How to Make Housing More Affordable
November 2021
By Nico Hohman
Recently, CNBC and the National Association of REALTORS shared an article about the challenges buying a home as a first-time home buyer.
With a decrease in the supply of homes, an increase in the price of homes, a tumultuous labor market, and an ever-evolving pandemic, it is no wonder first-time home buyers are struggling to afford their first home.
Real estate professionals are now best suited to help the clients they wish to serve most.
While it is great to know the extend of all of these problems, the articles don't share any solutions to this issue. It's great to know that you're digging yourself into a hole while you're doing it, but the only way to get out is to stop digging.
This issue of housing affordability is only going to get worse before it gets better. However, there are ways that more first-time home buyers can actually afford a median home in their desired locality if programs and initiatives are either created or better enforced.
Specifically, there are ways that members of the National Association of Realtors can help address this issue. After all, that's what REALTOR members are here to do. That's who we are.
Down Payment Assistance
In a fast moving housing market, one that favors sellers over buyers, the offer that stands above the rest is usually the one that offers the highest price with the fewest contingencies. The often means cash offers or offers with very few strings attached (re: no financing contingency) are the ones that win the bidding wars.
Sellers are forgoing offers that include FHA financing, VA financing, or financing methods that require more than 80% LTV for fear that offers with these contingencies will not close on time or at all.
In instances where the credit-worthiness of the home buyer is not in question but their cash equity is low, first-time home buyers should be eligible for more down payment assistant programs. Institutions and organizations from federal, state, and local government entities to nonprofits and trade organizations - like the National Association of Realtors - should create funding programs specifically for these buyers.
These programs could be anything from outright gifts, to grants, to forgivable loans, to traditional second mortgages. Whatever the case, the more cash that can be infused in the hands of first-time home buyers, the more likely their offers will be picked by selective sellers.
Increase Funding for Workforce Housing
In some instances, even when a potential home buyer does everything in their power to be able to afford a home, they can still be left without. In those instances, it should be the responsibility of state and local governments and nonprofits to step up their support of workforce and affordable housing.
In many instances, there are special taxes and ordinances that collect money specifically for affordable housing. Yet, lawmakers regularly choose to spend these funds elsewhere.
Let's use housing funds for housing.
Eliminate Exclusionary Zoning
To get more affordable housing you simply need more of it. Existing home owners are sparsely selling their homes and home builders can barely keep up with the demand of pent-up buyers. We need a force greater than that of the competitive market.
Local zoning boards and councils should find ways of reducing or even eliminating entirely the single-family home zoning ordinance in most situations.
Existing home owners (who often become NIMBY-esque once they become homeowners for an extended period of time) are often the ones most forcefully against change. However, more evidence has been presented that this mindset is counterintuitive. Not only is embracing more homeowners the socially-acceptable thing to do, it has also been proven to be the economically beneficial thing to do. Locals can survive - and thrive - with more housing in their backyards.
Let's be encouraging of and more comfortable with more neighbors and with more diverse neighbors too.
It is great to know the problems, but it is even better to know the solutions. Don't present me with the issues, present me with the fixes. Let’s be proactive and share solutions. Let’s be the local community partners these buyers need most.
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Nico Hohman, the Founder of Eaactive Leadership, is an award-winning leadership, real estate, and construction consultant with an extensive background in business development, sales training, and change management roles throughout the United States. Nico serves business executives and aspiring leaders on how to sustainably grow their organizations through better use of their physical and knowledge-based assets. Nico's focus is to help others be leaders in their communities, guide their followers, and make better decisions using the findings of their personalized Eaactive Leadership Style Assessment (ELSA). You can connect with Nico on LinkedIn and get the latest daily updates on the Assorted Questions & Such blog.
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