Summary: A National Infrastructure Bank (NIB, HR4052) will address our nation’s housing crisis by fully complementing current or proposed Federal and local housing policies. The United States is experiencing a serious housing crisis, and the housing market alone cannot fix the problem. Funding currently in the Federal budget for housing initiatives is woefully inadequate, and new legislation to increase this funding is not likely to pass under today’s strained Federal budget and high National Debt. The NIB will provide adequate off-budget financing, as well as flexible loans, to meet each state’s individual housing needs. This paper describes the superior advantages of the NIB proposal, the state of the housing crisis, and current proposals to raise spending through the budget.

The National Infrastructure Bank as set out in HR4052 Provides a Comprehensive Solution to the Housing Crisis:

Legislation to create a $5 trillion off-budget public bank for infrastructure financing will go the farthest towards solving our nation’s housing crisis. The NIB will lend up to $720 billion over 10 years, at very low interest rates, to build at least 7.3 million housing units for extremely low-income households. Loans will be configured in such a way as to finance adequate new construction – to bring housing costs down – while ensuring that a large portion of units are subsidized to make then affordable and available for a spectrum of households. Infrastructure investment across the board will create millions of great-paying, family sustaining wages, improving families’ capacity to afford housing in areas where they currently live. Because the Federal budget cannot be relied on to provide this new housing assistance (see below), NIB lending will be configured to ensure that units remain permanently affordable.

Unique, improved features of HR4052 include:

• Scale of Housing Construction: The NIB would provide up to $720 billion over ten years for “expansion in the provision of public housing” (Section 205 of HR4052, Criteria for Community Development Loans). An objective would be to build adequate numbers of affordable housing units to match escalating demand and lower housing prices. The NIB would concentrate on rental public housing, since low-income families are often not in a position to purchase homes outright, and the private market is not building adequate numbers of affordable rental units for them.
• Off-Budget Financing: The NIB is an off-budget lending bank – capitalized by private investors, taking in deposits, providing low-cost loans – whose operations require no infusions from the Federal budget to operate over time.
• Complements and Tops Up Existing Housing Programs: For the past three decades the Federal budget has spent a steady 4% of all discretionary spending on housing assistance (see below). However, affordable housing needs have grown over the period, largely on account of stagnant real wages which did not keep up with the sharp escalation in shelter costs. The NIB will top up Federal housing assistance programs by filling the financing gap for the construction of affordable new units.
• Flexible Affordable Housing Definition: The Bill will follow the widest possible definition of affordable housing in Federal law (34 USC 12491(a)(3)), so that resources can be efficient used to complement Federal, State and Local housing initiatives. The NIB will lend to the 2,100 existing State and Local Public Housing Agencies (PHAs) which currently administer HUD programs, or to new ones which may be incorporated to own public housing and contract indebtedness, or to land trusts or housing co-operatives.
• Public Ownership as Best Option to Ensure Financial Sustainability: Although the Board of Directors will decide on an exact policy, the NIB will likely focus on: permanent public ownership of rental housing to ensure it does not revert back to the private market; mixed-land use projects (residential and commercial) to diversify and ensure the financial viability of the borrowing housing authority; and mixed-income projects to generate an internal source of funding for low-income rent subsidies, just as Low Income Housing Tax Credits do now. Several states, countries, and legislative proposals are adopting this model already (see below).
• Cost-Benefit: As with all NIB-financed loans, projects will be required to exhibit best cost-benefit indicators. Community housing projects should “promote economic growth and poverty reduction” as well as more dense use of land to keep project costs down. And they should utilize technical advances and resiliency features in design and construction to ensure each infrastructure project’s longevity.
• Improves Low-Income Household Wages: $5 trillion in project loans from the NIB will create 25 million new, family-sustaining wage jobs, allowing a large section of low-paid service workers to transfer over to permanent, high paying technical jobs. Training for new jobs will feature “earn while you learn.” Economic modeling shows that infrastructure investments on this order of magnitude will ultimately grow the economy faster by 2.9% per year, and raise real disposable income by 3.4% per year, than without such investments.
• Supports Better Urban and Community Planning: The Bill explicitly lends for “modernization of local land use policies, including those that promote transit-oriented development and location efficiency.” Other NIB-financed projects, meanwhile, can build infrastructure – transportation, utilities, schools, and more – to link to the new housing. Better community planning with adequate financing will complement and finance HUD’s and Department of Agriculture’s Offices of Community Planning and Development, as well as city and regional planning efforts.
• Supports Industrial Policy: Although the IIJA, CHIPS, and IRA spending Acts have operated for some time now, they have not stimulated new manufacturing production. In fact, manufacturing output and employment generally fell over the past two years, while other sectors of the economy – like health services and leisure – grew rapidly. Both Presidential candidates have called for boosting American manufacturing, but recommended policies which did not work in the past. Instead, a bold infrastructure investment policy supported by NIB lending will form a solid base, creating sustainable demand for U.S. manufactured construction inputs, while growing the economy faster to spur further manufacturing demand and technological advancement.

The Current Housing Backlog: According to real estate tracker Zillow, the U.S. now faces a shortfall of nearly 4.5 million homes (as measured by the difference between the number of households and the total number of housing units available). This shortfall has pushed up housing prices to extreme levels: the median cost of existing homes in 2024 rose by 4% from the year before, to an all-time high of $426,900. Soaring prices pushed middle- and lower-income families further away from jobs and opportunities, lengthening commutes and worsening air pollution. For the first time, rents surged faster than home mortgages, evictions surged to record levels especially across the growing South, and shortages of units resulted in rental price competition in many cities. Meanwhile, impediments to construction included: restrictive zoning rules, escalating land and construction costs, gentrification, and the entry of high profit-seeking financial institutions into the real estate market.

Housing prices are now eating up bigger chunks of people’s budgets every year — and that was before inflation wreaked havoc on household finances. As a result, millions of renter households -- nearly half by one measure; 7.3 million by another measure -- are cost burdened, meaning they pay more than 30-50 percent of their income in rent. Only 34 affordable units are available for every 100 low-income households trying to rent (only 14 available for every 100 extremely low-income renters). Escalating inflation since 2022 has adversely impacted low-income households more than most, and made them more housing insecure. Meanwhile, high rents have made it harder for businesses to hire at all levels, as high housing costs erode the urban wage premium for workers with fewer years of formal education, who are typically employed in low-paying service jobs.

Existing Housing Programs: The U.S. government has programs in place through enacted legislation to provide yearly housing assistance through the budget ($66 billion in FY2024), including for:

• Section 8 (housing) (HUD): Accounting for about half of all Federal housing assistance, Section 8 provides rental housing assistance to low-income households via payments to private landlords on behalf of qualifying low-income tenants. The Department of Housing and Urban Development (HUD) oversees Section 8 programs, which are administered locally by public housing agencies (PHAs).
• Public Housing (HUD): classified either as housing projects that are owned by a city's housing authority or federally subsidized public housing operated through HUD. Section 8 plus public housing combined provide or subsidize about 4 percent of the total stock of dwellings in the U.S. as of 2022. Inadequate assistance to public housing agencies – such as the New York City Housing Authority (NYCHA with a $40 billion shortfall) – has weakened their finances, resulting in operating budget gaps; rising expenses and weakened rent collections; deteriorating physical conditions (lack of heat, mold); and urgent needs to improve and modernize management.
• Low Income Housing Tax Credit (LIHTC through the U.S. Federal tax code): Led to the construction of at least 3.55 million homes (1987-2021) by private developers through public-private partnerships. The LIHTC program is estimated to cost the government an average of $13.5 billion per year, producing about 50,000 low-income rental units annually. Projects developed with LIHTC must maintain a certain percentage of affordable units for a set period of time, typically 30 years, although there is a "qualified contract" process that allows property owners to opt out after 15 years. Accordingly, as many as 223,000 affordable housing affordable units across the U.S. could be yanked out from under low-income renters in the next five years alone, nearly as many as the number of new units being added under LIHTC.
• Home Investment Partnerships Program (Home Program, HUD): provides grants or tax breaks to promote home ownership. The HOME Program is the largest federal block grant provided by HUD to state and local governments designed to create affordable housing (more than 1.36 million units since inception, of which a significant portion are targeted to very low-income or extremely low-income households). And,
• Homeless Assistance Grants (HUD): to finance homeless shelters.

Beginning in the 1960s – and extending through the 1970s Nixon-era and Bush-era amendments of 1990 – housing assistance generally switched from the construction of public housing complexes towards a market-based approach that allowed local housing authorities to place individuals in privately leased units while providing vouchers that covered the gap between a household’s ability to pay and market rents. At the same time, aggregate spending for housing assistance was sharply cut back, from 12% of total discretionary spending in 1977, to 2% by 1986, before stabilizing at roughly 4% of total discretionary spending per year through 2024. Meanwhile, a growing U.S. population and escalating rents meant that 7.3 million renter households became severely cost burdened by 2024, compared with about 4 million in 1990. That is, housing assistance financed through the budget did not keep pace with the growing needs of low-income families. Moreover, the approach of subsidizing market rents through the budget proved to be an unsustainable financing model as housing costs escalated rapidly.

New Proposals for Housing Assistance: Several new legislative proposals have been introduced to address the current housing crisis and bolster Federal programs. In general, the proposals represent important initiatives that will partly address the current housing crisis by raising spending for housing assistance through the budget. However, these bills call for added spending of from $200-300 billion over 10 years, and might not, therefore, gain support given current budget constraints. That’s because the total National Debt stands at $35 trillion, deficits are projected to run at $2 trillion annually, and interest payments on the Debt now exceed defense spending. Budget limitations alone will likely prompt legislators to declare that added housing assistance is not affordable at this time, or to cut back the size of proposals far below what is actually needed. The list of legislative proposals in the 118^th Congress includes:

·        Congresswoman Maxine Waters three Housing Bills introduced in 2023: These bills seek $100 billion in direct assistance for first-time home buyers, as well as $150 billion in fair and affordable housing investments (HR 6948, Strengthening Housing Supply Act of 2024), including $25 billion for the Section 8 housing voucher program, to be reclassified as a federal entitlement that is accessible to every American family that qualifies for it. The three bills have not yet moved forward in the House.

·        The Harris/Walz housing plan: Would build 3 million affordable housing units, provide $25,000 in tax credits to first time home buyers (cost unspecified), and go after large Wall Street firms -- like BlackRock and Blackstone -- which have bought up swaths of rental apartments and homes across the country contributing to rising shelter costs and inflation. The plan also calls for “streamlining permitting processes and reviews, including for transit-oriented and conversion development, so builders can get homes on the market sooner and bring down costs.” An earlier Biden-Harris administration announcement that it would build 2 million affordable housing units using a $20 billion request in next year's budget was blocked by House Republicans.

• Senator Elizabeth Warren ‘s Public Housing Restoration Bill: Reintroduced in May 2024, the Public Housing Emergency Response Act would fund the estimated $70 billion backlog of maintenance and repairs in our nation’s stock of public housing.
• Congressman Emanuel Cleaver’s Home Investment Partnerships Reauthorization and Improvement Act: Would re-authorize the Home Program’s federal block grants and loans to create affordable housing for low-income households. The 5-year reauthorization would provide $5 billion per year (up from about $3.5 billion currently in FY2024), and establish a loan guarantee program under HOME to allow State and Local Participating Jurisdictions (PJs) to leverage limited federal resources to expand the program’s impact.
• Alexandria Ocasio-Cortez and Tina Smith Homes Act of 2024: Would establish a new, federally backed development authority to finance, build, and preserve more than 1.25 million homes, including more than 850,000 for the lowest-income households that by law must remain affordable. Some would be rental units; others would offer Americans the opportunity to build equity. Homes would be built to last by union workers and then turned over to entities that agree to manage them for permanent affordability: public and tribal housing authorities, cooperatives, tenant unions, community land trusts, nonprofits and local governments. Rent would be capped at 25 percent of a household’s adjusted annual gross income. 40% of homes would be set aside for extremely-low income households, and 30% of units for low-income households. To fund the $300 billion in social housing construction over a decade, the development authority would rely on a combination of congressional spending and Treasury-backed loans, making financing resilient to the volatility of the housing market and political winds of the annual appropriations. The bill would repeal the Faircloth Amendment, which prevents the construction of new public housing. And it would follow a social housing model already working around the world — such as in Vienna, Austria, and in some parts of the United States — to prevent the largest affordable housing incentive our government offers — the low-income housing tax credit — too often ending up in the hands of for-profit developers.
• State and Local Responses: Several states with the most severe housing affordability problems (CA, NY, WA, TX, CO, VA, FL) are: passing laws to incorporate public housing authorities, change zoning rules to permit more dense land use, and re-adopt a public housing model to improve affordability and sustainability in their areas. California state representatives introduced a bill this year to create new publicly owned mixed-income housing. Termed “social housing” — to help differentiate its vision from the segregated, income-restricted, and underfunded public housing that has defined the American model, the legislation commanded wide support from powerful constituencies in California, and passed through both the lower chamber and the state’s Senate’s housing committee. In Colorado, lawmakers passed a bill creating a new state office to develop 3,500 new housing units targeted to middle-class families. A new bill in the New York legislature would break away from dependency on budgets, and create an independent Social Housing Development Authority to develop permanently affordable, democratically controlled, union-built housing across the state. It mirrors the successful housing model of Vienna, Austria. Arlington County, Northern Virginia adopted new zoning rules to allow for more dense land use (townhouses, duplexes, and in-law suites) in areas previously limited to single-family homes. However, San Francisco removed a $20 billion general obligation housing bond request from the November ballot in the belief that voters would not pass it.
• Arlington County, Northern Virginia adopted new zoning rules to allow for more dense land use (townhouses, duplexes, and in-law suites) in areas previously limited to single-family homes. However, San Francisco removed a $20 billion general obligation housing bond request from the November 2024 ballot in the belief that voters would not pass it.

SUMMARY: Accordingly, the National Infrastructure Bank provides off-budget financing, as well as the organization needed to solve today’s housing crisis. The NIB’s construction of millions of new units will bring their prices down, improve worker’s pay so they can better afford housing, and provide internal cross financing by borrowing authorities to bridge the gap between market rates and what families can afford to pay. Once the NIB is enacted, it will be independent of budget cycles, although it will still complement Federal, state, and local housing programs. By comparison, current plans to raise new financing for housing through the Federal budget will likely stall due to the budget constraint. Therefore, the NIB is the only viable option to adequately address the housing crisis.