Banking, home construction, and government leaders urged Congress to advance more reforms that would bolster the housing market.
The fight for more housing is coming to your backyard.
Banking, home construction, and government leaders urged Congress to advance more reforms that would bolster the housing market. Speaking at a D.C. conference at the U.S. Chamber of Commerce, they said the newly passed 21st Century Road to Housing Act misses a number of key issues that impact Americans' ability to buy homes.
The government must now act on dozens of provisions in the bill, and standing up new programs and rules will take time. Lawmakers behind the bill also said they have more ideas for housing reforms. And the industry is lobbying for more changes—and not just at the federal level.
"Half of what we do every day, it really is local politics," Ross Perot Jr., founder and chairman of Dallas-based Hillwood Development Co. "You have to get along with the city councils, the county officials, the mayors to do these big complex projects. The better you are on your politics, the higher probability you'll have success."
The industry insights give a view into what major industries in the housing world are telling Congress and local governments as they capitalize on Washington's focus on affordability.
Financing hurdles for housing
"Increasingly, it is a business topic, and it is a complex one," Karen Purcell, head of Community Development Banking for Commercial Real Estate JPMorgan Chase, told the Chamber. JPMorgan recently announced a $750 billion investment in housing over a decade.
It's not alone. Banks are making major investments in the housing market, such as Citi's "Blueprint for Housing Opportunity Initiative," a $60 billion plan to support the preservation and construction of 250,000 homes. And on Monday, Airbnb announced it would invest $250 million into financing affordable housing projects across the country.
Purcell said her 'aha' moment for housing was how quickly middle-class people have been priced out of the market in recent years, with the salary needed for a middle-income home almost doubling over five years to $124,000, a level only about the top 30% of wage earners. Meanwhile, 169 of 390 metros don't have enough housing stock even at that level.
Citi's advocacy includes pushing for changes to the Low Income Housing Tax Credit, a tool that helps finance affordable housing development with federal tax breaks.
Allowing it to be transferrable would encourage more banks and other investors to put money behind the credit that developers can use, said Jim Bendernagel director at Citi Community Capital.
Construction costs cited as key challenge
As with lawmakers, private industry wants to see changes to the "Build America, Buy America" provisions for federally funded infrastructure projects.
Those rules meant to encourage American companies to use more materials sourced in the United States. But they also apply to some federally financed homebuilding projects, an industry that sources many materials aboard. Industry experts say it further drives up the costs of building a home.
As well, that provision drives up compliance fees across the board, says Gina Metrakas-Suber, head of federal advocacy for Capital One, because builders must examine sourcing of materials and their components.
A study from the National Association of Homebuilders this year estimated compliance fees and other costs add $131,000 to the cost of building a new home. (Bloomberg via Getty Images) In the meantime, Viji Rangaswami, head of government affairs for Liberty Mutual Insurance, pushed back on the mounting criticism of home insurers. She blamed insurance premium increases on construction inflation, including materials and labor costs, and growing time to get permitting and licensing done.
"That's where see, over the last 5 years, the most pressure in terms of setting the premiums, it's on the expected severity of loss," Rangaswami said. While she acknowledged catastrophes are growing more severe, "the largest driver in terms of severity of loss has been inflation. And in particular, construction inflation."
Pro-growth politics
Ryan Benson, co-owner of custom homebuilder A. Vernon Allen Builder, said the industry is wary of NIMBYism and housing opposition. The industry wants to find ways to cut back on compliance costs and fees, which drive up the costs of new homes.
Perot said builders and industry must take a more transactional approach with local government to ensure success.
That can at times mean public-private partnerships and deals, such as taking on private infrastructure. It can also sometimes mean timing, and walking away from deals to come back in a different political climate.
"Politics in our world is very, very local," Perot said. "What we're really pushing, all of us, is deregulation. Good, clean deregulation environment. It makes it easier for all of us to develop our communities quickly."