“Compromise is not a dirty word.”
That was the refrain from President Joe Biden and his administration as Democrats sought a deal on a massive spending package meant to address everything from the oppressive burden of child care to crumbling roads and bridges. With Republicans largely opposed to the initiatives and warring factions within the Democratic party clashing over priorities, many questioned whether either of the two bills—known as the Infrastructure and Jobs Act and the Build Back Better Act—would survive the divisive climate in D.C.
But it now looks like versions of these bills, pared down after months of fiery negotiations, finally have a final version, as President Joe Biden announced a framework this morning that he promised would be supported by both progressive and centrist legislators in his party.
“Compromise and consensus are the only way to get big things done in a Democracy, important things done for the country,” Biden said. “But this framework includes historic investment in our nation and in our people.”
Compromise, though, means that no one gets everything they want. Progressive Democrats almost immediately began pushing back on the expectation that the the framework would pass immediately, objecting to many of the cuts forced by centrists in the Senate, and it was not immediately clear if both bills would receive the necessary support.
For the most part, the Build Back Better Act has been supported by real estate and housing advocates including the National Association of REALTORS® (NAR), with many lobbying hard for the housing provisions in the bills—while also working against proposals that would have removed certain tax loopholes to fund it.
NAR put out a statement Thursday afternoon as lawmakers continued to push forward on the bill, highlighting the “hard-fought NAR priorities like investments in affordable housing and down-payment assistance” as well as the bill “sparing real estate investment from the most feared taxes.”
“NAR’s advocacy operation is built for crossroads moments like this one. For the past year, we have educated lawmakers on the effects of misguided and harmful taxes on real estate and the need for affordable housing investment,” said Shannon McGahn, chief advocacy officer at NAR in a statement.
The original proposal for the Build Back Better Act included over $300 billion for housing-related programs and funding. NAR and other organizations involved in the real estate and housing industry, including the National Association of Homebuilders (NAHB), the Mortgage Bankers Association (MBA) and National Association of Hispanic Real Estate Professionals (NAHREP) rallied against any cuts to these programs, even holding a joint press conference with lawmakers in Washington a week ago.
An NAHB spokesperson referred back to an earlier statement from their organization supporting housing provisions in the bill.
Though the Infrastructure and Jobs Act will certainly have a lasting impact on the real estate industry, pouring billions into energy infrastructure, high-speed internet expansion and road revitalization, it was the direct housing monies in the Build Back Better Act that drew the most attention from real estate advocates.
With that bill slashed from a top-line $3.5 trillion to $1.75 trillion, funding for housing took a 50% cut, with Biden releasing a short summary of the agreement that promised $150 billion toward “investment in housing affordability and reducing price pressures, including in rural areas,” along with building one million new affordable rental and single-family homes and creating “rental and down payment assistance and public housing.”
Both bills still must make it through the legislative process before becoming law, and there is still a chance that even a single legislator could block the plan. As negotiators grapple with the new details, here is what is in the latest proposal:
$65 billion for Section 8 vouchers
Originally proposed at $72 billion, this program subsidizes very low-income renters or those who are at an immediate risk of homelessness, domestic violence or human trafficking. Other amounts would be steered toward landlords to create or rehab rental housing in areas where people are likely to be displaced or already struggling to find housing.
$25 billion for Public Housing
The Build Back Better bill would provide a large investment in the current Housing and Urban Development (HUD) programs that fund the majority of affordable, income-restricted housing across the country–though it was cut significantly from an original proposal of close to $80 billion. This program operates mostly through public-private partnerships, and has focused on rehabilitation or repurposing existing housing, though this money can also be used for maintenance, upgrades, energy efficiency improvements and homeownership programs.
$500 million for Supportive Housing for People with Disabilities
Originally proposed at $1 billion, this was cut in half through negotiations. This money would fund existing programs to provide rental assistance as well as create more housing for disabled people. It would also pay for supportive, individualized services for these people.
$7 Billion for First-Time Homebuyers
Originally proposed at $10 billion, this fund would be paid as grants to people whose parents did not own homes, and spouses did not own a home in the past three years. A large portion would be distributed by state governments and about a quarter of the money would be provided to non-government entities, through a “competitive” process, who would then disburse the money. The amount of down payment per homebuyer would not exceed either $20,000 or 10% of the purchase price. If the homebuyer abandons the property within five years, they will have to repay the grant.
$2.2 Billion for Rural Housing
The $2 billion for rental assistance, which is less than half of an original proposal of around $4.5 billion, is earmarked “revitalize” rentals in these areas, including removal of safety hazards and efficiency improvements. About $200 million would go toward loans for rural home repairs
$1.75 Billion for ‘Unlocking Possibilities Program’
Meant to encourage better land use and planning, these monies would go as grants to state or local governments and regional authorities to come up with strategies to further fair housing goals, focused specifically on growth, reducing concentrations of poverty, finding efficiencies and removing barriers. This can explicitly include things like zoning reform—part of executive action and policy taken by the Biden’s administration earlier this year. This was originally proposed to be funded at $4.3 billion.
$1.5 Billion for Distressed Multifamily Housing
This money would be provided as forgivable loans that explicitly could only be used for “necessary physical improvements” to a distressed multifamily property. The original proposal was for $4 billion. Loans can be forgiven at the discretion of the Secretary of HUD. Owners of these properties must also make their rents affordable for 30 years if they participate in the program.
$600 Million for Flood Insurance Assistance
This funding would go directly to homeowners based on financial need to offset the cost of their flood insurance—especially timely now as premiums are likely to rise for many homeowners over the next few years. The original bill had proposed $1 billion for this, with an additional $3 billion for broader resilience projects such as risk assessments and flood mapping. That appears to have been cut from the final bill.
$1.8 Billion to Minority-Owned Businesses
Of the total funding (cut from about $2.8 billion), about half would go as direct grants to businesses owned by underrepresented groups, which includes people from low-income communities, those with disabilities, veterans, refugees, members of native tribes and people who have served prison time. The rest of the money would fund an agency that would permanently serve minority-owned businesses, opening centers across the country and holding forums with government agencies. Minority-owned real estate businesses would almost certainly be included in these programs based on the current language.
Other Takeaways
The Build Back Better bill also includes significant money for transportation improvements, re-routing streets and removing lead paint from housing, all of which could have significant effects on real estate markets. Around $3.3 billion is earmarked for the Small Business Administration’s popular 7(a) microloan program, which serves many real estate businesses. Some of that is explicitly reserved for underserved markets and disadvantaged classes of business owners.
Also notable is how the Build Back Better bill is funded. Proposals that were floated earlier this year included bids to close two tax loopholes—the so-called carried interest loophole and like-kind exchanges. NAR lobbied against changing these practices, which largely benefit very wealthy individuals, arguing that they are not loopholes and promote business growth, and both were removed from early drafts of the bill. According to the framework released by the White House, a 15% minimum tax rate for large corporations, surtaxes on multi-millionaires and billionaires, increased IRS enforcement and closing certain tax loopholes will ensure the bills do not increase the deficit.
Note: This story was updated at 4:30 p.m. with additional comments from NAR and details on the bill.
Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas to jwilliams@rismedia.com.
