AOC and Progressive Allies Push for Federal Social Housing: The HOMES Act Explained

The HOMES Act, introduced by Rep. Alexandria Ocasio-Cortez and Sen. Tina Smith, aims to create a federal housing development authority to build over a million permanently affordable homes. This new model of social housing is gaining traction, but it faces

Social HousingAffordable HomesHomes ActAlexandria OcasiocortezTina SmithReal EstateOct 27, 2024

AOC and Progressive Allies Push for Federal Social Housing: The HOMES Act Explained

Real Estate:A new model of public housing is gaining steam among Democratic lawmakers across the US. Rep. Alexandria Ocasio-Cortez and Sen. Tina Smith of Minnesota introduced a bill called the HOMES Act. This act aims to create a federal housing development authority tasked with building and rehabilitating over a million permanently affordable homes. The housing would be owned and operated by local governments, nonprofits, or cooperatives, with rent capped at a percentage of income. The legislation aims to address the fundamental issue of a shortage of affordable homes, which has made housing one of the most urgent issues in this election.

About half of renters spend more than 30% of their income on housing, while homeowners face rising insurance premiums, home repair costs, and property taxes. Government housing aid for the neediest has recently hit a quarter-century low. Vice President Kamala Harris has promised to build 3 million new homes over her first term, send $25,000 in downpayment assistance to first-time homebuyers, and spend billions on housing innovation. However, some progressive lawmakers in Washington want to go much farther.

The new developments would be so-called 'social housing,' existing outside the for-profit market, capping rent at a percentage of income, and owned by the government, nonprofits, or cooperatives. Unlike traditional American public housing, which is usually reserved for low-income families, social housing is intended to be mixed-income. Under the HOMES Act, 70% of a given development's units would be reserved for low- and extremely low-income people, while 30% would be reserved for people making up to the area's median income.

However, some pro-housing policy experts, who subscribe to the YIMBY (Yes in My Backyard) movement, are skeptical that a federal social housing authority makes sense. They want to see more experimentation at the local level first and believe that many state governments, let alone the federal government, lack the resources and know-how to take on the role of developers and real estate companies.

Local and state governments are experimenting with social housing. A 2022 trip to Austria changed how New York State Assemblywoman Emily Gallagher views housing. Gallagher, a Democrat representing gentrifying neighborhoods in North Brooklyn, was struck by the stability created by social housing in Vienna. Residents 'were not thinking about their rent getting raised. They were not worrying about being displaced,' she said. So, earlier this year, she introduced legislation to establish a new state housing authority tasked with building permanently affordable housing for both very low-income and middle-income New Yorkers.

Progressive policymakers across the country, including Rhode Island and Atlanta, are exploring the model, too. California passed a bill last year to study the concept. The wealthy DC suburb of Montgomery County, Maryland, has already built its own social housing. In Reno, Nevada, Mayor Hillary Schieve, who prioritizes housing in a state facing a severe shortage, argued that the success of a social housing effort would rely on the quality of the local housing authority and its partners. 'It just worries me because we aren't developers. You have to have very knowledgeable people at the table,' she said.

While 'high-capacity, wealthy local governments with political will' can make it happen, many other localities lack the resources or know-how, according to Jenny Schuetz, an expert in urban economics and housing policy at the Brookings Institution. 'The reality is many states and authorities are not going to be interested in building housing themselves,' said Shane Phillips, a housing researcher at UCLA's Lewis Center for Regional Policy Studies.

Unlike traditional public housing, which relies on fickle federal lawmakers to supply funding for maintenance and operations, the social housing proposed would be funded in part by marketing bonds and operated by a range of local organizations, including nonprofits and tenants' unions. Schuetz is concerned that co-ops and tenants' unions might not be able to tap the kinds of capital that real estate companies have access to, which is needed to continue investing in the buildings. Local housing authorities also have limited budgets. 'The challenge is always where do you come up with the money 10 years out, 15 years out, when you have real capital expenses?' she said.

Federally funded public housing has a flawed history. Between the 1930s and the 1960s, the government reinforced racial segregation by clustering public housing in poor Black and brown neighborhoods, even as it built highways that tore through those same communities. A lack of ongoing congressional funding meant the housing deteriorated over time, and much has been demolished. Over the last several decades, the US has moved away from the tarnished model of publicly built and owned housing and embraced federal subsidies for privately built below-market-rate development powered by the Low-Income Housing Tax Credit (LIHTC).

Under the HOMES Act, the US Department of Housing and Urban Development (HUD) would have to work with states and cities to take on the role of the developer. Schuetz argued that the federal government would have to outsource so much of the work to local governments and developers that a national approach would look similar to the LIHTC model of development. 'Could HUD even hire a team of people who know how to work through the land development and entitlement and construction process in localities around the country?' Schuetz said. 'There's a reason we've evolved from public housing to LIHTC.'

Congress would likely not support a federal social housing authority until there is evidence of its success at the state level. After states build out their programs, 'it's far easier to go back and say, 'Okay, we need a national coordination entity to manage this,' a national affordable housing expert, who requested anonymity to protect his relationships in Congress, said. Schuetz would also like to see HUD invest in a range of local pilot programs to experiment with different versions of social housing, evaluate them, and then help scale whichever model is most successful. 'It's not as headline-grabbing and sexy as a social housing program, but would actually be a lot more effective and more likely to get through Congress,' she said.

Frequently Asked Questions

What is the HOMES Act?

The HOMES Act, introduced by Rep. Alexandria Ocasio-Cortez and Sen. Tina Smith, aims to create a federal housing development authority tasked with building and rehabilitating over a million permanently affordable homes. The housing would be owned and operated by local governments, nonprofits, or cooperatives, with rent capped at a percentage of income.

How does social housing differ from traditional public housing?

Social housing exists outside the for-profit market, caps rent at a percentage of income, and is owned by the government, nonprofits, or cooperatives. Unlike traditional public housing, which is usually reserved for low-income families, social housing is intended to be mixed-income.

What are some concerns about the HOMES Act?

Some experts are concerned that many state governments and the federal government lack the resources and know-how to take on the role of developers and real estate companies. There are also concerns about where to find long-term funding for maintenance and operations.

Which local and state governments are experimenting with social housing?

Local and state governments, including New York, Rhode Island, Atlanta, California, and Montgomery County, Maryland, are exploring or have already implemented social housing models.

What is the YIMBY movement?

The YIMBY (Yes in My Backyard) movement is a pro-housing policy movement that advocates for more housing development, often focusing on removing regulatory barriers to building more housing.