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Bill Introduced to Address Affordable Housing Crisis

Sens. John Thune of South Dakota and Jerry Moran of Kansas have reintroduced the Housing Supply Expansion Act, a measure that would address the shortage of affordable housing options across the nation by making targeted reforms to requirements under the Davis-Bacon Act, a 1930s-era labor law. These reforms would reduce labor costs and administrative burdens on residential construction contractors, which would free up capital that could be redirected toward building additional affordable housing.

“Affordable housing shortages directly affect prospective homebuyers and renters, but they also impact small businesses that are trying to overcome pressing workforce needs,” said Sen. Thune. “I continue to hear about this issue from folks across South Dakota, and I’m proud to lead this common-sense legislation that would reform archaic requirements in the Davis-Bacon Act, cut through its overly-burdensome red tape, and increase the supply of affordable housing.”

Enacted in 1931, the Davis-Bacon Act requires construction contractors involved in certain federally funded or federally assisted construction contracts, like those participating in various federal housing programs, to pay individuals working on the contract at least the prevailing wages of the vicinity in which the construction project is located.

“Purchasing a home is a part of the American dream that is currently out of reach for many families,” said Sen. Moran. “Reducing the burden of federal regulations will help homebuilders meet the demand for new homes, making homeownership a reality for more Kansans.”

The Davis-Bacon Act–as it stands–can disincentivize the construction of affordable housing due to the high costs it places on construction contractors and the administrative burden that accompanies it. The U.S. Department of Labor (DOL) sets these prevailing wage rates by reviewing data submitted by construction contractors through voluntary surveys, which can be, at times, inaccurate or inconsistent. Last year, DOL initiated a rulemaking that would revise certain tenets of the Davis-Bacon Act.

The measure has received praise from several industry trade groups, including the National Association of Home Builders (NAHB) and the Mortgage Bankers Association (MBA).

“NAHB commends Senators Thune and Moran for introducing this bill, which will help lower housing costs by streamlining and modernizing Davis-Bacon prevailing wage requirements,” said Alicia Huey, Chairman of the NAHB. “A recent Berkley study found that prevailing wage requirements raise construction costs by more than $30 per square foot. This means that current Davis-Bacon requirements are increasing construction costs by at least $27,000 for an average 900-square foot apartment, which ultimately translates into higher rents. To solve the housing affordability crisis affecting our communities, Congress needs to look at all the factors driving up housing costs. The nation’s home builders strongly support this legislation.”

Bill Killmer, SVP of Legislative and Political Affairs at the MBA, added, “The MBA commends Sens. Thune and Moran for taking action to improve and encourage access to quality affordable housing. The improper application of Davis-Bacon wage rates is an unnecessary barrier to the modernization and development of multifamily housing, and this bill will help reduce the administrative burden and complexity for residential housing projects. MBA will continue to advocate on behalf of policies that both ensure a healthy real estate market and provide consumers with sustainable housing choices.”

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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