• Home prices and rents in the US have risen in part due to a housing shortage.
• There are four main obstacles to building more homes, according to one industry leader.
• These are the cost of land, a shortage of construction workers, regulations and NIMBYism.

The US is suffering from a severe housing shortage, which is causing skyrocketing home prices and rents.

The laws of supply and demand explain this: the shortage of supply – estimates range from 2.8 million homes to more than 7 million homes – combined with a rebound in demand in recent years has caused prices to soar .

The leader of the most important trade association and lobby for the housing sector thinks there are a few major obstacles to solving that shortage. Jim Tobin, CEO of the National Association of Home Builders, blamed high land costs, a shortage of skilled construction workers, burdensome government regulations and anti-development “Not in My Backyard” sentiment for the housing shortage.

Cost of land

The cost of land – a significant portion of the cost of a home – has risen significantly in many places in recent years as its availability has plummeted, exacerbated by high demand for housing and restrictive land use laws that restrict dense prohibit construction.

At least 75% of residential areas in many major American cities such as Los Angeles, Seattle and Chicago are zoned exclusively for detached single-family homes. This means that as housing demand increases, these communities cannot accommodate many additional homes. As demand exceeds supply of land, prices rise.

“We’re hearing more and more that it’s harder to find affordable land to develop for housing,” Tobin said.

A labor shortage

A national shortage of construction workers — estimated at about 500,000 workers this year — has also driven up the costs of building new homes and renovating existing ones, Tobin said, noting that the skilled labor industry is in particularly short supply.

Fewer construction workers means less – and slower – home construction and higher wages for workers, which in turn leads to higher home prices. Labor shortages have worsened as policymakers have emphasized education over trades and a wave of experienced workers have retired during the pandemic, industry experts say.

Lots of regulations

Tobin also pointed out that builders face significant regulatory burdens. Rising demand for housing in recent years has run headlong into a web of local, state and federal regulations — from restrictive single-family zoning to energy code requirements — that are slowing or even halting housing construction in communities across the country, said he. When it comes to housing, state and local governments control over most of the regulations that drive up housing costs the most by limiting or slowing construction, but federal regulations also play a role.

“These delays all add up to more costs and less availability,” Tobin said. “We need all options when it comes to increasing housing supply, which means allowing for more density in suburbs or cities.”

‘NIMBY’ Opposition

Many of these restrictive rules are reinforced by local resistance to new housing — epitomized by the sentiment “NIMBY” or “Not in my backyard,” Tobin said. Many local homeowners oppose new construction for the simple reason that additional housing in their community would depress the value of their homes, he argued.

“One of the challenges we face in places across the country is people who already have theirs, and they don’t want anyone to have theirs,” Tobin said. “We have local government officials who don’t want to support more housing development because they fear the backlash from local voters.”

The future of housing

Tobin said the strength of the overall economy and interest rates will also play a major role in determining housing costs in the coming years. He expects mortgage rates to reach a “new normal” of around 5 to 5.5% in 2026, lower than current 30-year fixed interest rate of 6.79% but above the pre-pandemic average.

Looking into next year, Tobin said he expects President-elect Donald Trump to have a mixed impact on housing costs. He is optimistic that Trump will roll back some federal regulations and free up federal land for new housing, but he is concerned about mass deportations that could reduce the already scarce supply of workers and new tariffs that will drive up the cost of building materials.

Tobin said he plans to work with Trump’s transition team, the new administration and Congress to advocate for tariff policies that don’t increase construction costs. “I would certainly welcome an increase in domestic industry when it comes to building materials,” Tobin said, “but tariffs only work if that is the outcome.”