Donald Trump Executive Order on Affordable Housing

[Art Perkitny]

Read this the other day regarding Donald Trumps recent executive order on examining the affects of regulatory barriers at the Federal, State, local levels on the availability and development of affordable housing. 

https://www.whitehouse.gov/presidential-actions/executive-order-establishing-white-house-council-eliminating-regulatory-barriers-affordable-housing/

The order states that the council endeavors to encourage State, local, and tribal governments to reduce regulatory barriers to the development of affordable housing.

Which in turn, aims to increase the supply of affordable housing.

I asked myself what effect will the have on the REI space and my first thought was that the increase in supply will cause rent and values to slow down or possibly even stagnate all together.

Then I considered the question, is affordable housing even really affordable without government subsidies?

To say, will reducing regulatory overhead really drive down the cost of new construction so much that private owners will be able to make adequate returns while charging affordable rents?

The White House states that more than 25 percent of the cost of a new home is directly related to federal, state and local regulations and up to 42 percent for some new multifamily constrictions.

If the above is factual, then the a dramatic increase in low priced rentals should occur and drive supply up. If demand is met or exceeded, then this policy could have the potential to increase vacancies, lower rents and reduce property valuations for lower end real estate. 

if not, then the policy (if abused), may only serve to speed up the development of high-end rentals and consequential leave the low to mid end market largely unscathed. 

Curious what other BP members think about this? 

[Mike Dymski]

Of all the housing trends discussed on BP, the only undeniable one is the severe lack of affordable housing in the country (and this is not referring to starter homes).  There are many markets where the wait list is in years for low income housing availability.

• Rents have dramatically outpaced wages
• Baby boomers are living longer
• Corporate income tax rate cut makes affordable housing tax credits less valuable
• Rising labor and material costs makes it expensive to build
• Land is expensive in metro markets; so, it's only economical for developers to build at the high end
• Hurricanes have driven down the availability of construction labor and driven up the cost
• NIMBY regulations

The shortage is so severe that it may never be resolved in my lifetime.  I would not be concerned about reduced rents or increased vacancy in the low income sector at a macro level any time soon.