Two Federal Policy Ideas for America’s Housing Affordability Crisis
Over the last decade, housing affordability has become arguably the most salient economic and political issue of our time. State and local policymakers have an indispensable role to play in addressing affordability, especially in high-demand communities. But so do federal policymakers. Check out two federal policy solutions for addressing the housing affordability crisis: one to help boost the housing supply and another to help address the demand side of the problem.
1. Expand the Low-Income Housing Tax Credit (LIHTC) Program
What is it?
The Low-Income Housing Tax Credit (LIHTC) is an important funding mechanism for developing affordable housing. Through the program, developers who are willing to build affordable housing are awarded tax credits on a competitive basis. They then sell these credits to private investors and use the proceeds of these sales to help fund the construction of affordable homes and apartments. Since its creation in 1986, the LIHTC program has helped fund the construction, preservation and rehabilitation of more than three million affordable units.
Why expand it?
The demand for affordable housing far outpaces the supply. By increasing LHITC allocations to states and by expanding the LIHTC program in other ways, Congress could spur the construction of tens of thousands of additional affordable units each year.
2. Increase Funding for the Housing Choice Voucher (HCV) Program
What is it?
The Housing Choice Voucher (HCV) program, often called Section 8, helps low-income families afford the cost of renting a home or an apartment in the private market. The program is funded by the federal government and administered by local housing authorities. Through the HCV program, the government covers part of a low-income family’s rent. But the assistance provided to each family varies based mainly on how many members of the family there are, how much income the family earns and how much it typically costs to rent a home or apartment in the area.
Why increase funding for it?
As with the LIHTC program, the demand for rental assistance far exceeds the resources allocated to the HCV program. Hence, in many communities, there are long waitlists for rental assistance through the HCV program. And the worse the local housing affordability crisis is, the longer the HCV waitlist will be in that community.
This is why three in four families that qualify for a Housing Choice Voucher never receive assistance. Many are on waitlists. Sometimes, they remain on waitlists for years before receiving assistance. In San Diego, California, for example, low-income families have spent as much as seven years on HCV waitlists. In Florida, at the opposite end of the country, low-income families in Miami-Dade County have spent more than eight years on HCV waitlists.
But Congress can trim these waitlists by increasing funding for the HCV program and also by making it easier for landlords to rent their units to voucher-holders. Currently, the HCV program helps roughly 2.3 million families afford housing. And according to recent estimates, a funding increase of $1.1 billion dollars (less than 1/10 of 1% of the 2022 federal budget) could help bring relief to an extra 100,000 American families.
What Does This All Mean?
Many states and localities have adopted smart policies to spur housing development and drive down housing costs. See Montana, Colorado, Florida and California (for example). But at the federal level, some members of Congress are instead pursuing a form of rent control tied to mortgages backed by federal loans. As we’ve seen at the state and local level, rent control is a recipe disaster, only serving to exacerbate housing shortages.
Federal lawmakers can play a pivotal role in housing policy. The two policies highlighted above are a good starting points. Rent control is not.