Biden suggests bigger federal role in reducing housing costs

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By journalsofus.com


Biden administration economists are calling for more aggressive federal action to reduce costs for home buyers and renters, pointing to one of the biggest economic challenges facing President Biden as he runs for re-election.

The policy proposals contained in a White House report released on thursday They include what could be aggressive federal intervention in local politics, often dictating where homes are built and who can occupy them. The administration backs a plan to pressure cities and other localities to relax zoning restrictions that in many cases hinder the construction of affordable housing.

That recommendation is part of a new administration that is diving deep into a housing crisis, decades in the making, that 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 real estate push if Biden wins a second term.

The report includes a set of measures aimed at reducing the cost of renting or buying a home, while encouraging local governments to change zoning laws to allow the development of more affordable housing.

“It’s really difficult to make a difference in this space, in this affordable housing space, without addressing land use regulations,” Jared Bernstein, chairman of the White House Council of Economic Advisers, said in an interview.

Bernstein added that administration officials believed many local leaders were encouraging a larger federal role in zoning reform, which may help override objections from local groups opposed to the development. “I feel like we’re opening more doors now than ever before,” she said.

The report is filled with statistics that illustrate why housing has become a serious source of stress for American families and an electoral liability for Biden.

The administration has acknowledged that it has limited power over local zoning rules, which tend to dictate the layout and density of housing in particular neighborhoods. Most of the president’s recommendations for expanding supply involve using the federal budget as an incentive to encourage local governments to allow more construction, including adding low-income housing and smaller starter homes.

These types of policies are unlikely to become law this year, with elections looming and Republicans controlling the House.

But the focus on housing and support for a comprehensive set of policies to increase its supply and affordability could serve as a model for a potentially bipartisan effort on the issue if Biden wins re-election. It could also give momentum to a housing reform movement already underway in state legislatures across the country.

The report documents how, over the past decade, home prices have significantly outpaced wage growth for American families. That has put ownership out of reach for middle-income homebuyers and left low-income renters on the brink of poverty.

A quarter of renters (around 12 million households) now spend more than half of their income on rent. Prices are so high that if a minimum wage employee worked 45 hours a week for a month, the average rent would eat up every dollar he earned.

Behind all this, according to the report, is a long-standing housing shortage. Homelessness has become a rare point of agreement between Democratic and Republican lawmakers.

The shortage is a product of decades of not building enough housing, a trend that worsened after the 2008 financial crisis. It has been exacerbated by the rising cost of construction along with numerous local zoning and land-use rules that make make housing construction more difficult and more expensive. These rules also limit what types of units can go where, for example, making it illegal to build apartments in single-family neighborhoods.

The lack of affordable housing especially hurts low-income families and starting couples. Millions of low-cost apartments have essentially disappeared over the past decade, either due to rising rents or deterioration. At the same time, smaller and lower cost”starter homes”are a smaller and smaller part of the market.

In recent years, a bipartisan group Lawmakers in both red and blue states have pushed dozens of state laws to limit cities’ control over development. The report applauded them and highlighted the administration’s efforts to encourage such reforms, including Housing Supply Action Planwhich was released two years ago.

Biden has focused heavily on housing in recent weeks, in part to show voters that he is fighting to reduce one of his major monthly costs. Privately, her advisers have expressed hope that the Federal Reserve’s interest rate cuts this year will lower mortgage rates and possibly home prices, if new housing supply hits the market in response.

Publicly, Biden has seized on the initiative, calling on lawmakers to approve big federal investments in housing supply and tax credits for homebuyers.

“If inflation continues to go down – and it’s expected to – mortgage rates will go down too, but I’m not going to wait,” Biden said Tuesday in Las Vegas. “I’m not going to wait.”

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