There are several factors contributing to the current housing shortage in the U.S. For starters, low inventory of existing homes for sale has driven up the prices of available housing, leaving many first- and second-time homebuyers unable to afford to buy or trade up. Housing permits for new construction have risen throughout the past couple of years, but they haven’t kept pace with the formation of new households. And while the number of residential construction workers has increased to more than 800,000, the country is nearing full employment levels so contractors are finding it tough to add to their teams.1
Part of the employment problem is the slowdown in immigration due to the documentation and guest worker visa process, designed to permit only highly skilled legal immigrants into the country. As a result, both the construction and agricultural industries find themselves short-handed, further contributing to the housing crisis.2
Supply of available homes has been falling steadily in recent years. Some of the greatest hardships are found at the lower end of the market. The growing number of millennials who are looking for, and can afford, housing could lessen supply even more.3 The potential impact on renters is that a high percentage of their income is devoted to housing costs.4
Fortunately for retirees, more than 78 percent of households age 65 and older own their homes. Interestingly, after age 80 the home ownership rate drops and many become renters.5
The issue is so severe it has a line item among Democratic candidates vying for the presidential nomination this year. Bernie Sanders has proposed a $2.5 trillion initiative for the construction of affordable and mixed-income housing, as well as the preservation of existing housing. Joe Biden proposes investing $640 billion for housing throughout 10 years that would focus on strengthening existing programs.6
For budget hawks, Trump’s proposed 2021 budget, while unlikely to pass in its current form, calls for a 15 percent reduction in public housing. That would result in a total reduction of $8.6 billion from housing programs compared to current levels. The president’s plan includes stricter mandates for work requirements and a higher percentage of contributions toward rent for low-income program participants.7
Fresno Financial Consultant Takeaways
Fresno portfolio advisor– Soutas Financial appreciated these points: There are several factors contributing to the current housing shortage in the U.S. , One of the reasons is because low inventory of existing homes for sale has driven up the prices of available housing, leaving many first- and second-time homebuyers unable to afford to buy or trade up. What does this mean for us? For budget hawks, Trump’s proposed 2021 budget, while unlikely to pass in its current form, calls for a 15 percent reduction in public housing. That would result in a total reduction of $8.6 billion from housing programs compared to current levels. The president’s plan includes stricter mandates for work requirements and a higher percentage of contributions toward rent for low-income program participants.
Soutas Financial & Insurance Solutions Inc. your Fresno retirement planning advisor is committed to helping take the complexity out of retirement planning. By using a variety of insurance and investment products such as trusts, probates, charitable giving, estate planning, or tax-efficient strategies, we can help you develop an overall retirement income strategy specific to you and your family. We have a strong team of professionals helping ensure you receive all the assistance you need not only in developing your retirement income strategy, but in maintaining it throughout your retirement. Contact us today at 559-230-1648 or visit us today at Soutas Financial to get your retirement plans on track for success!
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Content prepared by Kara Stefan Communications.
1 Roger Zellerites. Urban Land. Feb. 26, 2020. “Closing the Efficiency Gap in the U.S. Housing Affordability Crisis https://urbanland.uli.org/development-business/the-efficiency-gap-and-the-u-s-housing-affordability-crisis/. Accessed March 2, 2020.
2 Rebecca Rainey. Politico. Feb. 21, 2020. “Mulvaney: U.S. ‘desperate’ for immigrants.” https://www.politico.com/newsletters/morning-shift/2020/02/21/mulvaney-us-desperate-for-immigrants-785576. Accessed March 2, 2020.
3 Diana Olick. CNBC.com. Dec. 4, 2019. “Next year will be hard on the housing market, especially in these big cities.’’ https://www.cnbc.com/2019/12/04/harsh-housing-forecast-for-2020-especially-in-these-big-cities.html. Accessed March 17, 2020.
4 Jacob Passy. MarketWatch. Feb. 4, 2020. “Even the middle class is having trouble paying rent now.’’ https://www.msn.com/en-us/money/realestate/even-the-middle-class-is-having-trouble-paying-rent-now/ar-BBZDVi9. Accessed March 17, 2020.
5 Linda Yang. Joint Center for Housing Studies at Harvard University. 2018. “Housing America’s Older Adults.” https://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_Housing_Americas_Older_Adults_2018_1.pdf. Accessed March 2, 2020.
6 Georgia Krameria. The Real Deal. March 2, 2020. “Here’s how Bernie, Biden and the remaining presidential candidates would tackle housing crisis.” https://therealdeal.com/2020/03/02/heres-how-bernie-biden-and-the-remaining-presidential-candidates-would-tackle-housing-crisis/. Accessed March 2, 2020.
7 Niv Elis. The Hill. Feb. 14, 2020. “Housing advocates decry Trump budget cuts.” https://thehill.com/policy/finance/housing/484132-housing-advocates-decry-trump-budget-cuts. Accessed March 2, 2020.
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