President Joe Biden released his long-awaited $2 trillion infrastructure plan this week, which, among many other things, attempts to combat an affordable housing crisis that has reached critical proportions during the pandemic.
While it’s extremely unlikely the American Rescue Plan will get the congressional seal of approval in its current state, housing experts and advocates praised its aim of addressing the worsening problems in the housing market. These issues include a severe shortage of lower-priced rentals, a dearth of homes for sale, and soaring prices for properties on the market. The president’s plan would invest $213 billion to preserve, retrofit, and create more than 2 million affordable housing units for low- and middle-income Americans.
“It’s ambitious, which is good, but also makes it difficult to pass,” says realtor.com® Chief Economist Danielle Hale. “It’s targeting the fact that we need more homes. … The housing market needs more homes, especially affordable homes.”
Details on how these lofty goals would be achieved were scant, but housing experts were quick to point out that this would be a significant investment in addressing the affordable housing crisis. The plan didn’t follow up on the president’s campaign promise of providing a $15,000 tax credit for first-time home buyers.
“We’ve got a pretty severe housing squeeze,” says Frank Nothaft, chief economist of real estate data firm CoreLogic. “Anything that can be done to support [the creation] of additional affordable housing is helpful.”
Biden would like to build and rehabilitate more than a half-million homes for lower- and middle-class buyers, and to offer about $20 billion in tax credits over the next five years for buyers and renovate properties in struggling neighborhoods. This is designed to help revitalize underserved communities and assist more Americans in becoming homeowners.
“Any amount would be helpful to incent additional construction for affordable housing,” says Nothaft. “Twenty billion dollars worth of tax credits is a good amount. That will help.”
The plan also calls to do away with zoning and land use policies that make it more difficult and expensive for new homes to be built. The president would like to create a competitive grant program that provides money to localities that get rid of barriers to new construction, such as minimum lot sizes, parking requirements, and not permitting apartments, condos, and townhouses from going up in certain areas.
These zoning requirements are often used in wealthier communities to preserve the uniform look of a neighborhood and keep property values high.
Existing “zoning policies sound like a good idea. You want to keep neighborhoods nice with big homes and large yards,” says Hale. “But the reality is, all of these things make these homes more expensive. They are obstacles to having more homes go up, especially affordable homes.”
However, including zoning in the plan could make it harder to get through Congress.
“Most presidential administrations have not actively pursued this because zoning has always been seen as a local power,” says urban planning professor Edward Goetz at the University of Minnesota in Minneapolis. “The kinds of communities that restrictive zoning benefits are wealthier, and the residents there vote at higher rates.”
The plan also aims to invest $40 billion to improve the nation’s public housing, such as maintaining, modernizing, and making these complexes more energy-efficient. The president would also use tax credits, grants, rental assistance, and other forms of funding to bring more reasonably priced rentals to the market.
“Congress has been disinvesting in public housing for 20 years or so,” says Goetz. He believes about double the amount the president has proposed is needed for public housing, but this is a good start.
“This $40 billion is absolutely necessary, and it’s a good down payment on everything that is needed—but I’m not hopeful all $40 billion will survive,” says Goetz.
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