U.S. homebuilding reached a two-year low recently, and it’s worth investigating why. Simply put, despite low mortgage rates and a strong economy, fewer homes are being built.
Labor shortages are a serious problem in the construction industry, but they are largely regional in nature. In some areas, there is a serious dearth of workers, while there might be an excess in another area. Still, there don’t seem to be enough workers to do the job.
Wages need to be commensurate with the risks and hours associated with a particular field for workers to view a job, especially one as dangerous as construction, as being worth pursuing. Another issue is the lack of technical education, which I have written about recently.
But there exists a much more basic issue: a lack of productivity. We build houses in more or less the same fashion as we have for the last 30 or so years. There has been no “disruption” of the homebuilding industry.
Much of that, in turn, has to do with regulations passed by local governments and homeowners associations which make alternative forms of housing impossible to build. Since all of these laws make building a home more expensive, homes have to fetch higher prices to be worth building in the first place. Since fewer people can afford that price, fewer homes are built.
The solution is simple: Gut zoning laws, implement taxes on luxury housing and on the building of homes beyond a certain square footage, and create tax credits for affordable market-rate and below market-rate homebuilding.