AOC and Progressive Allies Push for Federal Social Housing to Address Housing Crisis

Progressive lawmakers, led by Rep. Alexandria Ocasio-Cortez, are proposing a federal social housing program to build over a million affordable homes. The HOMES Act aims to address the nation's housing crisis by creating a federal housing development autho

Public HousingAffordable HousingHomes ActAlexandria OcasiocortezSocial HousingReal Estate NewsOct 27, 2024

AOC and Progressive Allies Push for Federal Social Housing to Address Housing Crisis

Real Estate News:A new approach to public housing is gaining momentum among Democratic lawmakers across the United States. Representative Alexandria Ocasio-Cortez and Senator Tina Smith of Minnesota have introduced a bill called the HOMES Act, which seeks to create a federal housing development authority. This authority would be tasked with building and rehabilitating over a million permanently affordable homes, owned and operated by local governments, nonprofits, or cooperatives, with rent capped at a percentage of income.

The housing crisis is one of the most pressing issues facing voters in this election. High rents and home prices have left many struggling to afford a place to live. 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, provide $25,000 in downpayment assistance to first-time homebuyers, and spend billions on housing innovation. However, some progressive lawmakers want to go further. The HOMES Act aims to tackle the fundamental issue of a shortage of affordable homes.

'There has been a lot of talk about building new housing in this country, but too often we don't talk about who will be building that new housing,' Ocasio-Cortez said last month. A spokesperson for Ocasio-Cortez did not provide comment before the publication of this story.

The proposed developments would be 'social housing,' which exists outside the for-profit market and caps rent at a percentage of income. 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 units would be reserved for low- and extremely low-income people, while 30% would be for those making up to the area's median income.

Some pro-housing policy experts, who subscribe to the YIMBY (Yes in My Backyard) movement, are skeptical of a federal social housing authority. They argue that more experimentation at the local level is needed first, and many state governments lack the resources or expertise to take on the role of developers and real estate companies.

Local and state governments are already experimenting with social housing. New York State Assemblywoman Emily Gallagher, a Democrat representing gentrifying neighborhoods in North Brooklyn, was inspired by a 2022 trip to Austria, where she saw the stability created by social housing in Vienna. 'Residents were not thinking about their rent getting raised. They were not worrying about being displaced and the things that consume New Yorkers' minds,' she said. Gallagher 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 those in Rhode Island and Atlanta, are exploring the social housing model. California passed a bill last year to study the concept, and 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, emphasized the importance of the quality of local housing authorities and their partners. 'It just worries me because we aren't developers. You have to have very knowledgeable people at the table,' she said.

Jenny Schuetz, an expert in urban economics and housing policy at the Brookings Institution, noted that many localities lack the resources or know-how to build housing themselves. '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 federal funding that can be inconsistent, the social housing proposed under the HOMES Act would be funded in part by market bonds and operated by a range of local organizations, including nonprofits and tenants unions. Schuetz expressed concerns about the ability of co-ops and tenants' unions to access the capital needed to maintain the buildings over time. '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 troubled history. From the 1930s to the 1960s, the government reinforced racial segregation by clustering public housing in poor Black and brown neighborhoods. A lack of ongoing congressional funding led to the deterioration of these homes, and many have been demolished. Over the decades, the U.S. has moved away from publicly built and owned housing, instead relying on federal subsidies for privately built below-market-rate development through the Low-Income Housing Tax Credit.

Under the HOMES Act, the U.S. Department of Housing and Urban Development (HUD) would work with states and cities to take on the role of the developer. Schuetz argued that the federal government would have to outsource much of the work to local governments and developers, making a national approach similar to the Low-Income Tax Credit model. '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 asked. 'There's a reason we've evolved from public housing to LIHTC.'

Congress is unlikely to support a federal social housing authority until there is evidence of its success at the state level. One national affordable housing expert, who requested anonymity to protect relationships in Congress, suggested that states build out their programs first. 'It's far easier to go back and say,

Frequently Asked Questions

What is the HOMES Act?

The HOMES Act, introduced by Rep. Alexandria Ocasio-Cortez and Sen. Tina Smith, is a bill that proposes the creation of a federal housing development authority. The authority would be tasked with building and rehabilitating over a million permanently affordable homes, 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 and caps rent at a percentage of income. Unlike traditional public housing, which is usually reserved for low-income families, social housing is intended to be mixed-income, with 70% of units reserved for low- and extremely low-income people and 30% for those making up to the area's median income.

Why are some experts skeptical of a federal social housing authority?

Some experts are skeptical because they believe more local experimentation is needed first. Many state governments lack the resources or know-how to take on the role of developers and real estate companies. They also argue that co-ops and tenants' unions might not be able to access the capital needed to maintain the buildings over time.

What is the history of federally funded public housing in the U.S.?

Federally funded public housing has a troubled history. Between the 1930s and 1960s, the government reinforced racial segregation by clustering public housing in poor Black and brown neighborhoods. A lack of ongoing congressional funding led to the deterioration of these homes, and many have been demolished. Over the decades, the U.S. has moved away from publicly built and owned housing, instead relying on federal subsidies for privately built below-market-rate development through the Low-Income Housing Tax Credit.

What is the proposed funding mechanism for social housing under the HOMES Act?

Under the HOMES Act, social housing would be funded in part by market bonds and operated by a range of local organizations, including nonprofits and tenants unions. This approach aims to provide a more stable and sustainable funding model compared to traditional public housing, which relies on inconsistent federal funding.