Can President Biden’s $6 Trillion Budget Help Home Buyers?
As Americans grapple with rapidly rising rents and property prices, and a severe shortage of affordable property, housing has become one of the president’s priorities Joe BidenAdministration.
In his first proposed budget of $ 6 trillion, the president would provide the US Department of Housing and Urban Development with the largest increase in funding in more than two decades. The additional $ 9 billion, a jump of around 15%, would help create affordable housing, tackle discrimination, and help struggling lower-income tenants. That money is on top of the $ 27.4 billion in housing benefits included in the $ 1.9 trillion pandemic relief bill passed earlier this year.
“We’re leafing through decades of divestment and disregard for our nation’s real estate crisis, and we’re putting housing where it belongs – at the center of our efforts to build a stronger, fairer America,” said HUD Secretary Marcia Fudge said in a statement. “HUD will no longer be left on the sidelines as millions of Americans struggle with housing and excluded from the opportunities that a good home offers.”
These are ambitious goals, but the proposed budget has yet to be approved by Congress, which is likely to make some cuts.
“Where we invest speaks for what we value as a nation,” wrote Biden in his introduction to the budget. “This year’s budget, the first of my presidency, is a declaration of the values that define our nation at its best.”
More affordable housing would be created
The dire housing shortage has pushed home prices to new highs, made home ownership unaffordable for many Americans, and cut them off from an important wealth-building opportunity. Tenants also have a harder time finding accommodation they can afford.
The president plans to build, maintain and retrofit more than 2 million homes and commercial buildings to alleviate the housing shortage.
About $ 1.9 billion would be used for the HOME Investment Partnership Program, which is helping to create more affordable housing for lower-income households. About $ 100 million of that money would be used to help homeowners stay in their homes.
“Some of the previous Biden government proposals were about housing from a demand perspective,” he says Ali Wolf, Chief economist at the construction consultancy Zonda. “Demand isn’t the problem today – it’s the lack of accessible living space. The best use of federal dollars in the housing market is to help solve the utility problem. “
The budget also provides for the creation of new types of credit that first-generation first-time buyers can more easily qualify for.
“Making home ownership achievable is a worthy goal given the hot market we’ve seen this year,” says Realtor.com® Senior Economist George Ratiu. “However, given the hot market and the extremely low number of homes for sale, affordability will not be solved simply by qualifying more people for credit without increasing the supply of homes.”
More money would be used to combat discrimination in housing
To increase black home ownership, the government is proposing a $ 100 million initiative to give higher down payments to buyers looking to move to more affluent areas. The program would help buyers receiving federal housing management loans make down payments of up to 10%.
This would give these buyers instant equity in their homes. This would also make their offers more attractive to sellers in this ultra-competitive real estate market.
While Wolf welcomes these efforts to level the playing field, they could have the unintended effect of heating up markets even more.
“Any support for minorities and people with lower incomes is good for the housing market and the economy in the long term,” says Wolf. “However, an additional increase in demand can lead to a rise in prices in the short term.”
The Biden government also plans to send $ 3.8 billion to officials in underserved communities through the Community Development Block Grant program. The funds are intended to increase the supply of affordable housing and enforce fair housing laws.
The administration plans to hold landlords, lenders and other real estate professionals accountable for violating fair housing laws. The Biden government plans to increase funding for the HUD fair housing division by 20% to $ 85 million. This money is usually distributed to local groups investigating discrimination complaints (e.g. a landlord refusing to rent an apartment to a black family or a woman who is denied a loan because she was on maternity leave ). These groups also provide education, outreach, and training in these areas.
“Given that we have a proven track record at addressing housing discrimination, allocating resources to minimize inequality in lending and home buying should make home access more accessible,” says Ratiu. “It should also lower the cost of home ownership as borrowers shouldn’t be charged higher mortgage maintenance fees.”
More help could be given to low-income tenants
Many low-income tenants have been seriously injured in the coronavirus pandemic as they are more likely than employees to lose jobs and income in restaurants and hotels. While many were protected by eviction moratoriums during the crisis, many will have to pay back rent that they owe their landlords when the eviction ban expires.
But help could be on the way. According to the New York Times, Fudge’s top priority was increasing rental support for the poorest tenants. Tenants usually use the vouchers to pay the difference between market rents and what they can afford. The administration also wants to make it easier for recipients of vouchers to move to more affluent areas with better schools and more services available.
The budget would allocate $ 30.4 billion in apartment choice vouchers to help tenants in trouble. This would create an additional 200,000 vouchers designed to help homeless youth, people escaping domestic violence, and others.
Another $ 3.5 billion would be earmarked for grants to assist the homeless to provide housing and services to some of the most vulnerable families and individuals.
“Any program that would at least help eradicate the threat of homelessness in difficult economic times is a welcome development,” says Ratiu. “The only question for me is, is the current budget going far enough?”