Biden proposes a larger federal role to lower housing costs
Economists in the Biden administration are calling for more aggressive federal action to reduce costs for homebuyers and renters, targeting one of the biggest economic challenges facing President Biden as he runs for re-election.
The policy proposals in a White House report released Thursday include what could be an aggressive federal intervention in local politics, often dictating where homes are built and who can occupy them. The administration is backing a plan to pressure cities and other places to relax zoning restrictions, which in many cases are hampering affordable housing development.
The recommendation is part of a deep dive by the new administration into a housing crisis that has been brewing for decades and is hampering the president’s chances for a second term. The proposals, included in the president’s annual Economic Report, could serve as a blueprint for a major boost to the housing market if Mr. Biden wins a second term.
The report includes a series of measures intended to reduce the cost of renting or purchasing a home, while encouraging local governments to change zoning laws to allow for the development of more affordable housing.
“It’s really hard to make a difference in this space, in this affordable housing development, without addressing land use regulations,” Jared Bernstein, the chairman of the White House Council of Economic Advisers, said in an interview.
Mr. Bernstein added that government officials believed many local leaders were encouraging a greater federal role in zoning reform — which could help override objections from local groups opposed to development. “I feel like we’re kicking ass more now than ever before,” he said.
The report is packed with statistics that illustrate why housing has become an acute source of stress for American families and an electoral burden for Mr. Biden.
The government has recognized that it has limited power over local zoning rules, which tend to dictate the design and density of housing in certain neighborhoods. Most of the president’s recommendations to expand supply involve using the federal budget as a carrot to encourage local governments to allow more construction — including adding low-income housing and smaller starter homes.
Such policies are unlikely to become law this year, with elections looming and Republicans in control of the House of Representatives.
But the focus on housing and the adoption of a comprehensive set of policies to increase supply and affordability could serve as a blueprint for a potentially bipartisan effort in this area if Mr. Biden is re-elected. It could also boost a housing reform movement that is well underway in state legislatures across the country.
The report documents how home prices have significantly exceeded wage growth for American households over the past decade. That has put ownership out of reach for middle-income homebuyers and pushed lower-income renters to the brink of poverty.
A quarter of tenants – around twelve million households – now spend more than half of their income on rent. Prices are so high that if a minimum wage worker worked 45 hours a week for a month, an average rent would eat up every dollar he or she earned.
According to the report, behind all this lies a long-term housing shortage. The lack of housing has become a rare point of agreement between Democratic and Republican lawmakers.
The shortage is the result of decades of inability to build enough homes, a trend that worsened after the 2008 financial crisis. The situation has been exacerbated by rising construction costs and many local zoning and land use regulations, which make building housing more difficult and expensive. These rules also limit which types of units can go where, for example making apartments in single-family neighborhoods illegal.
The lack of affordable housing mainly affects lower-income families and first-time couples. Millions of cheaper apartments have all but disappeared over the past decade, either due to rising rents or falling into disrepair. At the same time, smaller and cheaper ‘starter homes’ form an increasingly smaller share of the market.
In recent years, a bipartisan group of lawmakers in both red and blue states have passed dozens of state bills to limit cities’ control over development. The report applauded them and noted the government’s efforts to encourage such reforms Housing supply action planwhich was released two years ago.
Mr. Biden has focused heavily on housing in recent weeks, in part to show voters he is fighting to reduce one of their biggest monthly costs. Privately, his aides have expressed hope that interest rate cuts by the Federal Reserve this year will push down mortgage rates and possibly home prices, if a new supply of homes comes onto the market in response.
Publicly, Mr. Biden has taken the initiative, calling on lawmakers to pass major federal investments in housing supply and tax breaks for people who buy homes.
“If inflation continues to fall – and that is expected to happen – mortgage rates will also fall, but I am not going to wait,” Biden said in Las Vegas on Tuesday. “I’m not going to wait.”