Eric Person, CEO of the Home Builders & Remodelers Association of Central Connecticut,, talks about the various challenges his members and industry face amid the state’s lackluster demand for new home construction.
Q. Through July of this year, new home permits issued in the state are up 17 percent (2,480 new home permits vs. 2,117 granted the same period a year ago). How would you characterize the state of the homebuilding industry right now?
A. The homebuilding industry in Connecticut still lags much of the country. Most areas of the country have recovered fully with their housing production. One of the big exceptions is the Northeast, except pockets like the Boston and metro New York markets.
Before the housing downturn, Connecticut builders produced 9,000 to 10,000 new housing units a year. In 2018, there were 3,812 new housing starts for the entire state. There are many builders who are no longer in business and those still building see large fluctuations in their business; one year is busy the next is soft and so forth.
Q. Before the Great Recession, Connecticut averaged over 9,000 new home permits annually. We haven’t gotten close to that level since. Why? Will we ever get back to those pre-recession highs?
A. The biggest reason we have not returned to our pre-recession levels of new housing is the state’s slow economic growth. Without new job and household formation the demand for housing has dropped. It will take a strong economic recovery that includes robust job growth to see those levels again.
We have seen some high-profile corporate jobs relocate out of Connecticut. When these high salary, high-income taxed individuals move out of our state it can take upwards of five to six new jobs to replace that one job to have the same impact on the state’s economy.
Q. Is there anything the state can do to encourage a more fertile homebuilding environment in the state?
A. While most legislators are well-intentioned, additional regulations or increased code standards that add cost to the price of construction make housing less affordable. As the cost of building a home goes up in Connecticut new affordable housing becomes less achievable for many.
On average, 25 percent of the cost of a new home is the result of regulations. Not all regulations are bad, but some that have negligible benefits, but see a long payback, make it unaffordable to buy new. This also creates a problem for many employees to afford to live in the towns they work — teachers, first responders etc.
Q. Are there any new housing segments that are hot right now?
A. Townhomes and luxury apartments are busy right now. With both people in a relationship working, many are looking for maintenance-free living. New construction provides a more efficient and maintenance-free lifestyle many are looking for.
Q. Has the homebuilding industry been impacted by tariffs?
A. The homebuilding industry was sharply hurt in early 2018 when the softwood tariffs went into effect with Canada. Those prices have since returned to normal levels and stabilized.
Some of the Chinese imports, particularly cabinets and other products, are seeing steep price increases. When lumber prices were skyrocketing, a builder could sign a contract to build a home and by the time the lumber was delivered, see a $7,000-plus increase in prices.
Again, these price changes make it difficult to predict with certainty what the cost to build could be, and make housing much less affordable to many.
Q. What is one key trend impacting the homebuying industry right now?
A. One of the biggest trends is shifting demographics. Household formation is starting much later than previous generations. During the past decade, people who would sell their starter home and move to their next home left the market. This not only removed a level of new construction for the move up, but did not open up the inventory of starter homes for people to purchase their first home.
