Elizabeth Warren's New Bill Would Spend $500 Billion on Housing
The American Housing and Economic Mobility Act would nearly double current federal housing spending.
Sen. Elizabeth Warren (D–Mass.) wants to build America out of its housing woes with a huge infusion of federal dollars.
On Tuesday, Warren introduced the American Housing and Economic Mobility Act, which would spend roughly $500 billion over the next 10 years on a variety of new and existing federal housing programs. It would give an extra $45 billion a year to the Housing Trust Fund—a big increase from the $219 million allotted to that program in 2017. An additional $2.5 billion would be spent annually on the Capital Magnet Fund, used to leverage private funds for affordable housing funding. Another $2.5 billion would go each year toward housing in rural and tribal areas. The funds would come mostly from hiking the estate tax.
All told, this is a giant increase in federal housing spending, more than doubling the current annual Department of Housing and Urban Development (HUD) budget of $50 billion. In return, this spending will—according to an analysis by Moody's Analytics—produce 3 million housing units by 2028, shaving a whole percent off per-year rent increases and lowing rents for below-market units by about 10 percent. (Moody's analysis assumes that each new unit will cost the federal government $175,000 to produce. That's close to the average per-unit cost of new, federally-funded affordable housing, but it's well below the $326,000 average cost of new affordable housing in a pricey state like California.)
The bill's spending measures makes standard progressive fare, similar to proposals from Sens. Kamala Harris (D–Calif.) and Bernie Sanders (I–Vt.). Harris introduced her own housing bill in July that would offer a refundable tax credit to renters spending more than 30 percent of their income on rent. Sanders called for "significantly expanding" the Housing Trust Fund in June.
Unlike either Sanders' or Harris' ideas, Warren's legislation calls out restrictive zoning laws for the upward pressure they put on housing costs. "Instead of supporting development and promoting competition, state and local governments have imposed needless rules that substantially raise the cost of buying or renting a home," reads the summary of Warren's bill.
To counteract these policies, Warren proposes a new grant program that would make $10 billion in infrastructure funding contingent on localities loosening their zoning rules.
It's welcome to see the senator addressing the issue of zoning at all, given the outsized impact it has on housing costs. But her solution is unlikely to fix the problem. Those cities and neighborhoods that have the most restrictive zoning laws tend to be wealthier communities that are less dependent on federal funds in the first place, so they're less likely to be swayed by promises of more cash.
More federal money for a new park or elementary school also seems unlikely to placate the concerns of most NIMBYs, whose opposition to new development usually can be reduced to narrow fears about unwanted construction noise, unwanted traffic, and unwanted neighbors (be they low-income tenants or gentrifying yuppies).
And while Warren's bill aims to reduce regulation with one hand, it would creates a lot more regulations with the other. The legislation would impose prevailing wage requirements on projects, expand the Community Reinvestment Act's requirements to more types of financial institutions, and broaden the Fair Housing Act's anti-discrimination measures to include sexual orientation and gender identity. So despite the encouraging language about zoning, the meat of Warren's proposal is more federal spending and more federal regulation.