There is a broad consensus amongst Americans across the country that housing is unaffordable. The median single-family home now costs five times the median household income, the age of the median first-time homebuyer is now 40, and the United States has a housing shortage of roughly six million homes nationwide. The housing situation is so dire that Congress has noticed and has proposed different reforms to combat the crisis. The Senate passed the 21st Century ROAD to Housing Act in March, and the House of Representatives released their amended version of the bill last week. The House version will be voted on this week. Yet, the federal government cannot possibly address state or regional housing differences across the country, and federal preemption would violate the core American principle of federalism.
There are a few policies where federal reform is necessary, as outlined in AFP’s Federal Housing Reform Policy Solutions explainer, some of which are included in both the Senate and House’s proposals. Notably, both versions of the bill would remove the Department of Housing and Urban Development’s permanent chassis requirement, which would reduce restrictions on manufactured housing and allow for more innovative housing construction across the country. Additionally, both versions would significantly reform federal environmental permitting requirements for some housing, reducing onerous and costly red tape and delays for housing projects.
However, both versions would also create numerous new federal subsidies and grant programs, increasing federal spending and further inserting the federal government into state and local affairs. Increasing top-down government subsidization of housing reduces individual choice, crowds out private investment and state and local reform, and ultimately increases housing costs for all. Instead of increasing federal intervention in housing, Congress should continue to remove federal restrictions and allow the free market in housing to prosper. The House version of the 21st Century ROAD to Housing Act does, however, include sunset dates for many of the proposed grant and subsidy programs, at least paying lip service to more fiscal responsibility and limited government.
The most notable provision in the 21st Century ROAD to Housing Act is the restriction on large investor-owned housing. The Senate version would prohibit investors from owning more than 350 single-family homes nationwide (including townhomes and duplexes) and would require investors to sell off many properties (including build-to-rent and renovate-to-rent homes) within seven years of purchase. These restrictions would likely actually reduce housing supply, as developers would build fewer rental properties, and investors would be less likely to purchase dilapidated and uninhabitable homes in need of renovation. Additionally, the forced sale provision may be unconstitutional.
The House version substantially revises this prohibition. The House proposal repeals the Senate’s seven-year disposition requirement, applies the ban only prospectively to future acquisitions, and excludes build-to-rent, renovate-to-rent, and some other types of investor-owned housing from the prohibition on investors owning more than 350 single-family homes. These changes would likely blunt the ban’s impact on housing supply. However, the House’s watered-down ban would still infringe on property rights and increase government meddling in the housing market.
With few exceptions, such as repealing the permanent chassis requirement or selling excess federal land, there isn’t a need for federal intervention. AFP chapters in states across the country have helped pass transformative and meaningful zoning, land-use, and permitting reforms in recent years, reforms tailored to each state’s unique situation. AFP’s Roadmap for Housing Policy Reform report outlines numerous reform options for state and local governments to implement to increase property rights and reduce housing shortages. Rather than insert itself further, Congress should get the federal government out of the way and leave most of the reforms to states and local governments.
