Constructing Controversy: How Home-builders Are Gaming the System

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The Hidden Billionaires of the Housing Crisis: A Critical Look at the New Home Construction Industry

In the midst of a housing crisis that has left many Americans struggling to afford a home, a surprising trend has emerged: the creation of new billionaires in the home construction industry. This blog post delves into the concerning practices of major home-builders and their potential impact on the housing market and affordability.

The New Billionaires

While many have suffered financial losses during the recent housing and market crisis, a select group of individuals have seen their wealth skyrocket. These newly minted billionaires include:

• Ryan Regan and Mary Horton
• Stewart Jeff and Leslie Miller
• Kathy Britton
• Bruce Toll
• Itzhak Ezratti
• Thomas Bradbury
• Elly Reisman
• David Weekly

What do they all have in common? They’re all connected to new construction companies, many of which are household names in the industry.

Questionable Practices

1. In-House Lending and Rate Buy downs

Major home-builders like D.R. Horton and Dream Finders Homes are increasingly offering mortgage services through their in-house lenders. While they claim this allows them to offer better rates and incentives to buyers, it raises concerns about competition and consumer choice.

• D.R. Horton plans to offer more long-term mortgage rate buy downs through its in-house lender, DHI Mortgage.
• Dream Finders Homes acquired the remaining 40% of Jet Home Loans to offer lower rates to buyers.

2. Exclusive Deals and Subsidies

Some builders are offering deals that seem unbeatable in the current market:

• Ashton Woods Homes advertises a 5% mortgage rate in Durham, N.C., when most banks can’t offer less than 5.5% on existing homes.
• These rates are often achieved by subsidizing closing costs or interest rates using a portion of the builder’s profits.

3. Supply Control

There’s a suspicion that these large builders are intentionally controlling the supply of new homes to keep prices high, despite claims of rising costs preventing construction.

The Impact on Consumers and the Economy

The practices of these home-builders raise several concerns:

1. Limited competition in lending, potentially leading to higher costs for consumers in the long run.
2. The use of 40-year mortgages, which can significantly increase the total cost of home-ownership.
3. Artificial scarcity in the housing market, contributing to unaffordability.
4. Displacement of families and individuals due to high housing costs.

A Call for Accountability

The author argues that these practices border on collusion and calls for congressional oversight:

1. Investigate the pricing and supply practices of major home-builders.
2. Examine the relationship between builders and their in-house lenders.
3. Consider policies to increase housing supply and improve affordability.

Conclusion

While the housing crisis continues to affect millions of Americans, a select few in the home construction industry have profited immensely. It’s crucial to scrutinize these practices and consider their broader impact on the housing market and the economy as a whole. Only by addressing these issues can we hope to create a more equitable and affordable housing landscape for all.