Americans are facing a historic housing affordability crisis that is leaving millennials feeling “disenfranchised” and hindering Gen Z’s efforts to leave the nest. With sky-high home prices and onerous mortgage rates putting pressure on buyers, the housing market is in a deep freeze. Meanwhile, rents have risen about 30% since the pandemic, forcing a record number of renters to move into unaffordable housing.
The Biden administration has introduced a number of measures to address these issues, including tax benefitsadvance payment helpand reduced closing costs. But a senior Biden official acknowledges that the housing crisis cannot be controlled without the change many in the real estate industry are calling for: build more. Much more.
“To be able to buy houses, we need more houses overall,” said Adewale Adeyemo, deputy finance minister. Luck in an interview following President Biden’s State of the Union address.
“We have supply issues in the economy,” Adeyemo explained. “Since the financial crisis, we have built too little housing here in the United States.”
Indeed, according to calculations Realtor.com. Despite nearly 1.5 million new homes starting construction in the United States over the past three years, the country’s housing supply remains far from where it should be.
In his State of the Union Address on Thursday, Biden highlighted his steps to address the housing crisis, noting that he has “cut red tape” to increase federal funding for housing projects and proposed a number of other measures to control housing costs.
Biden this week proposed a tax credit that would give first-time home buyers and sellers roughly $400 a month over the next two years to help with high mortgage costs. The new plan would also eliminate title insurance fees for federally backed mortgages. “When you refinance your home, it can save you $1,000 or more,” Biden said.
Still, a $1,000 savings is peanuts compared to home prices, which have risen about 40% since the pandemic began; for the average American, that covers about two weeks’ rent, according to Latest Zillow Data.
So despite Biden’s mostly demand-driven proposals, Adeyemo pointed to the president’s call Thursday to build and renovate 2 million homes as evidence that he understands that “the only way to deal with a supply problem is to increase supply.”
Biden proposed developing his 2022 plan Housing Action Plan ahead of Thursday’s State of the Union Address with tax breaks for home builders who build affordable housing; a new $20 billion “innovation fund” to build multifamily and starter homes and “incentivize” removal of barriers to construction; and doubling the Federal Home Loan Bank’s annual contribution to the Affordable Housing Program. On the tenant side, Biden has vowed to crack down on “junk” rental fees and “fight rent gouging” by corporate landlords.
“The President is trying to do everything he can to reduce costs using the powers that Congress has already given us,” Adeyemo said of his actions. “And we’re going to urge Congress to provide more resources so we can build more housing.”