In a country as large and diverse as the United States, much of the machinations of government happen without the input or even awareness of people most affected by what eventually becomes new legislation. While trade organizations like the National Association of REALTORS® (NAR) represent the interests of millions in Washington, individuals will always need to educate themselves on issues that affect their industry and their livelihood if they hope to be participants in democracy.
Because housing is intertwined with so many other sectors and industries, there are always any number of new bills that could upend the average real estate practitioner—even though most of them will not make it across the finish line. And as ideas percolate and bounce around among many competing interests, it can be hard to get a bead on when any single proposal has sticking power.
Despite this, there has been no shortage of proposals that could fundamentally affect the real estate industry. Here are a handful, focused on everything from employment designations for agents, to housing on federal land.
Zoning and inventory
The primary barriers to freeing up more desperately needed housing stock are nearly all controlled at the state or local level. But that doesn’t mean creative federal lawmakers aren’t trying to get involved.
A bill proposed by Republican Senator Mike Lee of Utah (called the HOUSES Act) would create a unique system where state or local governments could select federal land within their borders for the express purpose of building new housing, essentially circumventing local zoning, to leverage so-called “underutilized” areas for denser residential development.
Republicans on the U.S. Congressional Joint Economic Committee claim the bill would lead to the construction of 2.7 million homes, and substantially solve the inventory crisis in the West.
Patrick Gourley, an associate professor of economics at the University of New Haven, tells RISMedia he was not familiar with the specific bill, but called the general concept “a great idea.”
“We have a huge problem with how difficult it is to build housing,” he says. “We need to legalize housing.”
Lee’s idea isn’t totally without precedent. While making clear that he was not familiar with the specifics of the bill, Gourley says that land-grant universities followed a framework of the federal government partitioning land for states to use for a vital purpose—with housing arguably an even more fundamental aspect of society than education.
While the federal government usually gifted land in the case of the land-grant universities, the HOUSES Act would require local jurisdictions to pay for it.
Lee’s bill has not received a whole lot of attention from real estate professionals or those outside the industry. The Bureau of Land Management in Lee’s home state pushed back against the bill, and an Orange County op-ed worried the bull would result in plummeting home values.
Gourley agrees that any big initiative like this to free up supply will decrease home values across the board.
“If we want housing to be more affordable, that means that prices have to go down, which means yeah, if you just paid top dollar for a house, you might be underwater. There’s always a give and take in economics,” he admits.
Ken H. Johnson, an economist at Florida Atlantic University, says generally that the “devil is in the details” when it comes to these types of proposals.
“I want to know who is building that housing,” he says.
Johnson highlights the federal government’s long and inconsistent history of building lower-income housing. But he adds that there are possibilities for a larger, simplified way of utilizing land and funding—dashboards that can track where there are housing needs and available land, for instance.
“There’s gotta be some public-private partnerships where everybody’s coming together and saying, ‘Why don’t we do something reasonable?’” Johnson expounds.
A more mainstream method for the federal government to create more housing involves incentives—simply offering local governments grants or other investments if they loosen zoning restrictions and encourage more homebuilding. The Biden administration has already promised to do that in a housing roadmap released in May.
An NAR spokesperson also highlighted this approach in an emailed statement to RISMedia, referring to a bill introduced by Democratic Senator Amy Klobuchar last year called the Housing Supply and Affordability Act, which would provide about $300 million in grants for housing based on income.
“NAR continues to urge federal legislators to improve access to homeownership, increase housing inventory and encourage adaptive reuse of commercial properties by supporting bills such as the Housing Supply and Affordability Act, which creates a Local Housing Policy Grant program to enact pro-housing policies at the local level,” the spokesperson said.
NAR has registered to lobby on this bill as well as the HOUSES Act, according to nonprofit government transparency organization OpenSecrets.
Independent contractor status
An ongoing debate around the rights and responsibilities of independent contractors has not really affected the real estate industry so far for a simple reason: real estate agents are very specifically exempted from being considered employees, as long as they are not paid by the hour.
IRS Code 3508 ensures “qualified real estate agents” are not treated as employees, as long as “substantially all” their income is based on commission and not hours worked.
The Department of Labor (DOL) is expected to deliver new rules and definitions around the rights and definitions of independent contractors sometime later this year. Most of the debate and controversy around these rules has focused on so-called gig workers—ride share service drivers, for instance.
An NAR spokesperson said that generally, they are focused on protecting the specific clause in the IRS code allowing real estate agents to be classified as independent contractors.
“NAR supports the ability of a worker to be classified as an independent contractor, including the continued right of real estate brokers to choose whether to classify agents as employees or independent contractors and state level actions that strengthen the rights of brokers to make these determinations,” the spokesperson said.
An “Issue Brief” posted to the NAR website a little over a year ago said that the organization is worried about “increased litigation challenging real estate professionals’ ability to be classified as independent contractors” based on the changing DOL rules, even though those changes are not expected to directly modify the real estate classification.
A bipartisan proposal in the House from Republicans Elise Stefanik and Michelle Steel, and Democrat Henry Cuellar, would create a brand-new classification of worker through something called a “flexible work agreement.” Workers classified under this new designation could work for multiple companies at the same time with protection from harassment and retaliation, the right to family or medical leave, privacy rights and safety assurances—though they will still not be classified as employees.
It was not clear if this proposal—which has not yet been officially introduced as a bill—could legally apply to real estate agents. Often, the specifics of how non-employees are treated is decided at the state level, from workers compensation to what percentage of income must be commission-based.
“Having a written independent contractor agreement is a fundamental element of managing the broker-agent relationship to help protect that independent contractor classification and comply with many state laws,” the NAR spokesperson said.
Credit scores
Another area where specifics are everything, several lawmakers have approached these issues differently in recent years. Broadly, the focus is expanding what can help potential buyers qualify for loans—consistent rent or phone bill payments, for instance.
Proposals have varied broadly, from a bill introduced by Democratic Representative Ayanna Pressley that would require more transparency from mortgage lenders regarding how they use scores, to another bill from Democratic Representative Nikema Williams that would require all mortgage lenders to consider alternative factors in their credit history (but only when the consumer requests it).
Many of these programs have focused on equity, as Black and hispanic families are much less likely to have a strong credit score or credit history (and have lower rates of homeownership). Bank of America recently launched a pilot program focused on predominantly Black and Latino neighborhoods that considers alternative credit qualifications, from rent payments to car insurance (the program is open to people of any race, despite significant misinformation on social claiming otherwise).
Responding broadly to credit score reforms, the NAR spokesperson said that “homeownership…shouldn’t be out of reach for low-income, rural and minority borrowers who lack access to traditional forms of credit.”
“Many consumers, especially minority and first-generation borrowers, have thin credit profiles or, worse, no credit profile at all, thus keeping them out of the housing market. NAR supports alternative credit scoring models aimed at responsibly expanding mortgage credit for millions of hardworking families,” the spokesperson said.
Johnson sees all these initiatives as generally able to broaden access to homeownership.
“This could actually open up a wealth creation channel to people who hadn’t otherwise been able to gain access,” he says.
But again, Johnson cautions that the specifics will determine the success of these programs.
“How liberal are the qualifying standards going to be?” he asks.
While he says that generally these types of programs can be positive for homeownership, maybe more important right now is timing. Johnson argues that encouraging or assisting people who are lower income and maybe just at the cusp of homeownership is almost counterproductive in the current market and carries more risk.
“More people need access, but we’re talking about giving more people access at the height of the housing cycle when now is probably not the time to be buying,” he notes.
Gourley says he also sees a general positive in adding more ways to qualify for mortgage loans, while also cautioning that there are always unintended consequences.
“There’s always going to be ways to game the system, there’s always going to be people who qualify easier than they should, and there’s always going to be people who don’t qualify for as much as they could,” he says. “In general, if you can add a piece that seems relevant to a mortgage…then that generally will help.”
But if some things become de-facto requirements for mortgage loan qualification, then that can create whole new issues, Gourley warns.
“You have someone who’s saving up money living at home with their parents, they could be in a great position to take out a mortgage, and then they actually see a penalty because they have no rent,” he explains
The risk of overqualifying too many people is relatively low in the long-term, Gourley says, with plenty of fundamental safeguards still in place.
“Things were crazy ,” he recalls. “There was no way people were going to be able to afford their mortgage payments. The balance sheet of the typical American homeowner is much stronger than it was in 2005.”
Redlining and the homeownership gap
The Department of Justice has been running a taskforce focused on enforcing fair lending standards and weeding out racial discrimination since late last year, but legilsators have also been working to better codify protections, or address systemic racial inquities in both home values and homeownership rates.
A proposal from Democratic Representative Maxine Waters would create an entirely new federal agency that would set valuation stands and appraiser criteria, establish a national database of registered appraisers and create new standards for training on racial bias and fair housing.
Other proposals would seek to reform or strengthen the Community Reinvestment Act (CRA), which incentivizes banks to prioritize the credit needs of low- and moderate-income families. Several bills have also sought to create targeted federal downpayment assistance programs to boost homeownership rates for certain demographics.
Gourley is not particularly optimistic about the downpayment assistance programs, claiming that in the long-term they will just make housing more expensive.
“If you give people money so they can buy more housing, then the price of housing will go up,” he explains. “It doesn’t do anything to solve the problem.”
He cites the recently passed Inflation Reduction Act, which extended approximately $7,000 subsidies for electric vehicles, and connects this to recent price hikes made by automaker Ford on its EVs (though many of those increases were announced more than a month before the bill was passed).
That doesn’t mean that the equity-focused programs couldn’t achieve their goal of bringing homeownership more into balance, however.
“The individuals who qualify for that program would have an easier time buying houses, but then everyone else has a harder time because prices are up. So that probably wouldn’t have a net effect on homeownership,” Gourley explains.
Johnson takes an even broader view. While generally lauding efforts to reform the CRA—especially around price point caps—as well as appraisal reforms and downpayment assistance, he adds that some people are better off renting, and investing the money they would have put into a house in stocks and bonds.
Financial education could help many individuals better decide not only when it is financially beneficial to buy a house, but could really help disadvantaged communities build equity and leverage credit in other ways.
“It’s such a strange beast to most people, but it’s really pretty simple. I could teach a 10th grader to do it,” he says.
At the same time, Johnson says he fully appreciates that buying a home is not a fully financial decision, and that allowing everyone an equal chance to buy a home is a valuable and important thing by itself—even if the timing isn’t so perfect in a lot of markets.
“Anything right now that means we can have more access is great. Creating more access to homeownership for people is great. I just wish that we weren’t doing it right at the peak of the housing cycle,” he says.
