The current U.S. housing system creates tremendous profits, but it doesn’t work for everyone.
Half of the nation’s 45 million renters pay more than a third of their paychecks to landlords. Every year, landlords file 3.6 million evictions, and 6.7 million live in substandard housing — realities that disproportionately affect people of color. Homeownership doesn’t guarantee protection either, with almost 20 million owners in a similar boat, paying more than 30 percent of their incomes to banks for mortgage payments and other costs.
The consequences we face as a society with a bad housing system are staggering and well-documented, including displaced communities and bad health and education outcomes, among others.
The system is also unable to deal with the reality of climate change. The real estate sector accounts for 39 percent of global carbon emissions, with 17 percent coming from our energy-inefficient homes. Retrofitting our housing stock is both crucial and costly. When landlords do opt to do it, the result is frequently higher costs and what has been called “green gentrification.” Moreover, American households owe about $20.3 billion in debt for utilities.
We need something different. What’s needed is a progressive building agenda that expands housing supply while prioritizing the needs of families and communities.
That’s why Rep. Alexandria Ocasio-Cortez (D-N.Y.) and Sen. Tina Smith (D-Minn.) introduced the Homes Act, a bill to create a “housing development authority” for permanently affordable social housing. The bill would create a public entity with the power and financing to rehabilitate and develop this housing in the form of community land trusts, public rental housing, limited-equity cooperatives, and non-profit housing.
By using a revolving loan fund model and operating at a federal scale, it makes smart use of public money to create desperately needed housing that is desirable, environmentally sound, and in places where people need it. It would create housing opportunities for broad cross-sections of the working and middle class, while still prioritizing those with the deepest affordability needs.
In addition to working on its design, we have, along with a team of colleagues, modeled the impacts of this proposal. With a congressional appropriation of $30 billion a year — roughly the cost of the mortgage interest deduction — and a parallel loan program, we estimate that the Homes Act could create up to 1.25 million units of social housing, with up to 875,000 of those for extremely and very low-income households. And all this could support 427,000 jobs annually, including 161,000 well-paying union jobs.
Virtually all mainstream policymakers agree that the key to addressing the housing crisis is to make homes easier to build. The problem is that neither renters nor owners believe it.
According to a recent poll of swing-state voters, the housing policy that had the least support was “increasing supply,” whereas “rent stabilization” (which most economists and policy experts pooh-pooh) had the highest support. Everyday people, especially those facing burdensome payments and housing insecurity, just don’t believe that the developers building towers down the street will help make housing more affordable.
The skepticism is justified. From the beginning, U.S. housing policy has prioritized the needs of one constituency: the real estate industry. Marriner Eccles, architect of the Federal Housing Administration, shared that the FHA was designed to avoid interference by the government with regard to private business, while using government power to support private initiatives. In contrast to the more universal-access European housing programs that inspired it, the 1937 Housing Act crated public housing only for lowest-income Americans. This was because lawmakers cowed to the interests of a real estate industry that felt threatened by affordable public options for the middle classes. The industry’s stronghold persists today as one of the single largest campaign contributors to both parties.
Up until now, progressive legislative and advocacy efforts (e.g., regulating rents and preventing discrimination) have generally been more about mitigating harm than addressing the root of the problem. The Homes Act changes that by creating a robust public option for housing.
As both a public developer and public bank, it would be an efficient one-stop-shop for financing, grants and technical assistance to get projects off the ground. It would cut out middlemen who add significant time delays and costs to today’s affordable housing projects. It could build more dense housing than the private market, since federal entities are exempt from local zoning restrictions. And it would rehabilitate distressed properties for communities with a real say in how they are managed.
We know that these proposals work because there are already dozens of successful projects around the country, from Co-op City in New York to resident-owned communities of manufactured housing in Austin to the Bay Area Community Land Trust, in addition to the millions around the world, including 11 percent of Europeans who live in similar kinds of housing.
The Homes Act gives a comprehensive answer to the supply problem in a way that prioritizes communities. It sets out to create enough housing for people to live where they want, in beautiful homes and communities, and at a price everyday people can afford.
Gianpaolo Baiocchi is director of the Gallatin School’s Urban Democracy Lab and professor of Individualized Studies and sociology at NYU. H. Jacob Carlson is assistant professor of sociology at Kean University. They are co-authors of the forthcoming book “Housing is a Social Good,” with University of Chicago Press.