‘Buy America’ Policy Creates Hurdles for Affordable Housing Builders

It has a catchy name — Build America, Buy America — and the lauded goal of bringing manufacturing jobs back to the United States. But the law, known as BABA, has created a significant bottleneck for affordable housing development at a time when the country faces a critical housing shortage.

Under BABA requirements, nearly everything from HVAC systems and lighting to sink hooks and ceiling fans in federally funded affordable housing projects must carry the “Made in USA” label. The problem, developers say, is that numerous essential construction products are imported from overseas markets with cheaper labor costs.

While builders can apply for waivers, the process has hit a near standstill. The Department of Housing and Urban Development (HUD), which saw significant staff reductions during the Trump administration, has only approved a handful of projects. This bureaucratic logjam has led to construction delays and hundreds of thousands of dollars in additional costs for affordable housing developers nationwide.

“They need to be treating this like the fire that it is,” said Tyler Norod, president of Westbrook Development Corporation, which builds affordable housing in Maine. “We’ve sort of resigned ourselves that we’re just gonna build less units across the entire country during a housing crisis.”

Human Cost of Delays

The impact of these delays extends beyond paperwork and budgets to real people like Diana Lene. The 75-year-old Fargo, North Dakota resident has been on affordable housing waitlists for five years. While she wants to remain close to her daughter and grandchildren, her current apartment consumes too much of her Social Security income.

“It’s just maxing my budget down to pennies,” she said. To save money, Lene limits driving and hunts for food sales. “I’m just trying to keep a roof over my head, but it’s getting more and more difficult. I don’t like to live in fear, and yet sometimes it jumps in there.”

Lene is waiting for an apartment in a 36-unit building being constructed by nonprofit developer Beyond Shelter. CEO Dan Madler has had to postpone lumber orders to verify compliance with BABA and cannot find ceiling fans made in America. Like many developers, he’s in limbo waiting for HUD to approve a waiver request.

Origin and Implementation Challenges

President Joe Biden signed BABA as part of the Infrastructure Investment and Jobs Act in 2021, aiming to boost American manufacturing as the economy recovered from pandemic disruptions. The law applies to infrastructure projects receiving federal funding, not exclusively to affordable housing.

Denver developer Julie Hoebel has spent over $60,000 on a consultant just to research American-made materials, plus additional labor costs. Despite submitting waiver requests to HUD in November for approximately 125 materials needed for an 85-unit building, she’s still awaiting approval.

“If they take much longer then we’ll come to a standstill,” Hoebel warned.

Bureaucratic Bottleneck

HUD is taking at least six months to approve many waivers. Even BABA advocates acknowledge that HUD must expedite the waiver process and provide clearer instructions, something other federal agencies have managed to do.

When asked about addressing the delays in January, HUD Secretary Scott Turner said the agency was “looking at this… with BABA as it pertains to HUD to provide flexibility to certain projects in certain places around our country,” though he provided no specific solutions.

Unions representing steel and manufacturing industries defend the law, arguing that taxpayer dollars should fund American-made materials and that suppliers will adapt to meet demand.

“You’ve got a system in place that leans heavily on using imported materials to make a better profit,” said Scott Paul, president of the Alliance for American Manufacturing. “I don’t know if that serves the public good.”

Industry Concerns

Jennifer Schwartz, director of tax and housing advocacy at the National Council of State Housing Agencies, argues the waiver process is “failing” because requirements were implemented before a proper assessment of domestic manufacturing capacity.

While producing more raw materials domestically may be achievable, manufactured products like appliances and elevators will take longer to become available, according to Kaitlyn Snyder, managing director of the National Housing and Rehabilitation Association.

“I don’t know that it economically, financially makes sense for people to be producing door hinges,” Snyder noted. “We are an advanced country and we’ve outsourced a lot of that stuff.”

Notably, the housing bill that passed the Senate in March did not include provisions addressing BABA implementation problems.

“The process isn’t working for affordable housing,” said Jessie Handforth Kome, who worked at HUD for nearly 40 years until 2024. “People want to comply, but it’s unclear how to.”

Rising Costs and Fewer Units

Vermont-based developer Jessica Neubelt estimates spending an additional $150,000 simply to verify that iron and steel used in her project were American-made. She’s equally frustrated by the hundreds of hours consumed by compliance verification.

“I would like every member of Congress to sit in on a construction meeting,” Neubelt said. “The amount of detail that goes into figuring out if a specific thing is compliant or not is enormous.”

Some congressional representatives, like Rep. Mike Flood (R-Nebraska), advocate exempting certain HUD funding from BABA requirements. “Owning a home is the American dream, but it’s out of reach in a very big way and anything that adds cost to that isn’t allowing hardworking Americans to achieve the dream,” Flood told the AP.

Union leaders counter that compliance costs are exaggerated and that the law includes reasonable exemptions. Developers can receive waivers if American-made products increase a project’s overall cost by more than 25%, and a small percentage of a project’s total material cost is exempt from the requirements.

Some developers are exploring ways to avoid federal funds altogether, though this approach is challenging since federal dollars often provide crucial financing for affordable housing projects. In Kentucky, developer Scott McReynolds has decided to build smaller projects that fall below BABA thresholds rather than apply for federal grants to build larger affordable housing developments.

“It’s a nightmare,” McReynolds said, noting that American-made materials are particularly difficult to source in the rural areas he serves.

As the affordable housing crisis continues, the unintended consequences of well-intentioned policy highlight the delicate balance between supporting domestic manufacturing and addressing urgent housing needs.