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For Immediate Release

Statement of David M. Dworkin, President and CEO of the National Housing Conference on FOMC announcement

Contact:

Whitney Sarkodie

914-907-3829

WASHINGTON, DC: Today’s announcement by the Federal Reserve Board’s Federal Open Market Committee to increase interest rates by an additional 75 basis points will drive up the cost of housing and may fail to adequately reduce inflation. Housing supply deficits, made worse by increased interest rates, are likely to blunt the anti-inflationary impact of the Fed’s rate hike as the housing supply continues to shrink, offsetting the impact of interest rate-driven reductions in demand.

Housing affordability is the worst it’s been in decades. Rising shelter costs, especially rent, conspire with higher interest rates to drive up inflation. Rent costs are up 25 percent since the beginning of the pandemic. For first-time homeowners, the cost of the American Dream has never been higher. According to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, the median home price has risen to a record $440,300 from $329,000 in March 2022. As a result, the annual income necessary to buy a home has nearly doubled from $64,400 to $120,000. It is safe to say that no one making under $100,000 has received a $50,000 salary increase over the past two years.

Interest rates for new construction loans are over 8 percent, constraining supply and undercutting the demand impact of higher interest rates, while fewer homeowners can afford to list their homes for sale. There is no way to solve inflation without addressing housing supply. The law of supply and demand cannot be repealed. As we saw in last week’s report on the Consumer Price Index, despite falling fuel costs, rising housing costs continue to keep inflation at historically high levels. Inflation is not under control and housing is the major reason why.

Congress must take action to increase affordable housing production. The Biden Administration and bipartisan leaders in Congress must work together this year to address the housing supply and affordability crisis. Legislation like the Affordable Housing Credit Improvement Act and the Neighborhood Homes Investment Act have bipartisan support and would create 2.5 million homes over the next ten years. While there is no magic wand to solve the housing affordability crisis, if we do not increase supply, it will continue to worsen next year and the year after that.

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The National Housing Conference has been defending the American Home since 1931. NHC is a diverse continuum of affordable housing stakeholders that convene and collaborate through dialogue, advocacy, research, and education, to develop equitable solutions that serve our common interest – an America where everyone is able to live in a quality, affordable home in a thriving community. Politically diverse and nonpartisan, NHC is a 501(c)3 nonprofit organization.

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