Of the many prominent storylines to emerge during President Biden's first year in office, one in particular continues to make the rounds as the situation becomes increasingly dire. This is, of course, in reference to the vast housing shortage being experienced in Texas and around the rest of the country.
Particularly being affected are homes deemed "starter homes", which are common for first-time homebuyers. According to an article in the Wall Street Journal, starter homes are getting more and more difficult to find. For a home to be considered a “starter home” to Freddie Mac, it must be 1,400 square feet or less. Data from the mortgage giant shows that the supply for these types of homes has hit a four-decade low.
From the 1970s to today, the number of starter homes built annually in the United States has decreased from 418,000 to 55,000. Sam Khater, chief economist and head of Freddie Mac’s Economic and Housing Research division, expressed his surprise to the WSJ about the consistency of the scarcity: “What was really striking to me was the consistency in the decline in the share of entry-level homes, irrespective of geography. The thing that struck me the most was that really, it’s all endemic. It’s all over the U.S. It doesn’t matter where.”
The Biden administration has taken notice of the short supply of starter homes. A statement from the White House noted that home prices across the United States increased 7% to 19% from September 2020 to June 2021. To bring these prices back down to normal, the Biden administration intends to take both legislative and non-legislative measures to create or flip over two million housing units (at least one million rental units).
The affordable housing initiative packed into the recently revealed infrastructure plan takes aim at zoning restrictions the Biden administration claims have excluded different minority groups from living in certain areas with greater opportunity. Local zoning regulations, such as minimum lot sizes and blocks to multifamily housing, may be reconsidered as a result of this federal action. Other changes include lengthening the time that an individual or nonprofit can make offers on homes without the competition from investors, allowing Fannie Mae and Freddie Mac to invest more in rental housing, and expanding an existing grant program to motivate the production of affordable housing.
In Texas, it is a state law that makes inclusionary zoning a requirement for development. Requiring inclusionary zoning can lead to more affordable housing within cities. Texas, Arizona and Tennessee are the only states that prohibit this requirement. Gina Hinojosa has attempted multiple times to change that law to no avail. She seeks to allow cities to require inclusionary zoning, which she believes would help alleviate the high housing prices in cities like Austin and Houston. The Biden administration’s plan could potentially change that.
