Erdmann Housing Tracker · Housing & Cities
TIER 4 Fri, 19 Sep 2025 16:02:57 +0000
Recently, there have been some decent bills on housing proposed in Congress. ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ | | ---|---|--- | | | Forwarded this email? Subscribe here for more --- --- # Decent federal housing policy news | | Kevin Erdmann --- | Sep 19 --- | --- --- | | | --- | | --- | | --- | | --- | | READ IN APP --- Recently, there have been some decent bills on housing proposed in Congress. Upgrade to paid This is an improvement. I have previously written about a bill meant to curtail the flow of large scale capital into rental housing. That is such an ill-conceived, ignorant, and prejudiced approach, bound to create little but harm for American families who are already hurting the most, I hesitate to even remind readers that it exists. It would be like passing a bill making "corporate farms" illegal. You have a right to whatever feelings and opinions you want to have about the evolution of farming away from small scale family farms. But, making our main source of food illegal is probably not a great response to it. That would take us from food abundance to food shortage. We don't even have the benefit of starting from a position of housing abundance, so banning much needed capital from the housing market would be catastrophic. But, more forward looking points of view seem to be on the upswing. The Senate Committee on Banking, Housing, and Urban Affairs has proposed the ROAD to Housing Act of 2025. It has met a positive response from many housing advocates. I agree that its proposals seem to all have their priorities in the right place - making it easier to build, fund, and pay for housing. But, I must admit that I'm a little bit uncomfortable referring to a bill that takes 6 pages to outline 40 different programs, set asides, initiatives, etc. as a deregulation bill. I feel like this approach means that the first thing anyone will have to do if they want to successfully engage in the production of housing is to hire a legal department. The way to build affordable housing profitably will be to know the 5 different federal programs that you can tap for subsidies and approvals. That worries me. Maybe I'm just a grump. I think one way to approach this is to consider places where housing was abundant. We had a lot of them, not that long ago. Atlanta had plenty of homes in 2005. Since then, it has permitted about 500,000 fewer new homes than it would have if it had continued on pre-2008 trends. When Atlanta had plenty of homes, was it because it used to have those 40 programs? Will the implementation of those 40 programs lead to housing construction in Atlanta that returns to those pre-2008 conditions? I think, unfortunately, the answer to both of those questions is "No". All of the reforms in the bill seem like improvements, individually. And, while Atlanta had plenty of homes in 2005, it did have problems. There are too many obstacles to city-building, and so metro areas like Atlanta were compensating for that by building more single-family homes in the greenfield. For Atlanta, the reform that would fix that in 2005 wouldn't have necessarily made housing more abundant in 2005. But it would have allowed Atlanta to grow into a proper city, with more of the types of homes and neighborhoods that its residents want and need. Reforms that make it easier to build modular housing, for instance, also wouldn't have necessarily made housing more abundant. But, it might have made it less expensive. It would have allowed families to consume more housing on the margin, but families weren't having a hard time being housed, in general. Those are good things, but I think they are different from the housing shortage. It is true that if Atlanta allowed easier infill building, then the mortgage crackdown in 2008 would not have led to such a shortage. More multi-family infill building would have risen up to fill in the gap left from the sudden collapse of owner-occupied single-family building. But, at the end of the day, I feel like a 40 section housing bill that doesn't include simply returning to late-20th century underwriting standards as a starting point is reaching around the elephant in the room to such a degree that I am uncomfortable with it. The ratio of material improvements in people's lives to words added to the federal register seems low. Still. At least, those 40 sections are not directly making things worse, which is a good trend. Now, the house Congressional Real Estate Caucus has proposed a bipartisan bill that is much less detailed. It is called the ''Saving the American Dream Act". It calls for various federal agencies to coordinate on a number of research areas. Those areas include: 1. Federal housing finance programs and coordination. 2. Opportunities to lower mortgage origination and servicing costs by aligning program underwriting and servicing standards to the greatest extent possible. 3. Housing construction costs, production barriers, and development incentives. 4. Local regulatory barriers to housing production. 5. Insurance costs and availability affecting housing markets. 6. Down payment assistance and housing transaction incentives. 7. Disaster resilience and housing recovery coordination. Again, all of these are areas where reforms could be helpful, and I think this is a step in the right direction. But, fundamentally, nobody knows the right questions to ask, and until they do, finding the appropriate reforms that address our current crisis will be difficult. Several of the points here address costs. And, again, yes, there is a lot of potential for lowering production costs, and that would be good. But the crisis isn't about costs. The high cost of housing in Los Angeles or New York isn't due to a lack of construction productivity. It's because they won't let you build anything. One reason housing expenses are inflated is because the family paying $1,200 rent for the little old home on the outskirts of Tulsa would be denied the $800 mortgage it would take to purchase it. And, as Figure 1 shows, before Covid, price/rent ratios were much lower. The mortgage payment would have been less than half the rent payment then. Interest rates were lower, but more importantly, homes were cheaper. They were _too_ cheap. They were too cheap for new homebuilders to compete against. And they were too cheap because the families renting those homes were no longer able to access the mortgage products that had been commonly approved in the 20th century. | | ---|---|--- Figure 1 There are many places where ownership is now more expensive than renting. But, where that's the case, it's because _land_ values are inflated. And land values are inflated because the shock to the new home construction market from the 2008 crackdown on mortgage access was so devastating, 20 years later, the market is in a condition of hysteresis (slowly growing back after losing capacity), and new supply has not been able to meet demand as rents increased past the point at which new homes could be profitably constructed. The mortgage payment on a starter home in an old neighborhood in Mesa (a suburb of Phoenix) _is_ likely higher than the rental payment. That is because the land under the home in Mesa is inflated. Figure 2 compares the ZIP codes in Tulsa and Phoenix where the homes linked to above are. According to the FHFA, the average home in the Tulsa ZIP code (74063) is worth $185,000. The average home in the Phoenix ZIP code (85204) is worth $446,000. That represents an increase of 75% in Tulsa and 224% in Phoenix since 2012, and the difference is entirely due to different trends in land prices. | | ---|---|--- Figure 2 This is a tough point to get across. Both those homes were too cheap in 2012. The Tulsa home is still too cheap - to own - and that's why it's too expensive to rent. Every family is a tenant (a demander) and we limit now who can be an owner (a supplier). The Phoenix home is now too expensive to own or to rent. And, the reason for all of those conditions is that mortgage borrowers are, first and foremost, _**suppliers of housing**_. When we eliminated millions of them, our ability to produce homes collapsed. You can see in Figure 1 that expense isn't the problem for homeownership. Figure 1 shows the homeownership rates for 45-54 year-olds and 55-64 year-olds, in order to show demographically neutral trends. Homeownership collapsed when homes were cheap. And it has stabilized while home prices have skyrocketed again. That's because our overbearing regulations against mortgaged ownership were the _cause_ of low prices, and those low prices became the cause of high rents. High interest rates and high construction costs aren't the constraint here. _**Access to mortgages**_ and _**legal alternatives to owned single-family homes**_ are the binding constraints. Some of the focuses of these bills are appropriate to those challenges. But, most importantly lending reforms must focus on access. I hope the task force the house bill creates can recognize that. Unfortunately, it is such a blind spot that many housing advocates who focus on the problem of local land use regulation simply can't see it. They will tell these Congresspeople, "We don't have a shortage of homes. We have a shortage of homes where people want to live." It's a shame. The thing about that comment is that it is a truism. It couldn't not be true. So, why do they feel the need to say it? Because they refuse to see that the problem is now nationwide, and they are announcing their ignorance by tarring most of the country with a "nobody wants to live there" brush. There is no other reason to say it. But, _this is the primary mechanism through which the federal government can directly and immediately improve housing supply and lower housing costs in all the parts of the country. People do, in fact, want to live in many of them._ Every city in the country limits infill city-building. And, when we killed entry-level mortgage-funded homeownership in 2008, we exposed this problem in every city. And, now, _rents are highly inflated in every city_. People want to live in all of them, and they all have shortages, because trillions of dollars suddenly were blocked from mortgage markets by federal regulators. One thing that would be more effective than any subsidies, programs, or carve outs would be to simply return to lending standards of the past. That might make you nervous, but it is true. I wish we could start there and work on any problems that might arise from that. If we can't then we need to not only allow it, but we need to _beg_ Wall Street capital to get into the housing markets. Homes _are_ capital. Homes are a pile of physical inputs that somebody had to forgo consuming today so that somebody will have a place to live 30 years, 40 years, 80 years from now. That is, definitionally, capital - somebody with more income than they need to consume today choosing to use some of it to create services for someone to consume in the future. Wall Street is where we decide what future goods and services our savings should be turned in to. Blocking both the banks and Wall Street investors from being involved would be like blocking seed stock from the food market. It would be nice to have both Wall Street lenders and Wall Street investors fully active in the housing market. We're in an all-hands-on-deck situation. It will be necessary to have at least one. Let's hope that while Congress develops a habit of looking around the room for the right solutions, they notice these elephants standing in the middle of it. In the meantime, success on local land use obstructions can cure some of the same problems, but it is a problem that the federal government only has indirect influence on. And success on the cost of construction or the cost of borrowing might be beneficial in a generalized sense, but they are not well-targeted to the current crisis. Upgrade to paid You're currently a free subscriber to Erdmann Housing Tracker. 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