Home prices across the nation are back up near a record high. That makes this a particularly bad time for the Biden administration to have rolled out its new “green” energy mandates, which will add $31,000 to the cost of a new home.
The mandates are being pushed through the Department of Housing and Urban Development (HUD) and while they technically won’t apply to all homes, all home builders will effectively be forced to comply with them.
The Biden administration doesn’t deny this higher upfront cost. It simply claims it’ll pay for itself via lower energy bills. Unfortunately, the breakeven point is 90 years.
So if a young couple buys one of these new “green” energy homes and has a child one year later, the regulatory costs still won’t have paid for themselves in that child’s lifetime, let alone the life of the couple who bought the home.
HUD argues that homebuilders will be able to get tax credits, via the Inflation Reduction Act, to offset some of these costs, with those savings hopefully passed along to homebuyers. However, this is not a real reduction in costs; it’s merely passing the buck to taxpayers.
Instead of a homebuyer bearing the full freight of these “green” energy mandates, some of the cost will be passed on to taxpayers, including renters.
This is just the latest example of how failed public policies are creating a two-tiered society in this country, where an entire generation of Americans will likely never be able to afford their own homes.
Amid a cost-of-living crisis, renters today are paying more than ever in housing costs, with half of them reporting difficulty paying their rent on time. Over 20% did at least one of the following to stay current on their rent: skipped meals, worked extra hours, sold personal belongings.
With the average monthly rent for a home up 50% in just four years and the cost of other necessities like food, clothing and energy also skyrocketing, many Americans have nothing left to save at the end of the month. Small wonder the average savings rate today is less than half what it was before the pandemic.
That means many renters can never afford to save for a down payment, so they’re stuck renting forever.
Even those who manage to scrimp and save for their jumbo-sized down payment still may not be able to afford the monthly mortgage payment, which has doubled since January 2021.
Despite record high rental prices, owning a home has never been so expensive relative to rents.
The fallout from people being unable to afford a home goes far beyond dollars and cents. Young people delay marriage and having children. A two-tiered society springs up between the “haves,” who were lucky enough to buy a home at the right time, and the “have nots,” who were too late. Americans become increasingly divided along racial lines. People lose hope.
These new “green” energy mandates will worsen conditions in the frozen housing market for the same reason that other failed public policy caused the mess in the first place: they increase prices.
Runaway government spending caused 40-year-high inflation that drove up prices everywhere, including for housing. Inflation also necessitated higher interest rates, which have made it impossible for many people to sell their homes since that would mean losing a 2-3% mortgage in exchange for a 7-8% one.
Inflation has also driven construction costs to record highs, and those costs are passed to homebuyers in the form of higher prices.
Since most people cannot afford a home at these higher prices, homebuilders are producing fewer houses.
Thus, the supply of new and existing homes has been severely curtailed. The growth in apartment buildings will likely fall sharply and soon, too. Forward-looking indicators like building permits are declining and the number of job openings in construction fell in March by the biggest drop on record.
Less construction of apartments will mean even more upward pressure on rent prices.
Americans need relief, not regulation, in their struggle to find affordable housing.
