Developers nationwide are expected to deliver just shy of a million new single-family homes this year — far from what's needed to meet the demand.
Developers are expected to deliver an estimated 944,000 single-family homes this year, said Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis at the National Association of Home Builders. The Washington, D.C.-based organization represents real estate developers, builders and contractors.
The historical average is 1.29 million, according to the U.S. Department of Housing and Urban Development.
Builders face a handful of challenges to meet demand, according to NAHB reports:
- An estimated skilled labor shortage of about 200,000 people that has resulted in $2.63 billion in higher carrying costs and $8.14 billion in lost single-family home builds — the equivalent of 19,000 homes
- Tariffs that have raised the cost of building materials to nearly $11,000 per home
- Supply-side challenges
- Mortgage rates in the sixes and economic uncertainty keeping some buyers on the sidelines
- A tangle of regulations that accounts for nearly 25% of the cost of building a single-family home
"It’s extraordinarily hard for a first-time buyer without assistance from somebody else to buy a home," said builder Dwight Sandlin of Signature Homes in Alabama. "The biggest impediment on the single-family side is the entry-level market. The second- and third-time buyers have equity coming out of their house."
When housing industry leaders gathered in D.C. on Nov. 18, Homes.com asked them what solutions they are using to get homes built.
They noted three main concepts tied to most solutions:
Tax credits
Developers can tap into federal assistance to build affordable single-family homes, including New Markets Tax Credits. This program, launched in 2000, incentivizes development through private investment in low-income communities in exchange for a reduction in the investor's tax liability.
New Markets Tax Credits are a favorite of Cindy Holler, president and CEO of Community Housing Capital, a lender based in Decatur, Georgia.
"We have a very specific model that allows you to pair that program with homeownership. I like that program, because it allows our borrowers to continue to do community development by bringing affordable homes into the market, but also it provides what amounts to a forgivable loan to their project over a seven-year period that is very flexible," she said. "It allows developers of homeownership projects to do what their markets demand."
Partnerships
Builders collaborate with another development firm to bring more capital upfront to a project. For-profit and nonprofit partnerships can be especially fruitful, said Anthony Simpkins, president and chief executive officer of the nonprofit community development organization Neighborhood Housing Services of Chicago. Nonprofit leaders bring access to public funding and for-profit enhances development capacity.
Subsidies
Subsidies allow developers to keep down costs. Builders rely on a variety of subsidies to make the numbers work, including down payment assistance, land donations, and grants.
"Subsidies are helpful, because often the cost of developing housing often exceeds the price at which you can price it or sell it affordably," Simpkins said.