President Joe Biden’s State of the Union address on Thursday was certainly fiery, and while he touched on a variety of topics from border security to the Gaza conflict to reproductive rights, the country’s housing issues were core to some of his biggest proposals.
Biden was adamant that he wanted more opportunities for Americans to achieve homeownership — opportunities that are currently being staunched by high home prices, low inventory, and elevated interest rates.
“I know the cost of housing is so important to you,” Biden said. “If inflation keeps coming down, mortgage rates will come down as well. But I’m not waiting.”
The foremost of the commander-in-chief’s housing propositions was the establishment of an annual tax credit to give Americans roughly $400 a month to put toward their mortgage when they buy their first home. The White House elaborated on this plan in a fact sheet released the same day as the State of the Union: Biden is specifically calling in Congress to pass a mortgage relief credit to provide middle-class first-time homebuyers an annual $5,000 tax credit, active for the next two years to theoretically coincide with an extended cycle of interest rate lowering.
Such a credit, the White House said, would be “the equivalent of reducing the mortgage rate by more than 1.5 percentage points for two years on the median home, and will help more than 3.5 million middle-class families purchase their first home over the next two years.”
Biden also called for a separate credit to unlock the inventory of starter properties and help growing households trade up for larger homes. The proposal would provide middle-class families who sell their starter homes (defined as homes below the area median home price in the county) a one-year tax credit of $10,000.
The president also advocated for lowering housing costs by creating and renovating more affordable homes. He proposed an expansion of the Low-Income Housing Tax Credit (LIHTC) to build of preserve 1.2 million more affordable rental units, as well as a new Neighborhood Homes Tax Credit, which the White House claims “would lead to the construction or preservation of over 400,000 starter homes in communities throughout the country.”
Biden’s plans also took renters into account, pushing for a crackdown on rental “junk fees”, the expansion of housing choice rental vouchers for low-income veterans and youths aging out of foster care, and enhanced scrutiny on what the White House called “illegal corporate behavior that hikes [rent] prices on American families through anti-competitive, unfair, deceptive, or fraudulent business practices.”
“For millions of renters, we’re cracking down on big landlords who break antitrust laws by price-fixing and driving up rents,” said Biden in his speech. “I’ve cut red tape so more builders can get federal financing, which is already helping build a record 1.7 million housing units nationwide. Now pass my plan to build and renovate 2 million affordable homes and bring those rents down.”
While the aforementioned proposals will require Congressional action and approval, some initiatives announced by the White House don’t need assistance from Congress. The Biden administration, for example, announced that the Federal Housing Finance Agency (FHFA) has approved some policies and pilot programs to reduce closing costs for homeowners. One such pilot involved waiving the requirement for lender’s title insurance on some refinances; according to the White House, this would save “thousands of homeowners” up to $1500, and an average of $750.
Additionally, the Consumer Financial Protection Bureau (CFPB) will pursue rules and guidance to address what the White House called “anticompetitive closing costs imposed by lenders on homebuyers and homeowners.”
The focus on housing issues elicited a bevy of responses from housing and real estate industry stakeholders, ranging from praise to consternation.
David M. Dworkin, president and CEO of the National Housing Conference, lauded the president’s proposed initiatives, calling Biden’s speech “the most consequential State of the Union address on housing in more than 50 years.”
“President Biden’s proposals to help homebuyers are measured and calibrated so they will not increase prices,” Dworkin said. “What they will do is open the door to homeownership to people who have been locked out of the American Dream for generations. Asking them to wait another decade while we dig out of a 10-year supply hole is not fair and not necessary.”
“The proposed Mortgage Relief Credit initiative will lower homeownership costs by reducing the mortgage rate by 1.5 percentage points for two years on a median-valued home,” said Scott Olson, executive director of Community Home Lenders of America (CHLA). “In a time of historically high mortgage rates, such affordability initiatives are critical in empowering first-time and low-income borrowers in purchasing a home and building generational wealth.”
Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), welcomed the administration’s focus on growing housing supply, but was leery of some of its actions relating to closing costs.
“MBA has significant concerns that some of the proposals on closing costs and title insurance could undermine consumer protections, increase risk, and reduce competition,” Broeksmit said. “In 2015, the industry implemented final rules from the Consumer Financial Protection Bureau making comprehensive reforms to mortgage disclosures to increase clarity and transparency and to help facilitate consumer shopping. In 2020, the CFPB reviewed and praised its own rules.
“Suggestions that another revamp of these rules is needed depart from the legal regime created by Congress in the Dodd-Frank Act and will only increase regulatory costs and make it untenable for smaller lenders to compete.”
The American Land Title Association (ALTA) was even more forceful. In a statement, it framed the title insurance waiver pilot as “a purely political gesture offering a false promise of savings for homeowners while exposing consumers, lenders, and taxpayers to greater financial risk.”
“The approval of this waiver is a hollow attempt by the White House to placate Americans’ current economic frustrations,” ALTA said. “By announcing this only hours before the State of The Union address, without outreach to, or engagement with, the title insurance industry, the Administration has reduced the crucial role of the industry to nothing more than a politicized talking point.”
The National Apartment Association (NAA), meanwhile, released a statement of its own decrying some of the President’s remarks on landlords.
“While we are pleased that housing policy is meaningfully in the spotlight for the first time in generations, the President’s misguided blame only serves to further divide us instead of solving the problems at hand: a critical shortage of housing supply and soaring costs across the board,” the NAA said. “NAA has long been ready to partner with policymakers to pursue substantive solutions; now more than ever, rental housing providers and renters across the country need policies, not finger-pointing.”
Marty Green, principal at mortgage law firm Polunsky Beitel Green, pointed out that the increased spotlight on housing is noteworthy, regardless of whether one does or doesn’t support Biden’s policies.
“Irrespective of one’s political leanings, it is a positive development that housing policy has returned to the forefront of the political debate,” he said. “This industry is too critical to our economy and as a wealth builder for Americans to be ignored.
“It will be interesting as we move closer to the November election whether we see meaningful proposals for policy support that addresses the chronic undersupply of new homes. A decade of underbuilding of new single-family residences is the biggest reason for the lack of inventory driving home prices higher. Market forces likely will not address this deficit quickly enough without significant supply-side policy initiatives from the government.”
