President Trump on the campaign trail famously told the nation: “We’re going to win so much, you’re going to be so sick and tired of winning!” After winning on the border wall and immigration now Trump sets his high energy focus on winning on affordable housing too. Executive order #13878 creates a new cabinet council to sort it all out. Not a moment too soon!
Yes, the rent is too damned high. Trump’s latest executive order recently published in the Federal Register makes the case for us.
For many Americans, access to affordable housing is becoming far too difficult. Rising housing costs are forcing families to dedicate larger shares of their monthly incomes to housing. In 2017, approximately 37 million renter and owner households spent more than 30 percent of their incomes on housing, with more than 18 million spending more than half of their incomes on housing. Between 2001 and 2017, the number of renter households allocating more than half of their incomes toward rent increased by nearly 45 percent.
The order continues,
These rising costs are leaving families with fewer resources for necessities such as food, healthcare, clothing, education, and transportation, negatively affecting their quality of life and hindering their access to economic opportunity.
The president will get no argument from Renters Alliance on those points. Here in Beverly Hills over half of the city’s renting households pay too much of their income in rent, according to the census. Thus they meet the federal benchmark for ‘rent burdened’ by paying more than 30% of their household income to rent. Nearly a third of renting households pay more than 50% of household income in rent which meets the threshold for ‘severely rent burdened.’ Fully one-in-six Beverly Hills renting households meet that more precarious threshold.
There are many reasons why a family in rental housing may find itself precariously housed. First, tenants accumulate no wealth in real estate, which is the single-greatest wealth-builder in the US. Many households find income has not kept up with costs (particularly housing costs) given our changing labor market. Not only have real wages stagnated for decades; tax changes over decades have favored earnings from capital over earnings from wages. Wage-earners are at what economists call a ‘structural disadvantage.’
Another important reason why some renting families in Beverly Hills in particular find themselves precariously housed? Overextending themselves to keep their kids in our school district. That exacerbates the rent burden, of course, but it’s an important means of investing in opportunity for the kids when that opportunity is increasingly husbanded by the affluent.
What Does the Executive Order 13878 Say?
None of these considerations prompted the president’s executive order titled, Establishing a White House Council on Eliminating Regulatory Barriers to Affordable Housing. The new cabinet-level council it creates is not tasked with addressing the systemic issues that make the rent less affordable for a significant share of Beverly Hills households. As the name implies, the new council would put a thumb on the side of investor interests by targeting the “regulatory barriers that hinder the development of housing.”
Here’s a small sampling with my emphasis to underscore the conservative rhetoric embedded in the purpose statement:
- Overly restrictive zoning and unreasonable maximum-density allowances;
- Cumbersome building and rehabilitation codes and and inordinate impact-fees and developer fees;
- Time-consuming permitting and review procedures and overly complex labor requirements;
- Excessive energy and water efficiency mandates and overly burdensome wetland or environmental regulations;
- Tax policies that discourage investment or reinvestment; and simply,
- Rent controls.
That last, as we all know, is the landlords’ favorite bugaboo: rent control. Even the name of this new body (Council on Eliminating Regulatory Barriers) recalls the landlords’ perennial and specious claim that the problem is not the pricing of rental housing but the lack of supply.
The supply-side argument is convenient because landlords know that they can point to a political logjam that will assuredly keep the construction of new affordable housing off the public agenda. But it’s also disingenuous because conservative fiscal and tax policy actually militate against housing affordability.
For example, the executive order strokes the Trump administration for a rental assistance subsidy program that “grows at approximately 3 percent per annum while assisting a fixed number of households.” That claim is factually true but of course it’s not a Trump program. Translated that bit says that the rental housing affordability problem is growing yet the government’s response is not only insufficient for the task. But it is also too limited to scale with need:
- The program does not do enough to help any recipient. In most places housing vouchers are the option of last resort; they don’t cover the rent in urban areas and many private landlords won’t even accept them.
- Rents are rising fast and voucher values increase at too slow a rate for beneficiaries in larger urban markets. In our region the rent of primary residence has increased more than 5% annually in recent years, according to the Bureau of Labor Statistics.
- It is obvious from the statement that the number of recipient families is fixed so the program will reach no new households.
The executive order proposes no solutions to the affordability problem as we know it exists today. Instead it simply sets-up the problem as a function of overly restrictive zoning, cumbersome building codes, overly complex labor laws and (believe it) even historic preservation. (I wasn’t aware that historic preservation was an impediment to building affordable rental housing for middle-class families.)
But it is the penultimate bullet in that list that really rankles: “Tax policies that discourage investment or reinvestment.”
Making that claim is nothing more than trolling affordable housing builders and advocates. The 2017 Republican tax amendments materially undermine the only federal tax support for the construction of affordable housing: the low-income housing tax credit. Because the tax law reduced the tax burden on builders, it made makes buying tradable tax credits to offset gains less necessary. Those tax credits helped to fund affordable housing.
Instead of encouraging the production of relatively affordable housing with incentives, say, which do cost money, the order instead charges the new council with dismantling those “regulatory barriers.”
It shall be the policy of my Administration to work with Federal, State, local, tribal, and private sector leaders to address, reduce, and remove the multitude of overly burdensome regulatory barriers that artificially raise the cost of housing development and help to cause the lack of housing supply.
The most cynical aspect of this whole charade? The “tribal” shout-out. To my knowledge, there is no regulatory barrier to providing housing on tribal land. With the exception of major urban gaming enclaves, perhaps, I can think of no developer that is clamoring to build on tribal land. I bet that 99% of tribal land has no zoning whatsoever. And zero regulatory barriers.
Take a look at most tribal lands and witness the cheapest possible housing is provided courtesy of the federal government. These are trailers of the kind that FEMA provides to disaster victims. However for tribes the are permanent housing.
Now if the prevalence of those tribal-land trailers is a reflection of the “multitude of burdensome regulatory barriers” that hold back the pent-up developer demand to build on tribal land, then those barriers are indeed exceptionally effective. Mr. Trump, break down those barriers! It is your charge to make rental housing great again.
There is some irony in charging a new cabinet council to make rental housing great again. It once was great. Corporations in the early 20th century built mega residential developments under federal and state programs and they housed many middle-class families. Developments like ParkLaBrea (here in Los Angeles) produced an investment-grade return. Corporations like MetLife did well by doing good. The properties still provide desirable and affordable housing for middle-class families today.
Trump’s father Fred, too, made a mint by building and operating housing for middle-class New Yorkers. The Donald himself was a ‘landlord’ long before he struck gold as a made-for-TV carnival barker. Even long before he took an active role in the Trump organization. The New York Times shows that Trump was a mere infant when he was cashing checks from the family business. His sinecure in the Trump business was funded by middle-class rents. Moreover those rents were fraudulently inflated by a self-dealing scam to unlawfully pilfer more money from middle-class pockets. None of the “restrictive,” “onerous” and “cumbersome” regulations identified in this executive order would target such landlords that bilk tenants.
Yet the executive order says nothing about revisiting those policies or programs that actually built units by the thousands. Which regulatory barriers might be in the way of housing-at-scale for middle-class families today? The executive order provides no hint. Trump knows as well as anybody that the earlier business model worked.
As for housing affordability “hindering” access to economic opportunity, then is it too obvious to point out that the Trump administration’s own policies actually undermine access to opportunity? His education secretary actively works against equity in post-secondary education. His health secretary works to make health care less affordable and accessible. When families have to pick up a higher cost for rental housing, there remains a diminished proportion of the languishing household budget available for medical bills, private school tuition, and tutoring.
Were this clown-cabinet council concerned about the supply of affordable rental housing it only need to turn the clock back 75 years. Those laws, programs and, yes, regulations enabled big investors to construct housing at scale. They also sometimes mandated that units be kept affordable in exchange for the incentives. But today that’s anathema to property interests. Because competition! And that’s why “rent controls” is added to the new agenda of deregulation in property development.