Federal housing bill passes, to little effect

Why this article is important: A new set of federal housing legislation is now on the books. How will it impact California’s housing market?

More balm for the housing shortage

In today’s political climate, the term bipartisan is only used when talking about dreams, or miracles. That is, except when it comes to the rare cause of providing accessible housing to low- and moderate-income households.

Here in California, the housing shortage has been at the top of the legislative agenda for the past decade. We are a state that suffers from chronically low inventory, due to overly restrictive zoning and high building costs which make it unfeasible for builders to construct anything but high-tier properties without deep subsidies.

Now, a similar housing shortage has begun to wrest control of other parts of the nation’s housing markets, and federal legislators have taken notice.

Recently, a bulky bill was passed into law with support across both sides of the aisle. The new package of laws:

improves housing counseling by giving HUD greater authority to evaluate, train, certify, and revoke housing counselors;
expands multi-family housing options through support for single-stair multi-family buildings, which promote infill development, allowing more housing to be built on smaller lots with the elimination of a second, often useless stairwell;
reduces regulatory barriers by removing environmental review requirements for infill projects using U.S. Department of Agriculture (USDA) assistance;
supports infill and adaptive reuse development by easing environmental reviews for infill projects and funding conversions of vacant commercial and industrial buildings into housing;
improves access to small mortgages through establishment of a HUD program which allows FHA-insured mortgages for less than $100,000;
modernizes FHA and multi-family financing by updating loan limits and expanding mortgage access;
invests in home repairs through a HUD program to provide forgivable grants for homeowners and landlords to make repairs;
expands manufactured housing opportunities by modernizing regulations, financing, and energy standards.
increasing access to rental assistance programs by expanding the Rental Assistance Demonstration (RAD) program, which allows landlords to transform dilapidated public housing into Section 8 housing;
supports public housing quality by providing grants for landlords to install temperature sensors to ensure compliance with habitability standards;
addresses the appraiser shortage by developing the pool of appraisers eligible to value FHA-insured property to include state-licensed appraisers (not just certified appraisers) and offering appraiser training grants to institutions that provide appraiser training;
provides targeted support for veterans through improved VA loan disclosures and expanded eligibility for supportive housing and informing veterans of the availability of VA-guaranteed mortgages on the URLA application;
improves disaster recovery programs through reforms to HUD’s Community Development Block Grant Disaster Recovery program;
streamlines community planning by requiring HUD to publish guidelines for land use and zoning laws to help localities better construct land-use policies;
prohibits large institutional purchases of new single-family homes while preserving exemptions for rental housing development.

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Federal reform at the local level

While this is mostly positive news for the production of low- and moderate-income housing — a much-needed endeavor — it’s also kind of a nothing burger.

That’s because, while it’s great that the federal government is outlining all the steps that states and individuals can do, whether steps are actually taken is up to the states, local governments and even individual landlords.

For example, the new law calls for HUD to provide guidance on zoning and land use regulations so that local governments may provide a more balanced level of housing for their residents. And while guidance is all well and good, it has no force of law — local governments can take it or leave it.

Of more concern to local authorities than federal guidelines are the vocal not-in-my-backyard (NIMBY) advocates who continue to preserve overly restrictive zoning regulations intended to discourage builders from meeting local demand. Politically responsive city councils are the biggest offenders as they enact ordinances to limit density, building height, mixed use and parking.

How much — or how little — the new housing laws affect housing in California’s communities is up to local gatekeepers, including real estate brokers and mortgage lenders.

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