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Biden Aims to Fill Housing ‘Gap’

But it focuses on housing supply, not buyers as it should

Lew Sichelman headshot
Lew Sichelman
Biden Aims to Fill Housing ‘Gap’

When it comes to housing, the focus sure has changed at 1600 Pennsylvania Avenue.

During the run up to the presidential election, candidate Joe Biden went heavy into policies to increase the supply of home buyers, offering, among other things, a down-payment assistance program paid for with a refundable and advanceable tax credit. He also advocated for fully funded federal rental assistance.

Now, President Biden has switched gears, forgetting about buyers — at least for the moment — and concentrating instead on the supply of houses.

My, how the times have changed in the 18 months Biden has been in office.

Housing prices are such that many buyers — especially rookies — are still having a tough time rubbing enough shekels together to come up with a down payment, let alone enough to cover their closing costs, too. Rising mortgage rates haven’t helped their cause, either. But the real bugaboo right now is that there aren’t enough houses for sale or apartments for rent to satisfy demand.

If there were more of each, the thinking goes, the crawl of ever-rising prices buyers and tenants pay would slow to, well, a crawl. Or maybe even fall back to somewhat more affordable levels, at least for some people. Moreover, once inflation is tamed and supply chain issues are solved, loan costs should return to a more modest level, maybe even to those of the last year or so.

Too Little, Too Late?

Some may believe that Biden is too late on the draw. After all, most signs already point to a falloff in demand and an increase in houses listed for sale. Some sellers, already in a panic, are cutting their asking prices. But the total lack of for-sale houses has gummed up the works for everyone, starting with apartment dwellers who would like to move into places of their own and moving on to current owners who want to move up to bigger, better houses. Even elders who’d like to retrench into smaller digs in better climates are stuck.

So, the White House is taking aim at boosting the supply, and with good reason. In a 2020 resolution, the National Lieutenant Governors Association put the shortfall at more than 1 million. Robert Dietz, chief economist at the National Association of Home Builders, says that number is still about right. “That is the growth in the housing stock (needed) to return vacancy rates back to near historical norms,” he told me. But Moody’s Analytics puts the figure at nearly 1.5 million nationally, largely because fewer new houses were built in the 10-year period following the Great Recession of 2008 than in any other decade since the ‘60s.

Hence, Biden’s 13-page Housing Supply Action Plan, a multi-faceted effort to close the gap over the next five years. “The best thing we can do to ease the burden of housing costs,” said White House Press Secretary Karine Jean-Pierre, “is to boost the supply of quality housing, including building more new homes and preserving existing federal support and market-rate affordable housing.”

All well and good, but there are a few problems. For one thing, it seems that part of the Biden Administration hasn’t heard the message. I’m talking about the Federal Housing Administration, which is said to be seriously considering a cut in its insurance premiums. Such an admirable step would allow more borrowers to qualify for low-cost government-backed financing. But the last thing the housing market needs right now is more buyers, at least not until the well of dwellings rises.

“While it may be well-intended to make the cost of a FHA mortgage cheaper at a time when it seems like all consumer goods are going up in price,” says the U.S. Mortgage Insurers, the trade group for private insurance companies, “it will have negative unintended consequences further increasing demand with minimal housing supply as well as the economic uncertainty related to the economy.”

‘Down In Flames’

Furthermore, a good part of the President’s plan must be executed legislatively. Unfortunately, or fortunately, depending on your point of view, the Republicans in the evenly divided Senate have shown little interest with anything put forward by the White House. Consequently, while the administration’s legislative proposals could clear the House, they are likely to hit a wall in the upper chamber.

Indeed, some proposals have already gone down in flames on Capitol Hill. For example, broader funding for 800,000 new rental and affordable housing units through the Low-Income Housing Tax Credit program was part of Biden’s “Build Back Better” initiative, which stalled in the Senate. Now it has been salvaged as a stand-alone legislative proposal that would expand LIHTC allocations and reduce the 50% bond test to 25% from 2022 to 2026.

Proposals like this are usually “embedded in some sort of tax credit bill and attached to a bigger piece of tax legislation,” David Sebastian, senior managing director at Greystone, told Multi-Housing News. But, as the White House noted, there has been longstanding support for the LIHTC program, so the proposal could happen, perhaps as part of the President’s 2023 budget.

On the brighter side, meanwhile, a big part of the Housing Supply Action Plan can be implemented immediately, either by Presidential fiat, aka executive orders, or by various federal departments. And at this writing, some steps have already been taken.

In early May, days before the Biden plan was released, the FHA as well as Fannie Mae and Freddie Mac, at the direction of their conservator, the Federal Housing Finance Agency, extended the period during which REO properties are made available only to owner-occupants and non-profits to 30 days. The 30-day exclusive period gives these specified buyers an opportunity to bid before investors are allowed their shot at the brass ring.

Separately, the FHA also established an initial 30-day exclusive sales period for Claims Without Conveyance of Title (CWCOT) post-foreclosure sales for owner-occupants, HUD-approved non-profits and governmental entities. Again, large investors are only permitted to submit bids after the 30-day period expires.

The White House says that after it announced that it would take these steps, 50% of the notes secured by HUD-held properties sold at auction went to non-profits. Normally, 90% of the assets would be snapped up by investors, so there is evidence this step puts more houses into the hands of people who will live in them rather than profiteers. Now, under the Action Plan, the target going forward is “at least 50%.”

You can see the entire plan here ( For now, let me highlight a few sections:

  • Exclusionary zoning and land use regulations are often blamed for constraining housing supply. Consequently, the Administration has begun using federal transportation programs to encourage localities to boost housing supplies. For example, the Transportation Department is urging applicants for $6 billion in federal grants to put in place land-use policies that promote density and rural main street revitalization. But Congress needs to pass the Unlocking Possibilities Program included in last year’s budget reconciliation bill. That program would establish a new $1.75 billion competitive grant program to help state and local governments eliminate barriers to affordable production, including permitting manufactured housing communities.
  • To boost funding for new construction for affordable housing and the rehab of same, the White House is going big on manufactured housing. Toward that end, Fannie and Freddie have revised their targets for purchasing mortgage on such properties under their Duty to Serve requirements. Meanwhile, the Department of Housing and Urban Development is backing greater securitization of the FHA’s Title I program for manufactured houses through the Ginnie Mae platform.
  • At the same time, the FHA and FHFA are looking at ways to help lenders pilot and scale up construction financing for backyard alternative dwelling units, particularly for low and moderate-income homeowners and renters. And the Agriculture Department’s Rural Housing Service plans to work with lenders to boost its construction-to-permanent loan program.
  • The White House also is asking lawmakers to revive the Neighborhood Homes Investment Act, which also was part of the last year’s reconciliation measure. The bill would offer tax credits to encourage investment in houses too costly or difficult to develop or rehab and require those places to be sold to owner-occupants rather than investors. Biden also is asking for $25 billion in grants for affordable housing production is his ‘23 budget.
  • To close the housing gap within the targeted five-year time frame, the Administration wants to expand Fannie-Freddie financing for multi-family properties, with one possibility being a single-close, construction-to-permanent program. Additionally, the Treasury Department is pushing state and local governments to dedicate more of their American Rescue Plan money to build affordable housing.

To date, the White House says, nearly 570 jurisdictions have committed more than $11.7 billion to housing-related activities, $3.2 billion of which is set for production and preservation.

This article was originally published in the NMP Magazine July 2022 issue.
Lew Sichelman headshot
Lew Sichelman,
National Mortgage Professional Contributing Writer

Lew Sichelman has been covering the housing and mortgage sectors for 52 years. His syndicated column appears in major newspapers throughout the country. He also has been the real estate editor at two major Washington, D.C., dailies and spent 30 years on the staff of National Mortgage News, formerly National Thrift News.

Published on
Jul 18, 2022
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