The Road to Housing is Full of Potholes
What's going on with the biggest piece of federal housing legislation in decades
Over the last few weeks, YIMBY Action has been working on the latest installment of the most ambitious piece of federal housing legislation in a generation (I even took a trip to DC to do some lobbying.) In March, the 21st Century ROAD to Housing Act passed the United States Senate 89-9, demonstrating an emerging bipartisan consensus that housing is too expensive and the federal government should do something about it. That alone is a huge breakthrough.
The bill has a lot to like. It would incentivize local governments to cut down exclusionary land use and zoning policies; create a national building code for some types of manufactured housing; improve existing programs like Housing Choice Vouchers, Community Development Block Grants for Disaster Recovery, and the HOME Investments Partnerships program; and expand assistance for homeless veterans.
Over the last two years, Congress has been kicking around a lot of bills that would address the housing crisis. In some ways, The 21st Century ROAD to Housing Act is a Frankenstein monster made of those bills. (Read the extremely long explainer from the Bipartisan Policy Center.) At least when I was there, the mood in DC about it was positive — a coalition of widely divergent groups are all pinching themselves that Congress might actually do something about housing production in the United States. (Just talk to the nerds at Pew about chassislessness!)
But at the eleventh hour, a single provision was added that could undo much of what this bill promises —a provision from Senator Elizabeth Warren that would undermine if not eliminate build-to-rent housing.1 If the bill were to pass as currently written, instead of increasing the supply of new rental units in the United States, it could reduce them, according to the Urban Institute: “Congress could ultimately decrease the number of rental units built each year by at least 72,000, meaning its package to expand the supply of housing has included a measure that would actually reduce housing development.” To state the obvious: we shouldn’t pass a supply bill that could decrease the supply of housing.
The build-to-rent ban has rightfully drawn a lot of criticism from bloggers, writers, think tankers, newspapers, libertarians, and opinion page editors. As Senator Brian Schatz said jokingly during the debate, “There’s literally no reason for this. They wrote it wrong.”
Behind the provision is the fact that both Republicans and Democrats have converged on a shared villain for the price of housing: Institutional investors buying up single-family homes.
They’re reaching for this populist argument because the public agrees with that story: nearly three in four Americans in one recent poll blamed real estate investors for high home prices. It’s hard to get three out of four Americans to agree on anything, so it’s not all that surprising that politicians would want to grab this moment.2 But meanwhile, smart chart guys like Matthew Yglesias are making the extremely correct point that “protectionism for small landlords is a dumb idea.”
As someone monomaniacally focused on supply, the big problem isn’t that this provision tries to block large investors from buying existing homes, it’s that it will kill an industry that is a significant contributor to housing production, including subsidized affordable LIHTC projects. The growing industry of Built-to-Rent single family homes is booming, and losing that would have a dramatic effect on America’s housing supply. As my friend Sharon Wilson Geno from the National Multifamily Housing Council told Semafor, “It really undermines the whole purpose of the bill.”
Are investors buying up homes actually a huge problem? I don’t want to dismiss the very real ways in which private equity ruins everything, from your dentist to your yoga studio. The problem is that mom-and-pop landlords are not always better. Instead of banning one class of owners, we ought to regulate whatever bad behavior we actually think those owners might be doing. When we attack who can own things rather than regulating everybody we end up in weird places.3
There are very real negative effects that this ban could create. One is that because the bill would require built-to-rent owners to divest their holdings, it could mean mass evictions of existing build-to-rent communities. And it’s unclear what would happen to single-family subdivisions run by Affordable Housing providers. This bill puts residents who went through income certification and more to get into subsidized affordable homes into very uncertain futures.
As we wrote in our most recent letter to Congress, “YIMBY Action is specifically concerned about Section 901 of the legislation, which creates restrictions on investment in build-to-rent housing that could limit the construction of new homes — particularly family-sized rentals — at a moment when the country urgently needs more housing of every type.”
We don’t know what will happen when Congress comes back from recess, but the politics on this bill are interesting, because they are all about economic populism. On the one hand, every elected official ought to be angry about how the middle class has been ground down. But populist rhetoric can lead to self-defeating policies like this one, because economic populism focuses on villains rather than outcomes. To me, economic populism is good at pointing out problems but lousy at offering solutions. Advocates and politicians have an obligation to channel economic frustration into policies that will actually deliver. We shouldn’t write policy based on whom we hate. We should write policy based on whom we can help.
As a political question, the bill’s fate is uncertain. Congress is in recess, with most folks making appearances in their home districts (or Disneyworld). So if you have the ability to get in touch with your Representative or Senator, now’s the time! Otherwise, use our call tool to make your voice heard now!
More precisely, the bill would require build-to-rent homes to be sold within seven years, which would all but eliminate the incentive to build them.
These regulations would not apply to multi-family housing, which opens a big question: Are single family homes Just Different? Conor Dougherty and Ronda Kaysen said in the New York Times, “the bill treats one housing type as a special case.” Implicit in this is that it’s fine if institutional investors build or own multifamily housing, but owning a suburban subdivision is Just Wrong. Real families live in single family homes. Only fake families live in apartments. Fuck you, Sesame Street.
There’s weak evidence for investors driving up prices. As we’ve said before, they own a miniscule amount of the market.