With the Senate joining the House in passing the “Big Beautiful Bill” this weekend, the two chambers will now need to enter a conference committee to debate the differences between their two versions and agree upon final text. They should use this opportunity to revise the legislation’s misguided housing subsidy.
For millions of Americans, especially younger families, renters, and first-time homebuyers, the past four years have been a harsh lesson in the failures of housing policy.
Under the Biden administration, prices skyrocketed. The median U.S. home price has jumped from $322,000 in 2020 to over $420,000 today, according to the Federal Reserve Bank of St. Louis. Rents haven’t fared much better, increasing more than 20% nationally between 2021 and 2024, with some cities experiencing hikes well over 30%.
The Big Beautiful Bill intends to address America’s housing shortage by expanding the Low-Income Housing Tax Credit (LIHTC), which subsidizes private investment in the development and rehabilitation of affordable housing.
The House version of the bill would increase LIHTC allocations by 50% over the next four years and reduce barriers that limit its use in high-cost markets. It also includes a provision to permanently exempt capital gains taxes on the sale of residential properties that are converted into long-term affordable rentals. The philosophy underlying these efforts is clear: the market will not deliver affordable housing unless the government kicks in some cash.
That’s a strange philosophy. In nearly every other domain, the market delivers affordable goods and services without government subsidies. Why doesn’t the market deliver enough affordable housing?
America’s housing shortage is largely due to government-imposed restrictions on property rights. Most notably, zoning laws and land-use regulations limit the types of housing that can be built in certain areas, reducing the overall supply of new homes. For example, some areas only permit single-family homes, excluding apartments and other higher-density housing options. Without those options, growing demand pushes home prices and rents higher and higher.
Governments also makes it difficult to evict tenants who don’t pay or damage the owner’s property. In some of the most egregious cases, squatters have been permitted to remain in the residence rent-free despite never having permission to enter the property, let alone a lease. More typically, an owner must bear the cost of going to court, while missing out on weeks or months of rental income. Still, such prospects lead many would-be suppliers of affordable housing to opt out.
While zoning, land-use, and eviction policies are usually imposed by state and local governments, federal policies also limit supply. Congress imposed a nationwide eviction moratorium in March 2020. The eviction moratorium was initially intended to provide relief during the pandemic, but was extended far beyond what may have been justifiable.
The federal government has also discouraged institutional investors from supplying affordable housing.
In 2024, the Biden administration unveiled plans to crack down on private investors and falsely suggested that excess private participation in the housing market was a primary driver of price increases.
This attack was nothing new. Left-wing lawmakers at both the state and federal levels have been waging a coordinated campaign to crack down on institutional investors in housing for years now.
In Congress, progressive Democrats like Sens. Bernie Sanders (I-VT) and Elizabeth Warren (D-MA) and Reps. Ro Khanna (D-CA) and Katie Porter (D-CA) have introduced bills to restrict or tax large-scale property ownership by corporations, framing them as predatory actors. Meanwhile, blue states like California, New York, Minnesota, and Washington are pushing similar measures, ranging from new taxes on rental income to outright bans on bulk home purchases by investment firms. These efforts reflect a broader ideological push to blame free-market actors rather than failed government policies for America’s housing affordability crisis.
Studies show that institutional buyers don’t price out homeowners. Indeed, investor activity often helps stabilize housing markets, especially in underserved or blighted areas where institutional capital is needed to rehabilitate and reintroduce properties into the housing supply. Rather than driving prices up, private investment frequently brings neglected housing stock back online and expands access to high-opportunity neighborhoods.
Now, with the “Big Beautiful Bill,” Congress is trying to pay suppliers to overcome the government-imposed barriers. That marks a significant departure from the Biden administration’s approach, which sought to demonize landlords, scare off investment, and micromanage housing markets through centralized mandates. But there is a far simpler solution: just get out of the way.
Zoning laws, permitting delays, and eviction restrictions impose massive roadblocks to building affordable housing. For the sake of America’s builders, renters, and future homeowners, all levels of government must work to reduce those barriers. Restoring property rights would boost investment much more than the proposed subsidy, opening the door to a more dynamic and affordable housing market.
