Home builders at work in Sacramento, Calif. Democrats in Congress are trying to pass a bill that would make the largest investment in affordable housing in history and try to boost construction of more moderately priced homes.

Home builders at work in Sacramento, Calif. Democrats in Congress are trying to pass a bill that would make the largest investment in affordable housing in history and try to boost construction of more moderately priced homes. / AP

It used to be people complained about housing being too expensive in New York, San Francisco, or Washington, D.C. The problem is now way bigger than that.

"Unless you're making a lot of money right now you can't afford a house in this country," Senator Jon Tester said at a recent hearing. He represents the state of Montana where now home prices and rents have been rising dramatically too.

"We've got businesses that can't expand because there's no workforce housing," Tester continued. "There's no housing for people who make regular wages ok?"

In their social spending bill, called Build Back Better, Democrats want to make the biggest investment in affordable housing in history - more than $150 billion.

The biggest problem facing the housing market is that there just aren't enough homes for people to buy or rent.

In the aftermath of the housing market collapse and financial crisis more than a decade ago, about half of home building companies went out of business. Year after year since then builders just did not build enough homes. So now economists say we're roughly 2 million homes short of what we need.

"Given the population, there are fewer homes available to rent or to own than we've had really at any time since World War Two," says Jim Parrott, who was an economic advisor for housing policy in the Obama White House.

In the past, he says, Congress has spent money on things like first time homebuyer tax credits. But right now that would just juice up demand and makes things worse by pushing prices higher. He says it's just basic economics: to make housing more affordable you have to increase supply by building a couple million more homes.

The spending bill aims to help with that underlying problem. By Parrott's count it puts more than $50 billion dollars towards building more affordable housing.

"The package on the table now will undoubtedly help," Parrott says.

The fate of the bill is uncertain because Democrats are trying to pass it without any Republican support. So it could change or stall in the Senate.

Congressman David Price, (D- North Carolina) has been crafting the affordable housing portion of the bill. He says the bill has money for more vouchers to help renters pay rent and funding to repair public housing. But he says there is also money to build a lot more affordable housing.

"I do think we're achieving a good balance," Price says.

Of course, local zoning rules often block the construction of smaller homes on smaller lots or affordable apartment buildings. So Price says the legislation is also trying to nudge states and localities to make zoning less restrictive.

He says the extent to which local governments become eligible for tax credits or direct assistance for housing construction can be determined "by the local practices with regard to the zoning, with regard to density."

So in other words, if a state or a town wants this federal money, they have a better chance of getting it if they change their zoning rules to allow for more affordable housing.

Even though the spending goals are ambitious, the bill can only do so much, especially when it comes to starter homes that first time home-buyers can afford, says Robet Dietz, the chief economist with the National Association of Home Builders.

"There are a lot of different reasons why we don't have enough housing in the United States right now," he says. "And we've called these generally the five L's." That is, the 5 factors limiting home building.

"It's a lack of labor, it's a lack of lots available to build on, the availability of lumber and other kinds of building materials," he says. The other 2 L's: laws, as in zoning laws, and loans for builders, which often have high interest rates.

So he says another thing the government could do is arrange for lower-cost loans to help developers buy land and build more affordable homes.

And, even if the government were to approve all these different measures to spur construction, building homes and apartment buildings takes time. It can take years from buying the land to putting a for sale sign in the yard. So, the affordable housing crisis promises to be with us for a while yet.

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Tags: affordable housing  housing crisis  Housing