Christmas in June: This Time NAR Got What It Wanted

Over the past two weeks, the housing industry hasn’t had much to celebrate – following the trend.

First, NAR Chief Economist Lawrence Yun reduced his forecast for existing home sales growth from 14% to 4%. That’s not a small revision. It’s probably still rose colored glasses, but a reminder that high rates, affordability challenges, and economic uncertainty continue to weigh on the market.

Then came the Federal Reserve. While nobody expected a dramatic pivot, the message from the new chair in his first official meeting wasn’t exactly up lifting. Rates appear likely to remain higher for longer, and the path to cheaper financing looks slower than many in housing had hoped.

Then, Congress delivered a gift.

A bipartisan housing bill, years in the making, cleared both chambers and headed to the President’s desk, who has been advocating this bill as a win for his party pre-midterm.  NAR got much of what it had been advocating for. Builders got several items from their wish list. Homebuyers and renters may eventually see some benefit as well. This is great news.

Call it Housing Christmas in June.

No one is waking up to a new bike under the tree, and this bill won’t solve the housing shortage overnight. But after a few years of economic coal in the industry’s stocking, housing finally got something worth unwrapping.

UnAffordability 

The bill contains dozens of provisions, but most point toward the same conclusion: America needs more housing, with greater affordability.

For years we’ve tried to address affordability from the demand side through lower rates, tax incentives, down payment assistance, and specialized financing programs. Those efforts can certainly help individual buyers, but they don’t create more homes. At some point affordability becomes a supply problem, and supply problems require more supply.

Obvious? Perhaps, but housing policy often gets distracted by symptoms instead of causes. The country has underbuilt for years. Builders never fully recovered from the Great Recession, population continued to grow, households continued to form, and supply failed to keep pace. We’re now living with the consequences.

The encouraging part of this legislation is that lawmakers from both parties appear to agree on the diagnosis, even if they disagree on almost everything else.

This Time NAR Did Its Job

If you’ve read this blog for any length of time, you know I’ve never been accused of being NAR’s biggest fan.

I’ve questioned its priorities, criticized its leadership, and written about commission lawsuits, sex scandals, and what I viewed as an organization that sometimes spent too much time protecting itself and not enough time addressing the industry’s biggest challenges.

Earlier this month NAR held it’s Legislative Meetings in Washington, D.C. as they have for decades. Ironically, for what I believe is a first, Congress wasn’t even in session.  As someone who enjoys pointing out irony, that struck me as a strange time to bring thousands of REALTORS to Capitol Hill. The whole point is Hill visits, after all.  I don’t think I was alone in thinking that the event was a bust, however…

This housing bill was the result of a broad bipartisan effort involving lawmakers, builders, lenders, housing advocates, community organizations, and yes, NAR. NAR wasn’t the star of the match, but they were on the roster and frankly they should have been.

Housing supply is one of the most important issues facing the real estate industry. If REALTORS® want more transactions, consumers need more homes to buy. If renters want relief, we need more housing options. If first-time buyers want a realistic shot at ownership, we need more inventory.

Manufactured Solutions

One provision that caught my attention involves manufactured housing and efforts to reduce construction costs. Not because I’m particularly passionate about manufactured housing, but because I appreciate affordability.

A few months ago I attended the HousingWire Economic Summit and listened to builder Wade Jurney explain housing affordability in the simplest possible terms:  For every $1,000 increase in the cost of a home, roughly 100,000 potential buyers are priced out nationally.  Small increases in price, eliminate entire groups of potential homeowners.

Builders can’t control interest rates, but they can control costs. Smaller homes, standardized materials, simpler finishes, lower ceilings, and less waste all add up.  

The manufactured housing provisions in this bill strike me the same way. They suggest that Mfg homes remove the steel frame that makes them “mobile”.  This would reduce the cost. If changing outdated regulations allows builders to safely deliver housing at a lower cost, we should at least be willing to have that conversation. 

Multifamily Matters

I was also encouraged to see multifamily housing included in the discussion.

America doesn’t just need more single-family homes. We need more housing of all types, including apartments, townhomes, duplexes, manufactured housing, and starter homes.

A while back I wrote about the possibility of a modern version of the Los Angeles dingbat: smaller units, transit-oriented locations, fewer parking requirements, and built for ownership rather than rent.

Not every first-time buyer needs a three-car garage and a wine fridge. They need a payment that fits.

For decades we’ve layered on requirements, amenities, parking mandates, and regulations that quietly increase costs. Some of those requirements make sense. Some deserve another look.

Parking is a good example. In many markets structured parking can add tens of thousands of dollars per unit, yet younger buyers increasingly prioritize proximity, walkability, and access over square footage and garage space.

The future first-time homeowner may not need more features. They may simply need a lower monthly payment.

Keeping Investors in Check

The provision limiting institutional ownership of existing single-family homes will probably receive the most attention.

Politically, it’s easy to understand why. Most Americans don’t love the idea of large investment firms competing against families for homes. I’m supportive of keeping institutional investors in check (in theory). The challenge is that real estate investors are incredibly creative. If there’s a loophole, somebody will find it.

Multiple LLCs, partnerships, affiliates, and ownership structures can make enforcement difficult, and I suspect we’ll be debating the real impact of this provision for years. Still, policymakers are acknowledging a concern many consumers have expressed for a long time, and that’s a worthwhile conversation – if even there only for the headlines.

Will It Work?

The biggest criticism I’ve heard/seen from builders and housing advocates is that many of the barriers to housing aren’t federal. They’re local.

Zoning restrictions, density limits, parking minimums, approval timelines, and neighborhood opposition all play a significant role in determining what ultimately gets built. Washington can create incentives, but local governments still make many of the decisions that shape housing supply.

That means affordability won’t improve overnight. Housing shortages took years to create, and they won’t disappear in a single election cycle.

So if you’re expecting affordable homes to magically appear next month, you will be sadly empty handed.

But if it helps communities build more housing, modernizes outdated regulations, encourages multifamily development, and reduces unnecessary costs, it’s a step in the right direction. And, that’s a better gift than many of us expected from Washington, and NAR this year.