Dodd-Frank Drives Home Prices Up, Suppresses Affordable New Home Construction

Economists are starting to acknowledge that the lack of supply in the housing market, especially the supply of affordable single family homes, is one of the main drivers for the rise in home prices observed in early 2016.

While a number of variables can cause reductions in housing supply, repercussions from excessive Dodd-Frank regulations, especially on the availability of financing for smaller commercial properties is clearly a significant variable. If homebuyers don’t have healthy access to lending in order to purchase a home, why would home construction companies build new ones? This kind of market distortion is particularly harmful for low-income and first time homebuyers who are being priced out of the market.

NAR Chief Economist Lawrence Yun recently acknowledged this problem stating, “Much of the lending for single family housing starts historically has been among the community bank and the smaller-sized banks. Smaller banks are hindered by this (Dodd-Frank) massive new regulation. Now they are frozen, and they are not making those loans.”

Government policy that cuts off healthy access to lending is proving devastating for low-income and first time homebuyers who no longer have affordable home options. Congress should repeal the Dodd-Frank Act.

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