America’s scramble for an ever-shrinking supply of housing is shaping the 2024 presidential race, with (former) President Donald Trump and Vice President Kamala Harris walking a tightrope on the politics of real estate.
It comes as Wood Central reveals that the multifamily lending market (considered a new sweet spot for mass timber construction) nosedived 49% last year, with more than 42% of the US $246.2 billion in loans written for Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac:
“Multifamily lending fell by roughly half in 2023 as sales transactions declined and far fewer property owners sought to refinance their loans,” according to Jamie Woodwell, MBA’s Head of Commercial Real Estate Research, which comes after Wood Central reported that developers have been crowded out of a market, now flooded with an oversupply of lumber.
On Friday, Vice President Kamala Harris shared her new housing plan as part of her economic agenda. The plan includes efforts to help struggling renters, crack down on corporate landlords, and spur the construction of 3 million new homes in four years.
So far, the Democratic candidate – who will address the Democratic National Convention later today, has offered a far more detailed plan than her Republican rival. But both face a political challenge that has long bedevilled housing policies and is only getting harder as the affordability crisis has worsened:
“What we want from housing as a country is for it to both be affordable and for it to be a way to generate wealth,” according to Chen Zhao, economics lead at the real estate company Redfin, who spoke to NBC News on Friday. “The problem is that you can’t generate wealth without prices going up, and if prices are going up, they’re no longer affordable.”
And with mortgage rates finally retreating after blowing past 7% in recent months, home buying remains historically difficult. Rents continue to squeeze millions of tenants, with shelter costs up more than 5% since last year, leaving half of all renter households “cost-burdened.” This has led to a situation where the economy is short 2.5 million to 4.5 million homes.
“Supply is the No. 1 thing we must be worried about,” said Zhao. “The main thing we need to do is to build more supply, and one of the main constraints — perhaps the main constraint to building more supply — often is local zoning rules and building regulations.”
That reality is a political minefield – not only does the federal government have limited say over zoning, which can be a community-level flashpoint, but cheaper housing risks reducing property values for existing homeowners, who could seek revenge at the polls.
However, times are changing, with Diana Yentel, the President and CEO of the National Low Income Housing Coalition, saying that “before 2020, when presidential candidates talked about housing at all, it was always about middle-class home ownership.” Now, both parties are prioritising the issue “much more than they have before,” including “the needs of people with the lowest incomes,” said Ms Yentel, in part because of “the severity itself” of the crisis.
While Trump has said that sweeping crackdowns on both legal and unauthorised immigration would free up housing supply for US citizens, the Harris team is attacking Trump’s tariff plan, which it said would drive up the cost of building materials (including huge volumes of plywood and mass timber imported from China and the European Union).
“It’s generally considered that the net effect of immigration restrictions is to put upward pressure on housing costs,” said Scott Lincicome, vice president of general economics at the libertarian-leaning Cato Institute. In addition, some analysts say Trump’s calls for steeper tariffs could drive up the costs of many construction materials, discouraging development.
“In many places, it’s too difficult to build, and it’s driving prices up,” Vice President Harris acknowledged on Friday. “We will remove barriers and cut red tape, including at the state and local levels,” she said.
Wood Central understands that the Biden-Harris administration has already tried to influence zoning through a grant program for municipal governments that want to tweak zoning laws to accommodate affordable housing. While Zhao agreed that funding is “the main pressure” policymakers can apply to seek such reforms, the administration’s housing efforts represent “a lot of nibbling around the edges.”
Can new timber-construction systems help address the squeeze?
Earlier this month, Wood Central spoke to Nick Milestone, the Vice President of Building and Construction for Mercer Mass Timber – one of North America’s largest timber manufacturers, who said developers can now “use full structural steel frames with cross-laminated timber floor decks (to build) full mass timber residential developments.”
Already, Californian developers like oWow are using new types of timber systems (including mass ply panels) to build 25% faster and 15% cheaper affordable housing projects – despite “constrained capital market conditions” making private development far more difficult to finance.
However, Danny Haber, oWOW’s CEO, said that whilst conditions are more challenging, “we believe that this period represents an opportunity for oWOW as the need to offer a high-quality product that is 50% less than competition becomes more paramount,” added that California’s “density bonus laws enable us to double the number of initial units.”
“What we can do is mix concrete, steel and mass timber to create a very dynamic solution which reduces the construction schedule by 20-25%, which can impact the cost of the whole building from between 10-12%,” Mr Milestone said.
“It also makes the structure incredibly lighter, which impacts the foundation design, such as how quickly you can get more follow-on suit trades into the buildings. So, effectively, the developer or the building owner will realise that asset much sooner and get a much quicker return on the investment.”
According to Kevin Naranjo, National Program Manager for Mass Timber at the US Forest Service Wood Innovations Program – now looking to promote timber construction across the United States, timber has significant advantages not just in major centres (like Oakland and LA) but also in urban, regional and rural areas.
“It creates a safer and quieter construction site,” Mr Naranjo said, “you bring a truck in, put the pieces in place, and the truck goes away. Most projects can shave two or more months off construction and occupy the building sooner,” he told Wood Central last month.
“I hope it can solve the housing crisis,” he said, “here in the US, young people are not going into the trades anymore, and as more and more people are moving to urban areas, there are not a lot of trades away from the metropolitan cities,” Mr Naranjo said. “We have a lot of partners that are now banking on prefabricating parts and bringing them in “flat-pack” to solve housing in rural areas.”
