Regulatory Issues And The Strongholds They Have On Housing Affordability
One delay here and there might seem like a normal part of the building process, but the long-term effects are costly. Developers are doing their best to complete building projects as quickly as possible but many times there are factors that are out of their control. A construction delay Americans have been facing are the electrical transformers. Why are electrical transformers in high demand? In 2018, the Trump Administration slapped tariffs on Chinese transformers causing them to be in short supply. “As a result of that, the number of transformers that we bring from China has fallen by nearly 90%,” said Rose Quint with the National Association of Home Builders. How long of a delay are builders and developers experiencing with electrical transformers? John Kirk, a multifamily developer based in San Antonio, said, “The wait time for a transformer has grown from three to four months, to at least a year.”
Unfortunately, many of our members are experiencing the same delayed wait time. We have had multiple roundtable discussions with Duke Energy regarding how to tackle these delays and the long-term ramifications they have for Mecklenburg County residents. We explained to them how costly months long delays are and how they affect housing affordability. By being months behind in a project, the owner/operator must increase rent to make up the cost. What could have been an affordable apartment community becomes needlessly expensive. The situation has put the region’s developers into a hurry up and wait situation. Sadly, their projects are on pause until Duke Energy supplies the needed transformers.
Duke Energy’s Carolinas Multi-Family Team has been responsive and opened the doors for communication regarding construction delays.
Not only are developers experiencing delays with electrical transformers, they are also struggling with inflation and rising interest rates making it difficult to start new projects. As of May, eight months into fiscal year 2023, the U.S. Department of Housing and Urban Development has received 506 applications totaling $12 billion for Federal Housing Administration loans to construct multifamily developments. That’s about half the volume of the same eight-month period in FY 2022 (940 applications for $22 billion) and less than one-third of the volume for the same stretch in FY 2021 (1,739 applications for $37 billion). Charlotte’s housing affordability crisis won’t be solved until developers have the required resources in a timely manner that sets them up for success and encourages more development.