Arguing, “We can’t wait for the private market alone to solve the housing crisis,” in a NY Times Op-Ed, New York Representative Alexandria Ocasio-Cortez and Senator Tina Smith of Minnesota put forward their proposal to address the housing crisis.
In their op-ed, they note the struggles of working families, and argue: “It’s becoming nearly impossible for working-class people to buy and keep a roof over their heads.”
The problem, according to them: “For generations, the federal government’s approach to housing policy has been primarily focused on encouraging single-family homeownership and private investment in rental housing.”
Federal loans along with backing from Fannie Mae and Freddie Mac, they argue, “provide up to $150 billion in financial backing to the multifamily rental market every year, but much of it goes to large, corporate landlords. These lucrative loans come with very few tenant protections or labor requirements.”
Moreover, they argue, “the largest affordable housing incentive our government offers — the low-income housing tax credit — too often ends up in the hands of for-profit developers.”
They add, “Outsourcing development to the private market leaves affordable housing subject to the boom-and-bust cycle of private investment. What’s more, the federal government relinquishes the oversight needed to protect tenants from abusive landlords and racial discrimination.”
This is the left narrative on the housing crisis, and the result is that you have a housing market where “corporate landlords make record profits while half of America’s 44 million renters struggle to pay rent.”
But at the bottom line: “Why is this happening? For decades, thanks to restrictive zoning laws and increasing construction costs, we simply haven’t built enough new housing.”
Instead they propose “social housing.”
“Instead of treating real estate as a commodity, we can underwrite the construction of millions of homes and apartments that, by law, must remain affordable,” they write.
Some of this housing would be rental units while others “would offer Americans the opportunity to build equity.”
They argue, “Because we believe that housing is a human right, like food or health care, we believe that more Americans deserve the option of social housing.”
The bottom line is they are introducing the Homes Act which would “establish a new, federally backed development authority to finance and build homes in big cities and small towns across America.”
They write: “These homes would be built to last by union workers and then turned over to entities that agree to manage them for permanent affordability: public and tribal housing authorities, cooperatives, tenant unions, community land trusts, nonprofits and local governments.”
This housing development authority, they argue, would not focus on maximizing profits or returns to shareholders.
Rep. AOC and Senator Smith focus on capping rent at 25 percent of a household’s adjusted gross income. They would set aside homes for lower-income families in mixed-income buildings.
Each home would be built “to modern, efficient standards, which would cut residents’ utility costs.”
Where does the money come from?
They write that “our development authority would rely on a combination of congressional spending and Treasury-backed loans, making financing resilient to the volatility of our housing market and the political winds of the annual appropriations process.”
They also are calling for the repeal of the Faircloth Amendment which prevents the construction of new public housing.
This law, passed in 1998 with bipartisan support, they argue, “helped entrench a cycle of stigmatization and disinvestment. Our legislation would reinvest federal money in local public housing authorities to fund the backlog of much-needed repairs.”
They also point out that housing looks different in different locations in the county.
“We know that housing looks a lot different in Bemidji, Minn., than in the Bronx,” they write. “It shouldn’t be a one-size-fits-all approach. That’s why our bill would task local governments, unions and established local nonprofits with developing homes that blend seamlessly into the landscape of the town and fit the needs of the people living in them.”
They cite research from New York University, the University of California, Berkeley, and the Climate and Community Institute which finds that their bill “could build and preserve more than 1.25 million homes, including more than 850,000 for the lowest-income households.”
AOC and Senator Smith conclude: “This is the federal government’s chance to invest in social housing and give millions of Americans a safe, comfortable and affordable place to call home — with the sense of security and dignity that come with it.”
Can their plan work?
I’m a believer that we need a multi-pronged approach to solve the housing crisis. One of those approaches, as I’ve argued, must be a market-based approach to increasing supply and demand.
At the same time, I firmly believe that the market-based approach will not work to reduce costs for people from working backgrounds and increasingly middle-class families.
As such, we need a mechanism to subsidize affordable housing and make it possible to build. To the extent that their plan would create a funding mechanism from 850,000 to 1.25 million homes, it is worth consideration.
While I don’t think this is *the* solution to the housing crisis, it could be a substantial tool in the toolkit.
