Biden's bold plan for American housing

Many pieces of the Biden agenda contained in the reconciliation bill currently being negotiated in Congress need work. Some are barely worth passing at all. The child tax credit, for example, isn't reaching many people who need it most. And Rep. Richie Neal (D-Mass.) has turned a decent paid leave plan into a convoluted, expensive, inefficient public-private monstrosity.

But there is one part of the bill that is both necessary and excellent: the housing plan. It would be the biggest improvement in American housing policy in decades. If something must be sacrificed to keep the Biden agenda's price tag under some arbitrary number so the bill can pass, let it not be this.

The housing program contains $327 billion directed largely — but not entirely — at the bottom of the housing market. As Jain Family Institute fellow Paul Williams explains, this has several components.

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First, there is a huge expansion of Section 8 housing vouchers, which will be increased by more than 50 percent over five years. That will be a godsend to many cost-burdened renters (though it still will not make them available to every person who is eligible).

Second, there is $80 billion in new capital grants for public housing and a temporary repeal of the Faircloth Amendment, which restricts the number of public housing units that can be built. The secretary of Housing and Urban Development would also be given wide discretion over how most of this money could be used. That's good, because Secretary Marcia Fudge could direct disproportionate money to the handful of large cities that have significant public housing, much of it overdue for repairs to keep the units livable. New York City, where half a million people live in public units that have an estimated maintenance backlog of $40 billion, is the most urgent priority here.

Finally, the plan includes a number of smaller pots of money to go to vouchers for people in truly desperate need. There's also a small grant program to incentivize states and municipalities to upzone their land — for instance, allowing for duplexes and triplexes instead of mandating single-family homes only. (Several places have already done this.)

Now, as Saoirse Gowan and I argued in a paper for the People's Policy Project, instead of traditional public housing available only to low-income folks, it would be better to build social housing in which anyone could live. This could be self-financing (hence allowing many more units to be built) and also direct assistance to all parts of the income spectrum that need help with housing (that is, almost all of it).

Biden's housing plan doesn't do that, but in terms of general priorities, it's quite good. It would assist millions of people who desperately need it. Crucially, it would also create millions of new rental units and homes for purchase so that assistance doesn't simply drive up prices on a fixed housing supply. Protecting and expanding public housing in particular is a sea change in American housing policy. Williams figures homelessness — created above all by excessive housing prices — might be more than halved. More broadly, the plan signals to towns and cities that they should be building more, by hook or by crook, and the federal government will help them in that effort.

None of the Democratic moderates who are apparently resistant to this package have made an argument against it, as far as I can tell. Their opposition is especially weird because it would directly address one of their biggest complaints about the Biden agenda: inflation. In a recent op-ed, Sen. Joe Manchin (D-W.V.) — with Sen. Kyrsten Sinema (D-Ariz.), one of the two key holdouts to passing the bill — complained that passing the Biden agenda risks fueling price increases. But as White House economists Jared Bernstein, Ernie Tedeschi, and Sarah Robinson carefully explain, one of the biggest factors fueling overall inflation numbers today is housing. Rents are going up fast, and so are home prices.

Such increases are always a two-sided phenomenon: a) lots of people bidding on b) a restricted supply of something. In the case of housing, on the one side we have a lot of people who are cash-rich thanks to the pandemic rescue payments and/or saving money due to social distancing, cashing out on their home price appreciation, or some combination thereof. On the other side, we're at the end of a decade in which residential investment was far, far too low — from about 2008 to 2014, housing investment was below the previous postwar record. Only in the last year or so has it returned to a respectable, average figure. We need half a decade at least of exceptionally busy construction simply to make up for lost ground.

Sometimes there's nothing to be done on the supply side. During World War II, for instance, government and private firms were cranking out tanks and airplanes as fast as they possibly could. But today, housing supply could be drastically expanded — and this bill would help that happen.

The approach implicitly advocated by Manchin and others who oppose this bill is keeping the housing supply bottleneck in place and making Americans so poor they can't afford a place to live anyway. To quote John Maynard Keynes, that idea "belongs to the species of remedy which cures the disease by killing the patient."

Let's do the smart thing for the American people and economy. Let's build.