Some rare bipartisanship on Capitol Hill has a legislative package moving closer to law that lawmakers hope will address the housing affordability crisis. But those within the housing industry worry that these bills will have unintended consequences.
The 21st Century ROAD to Housing Act includes several bills and aims to increase housing supply, lower housing costs, ban institutional investors from buying up single-family homes and more.
Critics say some of that legislation will actually reduce the housing supply, which could keep costs rising.
“It’s best understood as Congress’s effort to encourage additional housing supply through a variety of changes to incentives and regulations,” Yonah Freemark, researcher at the Urban Institute, told Straight Arrow.
The package has passed in the Senate and is now with the House for review.
There are three main elements to this legislative package.
Housing affordability crisis
The first two elements are the combination of the Renewing Opportunity in the American Dream (ROAD) to Housing Act and the Housing for the 21st Century Act.
The former was cosponsored by Sens. Tim Scott, R-S.C., and Elizabeth Warren, D-Mass.
Warren said that legislation would take “a good first step to rein in corporate landlords that are squeezing families out of homeownership.”
That legislation passed the Senate as an amendment to the National Defense Authorization Act for the current fiscal year.
The Housing for the 21st Century Act, which was cosponsored by two Democrats and two Republicans, received nearly unanimous support in the House earlier this year.
One of those cosponsors was Rep. Maxine Waters, D-Calif., who called the legislation “a critical first step.”
Among the goals of this package are improving financial literacy through agencies, counselors and training.
The bills in that package would also encourage building more homes in the U.S. and eliminate barriers to building manufactured housing.
The legislation would provide more incentives to localities that change their regulations and encourage additional housing supply.
“It’s good that the federal government’s taking some action, but really, most of the barriers that [developers] face are at the local level, and this act won’t do very much to sort of help with those kinds of issues, like an option zoning board or NIMBY objectors,” Brian Asquith, an economist, told Straight Arrow.
Freemark agreed.
“The reality is that this is not a fundamental change in our housing markets in most ways,” he said.
The bill package also aims to modernize the Department of Housing and Urban Development and the Consumer Financial Protection Bureau to help people get loans and protect consumers.
Trouble getting financing and general affordability are some of the biggest reasons Americans are having trouble buying a new home.
“The federal government has a big role in financing, home development, home construction, home development, home purchasing,” Asquith said.
Institutional investors
One of the big additions to this new package is a language that would limit the buying power of institutional investors.
The number of homes being bought up by large investment companies continues to increase.
“This is a departure from the norm in American society, where it’s typically been understood that single-family homes are supposed to be for sale,” Freemark said.
While the increase is clear, the number of homes in America owned by institutional investors remains extremely low.
The legislation defines an institutional investor as a landlord with at least 350 properties. Only about 140 institutional investors meet that criterion, which accounts for 0.59% of single-family homes.
They also only accounted for roughly 1% of single-family home purchases over the last decade.
“There’s some reasons to think that institutional owners are not helping, but one thing they are doing is making it more feasible for people to rent properties in neighborhoods that previously had been only available for home ownership,” Freemark said.
Industry concerns
The push against institutional investors has been the biggest concern amongst people in the housing industry, who said this could hurt Americans in two ways.
First, it could cause fewer of these larger companies to build more homes.
Second, it could hurt renters.
“You’re going to be hurting a lot more people who are potential renters than helping people who are potential buyers,” Asquith said.
The National Association of Home Builders estimates single-family housing starts could drop 40,000 units per year because of that mandate.
It’s also drawn some concern from members of Congress, with 76 House members signing a letter to House Speaker Mike Johnson, R-La, and Minority Leader Hakeem Jeffries, D-N.Y., voicing issues. The representatives said the mandate “would have far reaching and unintended consequences that run counter to the bill’s stated goal of expanding housing opportunity.”
Some projects have already been paused as the bill continues to move through Congress, including a major project in Phoenix. Hancock Builders is in the process of building 35 buy-to-rent communities, which would create 7,200 units.
The company has paused production while it waits to see what comes of the legislation and said they may be forced to lay off workers if the project cannot continue.
Will Trump sign?
During his State of the Union speech earlier this year, President Donald Trump spoke about the housing market several times.
He also specifically called out institutional investors. The president had a mother from Houston in attendance, saying she lost bids on 20 different homes to corporate buyers.
An executive order signed by the president in January aimed to stop that from happening.
So, while the president has not made a specific mention of this legislative package, it likely will have his support.
“If you’re a middle-class person looking to buy your first home, if you have your first kid, there’s just not that much help that’s out there, and at least the federal government is trying to do something,” Asquith said.