House Passes Landmark Housing Bill Aimed at Making Homeownership More Affordable

If there's room for agreement on anything in Washington, it's that lawmakers need to do something to make homeownership more affordable. On Tuesday, legislators on both sides of the aisle clinched the final vote in the House to pass the largest piece of housing legislation in decades.

The bill, called the 21st Century Road to Housing Act, passed 358 to 32 in the House. The Senate approved it Monday with similarly overwhelming bipartisan support. It now heads to President Trump's desk for his signature.

In an interview with NPR, Sen. Elizabeth Warren, D-Mass., a co-sponsor of the bill, said housing affordability has become a priority for Congress.

"Every time every member of Congress goes back home they hear how urgent it is to bring down home prices. And that's what the bill does," she said.

A number of factors have made homes out of reach for many U.S. buyers. According to the real estate broker Redfin, a family needs an income of about $117,000 a year to afford the typical home on the market, almost $30,000 more than what most U.S. households earn.

Mortgage rates have also risen over the past several years, and that boosts the monthly cost of ownership. Rates had been falling earlier this year, but the war in Iran raised the cost of borrowing, and the nationwide average is now about 6.5%. Families also have less purchasing power, as inflation has outstripped wages.

But the main issue this bill tries to address is that the U.S. does not have enough houses to keep up with demand. Realtor.com estimated that last year the U.S. was short by more than 4 million housing units.

"Supply is the key problem here," said Jeanna Kenney, assistant professor of economics, finance and real estate at Villanova University. "Anything you can do to make supply easier is going to be helpful in the long term."

Ban on corporate investors that buy hundreds of homes

Rather than making a single change, the bill is a hodgepodge of provisions designed to either encourage housing construction or make it easier for home seekers to buy. The flashiest part of the package is a ban that prevents corporate investors from buying up more single-family homes to rent out. If one of those groups already owns at least 350 houses, they won't be able to buy others.

This provision was one of the most contested as the bill worked its way through the legislative process. Some politicians endorsed it as a move to stop corporate landlords from being able to outbid families, and buying up large chunks of local housing markets with cash offers.

But nationally, these investors make up only about 3% of the single-family rental market. And some experts warn the ban could actually limit the supply of available homes, because investors often buy and fix up homes that would otherwise fall out of the market. "It chills investment, and we need more investment in housing stock, not less," said Ross Marchand, executive director of the right-leaning think tank the Taxpayers Protection Alliance.

Still, Warren hailed the investor ban, pointing out that investors are buying up a large slice of the market in some parts of the country, like Atlanta. "If you don't live in a neighborhood where private equity has already moved in, believe me, you're on their list," Warren said.

Streamlining regulations for homebuilders

While the legislation doesn't provide new federal dollars for homebuilding, it streamlines some of the regulations homebuilders must follow in order to get existing federal financing.

For example, it allows builders to skip the environmental review when a housing project is going up between two buildings that already went through the process.

A different provision creates a grant program for communities to develop "pattern books" of preapproved housing designs, so builders won't need as many approvals to get up to code.

Another is aimed at making manufactured homes more affordable by getting rid of the rule that those houses must have a permanent chassis, or a steel frame that makes them moveable. Manufactured homes are often installed onto permanent foundations, and housing policy experts say that removing the chassis requirement could cut $5,000 to $10,000 off of construction costs, and allow for designs that could more easily incorporate a second story or basement.

"Not having that chassis immediately wipes several thousand dollars off that price — and this is already a type of home that is significantly less expensive than a traditional stick-built home," said Kate Wood, a lending expert at the financial advice website NerdWallet. (Stick-built is a real estate term for wooden homes that are constructed on site, rather than prefabricated.)

The bill also encourages local governments to speed up the homebuilding process by giving more federal dollars to places that build more housing. "If you don't build more housing, you should lose those incentives. And they should go to the places where you're building more housing," said the bill's co-sponsor, Sen. Tim Scott, R-S.C., on the Senate floor Monday ahead of the chamber's vote.

What federal legislation can't do

Washington lawmakers have a limited role when it comes to homebuilding — local governments have a much bigger say over construction. So do private builders, who are facing external challenges like the high cost of labor and supplies.

And Congress doesn't get a vote on mortgage rates. With rising inflation, the Fed might actually raise interest rates later this year.

But this is still the largest housing affordability bill to come out of Congress in decades, and researchers and those in the housing industry say it could help make homeownership more accessible.

"Honestly, the dream of homeownership is simply just that — a dream for so many Americans," said Amanda Crist, the vice president of member engagement at Greater Nashville Realtors. She said that anything that helps improve affordability "is absolutely necessary."

Senator Warren put it this way: "It has just been more than 30 years since the federal government has done anything but sit by and say, 'Damn, the price of housing sure has gone up.' Finally, we are actually moving."