UpTrajectory Review
The recent report from Realtor.com highlights the significant influence of federal legislation on homeownership rates in the U.S. Over the past 160 years, key laws have shaped who can buy homes and how they can afford them. With a current housing supply gap of 4 million homes, the passage of the 21st Century ROAD to Housing Act could mark a pivotal moment for aspiring homeowners, particularly millennials who have faced prolonged barriers to entry in the market.
For small business owners, especially those in real estate or related sectors, this legislation could signal a shift in market dynamics. While the report suggests that immediate changes in homeownership rates may not be expected, the potential for increased housing supply could create new opportunities for businesses involved in construction, real estate, and financing. Operators should keep an eye on how this legislation unfolds and consider how it might affect their customer base and market strategies.
“The bill has the potential to relieve some downward pressure on homeownership by increasing home production and facilitating more matches with prospective buyers.” — Fast Company
Takeaway: Monitor the impact of the 21st Century ROAD to Housing Act on housing supply and adjust your business strategies accordingly.
From the original item — Fast Company:
Do lawmakers deserve some credit for helping you to become a homeowner—or the blame for keeping you locked out of the housing market?
Congressional lawmakers may wield more power in the housing market than meets the eye, as a new report released Tuesday by Realtor.com finds that five landmark federal laws drove the most significant surges in the U.S. homeownership rate over the past 160 years. But it’s been decades since Congress acted in such a meaningful way—and the current housing market, with a supply gap of some 4 million homes, now awaits its moment to benefit from federal legislation.
“Homeownership has never been purely a product of markets,” Joel Berner, senior economist at the Austin-based real estate site, said in a statement. “At several major inflection points in this country’s history, from the Great Depression, World War II, the Civil Rights era to the financial crisis, Congress stepped in and changed who could own a home and how they could afford one.”
The 21st Century ROAD to Housing Act that finally passed Congress last week with overwhelmingly bipartisan support could present the next example of legislation that helps Americans to achieve their dreams of homeownership, according to Berner. That’s because the legislation includes many provisions that are aimed at boosting the housing supply—which may ultimately enable more Americans to become homeowners.
“We don’t anticipate a major uptick in homeownership, especially not right away, but the bill has the potential to relieve some downward pressure on homeownership by increasing home production and facilitating more matches with prospective buyers,” Berner exclusively tells Fast Company.
Currently, about 65% of American households own their homes, according to figures from the Federal Reserve Bank of St. Louis.
Millennials have had to wait for many years for a federal bill that might ease the path to homeownership, whereas prior generations benefited greatly from such legislation. And it’s reasonable that younger Americans might feel frustrated by the relative lack of intervention by the federal government to address the underbuilding problem that’s persisted for more than a decade, Berner tells Fast Company.
“I can see how younger Americans feel that their timing has been especially disadvantageous,” Berner says. Home prices have surged during their window of buying opportunity so much that some people may feel priced out, all while the government hasn’t offered any assistance and current homeowners sit on record levels of equity, he adds. “American leadership has seemed to be content to watch the benefits of homeownership concentrate in the hands of those who were around to buy earlier.”
The last housing bill that truly stimulated the homeownership rate was the Fair Housing Act in 1968, which prohibited discrimination in the sale, rental, and financing of housing based on race, color, national origin, religion, sex, familial status, and disability.
In the aftermath of that bill’s passage, the homeownership rate climbed steadily from about 64% to nearly 66% by the early 1980s.
The most recent legislation that Berner examined, the Housing and Economic Recovery Act of 2008, was intended to prevent a collapse in the housing market rather than broaden homeownership. Without the stabilizing interventions of this legislation, however, the subsequent dip in the homeownership rate could have been much more severe, he concluded.
As it was, the homeownership rate dropped to about 63% in 2016, down from as high as 69% in 2004.
But nothing compares to post-World War II efforts to encourage homeownership. Thanks to the GI Bill—formally known as the Servicemen’s Readjustment Act of 1944—veterans were guaranteed low-interest, no-money-down home loans backed by the federal government. Between 1940 and 1960, the homeownership rate jumped from almost 44% to nearly 62%.
“The postwar homeownership surge is the most dramatic in American history, and it was not organic,” Berner said. “It was the direct result of Congress making homeownership financially accessible to a generation of Americans who would not otherwise have been able to achieve it.”
As past examples of legislation indicate, there’s a successful playbook for helping more Americans to get their foot in the door of the housing market. But it will take at least five years to gauge whether the latest act by Congress will prove stimulative, Berner tells Fast Company.
“The way the bill will be judged is on whether it leads to expanded home construction in the places that need it most, where the market is tight, and historically there have been steep regulatory barriers to homebuilding,” he says.