As residential real estate prices continue to hit new records and the economic effects of the coronavirus pandemic linger, the need for affordable housing is only going to get greater, and so will the opportunity for investors to profit while contributing to the solution.
Not that it isn’t already acute. According to the National Association of Home Builders, 75.1 million households, or roughly 60% of all U.S households, are unable to afford a new median-priced home, and every price hike of $1,000 pushes another 154,000 households into that category.
That’s while prices for existing homes continue to soar, hitting a median price of $329,100 in March that sets a new all-time record while shrinking inventory and low interest rates have pushed the average time on market to a new low of 18 days, according to the National Association of Realtors.
The federal government is responding in various ways. For instance, the $1.9 trillion American Rescue Plan already in place includes billions in rental aid, homeowner assistance, and emergency housing vouchers. Still on deck is the administration’s even bigger American Jobs Plan, the infrastructure bill which includes hundreds of billions toward building and renovating more than 2 million "affordable and sustainable places to live."
Now, the Housing Supply and Affordability Act
Now, add to that mix the bipartisan Housing Supply and Affordability Act (HSAA) recently introduced by Amy Klobuchar (D-MN), Rob Portman (R-OH), and Tim Kaine (D-VA) in the Senate and by Lisa Blunt Rochester (D-DE), Jaime Herrera Beutler (R-WA), and Joyce Beatty (D-OH) in the House.
That bill would commit $300 million a year to what would be called the Local Housing Policy Grant (LHPG) program. Through that, the U.S. Department of Housing and Urban Development (HUD) would, according to an announcement from the lawmakers, "award planning and implementation grants to states, localities, and regional coalitions of localities to support the development and implementation of comprehensive plans to expand the supply and affordability of housing, reduce barriers to new housing development, and avoid the displacement of current residents."
Engaging with community members on housing reforms and routine reporting from applicants regarding the use of these grant funds, as well as HUD studies of the program’s impact, also would be required.
The lawmakers’ announcement says the HSAA Act has been endorsed by 100 national and local organizations, including the American Planning Association, Habitat for Humanity, Up For Growth Action, and NeighborWorks Association.
Click here to see a one-page fact sheet on the bill courtesy of the Up For Growth advocacy group.
The Millionacres bottom line
Now, by Washington standards, $300 million a year is relative peanuts, but the idea here is to incent and empower local governments to create their own strategies, including how to effectively leverage other sources of federal, state, and local funding to increase housing supply and affordability.
These are the people on the ground who have the best idea of what local barriers exist, such as restrictive zoning, and what opportunities exist, such as development and redevelopment options near job centers and transportation.
Developers and other real estate investors have a big stake in what’s happening here, including commercial developers and property owners and providers of rental properties of all kinds.
The LHPG, the policy-creating grants program the HSAA would create, needs input from private stakeholders, since they’re the people in this country who actually build and operate much of that kind of housing.
And while the HSAA itself may or may not become law, parts of it probably will show up in other ways, if not. The ideas and imperatives around affordable housing options are percolating and the momentum seems to be building. It seems likely there will be changes and opportunities.
The HSAA looks like a kind of infrastructure bill for housing planning and policy. For real estate investors, now is the time to follow the developments.