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58 Palmer, SVP of Single-Family Credit Risk Transfer at Freddie Mac, told the crowd that the GSEs are exploring various ways to bring relief to the inventory and affordability issues. "Right now, there are over 40 million households struggling with the high demand and low supply of affordable single-family homes," Palmer said. e GSEs initiatives include the Home One program, which lets first-time homebuyers put down as little as three percent up front. ere's also the "borrower of the future" program designed to take into account changing demographics such as the increased importance of the so-called "gig economy" among younger potential homebuyers. "You've got a lot of borrowers today who choose to have a much more flexible lifestyle. We want to be able to underwrite them better," Palmer said. Ragland also cites the ongoing government conservatorships of the GSEs—Freddie Mac and Fannie Mae. "e government is still sitting on a massive amount of paper, and that has to go somewhere," Ragland said. "Eventually, that has to be unwound." e White House would seem to agree. On ursday, June 21, the Executive Office of the President released its Reform Plan and Reorganization Recommendations, which included a proposal to "remove the Federal charter from statute and fully privatize the GSEs." e proposal calls upon policymakers to "pursue an approach that would level the playing field with the private sector to decrease the Federal subsidies supporting housing" and states that competition to the duopolistic role held by the now privately owned GSEs would be essential reform to decrease moral hazard and risk to taxpayers. Land is inherent when it comes to providing housing, but in many cases, the challenge is not finding land available for development but rather finding the right type of land in the right location. Even when there is land available, regulations governing its use often haven't kept up with the needs of population expansion. California, with its densely packed markets such as Los Angeles, has been struggling with this challenge in recent months. One California bill designed to allow more housing near transit stops—SB 827—died in committee in April, sending the state back to the drawing board when it comes to solving its housing shortage. "at is the most important piece of legislation anywhere in the country right now, whether at a state or a national level," Kapfidze said. "California is an engine of the U.S. economy, the fifth-largest economy in the world. If we were having a housing crisis in a country with the fifth-largest economy in the world, they would be talking about it at the World Bank and the IMF." e problem certainly isn't limited to the Golden State, however. "Currently, 64 percent of builders tell us that the lot supplies in their market are low or very low," said Dietz. "One of the reasons you find constraints on the ability to build single-family homes is because the approval process is either too costly or takes too long, and it reduces the ability to grow. We need to be growing faster than we are. If we can reduce impact fees or encourage a faster approval process, we can reduce the cost of construction. at will help increase the supply and help us work on the affordability issue." "Another factor to consider is the logistics and transportation problem," Ragland said. "We were recently supporting some housing in an area transitioning from a rural to an urban environment, and we couldn't get trucks out there because the bridges were too old. is goes back to infrastructure. As cities grow and expand, there's no budget to go back to these federally and state-supported highway systems to fix these things. ey're only doing it as they begin to fall apart. It's going to become a larger and larger issue." One reason construction rates are struggling to keep up with demand is that the housing market isn't just facing inventory shortages—it's facing labor shortages. "If you look at Bureau of Labor Statistics data, the job-vacancy rate in the construction sector is the highest it's been in almost 20 years," Nothaft said. In January 2018, Phil Crone, head of the Dallas Builders Association (DBA), told the Dallas Morning News, "We are 20,000 construction workers short in DFW despite wages rising 35 percent for most needed trades." Crone added that 92 percent of the DBA's members cited "lack of labor" as having a significant impact on their business. "In most cases, that's adding a month and more than $5,000 to every home built in our area," Crone said. How to address the problem, however? "One policy that could be worked on by federal, state, and local governments is encouraging more individuals coming out of high school to consider community college and trade schools to be trained in professions that need that workforce right now," Dietz offered. "at's going to require governments working with educational facilities, as well as builders and trade associations representing builders, because we have to recruit the next generation of workers." Builders may also have to figure out how to build smarter and cheaper. "If labor is going to remain scarce, we have to find ways to build more with less," Dietz continued. "at could include increasing what is admittedly a small share of modular construction or factory-built housing. at's about 3 percent of single-family homes right now—that's going to require some investment. To the extent that tax and finance policy can help facilitate that investment and improve the productivity of the construction industry, that would help." at leaves the last L—lumber. It's a factor that's been hit hard by government policy in recent years. In November 2017, President Trump imposed 21 percent import tariffs on Canadian softwood lumber. In June, Dietz discussed the impact of lumber tariffs with attendees at the National Association of Real Estate Editors conference in Las Vegas, Nevada. During his speech, Dietz estimated that the lumber tariffs had increased the price of an average newly built home by around $9,000. "e cost of softwood lumber in the United States has grown almost 60 percent since the start of 2016," Dietz told DS News. "Canadian lumber makes up about 95 percent of the lumber that's imported into the United States, and about a third of the lumber consumed in the United States is imported. It's a good example where trade produces a win-win situation." "ings happen at a federal level, and it "These were some of the most broad-stroke government interactions we've seen since the New Deal. I don't think we will understand the long-term ramifications for quite some time." – Chris Ragland, COO, Noble Capital

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