A sweeping housing bill that seeks to build more than 3 million new homes in 10 years and bring down rents by 10% was introduced Sept. 26 by Sen. Elizabeth Warren (D-Mass.).
Warren’s solution to the affordable housing crisis is to attack the problem from multiple angles, including increasing investments in the National Housing Trust Fund (HTF) and Capital Magnet Fund, expanding the Community Reinvestment Act (CRA), and creating incentives for local governments to eliminate unnecessary land-use restrictions. It also seeks to expand the Fair Housing Act to strengthen anti-discrimination laws.
The American Housing and Economic Mobility Act of 2018 provides an average of $50 billion per annual to alleviate the shortage of affordable homes. The ambitious plan would be largely funded by raising the estate tax to 2009 levels, a move that affects only about 10,000 of the wealthiest families, according to a bill summary.
Despite the bill’s hefty price tag, it is still “deficit neutral,” according to an outside study by Moody’s Analytics.
The analysis determined that the legislation would build or rehabilitate more than 3 million units over the next decade and create approximately 1.5 million jobs.
“Sen. Warren is to be lauded for her comprehensive approach to addressing the deficiencies in housing policy and funding,” said David Gasson, executive director of the Housing Advisory Group and vice president at Boston Capital. “It is commendable that this legislation would not add to the federal deficit but instead create jobs, housing, and opportunities that have been so limited for the constituencies it would assist. In conjunction with ongoing efforts by Sens. Maria Cantwell, Orrin Hatch, Ron Wyden, and many of their colleagues, we may just be on the cusp of finally addressing in a serious way our country’s affordable housing crisis.”
A number of other housing bills have been introduced this year, but none match Warren’s legislation in sheer scope. Frequently rumored to be a 2020 presidential candidate, the Massachusetts Democrat is making affordable housing a key issue.
"Housing is the biggest expense for most working families—and costs for everyone, everywhere are skyrocketing. Rural housing is falling apart, and decades of discrimination have excluded generations of black families from homeownership. My bill would cut rents by 10% and give families in urban, rural, and suburban communities more economic security," Warren said. "This proposal will attack the rising cost of housing by helping to roll back needlessly restrictive local zoning rules and taking down other barriers that keep American families from living in neighborhoods with good jobs and good schools. After bungling housing policy for decades, it's time for Congress to make things right and pass my bill."
A key component of the bill is a 10-year federal investment of $45 billion in the HTF, which states can use to build, rehabilitate, and preserve homes for extremely low-income households that earn no more than the federal poverty limit or 30% of the area median income. Expanding the HTF would help build and rehabilitate up to 2.1 million homes.
“The proposal expands investments in proven solutions—like the National Housing Trust Fund—at the scale necessary to help millions of the lowest-income families who today face impossible choices between paying rent and putting food on the table, buying medication, or saving for a rainy day,” said Diane Yentel, president and CEO of the National Low Income Housing Coalition, in a statement. “Congress should quickly enact this ambitious bill to help end homelessness and housing poverty once and for all.”
The bill also calls for investing $25 billion in the Capital Magnet Fund, which would be leveraged with private capital to build more than 835,000 new homes for lower-income and middle-class families, according to a bill summary.
In addition, Warren proposes investing $4 billion in a new Middle-Class Housing Emergency Fund, which would support the construction of homes for middle-class buyers and renters where there’s a supply shortage or housing costs are rising faster than incomes, and $523 million in rural housing programs to create 380,000 rental units and help 17,000 families buy homes. Another $2 billion would go to build or rehabilitate 200,000 homes on tribal land.
In another significant move, the American Housing and Economic Mobility Act calls for major changes to the long-standing CRA.
“Obligations under the CRA to provide credit to lower-income and middle-class communities are too weak,” according to the bill summary. “The bill extends the law to cover more financial institutions, promotes investment in activities that help poor and middle-class communities, and strengthens sanctions against institutions that fail to follow the rules.”
The cost of building affordable housing is a major hurdle for developers and a growing point of scrutiny. The bill seeks to reduce the cost of developing affordable housing by creating incentives for local governments. More specifically, the bill would put $10 billion into a competitive grant program that communities could use to build infrastructure, parks, roads, or schools. To be eligible, local governments would have to scrap land-use rules that restrict construction of new affordable housing.
There’s more. Warren also takes aim at housing discrimination. The Department of Housing and Urban Development has recently come under fire by housing and civil rights organizations for delaying the implementation of the Obama-era Affirmatively Furthering Fair Housing rule that requires communities to address patterns of racial segregation and foster inclusive communities.
Warren’s bill would expand the Fair Housing Act to prohibit housing discrimination on the basis of sexual orientation, gender identity, marital status, and source of income, including government assistance.
This story first appeared on the website of MFE sister brand Affordable Housing Finance.
