Housing Affordability: CAPs New "Build, Baby, Build" Proposal.

We propose a bold plan to knock us off of the bad equilibrium in which we've been stuck for far too long.

I’ve been warning you that myself and a group of very sharp colleagues at the Center for American Progress, where I’m a policy fellow, have a new housing plan. Well, here it is!

Its unifying theme is that we need to build not just more housing in America, but more affordable housing. The goals we set out for ourselves were to attack the problem of housing affordability largely from the supply side, by breaking down barriers to building (Abundance-style reforms), lowering the costs of building, and protecting renters and homeowners against anticompetitive and exploitative practices that drive up costs.

It so happens that the NYT Daily podcast had a great show yesterday on housing affordability, framed around the Trump administration’s non-starter idea of moving from 30- to 50-year mortgages. Conor Dougherty does an excellent job of explaining why the reaction to this has been so negative (I made similar arguments last week).

But in terms of what the federal gov’t can do in this space, Dougherty said:

…the problem with the housing shortage is that it takes a long time to have any impact on. And it’s not a thing that the president has a lot of control over. There are state regulations for how you build housing. There are local regulations for how you build housing. All this stuff that just breaks your brain the White House doesn’t have much control or even influence over.

He’s not wrong, and this is the key constraint that has long rendered federal housing policy ineffective, particularly when it comes to building affordable housing. But why has that been the case? Well, consider SNAP. Providing nutritional support to low-income people isn’t rocket science. Provide them with the resources to do so, they hit up Safeway, and that’s it.

But if local officials want to build affordable housing, they must contend with everything from detailed and cumbersome rules on zoning, parking spaces, stairwells, building height, lot sizes, and much more. And that’s before you get to opposition from NIMBY forces.

So, there’s just not much the feds can do to crack that code, right?

Wrong! Cue R3, an innovative proposal wherein the federal gov’t identifies high-cost areas and makes a deal with them, offering a nice, big, orange carrot…along with a big stick. From our fact sheet:

Launch the Rent Relief for Reform (R3) program to provide rent relief to residents and push high-cost communities to remove local barriers to building and lower rents. Under the R3 program, the federal government would enter into affordability contracts with high-cost cities to effectively freeze rent growth and rapidly increase supply. These contracts would include a mix of new resources, carrots, and sticks. The U.S. Department of Housing and Urban Development (HUD) and each jurisdiction would determine the size of the local housing supply gap to be closed over a five-year period, along with specific milestones to get there. HUD would then allocate new resources to support local planning and enable high-impact multifamily projects—ensuring every community has what it needs to succeed. If cities meet their production targets, the federal government would allocate new resources to provide relief to renters in the short term while the effects of new supply take root and moderate rental growth in the long run. Cities that fail to make reasonable progress toward their targets would lose access to discretionary federal grant programs for infrastructure, economic development, and other priorities.

You do the right thing, the feds not only help finance new rental units, but we help support your existing renters to the tune of around $1,000 per year (which, on average, is about how much rents grow in a year in expensive places). But if you’re in a high-cost place and you don’t make a good faith effort to cut through the sludge and build more, you’ll lose other federal grant dollars. That may sound harsh, but to our thinking, it’s the best way to use the fed gov’t’s leverage to accomplish an essential and elusive goal. We think this could add ~500K units over 5 years.

But wait! There’s more:

—The other big cost-increasing barrier we must break through is the decades-long decline in construction productivity. I’m exaggerating for effect, but in what other sector do workers still show up with tools from a century ago—e.g., hammers and nails? We propose a set of ideas that will boost the production of manufactured and modular homes, which are rare here (and rare in most other countries too, excepting Sweden; I plan to dig further into why that’s the case) but should be a lot less so, given advances in the quality and cost of such buildings. We explain some straightforward changes to regs and financing that, in tandem with some other recommendations re single-family-home costs, could result in 600K new homes and save first-time homebuyers $24,000 on a typical home.

—Here’s another way the feds can make an impactful difference here: support ongoing, sub-national efforts that are getting a big bang for their bucks. We in DC can’t know everything, or really hardly anything, about the specific building barriers that exist in the 20,000 zoning districts across the land. But what we can know, with some careful research, is what efforts are working to expand affordable housing in the places—and there are a bunch of them—that are already doing so. In some of the best cases (see the report for e.g.’s), public/private revolving funds (where current rents feed back into the fund) support mixed-income rental units. But these funds are often undercapitalized, so investing in them is another part of the plan.

—From the “duh!” category, rolling back the Trump tariffs on building materials should “quickly reduce the costs of building a new home by nearly $11,000 and increase homebuilding.” There’s almost never a rationale for homeowners spending a lot on title insurance for refis, and yet there’s an active ripoff-racket going that we propose to take down. We propose actions to block landlords from using AI to collude on higher rental prices.

I’ll stop here for now, but put it all together and we think our plan, with a price tag of $95 billion over five years, could fully close the supply gap, which we estimate to be 2 million homes.

For readers who know the history of housing policy in America, I understand your skepticism. But the problem is that we’ve been stuck forever in a bad equilibrium, with a system that’s failed to provide too many Americans with not just an essential part of a decent life—a secure, affordable roof over their head—but, in the case of homeownership, a source of appreciating wealth.

And when you’re stuck in the wrong equilibrium, you need a bold plan to knock you onto a better one. We humbly submit that’s what we’ve got here! So, check it out and see if you agree.