the issue
The demand for housing in the US has for years outpaced supply, fueling an affordability crisis that leaves a growing number of people unable to comfortably buy a home or pay rent.
As Congress faces mounting pressure to act, Republicans and Democrats have struggled to coalesce around a legislative solution. Democrats have long advocated for spending more federal dollars on the sector, while Republicans would rather roll back restrictions on it.
the bond
A major breakthrough happened last week in the Senate Banking Committee, which advanced bipartisan housing legislation for the first time in over a decade. The package included a new proposal from Sens. Elizabeth Warren, D-Mass., and John Kennedy, R-La., that would attempt to boost housing supply by incentivizing communities to build more.
“We’re basically telling folks in local government, ‘We’re not telling you how to do your job, we’re just telling you what we want as an end result,’” Kennedy told Semafor. “‘We want more houses, and those of you who do build more houses will get extra money. Those of you who don’t will lose money.’”
That money would come out of the Community Development Block Grant program, which funnels federal funds to state and local governments. Communities would have two years to speed up their current pace of home-building in exchange for extra cash; if they don’t, they would see their share of the grants reduced.
“It fundamentally changes the role of the federal government in developing more housing in America,” Warren told Semafor. “It starts from the premise that we need more housing — but it also incorporates the idea that the federal government shouldn’t tell you how to get there.”
Communities on track for a funding reduction would receive guidance from HUD on how to turn things around. There would be exclusions for communities facing low demand, economic distress, natural disasters and other extenuating circumstances.
“There was a lot about who gets scoped in, who gets scoped out,” Warren said. “We don’t want to punish cities that are already in terrible financial trouble. And some cities actually have adequate building supply.”
Know More
The idea stemmed from a hearing on housing the Banking Committee held earlier this year, Warren recounted.
“I’ve been working for years on housing supply and lots of ideas to push in that direction, including an innovation fund,” Warren said.
“Kennedy, in this hearing, says he thinks it’s time not just for some carrots, but for some sticks,” she added, focused on federal funds.
“So when Kennedy gets up to leave, I said to him, ‘Are you serious about that approach?’ and he said, ‘Well, yes,’” Warren added. “We never varied from the initial idea of carrots and sticks.”
The bill now heads to the Senate floor for a vote. Kennedy told Semafor he’s not sure when that might happen.
“It depends on how much controversy it is,” Kennedy said. “Once people digest it, it’s not going to be universally popular. … You’ll have some folks in local government saying, ‘Why is the federal government telling us what we have to do?’”
“I sympathize with that point of view,” Kennedy added. But “we’re not telling them what to do — they don’t have to do anything. But if they don’t, they lose some of their federal money.”
Notable
Yahoo Finance reports President Donald Trump recently praised a different legislative proposal to boost housing supply by eliminating the capital gains tax on primary residences to encourage more people to sell.
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