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An analysis of a new bill proposed by Sen. Elizabeth Warren would fund 273,000 new affordable housing units per year over 10 years according to an analysis by Moody’s Analytics chief economist Mark Zandi, commissioned by Warren’s office and released Monday.
Warren, D-Mass., unveiled her new legislation, dubbed the “American Housing and Economic Mobility Act” in Boston Monday. Sen. Raphael Warnock, D-Ga., is the other lead Senate co-sponsor and it has the endorsement of the Cooperative Credit Union Association, the main credit union trade group for Delaware, Massachusetts, New Hampshire, and Rhode Island.
“The only way to dig our country out of this housing crisis is to build more housing so everyone has a place to call home,” Warren said in a statement. “My bill will make bold investments in our country’s housing and encourage local innovation to lower housing costs even more – and it’s all paid for by getting America’s wealthiest families to chip in.”
The proposal would roll back estate tax exemptions to 2009 levels to raise tens of billions of dollars for the existing federal Affordable Housing Trust Fund, an existing “Capital Magnet Fund” intended to be leveraged with private capital at a 10:1 ratio, assistance to build rural and tribal housing and a new “middle-class housing emergency fund” dedicated specifically to areas where there’s both a supply shortage and where housing costs are rising faster than incomes.
Around $35.6 billion would be spent the first year, scaling up to $51.4 billion in the final, 10th year, Moody’s estimated. Over its lifetime, the proposal would pump $445 billion into the federal affordable housing trust fund, $70 billion into public housing repairs, $25 billion into the Capital Magnet Fund and $4 billion into the middle-class housing fund, Warren’s office said. Much of the money would be used to build new affordable housing and to help nonprofits and others buy existing homes and preserve them as affordable units.
Other policy changes include down payment assistance for first-time, first-generation homebuyers, a $10 billion competitive grant program to reward communities that make it easier to build affordable housing or protect tenants from displacement. The bill would also significantly expand the Community Reinvestment Act to cover non-bank mortgage companies and beef up penalties for institutions that fail CRA exams while giving banks “more flexibility to banks to engage in activities that further the public welfare,” Warren’s office said in a fact sheet.
The net effect would be the construction of 185,000 additional affordable housing units in 2025 if the bill is passed this year, Moody’s Zandi calculated, ramping up to almost additional units 300,000 per year by the 2030. Zandi’s report was based on construction cost data for units built using federal low-income housing tax credit dollars and assuming a 2 percent inflation rate for construction costs.
All that building would keep rents 10 percent lower than they otherwise would be in 2034, Zandi’s report says, and create as many as 400,000 new jobs by the end of the 2020s while having “little impact on the economy and jobs” via scaling back estate tax exemptions and related reforms.
“The wealthy households that will pay more in estate taxes have substantial financial resources and will not significantly change their spending and saving behavior. Moreover, since the increased tax revenues pay for the expansion of the HTF and CMF and other programs, it ensures that the American Housing and Economic Mobility Act is deficit neutral, with no resulting impact on interest rates,” the report said, adding that the new housing and contained rent increases would likely have significant net benefits to regional economies around the country by improving working families’ economic positions and helping them live closer to jobs.
The bill arrived Monday with support from a who’s-who of national affordable housing advocacy groups.
“Anybody who cares about repairing what’s broken in American society understands that getting housing costs back in line with what working-class people can really afford is a mandatory step in that process,” National Community Reinvestment Coalition President and CEO Jesse Van Tol said in a statement. “This important legislation may have an acronym that sounds like someone politely asking for your attention, but the tens of millions of families that can hardly make ends meet because of the issues AHEM addresses are ready to scream.
However, banking and housing industry trade groups were notably absent from the list of backers. And with Congress continually hamstrung and its two chambers controlled by rival parties in a presidential election year, it’s unclear whether Warren’s bill has any chance at all of advancing further.
