Policy Problem

Stakeholders

Young people in America want to buy houses. When the majority of young adults hit their late 20s or early 30s, they begin looking to purchase a home. However, there are a number of reasons that more and more of these young people are not becoming homeowners as early as their parents and grandparents. One of the most significant factors is the sheer price of buying a house in America today. 

Risks of Indifference

Since the 1981 recession, average housing prices have steadily risen at a far greater rate than average wages. This decades-long trend has accelerated dramatically since the onset of COVID-19, exacerbating the pre-existing housing affordability crisis. Pandemic-induced economic circumstances have led to a dramatic boom in the housing market, due to supply-side constraints like a shortage of housing units and a dearth of willing sellers. The housing market has also faced an influx of demand encouraged by low interest rates and heightened savings rates. These imbalances caused the average price of housing to soar by 19% in 2021. 

Nonpartisan Reasoning

While current homeowners and real estate investors have the advantage of owning an asset with greatly appreciating value, would-be new buyers and low income earners are often unable to purchase a place to live. Instead, these consumers are forced to take on higher monthly rent payments, reducing consumer purchasing power and reducing economic growth through the misallocation of labor. Heightened housing costs also threaten to inflame inequality through the transfer of intergenerational wealth.

A lack of affordable housing also threatens to exacerbate homelessness for vulnerable demographics like veterans, elderly, and people with disabilities. Bipartisan legislation like the Affordable Housing Credit Improvement Act (AHCIA) has attempted to create a safety net for these types of vulnerable communities. However, unless meaningful action is taken to address the supply-side weaknesses in the housing market, the volume of vulnerable populations will continue to grow and inequalities are likely to grow deeper. 

Proposed Policy

In order to address the need for affordable housing in the United States, the Affordable Housing Credit Improvement Act of 2021 was developed, expanding the Low-Income Housing Tax Credit, otherwise known as Housing Credit. The main impact of this act would be increasing the amount of affordable housing options while preserving current housing, resulting in almost 2 million new developments and nearly 3 million jobs over the next eight years. Some detailed impacts of this act would be serving marginalized communities, improving the Housing Credit student rule, and a longer rebuilding period for natural disasters.

Another option that advocates for federal funding for affordable housing is the Housing is Infrastructure Act of 2021, introduced by Congresswoman Maxine Waters. This act would provide $600 million to support public housing and provide more resources for affordable housing, such as energy efficiency improvements. With the Affordable Housing Credit Improvement Act of 2021, the housing credit would be a more effective tool, serving Americans in the unprecedented time of the Covid-19 pandemic.