Largest housing affordability package in a generation passes in the Senate

By Samantha Delouya, CNN

(CNN) — A bipartisan group of senators passed a bill Thursday aimed at improving housing affordability.

The measure contains roughly 40 provisions intended to increase housing supply and lower costs. It remains to be seen if it can pass the House as is, and comes one month after the House of Representatives passed a similar, slimmer package.

The Senate’s bill, called the 21st Century ROAD to Housing Act, is led by South Carolina Sen. Tim Scott, a Republican, and Massachusetts Sen. Elizabeth Warren, a Democrat. It seeks to encourage local governments to expand housing development, remove regulatory barriers that critics say slow construction, and expand manufactured housing, which can often be built faster and at lower cost than traditional homes.

In the years since the 2008 financial crisis, homebuilding has lagged behind demand, contributing to a nationwide housing shortage that has pushed prices higher across much of the country. Lawmakers say the package aims to spur more construction by encouraging municipalities to ease zoning restrictions and by reducing federal barriers to development.

Taken together, it’s one of the most significant housing initiatives in three decades.

In a statement, National Housing Conference president David Dworkin applauded the bill’s passage, calling it “an important step forward in addressing the severe shortage of affordable housing.”

However, Dworkin added that “provisions in the bill that could hurt the ability of investors to build tens of thousands of units of rental housing per year will need to be addressed by the House.”

President Donald Trump has pledged to address the housing affordability crisis, though the White House has so far offered few specifics about its broader strategy. Still, the administration has expressed support for the bill. In a statement earlier this month, the Office of Management and Budget said Trump would be willing to sign the Senate’s bill in its current form.

The House bill, called the Housing for the 21st Century Act, led by Arkansas Rep. French Hill, contains a narrower set of provisions. Lawmakers in the two chambers will now need to reconcile differences between the bills before sending a final version to the president’s desk.

Here are key provisions in the Senate’s bill:

Easing zoning rules

Many housing experts point to local zoning and red tape as the root of the slowdown in homebuilding, something that is difficult for the federal government to address, since each local government makes its own rules.

But if land-use regulations were relaxed, an extra 2.5 million housing units could be added to the US in the next decade, a Goldman Sachs report found.

The bills include provisions to encourage states and local governments to adopt more pro-housing land use and zoning policies, encouraging them to boost their housing productions, including by helping local governments implement pre-approved pattern books.

The bill would also make it easier for homeowners and landlords to get loans for home repairs – in order to help fix up the aging existing housing stock.

Increase supply of manufactured homes

The bills would also make it easier to expand the supply of manufactured homes, which are built in factories and typically faster and cheaper to produce than traditional, site-built houses.

Under federal law dating back to 1974, manufactured homes must be built on a permanent chassis, a wheeled base that allows them to be transported, similar to traditional mobile homes. In practice, though, most manufactured homes are never moved once they reach their destination.

The requirement to add wheels adds costs and can limit where these homes are allowed, often confining them to mobile home parks under local zoning rules. The bill eliminates that rule – which could cut the cost of each manufactured home by $5,000 to $10,000, according to the Bipartisan Policy Center.

Banning institutional investors

In January, Trump signed an executive order banning large institutional investors from buying single family homes. Unlike the House’s bill, the Senate’s version contains provisions that follow through on Trump’s order.

While the bill bans large investors, including Wall Street firms, from buying new homes, it still allows those investors to build new construction and rehabilitate existing homes. However, the law would require large investors to sell those properties to real people after seven years, with a three-year extension to that deadline if a renter wants to stay in the property.

Large investors, like private equity firm Blackstone, have been blamed for the US’ housing woes by both sides of the political aisle in recent years.

However, the data does not necessarily support the idea that large investors are a major culprit behind the country’s affordability crisis.

Investors who own more than 100 properties make up less than 1% of the market nationwide, according to an August report from the American Enterprise Institute’s housing center. Most investor-owned homes belong to smaller landlords who would not be affected by Trump’s proposal.

Jay Parsons, a rental housing economist, argued that banning institutional investor ownership of single-family homes could end up pushing renters out of certain neighborhoods and may make rent more expensive for everyone as renters who live in single-family homes are pushed into multifamily units.

“There is certainly a lack of available starter homes for sale, but this isn’t going to solve that root issue,” he added.

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