It's hoped it will ease housing supply logjams
Industry reaction began to pour in after Congress this week passed the Ocean Shipping Reform Act, a step toward mitigating delays in shipments of homebuilding materials and other supplies.
The US House of Representatives approved the legislation aimed at improving oversight of ocean shipping, which pundits see as a step toward easing inflation while losing export backlogs. After approval on a 369-42 vote, the measure now heads to the White House for a signature from President Joe Biden to enact the legislation into law.
The measure was previously passed by the Senate in March.
“Anything that we can do in order to encourage more moderate- and low-income housing to be built is something that’s key for America,” Melissa Cohn – regional vice president of William Raveis Mortgage and an industry veteran with 40 years of experience – told Mortgage Professional America. “There’s an absolute shortage of proper housing stock. It’s very severe. It’s something a lot of people turn a blind eye to.”
While some may view the matter in the abstract, others feel the sting of the housing dearth rather acutely, she added. “I know here in South Florida where I am at the moment, it’s a real issue,” she said. “People can’t afford to hire people to work in their restaurants, their stores and other paraprofessional roles because they can’t afford to live there.”
Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Ga., issued the following statement after Congress passed the Ocean Shipping Reform Act: “NAHB commends Congress for acting in a bipartisan manner to pass the Ocean Shipping Reform Act. This legislation will help ease building material supply chain bottlenecks that are raising the cost of housing and allow builders to increase production of badly needed affordable housing.”
The National Association of Home Builders – a Washington-based trade association representing more than 140,000 members involved in home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction – also praised the move.
“NAHB commends Congress for acting in a bipartisan manner to pass the Ocean Shipping Reform Act,” the association’s chairman, Jerry Konter, said. “This legislation will help ease building material supply chain bottlenecks that are raising the cost of housing and allow builders to increase production of badly needed affordable housing.”
Konter has a vested interest in seeing an easing of export backlogs. In addition to helming the association as its chairman, he is a developer from Savannah, Ga. NAHB is affiliated with 700 state and local home builders associations across the country, and its members will construct about 80% of the new housing units projected for this year, the group claims.
The measure marks the first major update to federal regulations for the ocean shipping industry in more than two decades. If effective, it will have the net effect of lowering costs across the breadth of industry.
“During the pandemic, ocean carriers increased their prices by as much as 1,000%,” Biden said in a prepared statement from the White House. “And, too often, these ocean carriers are refusing to take American exports back to Asia, leaving with empty containers instead. That’s costing farmers and ranchers – and our economy – a lot of money.”
In the housing industry, the key commodity lumber is among the backlogged supplies.
In an interview with MPA earlier this year, Brian Leonard, a lumber analyst with RCM Alternative in Chicago, noted the volatility. “We had an incredibly volatile year. We went up to $1,700, down to $400. In historic levels, $650 was the contract high before. There was a substantial gain.”
The price of lumber is calculated based on a board foot as the measurement of volume. The single piece of lumber is the equivalent of one square foot (12” by 12”), and one inch thick. Typically, Leonard noted, a rail car would carry 110,000 board feet worth of the commodity, valued at some $170,000 per car.
Yet price spikes aren’t limited to lumber. According to recent data from the Producer Price Index report released by the Bureau of Labor Statistics, the price of goods used in residential construction rose by 1.5% last December. Building materials prices increased 16% last year, the data show, and have risen 18.8% since December 2020.
“We just saw a COVID slowdown in construction and a boom in the housing market,” Leonard noted. “The housing market was getting better, and then it just took off. After last year, when it declined to the $400 mark, a lot of the distribution side of it did not want to re-enter the marketplace. So even while demand stayed strong, we weren’t filling inventories. By December, the market just took off because people needed wood for job sites, and it wasn’t available in the distribution chain.”