Trade group CEO discusses building blockages
Seven years after the Great Recession, U.S. home building faces at least four obstacles to full recovery: financial reform that is choking mortgage lending, a labor shortage, a builder shortage, and government labor and environmental restrictions.
That’s according to Gerald Howard, CEO of the National Association of Home Builders.
Howard was a speaker Wednesday at the OwnOK Real Estate Industry Conference presented by the Oklahoma Association of Realtors at the Embassy Suites Oklahoma City Downtown/Medical Center.
About 1 million new housing units — single-family homes and apartments — will be built this year, Howard said, well off the pace needed just to meet the “organic demand” from household growth and immigration.
That’s close to three times the number of housing starts at the bottom year of the recession, when just 350,000 units were built, but still short of the 1.6 million to 1.8 million needed to meet the natural increase in demand.
Housing did not lead the country out of the recession this time for the first time since World War II, and it still struggles, he said.
That’s partly because, as he acknowledged, home building got carried away with itself with financing resting on dubious use of mortgage-backed securities during the
2001-2005 housing bubble. The bubble building pace was an unsustainable 2.6 million units per year.
Trying to work out of the bust, with commercial construction lenders burned, Howard said the industry turned to Wall Street seeking private equity. He said he and Tulsan Joe Robson, who was president of the National Association of Home Builders in 2009, had a rough go of it.
“We were literally laughed out of offices on Wall Street,” Howard said. “The first year we were thrown out. The second year we were laughed out. The third year they listened.”
Now, he said, significant private equity is invested in housing. About the obstacles? • Financial regulations, in the form of the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act.
Capital requirements on banks took away their flexibility to invest in housing, and the Consumer Financial Protection Bureau is making it too hard for first-time homebuyers to get a home, Howard said.
• Construction labor shortages are delaying building and creating housing bubbles in some locales, driving up both the cost and time it takes to build.
In answer, the National Association of Home Builders is working on job training programs with veterans, moderate-security state prisons and middle and high schools.
• President Barack Obama’s turn “hard left” in the last year of his last term to pay back liberal supporters has brought environmental and labor rules that are onerous for building and other business.
Howard noted that President George W. Bush turned “hard right” in the last year of his last term to pay back conservative supporters.
• The housing bust and recession cost the country builders.
Howard said the National Association of Home Builders lost about half of its membership and that it’s hard “trying to get new builders” and get former builders “to come back.”