage have made the actual building much more difficult to do.
Add those complexities to already tedious and costly permitting regulations for housing development, and it’s not surprising the homebuilding process has slowed to a crawl. And the regulations that affect the housing industry go far beyond just permitting. Everything from local housing ordinances to regulations on commercial timber harvesting influences the ability of developers to create an ample supply of housing. Each of those regulations increases costs for the final homeowner.
Both states and the federal government should review regulations with an eye toward lowering the cost of such regulations on the economy. The Regulations from the Executive in Need of Scrutiny Act, or REINS, would require legislative oversight and approval over administrative regulations that are estimated to cost the economy $100 million or more each year. This legislation, if adopted at the federal level, could lower the cost of doing business, including business in the housing industry. And states can adopt similar legislation to ensure any state regulations are not overly burdensome.
Lowering the regulatory burden of housing development is a positive step toward fixing the housing predicament, but it’s not the only necessary one. Without talented people to do the work, we’re no closer to resolving the housing shortage.
To bring more workers into the fold, lawmakers should reform policies that act as barriers to work. For example, occupational licensing requirements make it more costly to enter the workforce, even if able people are ready and willing. In fact, more than 1 in 5 workers now need a license to work. And those in the building industry often face licensing requirements at both the state and local levels. These local licensing requirements are often duplicative and unnecessary and not only increase the cost of entry into the field but also the end product — in this case, a house.
Florida, West Virginia, Tennessee, and Arkansas have already enacted some measure of local licensing preemption, and more states should follow suit to make it easier for builders to work across the state. If licensure is truly needed to ensure safety, those requirements should be maintained at the state level for consistent compliance.
There’s no silver bullet to fixing the current housing dynamic, and proposals that simply throw money at the problem will ultimately fail. We must address the systemic causes of the worker shortage — both on the materials and supply side, as well as final construction. We should start by decreasing regulations that stymie development and lowering the cost of entering the workforce.
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Haley Holik is a senior fellow at the Foundation for Government Accountability.
