American families are enduring the least affordable housing market in history. President Donald Trump and Congress rightly recognize the scale of the crisis. But the Republican Senate’s 21st Century ROAD to Housing Act is a dead-end. The legislation fuels more home-price inflation with an expansion of government subsidies. Meanwhile, its frontal assault on private investment will suppress the supply of new single-family rental homes. Luckily, it appears the president is realizing that the Road to Housing Act advances problems rather than solutions.
The bill expands nearly every demand-side subsidy Washington already has on the books. Increasing FHFA multi-family loan limits steers more subsidized credit into housing, inflating values while crowding out private financing. Widening terms for government-backed manufactured housing loans will drive up prices in one of the last truly affordable market segments; and because manufactured housing supply is already choked by zoning barriers, that inflation risk is especially acute. New down-payment assistance entitlements, a federal pilot program for home-repair financing, and expanded Community Development Block Grants (CDBGs) all direct capital toward projects preferred by central planners in D.C. rather than providing what families actually prefer.
Recommended Stories
One CDBG provision deserves special attention: It pursues some of the objectives of the Obama-era Affirmatively Furthering Fair Housing Rule, the same rule Trump repealed. Conservatives rightly rejected that attempt to let federal central planners override local zoning decisions. Repackaging it inside a ‘housing affordability’ bill does not change what it is.
The bill compounds this problem by subsidizing housing supported by Section 8 vouchers. Suburban and rural areas that have built schools, infrastructure, and tax bases around their own preferred development patterns could find more voucher recipients pushed into concentrated subsidized housing in their neighborhoods. Federal bureaucrats should not be influencing decisions, whether by mandate or financial incentives, about what gets built where.
But the most damaging provision is Section 901, which effectively bans large-scale single-family rental investors. The bill defines a “large institutional investor” to include investment funds, corporations, partnerships, and most other for-profit entities, then bars them from owning more than 349 homes. The exceptions come loaded with regulatory conditions: renters’ rights of first refusal, time caps on ownership, and ongoing compliance burdens.
The premise behind this restriction is that institutional investors are responsible for pricing ordinary Americans out of the market by gobbling up supply. The evidence does not support it. Various estimates put the institutional share of single-family rentals in the low single digits.
Even more importantly, the legislation will result in a dramatic curtailment of build-to-rent (BTRs). Families who desire to live in a single-family home without the burdens of a mortgage payment, maintenance, taxes, and insurance especially enjoy the BTR option. Now, they will be forced to either rent an apartment or make a home purchase they hoped to avoid.
It’s no wonder that when Republicans advance proposals championed by Sen. Bernie Sanders (I-VT) and Sen. Elizabeth Warren (D-MA), they lose their polling advantage over Democrats on the economy.
The logic behind the mantra “homes are for people, not corporations” is deeply flawed. Corporations involved in residential real estate only succeed by meeting the needs of people. Removing them also removes capital needed to construct new homes and renovate existing homes. Both investors and families lose out.
There is also a deeper principle at stake. Deciding by statute who is and is not permitted to buy a home is an assault on secure property rights. It sets a precedent for politically managed housing markets, where ownership is rationed based on government approval rather than a free people deciding for themselves whom to do business with.
Voters are likely confused because midterm elections are not until November. Yet, Republicans on the Senate banking committee are already acting like Democrats.
The real drivers of the housing affordability crisis are government red tape, inflationary subsidies that juice the amount of capital flowing to residential real estate, and tariffs on construction inputs that raise building costs. Congress should be attacking those problems directly: by fully privatizing Fannie Mae and Freddie Mac, eliminating tariffs on lumber and other construction materials, and reforming environmental regulations that needlessly add to costs or reduce new supply.
Conservatives should advance the handful of regulatory relief provisions while stripping out the subsidy expansions and the investor ban. Otherwise, the “good intentions” of the 21st Century ROAD to Housing Act will be a dead-end, leaving families with both unaffordability and fewer options.
Joel Griffith a senior fellow for the Plymouth Institute for Free Enterprise at Advancing American Freedom Foundation.
Marc Short is Board Chairman at Advancing American Freedom Foundation.
