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Biden Administration Announces Plan For Affordable Housing

Katie Jensen
Sep 01, 2021
White House

President Biden and his administration firmly believe it is time to intervene in the housing market.

KEY TAKEAWAYS
  • The Biden administration announced their new plan to create 100,000 affordable homes to sell to homebuyers and renters over the next three years.
  • The White House fact sheet details just how much supply constraints have intensified, especially with large investors stepping up their real estate purchases.
  • Fannie Mae and Freddie Mac (the Enterprises) will provide a $850 million annual investment to the LIHTC.

President Biden and his administration firmly believe it is time to intervene in the housing market, after the country has had to withstand the ever-widening gap between supply of and demand for affordable homes. 

While Congress works on passing the Build Back Better Agenda, a historic investment to build new homes and make existing homes safer, Biden today set forth a much more ambitious agenda: a new plan to create 100,000 affordable homes to sell to homebuyers and renters over the next three years, with an emphasis on lower- and middle-market segments. 

More specifically, federal agencies will:

Boost the supply of quality, affordable rental units: The partnership between the Treasury Department’s Federal Financing Bank and the Department of Housing and Urban Development"s (HUD) Risk Sharing Program will be rejoined to enable state housing finance agencies (HFAs) to provide low-cost capital for affordable housing development. 

Boost the supply of manufactured housing and 2-4 unit properties: The expansion of financing by Freddie Mac, as well as the policy decisions of Fannie Mae and the FHFA, will enable more Americans to purchase homes and increase the availability of rental units. 

Make more single-family homes available to individuals, families, and non-profit organizations — rather than large investors: Homeownership will be prioritized over large investors with FHFA-insured and HUD-owned properties.

Work with state and local governments to boost housing supply: Existing federal funds will be leveraged to spur local action, reduce exclusionary zoning, and launch learning sessions with local leaders.

The White House fact sheet details just how much supply constraints have intensified, especially now that large investors are stepping up their real estate purchases. Reports from Redfin show that one of every six homes purchased in the second quarter of 2021 was acquired by investors, and in some markets, the number is one in four. 

When large investors purchase single-family homes and convert them into rental properties, it transitions the neighborhood from homeownership to rental, driving up the cost of housing. In turn, this makes it more difficult for first-time or first-generation buyers to purchase a home. Large investors also are unlikely to boost the supply of lower-cost rental units, since they charge more for rent to recoup higher purchase costs. 

“The severe shortage of affordable housing in America requires coordinated government action,” said FHFA's Acting Director Sandra L. Thompson. “As part of the federal government's response, FHFA is instructing Fannie Mae and Freddie Mac to boost the housing supply in communities across the country by significantly increasing their Low-Income Housing Tax Credit investments and by expanding opportunities for local families to access affordable homeownership and rental housing. In addition, FHFA will begin to study the interaction between exclusionary zoning and our regulated entities.” 

The Low-Income Housing Tax Credit (LIHTC) is a coordinated effort between Fannie Mae and Freddie Mac (the Enterprises) to provide a $850 million annual investment for the low-income market. Previously, the Enterprises were limited to investing $500 million to the LIHTC annually. 

Within the $850 million funding cap, any investment above $425 million in a given year will be dedicated to areas that the FHFA identifies as being difficult to attract investors. The increased budget will go towards supporting Duty to Serve-designated rural areas, affordable housing preservation, mixed-income housing, and supportive housing. The funds will also go towards meeting other affordable housing objectives.

“Increasing the amount each Enterprise can invest in the LIHTC market, especially in areas that have difficulty attracting investors, will help expand the supply of affordable housing across the country,” Thompson added.

For more information on Biden’s supply initiative or the FHFA’s Low-Income Housing Tax Credit, click the links provided.

 

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