Regulatory relief, not subsidies, can make housing more affordable

Housing affordability has become a major issue – and for good reason given skyrocketing home prices and high mortgage rates coming at a time when many aspiring homeowners are struggling just to make rent. Vice President Kamala Harris has suggested a number of new subsidies to remedy these problems, including providing $25,000 in down payment assistance to first-time homebuyers. But there is a much better approach than simply handing out checks, and that is to reconsider the federal climate change regulations that are contributing to rising home prices.    

Most recently, the Department of Housing and Urban Development (HUD) has imposed ultra-stringent building efficiency standards on any new homes qualifying for federally-backed mortgages. Though championed by climate change activists, these new standards are very bad news from a housing affordability standpoint. According to a study from the National Association of Home Builders, they could raise the cost of a new home by up to $31,000. Even a fraction of that estimate would be enough to make housing prohibitively expensive for many more would-be homebuyers. Adding insult to injury, the claimed energy savings from this ill- advised measure are likely far too minimal to justify the higher up-front cost.

Home appliances are also the target of regulations that boost home prices. Central air conditioning is the most expensive such appliance, and the installed cost of a new unit has gone up by thousands of dollars over the last 5 years, driven by regulatory costs and other factors. And the red tape keeps growing, including a new Environmental Protection Agency requirement that all systems manufactured after January 1, 2025 use refrigerants approved by the agency as sufficiently climate friendly. Based on what manufacturers are saying, we can expect a price jump well into the hundreds of dollars, pushing new home costs even higher.

Other regulations will also increase appliance prices. In fact, the Department of Energy (DOE) is in the process of setting new energy efficiency regulations for furnaces, dishwashers, water heaters, ceiling fans, washing machines, stoves, and more. For example, residential electric water heater prices will jump by $953 when a new regulation takes effect in 2029, according to DOE. And this is but one of many such regulations already in place or coming over the next several years. It adds up.

 Granted, high interest rates – over which excessive federal spending is undoubtedly a contributor – get most of the attention when discussing housing unaffordability. And other federal polices, including recently-increased tariffs on Canadian lumber – don’t help either. But regulations at all levels of government are estimated to comprise fully 25 percent of a new home’s cost. Several of these are recently-enacted federal climate change measures, all of which come with their own price tags and need to be back on the table in any serious attempt to stem the increase in housing costs.