NIMBYism is a huge affordable housing problem, Fed official says

A ranking Federal Reserve official has called out NIMBYism as a key reason why housing is so unaffordable.

Tom Barkin, president of the Federal Reserve Bank of Richmond, cited the not-in-my-backyard crowd in a speech to the Virginia Governor’s Housing Conference in Hampton, Va., according to the ResiClub housing news service.

Tom Barkin, president of Federal Reserve Bank of Richmond (Courtesy: Federal Reserve Bank of Richmond) 

Housing affordability is hovering at near-historic lows, several benchmarks show, as lofty home prices and high mortgage rates push house payments well past what typical household incomes can absorb.

Building far more residences – to own or rent – is a key cure, Barkin said.

While that’s nothing new, what’s revealing is that a senior Federal Reserve official is lamenting the wave of opposition to many housing developments. That shows how widespread NIMBYism has become.

“While the need for more housing may be obvious to us, it often isn’t to those who don’t want their town to change, or who don’t like the specific change being proposed,” Barkin’s prepared speech reads. “They understandably worry about environmental impacts, or infrastructure capacity or school crowding. NIMBYism is real, and failing to secure buy-in from the community adds time, cost and uncertainty.”

Barkin’s audience in Virginia likely were bankers from the five states and the District of Columbia that the Richmond Fed oversees. Still, his words about the housing affordability headaches ring true from the Atlantic to the Pacific.

Homeownership, “is becoming increasingly unattainable for too many workers,” he said.

“Take teachers for example. The math all too often just doesn’t work for them,” Barkin’s speech states. “In 2022, the median middle school teacher made just over $60,000. With that salary today (and without becoming cost-burdened), that teacher can afford a $228,000 house with a 20 percent downpayment. But the median price for a new starter home last year was $299,000, and that’s on the off chance you could even find one.”

Or look at the challenge this way: A US house hunter needed an $105,000 household income to qualify to buy the median-priced home in September, according to the National Association of Realtors. For all of 2020, just a $50,000 income was needed.

So renting has become the cheaper option, Barkin noted. But it’s costlier, too.

“In 2021, rents spiked as national rental vacancy rates dropped to levels not seen in almost 40 years,” the speech said. “Our same teacher looking for a place to live in 2019 would have faced a median asking rent of $1,643 per month, already a stretch for their budget. Now, that sum is up 22 percent to $2,011. I will note that we are now seeing some relief in rent growth nationally, as construction has brought more units online.”

Barkin acknowledged that urgent fixes are required but not simple. And he strongly hinted the Fed won’t be helping much with overly generous mortgage rates.