[ad_1]
- Biden has launched a plan to stimulate housing construction and counter the price spikes in the housing market.
- The move follows months of record price growth and would solve a fraction of the housing shortage.
- It aims to build 100,000 affordable homes over three years, but the United States is short of millions of homes.
After months of soaring prices, supply shortages and pressures on affordability, the Biden administration is doing something about the housing crisis in the United States.
The White House rolled out several regulatory changes on Wednesday in an attempt to boost home construction and lower barriers for first-time homebuyers. The administration will use its authority over regulators, including the Federal Housing Finance Agency, to address the nationwide housing shortage. Together, the changes aim to build and preserve 100,000 affordable homes for buyers and renters over the next three years, according to a press release.
The measures proposed by the White House are relatively small in themselves. One would expand a grant program to community development financial institutions to stimulate the construction of affordable housing. Another would push state and local governments to reduce exclusion zoning.
One of the changes is to increase investment in manufactured homes, which are made in factories and not on their own lots, tend to cost less and offer more affordable alternatives to low-income buyers.
A handful of other efforts hope to level the playing field between investors and ordinary Americans. Investment firms rushed into the housing market after the financial crisis, snatching up low-cost properties and earning steady income from renting them out. This trend accelerated during the pandemic as more institutional investors began buying rapidly appreciating homes, and the frenzy further eroded affordability.
The administration plans to give first-time buyers and philanthropists the opportunity to purchase distressed properties insured by the Federal Housing Administration, giving them a critical head start on Wall Street.
But decades of under construction have left the United States with a massive shortage of available housing. Estimates of the housing deficit range from 3.8 million units to 6.8 million, according to Freddie Mac and the National Association of Realtors, respectively. And while construction has steadily increased, it remains well below the levels needed to match supply with demand.
A crisis already in full swing
The changes are a promising first step in countering the price spikes seen this year, but they could come too late for the country’s most desperate buyers.
Home prices have already risen at a record pace for four consecutive months. The unprecedented level of home price inflation came amid massive demand from pandemic-era movers and inadequate home inventory.
The crisis was also exceptionally widespread. While large cities had been the centers of housing shortages and skyrocketing prices, these problems spilled over into smaller towns, suburbs and even more into rural exurbs during the pandemic era migration.
The latest measures of housing market activity suggest that the boom is slowing. Sales of new and old homes edged up in July, while inventories also rose, suggesting Americans were having an easier time finding homes and doing business. Still, prices continue to climb at an all-time high, indicating that the post-pandemic market will always have a higher barrier to entry.
The White House plan isn’t the only housing aid going on. President Joe Biden also urged Congress to spend around $ 213 billion on housing initiatives as part of the Democrats’ $ 3.5 trillion infrastructure proposal. This funding should make it possible to create 2 million additional new housing units. But the retreat of moderate Democrats in the Senate risks lowering the price of the package, which may also mean housing initiatives are declining.
The United States is not alone in working to strengthen domestic supply. Canadian Prime Minister Justin Trudeau unveiled a plan last week that hopes to build 1.4 million homes over the next four years. He also wants to ban blind auctions – a process where buyers can’t see other people’s bids – and block the purchase of Canadian homes for investment purposes.
In New Zealand, Prime Minister Jacinda Ardern announced in March measures to strengthen residential infrastructure and provide more loans and grants to first-time buyers. She also became the first head of state to task her central bank with assessing house prices as part of her tenure.
Biden’s plan does not require congressional approval, which means it will likely go into effect before the Democrats’ infrastructure package is passed. And while it represents a critical step towards market normalization, its goal of 100,000 households is a drop in the bucket for the country’s historic shortage.
Editor’s Note: The article has been updated to include Freddie Mac’s estimate of the housing shortage, as well as how many homes are expected to be built with funding from the Democrats’ infrastructure proposal.
[ad_2]
Source link