Housing Market Gets More Bad News Amid Inventory Struggles

The nation's top homebuilding association is slamming the Biden administration for a new rule change giving the government greater oversight over creeks and wetlands, saying it will restrict their members' ability to construct new homes at a time the nation is grappling with a crisis-level shortage of affordable housing stock.

In a statement released in late August, Alabama developer Alicia Huey, chair of the National Association of Home Builders (NAHB), issued a statement slamming a revised rule by the Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers. The revision amended the waters of the United States (WOTUS) rule under the federal Clean Water Act, following the Supreme Court's 5-4 ruling in Sackett v. EPA this past March.

That decision, deemed by environmental groups as arguably "the most important water-related Supreme Court decision in a generation," stems from a 2008 lawsuit between the EPA and Idaho's Sackett family after they filled a protected wetland with gravel to build a home overlooking nearby Priest Lake.

In the view of the Sacketts and their attorneys, the wetland was not subject to the country's WOTUS rule because it was far from the nearby lake and not connected to a larger waterway—thereby disqualifying it from coverage under the definition of "navigable waters" under WOTUS.

The Clean Water Act is charged with ensuring the cleanliness of water for habitat and human consumption. But the Supreme Court sided with the Sacketts, saying the rule was not to evaluate waters in terms of whether they are connected within a single watershed but whether those waters are contiguous on the surface.

While slammed by critics as anti-scientific, the decision also appeared to fly in the face of what Congress initially intended when it passed the first WOTUS rule, in the 1980s.

"The very earliest regulations set forth by the EPA were inclusive," Jon Devine, who leads the federal water policy arm of the National Resources Defense Council, an environmental nonprofit, said in a statement at the time the case was decided.

He continued: "As a jurisdictional matter, WOTUS comprised 'all the relevant parts of an aquatic ecosystem,' including streams, wetlands, and small ponds—things that aren't necessarily connected to the tributary system on the surface, but that still bear all kinds of ecological relationships to that system and to one another."

Notably, that broad definition came at a time when housing developments are sprouting up anywhere developers can build them amid a shortage of inventory.

As of 1976, according to a U.S. Department of the Interior (DOI) report at the time, more than one-third of the nation's wetlands had been lost through various forms of direct habitat destruction, while "well over half" of the remainder had been severely modified. And the implications were broad, with environmental impacts ranging from chemical pollution to changes in water flow sometimes being felt miles from the new development.

"Many aquatic species are known to have been lost or severely restricted, and a number of species and habitats are currently in jeopardy, at least in part as a result of construction activities," DOI researchers wrote at the time. "Deliberate and drastic action is required to reverse the present trends, and recommendations are given for specific steps which must be taken to insure the survival of the wetland ecosystems of the nation."

The politics of the WOTUS rule, however, were particularly divisive, especially in the Western United States, affecting not only housing construction but agriculture as well. Many complained of the onerous and expensive permitting processes that could result from evaluating the environmental impact of projects. A series of bizarre legal challenges emerged, including a 2014 case involving a Wyoming rancher who dammed a small stream on his property to create a stock pond for his cattle.

The fight over WOTUS roared back to life in 2019 when former President Donald Trump, backed by Western lawmakers, announced his administration would be rolling back federal protections for 18 percent of stream and river miles and 51 percent of wetlands in the United States, leaving protections at their lowest levels since the Reagan administration.

In the aftermath of the Sackett decision, however, President Joe Biden expanded the scope of the rule to cover wetlands adjacent to traditionally covered lakes, streams and rivers, regardless of whether they were connected at the surface or not.

"While I am disappointed by the Supreme Court's decision in the Sackett case, EPA and Army have an obligation to apply this decision alongside our state co-regulators, Tribes, and partners," EPA Administrator Michael. Regan said in a statement after the final rule was approved August 29.

He went on: "We've moved quickly to finalize amendments to the definition of 'waters of the United States' to provide a clear path forward that adheres to the Supreme Court's ruling. EPA will never waver from our responsibility to ensure clean water for all. Moving forward, we will do everything we can with our existing authorities and resources to help communities, states, and Tribes protect the clean water upon which we all depend."

That rule change, however, represents a blow to the same developers that helped lead the charge against a broad application of the WOTUS rule for years.

Ahead of the rule's implementation, groups like the U.S. Chamber of Commerce and the NAHB argued that the proposed rule would give the federal government oversight of even "minor waterbodies" such as isolated wetlands, human-made ditches or features that contain water only in response to rainfall events. All of these, the NAHB argued in congressional testimony at the time, would be determined by a federal regulator who decides whether a specific water feature has "material influence on the chemical, physical or biological integrity of a traditional navigable water."

The burden of complying with those rules, the NAHB argued, could be prohibitively expensive to small builders, many of whom need to retain outside consultants to evaluate the land they build on. At a time when the cost of construction remains high—and when the country is short about 3.8 million units of housing, according to July estimates by Freddie Mac—the new regulations are expected to drive costs higher.

"The amended WOTUS rule represents a blow to housing affordability," Huey said in a statement. "It assures continued uncertainty regarding federal jurisdiction as established by the Supreme Court's recent Sackett decision that made clear the federal government only has authority over relatively permanent waterbodies."

She went on: "By failing to provide a definition of a 'relatively permanent' waterbody, the Biden administration set the stage for continued federal overreach, bureaucratic delays during the wetlands permitting process, and regulatory confusion for home builders and land developers.

"It will directly result in continued regulatory barriers to affordable housing as single-family and multifamily developers struggle to find the developable land necessary to produce the new affordable housing units this nation desperately needs."

Newsweek reached out to the NAHB and the White House's press office via email for comment.

The Biden administration has made strides to offset some of the concerns housing developers have. In July, the White House announced it was launching a "first-of-its-kind program" to address land use and zoning barriers that limit new housing development.

The program includes funding for municipal governments to rezone areas of their towns for greater density, funding feasibility studies to convert commercial space to residential, and offering incentives for cities to develop on land they already have that has previously been restricted for development, among other changes.