Build America, Buy America Law Sparks Construction Bottlenecks Amid Housing Crisis

The Build America, Buy America Act, designed to revitalize U.S. manufacturing, is inadvertently stalling affordable housing projects nationwide.

Developers are grappling with a requirement that nearly all materials used in federally funded housing must be sourced domestically. This mandate has created significant delays as many essential items, from HVAC systems to ceiling fans, are still imported due to lower costs abroad.

While waivers are available, the approval process has become sluggish. The Department of Housing and Urban Development (HUD), with reduced staffing levels, has only approved a limited number of requests, leaving many projects in limbo.

“They need to treat this like the fire that it is,” stated Tyler Norod, president of Westbrook Development Corporation in Maine. “We’re just going to build fewer units across the country during a housing crisis.”

In Fargo, North Dakota, 76-year-old Diana Lene has been on affordable housing waitlists for five years. Her current apartment strains her Social Security income. “It’s maxing my budget down to pennies,” she lamented, highlighting the dire situation many face.

Lene is waiting for a unit from Beyond Shelter, a nonprofit developer led by CEO Dan Madler. He is constructing a 36-unit building but has had to delay lumber orders and is struggling to find compliant ceiling fans. The timeline for HUD waiver approval remains uncertain.

Signed into law by President Joe Biden in 2021 as part of the Infrastructure Investment and Jobs Act, the Build America, Buy America Act aims to bolster domestic manufacturing as the economy recovers from the pandemic. However, its implications extend beyond affordable housing to all federally funded infrastructure projects.

Developer Julie Hoebel from Denver has spent over $60,000 on consultants to identify American-made materials for an 85-unit project. Yet, her waiver requests for around 125 materials remain unapproved since November. “If they take much longer, we’ll come to a standstill,” she warned.

HUD's waiver approval process is currently taking at least six months. Even advocates of BABA agree that HUD needs to expedite approvals and provide clearer guidelines for developers.

In response to inquiries about delays and rising costs, HUD stated its commitment to supporting American manufacturing while monitoring compliance impacts on builders. However, specific details regarding potential exemptions for affordable housing remain vague.

Supporters of the law argue that taxpayer dollars should prioritize American-made materials. “You’ve got a system that leans heavily on using imported materials for better profit margins,” remarked Scott Paul, president of the Alliance for American Manufacturing.

Jennifer Schwartz from the National Council of State Housing Agencies noted that there is no national data on BABA's cost impact but criticized the waiver process as ineffective due to premature requirements without assessing domestic manufacturing capabilities.

While producing raw materials domestically may not be overly challenging, the availability of manufactured goods like appliances will take time to ramp up, according to Kaitlyn Snyder of the National Housing and Rehabilitation Association.

The recent housing bill passed by the Senate did not mandate HUD to address BABA implementation issues. “The process isn’t working for affordable housing,” said Jessie Handforth Kome, a former HUD employee with nearly four decades of experience.

Developer Jessica Neubelt from Vermont expressed frustration over spending an additional $150,000 verifying that iron and steel used in her project were American-made. She emphasized the extensive time required for compliance checks that could be better spent on other projects.

U.S. Rep. Mike Flood from Nebraska has proposed exempting certain HUD funding from BABA requirements, arguing that rising costs hinder access to homeownership for many Americans.

Conversely, Roy Houseman from United Steelworkers contended that complaints about cost increases are exaggerated. “Developers seem to be trying to shift blame instead of genuinely engaging with HUD,” he said.

Union leaders maintain that the law allows for some flexibility; developers can obtain exemptions if American-made products increase project costs by over 25%. However, many developers argue this threshold is insufficient.

Some developers are considering avoiding federal funds altogether, though this presents its own challenges. Federal dollars often constitute a crucial portion of funding for affordable housing projects.

Kentucky developer Scott McReynolds plans to build smaller projects—two four-unit buildings—to circumvent BABA regulations. He described sourcing American-made materials in rural areas as “a nightmare.”

The ongoing challenges posed by the Build America, Buy America Act continue to complicate efforts to address the pressing need for affordable housing across the United States.