Democrats and Republicans both understand Americans are broadly worried about the cost of living, and a former Trump administration official says it’s time for both parties to take action.
In a bitterly divided Washington, DC, it remains to be seen whether lawmakers will heed that call when the 120th Congress convenes in January, with Democrats back in control of both the House and Senate.
After campaigning hard on affordability concerns, Democratic leaders say they’ll use their new majorities to focus on the cost of living. Republican leaders admit they didn’t heed voter concerns about the economy. Meanwhile, President Donald Trump has threatened to use his veto power freely.
The summer’s 21st Century Road to Housing Act, with its dozens of provisions aimed at cutting red tape, was a rare example of bipartisan consensus. What follows that landmark legislation remains an open question.
Republicans want more deregulation while Democrats aim for more support for housing. And each side must now contend with an upswell of hard-liners pushing policies that could radically change the market.
Many of the prominent names in both parties who built the housing bill are returning, including Rep. French Hill (R-AR), Rep. Maxine Waters (D-CA), Sen. Elizabeth Warren (D-MA), and Sen. Tim Scott (R-SC). They’re likely to return to the House and Senate committees on housing and banking.
“Now is a wake-up call,” Trump’s former Federal Housing Commissioner Frank Cassidy tells Realtor.com®. “Senate, House, White House. Everyone needs to get serious about tackling and addressing housing affordability. It can’t be ignored anymore.”
Tax changes
Congress had some bipartisan momentum to provide tax incentives that encourage the buying and selling of homes.
Colin Allen, executive director of the American Property Owners Alliance and a former housing issues adviser to Sen. Lindsey Graham (R-SC), said that could mean some ideas pitched in this Congress could come back as part of larger bills.
“They have good working relationships and have already done some bipartisan work,” Allen said.
Take, for instance, the Neighborhood Homes Investment Act, which would create a new tax credit to buy and renovate homes in economically distressed areas. The bill drew 70 sponsors from both parties.
Real estate groups put in significant groundwork this year to update the capital gains tax scheme for the first time in more than 30 years. The More Homes on the Market Act came close to 200 sponsors in Congress. It would double the exclusion for many filers. It’s been floating around Congress for several years and has been a target of the National Association of Realtors® and other groups.
Trump expressed some support for changing the capital gains tax scheme, though a specific plan hasn’t yet materialized from the White House.
“We’ve done a lot of legwork to get folks behind it,” Allen said. “If we’re looking at a larger bipartisan bill, you can see a scenario where a few of those ideas get together. The debt limit is coming up, and there are a few other opportunities to package together.”
Finance reform
Hill and Republicans have lobbied for more changes to the financing system. They were able to get several banking reform provisions into the Road to Housing bill. They’ve also floated new financial reforms to change and rescind banking rules codified in the Dodd-Frank Act and the Basel III accords after the subprime mortgage crisis. Republicans say they’ve chased smaller banks out of the housing market.
This summer, Hill called Dodd-Frank a “massive overreaction.”
“For our smaller banks, the new regulations were a poor fit, burying them in compliance work and bureaucratic red tape,” Hill said. “Instead of helping customers, their attention was diverted to filling out forms and satisfying examiners.”
Mortgage reform is also a lever Congress can pull. A bipartisan group of six members of Congress pitched the First-Time Homebuyer Affordability Act this summer. It would expand access to low-interest mortgages for first-time homebuyers.
“By expanding access to financing, we can help more hardworking families achieve homeownership, strengthen our communities, and build long-term financial security,” said Rep. Darin LaHood (R-IL) said.
Construction changes
Then there’s the matter of new construction. Democrats and Republicans found some bipartisan ground in cutting some of the federal red tape that blocks construction of new homes.
Republicans also said they favor rolling back Build America Buy America provisions. Builders, they say, have complained that the sourcing requirements are time-consuming and expensive. But they’ve also targeted some environmental regulations that Democrats passed.
Dennis Shea, chair of the J. Ronald Terwilliger Center for Housing Policy at the Bipartisan Policy Center, tells Realtor.com that some public housing authorities saw costs climb by double digits. The U.S. Department of Housing and Urban Development’s waiver process is every bit as time-consuming for builders.
“A sentiment exists in both parties to change the rules, but ultimately it takes an act of Congress to exempt housing,” Shea said.
Hill and other lawmakers such as Rep. Emanuel Cleaver (D-MO) have said that Congress’ action should shift some burden onto states to implement reforms at the local and state level. The American Enterprise Institute said this year that state and local policy changes could boost annual homebuilding by six figures. But many of those new homes are accessory dwelling units.
Congress and the White Hose also found common ground on manufactured housing reform. All sides recognize they need to keep eyeing supply-side reforms, says Cassidy.
“Ultimately, the problem in this country is supply,” Cassidy adds. “You could lower rates to 2% tomorrow, and all that will do is increase home values. It’s not going to solve the underlying issue.”
New programs
The other big question will be funding of the many provisions created under the Road to Housing Act. While the provisions in the bill were bipartisan, Congress must still approve funding for some of those programs. Some of those discussions are coming in the 2028 fiscal budget and beyond.
Over the months of negotiations on the Road to Housing bill, some Republicans took issue with unfunded mandates in it. Concerns about funding programs, and at what level, could spill over into congressional proceedings in coming years.
Tony Marquez, director of American University’s real estate program, who has a long career in real estate and banking, tells Realtor.com that the industry is still amenable to a few different ideas for how to solve housing. It doesn’t rely on one side’s control of the government.
“My un-professional assessment is we’ll have a certain amount of gridlock over a number of years where Democrats may come up with some suggestions,” Marquez says. “But the answer to affordable housing is not just one silver bullet. It can have many elements.”
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