I’m periodically asked, if I could make one thing happen to solve the housing affordability crisis in the United States, what would it be? I appreciate the desire for a simple answer. Unfortunately, there isn’t one. It took a long time and there are many complex reasons why housing costs are so unaffordable to so many. At NHC, our focus is on furthering solutions that are tangible, impactful, and achievable. That’s the subject of our Solutions for Affordable Housing conference on December 7, where we will hear from many of the smartest leaders in housing, including National Economic Council Director Lael Brainard and Federal Housing Finance Agency Director Sandra Thompson. They are looking for new and innovative strategies in addition to those we already support. It’s vital that we all contribute our intellectual capital to developing new approaches while committing our political and relationship capital to enacting the ones on our agenda today.
As NHC’s Chart of the Week from the latest Paycheck to Paycheck database reveals, the annual income needed to afford a typically priced home in the United States has doubled from $66,710 to $126,420 over the past four years. This is because median home prices have risen from $242,547 in August 2019 to $349,770 in August 2023, while mortgage interest rates soared from 3.31% to 7.51%. Mortgage rates are even higher today. The cost of renting has skyrocketed as well. In Phoenix, Ariz., the income needed to rent a one-bedroom apartment rose 34% — the highest in the nation. Not surprisingly, Phoenix has also seen a 46% increase in homelessness since 2019. Arizona was one of just four states where more than two-thirds of unaccompanied youth under age 25 did not have a place to sleep.
Arizona has experienced immense job and population growth in the past two years, but its housing supply hasn’t kept up. “We can have all the money [to help the homeless] we could possibly use,” said Tom Simplot, Director of the Arizona Department of Housing. “If we don’t have the units to actually house people, that money is basically worthless,” Simplot said.
In its simplest form, our housing crisis is one of a lack of supply, particularly, the supply of housing that is affordable to most Americans. Stockton Williams, Executive Director of NCSHA, an NHC member, wrote about it this week, noting that “a record number of low-income renters — more than 8.5 million — have federally-determined ‘worst case housing needs,’ homelessness is rising in dozens of communities, and the national deficit of affordable homes is in the millions.”
Demand strategies, like downpayment assistance and employer assisted housing, increased funding for counseling, and fair housing enforcement are vitally important. They make housing more equitable and accessible, but they don’t drive affordability. We can do more than one thing at the same time, and we must. We also face serious regulatory barriers to building and investing in housing, like the recent proposal to increase the capital required for banks to lend and invest in underserved communities – and people.
There are bipartisan legislative solutions that will contribute to increasing supply, like the Affordable Housing Credit Improvement Act and Neighborhood Homes Investment Act. While both bills have strong bipartisan support, we do not live in a bipartisan world. As the House of Representatives can’t even elect a Speaker, Congress quite literally cannot name a post office, yet alone fund the government or pass bipartisan legislation.
Historically high interest rates, while helping tame inflation, have also contributed to the increase in housing costs. It is increasingly likely that using higher interest rates to control inflation has reached a point of diminishing return. Compounding the impact of short-term rates is the widening spread between the 10-year Treasury rate and the 30-year fixed-rate mortgage rate. NHC members the National Association of REALTORS®, the Mortgage Bankers Association, and the National Association of Home Builders recently wrote about the crisis in mortgage spreads in a letter to Jerome Powell, Chairman of the Federal Reserve Board of Governors. They urged the Fed to “make clear it does not contemplate further rate hikes and will not sell off any of its MBS holdings until and unless the housing finance market has stabilized and mortgage-to-Treasury spreads have normalized.”
The Biden administration and leaders in Congress recognize this growing challenge, but we have to act this year. NHC is working with all of our members to pass bipartisan legislation and reverse destructive regulatory proposals to address this crisis. Unfortunately, talk is cheap and easy. Without action – tangible, impactful and achievable action, we will not begin the long, hard road to genuine recovery. Housing has a long history of being on the bottom of the list of “top priorities” where only three things get done. Housing has a drawer full of participant ribbons as a result. That’s not good enough, and if we don’t change that harsh reality, the problem – and the cost of addressing it – will grow exponentially.