President Donald Trump is under fire from both parties for his last-minute decision not to sign the bipartisan 21st Century ROAD to Housing Act. His reluctance may reflect mainly his higher priority for the voting regulations in the SAVE America Act — but that doesn’t mean he’s wrong to have doubts about the housing bill.
The history of federal interventions in the housing market has been one of unforeseen and even tragic consequences — including race-based “redlining,” the disasters of public housing, and the 2008 financial crisis. The current bill offers its own reasons for concern; ironically, its best parts are fixes to previous federal housing policy mistakes.
The sad history of federal housing interventions has essentially been one of progressive overreach — but the Left has been joined at key times by Republicans, demonstrating that “bipartisan” is no guarantee of a good outcome.
This history starts with the New Deal and the 1934 establishment of the Federal Housing Administration and its low-cost mortgage insurance, approved overwhelmingly by voice vote in Congress. It was the FHA, not capitalist banks, that decided not to insure loans in black or racially mixed neighborhoods — redlining — as bad risks. Race trumped individual creditworthiness.
The 1948 Housing Act, championed by President Harry Truman but co-sponsored by Ohio Sen. Robert “Mr. Republican” Taft, delivered a double whammy: 800,000 units of public housing enabled by widespread “slum clearance” and “urban renewal,” which led disproportionately to the demolition of vibrant black neighborhoods in Detroit, Atlanta, St. Louis, and many other cities. Black residents received a pittance for homes and businesses they owned. Public housing, whose rents were supposed to pay for its maintenance, spiraled quickly into disrepair or what a 1991 federal report would call “severe distress” and an ongoing need for federal bailouts.
Indeed, two defensible parts of the current housing bill are fixes for that troubled program: the expanded Rental Assistance Demonstration program channels private capital and management into public housing, a challenge to the program’s core concept.
The government was not the only party implicated in the 2008 financial crisis; mortgage securitization and faulty ratings agency ratings were key. But so, too, were the so-called “affordable housing mandates” imposed by Congress on two other New Deal era entities, the secondary mortgage market giants Fannie Mae and Freddie Mac. The mandates required both to purchase and securitize mortgages for homebuyers with borderline credit scores to expand homeownership. When housing prices fell, such buyers went underwater. Defaults, foreclosures, and a bond crisis cascaded.
Ironically, the affordable housing mandates were part of 1992 legislation, again passed with bipartisan support, entitled Fannie Mae’s affordable housing mandates, the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, which directed the Federal Housing Finance Agency to establish annual binding housing goals, the FHFA Fannie Mae & Freddie Mac Affordable Housing Goals. It received 77 votes in the Senate and passed the House by voice vote. Again, bipartisanship that enabled rather than resolving a housing crisis.
Then there’s the housing voucher program, minted by President Richard Nixon as the antidote to public housing and now twice as big as “bricks and mortar” projects. It has had at least two deleterious effects: encouraging single parenthood by giving priority to the lowest-income households and creating concentrations of poverty not just in cities but also in smaller towns (such as the Pope’s birthplace, Dolton, Illinois). Some 89% of housing voucher tenants remain in their subsidized units for 10 years or more, caught in a honey trap by rules that mandate their rent to increase if their income does. That rule resulted from a 1969 law sponsored by Republican Sen. Edward Brooke of Massachusetts.
It’s not impossible for the current housing bill to have some positive consequences; federal regulatory encouragement for manufactured housing is a good idea (though one originally invented by William Levitt of Levittown fame in 1948). Adding to the number of public housing agencies that can adopt time limits and work requirements may encourage economic upward mobility among public housing and housing voucher tenants.
RESTORING AMERICA: CHILDCARE DOESN’T NEED MORE SUBSIDIES. IT NEEDS LESS RED TAPE
But features such as a national tenant hotline about bad landlords reveal the progressive bias underlying housing policy — the historic and continuing assumption that the private housing market is the source of housing problems rather than what it really is: the solution.
Housing abundance, a worthy bipartisan goal, will not be achieved by convincing the thousands of local zoning and planning boards that more construction should be welcomed, not blocked. That’s a battle that developers and potential buyers will have to fight on Main Street, not Pennsylvania Avenue.
Howard Husock is a senior fellow for Domestic Policy Studies at the American Enterprise Institute and author of The Projects: A New History of Public Housing.