Federal financing and spending on real estate impacts millions of Americans on every street, in every neighborhood, town and rural community. From loan guarantees to commercial tax credits, these programs help those most in need pay their rent, help families purchase their first home, and provide financing for commercial development. The federal government impacts where and how homes and even whole neighborhoods are built.
Each year, the federal government spends approximately $450 billion on real estate through a combination of direct expenditures and tax and loan commitments. Smart Growth America surveyed 50 federal real estate programs to better understand where this money goes and how it influences development in the United States. The spending examined in the report’s analysis includes tax expenditures, loan guarantees, and low-interest loans and grants. It does not include the Government Sponsored Enterprises, nor does it include non-real estate spending that greatly influences development, including investments in transportation, other infrastructure and federally owned real estate.
This spending has an enormous impact on the U.S. real estate market. Though usually viewed as a “free” market, the U.S. real estate sector is heavily influenced by direct and indirect government intervention. Much has been written about how zoning, infrastructure provisions, subdivision regulations, local approval processes and other factors make the real estate market a product of more than simple supply and demand. And recently, more has been written about the outsized role of the GSEs and the need for their reform. Taken as a whole, these expenditures and investments impact where real estate is developed and what kind of product is built.
Even a cursory analysis reveals this impact is uneven. For example, small multifamily buildings are less likely to receive financing, despite the fact that most renters in the United States live in these smaller buildings. Viewed as whole, federal funds are not targeted to those most in need, are not targeted to strengthen existing communities and are not targeted to places where people have economic opportunities.
Federal real estate spending should be reviewed and refocused. Smart Growth America’s survey revealed several instances where federal real estate expenditures and commitments could better meet our national needs and provide better benefits to homeowners, renters and communities. These shortcomings mean U.S. taxpayers are failing to get the most out of these large federal investments.