Amid skyrocketing shelter inflation, which contributed to over 90% of the recent Consumer Price Index (CPI) surge, the National Association of Home Builders (NAHB) is urging policymakers to implement strategies aimed at alleviating the mounting housing supply crisis. The NAHB's call comes as the Bureau of Labor Statistics reveals a 7.7% year-over-year rise in shelter inflation, emphasizing the urgent need for measures to stabilize the housing market.

Alicia Huey, NAHB Chairman and accomplished custom home builder from Birmingham, Alabama, underscores the vital role of addressing the housing supply shortage in tackling inflation. "The Federal Reserve shouldn't have to fight inflation on its own, as the central bank's ability to address rising housing costs is extremely limited because shelter cost increases are driven by a lack of affordable supply and increasing development costs," says Huey.

 

According to the NAHB, the stark reality of a nationwide housing shortage of 1.5 million units underscores the importance of bolstering the housing supply. NAHB's analysis suggests that building more homes is the primary solution to curb inflation, meet pent-up demand, and reestablish a healthy equilibrium between supply and demand in both the sale and rental markets.

To tackle the issue comprehensively, NAHB highlights the collaborative efforts required from various levels of government. Alicia Huey emphasizes the need for improved efficiency in the residential construction sector and outlines potential policy changes that could facilitate this.
This includes securing a new softwood lumber agreement with Canada, streamlining permit approval processes, enhancing skilled labor training, and repealing counterproductive regulatory rules.

Moreover, the impact of higher interest rates on housing supply cannot be overlooked. Elevated interest rates are hampering financing for land acquisition and development, as well as construction loans, consequently curbing housing supply. The rapid surge in mortgage rates is also exacerbating the situation by discouraging homeowners from selling their existing properties.

https://www.nahb.org/news-and-economics/press-releases/2023/08/boosting-housing-production-can-ease-inflation