The 21st Century ROAD To Housing Act became law last month, and is in many ways a piece of landmark legislation. The Act passed the Senate by an astounding 85-5, and passed the House by an equally astounding 358-32.
I say “astounding” because not a single piece of important legislation has been passed in the last 18 months at those kinds of bipartisan numbers and, in fact, very little is getting done in Congress against the backdrop of bickering that reflects a painfully divided government.
As has been published in the popular business press, political pundits are quick to point out this is nowhere near the landmark Great Society piece of legislation, the 1965 act that created the Department of Housing and Urban Development and which unleashed billions of dollars to build affordable housing and provide rent subsidies.
But it is the biggest housing legislation to have passed Congress in a generation, and will benefit underserved Americans who struggle with affordable housing and will help serve an underserved segment of the population. It contains a long list of measures that, in various ways, aim to speed up building in hopes of backfilling a housing shortage that economists estimate at one million to six million units. Housing experts across the political spectrum had been calling on Congress to pass a measure like this for a decade.
Critics Say
But its critics are not so sure the legislation holds much in the way of real relief for the housing market. The main reason aside from money, which the legislation contains little of, is that the federal government does not control the biggest levers in the housing market. Cities and states write most of the regulations that determine what gets built where, while interest rates and other macroeconomic factors hold most of the sway over mortgage costs.
But from my viewpoint, there are some positive and notable elements in the Act. First, it shows that Congress can legislate, even if modestly. Much of the measure consists of small changes that housing experts have been talking about for decades.
For instance, it tweaks the Housing Choice voucher program, better known as Section 8, which provides subsidies to low-income people renting from private landlords. The program requires regular inspections and participating landlords may have to hold units vacant for months while they wait for one.
In effect, this reduces the supply of affordable housing by discouraging building owners from accepting voucher holders as tenants. The legislation waives inspections of units that have been inspected for other federal programs (such as the low-income housing tax credit) in the previous 12 months.
Uncontroversial Policies
Housing experts had been pushing for this and other relatively uncontroversial policies such as guidance for how state and local governments can spend disaster recovery money under several administrations, which Congress just never got around to. Some experts say the bill is just a catch-up on 30 years of policy that has been stalled because Congress hasn’t had any appetite to tackle housing legislation.
Another positive is an incentive that nudges city councils and planning commissions to build more through a carrot-and-stick approach to HUD’s Community Development Block Grant program. The carrot is allowing cities greater leeway to use HUD funds for housing construction which was previously not allowed.
Also, since the 1970s, HUD has required that manufactured housing be built with a permanently attached chassis so homes can be easily transported. Yet only a small share of these are actually mobile homes; after sliding off a flatbed, most manufactured homes are placed on a permanent foundation.
The chassis requirement added thousands of dollars to the cost of each unit, so the new law removes the chassis requirement, immediately lowering the cost of producing those homes. More importantly, it could allow builders to experiment with the look of manufactured homes, creating cheaper factory-built houses with broader appeal.
The fact is the new ROAD Act takes small steps in hopes of creating a more efficient and fluid housing market. But when it comes to addressing the affordability challenge, it misses the mark.
AVP Pulse Index
But for the Construction Confidence Index which was up 2.2% and the less-than-1% tiny movements in some of our other indicators, big downward moves were experienced in the AVP Pulse Index last month, including the Dodge Data Momentum Index (-1.9%), the NAHB/Wells Fargo Housing Market Index (-2.0%), and the Architectural Billings Index (-7.9%) which all served to downdraft the entire Index. But the biggest drag came from Housing Starts, which came in at a woeful (-15.4%). Still, the Index was only down a -1.5% for the month, while still up +3.2% year-over-year, and +8.2% over the past rolling 36 months.