WASHINGTON — The fate of affordable housing funding and other homeowner assistance programs has become a key battleground as lawmakers debate the Biden administration's $3.5 trillion social policy agenda.
Lawmakers in the House and Senate are weighing a number of measures that, taken together, would amount to a historic expansion of affordable housing. They include billions of dollars for two federal housing funds, as much as $100 billion for down payment assistance, and even a proposal to enable mortgage borrowers to build equity faster.
But many of the proposals could face the chopping block as Democrats seek to pare back the Build Better Back Act by as much as $2 trillion to satisfy centrists whose support is crucial for passage.
“I'm hoping for the best but we should assume the worst and we should organize and plan accordingly, because housing is a natural target for budget cutting,” said Rep. Ritchie Torres, D-N.Y., speaking Tuesday on a weekly call organized by the National Low Income Housing Coalition.
The House version of the Build Back Better Act would provide more than $330 billion for affordable housing. That includes $37 billion for the national Housing Trust Fund — on top of what Fannie Mae and Freddie Mac contribute — to support low-income home-building, and $35 billion for the HOME Investment Partnerships Program, which provides grants for homebuyer assistance and affordable housing.
The bill also appropriates $10 billion for a Department of Housing and Urban Development program offering grants to provide down payment assistance to first-generation homebuyers of up to either $20,000 or 10% of the purchase price. A competing plan supported by Senate Democrats would allocate $100 billion for down payment assistance for first-time, first-generation borrowers.
But given the refusal of Sens. Joe Manchin, D-W.Va., and Kyrsten Sinema, D-Ariz., to back the $3.5 trillion reconciliation bill, citing concerns about the top-line dollar amount, Democrats are scrambling to trim the package and are rethinking their priorities. Many worry that the housing funds could be among the first to be cut.
“All of this funding is now at risk of being cut from budget reconciliation entirely,” House Financial Services Committee Chair Maxine Waters, D-Calif., said Tuesday at a press conference outside the U.S. Capitol building. “This is our once-in-a-generation opportunity to finally invest in our housing programs, our communities and our future — an investment that is long overdue.”
To go along with calls to shrink the package but still preserve housing-related funding, Waters says she plans to trim each housing provision in the bill by an equal percentage instead of cutting certain programs from the bill entirely. She also indicated Tuesday that she could get on board with cutting the duration of some of the housing programs.
“I'm not for wiping people out, but I'm for fairness, and fairness to me is everybody has to take a hit and it should be equal percentage-wise,” she said in an interview.
But some are already preparing for the worst should that strategy not pan out.
House leadership is reportedly considering cutting the entire housing agenda to make room for other elements of the reconciliation bill, such as policies to address climate change. But Waters is taking a hard line against that approach.
“There are competing priorities, and we have to ensure that housing is front and center,” said Torres.
For many, a historic investment in affordable housing couldn’t come at a better time. Home prices are soaring in part because of a lack of supply, which has priced many first-time homebuyers and minorities out of the market. On top of that, the disparity between Black and white homeownership is wider today than it was in 1960, before the Civil Rights Act was passed.
“Not addressing the problem now guarantees that we make it worse,” said David Dworkin, president and CEO of the National Housing Conference. “In whatever comes out, I think if we don't see significant money for down payment assistance and redevelopment of communities that have been left behind, then we will have failed and missed a historic opportunity.”
Even if the housing programs are preserved, any substantial cuts would be disappointing, said Scott Olson, executive director of the Community Home Lenders Association.
“We haven't really, at any scale, built new, affordable housing for 40 or 50 years, and so if that gets cut significantly in this bill, that's really unfortunate, because this is the opportunity to really start making a dent in this,” he said.
Olson hopes that investments for the Housing Trust Fund and HOME Investment Partnership Program, along with a proposed boost in low-income housing tax credits, are prioritized and not cut as much as other programs in the bill.
“I think that this is a once-in-a-lifetime opportunity,” he said. “Whatever happens, a rigorous new construction component, the housing tax credits and the [Housing] Trust Fund, plus more Section 8 assistance to reach homelessness, those particular areas, I hope that they're protected and they don't get any deeper cuts, because those are critical to address."
Waters said at Tuesday’s press conference that she has had two conversations with President Joe Biden about preserving housing funds in the final Build Back Better Act. He committed to include funding, she said.
“We’re going to hold him to that,” she said.
Waters also led all of the Democrats on the House Financial Services Committee in a letter sent to Biden and congressional leadership last week, in which they said that housing investments “must be included at robust levels” in the reconciliation bill.
Analysts said Waters appears to be making the point that the housing provisions are supported by all Democrats.
“In a House that is so evenly divided, [House] Speaker [Nancy] Pelosi needs every vote. We see this as Waters telling leadership that the best way to get those votes is to include the housing programs,” Jaret Seiberg, an analyst with Cowen Washington Research Group, said in a research note.
Democrats want down payment assistance for first-generation homebuyers, in particular, to remain in the bill.
“I think that the thinking has evolved this way — both with Democrats in the Senate and in the House — that we should be supportive of people who are working every day, can afford a mortgage [but] can't afford to save up their down payment,” said Waters. “We think it makes good sense to give assistance to this first generation of would-be homebuyers, and that includes millennials, [whom] we think we need to pay a lot more attention to.”
A down payment assistance program geared toward borrowers who lack the same generational wealth as those whose parents are homeowners could help boost minority homeownership, Dworkin said.
“We have a crisis in Black homeownership in this country. All racial and ethnic groups have homeownership gaps, but none are as bad as we've seen in the Black community,” he said. “If we don't have significant down payment assistance for first-generation homebuyers, then we simply failed to address racial equity in a multi-trillion dollar bill.”
Waters agreed that the first-generation down payment assistance program would go a long way to address the racial disparity in homeownership rates.
“We know that first-generation down payment assistance, that minorities will benefit from that, because the discrimination and the predatory lending has been very prominent in minority communities,” she said.
Additionally, Sen. Mark Warner, D-Va., has a plan that would offer 20-year mortgages to first-generation homebuyers with about the same monthly payment rate as a 30-year mortgage, which he said would allow borrowers to build equity in their homes twice as fast. And Sen. Ron Wyden, D-Ore., has put forward a proposal to offer a $15,000 down payment tax credit to all first-time homebuyers.
Torres said that the racial equity component could be a major selling point to Democrats who might be on the fence about including money for housing in the Build Back Better Act over other priorities.
“President Biden has made racial equity the centerpiece of his presidency, and in my view, you cannot address systemic racism without addressing the affordability crisis,” he said. “That's a message that's going to be persuasive, not only to the Congressional Black Caucus and the Congressional Hispanic Caucus and the Congressional Progressive Caucus, but also to the Democratic Party writ large, which has become much more committed to racial equity.”
