21st Century ROAD to Housing Act Becomes Law Amidst Affordability Concerns

The 21st Century ROAD to Housing Act has officially become law, a legislative development that occurred without a signature or veto from the President, demonstrating a unique path to enactment. This legislation has been met with considerable praise from policymakers across the political spectrum, who are characterizing it as a landmark achievement, evidenced by significant bipartisan cooperation. The core premise of the act, a long-standing argument in housing policy circles, is that the persistent issue of housing affordability is primarily a consequence of insufficient housing supply. The proposed remedies outlined in the act include strategies to boost the construction of new homes and to curb the purchasing activities of large institutional investors within the real estate market. The underlying expectation is that these combined efforts will ultimately lead to a more affordable housing landscape for consumers.

However, a growing body of economic data is challenging the efficacy of this supply-centric narrative. Contrary to the intended outcome, total housing inventory has already surpassed the five-month mark, moving beyond the six-month supply level that is generally considered the benchmark for a balanced housing market. This indicates a material improvement in the availability of homes for sale. Despite this increased inventory, the Atlanta Fed’s Home Ownership Affordability Monitor continues to report that housing affordability remains severely compromised. The data illustrates a significant gap between the income required to qualify for a mortgage on a median-priced home and the actual median household income. Compounding this issue, the Federal Housing Finance Agency (FHFA) House Price Index reveals that home prices have not declined, even with the rise in available inventory. This means that while potential buyers have a wider selection of properties, their purchasing power has not commensurately increased.

While some analyses suggest that wage growth has begun to outpace home price appreciation since the beginning of 2024, with wages showing a modest advantage of approximately 1%, this trend is unlikely to resolve the affordability crisis in the near future. Projections indicate that it would take an estimated 18 years to revert to the affordability levels observed in 2019, even under the current favorable wage growth scenario. This timeline pushes the potential restoration of 2019 affordability to the year 2044. Furthermore, the overall cost of homeownership is influenced by more than just the purchase price. Property taxes have seen a substantial increase of 27% since 2019. Simultaneously, homeowners insurance premiums have escalated dramatically, with increases ranging from 24% to 64% since 2021, depending on the specific geographic location, further exacerbating the financial burden on homeowners and prospective buyers.