Challenging the Federal Government to Treat the Housing Crisis like a Crisis
How does the federal government address the housing crisis?
By Bruce Katz, Ben Preis and Michael Saadine
This is the first in a series of policy newsletters being produced alongside the National Housing Crisis Task Force, which will release a national policy agenda with recommendations that the federal government can implement to address our housing crisis later this fall. The Task Force, an ambitious, two-year project to bring the most promising innovations in housing production, preservation, and finance to communities across the country, was launched in July by the Nowak Metro Finance Lab at Drexel University and Accelerator for America (AFA). If you want to make sure you receive all updates and reports from the Task Force, please register here.
Housing is finally having its moment in the spotllght. Not a day goes by without national and local media elevating housing as one of the most central challenges facing our country. The housing crisis, largely subjugated to the sidelines for years, has rightfully become a bona fide election issue. During Tuesday’s presidential debate, Vice President Harris mentioned housing no less than five times. And for good reason.
Housing market conditions in the U.S. are undeniably in their worst state in years. Housing is any given American’s largest recurring expense and is linked to health, climate, jobs, and productivity. Home price to income ratios have reached record highs, more and more renters are cost-burdened or severely cost-burdened, homelessness is at unacceptable levels, and we have a massive shortage of homes.
The crisis is driven by structural, dynamic, and self-imposed causes. Structurally, renter incomes are stagnant and lagging rent growth. Increasing material, labor, and land costs have driven home prices to unsustainable levels. Climate disasters are occurring more frequently and leading to a looming insurance crisis. Interest rates have risen drastically in the last two years, freezing the market. New investors and technologies have disrupted the rental and homeownership market.
We have created a system rife with barriers via restrictive land use and building codes paired with cumbersome permitting processes. Federal regulations add time and cost to projects that leverage federal funding. Financial tools have become so distributed and complex as to increase the coordination costs of making projects pencil. Our delivery system for building housing and leveraging state, local, and federal capital tools is too complex to navigate. We have underutilized our vast public land and building assets. We have not sparked innovation in construction technology the way we have in other industries. Our remaining public housing stock is underfunded, in need of capital repair, and at risk.
These conditions have created a market in which we are underbuilding across geographies and incomes. Due to our inability to adequately respond, the housing crisis has metastasized unabated, spreading all over the United States.
Thus, we are faced with a national crisis that is far more than a number; it is felt deeply by all segments of our population. The salient question for fall 2024: what can the next Presidential administration do to provide Americans some relief?
The National Housing Crisis Task Force
The bipartisan National Housing Crisis Task Force is urgently focused on federal and national action, driven by the untenable worsening of the crisis and the opportunity brought on by the oncoming federal government transition.
The co-chairs of our National Housing Crisis Task Force — Utah Governor Spencer Cox, Atlanta Mayor Andre Dickens, Cleveland Mayor Justin Bibb, and Fifth Third Bank’s Susan Thomas — have been focused on housing at the state and local level for years. In launching the National Housing Crisis Task Force, they urge the rest of the country and the federal government to treat the crisis like a crisis. The Task Force itself has a dual mandate to 1) identify and scale local innovations, and 2) drive meaningful federal action in response to the crisis. The Task Force is currently hard at work identifying and cataloging the strongest local innovations and exploring mechanisms to genuinely scale them, as we’ve written about in the past few months. States and localities are pushing solutions, but that will only get us so far. The federal government must respond to the emergency in ways only it can.
How has the federal government responded to past crises?
The good news is that we have recent precedents for urgent crisis response, as the federal government has acted to address the COVID-19 and climate crises in the last four years. These responses cut across federal bureaucracy to mobilize genuine action. They leveraged organizational, legislative, and administrative action.
In response to COVID-19, the federal government declared a public health emergency and appointed a White House COVID-19 Response Coordinator. The Coordinator leveraged and coordinated the efforts of the HHS and its CDC and NIH, the FDA, FEMA, DOD, state and local governments, and the White House Coronavirus Task Force. The joint efforts resulted in the CARES Act pumping existential economic relief into the frozen economy, Operation Warp Speed accelerating vaccine development, and the American Rescue Plan Act further bolstering the economy and vaccine development. The crisis demonstrated how quickly and effectively the federal government could activate to coordinate across functions, protect residents, address the root causes of an emergency, and stabilize the economy.
While COVID-19 was a sudden crisis, the climate crisis, like housing, built over time and finally reached a tipping point. President Biden appointed former Secretary of State John Kerry as the Special Envoy for Climate along with a National Climate Advisor and a Climate Task Force. This group emphasized collaboration across agencies including DOE, DOT, DOI, DOA, and DOD. The Biden White House led with multiple executive orders and landmark legislation including the Inflation Reduction Act and the bipartisan Infrastructure Investment and Jobs Act. The administration also set clear measurements and goals while joining and leading international, diplomatic climate efforts.
Going back to previous housing crises, we have additional precedent for emergency response. The housing crisis brought on by the Great Depression led to the creation of the Federal Home Loan Banks, the Federal Housing Administration, and public housing authorities in the 1930s; the GI bill in the 1940s responded to underproduction during the war — institutions that, on the one hand, shaped housing markets throughout the last 70 years, but also produced deep inequalities in housing access. HUD’s Manufactured Housing Standards responded to inflation in the 1970s. The global financial crisis and associated housing crisis sparked HOPE for Homeowners, government sponsored entity conservatorship, and the Neighborhood Stabilization Program. Even the recent COVID crisis elicited eviction moratoriums and rent relief programs.
What the federal responses to the COVID-19 and climate crises teach us is that when the government wants to fully address a crisis, it can. It has the tools in its toolkit to create federal policy that can be implemented locally to meet local needs, incentivize the private market to meet the moment, and smartly partner with the non-profit sector to further just outcomes.
The housing crisis is an emergency that warrants a true crisis response, and the federal government has blueprints to draw from.
Proposing a true crisis response for the next administration
We believe that a true crisis response involves mobilizing across the federal government with an emergency set of actions within the first 100 days of the next administration that includes governance reforms, a legislative package, and administrative reforms. This burst of activity will set the stage for further actions via tax reform in 2025 given the expiration of the 2017 Tax Cuts and Jobs Act.
The Task Force is considering policy ideas for the federal government’s mandate that would cut across five themes: 1) lead and focus the nation, 2) reduce barriers and eliminate complexity, 3) mobilize federal capital and assets, 4) innovate with an industrial policy lens, and 5) protect the most vulnerable Americans.
Lead and Focus the nation
The Task Force is considering a recommendation for the establishment of a “White House Housing Crisis Council” with the responsibility to connect multiple federal agencies, state and local governments, and the private sector plus the mandate to push on the legislative, administrative, and tax actions. The Council would be led by an experienced, esteemed leader with the experience and gravitas to channel the energies of all the federal departments that touch housing: HUD, Treasury, DOD, DOE, DOT, DOL, HHS, USDA, VA, and the IRS. The Council would be empowered to address the full scope of wicked problems plaguing the housing industry, from the property and homeowners’ insurance crisis to the preservation of existing affordable homes. The Task Force is also considering recommendations related to enhanced data and measurement, setting and enforcing national-level production targets for all housing types.
Reduce barriers and eliminate complexity
Reducing barriers and eliminating complexity means finding, and either suspending or eliminating, artificial constraints to our housing response. The federal government has a long history of suspending burdensome rules when responding to national disasters; the housing crisis could be given the same treatment. Existing HUD programs, DOT, DOE, and EPA programs are a few tweaks away from helping address the housing crisis at scale and must be streamlined and updated. The Task Force is also exploring opportunities to incentivize land use and building code reform throughout the country, building on existing, organic local efforts and the Pathways to Removing Obstacles to Housing grants that have begun to flow from the federal government to forward-thinking localities.
Mobilize federal capital and assets
The next administration can harness the energies and resources across the federal government, states and localities, and the private sector. For instance, the federal government could increase funding for the existing programs that work -- and those that have worked in the past but have been underfunded in recent years. It can also provide capital through new sources to more appropriately deliver the range of units and the range of affordability that the American people need. The federal government could also look at the current stock of federal lands and buildings and put those assets to work to address the housing crisis. The Task Force is also considering innovative proposals such as new government-sponsored enterprise products to purchase and create a market for construction loan mezzanine debt, to reduce the cyclicality of available financing, and counter-cyclical reductions in interest rates for housing construction during periods of slowed building starts.
Innovate with an industrial policy lens
The Task Force is considering policies for the United States to treat the production of housing as an industry and spur innovation across it, mirroring existing efforts in climate, artificial intelligence, and manufacturing. We could incentivize creativity in construction technology and enhance every step of supply chains. A Housing Innovation Unit like DOD’s Defense Innovation Unit would leverage the private sector and incentivize the next revolutionary construction technology, in a capital-intensive industry traditional investors avoid. The federal government could do more to promote the development of the modular housing industry, including helping local governments form consortia to buy a guaranteed pipeline of units. The United States lost thousands of contractors and homebuilders during the great recession, and the Task Force is considering policies for the federal government to partner with community colleges to create thousands of new small developers in a short period of time.
Protect the most vulnerable Americans
Along with the critical need to stimulate new supply and reopen the market, the federal government’s efforts must respond to the needs of the most vulnerable residents. For those households whose incomes are too low or whose needs are too great, the Task Force is looking into policies that provide sufficient subsidy to ensure that they can find acceptable housing. For those households who find housing in the private market, the Task Force may recommend policies to make sure that tenants have adequate protections and support. A goal to end homelessness may be needed, along with new vouchers, expanded rent support from Medicaid, or a new joint HUD-HHS fund to provide wrap-around services. The federal government could ensure that those who do not own a home can experience wealth creation and stability in the long term. The Task Force may also recommend creating a new, mixed-income, direct-pay social housing tax credit or grant to expand beyond the narrowness of LIHTC. There also must be a community lens, investing in and revitalizing distressed communities in ways that build on the Choice Neighborhoods and Reconnecting Communities programs.
What does leading and focusing the nation look like?
The National Housing Crisis Task Force will release a specific set of recommendations around the time of the election that can be leveraged by the new administration with their transition teams. We will expand upon the themes above and express what we believe can be achieved on Day 1, by Day 100, and within the first year of a new administration. In the backdrop of the national political climate around housing, the time is now to pair state and local innovation with meaningful federal action that genuinely treats the housing crisis like the crisis it is.
The Task Force intends to present bold ideas so the next administration can meet the moment and provide the needed supply of new homes and bring affordability to homeowners and renters across the country. We are still in the process of generating ideas, and welcome feedback, suggestions, and recommendations. You know where to find us.
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.