Connecticut lawmakers on three legislative committees tried to tackle the real estate market Tuesday during an informational session on home sales, affordability, and construction.
Jessica Lautz, chief economist and vice president of research for the National Association of REALTORS, told the Housing, Planning and Development and Insurance and Real Estate Committees, that there are only 3,600 homes for sale in all of Connecticut. That’s down from 17,000 homes for sale in 2017.
The median price for a single-family home has also increased from $235,000 in 2017 to $339,000 in 2022.
But Connecticut still remained more affordable than the Boston and New York metro areas driving in a small number of new state residents over the past two years.
However, with interest rates for a 30-year fixed-rate mortgage at 6.3% things are very tough for first-time homebuyers.
The increase in the interest rates alone adds $700 per month to a mortgage payment and has pushed many, according to Lautz, into the rental market where rents are also up 20 to 30% “making it hard to afford a downpayment.”
Lautz said the lack of inventory is contributing to the problem.
Robert Dietz, chief economist and senior vice president for economics and housing policy at the National Association of Home Builders, said home building has been down since the Great Recession.
He said the cost of building a new single-family home has gone up 35 to 40% since the start of the pandemic.
Couple higher construction costs with higher home prices and a jump in mortgage interest rates and Dietz said it prices a lot of demand out of the market.
He said only 42% of new and existing home sales nationwide are considered affordable. He said migration may have increased slightly in Connecticut, but over a longer period of time it’s remained largely flat.
Dietz told the committee there are still supply chain problems and skilled labor issues that contribute to the decrease in inventory, but one of the biggest roadblocks has been regulatory costs.
Regulation costs $93,870 per new single-family home. He said whatever lawmakers can do to lower that cost will help grow the number of houses on the market.
He also warned against capping rents.
He said the rise in rents is a function of the lack of construction. He said rent control acts as a tax on supply and limits the solution which is construction.
When it comes to building Dietz said lawmakers have to be looking at building greater density housing and letting go of exclusionary zoning or aesthetic requirements.
Gov. Ned Lamont tackled the issue of housing in his Jan. 4 state-of-the-state address.
“The biggest slam to our affordability and economic growth is housing, or the lack thereof,” Lamont said. “Every business thinking about moving or expanding repeats over and over, ‘Even if you had the workforce, there is no place for them to live.’ The answer cannot simply be more subsidies. Connecticut towns and cities, you tell us where developers can build more housing so more housing can be built faster, at less cost, and local control will determine how and where it is built.”
For lawmakers Tuesday there were no easy answers about how to get there.