Here are five fixes for the U.S. housing shortage
Here are five fixes for the U.S. housing shortage
Among the many issues weighing on voters this election was the ongoing housing shortage. Depending whom you ask, the U.S. economy needs somewhere between 3 million and 7 million more housing units than it has, including homes for rent and for sale. The good news is that there are many solutions at the local, state and federal level. While it’s too early to know what, if anything, President-elect Donald Trump and the next Congress plan to do, here are five ideas from a range of housing experts.
1. Legalize variety in housing
“We can just start making it legal to build more types of homes in more places,” said David Garcia, policy director at Up for Growth, a pro-housing advocacy group, which recently estimated the housing supply gap at 3.85 million homes.
Most of the residential land in this country is zoned for detached, single-family houses, and restrictions like minimum lot size and square-footage requirements and height limits make it really hard to build anything else. Just allowing more apartments and duplexes, Garcia said, and those backyard cottages known as accessory dwelling units, would make a big difference.
“So that is one thing that can be done that can unlock a supply of a really popular type of housing that doesn’t cost any money,” he said. “It is really just a change either that the city itself could make or the state legislature could make.”
But many homeowners, and their elected officials, are resistant to zoning reforms that might change their neighborhoods, which brings us to another solution, from Lisa Rice, CEO of the National Fair Housing Alliance.
2. Incentivize zoning reform
Rice said tying federal money for housing and community development, transportation — even disaster relief — to zoning reform could motivate officials to do more.
“Congress could say things like, ‘Look, if you’re a community that is building your fair share of affordable housing, when we have a disaster, you’re first in line,'” Rice said. “But if you’ve got all these exclusionary zoning policies … you can foot your own bill for certain things.”
3. Cut tariffs on Canadian lumber
“We’re adding thousands to the cost of framing a new house because of a tiff with our closest ally,” said Salim Furth with the Mercatus Center, a free-market-oriented think tank at George Mason University.
That “tiff” goes back to the 1980s, when U.S. lumber companies complained that their northern competitors were unfairly subsidized by the Canadian government. After a long truce, the Trump administration imposed new tariffs on imported Canadian lumber in 2017, and the Biden administration has continued the policy.
“I understand the idea of being protectionist towards China and that free trade is traded off against security,” Furth said. “There’s no security tradeoff with Canada, and the spillover is massive in terms of the cost to constructing new houses.”
4. A moratorium on capital gains tax for investors selling to first-time homebuyers.
This one, aimed at helping more people become homeowners, comes from Laura O’Connor, a real estate industry consultant. Though we hear a lot about big institutional investors buying up single-family homes, she said, most are owned by smaller landlords with fewer than 10 properties, and a lot of those owners may not even want to be landlords.
“There’s a significant number of investors today that are accidental,” O’Connor said. “They inherited a home; they don’t know what to do with it.”
But if they sell that home, their tax bill could be 15% or 20% of the proceeds. If Congress suspended that tax for a year or two, O’Connor said, “we can help spur [investors] towards turning that property over and allowing it to become something that feeds that entry-level buyer.”
5. Turn unused office space into housing
Since COVID-19 upended the way we work, office vacancy rates remain high, said Reed Hundt, CEO of the Coalition for Green Capital. But converting buildings requires expensive plumbing; heating, ventilation and air-conditioning; and other overhauls.
To make conversions more appealing, Hundt suggested creating a tax credit for developers that kicks in when the housing is occupied. The more quickly that happens, the bigger the credit.
“Let’s not let people rebuild only for the high end and then wait a long time for the occupant,” he said. “Let’s have the tax credit be monetized when the person moves in. That way, they’ll be pricing to the market.”
Each of these solutions has potential downsides. Tax credits and incentives cost money. Cutting tariffs on Canadian lumber could hurt U.S. producers. Freeing up more housing for homeownership could take away much needed rental housing. But all the experts agreed: There’s no single fix to the housing shortage. It’s going to take all the fixes.
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