On Tuesday, workers were seen working on the roofing structure of a new home under construction in Richardson, Texas. This coincided with a significant development in Washington. Lawmakers have united to address the issue of affordable homeownership.
The House passed the largest housing legislation in decades, termed the 21st Century Road to Housing Act, with a vote count of 358 to 32. The Senate had approved it earlier with robust bipartisan support. The bill is now set for President Trump’s approval.
In a conversation with NPR, Sen. Elizabeth Warren from Massachusetts emphasized that housing affordability is a pressing concern for Congress. She highlighted that members of Congress frequently face demands from constituents urging for reduced home prices. The bill aims to fulfill this need.
The bill addresses several factors impacting U.S. homebuyers. According to Redfin, a family requires an annual income of approximately $117,000 to purchase a typical home, which is significantly higher than the median income of most U.S. households. Additionally, mortgage rates have surged over recent years. The nationwide average is now around 6.5%, partly due to the war in Iran increasing borrowing costs.
Inflation further challenges families, reducing their purchasing power as it outpaces wage growth. However, the bill focuses primarily on the housing shortage. Realtor.com reported a deficit of over 4 million housing units in the U.S. last year.
“Supply is the key problem here,” commented Jeanna Kenney, an assistant professor of economics, finance, and real estate at Villanova University. “Anything helping supply growth will be beneficial long-term.”
Banning Excessive Corporate Investor Purchases
The bill includes various provisions aimed at encouraging home construction and facilitating home purchases. Among its notable parts is a ban preventing corporate investors from acquiring more single-family homes for rental purposes if they already own 350 or more homes. This ban aims to curb corporate landlords who might outbid families in local housing markets.
While only about 3% of the single-family rental market is held by these investors nationwide, the ban remains contentious. Some experts caution that it might restrain housing investment, potentially limiting available homes.
Ross Marchand, executive director at Taxpayers Protection Alliance, cautioned, “It chills investment, and we need more investment in housing stock, not less.”
Sen. Warren champions the provision, noting the influence of private equity in markets like Atlanta. Corporate investors are keenly pursuing such neighborhood opportunities.
Facilitating Regulatory Processes for Homebuilders
The legislation, while not offering new federal funding for homebuilding, simplifies existing federal financing requirements. For instance, builders can forgo environmental reviews in projects situated between already-reviewed buildings. The bill also initiates a grant program for community-based creation of pattern books, featuring preapproved housing designs to streamline code approvals.
A further measure removes the mandate for manufactured homes to have a permanent chassis, lowering construction costs and enabling more flexible designs.
Kate Wood, a lending expert at NerdWallet, noted, “Removing the chassis immediately lowers costs, making already-affordable homes more economical.”
The bill incentivizes localities to expedite homebuilding by allocating more federal funds to those increasing housing supply prominently.
Sen. Tim Scott, R-S.C., stated, “If you don’t build more housing, you should lose those incentives.”
Securing Federal Support
Federal legislators possess limited jurisdiction in homebuilding matters, which predominantly fall within local government’s purview. The high costs associated with labor and supplies also challenge private builders. While Congress cannot directly influence mortgage rates, the Federal Reserve might opt to elevate interest rates in response to rising inflation.
This legislation marks a significant stride in bolstering housing affordability. Amanda Crist, Vice President of Member Engagement at Greater Nashville Realtors, asserts that making homeownership financially viable is crucial.
Sen. Elizabeth Warren reflected, “For decades, the federal government remained passive as housing prices soared. Finally, action is taking place.”