Keep Calm & Carry On: the DBA on How the Trump Presidency Could Affect DFW Home Building

We turned to local experts for guidance on what to expect and enjoy in the home building industry. This is the first in a series of posts we will run in partnership with the Dallas Builders Association, a shining star among professional organizations, whom we are honored to proudly partner with.

By Phil Crone, Executive Officer, Dallas Builders Association

I’m neither a Democrat or Republican, I’m a Houser. Housing affordability and the opportunity of homeownership are what our Association specializes in and the conversations are well received on BOTH sides of the aisle. Our industry has succeeded and struggled under both Democrat and Republican Presidents, and the script for our advocacy efforts is usually a predictable one depending on who occupies the White House. As pollsters and prognosticators now wearing egg on their face found out, past performance is not a predictor of future results. A Trump Presidency will be different, but the questions facing the housing market are the same, and their answers will determine the fate of our economy both here in Dallas and for our nation.

The prospect of a President Trump first entered my mind in August when he addressed our National Association of Home Builders Board in Miami. The vast majority of Trump’s speech focused on his experiences with his dad, who was a home builder, how he would pick up extra materials to use for the next job, how he valued his workers from all backgrounds, who put in a good, long, honest day’s work. He further connected with the audience when he said he knew just how much regulation was having an impact on the industry. He cited the significant increases to the cost of health care they were experiencing as a specific item he would address right away. The audience was captivated. Mr. Trump concluded the speech by accusing Secretary Clinton of being the founder of ISIS.

Guess what part of his speech made the headlines?

The last few years of the Obama administration have been pretty darn good for the Dallas-area housing market. Since homes are where the jobs sleep at night, record job growth in our region has led to a red hot real estate market where demand outpaces supply. Whether that success was because of or in spite of President Obama, I’ll leave for you do decide, but the fact of the matter is, we have a pretty strong tailwind pushing our region’s economy. But we also have several challenges. How President Trump confronts those challenges will have a “yuge” impact on our continued success.

First and foremost, we need to address our labor shortage. According to a survey of our builder members in September, the lack of available labor is adding more than $4,000 to the cost of a new home and extending completion dates by an average of two months. Licensed trades are in short supply and consist of an aging workforce. The average age of a carpenter is 49; the average age of a plumber is 56. More than two-thirds of our members cited the lack of unskilled trades, including roofers, framers and brick masons, as having a substantial impact on their business.

We must address the labor shortage from within and without. From within, it involves a culture change that I think Trump is well positioned to be the champion of. The last two Presidential administrations have perpetuated the fiction that success for young Americans is defined by obtaining a four-year college degree. It didn’t matter if that degree led to a career as a barista or a banker.

Working class midwesterners won the election for Trump. Growing up around South Bend, Indiana, I remember seeing the abandoned factories that served as mausoleums of an era where we made things here in America. Our ability to make things drove our economy and won world wars. Homes are one of the few things that we still make here, but we need more craftsmen to make them, especially here in the Dallas area. That means more trade and vocational programs for young people and adults acquiring the skills needed for opportunities that are readily available without student loans. These initiatives fit Trump’s narrative (and the housing industry) perfectly.

Even with more vocational programs, our business will remain heavily reliant on immigrant labor. Without a significant expansion in the guest worker program, a multibillion dollar wall will be a multibillion dollar mistake for President Trump. The vast majority of the construction workforce consists of hard working people who epitomize the American dream of building a better future for their families. An expanded guest worker program that provides the opportunity for citizenship would address national security concerns without crippling our economy. Mr. Trump will not be able to fulfill his grand promises of bringing manufacturing back to this country by walling off the workforce that ultimately installs the products that get produced.

Health care was a focal point of the campaign and it is top of mind for our members who have experienced premium increases by 30 percent or more. Many were dropped by their carriers in the last year. Mr. Trump has vowed to repeal the Affordable Healthcare Act, President Obama’s signature legislative accomplishment. I expect a lot of focus on this in the first 100 days of the new Administration, but with the Republican Congress so far unable to agree on a replacement, a powerful health care lobby to contend with and the lack of a filibuster proof majority in the Senate, reform is more likely than repeal. What that reform looks like is probably another column altogether, but relief from high premiums and a volatile market would be more than welcomed for small businesses.

Mr. Trump has promised to reverse many of President Obama’s executive orders including Waters of the United States, a potentially crippling regulatory overreach that allows the Environmental Protection Agency to regulate bodies of water on private lands, subjecting developers to the costly and time consuming federal permitting process. This and reducing the Department of Energy’s proactive role in energy codes would be welcomed by the industry, and I predict they will occur.

The efficiency of energy codes has increased by more than 30 percent on all new homes during the Obama administration. That’s not necessarily a bad thing if the upfront costs didn’t prevent people from affording the home in the first place. The Department of Energy continues to push for codes that pick product winners and losers instead of promoting market driven advancements. New energy code proposals are currently advanced if their upfront cost is covered in energy savings over a 30-year period; much longer than most people remain in their home. More reasonable proposals now being considered by Congress would reduce that threshold to 10 years and now have a high likelihood of being passed.

Finally, housing finance reform remains a big elephant in the room (pun intended) with the GOP now in charge. Trump’s stance on the topic is hard to discern, as it never came up on the campaign trail or in the debates. The big unresolved question is what to do with Fannie Mae and Freddie Mac, who have remained in conservatorship throughout the Obama Administration, and what role the federal government should play in the mortgage market.

The scars of the housing collapse and resulting recession still loom large on the industry. Congressman Jeb Hensarling, Chairman of the House Financial Services Committee, could potentially reopen them by pushing the Protecting American Taxpayers and Homeowners (PATH) Act, which sought to remove any government role from the conventional mortgage finance market and drastically reduced the Federal Housing Administration’s role in the housing market. Passage of the PATH Act would be the end of the 30-year mortgage. Hopefully, a more balanced approach will prevail that pushes private investment out front but provides a critical federal backstop necessary to ensure stability in the market and avoid another housing crises. Such proposals have received bipartisan support in the Senate.

From labor to regulation and housing finance, there are several key questions that must be answered by President Trump and his administration. How he answers them will have a major impact on the nation’s best housing market, currently found here in Dallas, and the rest of the nation, where housing and the American dream of homeownership remain the primary engines that drive our economy.

A strong housing industry with a robust workforce are truly what it takes to make America great again.