Solutions on the ground: bridging the housing divide
What we've seen that can promote affordable and attainable housing.
In my last post, I covered housing and the 2024 election. Here’s a summary:
Housing crisis overview: The U.S. is facing a severe housing shortage, with an estimated need for 4 to 7.3 million homes. Nearly half of Americans now see affordable housing as a major issue, particularly for low-income households.
First election focused on housing: I’m excited to see housing become a major political issue in the 2024 elections. Vice President Kamala Harris and former President Donald Trump have very different plans to tackle the crisis—Harris focuses on rent control and renter protections, while Trump pushes for deregulation and more housing supply.
The ideological divide (do we cap rents, or promote building?): Harris emphasizes rent caps and regulating corporate landlords to improve affordability, whereas Trump advocates for deregulation, tax incentives, and increased construction to bring down housing costs through supply-side solutions.
Energy production and “all of the above”: I liken today’s housing shortage to the energy crisis from 25 years ago. Just as the U.S. shifted from an energy deficit to a surplus through innovations like fracking and renewables, I believe we could see a similar transformation in housing.
Solving the “pencil problem” and challenges ahead: I’m asking whether pro-renter or pro-builder policies will be more effective in addressing the crisis. I see the need for a balanced approach that solves what CEA Chair Jared Bernstein called in a recent meeting "pencil problem"—the high costs and regulations making affordable development difficult—and prepares us for the upcoming rental supply drop.
In this post, I’m going to highlight what I see working.
While the the national environment is muddled, the best positive examples are at the state and local level. In my opinion, Republicans could focus more on how affordability-of all income levels-is much needed for a thriving economy, and Democrats could recognize that without a builder-friendly environment, it will be prohibitively expensive (and just not possible) to make even a tiny dent in the 7 million person shortage.
The mixed evidence on rent control, and political hesitancy to embrace pro-builder policies, has created cities and states to adopt hybrid models that are showing evidence of promise.
Rent controls cool new construction. Alternate policies that promote construction could keep rent reasonable: Oregon passed a statewide rent control law in 2019 that caps rent increases at 7% plus inflation but exempts new construction. This is an attempt to provide tenant protections while encouraging the construction of new housing, which may need more flexibility in rent to solve “the pencil problem.” Similarly, Cambridge, Massachusetts, which repealed its rent control laws in the 1990s, saw an increase in property values 15-25%.
We’ve seen the best public private partnerships provide tax abatements with affordability commitments. We have done multiple deals with Texas’ PFC program which allows project developers to partner with governmental entities to receive property tax exemptions in exchange for setting aside a portion of their units for affordable housing.
Favorable lending for affordability: We’ve worked with the Commonwealth of Virginia’s VHDA program provides low-interest loans to developers building affordable housing. These loans, combined with state and federal tax credits, have helped expand affordable multifamily housing in cities like Richmond and Arlington.
Conclusion: Balancing Tenant Protections and Supply Incentives
While there is no doubt that tenant protections are important, the best approach may involve a combination of targeted tenant support, such as rental assistance programs, and policies that encourage the construction of new housing. This way, cities can strike a balance between protecting vulnerable renters and ensuring a sufficient housing supply for the future.
Ultimately, solving the housing crisis will require a mix of policies that protect tenants, incentivize development, and avoid the distortions associated with blanket rent control policies.
The Need for Affordability and Proven Government Incentives
Incentivizing construction (which we’ve seen through our $250M invested in Opportunity Zones), while not without its flaws, taps into the potential of a pro-builder market. If developers can be nudged to build more housing in underserved areas, it could help alleviate the pressure in housing markets across the country. However, simply building higher-rent apartments will not solve the whole problem. The state and local programs that reasonably target incentives can improve outcome.
Meanwhile, The Harris down payment assistance proposal could potentially be a game-changer for first-time homebuyers on the demand side. By providing financial support to renters who’ve paid on time but struggle to save for a down payment, her plan could help more people transition from renting to homeownership, easing pressure on the rental market. But there’s little evidence that rent controls could make a difference.
“All of the Above”
The housing crisis is complex, and of course there is no silver bullet. Both Harris and Trump have put forward ideas that could, in theory, make a difference. But as Bruce Katz and the National Housing Crisis Task Force emphasize, the next administration needs to act with urgency and pragmatism. Increasing the housing supply is critical, but it must be done in a way that ensures affordability for all. Rent control, while politically popular, is unlikely to achieve this on its own.
Moreover, supporting market-rate development doesn't mean abandoning affordable housing. Democrats could continue to push for expanded Housing Choice Vouchers, the Low-Income Housing Tax Credit (LIHTC), and public housing investments. But by combining these efforts with policies that remove barriers to market-rate construction—such as easing zoning restrictions, streamlining permitting processes, and offering density bonuses—the party can help address housing scarcity at all levels.
Conclusion
An "all-of-the-above" housing policy doesn't mean abandoning core values of the market, or a goal of making housing affordable for the working class—it means embracing pragmatism. Just as our country has adopted a nuanced approach to energy policy, balancing renewables with domestic production, we can all support a diverse range of housing solutions.