There’s at least one thing most Americans can agree on, no matter where they live or who they vote for: home prices are too high. There are several signs relief is imminent, especially after the Federal Reserve’s long-awaited interest rate cut in September. However, Fed Chairman Jerome Powell said key point of the country housing crisis is a supply problem—something central banks cannot solve.
To put it plainly, there aren’t enough houses to go around. It’s no wonder this has become a problem main topic on the path to running for president. Vice President Kamala Harris is calling for construction subsidies and expanded support for first-time homebuyers. Donald Trump has promised to lower interest rates, cut red tape and crack down on immigration to reduce competition for scarce homes.
Meanwhile, White House senior economist Jared Bernstein has his own opinion. Right after the Fed interest rate cut in SeptemberBernstein spoke with Luck to share what he sees as necessary measures to address the nation’s housing shortage. Some fixes are relatively simple, he said.
“From the perspective of developers, building affordable housing is not successful,” said Bernstein, who chairs the president’s commission. Economic Advisory Council.
There needs to be incentives to build such homes to help developers get a return on their investment, he said.
“In no small part because low- and even middle-income earners cannot always afford the costs of developing such properties, and that is a huge market failure,” he said. clear”.
One tried-and-true way to fix this “ROI problem” for multifamily housing, he said, is low-income housing. tax creditrequires developers to set aside a certain percentage of rent-restricted apartments for lower-income families. According to the Urban-Brookings Tax Policy Center, it is by far the largest federal program promoting affordable rental housing for low-income households.
The Joint Committee on Taxation estimates the program would cost $15.2 billion by 2025. President Joe Biden’s proposal annual budget in March called for a $37 billion credit expansion, as well as cutting private bond financing requirements in half to create more deals.
Many critics claim that many intermediaries will cut off the credit, meaning that a significant portion of the subsidy is not used to create new housing supply, and add that the credit could increase housing prices in general. shared. At the same time, according to the Tax Policy Center, some state agencies tend to approve projects that focus on low-income development in areas where they have previously been concentrated and where economic opportunities are limited. mechanism.
Learn about NIMBYism
Bernstein, who spoke of similar incentives to build affordable single-family housing, was known as a staunch progressive. However, both Republicans and Democrats across the country, Agree According to him, restrictive land use policies are also a major obstacle in solving the housing shortage.
Many states and cities are trying change zoning rules to allow for greater population density, specifically by permitting the construction of two- and three-story apartments in residential areas designed for single-family homes. However, opposition from landlords could quash these efforts.
When people say “not in my backyard,” a well-known phenomenon in the real estate industry is NIMBYismThey often hold city or town council meetings and put pressure on local officials to block such changes. Even as states pass laws limiting the ability of cities to say no, residents still find other barriers, according to Sean Dobson, president and CEO of the Amherst Group.
“And that’s the tension between cities trying to create more housing and landlords trying to maintain their stance on housing, [that] really a source of friction,” Dobson speak In luck Future of Finance Conference in May
Bernstein believes that’s where the federal government can help. In 2022, the $1.7 trillion spending package from Congress includes $85 million in grants for states and cities to implement zoning reforms. The Department of Transportation and Department of Housing and Urban Development programs have similar components.
“When we structure some of the grants and loans we offer, we say, ‘Look, if you want an infrastructure grant, that’s great,” Bernstein explains. We want to give it to you. Tell us how you would free up some of the exclusion zones and we’ll make sure you have a better chance of getting that bid.’”
Maybe that will lead to more homes and lower prices.
