Ambitious Agenda to Address America’s Housing Challenges

On May 16th the Biden-Harris Administration issued a comprehensive “Housing Supply Action Plan” to address America’s housing shortage with the goal to “help close America’s housing supply shortfall in 5 years.” It’s an ambitious goal, and the plan isn’t shy about its significance, boasting “This is the most comprehensive all of government effort to close the housing supply shortfall in history.” It’s certainly true that recent administrations have not undertaken anything this broad and substantive relating to housing. But this kind of ambitious agenda is needed to address America’s daunting housing challenges.

It’s an important step that the White House is acknowledging our nation’s housing shortage and proposing a substantive plan forward. Many elements will require support of Congress, state and local governments, private-sector players, and a myriad of federal agencies. That kind of broad support and alignment around a common goal is no easy task. To-date Congress has not supported some of the administration’s primary housing goals—foremost of which was the $150 billion for housing in the stalled Build Back Better Plan. 

The 28-point plan strikes a balance between proposals for federal funding, policy changes, and initiatives that engage the private sector. It echoes some popular ideas in national housing policy, such as relaxing zoning to build more density, investing in alternative housing types like accessory dwelling units (ADUs) and manufactured housing, and disposing of real estate owned (REO) properties to mission-focused nonprofits. In addition, it addresses avenues for public-private partnership—such as expanding the Low-Income Housing Tax Credit, more flexibility in financing through Fannie and Freddie, and the proposed Neighborhood Homes Tax Credit.

Several items in the plan come from the White House’s budget proposal, such as $25 billion for boosting affordable housing production. The plan also cites items in the House Reconciliation bill that would increase federal funding for existing programs like Housing Choice Vouchers and pumping resources into public housing agencies. However, these items cannot move forward without bipartisan support from Congress.

Other elements of the plan rely on cooperation from state and local governments. For example, the plan says, “Treasury has urged state, local, and Tribal governments to dedicate more of their American Rescue Plan funds to build additional affordable housing at lower costs for families and individuals.” This refers to the $350 billion of flexible funding distributed to state and local governments, able to be used for a range of activities. As the plan acknowledges, $11.7 billion has gone to housing so far, an encouraging sign, though still far from the funding needed to truly move the needle on America’s housing shortage.

Yet, other components require partnership by the private sector, such as exploring public-private partnerships to address supply-chain disruptions for building supplies, and working with HUD to look at modular and panelized construction. It encourages USDA to “educate lenders” on its debt programs. And it discusses how the FHFA, the regulatory agency over the Enterprises (Fannie and Freddie), will work on exploring the feasibility of those entities providing combined construction and permanent financing for housing projects. Partnership from the Enterprises and the private sector at-large is a critical piece of the puzzle.

Finally, some parts of the plan call for changes in policy and practice by federal agencies, such as integrating affordable housing into Department of Transportation programs. Other examples include updating the regulations for the HOME Investment Partnership program and finalizing a tax-credit rule that allows for mixed-income multifamily projects. An especially promising proposal is the call to continue expanding the Federal Financing Bank’s Risk Sharing Program, an approach for allowing housing agencies to access capital that has already shown its success since restarting last fall.

This kind of leadership from Washington is much needed to address America’s significant housing challenges. The plan cites research by Moody’s “that the shortfall in the housing supply is more than 1.5 million homes nationwide.” Other research by the National Low Income Housing Coalition cites a more daunting estimate that, “there is a national shortage of 7 million homes affordable and available to renters with extremely low incomes.”  This gets to the basic issue that housing supply is not enough; it needs to be in line with what Americans can afford. Unfortunately, there’s bad news on that front. Research shows that since 1965, average home values have increased by 118%, while median household incomes increased just 15%, in adjusted dollars. And likewise for renters, from 1985 to 2020, American rents increased 149%.

The status quo of housing affordability in America is dire, and there are some distressing trends like the fact that the Black-white gap in homeownership is wider now than it was in 1960.  Institutional investors are purchasing large portfolios of single-family homes and converting them to rental properties (between 2020 and 2021 there was an 80% increase in investors’ share of single-family home sales).  And while need has increased, federal funding for housing has been steadily declining, with the largest of these sources, the Community Development Block Grant, shrinking by 77% since the 1970s. The Section 8 (Housing Choice Voucher) program, that provides low-income families with housing aid, is only funded at a level sufficient to provide vouchers to one in five eligible households—resulting in years’ long waitlists for assistance.

The need is great, and we should applaud the White House in acknowledging our housing supply shortfall and providing this roadmap. It’s a long and difficult road ahead, but an essential one, to ensure that every American has a quality place to call home.