Upcoming National Housing Policy Proposals

November 20, 2018
Authors: Jennifer Shuch, HFO Research Analyst
Publishers: HFO Apartment Investor Newsletter - Fall 2018

The issue of housing unaffordability is no longer considered a problem exclusive to large coastal cities like New York and San Francisco. As smaller cities like Boise and Spokane are starting to feel the impacts of the slowdown in housing construction during the recession, more lawmakers at the federal level are taking note.

As an increasing number of cities grapple with housing shortages, the issue of housing unaffordability has been increasingly in the limelight. At the national level, some new policies have been enacted or proposed over the last year that could have a profound effect on where affordable housing is built and how low-income renters will keep a roof over their heads. 

When the Tax Cut and Jobs Act was passed in December 2017, the most prominently reported change impacting the real estate market was the mortgage interest deduction. The bill lowered the cap on the amount of debt that could be claimed from $1 million to $750,000. But now another section of the bill is piquing the interest of developers and investors: Opportunity Zones (OZ). The new program allowed states to designate census tracts with a poverty rate over 20% as opportunity zones, providing developers and investors significant tax breaks. While some cities, including Austin, TX, have expressed concern that OZ investment will exacerbate displacement in low-income neighborhoods, proponents of the program believe it will bring much-needed investment dollars into historically overlooked neighborhoods.

In “Regulatory Barriers and Affordable Housing: Problems and Solutions,” the Bureau of Housing and Urban Development argues that restrictive zoning laws, pervasive NIMBYism, and bureaucratic delays are significant factors contributing to housing shortages throughout the country. HUD’s assessment coincided with its third attempt at striking down the Affirmatively Furthering Fair Housing rule. HUD Secretary Ben Carson has argued that the AFFH rule is a burden to communities, indicating that his preference is to tie HUD funding to the loosening of zoning codes, rather than the enforcement of fair housing rules requiring extensive documentation. 

This year, three US Senators representing states where housing has become increasingly unaffordable have introduced legislation aimed at preventing displacement and helping renters.

Senator Kamala Harris of California proposed a tax credit for renters with rents more than 30% of income. Families earning less than $25,000 per year would receive a 100% credit on rent paid, while families making between $75,000-$100,000 annually would receive a 25% credit on rent paid. The benefit would only be available to people whose rents are no more than 150% of Fair Market Rent. While critics argue that a tax credit would not help families afford rent when it is due, proponents believe the proposal represents a significant step forward for federal recognition of this national issue.

Senator Cory Booker of New Jersey proposed the Housing, Opportunity, and Equity (HOME) Act, which would require that municipalities receiving funds from the Community Development Block Grant program create plans to reduce construction barriers and increase housing supply. Booker hopes his proposal would reduce income segregation and improve social mobility. The HOME act also includes a tax credit for cost-burdened renters similar to the one proposed by Senator Harris.

Finally, in September, Senator Elizabeth Warren of Massachusetts proposed the American Housing and Economic Mobility Act, which would raise the estate tax to provide billions of dollars for programs that subsidize housing development in rural and low-income communities. It would also create a competitive block grant program that would require cities to loosen zoning restrictions to qualify for grants. Senator Warren specifically aims to help African American families and those households still recovering from the financial crisis by providing down-payment assistance and $2 billion in support for people with negative equity on their mortgages.

All three of these bills would face challenges in the Senate, but if Democrats end up with a majority in the Senate after November’s election, housing legislation at the federal level may be more likely to pass.

Sources include Evidence Matters (Spring, 2018) Office of Policy Development and Research, U.S. Department of Housing and Urban Development.