Last week, President Joe Biden gave the most consequential State of the Union for housing in over 50 years. Not since Lyndon Johnson, has a president spent more time, and committed more resources, to increasing housing supply, making homeownership more attainable, and closing the racial homeownership gap. At a time when interest rates are stubbornly high, housing prices are at record levels, multifamily housing construction is falling after important gains in construction, and mortgage volume is the lowest in recent history, President Biden’s proposals are important for every member of NHC. Even those areas where there is disagreement, like the right approach to addressing high rent, the proposals mentioned in the State of the Union are milder than many industry leaders had feared. Taken in its totality, it is an important advancement in the effort to address the housing affordability crisis in the United States.
Not everyone likes every part of this proposal but taken together it’s a major effort to address the affordable housing crisis. The good news is that several of these initiatives have solid bipartisan support and can be enacted now – if there’s the political will in Congress to address the housing affordability crisis. Let’s take a look at this broad set of recommendations individually.
The most immediate housing production priority is passage of the Tax Relief for American Families and Workers Act. This bipartisan legislation includes major provisions from the Affordable Housing Credit Improvement Act, which will create 200,000 additional units of affordable rental housing. The bill passed 357 to 70 in the House of Representatives. Unfortunately, Senate Majority Leader Charles Schumer (D-N.Y.) has not brought the bill to the floor, and Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) has sent mixed signals about whether he’s willing to support the bill. But there’s no mixed signal in Boise, Idaho. According to NHC’s Paycheck to Paycheck database, a typically priced home in Boise’s metropolitan statistical area (MSA) is now $452,752, up from $359,440 in 2020. In order to comfortably afford to purchase a home in December 2023 with 3% down, a family must earn at least $158,801. In 2020, a 3% downpayment required a salary of $91,301. Within the entire MSA, only two of the 127 professions that are tracked within Boise’s MSA are able to meet that requirement: Airline Pilots and Dentists. All other occupations, from Registered Nurses and Veterinarians to Computer Programmers and Architects, cannot afford to buy a home.
My biggest problem with this situation is that Sen. Crapo is NOT the Chair of the committee; Sen. Ron Wyden (D-Ore.) is the chair. Given the fact that the bill passed the highly partisan House Ways and Means Committee by a vote of 40-3, Senate Democrats need to step up and lead. More than enough Republicans will follow. The bill is loaded with popular business tax credits.
There’s no excuse not to bring this bill to the floor, where it will receive broad bipartisan support. As I told the Washington Post, “We have a huge hole this would make a big dent in. The supply side is driving housing prices, and this is the most ambitious housing supply agenda in recent history.”
In addition to the increase in the LIHTC included in the tax bill, President Biden and NHC support a longer-term expansion of the credit that would create or preserve an additional one million units of affordable housing. His housing agenda also includes passage of the Neighborhood Homes Investment Act, another bipartisan bill that would build or renovate affordable homes for homeownership, which would lead to the construction or preservation of over 400,000 starter homes in communities throughout the country. NHC and many of our members, as well as the Black Homeownership Collaborative, strongly support this bill.
President Biden also asked Congress to pass legislation to increase the market for buyers of moderately priced homes by providing a $10,000 tax credit for first-time homebuyers and people who sell their starter homes to first-time homebuyers. This will help increase housing supply while giving additional help to as many as three million people struggling to afford their first home purchase, despite the fact that their mortgage is likely to be less than they are already paying in rent. Another promising proposal is a mortgage relief credit that would provide middle-class first-time homebuyers with an annual tax credit of $5,000 a year for two years. This is the equivalent of reducing the mortgage rate by more than 1.5 percentage points for two years on the median home and could help more than 3.5 million middle-class families purchase their first home over the next two years.
The President also proposed a new $20 billion competitive grant fund to support communities across the country to build more housing and lower rents and homebuying costs. This fund would support the construction of affordable multifamily rental units; incentivize local actions to remove unnecessary barriers to housing development; pilot innovative models to increase the production of affordable and workforce rental housing; and spur the construction of new starter homes for middle-class families. This could create hundreds of thousands of units which will help lower rents and housing costs. NHC looks forward to learning more about this proposal.
The speech included several other recommendations on rent controls, “junk fees”, and expansion of the contributions made by the Federal Home Loan Banks. Some of NHC’s members support these proposals and others strongly oppose them. The National Low Income Housing Coalition said in a statement that proposals “to prevent rent gouging are historic and a major win for renters nationwide who have been struggling with sky-high rents and who are at increased risk of housing instability due to the power imbalance between landlords and renters.” Industry groups largely support the housing production recommendations, but strongly oppose the regulatory recommendations. The National Multifamily Housing Council said a “heightened regulatory regime will reduce consumer choice by limiting fee for service arrangements” and undermine efforts aimed at “lowering housing costs, driving new housing development and creating more affordable rental housing.” The Mortgage Bankers Association expressed “significant concerns that some of the proposals on closing costs and title insurance could undermine consumer protections, increase risk, and reduce competition. In 2015, the industry implemented final rules from the Consumer Financial Protection Bureau making comprehensive reforms to mortgage disclosures to increase clarity and transparency and to help facilitate consumer shopping. In 2020, the CFPB reviewed and praised its own rules. Suggestions that another revamp of these rules is needed depart from the legal regime created by Congress in the Dodd-Frank Act and will only increase regulatory costs and make it untenable for smaller lenders to compete.” NHC will continue to work with our members to identify common ground wherever possible and leverage bipartisan support whenever possible.
There is no doubt, however, that we must act now to build more affordable housing. Every American is impacted directly or indirectly by this crisis – the people we rely on to take care of our kids, serve our food, clean our teeth, and teach in our schools. According to NHC’s Paycheck to Paycheck database, the need for affordable housing is clear when compared to wage data. Childcare workers can afford to rent a one-bedroom apartment in only 15 out of 390 metropolitan statistical areas (MSAs). Cashiers can afford to rent a one-bedroom apartment in only 13 of 390 MSAs. This is true for higher-paid workers as well. Dental assistants can’t afford to rent a one-bedroom unit in 101 of 390 MSAs, and Middle School Teachers cannot afford a one-bedroom apartment in 17 of those areas.
It’s time to address this crippling housing affordability crisis, which continues to keep inflation too high while preventing far too many Americans from reaching our vision of an America where everyone is able to live in a quality, affordable home in a thriving community.