The Biggest Housing Bill in Decades Just Passed... Who Wins?
Very important bill just passed the Senate. It's a bipartisan bill sponsored by Tim Scott from South Carolina, a Republican, and Elizabeth Warren from Massachusetts, a Democrat.
Seamus Nally:This has to be encouraging, right? This represents an increase in affordability.
John Martin:Hey, everybody. Welcome to another episode of Landlord Lens. Today, we have a very exciting development coming out of Washington DC, and that is a very important bill just passed the senate. You might have heard of it. It's the twenty first century road to housing act.
John Martin:It's a bipartisan bill sponsored by Tim Scott from South Carolina, a republican, and Elizabeth Warren from Massachusetts, a Democrat. And it has a lot of interesting reforms from the federal level down to your local housing market.
Seamus Nally:Yeah, John. And something kind of astonishing that we haven't heard recently is it is a bi partisan.
John Martin:Bipartisan? Holy moly. How many people voted yes in the senate, which has a 100 members by the way?
Seamus Nally:89 people.
John Martin:89 people voted yes on something so big and impactful?
Seamus Nally:Yes. Isn't that incredible?
John Martin:That's amazing. That's amazing.
Seamus Nally:Something that everyone can get behind and views politically valuable to get behind is housing affordability here in The United States.
John Martin:That's right. Yes. And there's a couple interesting, at least in the Senate bill, core ideas to this bill. And we'll talk through them one by one. The first is increasing supply.
Seamus Nally:Awesome. Well, I think we should start supply side because it is a topic we've honestly been criticizing every idea that's come out to address affordability over the last year and a half. We keep saying, well, what about just adding more supply? And actually letting the market do its thing. And this trying to do that with some, what sound like at least at face value, some pretty big changes in terms of removing some of the environmental restrictions to slow building, forcing towns to be more aggressive in their approval timelines.
Seamus Nally:So things aren't just sitting and waiting and building department purgatory.
John Martin:Right. Yes. And some of that's locally controlled and state controlled, which is managed in a different way. They're creating grants grant programs that can be utilized by states and local housing authorities to access money if they meet certain criteria. And those criteria are all things that are meant to speed up development.
Seamus Nally:Yeah, and one thing that's true throughout this bill for the most part is there's a lot more carrot than there is stick, right, where they're trying to incentivize the right behaviors since a lot of this activity does happen at a local or state level, and not necessarily at a federal level.
John Martin:Yes. But one area that is actually at a federal level is a lot of the environmental regulations that were set up in the National Environmental Protection Act. There is a piece of that act that carves out a categorical exclusion for certain types of housing, and this bill would broaden that significantly so that more and more housing developments are actually not subject to some of the checks in the Environmental Protection Act.
Seamus Nally:Yeah, and that's something that a lot of people have reason to be excited about. There's absolute horror stories in places where there's been fires, natural disasters, California, right? The Malibu area where no one's been able to rebuild, right? And California is not alone in having some of these very arduous restrictions in place that make it so the approval process just drags, drags and drags to the point where people give up on habitable land.
John Martin:Yeah. Exactly. I mean, it it's very disappointing, especially when especially disappointing when it's close to a population center. It's just empty land now where, you know, people are, throwing fistfuls of money to move in or build something there.
Seamus Nally:So very encouraging to see, also very encouraging as this would typically represent a little bit of a compromise from, I would say, the Democrats in terms of lessening, loosening some environmental policy all for the benefit of affordability in The United States.
John Martin:Right. And you you do see some progressive pushback to these for along the exact same lines you'd you'd expect. These are this is removing the guardrails that have maintained America's, you know, beauty and environmental specialness as a country, which we certainly do have. And then the other pushback is worry about loss of community control, because what the federal government's essentially doing is providing sticks for local governments to not listen to the litigation and hearing processes that have been set up in the last sixty, fifty fifty, sixty years to,
Seamus Nally:like Yeah.
John Martin:Slow down building stuff. Right?
Seamus Nally:I feel like we gotta pour one out for all the NIMBYism groups out there that have had strangleholds on some of these communities at the absolute benefit of the existing asset holders and the deterioration of affordability for those that are don't hold any assets. Absolutely.
John Martin:We'll four one out for them because if this passes, it's it is definitely bad news for them. The manufactured housing stuff, I don't know that we have a great takeaway on this one. It was kind of a surprise to both of us.
Seamus Nally:Yeah. Surprised to see it in there. I personally was not aware of some of the restrictions that do exist in manufactured housing, which they're trying to alleviate. We did have a brief conversation before we started filming about how impressive manufactured housing is actually becoming. A lot of these houses that are built in factories are also a great path to affordability.
Seamus Nally:And so it's great to see that from a legislation standpoint, we're removing restrictions that allow us to move forward faster on some of these new manufactured units.
John Martin:Now let's actually just jump straight to the juiciest one in here, because it's the one that wasn't in the House, and the Senate added it, And that's the institutional investor restrictions. What's kind of interesting in in my opinion here, just to frame it a little, is this large investor line was first drawn at the 350 plus homes. So you cannot own directly or indirectly 350 single family homes based on this law. There's restrictions to that now. But what's interesting is this is clearly a populist point.
John Martin:Right? It's a politically powerful populist point, and it's coming from the senate. It wasn't originated from the house, which is kind of an interesting piece of, I don't know, political strangeness in this moment.
Seamus Nally:Yeah. One thing that's good to see, I think, is them actually defining the amount of single family houses that have to be owned for you to fall into this category. We've seen a couple different numbers thrown around during some of, most of the executive order that President Trump put in place as well as some of the dialogue that's happened after it. So I think three fifty landing is not gonna impact a lot of your independent landlords, right? Or really any of your independent landlords, which is good to see.
Seamus Nally:Another interesting element, because we did a video talking about the executive order around this, is we were worried, well, does this actually limit supply since a lot of these institutions are actually the builders. And I love what they did here, which they said, hey, these individuals can still build, right? But they must sell after seven years. Now, one big asterisk in terms of my excitement around that is if you know you're building something only for a seven year usable life, I'm a little concerned that the quality of these may deteriorate of the actual units you're building. There may be corners cut since you know you have to sell seven years after the build.
Seamus Nally:But I like the fact that they still protected and acknowledge the fact that some of these large institutionals are large driving forces in building new supply in The United States.
John Martin:Exactly. And even in that video, we talked a lot about how Build to Rent is becoming a much larger share of the new construction in America. And, you know, the seven years, right, must sell after seven years idea, basically puts a timeline on the build to rent communities that have that are are being built, like, even today, right, if if this passes. And it it definitely changes the incentive set in a way that probably harms supply for that build to build to rent group. Although, it does definitely give some good points.
John Martin:Right? I mean, anytime you hear anything about affordability on a social media platform and you open the comments, in the first five, BlackRock gets named. Right? Like, it's such a politically convenient narrative that sliding this in and putting your vote next to it helps.
Seamus Nally:Yeah, makes a lot of sense. Something we talked about previously is that the percentage of supply that these institutions own is actually quite small. Right. Right? And so this, I think to your point, this is all about that headline grab and that we are doing something for the people of The United States.
Seamus Nally:We're fighting back the boogeyman that is this institutional investor. But I think there's almost every other provision within this bill seems like it'll have more of an impact on affordability broadly across The United States versus this juicy one.
John Martin:Yeah, this juicy one. So Seamus, looking at it now holistically, say it bounces back to the house and they pass it in its current state. Yeah. What grade do you give the bill?
Seamus Nally:Well, I think it's really dependent it depends on the direction you're coming at, If you are somebody who is looking to buy, whether that's because you're looking for investment properties, right, or you're looking for a new primary, this has to be encouraging, right? This represents an increase in affordability. If you're an asset holder though, right? You already have a home, you already have a rental portfolio, let's say you have a couple properties. This actually represents a shift in the future because as supply increases, the value of your properties is going to drop, Which makes refinancing loan to value ratios a little bit tighter.
Seamus Nally:The other thing is we would anticipate that rent prices would also drop. And so I think it's just super important to be very aware of the larger impacts. So I would say in terms of helping affordability, it's tough for me to understand the teeth that this will have. There's a lot of carrot, not a lot of stick. I think you need equal carrot and stick to really make big changes across The United States.
Seamus Nally:But I would give this a B in terms of helping affordability. If you're an asset holder and you're worried about the price of those assets dropping today, this probably looks like a D.
John Martin:Yeah. Likely true. And I I think the other layer I'd put on top of your your two grades there, B and D, is it also depends on where you live. A a lot of this is not actually going to impact all of America because so much of it's deployed via via carrots, right, to local governments. Yeah.
John Martin:And so you've got to also not only look at this federal bill, and you've you've also got to imagine how it's gonna filter down to your market. And that means you need to understand the profile and incentives of the people managing your market. And there are people managing your market. They're going to be making decisions off this bill. So I'd, you know, be reaching out, calling them, get what they think of the different provisions.
John Martin:What are they most excited about in it? What do they hate and they're never gonna touch. And, you know, I'd also say that vote for the people that align to your interest in this group and and pay attention to local elections.
Seamus Nally:Absolutely. And I think one other element that I didn't address in terms of reducing affordability is just housing is a really large aspect of all of our paychecks, right, of everyone in The United States is income. And so if we can bring those prices down, I do think it leaves individuals, it leaves families with more money with which to spend, right, also more money with which to save and get themselves out of maybe other consumer debt they have. So in terms of things that we're trying right now in The United States that could have a positive impact on the broader US economy, I would give this a B plus.
John Martin:I absolutely agree with that. It's housing and health care, right? If we can fix those two line items in our budget, it helps middle class a lot.
Seamus Nally:Yeah. Do you think health care is gonna get some good bipartisan support anytime soon?
John Martin:Oh, yeah. 100%. I mean, I think that's the next thing up. Right?
Seamus Nally:Next stop.
John Martin:Just kidding. So very exciting. Housing is being addressed at the congressional level, shockingly at a bipartisan level, 89 to 10, with some very promising outcomes for the middle class. If you've got any opinions on this bill or or you think there are any key provisions that we missed here, please leave a comment. We wanna hear about them.
John Martin:We'll probably do a couple more episodes on this as it continues its legislative journey towards the president's desk. See you all next week for another episode of Landlord Lens. Thanks.
