Biden Suggests Bigger Federal Role in Reducing Housing Costs

Biden administration economists are calling for more aggressive federal action to lower costs for home buyers and renters, taking aim at one of the biggest economic challenges facing President Biden as he runs for office. re-election.

Policy proposals contained in a White House report released Thursday include what could be aggressive federal intervention in local politics, which often dictates where homes are built and who can occupy them. The administration is backing a plan to pressure cities and other localities to relax zoning restrictions that in many cases hinder the construction of affordable housing.

The recommendation comes amid a new administration deep in a decades-long housing crisis that is hampering the president's chances of running for a second term. The proposals, included in the president's annual economic report, could serve as a model for a major housing campaign if Mr. Biden wins a second term.

The report includes a series of measures intended to reduce the cost of renting or buying a home, while encouraging local governments to change zoning laws to allow the development of more affordable housing.

“It's really difficult to make a difference in this space, in this affordable housing space, without addressing land use regulations,” Jared Bernstein, chairman of the White House Council of Economic Advisers, said. in an interview.

Mr. Bernstein added that administration officials believed many local leaders were pushing for a greater federal role in zoning reform — which could help overcome objections from local groups opposed to development. “I feel like we’re walking through a door that’s more open than ever before,” he said.

The report is packed with statistics illustrating why housing has become an acute source of stress for American families and an electoral liability for Mr. Biden.

The administration acknowledged that it has limited power over local zoning rules, which tend to dictate the design and density of housing in particular neighborhoods. Most of the president's recommendations for increasing supply involve using the federal budget as a carrot to encourage local governments to allow more construction, including adding public housing and smaller starter homes.

Such policies are unlikely to be enacted this year, with elections coming up and Republicans in control of the House.

But the focus on housing and the approval of a comprehensive set of policies aimed at increasing its supply and affordability could serve as a model for a potentially bipartisan effort on the issue if Mr. Biden is re-elected. It could also add momentum to the housing reform movement that is well underway in state legislatures across the country.

The report shows how, over the past decade, housing prices have far outpaced wage growth for American families. This put homeownership out of reach for middle-income homebuyers and left low-income renters on the brink of poverty.

A quarter of renters, or around 12 million households, now spend more than half of their income on rent. Prices are so high that if a minimum wage worker worked 45 hours a week for a month, median rent would eat up every dollar they earn.

Behind it all, the report says, is a long-standing housing shortage. The lack of housing has become a rare point of agreement between Democratic and Republican lawmakers.

This shortage is the product of decades of failure to build enough housing, a trend that worsened after the 2008 financial crisis. This situation has been exacerbated by rising construction costs as well as numerous local rules of zoning and land use planning that make housing construction more difficult and costly. These rules also limit what types of units can be installed where, for example by prohibiting the construction of apartments in single-family neighborhoods.

The lack of affordable housing particularly harms low-income families and couples just starting out. Millions of low-cost apartments have all but disappeared over the past decade, either because of rising rents or disrepair. At the same time, smaller and less expensive »starter homes» represent a decreasing market share.

In recent years, a bipartisan group Legislators in red and blue states have pushed dozens of state laws to limit cities' control over development. The report applauds them and highlights the administration's efforts to encourage such reforms, including Action plan for housing supplyreleased two years ago.

Mr. Biden has focused heavily on housing in recent weeks, in part to show voters he is fighting to reduce one of their biggest monthly expenses. Privately, his aides have expressed hope that the Federal Reserve's interest rate cuts this year would lower mortgage rates and possibly home prices, if new housing supply comes to market in response .

Publicly, Mr. Biden seized on the initiative, calling on lawmakers to pass big federal investments in housing supply and tax credits for homebuyers.

“If inflation continues to fall – and it is expected to – mortgage rates will go down as well, but I'm not going to wait,” Mr. Biden said Tuesday in Las Vegas. “I'm not going to wait.”

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