Why lax zoning regulations won't increase housing supply

Even if the Trump administration eases federal homebuilding regulations, other obstacles could still keep new-home inventory low, experts say.

New policies being ushered in by Trump's administration, but also pre-existing challenges all need to be addressed in order to see the number of houses available for sale increase, Robert Dietz, chief economist at the National Association of Home Builders, said during a housing panel at the National Association for Business Economics conference Monday.

"The big thing to keep in mind is if you fix one of these issues, you have to fix the others too," he said. "There is no single, simple, scalable solution. If you fix the zoning issues, you might not have enough workers. If you fix those things, there's still the issue of financing for builders. It's going to take years to address." 

Tariffs going into effect Tuesday on Canadian and Mexican goods, and a more stringent immigration policy, are negatives for the building industry, NAHB's economist said.

Dietz pointed out that tariffs will affect both lumber and appliance costs, a third of which are imported, inevitably driving up home prices. He also noted a risk of labor shortages in the homebuilding sector, with a third of residential construction jobs held by non-native workers.

In the past month, NAHB has actively voiced its concern about the announced tariffs on all imports from Canada and Mexico.

In January, NAHB urged Trump to exempt tariffs on building materials. It warned that duties on Canadian and Mexican goods could raise construction costs and harm affordability, two issues the president stated he wanted to address in an executive order.

Trump's administration is aware of NAHB's concerns and there are ongoing conversations between the two parties, Dietz confirmed.

Changing zoning requirements to allow for more dense builds and innovating within the homebuilding sector are two areas that NAHB's economist sees potential in increasing supply.

"Townhouse construction now makes up 18% of single-family home building. If you can zone it, builders will build for it," said Dietz. "When I look for optimism, I look at the growth in townhouse construction. I think the market share of townhouses will rise as we move forward."