Biden admin announces plan to build more affordable housing
Romer Debbas LLP managing partner Pierre Debbas reacts to the White House’s plan to increase the affordable housing supply.
Biden administration officials on Wednesday outlined a multi-pronged plan to build and restore more than 2 million homes, a move intended to quell last year's surge in housing prices.
The astronomical prices have driven millions of families out of the housing market or forced them to put the bulk of their paycheck toward rent. The S&P CoreLogic Case-Shiller 20-city home price index rose a record 19.1% in June from the year-ago period, driven by a lack of available homes and low interest rates that have caused wealthy buyers to drive up prices.
In fact, in the 15-year period from January 2006 to June 2021, housing as a share of the population plummeted by close to 40%. The current shortage of homes is close to 3.8 million, according to researchers at Freddie Mac – a substantial increase from the estimated 2.5 million in 2018. Without enough homes on the market, prices have ballooned in recent years, a problem laid bare by the pandemic.
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On top of the supply shortage in the ownership market, the U.S. also has an inadequate supply of homes for renters, according to a detailed analysis published by the White House Council of Economic Adviser. More than 10 million renters nationwide – or roughly 25% – pay more than half of their income on rent. Nearly half, or about 47%, spends more than the recommended 30% on rent and utilities.
The White House economists proposed a slew of changes – legislative and administrative – to address the dearth of supply in both homes for sale and the rental market.
To begin, the administration proposed increasing the supply of both single-family and multi-family housing units by about 100,000 over the next three years with a series of administrative changes. The White House called for increasing mortgage availability through Freddie Mac and Fannie Mae for manufactured houses and buildings with two to four units.
It also suggested making it easier for individuals to buy homes that failed to sell in foreclosure auctions by increasing the period in which nonprofits and owner-occupants – as opposed to investors – can buy the building.
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The Biden administration also plans to increase the affordability of financing buildings, particularly those intended for low- and middle-class tenants, through a series of tax credits, loans and grants.
On top of that, the White House estimates that its sprawling "Build Back Better" economic agenda will lead to the construction and renovation of 2 million homes through policies such as:
- Constructing or rehabilitating rental housing units using federal subsidies
- Expanding and strengthening the low-income housing tax credit
- Offer tax credits to those who build and rehabilitate homes for low- and middle-income homebuyers and homeowners
- Incentivize the removal of exclusionary zoning and harmful land use policies
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"There is no magic formula to quickly relieve the supply constraints described in this blog post," the economists wrote. "However, the proposals set forth by the Biden-Harris Administration — proposals we expect to create or rehabilitate over 2 million housing units — will make critical investments in our country’s housing infrastructure."
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