How Biden is taking action on the housing shortage

Story at a glance

• The Biden administration has outlined a new plan to tackle a U.S. housing shortfall decades in the making.

• Housing shortages have been exacerbated by increasing rental costs, supply chain issues, and a dearth of affordable housing, especially in major cities with economic opportunities.

• Here’s what Biden’s doing and why it is important.

The Biden administration has outlined a new plan to tackle a U.S. housing shortfall that is decades in the making, which includes expanding financing for development, encouraging development of low-income housing, combating rising rental costs, and working with the private sector to alleviate supply chain issues.

President Biden in recent weeks has committed to combatting the challenges caused by inflation – which has impacted the housing market – going as far as calling it his “top domestic priority,” while the administration’s Housing Supply Action Plan seeks to “ease burden of housing costs over time.”

“When aligned with other policies to reduce housing costs and ensure affordability, such as rental assistance and down payment assistance, closing the gap will mean more affordable rents and more attainable homeownership for Americans in every community,” the White House said in its plan.

Here’s what Biden is doing and why it is important.

Addressing the affordable housing shortage through expanded financing

Estimates show there is a 1.5 million shortage of homes across the U.S., which the White House said “burdens family budgets, drives up inflation, limits economic growth, maintains residential segregation, and exacerbates climate change.”

Moreover, data shows that in the first quarter of 2022, more than 89 percent of all available housing units in the U.S. were occupied.

The administration plans to eliminate the shortfall over a five-year period partly by implementing legislative and administrative actions, including an overhaul of financing options and deploying new mechanisms to fill gaps. These measures will make loans more widely available – especially for multi-family developments.

Jerry Konter, chair of the National Association of Home Builders, told Changing America Biden’s plan could help low-income housing if implemented while acknowledging there is a long way to go.

“There’s a lot of congressional action that needs to be taken,” Konter said. “There’s a lot of meat that needs to be put on bones, but if it’s implemented, I think it can help at the low end of the housing market, just where they wanted to help.”

“I don’t think that it will do much to solve the problem that America’s first-time homebuyers are experiencing right now,” he continued. “And I don’t think that it will help alleviate the housing shortage at the market rate level of housing. It will at the lower end but not at the market rate.”

Addressing lack of affordable housing for low-income families

There is a dearth of housing options for low-income families – a problem the administration plans to curtail through ensuring government-owned housing units are made available to tenants and families who will live in them, rather than selling to developers.

Meanwhile, the administration is encouraging state, local, and Tribal governments to use funding from the American Rescue Plan to build more affordable housing.

The U.S. is currently experiencing a shortage of rental units available to low-income residents whose income falls at or below the poverty line, according to data from the National Low-Income Housing Coalition (NLIHC). Their estimates suggest there are only 36 homes that are affordable and available to every 100 extremely low-income renters or families.

Changing America has reached out to NLIHC for comment on how the administration’s plan might add to the number of homes available to extremely low-income families and renters.

Meanwhile, the administration is encouraging state, local, and Tribal governments to use funding from the American Rescue Plan to build more affordable housing.

Combating rising rental costs

Census Bureau data from the first quarter of 2022 shows the median cost of available rental units in the U.S. stood at $1,225. Rent prices have steadily risen since the turn of the century but there was a sharp increase beginning around 2020.

Soaring rent costs, according to an analysis from Moody’s Analytics, leave tenants with little to spare after they use on average half of their monthly income to cover their rent. By the end of the year, a typical renter will save less than $500.

“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,” the White House plan read.

Working with the private sector to eliminate supply chain issues

Biden’s Housing Supply Action Plan will also address supply chain issues, which led to an explosive growth in the price of raw materials, like lumber, in 2021. Fluctuating lumber prices throughout the pandemic have caused the price of a new single-family home to increase by an average of $18,600.

“The housing market is facing growing challenges,” said NAHB Chief Economist Robert Dietz in a news release. “Building material costs are up 19% from a year ago, in less than three months mortgage rates have surged to a 12-year high and based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family.”

The administration’s goal is to work with developers to focus on combating supply chain issues, while developing techniques to finish building homes at a rate not seen since 2006.

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