The Senate voted to advance this major bipartisan housing bill which has the potential to be the most transformative bill on affordable housing.
In an 89 to 10 vote on Thursday, the chamber voted to pass the 21st Century Road to Housing Act, which aims to make it easier to obtain financing, build homes, and ban institutional investors from buying single-family homes.
Banning institutional investors from purchasing single-family homes has been a hot topic and, frankly, a long time coming. President Trump has long been echoing his disapproval and it was especially reflected during his State of the Union Address.
This bipartisan bill still faces major obstacles and has already gained voices of opposition from some more conservative members. Although the Trump administration has already made their support for this bill, they also are urging Congress to pass a voter ID bill. The administration has even suggested refusing to sign the bill. In the months to come, the Senate will have to make some compromises and tough decisions.
The bill’s stance on affordability
As seen this past year, Democrats and Republicans alike are equally concerned about the overarching issue of affordability. As summarized by Tim Scott, a Republican Senator from South Carolina, the bill aims to address the rising age of first time homebuyers and to reduce the hopelessness of the younger generation’s ability to purchase a home.
In addition, a provision is outlined in the bill that promotes homebuilding in rural and urban areas. These reforms were especially voiced by the right who doubled down on rural home building slowing down these recent years and wanted it back in full force.
This sentiment of increasing inventory and reducing obstacles for first time home buyers such as high mortgage rates and interest, while simultaneously not lowering the value of already purchased homes, is reflected by President Trump. In his State of the Union Address he voiced the need for increased home building, reduction of obstacles, and institutional investor purchasing bans while protecting home values.
Recurring issues with investor bans
In February, Trump signed an executive order that set heavy limits on institutional investors’ ability to purchase single-family homes.
This executive order raised some concerns with experts concerning the real scale this change would make. Housing experts estimate that institutional investors as of 2022 only own 3% of single-family homes. Therefore, the scale of this impact could be more limited than anticipated.
However, this is only one part of the concern voiced by housing experts. Many have voiced concerns about whether the institutional investor bans could slow down the construction of single-family homes. Former supporters of this bill such as the National Association of Home Builders (NAHB), also expressed concern. In a statement reported on by realtor.com the NAHB had this to say, “NAHB believes the current version of the Senate’s housing bill would greatly curtail investment in the construction of single-family rental housing.”
If the secondary effects of this bill includes the reduced construction of these homes, it is ultimately adding to the lack of inventory. This would exacerbate the housing affordability issue, especially for first-time home buyers. Further explained by Joel Berner, senior economist as realtor.com, “Build-for-rent can be a steady stream of income for homebuilders and investors. And fewer options on how to use the homes once built, and who they can be sold to, is a disincentive to build.”
Although this does provide some valuable relief to people looking to purchase homes, the question still remains if this bill is taking into account secondary or third order effects that has the potential to add further strain.
