Task Force plans ahead for housing growth
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Last week, the Indiana Housing Task Force released a list of recommendations for ramping up residential inventory, setting the stage for legislative action when the General Assembly reconvenes in January for a session that includes crafting the next two-year state budget.
It’s no secret that housing demand has been slashed since spring by the Federal Reserve’s efforts to tamp down inflation with escalating interest rates. Even though Indiana real estate has outperformed the U.S., statewide home sales from June through September are about 9% below 2021.
But the Task Force has a longer-term mandate and kept deliberations focused on the big picture beyond the current market: Housing supply has been declining for more than a decade, a growing threat to homeownership in Indiana. A five-year snapshot captures this trend:
Since 2017, average monthly home sales have grown by 10% (even including this year’s slowdown) while the monthly inventory of homes for sale has dropped nearly 60%. In that same timeframe, Indiana’s overall population has grown by roughly 150,000, including more than 50,000 new ‘Hoosiers by choice’ moving into the state from beyond our borders.
Adding to this imbalance, new residential construction dropped to nearly half the annual rate of the mid-2000s after 2010. New building permits have only recently hit 2006 levels again.
Prices began climbing at a faster pace with more buyers pursuing fewer properties. Communities across Indiana struggled with housing shortages that pushed workers further from jobs, limiting business investment and growth potential. These trends were super-charged from mid-2020 through 2021, as affordability and availability concerns grew.
Rising mortgage rates and economic uncertainty have put these pressures on pause for now. But Indiana needs a blueprint for rebuilding housing supply once demand recovers.
To start, the Housing Task Force report sends a common-sense message to lawmakers: Don’t add to the burden of homebuyers by taxing real estate transactions. In fact, let’s expand tax incentives for first-time and lower-income buyers to expand homeownership.
But encouraging buyers only works if inventory is available. The Task Force proposes new tax credits and abatement programs to incentivize residential construction, especially when it improves workforce access and affordability.
The cost of new housing is shared by local governments through expanded infrastructure. Relaxing limits on tax increment financing districts for residential developments would allow local units to keep up with these investments and even act as partners in land acquisition and other costs for high-priority projects.
Of course, local governments can also promote housing by reexamining local zoning, land use policies and permitting processes that may hinder growth – an issue the Task Force examined without making sweeping recommendations or suggesting one-size-fits-all strategies for local communities.
Across Indiana, we’ve seen compelling examples of new or renovated housing rising from unlikely parcels of land, strengthening neighborhood redevelopment or anchoring mixed-use development. The Task Force recommends additional funding for brownfield remediation, rehabilitation and historic restoration to add inventory in creative ways.
I’m also excited that the Task Force report looks ahead to the second round of READI grants for regional development and talent attraction. Indiana REALTORS supported the $500 million READI program as a worthwhile investment in quality of life strategies for attracting new residents and the business opportunities that follow.
But housing capacity is crucial to making these plans pay off, and members of the Task Force agreed that housing development should be prioritized in READI 2.0.
The Housing Task Force approved several other proposals (a draft is available here), adding up to an ambitious agenda for residential growth that opens opportunities for homeownership for more Hoosiers. I was proud to participate on behalf of 21,000 Indiana REALTORS and appreciate the opportunity to work with co-chairs Representative Doug Miller and Senator Linda Rogers, Representative Cherrish Pryor and Senator Fady Qaddoura, and housing experts and advocates from the public, private and philanthropic sectors.
As we held our final meeting last Thursday, economists and analysts were poring through the latest national GDP report, which showed positive output even as consumer spending continues to slow and residential investment retreats even further.
But there have also been rumblings that after this week’s expected increase, the Fed could ease up on future increases in December and after. Any signs of slowing inflation and less restrictive monetary policy will improve the mortgage lending outlook (and cut the cost of buying a home).
The next few months are filled with uncertainty, but the Task Force looked further ahead to the future we all know is coming: Housing will rebound, and Indiana needs a healthy balance between supply and demand to support homeownership and sustainable growth for Indiana.