New housing construction slowed as campaigns focus on affordability
Building a new house takes awhile, and now the pace is slowing down even more, underscoring challenges for Vice President Kamala Harris and former president Donald Trump as they pitch voters on their plans to make housing more affordable.
Data released Friday on housing construction showed that new building permits issued nationwide fell 2.9 percent in September compared with August, and were down 5.7 percent compared with the year before. Housing starts - marking when construction begins - dipped 0.5 percent, though there was more progress for single-family units, specifically, compared with August. Housing completions, the final step of the process, were down almost 6 percent.
And since a house might not be completed for a long time after it gets permitted, experts say finished projects are on track to slow even more in the months and years ahead.
“Everything is now moving downward,” said Joe Brusuelas, chief economist at RSM. He noted that the country is short more than 3 million homes and is building only about 1.35 million at an annualized pace. “That is simply not sufficient to meet basic demand,” he said.
Zoomed out, the latest figures from the Census Bureau and the Department of Housing and Urban Development highlight how federal and local policies alike can influence housing - and how people experience the economy in their daily lives. In Washington, high interest rates set by the Federal Reserve in 2022 and 2023 slowed new construction, since steep borrowing costs make it harder for developers to finance new projects, and also sent mortgage costs up, cooling buyer demand. More recently, housing has dominated as a major campaign issue in the run-up to the November presidential election: Harris has shaped her proposals around building millions of new homes, while Trump argues that mass deportations of undocumented immigrants will free up supply.
But the journey from a permit to a new home also overwhelmingly depends on state and local laws around zoning and construction. A high-rise that can go up in one neighborhood may not be allowed just down the road. Permitting squabbles can delay projects for months. Unexpected construction costs - for materials, labor or government fees - may force a developer to pull out of a project altogether.
Diane Swonk, chief economist at KPMG, pointed to years of insufficient construction making housing unaffordable for so many. New building slowed after the Great Recession, and training for skilled trades and construction ebbed, too. Then the pandemic torpedoed through supply chains and spurred an acute shortage of workers.
“These are all issues that are really important to look at but that can’t be solved with a silver bullet at the federal level, or they would have been,” she said. “This is where ‘all politics is local’ really holds.”
Still, there could be changes ahead for the broader market. The Fed has started lowering interest rates and is expected to follow its initial cut in September with more later this year and next.
Another major shift could hinge on who wins the presidential election.
Harris’s plan puts a unique emphasis on building more homes - 3 million of them around the country - and creating a $40 billion “innovation fund” to help local governments build more affordable housing. She is also promoting plans to provide first-time home buyers with $25,000 down-payment assistance, though many economists fear that will boost demand before supply can catch up and put even more pressure on prices.
Trump’s plan doesn’t tackle new construction. Instead, the focus is on freeing up existing homes that he claims are occupied by undocumented immigrants, whom he wants to deport by the millions. Economists have widely debunked this claim, saying other forces play a much bigger role in driving up prices and that undocumented immigrants are more likely to live in lower-income rental units than owner-occupied houses. They also note that new immigrants make up about a third of the construction workforce, which would be a crucial part of the push to build new homes and fix years-long shortages.
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