As President Biden courts young voters and bucks negative perceptions of his handling of the economy, one economic issue looms large over the upcoming election: a historic lack of affordable housing.
The cost of buying a house just hit an all-time high, and even though rental prices are down slightly from their peak in 2022, Americans in red and blue districts alike are feeling the crunch.
A White House report released in March found that although incomes have doubled since 2000, housing prices have tripled, meaning the housing prices rose 50 percent faster than income over the past two decades. The median home price recently hit $383,725, a record high that’s up 5.2 percent from a year ago, according to the real estate company Redfin.
The average 30-year fixed mortgage rate has ticked back up above 7 percent as a recent run of strong inflation and economic data delays the timeline for the Federal Reserve to cut borrowing costs. The U.S. is also short nearly 4 million homes, according to a recent study by Up For Growth commissioned by the American Planning Association.
Casey Dawkins, professor of urban studies and planning at the University of Maryland, identified two culprits of high housing prices that date back several presidential administrations.
“New housing production fell dramatically during the foreclosure crisis of 2007-2010 and has not since recovered. Several factors account for this, including rising construction costs due to supply-chain disruptions and local land use regulations that increase the time, cost, and uncertainty associated with obtaining a development permit,” Dawkins wrote.
“With rising income inequality, there are more people today earning incomes below what is necessary to afford an adequate home.”
In this housing market, it’s no surprise that the lack of affordable housing is weighing on the minds of voters. Just more than 53 percent of homeowners and renters say housing affordability will impact who they vote for in the upcoming presidential election, according to a report by Redfin released in March.
“I think that just goes to show that [housing affordability] is weighing on people’s perception of who they want to vote for,” Daryl Fairweather, Redfin’s chief economist, told The Hill.
Biden is battling negative perceptions on his handling of the economy as he gears up for a rematch against former President Trump, the presumptive Republican nominee. Just 34 percent of voters approve of how Biden has handled the economy while 29 percent approve of how he has handled inflation, according to a recent CNN poll, which also found Trump has a 6-point lead over the incumbent.
Shelter costs are a key sticking point for persistent inflation, which was up 3.5 percent in March from a year ago, according to the most recent data released by the Labor Department. Shelter costs, which were up 5.7 percent from a year ago, accounted for 60 percent of the total annual increase and were “the largest factor in the monthly increase in the index for all items less food and energy.”
High interest rates, which the Federal Reserve hiked to a 22-year high last summer, have also pushed up borrowing costs. The central bank is not expected to cut rates Wednesday and has signaled it is delaying its timeline to cut rates, meaning the cost of buying a house will likely remain elevated longer than initially expected.
The president dedicated precious time during this year’s State of the Union address to tout his administration’s efforts to make housing more affordable, “reflective of the fact that they recognize there’s growing public angst about affordability and Washington is still struggling with what to do about it,” said Jeb Mason, a partner at Mindset and a former Treasury Department official during former President George W. Bush’s administration.
Biden’s budget proposal for next year, which was dead on arrival in the Republican-controlled House, included several provisions aimed at bringing down housing costs such as expanding the Low-Income Housing Tax Credit, creating a New Neighborhood Homes Tax Credit, and grants to incentivize states, local governments and tribes to build more homes.
The president also asked Congress to pass provisions directly targeting first-time homebuyers, including a Mortgage Relief Credit and funding for a down payment assistance program.
Congress is considering a number of measures to alleviate high housing prices that are weighing on their districts. While some lawmakers have taken partisan swipes across the aisle during recent hearings on housing affordability, there are several bipartisan proposals this Congress.
Such measures include Sens. Tina Smith (D-Minn.) and Mike Rounds’s (R-S.D.) Rural Housing Service Reform Act; Reps. Darin LaHood (R-Ill.) and Suzan DelBene’s (D-Wash.) and Sens. Maria Cantwell (D-Wash.) and Todd Young’s (R-Ind.) Affordable Housing Credit Improvement Act; and Reps. Mike Kelly (R-Pa.) and Brian Higgins’s (D-N.Y.) and Sens. Ben Cardin (D-Md.) and Young’s Neighborhood Homes Investment Act.
Mason, who advises companies, policymakers and other stakeholders on housing and financial regulation issues, said “there is a bipartisan appetite to do something, I think the question is just what can realistically get done in an election year before people kind of get into full campaign mode.”
Rep. Jimmy Gomez (D-Calif.), who chairs the Congressional Renters Caucus, told The Hill he hears “often from people who are frustrated.” Gomez represents part of Los Angeles, which Redfin found to have the highest median housing price and the HUD report found to have the second-highest homeless population after New York City.
“Homeownership is core to the American Dream, but it’s out of reach for so many Americans who are forced to rent instead,” said Gomez, who is working to significantly increase federal funding for rental assistance in the new government spending package.
“Maintaining current federal levels is entirely inadequate and fails to meet the scope of the current housing crisis,” he said. Gomez also recently proposed new monthly tax credits specifically for middle-class renters “to help close the gap between income and rent, with tax credits that put money directly into the pockets of working people.”
But Fairweather said that “a lot of the stuff that seems comprehensive like homebuyer credits, down payment assistance, those kinds of things, don’t solve the problem either.”
“Really we have to solve supply problems,” she said.
Angela Brooks, president of the American Planning Association, the membership organization for planning professionals such as urban planners, told The Hill that increasing the housing supply “is a national challenge, and it demands a national response.”
“In many cases, localities are hamstrung by the local opponents afraid of change. And while housing action is a priority across many states, they’re not moving fast enough in the way we need to alleviate supply challenges. That’s where federal partners can play a big role. Housing supply and zoning reform is one of the few issues in Congress gaining bipartisan traction right now,” Brooks said.
Rep. Nanette Diaz Barragán (D-Calif.), who co-chairs the Congressional Caucus on Homelessness and also represents parts of Los Angeles, told The Hill that “congressional action is needed to deliver the critical investments and protections to our communities that will provide more affordable housing and keep families housed.”
State and local governments have been struggling to manage the increasing number of homeless individuals in their communities. More than 653,000 people were experiencing homelessness last year, an all-time high as a result of rising housing prices and the end of pandemic-era assistance, according to a report released in December by the Department of Housing and Urban Development (HUD).
“Congress can, and should, do its part to create more flexibility and invest more in federal programs such as the Housing Choice Voucher, HOME, and Homelessness Assistance Grants Program, provide strong tenants protections, and reform federal regulations that hamper our local partners’ ability to increase our affordable housing supply,” Barragán said.
But some cities and states have turned to more punitive measures, including fines and arrest, and the Supreme Court last week heard a controversial case that could strengthen their authority to enforce anti-vagrancy and anti-encampment laws.
Dawkins was doubtful that cracking down on the homeless population will solve the nation’s housing crisis.
“Penalizing unhoused people for sleeping in public spaces will do nothing to alleviate the national homelessness problem; it will only change the geography of the problem by forcing those without shelter to relocate to other communities,” Dawkins said. “To get more people into homes, we need to build more housing.”