Record high home prices pushed up by record low levels has been a persistent problem over the past year or so and relief seems farfetched in the short term. To combat this, the Biden-Harris Administration has announced a plan to “ease the burden of housing costs over time, by boosting the supply of quality housing in every community.”
The Housing Supply Action Plan, as it is officially called, will use current and future legislative and administrative actions that will help close America’s housing supply shortfall in five years, starting with the creation and preservation of hundreds of thousands of affordable housing units within the next three years.
The plan is not a cure-all solution, but is to be used in conjunction with other policies such as rental assistance or down payment assistance and closing that gap will mean more affordable rents and more attainable homeownership for Americans in every community.
“The Plan will help renters who are struggling with high rental costs, with a particular focus on building and preserving rental housing for low- and moderate-income families,” said a White House statement “The Plan’s policies to boost supply are an important element of bringing homeownership within reach for Americans who, today, cannot find an affordable home because there are too few homes for sale in their communities. And it will help reduce price pressures in the economy, as housing costs make up about one-third of the market basket for inflation, as measured by the Consumer Price Index.”
Under the Plan, the Administration will:
- Reward jurisdictions that have reformed zoning and land-use policies with higher scores in certain federal grant processes, for the first time at scale.
- Deploy new financing mechanisms to build and preserve more housing where financing gaps currently exist: manufactured housing (including with chattel loans that the majority of manufactured housing purchasers rely on), accessory dwelling units (ADUs), 2-4 unit properties, and smaller multifamily buildings.
- Expand and improve existing forms of federal financing, including for affordable multifamily development and preservation. This includes making Construction to Permanent loans (where one loan finances the construction but is also a long-term mortgage) more widely available by exploring the feasibility of Fannie Mae purchase of these loans; promoting the use of state, local, and Tribal government COVID-19 recovery funds to expand affordable housing supply; and announcing reforms to the Low Income Housing Tax Credit (LIHTC), which provides credits to private investors developing affordable rental housing, and the HOME Investment Partnerships Program (HOME), which provides grants to states and localities that communities use to fund a wide range of housing activities.
- Ensure that more government-owned supply of homes and other housing goes to owners who will live in them – or non-profits who will rehab them–not large institutional investors.
- Work with the private sector to address supply chain challenges and improve building techniques to finish construction in 2022 on the most new homes in any year since 2006.
The White House stated that the high prices we are seeing today, have been years in the making due to the fact that fewer new homes have been built in decade following the Great Recession than in any decade since the 60s. This has constrained housing supply and failed to keep up with demand—this mismatch only grew during the pandemic as migration habits and housing decisions changed rapidly.
“Moody’s Analytics estimates that the shortfall in the housing supply is more than 1.5 million homes nationwide,” the statement said. “This shortfall burdens family budgets, drives up inflation, limits economic growth, maintains residential segregation, and exacerbates climate change. Rising housing costs have burdened families of all incomes, with a particular impact on low- and moderate-income families, and people and communities of color.”
“As his Action Plan reflects, President Biden believes the best thing we can do to ease the burden of housing costs is to boost the supply of quality housing. This means building more new homes and preserving existing federally-supported and market-rate affordable housing, ensuring that total new units do not merely replace converted or dilapidated units that get demolished.”
Among other things, the plan will immediately begin supporting production and availability of manufactured housing, scaling Up ADUs and piloting ADU and home renovation financing tools, and boost rural single-family construction through the USDA.
"MBA commends the Biden administration for announcing steps to alleviate the acute shortage of single-family and multifamily housing for prospective homebuyers and renters,” said Mortgage Bankers Association's President and CEO Bob Broeksmit, CMB. "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.
“As the administration focuses on ways to improve the financing of multifamily projects, MBA strongly encourages HUD to focus on the issues that continue to lead to significant lending pipeline delays in its MAP program, which is a primary financing option for producing more affordable rental housing,” Broeksmit continued. "MBA will examine all aspects of the plan in greater detail and remains committed to working with the administration, Congress, and industry stakeholders on safe and responsible policies that increase homeownership opportunities and affordable rental housing options across America, especially for minority and low- and moderate-income households.”
The National Association of Realtors President Leslie Rouda Smith also issued a statement regarding President Joe Biden’s plan to address the housing supply shortage:
“Last year, a landmark research report commissioned by NAR recognized a shortage of 5.5 million homes in the U.S.—a gap so large it would take more than a decade to dig out of, even with accelerated new construction.
“With rising mortgage rates and a persistent shortage of affordable homes, the dream of homeownership is limited for many middle-income, first-time, and first-generation homebuyers. Urgent action is needed to tackle our nation's housing supply crisis. NAR welcomes the administration’s work on this effort and encourages policymakers to look at comprehensive action.
Click here to read the full release, including potential funding sources, a list of budget considerations, and legislative priorities as relates to this plan.