[An earlier version of this piece appeared in Forbes.com.]
Housing policy wasn’t a major theme of the recent Democratic National Convention, however, Joe Biden did put out a Housing Policy paper last February. If Biden gets elected, any new housing initiatives are likely already inside his 14-page policy paper.
Biden’s housing policy has a few major ideas, and a laundry list of new programs and new money for old programs.
“Housing Should be a Right”
The first paragraph of Joe Biden’s housing policy paper says, “Housing should be a right, not a privilege.” Later it says, “On the first day of his Administration, he will direct his Secretary of Housing and Urban Development to lead a task force of mayors and other local elected officials to put on his desk within 100 days a roadmap for making this right a reality nationwide.”
Sounds bold. But it also sounds a lot like this quote, “That new right is the fundamental and the very precious American right to a roof over your head—a decent home.” That’s from President Lyndon Johnson when he signed the Housing and Urban Development Act of 1968. I know this sounds completely impossible but the Black homeownership rate is about the same today as when President Johnson signed that act.
I am, therefore, skeptical of the “Housing is a Right” slogan because it has a terrible track record. Although the Black homeownership rate almost doubled from 1940 (23%) to 1970 (42%), when housing discrimination against Blacks was legal and horrific, somehow, half a century after President Johnson declared housing a right, the Black homeownership rate was essentially the same (41% in 2018) as when Johnson declared housing a right.
3 Most Important Proposals
The most important specific changes proposed in Biden’s housing policy are, 1) a $15,000 first-time home buyer tax credit, 2) a large increase in funding for the Section 8 subsidized housing voucher program, and 3) tying federal dollars to local communities increasing their zoning density. Let’s look at each and then end with a laundry list of the new and expanded housing programs in Biden’s housing policy plan.
1) $15,000 First Down Payment Tax Credit
The First Down Payment Tax Credit would be a new refundable, advanceable tax credit of up to $15,000 for first-time home buyers. You would get the money upfront so you could use it as a down payment when you buy your first house. You wouldn’t have to wait until the following year to get the money like with normal tax credits.
These subsidies, unfortunately, eventually make homes more expensive. The first people using the program do well but the subsidy lets buyers bid up home prices and they often do over time. People who don’t already own homes are worse off because they have to pay more to buy their first home but current homeowners, of course, are wealthier after home prices increase. Wealth inequality increases.
A similar first-time buyer program existed from 2009 to 2010 but the credit was only $8,000 instead of the $15,000 proposed by Biden. The smaller $8,000 tax credit had a big impact on home prices. Prices nationally had fallen 20% the previous two years but once the tax credit went into effect home sales increased and house prices stopped falling. In some metropolitan areas, house prices actually increased after the tax credit started but after the tax credit ended in 2010, prices started to fall again in those metros. Even though it was much smaller than the proposed Biden plan, the 2009 $8,000 tax credit had a huge impact on house prices.
It’s seems obvious that Biden’s $15,000 First Down Payment Tax Credit proposal would eventually jack up house prices in many markets and would hurt first-time home buyers who buy after the $15,000 subsidy is capitalized into higher house prices, especially where the subsidy causes home prices to increase more than the subsidy.
2) Section 8 Rental Voucher Program
Funding for the Section 8 rental voucher program would be greatly increased. About four times as many people qualify for Section 8 vouchers than there are vouchers available. That seems unfair to the people who qualify for the vouchers but can’t get them. Biden’s policy would fully fund the Section 8 voucher program. The goal in the housing plan is that no one has to pay more than 30% of their income for rental housing.
Besides more funding, the policy would change the mechanics of Section 8 vouchers so recipients would cluster less in the lowest income areas of a county. Average rents would be determined for each zip code instead of just for the county as a whole. The Section 8 subsidy paid to landlords would then be less in the cheapest zip codes in the county but more in the less cheap zip codes. The change should cause Section 8 voucher recipients to spread out more geographically instead of clustering so much in the lowest income areas. This spreading of recipients becomes all the more important if funding for Section 8 vouchers is greatly increased.
A problem with Section 8 vouchers that is rarely talked about is that studies have shown that vouchers tend to drive up rents in areas with a lot of Section 8 vouchers. The higher rents hurt renters who don’t have Section 8 vouchers. Spreading the vouchers around as mentioned above would help with that problem but increasing funding for Section 8 vouchers would tend to make the problem worse for lower-income renters who don’t qualify for Section 8 vouchers.
3) Single-Family Zoning
The Biden plan also attacks single-family zoning, “Exclusionary zoning has for decades been strategically used to keep people of color and low-income families out of certain communities.” This is the only part of Biden’s housing plan that has gotten much media attention and that’s because Donald Trump attacked the idea and said he reversed an Obama-Biden regulation that gave the government the power to “abolish single-family zoning.”
See the fifth and sixth bullets in the next section for two zoning-related programs in Biden’s housing plan.
The most contentious issues for city councils, whether Democrat or Republican, are rezoning issues. Trump is tapping into the strong emotions surrounding local zoning changes.
It’s interesting to note that some conservative think tanks also believe, like Biden, that single-family zoning should be more flexible and allow higher density housing.
New Programs In The Biden Housing Plan
- A new “Homeowner and Renter Bill of Rights.”
- A new renter’s tax credit.
- Creating the Public Credit Reporting Agency, a federal credit reporting agency that will accept rent and utility bill payment history when creating credit scores similar to FICO scores.
- Legal Assistance to Prevent Evictions Act of 2020.
- Identify existing federal grant programs that can be changed to require recipients to have to reform their zoning.
- Legislation similar to the proposed HOME Act of 2019 to withhold some federal funds from states unless they develop “inclusionary zoning.”
- Applying the Community Reinvestment Act to mortgage and insurance companies.
- Expand the Low-Income Housing Tax Credit for real estate developers.
- Apply the 10-20-30 plan to all federal programs – at least 10% of the money must go to areas that have had 20% or more poverty over the last 30 years.
- Continue to require communities receiving certain federal funds to be subject to the Affirmatively Furthering Fair Housing Rule.
- Expand the Good Neighbor Next Door program down-payment assistance for first responders and educators buying homes in areas with high rates of poverty.
- Ensuring 100% of formerly incarcerated individuals – at the federal and state level – have housing upon release, and require entities in federal housing programs to participate.
- Create a comprehensive housing grant program tailored to survivors of domestic and sexual violence.
- Tackle racial bias that leads to homes in communities of color being assessed by appraisers below their fair value.
New Money For Old Programs In The Biden Housing Plan
According to the policy paper, “As President, Joe Biden will invest $640 billion over 10 years so every American has access to housing that is affordable, stable, safe and healthy, accessible, energy efficient and resilient, and located near good schools and with a reasonable commute to their jobs.”
- Within the HOME program, establish a $100 billion Affordable Housing Fund to construct and upgrade affordable housing, including;
- $65 billion in new incentives for state housing authorities,
- $10 billion to make homes more energy efficient, and
- $5 billion to increase the stock of affordable housing as part of larger community development efforts.
- $20 billion increased funding for the Housing Trust Fund.
- $13 billion over five years to enact the Ending Homelessness Act.
- $10 billion over ten years to expand flexible funding for the Community Development Block Grant.
- $5 billion every year to expand the New Markets Tax Credit program.
- $300 million for Local Housing Policy Grants.
- Increase resources for mental health services and substance use disorder treatment, including through the Projects for Assistance in Transition from Homelessness program.
- Increase funding for the Multi-Family Direct Loans and the Single Family Direct Loans programs at USDA.
- Expand funding for the Community Development Financial Institutions Fund.
- Expand access to the Supportive Housing for the Elderly (“Section 202”) and Supportive Housing for Individuals with Disabilities (“Section 811”) programs.
“For all of these new housing investments, those receiving assistance will be required to abide by Davis-Bacon Act wage requirements” and the use of project labor agreements is encouraged.