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How Policy Can Help Housing Affordability

This year, proposals have begun making their way to Congress aimed at helping ease the tight supply and rising prices that are preventing many—particularly low-income Americans—from finding affordable housing. However, Jenny Schuetz, a David M. Rubenstein Fellow at the Metropolitan Policy Program at the Brookings Institution, called the proposals thus far “mostly partial fixes that do not address the underlying problems in the U.S. housing markets and policies.”

She made her own recommendations on how federal, state, and local governments can “improve the affordability, availability, and equity of housing outcomes for U.S. families,” in a recent post on Brookings’ blog, The Avenue.

Her recommendations include four major themes. First, “level the playing field between renters and owners;” second, “stop strangling supply in high-demand locations;” third, “help poor families bridge the gap between income and rent;” and fourth “housing policies alone cannot save places harmed by past policy failures.”

In terms of “leveling the playing field,” Schuetz said, “A key part of leveling the playing field is eliminating preferences for homeownership in the federal tax code, namely the mortgage interest deduction and the capital gains exclusions for owner-occupied housing.” She pointed out that the 2017 Tax Cuts and Jobs Act “moved in this direction.”

She said current laws that incentivize homeownership were “unfair and economically inefficient.” These laws penalized millennials who were delaying homeownership longer than generations past as well as people who lived in areas where home prices were leveling off or declining.

Schuetz suggested cities revise land use regulation and development processes that make it more difficult for multifamily development than for single-family home development.

Similarly, she called for revisions to zoning laws in order to help bring more supply to competitive markets. Referencing California and the Northeast, she said some markets are “artificially constrained by excessive local land use regulation.”

While these zoning laws can benefit current homeowners in these markets by inflating their home prices, she said the excessive zoning ultimately detracts from economic growth.

She called out Sen. Cory Booker’s (D-New Jersey) proposed Affirmatively Furthering Fair Housing rule, which charges communities that receive Community Development Block Grants with creating “a strategy to support inclusive zoning policies,” saying California “already requires localities to specify a plan ‘to meet the housing needs of everyone in their community’ in their comprehensive plan, yet those same localities continue to underprovide housing.”

While the first two themes Schuetz addresses will help middle-class households, she also addresses those in the lowest income rungs. Only one in five families eligible to receive federal housing assistance actually receive assistance.

For these families, the “most direct solution” is housing vouchers, an earned income tax credit, or a refundable tax credit.

Lastly, Schuetz suggested for the communities suffering from high vacancies and blight caused by past policies, future housing policies may not be enough. “Rather it will take sustained investments in human capital, infrastructure, and targeted economic development strategies to help people in these communities,” she said.

About Author: Krista Franks Brock

Krista Franks Brock is a writer and editor who has covered the mortgage banking and default servicing industries since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.
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