Letter for the Record: Hearing on “Housing Supply and Innovation,” Senate Subcommittee on Housing, Transportation, and Community Development

September 12, 2023

The Honorable Tina Smith
Chairwoman
Subcommittee on Housing, Transportation, and Community Development
United States Senate
Washington, DC 20510

The Honorable Cynthia Lummis
Ranking Member
Subcommittee on Housing, Transportation, and Community Development
United States Senate
Washington, DC 20510

Letter for the Record: Hearing on “Housing Supply and Innovation,” Senate Subcommittee on Housing, Transportation, and Community Development

Dear Chairwoman Smith and Ranking Member Lummis,

On behalf of the J. Ronald Terwilliger Center for Housing Policy, I want to commend you for convening this important hearing. The Terwilliger Center was launched two years ago to advance bipartisan policies that support access to affordable housing. We are driven by the belief that every family, regardless of wealth or background, should have the opportunity to live in a decent, safe, and affordable home. Unfortunately, due in large part to the housing supply shortage, this vision remains out of reach for millions of Americans.

It is not an overstatement to say that our nation is today mired in an unprecedented housing affordability crisis. In most major housing markets, home prices continue to remain at record or near-record highs after prices spiked during the pandemic. On a national basis, rents also increased by nearly 24% between 2020 and early 2023. The median sales price for a home now stands at $416,100, an insurmountable obstacle for millions of Americans seeking to become a homeowner for the first time. At the same time, more than one in four renters (11.6 million households in total) is “severely” burdened by their housing costs, paying in excess of 50% of income just on housing.

At the heart of the housing affordability crisis is the mismatch between the strong demand for housing and the inadequate supply of affordable and available homes. Although estimates vary, the United States has “underbuilt” housing by millions of homes over the past 15 years, never fully recovering from the 2007-2008 financial crisis.

Contributing to the housing shortage are several key factors: the homebuilding industry suffers from a lack of skilled construction workers which significantly hampers the industry’s ability to add new housing stock; restrictive local land-use and zoning policies limit the number of homes and housing types that can be built in communities across the country; regulatory compliance adds significantly to the overall cost of homebuilding, making up an estimated 25% of development costs for single-family homes and 40% for multifamily buildings; and the price of construction materials has remained elevated since 2020, with the cost of wood and steel rising by 16% and 22% in 2023, respectively. More recently, the significant increase in mortgage rates over the past year has discouraged existing homeowners who have benefited from lower rates from moving to new homes, thereby contributing to a lack of inventory for sale.

 To chart a path forward and address the housing affordability crisis, the Terwilliger Center has developed a comprehensive legislative plan, the American Housing Act. Drawing from past and current bipartisan proposals, the plan seeks to improve housing affordability using a three-pronged approach — increasing the supply of affordable homes both for rent and sale, preserving the existing stock of affordable homes, and helping families whose incomes do not match their housing costs through “demand-side” supports such as vouchers.

On the supply front, prompt congressional passage of the bipartisan Affordable Housing Credit Improvement Act and Neighborhood Homes Investment Act is critical. The Affordable Housing Credit Improvement Act would expand and strengthen the Low-Income Housing Tax Credit, our nation’s most effective affordable rental production program, while the Neighborhood Homes Investment Act would create a new tax credit to finance the creation of owner-occupied homes in distressed communities. Together, both bills would help support the construction and rehabilitation of an estimated two million affordable homes over the next 10 years. In addition, passage of bills such as the bipartisan Yes In My Backyard Act would encourage local communities to examine their land-use and zoning practices to allow for greater density and more diverse housing types.

Innovative construction technologies and processes are also critical to help close the housing supply gap. There are already a host of successful examples showing promise in the areas of off-site construction, 3D printing, and the use of new technologies and building materials such as mass timber. These innovations have the potential to lower housing costs and reduce construction timelines by enhancing productivity. Federal policy must support the growth of these burgeoning industries so they will be available sooner to help build up our nation’s housing supply quickly and inexpensively.

A bipartisan majority of Americans believe that passing bipartisan legislation to increase the supply of affordable homes and help address high housing costs should be a priority for Congress in 2023. We thank the Subcommittee for hosting this important hearing and stand ready to assist in advancing bipartisan policies to address the crisis of housing affordability in our country.

Sincerely,

Dennis C. Shea
Executive Director, J. Ronald Terwilliger Center for Housing Policy
Bipartisan Policy Center