In a speech at the National Press Club in January, Senator Elizabeth Warren, the Massachusetts Democrat, criticized Donald Trump for not doing enough to tackle affordability. He had recently posted a social-media message calling for a ten-per-cent limit on the interest rates that credit-card companies charge; if the President really wanted to get things done, Warren said, he would pick up the phone and use his leverage on Capitol Hill to get a bill passed. Later that day, Trump phoned Warren. According to a White House official, they “had a productive call about credit-card interest rates and housing affordability.”
The idea of capping credit-card fees didn’t go anywhere, but Trump subsequently threw out another populist proposal: preventing Wall Street investment firms, such as private-equity firms and hedge funds, from competing with ordinary home buyers to acquire residential real estate. In late January, he signed an executive order that instructed government agencies, including the mortgage giants Fannie Mae and Freddie Mac, not to approve or facilitate deals in which institutional investors purchased single-family homes. “People live in homes, not corporations,” the executive order said. Trump appeared to be making common ground with progressive Democrats like Warren and the Oregon Democrat Jeff Merkley, who, the following month, unveiled a housing bill that sharply limited the ability of private-equity companies to access tax breaks and other programs designed to support the housing market. The goal of the bill was to “stop Wall Street from snapping up homes in bulk and jacking up rent for families,” Warren said at the time.
The claim that private-equity companies are largely responsible for rising housing costs is hotly contested, especially when it comes to single-family homes. Large investors have undoubtedly been buying residential real estate in many parts of the country, and in some neighborhoods this investment may well be driving up prices and rents. But according to a recent analysis, the majority of investor-owned single-family homes belong to small investors, such as real-estate partnerships, that own fewer than ten properties. Many economists attribute the sharp rise in housing costs during the past decade and a half primarily to an acute shortage of supply that is linked to other factors, such as the scarring effects of the Great Recession of 2007-09, zoning restrictions, difficulties in getting access to credit, and rising prices of construction.
Still, the public anger over the lack of affordable housing is palpable, and the Warren-Merkley bill was only one remedial measure circulating on Capitol Hill, where lawmakers from both parties were keen to enact some sort of legislation in advance of the midterms. Earlier this year, the House and Senate passed separate housing bills, but it remained far from clear that they could agree on a unified package. At the start of last week, however, the two chambers did pass, with overwhelming support, a lengthy piece of legislation, the 21st Century ROAD to Housing Act. The bill has a provision that bans institutional investors from buying more than three hundred and fifty single-family homes, and it contains a variety of measures designed to expand the housing supply. These include streamlining federal environmental reviews, easing design restrictions on modular homes, and increasing federal financial support for localities and housing associations that build affordable units.
Although the bill seemed unlikely to have much immediate impact on the housing crisis, affordable-housing advocates and business groups alike said that it could have a significant impact over the longer term. In political terms, the message would be sent to voters that Washington isn’t oblivious to their concerns. In a joint statement, Warren and the Republican Senator Tim Scott, who is head of the Senate Banking Committee, said that the legislation reflected “years of work and priorities from the White House, Senate, and House.” All that was left was for Trump to sign it into law, which didn’t seem much of a stretch. A couple of weeks ago, he issued an official proclamation in which he declared June to be “National Homeownership Month” and called on Congress to pass the housing bill, which he described as “the most comprehensive and consequential housing legislation in the history of our country.”
