The American Dream is the ideal by which equality of opportunity is available to any American, allowing for upward mobility and happiness through hard work. Home ownership has long been a core component of the American Dream, as it allows people to accumulate wealth by accessing credit, building equity, and reducing housing costs.
The U.S. has a 5.24 million unit housing deficit, up 1.4 million from 2019. There is less housing available for sale or rent than in the past 30 years, and the problem is getting worse. The lower end of the market is most affected by this undersupply, putting the economic opportunities of homeownership farther out of reach for those seeking upward mobility.
With such an important component of the American Dream at risk, the Biden Administration is seeking to solve the problem through a new initiative that will increase the affordable housing supply. The plan includes the federally funded construction of hundreds of thousands of new homes, loosening of restrictive zoning policies, and new federal financing options for housing construction.
Los Angeles has the fewest homes per capita of any metro area in the country. More than half of the population are renters, and almost half of renters spend more than 50% of their incomes on housing. The federal definition of unaffordable housing is spending over 33% of your income on housing.
More than 75% of residential land in Los Angeles is zoned for single-family houses. There’s an anti-development coalition that fears multi-family zoning will lead to reduced property values, and they have sought to maintain the status-quo. California lawmakers recently passed Senate Bill 9, which allows duplexes to be built in single-family neighborhoods, easing the housing shortage. Beverly Hills recently passed a law that requires large development projects to include 10% of their units for affordable housing.
The new Biden housing plan incentivizes localities to adopt multi-family, denser zoning laws with potential grants from the Department of Transportation. It also promotes the use of manufactured homes, which are often half the price per square foot of homes built on site. It does so by allowing Fannie and Freddie to create cheaper mortgage products geared towards manufactured homes.
The shortage in housing is a problem that accelerated after the Great Recession, as less homes have been built in the past decade than in any time since the 1960’s. Surging demand during the pandemic only made things worse.
The Biden Action Plan is the most comprehensive government effort to close the housing supply in history. It seeks to close the gap within 5 years, allowing for more affordable rents and attainable housing in every community. Hopefully this initiative will reinvigorate the American Dream of home ownership.