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 homebuilders 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 break-even point is 90 years.
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’s 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 America, 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. More than 20 percent said they did at least one of the following to stay current on rent: skipped meals, worked extra hours, sold personal belongings.
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-size 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 policies caused the mess in the first place: These energy mandates 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 percent to 3 percent mortgage in exchange for a 7 percent to 8 percent 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 such as building permits are declining; 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.
