Launching a Federal Housing Policy Agenda
By Bruce Katz, Ben Preis and Michael Saadine
The time for housing deliberation is over; the time for housing action has begun.
With that simple mandate, the National Housing Crisis Task Force today released From Crisis to Transformation: A Federal Housing Policy Agenda.
Treating the housing crisis like a crisis means the federal government must fundamentally restructure the way it is organized, substantially boost the production and preservation of housing, and take bold action to provide a housing safety net. Taken together, the Task Force’s recommended actions will reduce regulatory barriers and provide sufficient support and incentives to produce more than 750,000 new housing units per year, protect and preserve our existing housing stock, and create the institutions necessary to fundamentally transform the housing sector for the twenty-first century.
The Task Force, a project of the Nowak Metro Finance Lab at Drexel University and Accelerator for America, was launched in July with a compelling directive: address the metastasizing housing crisis by prompting transformative action both at the federal and non-federal level. In other words, to treat the crisis like a true crisis.
The focus on federal action is a recognition of the outsized role that Washington, D.C. plays in the U.S. housing system. The federal government is the largest allocator of capital, the largest landowner in our economy, the central regulator of financial institutions and investors, and the catalyst for industrial innovation. It has the tools and rules either to impede and frustrate housing solutions or to catalyze them by harnessing the full energies of the nation.
The Task Force is built to catalyze national action at all levels of government and across the public and private sectors.
It is bipartisan, co-led by a Republican Governor (Utah’s Spencer Cox), two Democratic Mayors (Atlanta’s Andre Dickens and Cleveland’s Justin Bibb) and a major bank executive (Fifth Third Bank’s Susan Thomas).
It is multi-sectoral and interdisciplinary, with a broad cross section of reflective practitioners from public agencies, financial institutions, philanthropies, and nonprofit intermediaries. Unlike many other housing efforts, it is not driven by advocacy or special interests.
It has a built-in experimentation and scaling mechanism: a Mayors’ Implementation Committee, chaired by Mayor Quinton Lucas of Kansas City and Kate Gallego of Phoenix. The bias of the Task Force is towards action, offering solutions that can be codified, adapted, and replicated throughout the nation.
Given the complexity of the housing crisis, the Federal Housing Policy Agenda is purposefully far-reaching. It is simultaneously broad and deep, recommending reforms to existing federal tax incentives, housing vouchers and FHA mortgage insurance as well as action on new challenges like property insurance, modular housing and technological innovation. These reforms would increase homeownership, improve renters’ economic conditions, reduce homelessness, address market failures, invest in American innovation, and bring the American Dream back into reality for millions of households. It has 40 detailed steps, which form the basis for legislative reform, new appropriations, and administrative action.
In the end, however, the federal housing agenda can be boiled down to the following major ideas.
First, the federal government must fundamentally restructure the way it is organized. We need to be brutally frank: the Executive Branch’s approach to housing is currently a fragmented mess. Responsibility for housing finance, regulation and oversight is divided among a bewildering sweep of agencies, including HUD, Treasury, USDA, VA, HHS, DOE, DOT, DOL, DOD, CFPB, DOJ, the GSEs, the Federal Reserve and bank regulatory agencies. This fragmentation within the Executive Branch means that the federal government lacks any clear and unified approach to resource alignment, rule promulgation and program implementation. Everyone is in charge, so no one is in charge. The result is that the federal government programs are characterized by an accretion of requirements, exacerbating rather than alleviating the costs of housing.
The Task Force proposes that the next President establish a Housing Crisis Council. The leader of the Housing Crisis Council must be a Senior Advisor to the President and directly report to both the President and White House Chief of Staff. The person needs to have the gravitas gained from exceptional public service and/or private sector experience, to garner the respect of Cabinet officials, Congressional members, and housing stakeholders who protect their territory and guard their power.
The first order of business of this new Housing Crisis Council, to be carried out in the first 100 days of the next Administration in conjunction with the Council of Economic Advisors, should be to set high production goals for the nation, show how these goals can be met through an array of emergency actions and structural reforms, keep score on every piece of major legislation, and track the results on a regular basis. The nation currently builds 1.2 million units per year, but the goal should be at least 750,000 additional units annually. This goal could drive accountability, compelling policy makers to show how policy ideas can reduce the nation’s supply deficit in meaningful and measurable ways.
Second, the federal government must substantially boost the production and preservation of housing to meet that goal. The federal government has a plethora of loan, tax and grant programs that rarely work together, adding time, inefficiencies and costs. On paper, DOT has $35 billion in loan authority to deploy for housing; DOE has $65 billion. In practice, few loans have been deployed; developers find navigating these byzantine and labyrinthine programs to be a heroic act, built more to frustrate rather than deliver. The federal government also has underutilized its vast holdings of land and buildings and has not sparked technological or process innovation in construction technology the way it has in other industries.
And so, the Task Force urges action across multiple fronts. Highlights include:
To unlock stalled multifamily projects, the Task Force calls for immediate action to lower the interest rate on a suite of FHA products and allow better integration between HUD, DOT, and DOE loan programs. The combination of “cheap debt” and aligned capital is necessary to enable projects that are already permitted to “pencil” in the current interest rate environment.
To boost production, the Task Force calls for Congress to make simple fixes to long out-of-date FHA programs, enabling a burst of federal housing insurance for accessible dwelling units, manufactured housing, and multifamily housing.
To expedite the construction of housing, the Task Force recommends unclogging, fast-tracking, and waiving unnecessary requirements — as Congress often does in crises involving natural disasters. Common sense rather than one-size-fits-all prescriptions should prevail: infill housing developments, for example, should be exempted from following the time-consuming environmental review process required under the National Environmental Protection Act (NEPA).
To catalyze the construction of empty office buildings and hotels to residences, the Task Force recommends substantial financial incentives for adaptive reuse.
To accelerate the disposition of publicly held assets, the Task Force proposes streamlining the current burdensome process and, in the case of the U.S. Postal Service, creating a real estate development arm.
To lower the costs of construction, the Task Force calls for treating housing policy as an industrial strategy, spurring innovation in construction techniques through a Housing Innovation Unit modeled after DOD’s Defense Innovation Unit, updating and creating new building codes for traditional construction and modular, respectively, and creating financial backstops for pooled modular demand.
As can be seen, there is no one single solution to solve our market failures and get housing production and preservation back on track, as there may have been when the FHA 30-year mortgage was introduced. The federal government needs to throw the kitchen sink at this festering challenge, sending strong signals to the entire ecosystem of builders, nonprofits, lenders, investors and state and local governments that an era of drift has come to an end. The result, by conservative estimates, will ultimately be the annual production and preservation of hundreds of thousands of new homes and apartments.
Finally, the Task Force is united, across partisan, jurisdictional and sectoral lines, to recommend bold action to provide a housing safety net. Highlights include:
To treat housing on par with other safety net benefits, take demonstrable steps towards making Housing Choice Vouchers a universal benefit.
To acknowledge the reality that not all can be homeowners, and the incredible jump in cost burden on the nation’s renters, create a renters’ tax credit to substantially reduce the gap between wages and rents in our economy.
In recognition of the deteriorating state of the public housing we do have, rehabilitate our public housing and heavily subsidized inventory, one of the nation’s most critical resource for housing very low-income families.
To acknowledge the importance of places to outcomes, create a new Thriving Neighborhoods Program to build housing at scale in distressed parts of our cities, suburbs and rural areas.
To further address the spectrum of problems brought on by homelessness, align housing, health and other services to battle the nation’s rising homelessness challenges with new energy and ambition.
The Task Force knows federal action is not the only game in a federated system. In the coming months, we will turn our attention to the other side of the equation, identifying innovative state and local solutions that, if spread and scaled, could also boost the production and preservation of housing and protect the most vulnerable. The focus on non-federal action is a recognition of how our federated system operates and functions. States, cities and counties have large roles to play in making housing affordable and attainable and, in the absence of federal action, they have been doing so with ambition and vigor. The last decade has seen a burst in innovative state and local practices, policies and products that can both inform federal action and be spread and scaled across the nation.
A crisis of this magnitude merits a united response. States and localities, while fighting the crisis admirably, are eagerly awaiting bold action from federal government. Nothing short of a crisis response will transform the housing ecosystem into one in which Americans of all incomes can live in the places they wish to call home.
Bruce Katz is the Founding Director of the Nowak Metro Finance Lab at Drexel University. Ben Preis is the Director of the National Housing Crisis Task Force and a Senior Research Fellow at the Nowak Lab. Michael Saadine is a Senior Advisor to the Nowak Lab and Managing Partner at Invisible Group, an interdisciplinary real estate investment platform.