With home prices still sky high and inflation hamstringing the economy, President Joe Biden’s administration has announced a new plan to gradually improve housing costs by furthering the supply of affordable housing.
Noting that home prices are a major upward pressure on inflation, a statement from the White House introduced the executive branch’s Housing Supply Action Plan, which includes legislative and administrative steps aimed at addressing the country’s inventory shortfall in five years. The first step, per the release, will be the “creation and preservation of hundreds of thousands of affordable housing in the next three years.”
The plan includes a raft of new policies and addenda on existing ones toward achieving that goal. The administration, for example, seeks to incentivize building affordable housing by eliminating regulatory roadblocks, rewarding jurisdictions that have reformed policies regarding zoning and land-use policies. The plan seeks to ramp up such incentives without increasing spending by leveraging existing federal funds, including transportation funding from the Bipartisan Infrastructure Law. Reforms are also in the works for the Low Income Housing Tax Credit (LIHTC) program, which provides credits to investors developing affordable rental housing, while the Treasury Department is urging state, local and tribal governments to allocate more COVID-19 recovery funds for building additional affordable housing units and other housing-related activities.
Another barrier the new plan seeks to address is the shortage and increased cost of both building materials and labor that has hampered residential construction. To that end, administration officials will meet with representatives from the building industry to explore additional actions that both the government and private sector can take to increase the number of completed homes this year.
Many of the other policies outlined in the plan are tied heavily with the lending industry, targeted at either developing new financing mechanisms to build and preserve housing or promoting new ones. The White House’s statement, for instance, touted steps from both Freddie Mac and Fannie Mae aimed at increasing their purchases of manufactured housing loans. The two government-sponsored enterprises (GSEs) are also working to determine how to expand and promote financing for affordable multifamily development and rehab. Moreover, the Federal Housing Administration (FHA) and Federal Housing Finance Agency (FHFA) are exploring avenues to help lenders pilot and scale more financing for accessory dwelling units, while the Department of Agriculture will embark in coming months on ramping up education on its Construction to Permanent program, which encourages more rapid building of single-family homes in rural areas.
Finally, the White House’s plan seeks to stem the tide of investor purchases of single-family homes, which ramp up competition and drive up prices for potential homebuyers. Steps taken to that end include the GSEs extending the period when available real estate owned (REO) properties are available only to owner-occupants and nonprofit organizations.
Response to the plan from the real estate and lending spheres has so far been positive.
“[The Mortgage Bankers Association] commends the Biden administration for announcing steps to alleviate the acute shortage of single-family and multifamily housing for prospective homebuyers and renters,” said Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA).
“Eliminating the regulatory barriers to new construction, including manufactured housing, in underserved markets; expanding affordable financing for multifamily development and rehab projects; and a commitment to more private and public sector partnerships will help address the housing supply and affordability challenges that continue to burden families.”
“The plan contains many positive elements that would help address a host of affordability challenges and improve financing options, and acknowledges the long-term headwinds, like supply chain bottlenecks and chronic construction labor shortages, repeatedly identified by [National Association of Home Builders] members as holding back housing production,” said Jerry Konter, chairman of the National Association of Home Builders.
“We agree with the White House that the key to resolving our nation’s housing affordability challenges is to build more homes.”
Diane Yentel, president and CEO of the National Low Income Housing Coalition, praised the plan as a step forward, but called on Congress to take additional action.
“As rents rise, homelessness increases, public housing deteriorates, and millions of families struggle to keep roofs over their heads, robust federal investments and actions are badly needed and long overdue,” Yentel said. “I commend President Biden for taking significant and decisive action, but the administration cannot solve the crisis on its own. Congress must also act with similar urgency… Only through a combination of administrative action and robust federal funding can the country truly resolve its affordable housing crisis.”
