The Senate advanced a housing bill this week that is being touted as the first significant federal effort to improve affordability in decades. Americans priced out of homeownership need all the help they can get, but this won’t do much.
The bill deregulates some aspects of manufactured housing and eases some permitting processes, both welcome changes in a world where regulations senselessly slow construction. Fortunately, the legislation doesn’t include many of the worst ideas thrown around recently, such as 50-year mortgages, taxpayer subsidies for down payments or allowing workers to raid their 401(k)s for down payments.
Yet there’s little to get excited about beyond that. Many of the regulation-induced cost increases for housing come from state and local governments, not the feds. And rather than questioning whether federal housing programs such as Community Development Block Grants or Opportunity Zones are necessary and effective, it simply tweaks them.
It also includes one notably bad idea: restrictions on institutional investors buying homes. This provision is little more than politicians shoving blame for housing prices onto a caricature of Wall Street. There is no correlation between an area’s proportion of investor-owned homes and housing shortages.
Investors were unsung heroes for the U.S. housing market after the 2008 financial crisis, buying up many foreclosed homes from banks and then renting them out to families who couldn’t afford to buy. Restricting their ability to do so when a future housing crunch comes will make recovery harder. In the here and now, politicians should not care which parts of the private economy the capital to build new houses comes from, and the idea of greedy investors buying up homes from middle-class families is a fantasy.
Equally fantastical is the claim that the bill doesn’t increase government spending. While it is true that the bill’s budget score is neutral and it doesn’t appropriate money, it does authorize the expansion or creation of programs that will, inevitably, cost something. Just because Congress isn’t approving the spending right away doesn’t mean it won’t happen.
One area where the federal government could directly lower the cost of building new houses would be to exempt all imported housing supplies from tariffs. Democratic Sens. Chris Coons (Delaware) and Jacky Rosen (Nevada) have introduced legislation to do just that, but it’s not included in this bill. Home builders have also been warning that immigration restrictions have made it more difficult to find workers.
Another area where the federal government could make a difference is reforming the Dodd-Frank Act, the landmark banking law that has made it harder for many lower-income people to get mortgages. By increasing overhead costs and capping origination revenue, Dodd-Frank has made it financially unviable for many banks to issue smaller mortgages for cheaper homes, especially in poorer neighborhoods.
The way to make more homes more affordable is not to throw a 303-page bill on top of the thousands of pages of existing laws and regulations for housing.
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