Combating the Issue of Affordability

Implement a combination of these strategies to overcome the challenges in delivering on affordability


Despite the seemingly strong state of the economy, with lower unemployment rates and higher wages, it seems that one word keeps dominating the news stories in this industry: affordability.

Affordability is a double-edged sword, affecting both homebuilders and homebuyers alike. Builders are seeking more affordable land and materials while combating a labor shortage. Prospective buyers, on the other hand, are seeking low costs on every aspect, including the price tag, mortgage rates, and long-term utility costs.

Given these factors, finding a solution to the affordability crisis we keep hearing about may prove challenging, but many builders have already begun adapting their strategies.

One combative approach being frequently adopted by builders is that of expanding into the multifamily market. Building condos, townhomes, or apartments allows builders the opportunity to create high-density housing, and homebuyers will appreciate the savings that are incurred.

Many homebuilders are also implementing more energy-efficient features in the homes that they build. The implementation of more energy-efficient features can increase cost-savings in utilities through preventative techniques, such as LED lighting and sustainable insulation. Homebuilders should be informing prospective buyers of how the price tag of a home may not necessarily reflect the value of energy-saving features. A well-educated homebuyer will accept a higher upfront cost of a home to save on utilities long-term.

According to a survey released by the National Association of Home Builders (NAHB), which surveyed almost 4,000 prospective and recent homebuyers, 37 percent of buyers would be willing to spend upward of $10,000 for $1,000 in annual savings on utility bills.

“It’s confirmation that the most attractive green features for home buyers are those that help them save money on energy costs as well as those that improve the air quality inside their homes,” stated Rose Quint, AVP of survey research at NAHB, in a press release.

In addition to the savings on utility costs, sustainable building methods offer affordability solutions for homebuilders, too. Many times, recycled materials are more cost-effective – and sustainable – than traditional building materials.

Innovative design is another essential solution for both sustainability and affordability. This can be done through efforts such as creating open layouts to make compact floor plans feel larger, incorporating elements of indoor-outdoor living to open a space up, and experimenting with variations on common multifamily and single-family architectural styles. These space-maximizing strategies can help builders overcome the obstacles in trying to provide affordable homes.

Greg Ugalde, the newly elected chairman of the NAHB, spoke about the issue of affordability with Builder and Developer Magazine in an interview on page 130, citing one of the large factors contributing to a lack of affordable housing supply: a lack of skilled labor.

“As an industry, we need to push Congress to provide more job training programs to prepare people for careers in home building,” stated Ugalde. “Likewise, we need to ensure that our local school systems are providing options — including skills training — for kids who want good paying careers but don’t want to go to college.”

The second half of 2018 saw the lowest score on the NAHB/Wells Fargo Housing Opportunity Index in years: 56.4 and 56.6 in the third and fourth quarter, respectively. This scale measures the quantity of houses sold in a specific area that would have been affordable for a family earning a median income.

These numbers, in addition to the effect of foreboding headlines, have caused a recent decline in builder confidence. The important thing to remember about this market is that it is cyclical. Increasing pressure on builders to create affordable products eventually does just that, and then the housing market is revivified. A builder’s market becomes a buyer’s market and, when home sales increase, it is only a matter of time before builder confidence increases. In turn, it will become a builder’s market again as demand increases.

There are other cyclical factors of the market, too, one being who makes up the market itself. Currently, Generation X is moving into the active adult and 50+ markets, creating new opportunity for those builders who have been catering to the desires of Baby Boomers. Generation X will bring a change of pace. Additionally, millennial buyers, who have taken longer to enter the homebuying stage of life than previous generations for a number of reasons, are now making a major debut as these prospective buyers reach their 30’s.

Housing reform will need to happen on a large scale to address all of the layers of affordable housing. In the meantime, change is already occurring in this industry, and those builders who are prepared to adapt in their methods will surmount this obstacle with ease.

Julia Edinger is the Assistant Editor for Builder and Developer magazine. She may be reached at

Leave a Reply