Leading Democrats Clash Over Trump-Backed Housing Plan

WASHINGTON — Two top Senate Democrats clashed with each other Wednesday over a bipartisan bill designed to boost housing affordability, reflecting a simmering debate within the party between advocates for more housing construction and those seeking to ensure its profits don’t enrich private equity.

The squabble between Sen. Brian Schatz (Hawaii) and Sen. Elizabeth Warren (Mass.)— two members of Senate Minority Leader Chuck Schumer’s (N.Y.) leadership team — centers on a populist provision pushed by both Warren and President Donald Trump aiming to prevent hedge funds and private equity investors from holding on to single-family homes that could otherwise be purchased by families.

Schatz, a self-identified member of the Yes In My Backyard or YIMBY Movement which aims to speed up housing construction to increase supply and lower housing costs, took to the Senate floor to say he would have to vote against long-gestating bipartisan legislation aiming to lower the cost of housing unless changes were made to fix what he called a “drafting error.”

The problem, Schatz said, is the bill’s language requiring “large institutional investors” to sell their rental properties to families after seven years, potentially jeopardizing a source of roughly 47,000 new housing units per year that are single-family homes or duplexes.

“It was written in such a way that it was trying to capture the hedge fund problem, but they wrote it wrong,” Schatz said, noting that the legislation defines large institutional investors as for-profit organizations that own more than 350 single-family homes – not just hedge funds.

“That’s bananas. We are now targeting LLCs, limited partnerships, real estate investment trusts, individual owners, family companies, pension funds,” Schatz said. “Anyone who wants to build housing and then provide it for rent is going to be forced to sell after seven years.”

Warren suggested Schatz was mischaracterizing what sorts of organizations own more than 350 homes, and said they would still be able to build as much new housing as they wanted — they just wouldn’t be able to keep it.

“Private equity can build as many multi-family homes as they want, as many apartment buildings as they want, and as many single-family buildings as they want,” Warren said in an interview with HuffPost. “They can suck up all of the tax benefits that they’re currently entitled to, with the one exception that after seven years of benefits, private equity has to take those single-family homes and make them available for families to buy.”

The White House-backed bill advanced in the Senate on Monday with overwhelming bipartisan support, 89-9. It includes over 40 bipartisan policies meant to lower the cost of housing.

Warren, the top Democrat on the Senate Banking Committee, authored the bill alongside its chair, Sen. Tim Scott (R-S.C.). It’s expected to be approved by the Senate on Thursday.

Warren insisted there was no “drafting error” as Schatz claimed.

“There are some folks in private equity who don’t like that, but it’s a very deliberate choice that is supported on a bipartisan basis,” Warren said, noting that some on Wall Street are opposed to the provision.

Warren, who backs many YIMBY goals but is more skeptical of corporations than many of the movement’s loudest advocates, also dismissed concerns the build-for-rent provision will discourage construction of new housing, saying Democrats had an important choice to make.

“There’s an underlying values choice,” she added. “Is housing for Wall Street to make another profit on? Or is it there for families to live in? This bill comes down on the side of families getting those single-family homes.”

Schatz said the legislation would especially interfere with the Low-Income Housing Tax Credit, a federal program that gives developers a financial incentive to build and maintain housing for people with low incomes. It’s best known for helping finance apartment buildings, but it can also be used for single-family homes.

“All these LIHTC projects are going to die,” Schatz said. “There is literally no reason to do it this way, and it would take like a two-line fix, but what we were told last week was, ‘I’m sorry, the bill is closed.’”

The so-called ROAD to Housing Act contains dozens of uncontroversial provisions intended to make it easier for people to buy homes. One section of the bill would boost federal housing counseling, another would encourage states and localities to liberalize their zoning laws.

The language targeting investors has been championed by both Warren and President Donald Trump, who returned to the White House saying he’d address Americans’ affordability concerns but has overseen continued price inflation during his second term.

“We want homes for people, not for corporations,” Trump said last month during his State of the Union address.

Still, some Republicans have concerns with the legislation. Several top conservatives in the House have demanded changes to the bill before it can get to Trump’s desk, potentially imperiling the bipartisan coalition supporting it in the Senate. The legislation is one of the few chances Congress has to pass legislation addressing cost-of-living concerns before the midterms.

“My God, when did conservative Republicans start carrying Elizabeth Warren’s banner on housing strategy?” asked Sen. Thom Tillis (R-N.C.) on Wednesday, adding he planned to oppose the bill on final passage even though he voted to advance it on Monday.

“We’ve got so many examples of where free market conservatives are looking the other way when we’re doing anything but free market conservative policy,” he added of the bill.

Sen. John Kennedy (R-La.) said he didn’t like the build-for-rent provision in the bill but that he would defer to Trump on the matter.

“The president does feel strongly about it, and he is part of this process,” Kennedy told HuffPost. “He’s got to sign the bill, and I’m not going to let the perfect be the enemy of the good.”