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Biden seeks spending spree on affordable housing

Biden seeks spending spree on affordable housing
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President BidenJoe BidenSanders: Reinstating SALT deduction 'sends a terrible, terrible message' GOP braces for wild week with momentous vote Shining a light on COINTELPRO's dangerous legacy MORE is proposing a massive investment in affordable housing through his infrastructure plan as the coronavirus pandemic pushes home prices to record highs.

Housing isn’t a marquee part of the $2.5 trillion proposal Biden unveiled last week, dubbed the American Jobs Plan, as the next step of his economic recovery agenda.

The measure, however, would spend four times the entire Department of Housing and Urban Development’s 2020 budget on a range of programs meant to fight a housing shortage exacerbated by the pandemic.

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Biden is aiming to produce 2 million affordable houses and apartments with $213 billion in tax credits, federal spending and grants meant to encourage the construction of new buildings and the rehabilitation of existing ones to serve lower-income families.

The housing plan is still short on details and could change as Biden attempts to shepherd his infrastructure bill through Congress. Even so, affordable housing advocates, homebuilders and housing economists say that Biden is on track to make a crucial dent in a pressing shortage.

“To be frank, it's something the housing market has needed for decades. And in the long run, it should help chip away at the housing supply problem in the U.S.,” said Ralph McLaughlin, chief economist for real estate and mortgage brokerage Haus.

Home sale prices and rents have risen steadily in the more than 10 years since the Great Recession, taking up an increasing percentage of household budgets and locking out younger and less wealthy Americans from homeownership. 

While the onset of the coronavirus pandemic caused the housing market to bottom out briefly in the beginning of 2020, the combination of a surge in home purchases, a steep decline in construction, rising material costs and a drop-off in listing sent prices skyrocketing again.

The median sale price of a home rose above $300,000 for the first time this past summer and hit $349,400 in February 2021, according to data released by the Commerce Department last month. Every metro area tracked by the National Association of Realtors saw home prices rise in 2020, and 88 percent of metro areas saw double-digit price increases, the trade group said in a report from February. 

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“This affordability crisis is driven as much by supply as anything right now,” said National Association of Home Builders CEO Jerry Howard.

“If people can afford to buy their first home, it means somebody is moving up into another house, which grows the economy.”

Though harsh weather caused home sales to drop sharply in February, the housing market is expected to pick up speed as the U.S. nears the end of the pandemic. Affordable housing advocates say Biden’s plan could go a long way toward opening up opportunities at the lower end of the income spectrum.

“I'm actually really pleased to see that the president included such robust resources on housing,” said Sarah Saadian, vice president of public policy at the National Low Income Housing Coalition.

“It's definitely at a scale that's needed to address the underlying causes of the housing crisis. The real question is, are we prioritizing the right types of investments to make them as most effective as possible?”

Biden’s proposal includes $40 billion  to build and repair public housing. Saadian said that while that money would go a long way, it covers just more than half of the roughly $70 billion backlog in projects in need of support from the National Housing Trust Fund.

Other measures intended to expand the supply of affordable housing include $20 billion in tax credits meant to encourage the building and renovation of 500,000 affordable homes in underserved areas, and a grant program to reward states and localities that scrap zoning laws that prevent the construction of affordable housing.

“A lot of times, zoning has been used to exclude renters in general or to exclude affordable housing,” Saadian said. “Those sort of local zoning reforms can help increase the availability of affordable housing in different communities, so it gets to both the racial equity lens and income equity lens.”

The success of Biden’s zoning grant program will be one of the most closely watched — and most contentious — aspects of his housing plan.

Efforts to scrap restrictive zoning laws have often faced fierce opposition in wealthy areas of all political stripes, driven mainly by homeowners eager to fend off development that could reduce the value of their homes. Zoning laws have also been used to prevent the integration of predominantly white neighborhoods by keeping costs beyond the reach of Black and Hispanic households locked out of the market for decades by explicit discrimination. 

Former President TrumpDonald TrumpSanders: Reinstating SALT deduction 'sends a terrible, terrible message' GOP braces for wild week with momentous vote One quick asylum fix: How Garland can help domestic violence survivors MORE last year sought to revoke an Obama-era rule that conditioned federal housing grants on whether a jurisdiction had overly restrictive zoning rules, an effort housing advocates said would hamper equity in the market. Trump was also criticized at the time for playing on racist tropes by arguing that his efforts would keep low-income people out of the suburbs.

The zoning grant program in Biden’s infrastructure program, however, is a purely incentive-based initiative that fair housing advocates hope will help life struggling Black and Hispanic families, who have suffered disproportionate burdens during the pandemic.

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“You’ve got to pay attention to the fact that there is inequality in our actual systems. The landscape of America — you've got to take that into account when you are doing any kind of major investment,” said Lisa Rice, president and CEO of the National Fair Housing Alliance.

“In this particular bill, they're actually paying attention to it." 

Updated at 10:55 a.m.