Trump is doing his best on housing— but state, local policies keep costs high

There isn’t much the federal government can do to fix the housing crisis — but President Donald Trump has found the one idea that might work, which is to prioritize residents over big investors.

President Trump latched onto the fact that Wall Street firms have bought copious quantities of homes and are renting them out.

Instead, we should be encouraging single-family residences to be owned by people (families). It creates stable neighborhoods and stronger communities.

Most people cannot compete with big financial investors, who can swoop in with all-cash offers.

We want people to think of a house or condominum as a home first and an investment as byproduct of that. 

My fear was that Trump’s proposals would cut investors out of real estate altogether.

After review, it appears that what the feds have told investors is that you can invest in single-family homes, but we are not going to aid you at all.

Wall Street can buy homes, but will not have government help from HUD, the VA, or other federal agencies.

Trump’s policy would also give ordinary homebuyers a 30-day exclusive period to buy foreclosed properties before the big investors can.

In other words: Trump’s policy might work.

On the other hand, the Senate’s 21^st Century ROAD to Housing Act (which passed by a vote of 89-10) is cause for extreme concern

Though Sen. Tim Scott (R-SC) was one of the main sponsors, so, too, was Sen. Elizabeth Warren (D-MA). Warren has rarely pursued any effort to shrink government’s stranglehold on our lives. She is the mother of the Consumer Financial Protection Bureau (CFPB), which did everything but protect us.

The 300-page bill is a combination of some 40 prior bills. It bans big investors from buying additional single-family homes, which is fine, but it also forces them to sell their current stock over the next seven years.

Divestment has never worked in any market, and certainly not in housing.

The proposed law does try to simplify the onerous environmental impact reviews to which housing developments have been held hostage. It would do better to scrap them altogether.

These requirements have done nothing but create a cottage industry of people producing reports, which are then used in lawsuits by a myriad of environmental groups for nebulous offenses.

The Scott-Warren bill mainly uses the government to strong-arm private industry to do what the government wants it to do.

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For example, it lifts the limit on big banks investing in so-called community development institutions from a 15% to a 20% stake.

This could easily lead to government forcing banks to lend more to underqualified potential homeowners. That is exactly what led to the subprime mortgage crisis during the first decade of this century, leading in turn to the Great Recession.

States and municipalities have the most significant control over housing construction, and most federal interventions will do little to resolve the excessive costs at that level.

Zoning restrictions, building requirements, and permitting fees will continue to drive costs over which the federal government has little control.

Even with the supposed accelerated permitting process for the Palisades Fire, so far permits have been issued to rebuild only about 15% of the area. In Altadena, largely destroyed by the Eaton Fire, less than 10% of the burned properties have been issued permits.

There are also other drivers of cost that are rarely mentioned in the debate.

One is the rise in demand for larger homes. In 1970, the average size of a new residence was 1,500 square feet, and 20 years later it was 2,080 square feet. Fast forward to 2010, and it had grown to 2,392, and since then it has continued to grow by a small amount.

When the average size in 50 years has increased 60%, it is understandable that prices have soared. Add that to all the other demands by consumers, such as amenities and advanced electronic systems, plus additional government demands for costly “safety” provisions, and it’s clear that soaring prices are partly a result.

Another factor adding to the cost of housing is what are known as “impact fees.” Impact fees are supposed to cover the cost of off-site infrastructure, such as schools, parks, and roads. The first such fees appeared in California in 1947, but accelerated after Proposition 13 began limiting tax revenue in 1978.

About 35 states have impact fees, with the highest in the three pacific coast states. California’s is twice as high as any other state, at $30,000 per home.

Credit President Trump for doing his best — including by enforcing immigration law, which keeps some buyers out of the housing market.

But there is little the federal government can do except meddle. Real affordability has to be driven by state and local governments — and there is much room for change here in California.

Bruce Bialosky, a two-time presidential appointee, is a certified public accountant specializing in taxes.