Moves to move toward the 21st century housing law came to a screeching halt as members of the House and Senate clashed over regulations for institutional investors and rental housing communities. President Trump supports senators in calling for institutional investors to be required to sell their stocks after seven years.
“Senators Bernie Moreno and Tim Scott worked hard to ensure my call came true, and the bill passed the Senate by nearly 90 votes,” the president wrote on Truth Social. “I’m calling on Congress to pass a Highway to 21st Century Housing Act that ensures that housing belongs to people, not businesses.”
Several housing groups have also called on Congress to act, and National Housing Council President and CEO David M. Dworkin said the law, especially the provisions regulating institutional investors, reflects a dire need to solve the affordability crisis.
“Housing remains a major source of dissatisfaction among Americans,” he said in a statement Tuesday. “The Senate’s proposal to ban institutional investors from purchasing single-family homes reflects not only the President’s priorities but also the growing urgency of protecting homeownership opportunities for first-time buyers who are increasingly priced out of the market.”
Mike Miedler |Credit: C21
Mike Miedler, CEO of Century 21, has been vocal about the bill, attending a housing policy conference in March with other housing leaders to provide insight into what the bill will and won’t do.
Miedler said there is room to improve the Federal Housing Administration’s lending limits and regulations regarding investor activity. But he thought the legislation was ultimately a positive, as it represents a much-needed effort to address affordability issues.
“What we need is more supply in the market. And we desperately need it,” he said.
The following conversation took place on March 26th. Edited for length and clarity.
Inman: So let’s take a closer look. There are 38 provisions in the 21st Century Housing Act, but the ones most people are focused on are the Federal Housing Administration’s lending limits and provisions regarding institutional investors. There are also concerns that the structure of the bill could have unintended negative consequences for homebuyers.
Do you agree with that assessment? If so, how would you change the law?
Miedler: First of all, I’m not a lobbyist, I’m not a politician, I’m not a law author. I honestly believe this is the most momentum we’ve seen in decades in terms of supply and that we have bipartisan support. [The Act] is doing a lot of great things and you already know about it, but I think the two things that stuck with me are the two you mentioned.
FHA loans help people without a large down payment get into the housing market, but their limits are rising very slowly. I think just last year they brought them up to the mid-500s, and that’s in single-family units.
So the thing I try to do when it comes to FHA loans is to not just try to put a rough line on the loan limit.
It matters whether it’s a one-, two-, three-unit, or multifamily property. It matters what market a homebuyer is in. Oklahoma is different than New Jersey. California is not like Florida. You need to make sure there are no regional discrepancies in these limits and understand the nuances of regional costs and median home prices so you can set them appropriately.
So while I was reporting on housing policy, there was a debate about how the federal government should be involved in housing policy because the market dynamics are so localized. What conversations are housing industry leaders having about the balance between federal, state, and local policies and whether there is room to build flexibility to apply these policies in market-specific ways?
Looking at some of the other elements associated with this bill, the one I’m most excited about is streamlining the permitting and environmental review process. And I think it’s fair for the federal government to step in and say, as a country, we have to do this. Along with this, we are also encouraging modular and manufactured housing.
But to your point, depending on the market you’re in, the cost of allowing and complying with government rules and regulations varies widely. In general, it’s much cheaper in the South, where you live, than in the Northeast Corridor, where I live. Also, if you look at the West Coast, costs can be double-digit points higher than in other regions, and that doesn’t necessarily translate into better sourcing of building materials. It doesn’t lead to a better home. It’s just a cost borne by the government.
Because of these market differences, I think it’s clear that state and local governments should be able to monitor how federal law is applied. But we need that push to say, “We’ve got to be better guys.” We have to move faster. And we have to start cutting out some of the red tape. ”And I think this law will be the driving force behind that.
I understand the nuances of what you’re talking about, but I’m excited that we’re having the conversation and finding out that we’re not going to solve affordability on the demand side. This has to be resolved on the supply side.
That’s a good segue to my next question. In addition to increasing new housing construction, the law aims to salvage existing inventory by requiring institutional investors to sell it after a certain period of time. However, there appears to be real anxiety about these investors finding loopholes to limit large increases in inventory.
What do you think? Is this an effective and valuable solution considering you currently own about 1% of your inventory?
No, I think the reason this is so controversial is because it puts the government in the middle of a free market. And I don’t think the government should be involved in the free market at all. However, there is a point of balance where there are people and families who want to stay in these rental communities. This is the lifestyle they prefer or can afford more of.
So how do you balance the need for rental options with the need for sales options that allow your family to build wealth?
To be honest, as you said, institutional investors across the United States probably own less than 1 percent of the total inventory. It’s higher in various parts of the country, but even in markets with the most organized activity, it’s probably only 5%.
At the end of the day, it comes down to who you want to incentivize. I assume you want to encourage builders, developers, and even local independent contractors to build affordable housing for average households rather than sprawling communities built for rental. That’s my intuition.
As I talk to people on the front lines every day, what keeps me up at night is the individual families who are navigating this homeownership trend. That helps put these things into perspective. What we need is more supply in the market. And we desperately need it.
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