What the New Housing Bill Means for You

     After three decades of stalled efforts, the Senate just passed the first major housing bill in 30 years, and by a huge margin (85–5). That's almost unheard of in Washington these days. It has since been reconciled by the House, and is on President Trump’s desk, where it is being held hostage so Mr. Trump can get other legislation through. All that aside, let me walk you through what's in this 381-page bill, and more importantly, what it means for you.

The Real Problem: Regulatory Costs

     According to the National Association of Realtors (NAR), regulatory costs add roughly $175,000 to the price of a median $775,000 home in California, because of expenses associated with zoning restrictions, building codes, transportation rules, logging regulations, and even tariffs. Put plainly, if government stepped back from housing regulation entirely, home prices in many markets would likely be much cheaper than what they are today. While I'm not advocating for zero regulation, I would recommend much less.

The Good News: Deregulation

     The bill rolls back several permitting requirements and regulatory layers, which is good for the market. Less red tape for builders means more homes will be built, faster and cheaper. That benefits builders, lenders, real estate agents, and home buyers.

The Catch: Subsidies Aren't Free

     Where I'd urge some skepticism is around subsidies. Consider this: for government to hand a buyer or builder ten dollars’ worth of benefit, it generally has to collect more than that from taxpayers, first to cover the cost of IRS administration and the accountants and lawyers needed to navigate the program. Economists call this a negative-sum game, as opposed to a zero-sum game (where one person's gain equals another's loss but nothing is destroyed in the process). With subsidies, value evaporates along the way. The better fix isn't a subsidy to offset the $175,000 in regulatory costs; it's removing the costs in the first place.

Institutional Investors: Watch This Closely

     The bill also prevents institutional investors from owning huge numbers of single-family homes, even if they are the ones who build them. The goal is to force existing holdings back onto the market and to limit how long institutional investors can hold on to single-family homes. I understand the instinct, but there are unintended consequences. First, fewer investor-owned, single-family homes available as rentals likely means rents will go up. Second, if an investor's business model depends on long-term ownership, the new holding-period limits may simply make them walk away from building anything at all, shrinking future supply. To its credit, the Senate softened these restrictions for investors who built the properties themselves.

A Generational Shift Worth Watching

     It's not all regulation and subsidy, either. We're seeing a cultural shift where many Gen Z and younger millennials simply don't want to own a home right now. They value flexibility and aren't tied to one employer or city the way previous generations were. NAR data backs this up, stating that baby boomers now make up 42% of buyers, millennials 26%, and Gen Z just 4%. First-time buyers have fallen from 24% to only 21% of all purchases. Combine that with stagnant wages and you get a market where the buying age keeps creeping upward, skewing toward those who can already afford it.

Bottom Line for Buyers and Sellers

     The deregulation pieces of this bill are worth supporting. The subsidy pieces deserve a more skeptical eye. They tend to help a few while costing the rest of us, benefiting real estate agents, builders, lenders, and consumers who receive subsidies, while taxpayers who already own homes and those who do not want to buy a house will foot the bill.

     If you have questions about property management or real estate, please contact me at [email protected] or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.

     Dick Selzer is a real estate broker who has been in the business for more than 50 years. The opinions expressed here are his and do not necessarily represent his affiliated organizations.