Yesterday, the Subcommittee on Economic Growth, Energy Policy, and Regulatory Affairs convened a hearing titled “Housing Affordability: Saving the American Dream.” Lawmakers examined factors contributing to rising housing costs and discussed potential policy solutions. The discussion focused on federal and state regulations that have made housing less affordable for both younger and older Americans.
Edward J. Pinto, Senior Fellow and Codirector at the American Enterprise Institute Housing Center, described the situation as follows: “The current state of the housing supply is best described as an irresistible force meeting an immovable object. The immovable object consists of overly restrictive land use regulations promulgated by most of the 33,000 plus state and local jurisdictions. That’s how many have zoning and land use power. This leads to unaffordability and a dearth of starter homes on smaller lots. The irresistible force the Chairman referred to is the federal government’s efforts to make homes affordable by means of credit, easing subsidies and acts by the Fed, according to Realtor.com. Returning the housing market to 2019 levels is a daunting task.”
Buddy Hughes, Chairman of the Board of the National Association of Home Builders, outlined affordability challenges: “The United States is facing a housing affordability crisis. 77 percent of U.S. households cannot afford just the median price of a new single-family home. It’s crucial to put regulatory costs in focus because home buyers and renters are sensitive to price. For every thousand-dollar increase to the cost of a single-family home, an additional 116,000 households are priced out of the market. Likewise, for every $1,000 increase to the cost of a new rental, an additional 20,000 renters are priced out of that apartment. Market regulations are a significant part of construction expenses. 24 percent of the cost of a new single-family home can be attributed to regulations imposed at the local, state and federal levels. For multifamily projects, 41 percent of the cost[s] are due to regulations, and while we understand and value regulations that promote health, safety and welfare, there are many that unnecessarily make housing more expensive. In 2024, [Department of Housing and Urban Development] and [U.S. Department of Agriculture] released a rule mandating federally assisted projects use the 2021 energy code, which offers marginal energy savings to homeowners. This energy code will add thousands in additional cost, and homeowners won’t see a payback on these, sometimes for decades.”
Patrice Onwuka from Independent Women addressed barriers faced by millennials: “Home ownership is out of reach. [Millennials are] the largest generation, and yet they comprise only 29 percent of home buyers… Restrictive zoning laws, as we’ve heard, opaque permitting processes, and the rise of environmental laws and other regulations are posing major impediments. The federal government can eliminate these costly federal regulations including green energy mandates... So we’re pleased that Congress is considering rolling back Biden-era energy efficiency mandates on appliances that have added tens of thousands dollars to new homes.”
Panelists suggested several reforms aimed at increasing supply through market-based strategies such as unlocking existing housing stock or incentivizing construction previously limited by regulation.
Pinto explained: “First we should unlock existing housing stock frozen by capital gains treatment... Second we should incentivize building more starter homes currently made illegal by state/local land use regs... Third we should avoid solutions that only drive demand higher or have been proven ineffective... You could unlock an estimated 3.2 million rooms out ... over ten years by providing an income tax exemption for rental income on newly rented rooms.”
On legislative action taken so far—and possible future steps—Onwuka said: “I want to thank Congress for passing Working Families Tax Cuts ... But more can be done... Congress has an opportunity here to exclude more income from taxation ... potentially doubling exclusion amounts ... This would expand supply immediately [...] helping first-time home buyers [...] get into their homes.”
Subcommittee Chairman Eric Burlison (R-Mo.) highlighted issues renters face saving for down payments given high rents:
“Ms Onwuka last September U.S Census Bureau reported nearly half U.S renters were cost-burdened... How might this be heavy burden?”
Onwuka responded: “Well absolutely ... when you look at record 22.4 million renter households paid more than 30 percent income on rent ... Half spent more than 50 percent income on rent ... when you have half your income going rent then you have pay utilities transportation feed yourself leaves less ... As you free up more income through rising wages tax cuts leave more hard-earned dollars ... ending taxes tips overtime allows people put money aside things like downpayment.”
Rep Clay Higgins (R-La.) asked about property insurance driving up costs:
“Home prices go up/down interest rates go up/down but insurance always trends up... if it was market driven—how affordable would homes be if property insurance was more readily available?”
Hughes replied: “Property insurance … has gotten way out hand … builders … building in areas specific market or price point.” Higgins noted in some cases mortgage payments were less than insurance premiums.
Rep Scott Perry (R-Pa.) discussed how lobbying expands international construction codes leading to higher prices:
“Over my time watched international construction code grow… do you know how things added?”
Onwuka replied she imagined much lobbying; Perry agreed saying special interests influence code changes which jurisdictions then adopt.
No legislation was finalized during this hearing but lawmakers indicated ongoing interest in exploring ways Congress can address affordability concerns through regulatory reform or targeted incentives.
