Upcoming Housing Legislation in U.S. Congress
The U.S. House of Representatives is gearing up for a vote on housing legislation in the near future. This bill aims to tackle the ongoing housing affordability crisis, which has become increasingly important for politicians who want to show they’re taking action.
The Senate previously passed a related bill, The Road to 21st Century Housing Law, with a significant majority, receiving a vote of 89-10 back in March. Despite the push from President Donald Trump, the Democrats largely supported it, with virtually all dissenting votes coming from Republicans.
One key difference exists between the House and Senate versions of the bill, and it’s crucial.
The Senate’s proposal includes a mandate requiring investors with 350 or more single-family rental properties to divest the excess within seven years. Notably, large institutional investors are exempt but must vend their properties to individual homeowners after that period.
However, the House version eliminates this requirement—perhaps its most striking feature.
This Senate provision could not only be seen as arbitrary and unjust but it’s also economically problematic. Driving investors out of the housing market would likely cause prices to rise, rather than decrease. This would diminish the number of potential investors, lower the motivation for building and maintaining homes, and leave buyers competing for a dwindling supply.
Consequently, housing prices would inevitably climb.
Hawaii Senator Brian Schatz, the only Democrat to vote against the Senate’s version, harshly criticized the seven-year divestment rule during the debate, describing it as “banana” and “very weird” for limiting ownership by entities other than hedge funds. He pointed out that the legislation “demonizes” those striving to create rental housing, emphasizing that it could severely curb housing supply.
These opposing versions reflect sharply differing perspectives not just on housing, but on the role of markets and government intervention. The principal inquiry is whether the crisis stems from a “market failure” needing federal rectification or whether a thriving market exists best with minimal government interference.
Today’s housing dilemma may not be a market failure at all; many argue it’s primarily a result of government meddling.
As pointed out in a recent article, the surge in housing costs began with a substantial upswing in federal expenditure starting in January 2021, leading to inflation with a corresponding increase in house prices—eventually making housing statistically unaffordable by May 2021. When the Federal Reserve increased interest rates to mitigate inflation, the availability of housing further diminished, with mortgage rates reaching heights unseen since the early 1980s.
Simultaneously, the nation grapples with sluggish growth in housing stock, a lingering effect from the 2008 financial mess, also largely attributed to governmental and Federal Reserve actions. The increasing population fueled by immigration, along with Millennials and Gen Z entering their prime home-buying years, is poised to escalate this stress into a full-fledged crisis.
This is the challenge that Congress and Trump are attempting to solve.
Their response is to modify some federal regulations to stimulate more construction. While this may be somewhat helpful at the breaking point, it likely won’t significantly increase housing availability or combat the inflation that has transformed a challenging market into a crisis.
Research suggests that the antidote to the affordability problem lies in major cuts to federal spending, but such reductions lack political traction.
The long-term remedy is fairly straightforward: build more homes.
Once again, it seems the government remains the primary obstacle. Various policies such as zoning laws, taxes, and overregulation hinder construction and sales. These issues mainly originate from state and local governments, yet the federal government often encourages them through its financial involvement in housing and urban development.
Both versions of the current bill aim to reduce some of the federal government’s promotion of state and local overregulation—a step in the right direction as under the Constitution, housing regulations should reside within state jurisdictions.
The federal government does not possess the constitutional authority to determine what states can or cannot do. For decades, Congress and the president have taken that power for themselves, and it seems time for them to relinquish it.
A viable solution would entail confining the federal government to its constitutionally mandated roles—potentially eliminating federal housing spending entirely.
This alteration would cease Washington’s influence over the housing market, which typically benefits large corporations at the expense of everyday people. Reducing federal outlay could also alleviate inflationary pressures.
Both bills propose preventing the Federal Reserve from introducing central bank digital currencies until 2030—an agreeable aspect, although some fiscal conservatives in the House advocate for a permanent ban on this as well.
In practical economic terms, the answer to the housing crisis seems clear: building more homes and curtailing currency inflation. Politically, however, finding a solution remains unlikely.
For Congress and the President, the main purpose of this bill appears to be political. While it may not significantly allay public concerns regarding housing prices, it does provide politicians with a talking point to suggest they are taking steps toward resolution. In Washington, that often outweighs the need for a genuinely effective approach.
