White House moves to address supply shortage with affordable housing initiative

WASHINGTON (TND) — The Biden administration announced several initiatives to address a shortage in entry-level homes and affordable housing in the U.S.

The White House said its plan will help close the shortfall in housing in five years and will create hundreds of thousands of affordable housing units in the next three years.

Like many other things, the cost of housing exploded during the pandemic as the housing market became heavily saturated with homebuyers looking for space or relocation. Average home values soared as competing bids ramped up purchase prices and the cost of rent has increased as the economy recovered from the pandemic-induced slowdown.

Even with increased interest rates for a mortgage, the housing market is still seeing sustained demand. Homebuilders have not been able to keep up with demand for years, leading to a shortage of more than 1.5 million homes nationwide, according to a Moody’s Analytics estimate.

This shortfall burdens family budgets, drives up inflation, limits economic growth, maintains residential segregation, and exacerbates climate change,” the White House said Monday.

Part of the White House’s initiative prioritizes federal grant money to municipalities that change their zoning and land-use policies to encourage more building of affordable or high-density housing.

Zoning rules like limiting the height of buildings, stringent parking requirements and outright bans on multifamily housing have restricted America’s housing supply.

“The difference between housing supply that we get when we have an area zoned for high-density, multifamily housing versus an area zoned for single-family only residential homes is incredible in terms of the amount of housing that can be provided,” said Willow Lung-Amam, a senior non-resident fellow at Brookings Institute and associate professor of urban studies and planning at the University of Maryland.

Exactly how the grant funds will be distributed has not been announced yet, so it is difficult for experts to predict how effective the program will be to address a lack of affordable housing.

Emily Hamilton, a senior research fellow at George Mason’s Mercatus Center, said it will be important for federal agencies to structure the programs to be more effective than those of the past and target localities that receive outcomes that ease the supply bottlenecks.

“It’s important to get the right group of grantees,” she said. “I think that an effective federal grant program needs to reward housing market outcomes rather than specific policy changes or specific planning activities.”

In the past, some localities have implemented rules that allow for affordable units to be built by the letter of the law, but don’t actually make them feasible to build because of other regulatory barriers.

Urban planning analyses have found zoning laws contribute to racial and class segregation. Only allowing single-family homes has effectively limited the opportunity to middle-income earners.

Local governments have traditionally been hesitant to change zoning rules allowing for higher density buildings because of resistance from homeowners.

“There are many complicated reasons, but perhaps the simplest explanation is that in general, local land-use regulations are determined by local elected officials,” Hamilton said. “They answer primarily to homeowners in their locality, who are more likely to vote relative to renters and more likely to stay in a single jurisdiction over a longer time period.

Homeowners have an outsized effect in determining the land use regulations of the localities where they live, and they tend to prefer regulations that prevent their neighborhoods from changing over time.”

State-level reforms may be the most effective route to handling building and zoning restrictions, as state legislatures have the authority to limit what localities can do to prevent construction, while the federal government is mostly limited to using grant funds to encourage change, Hamilton said.

Decades of prioritizing single-family construction has led to higher costs of living by limiting the supply of places available to rent or own. Changing the minds of homeowners and their local elected officials will be a difficult step for the federal government to take.

“You don't want to underestimate the level of resistance that people in exclusively single-family home jurisdictions, both local government officials and their constituents, have against building multifamily housing,” Lung-Amam said.

Experts said ensuring local governments are making changes that lead to positive outcomes for affordable housing will be key to addressing the crisis.

The (federal) government provides a lot of funds to local governments in order to do housing policy, but it usually doesn't come with too many strings attached,” Lung-Amam said. “The government has the ability to attach those strings.”

Another piece of Biden’s proposal is changing funding mechanisms and federal regulations on manufactured housing, one of the most affordable types of new construction available. Expanding financing for the loans used by would-be buyers of manufactured homes would make them cheaper for borrowers and help producers with liquidity, the White House said.

The funding may help with affordability, but local governments have made it more difficult to live in manufactured housing, Hamilton said.

“Just as housing affordability problems are reaching some of their worst points over time, there's less and less land available where mobile homes can be lived in,” she said. “But I do think that's a promising area of reform for making it easier for more people to pursue that option.”