For the first time since he took office, President Biden openly confronted the challenges facing the U.S. housing industry and offered several proposals aimed at homeownership and rental housing.
A Last-Minute Acknowledgment
Housing market issues were conspicuously absent from Thursday morning’s “fact sheet” preview published by the White House ahead of last night’s State of the Union address.
However, shortly before the State of the Union, the administration put out another “fact sheet” under the heading “President Biden Announces Plan to Lower Housing Costs for Working Families.” Although Biden has yet to give a speech or conduct a forum focused exclusively on housing, the White House release stated, “President Biden believes housing costs are too high, and significant investments are needed to address the large shortage of affordable homes inherited from his predecessor and that has been growing for more than a decade.”
According to the “fact sheet,” the administration called on Congress to pass legislation that will offer “middle-class first-time homebuyers with an annual tax credit of $5,000 a year for two years.” The administration also advocated for “$25,000 in down payment assistance to first-generation homebuyers whose families haven’t benefited from the generational wealth building associated with homeownership.”
The administration called for the expansion of the Low-Income Housing Tax Credit and the creation of a new “Neighborhood Homes Tax Credit” to enable the construction or renovation of affordable homes. The White House also offered a new $20 billion competitive grant fund designed to “support communities across the country to build more housing and lower rents and homebuying costs.”
Overstretched Authority
The administration cited two agencies that are supposed to be independent of the Executive Branch – the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB) – as being key players in its housing strategy.
The “fact sheet” said the FHFA “has approved policies and pilots to reduce closing costs for homeowners, including a pilot to waive the requirement for lender’s title insurance on certain refinances.” It also claimed the CFPB “will pursue rulemaking and guidance to address anticompetitive closing costs imposed by lenders on homebuyers and homeowners.”
The White House “fact sheet” also stated Biden was “proposing that each Federal Home Loan Bank double its annual contribution to the Affordable Housing Program – from 10% of prior year net income to 20%.” The Federal Home Loan Banks are government-sponsored enterprises that do not fall under Executive Branch authority.
Biden Finally Talks Housing
During the State of the Union, Biden made his first-ever public admission that affordability issues are impacting the housing market.
“I know the cost of housing is so important to you,” he said. “If inflation keeps coming down, mortgage rates will come down as well. And the Fed acknowledges that. But I’m not waiting.”
He also addressed the issue of rental housing by adding, “For millions of renters, we’re cracking down on big landlords who use antitrust laws — who break antitrust laws by price-fixing and driving up rents. We’ve cut red tape so builders can get federally financing, which is already helping build a record 1.7 million new housing units nationwide.”
He then challenged his congressional audience by stating, “Now pass and build and renovate two million affordable homes, and bring those rents down.”
Industry Reaction
The American Land Title Association (ALTA) criticized the FHFA pilot program for waiving lender’s title insurance on certain refinances, calling it “a purely political gesture offering a false promise of savings for homeowners while exposing consumers, lenders, and taxpayers to greater financial risk.”
ALTA noted the waiver program was abandoned by the FHFA amid bipartisan opposition when it was first announced in August.
“By announcing this only hours before the State of The Union address, without outreach to, or engagement with, the title insurance industry, the administration has reduced the crucial role of the industry to nothing more than a politicized talking point,” ALTA added. In fact, the industry directly generates $30 billion to Gross Domestic Product annually and supports 155,000 jobs. Ninety percent of title companies are small businesses, according to a recent EY Quest independent analysis, the kind of enterprises that drive U.S. economic growth.”
Mortgage Bankers Association President and CEO Bob Broeksmit said his organization “welcomes the administration’s focus on legislative reforms and regulatory fixes that increase single-family and multifamily housing supply and help to make homeownership more affordable and attainable for all qualified borrowers. This is even more important in today’s high mortgage rate environment. Housing markets across the country continue to suffer from supply-demand imbalances, and we have urged the Administration to take meaningful action to remove regulatory barriers that impede development. We also have offered recommendations that would make government lending programs less costly and more effective for our members and consumers.”
Broeksmit echoed ALTA’s concerns, adding that “some of the proposals on closing costs and title insurance could undermine consumer protections, increase risk, and reduce competition. In 2015, the industry implemented final rules from the Consumer Financial Protection Bureau making comprehensive reforms to mortgage disclosures to increase clarity and transparency and to help facilitate consumer shopping. In 2020, the CFPB reviewed and praised its own rules. Suggestions that another revamp of these rules is needed depart from the legal regime created by Congress in the Dodd-Frank Act and will only increase regulatory costs and make it untenable for smaller lenders to compete.”
National Association of Home Builders President Carl Harris did not directly criticize the administration’s proposals, but he nonetheless offered a jab at Biden policies by stating that his organization “looks forward to working with the administration and Republican and Democratic leaders in Congress to help in this effort by eliminating excessive regulations; opposing restrictive, costly national energy code proposals that will raise housing costs while providing little energy savings to consumers; promoting careers in the skilled trades; and alleviating permitting roadblocks. These common-sense solutions will bend the housing cost curve, reduce housing inflation and the overall inflation rate, enable builders to boost attainable housing production and put the economy on a firmer footing.”
The National Multifamily Housing Council offered a mixed review of the speech, issuing a statement that said, “We applaud efforts such as the Biden Administration’s Housing Supply Action Plan that demonstrates a focus on increasing housing supply, including support for expansion of the Low-Income Housing Tax Credit and the newly announced additional Federal investments in increasing housing supply. On the other hand, we are very disappointed that the administration has, at the same time, chosen to focus on creating a heightened regulatory regime that will reduce consumer choice by limiting fee for service arrangements. These efforts are concerning because they will hurt renters by undermining the Administration’s objectives of lowering housing costs, driving new housing development and creating more affordable rental housing.”
Photo courtesy of the White House
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who is a first time home buyer?
Single one family homes need to be separate from all other ” Real Estate Business ” one family homes should be for “raising a family” and not used to make large profits by “Flipping ” them or in some cases by purchasing a “Foreclosed Property” from the courts or a lender then adding a large percent on the purchase price then selling it in some cases when the purchaser has not even cleaned the home out of it’s trash.
A single family home is where a young couple can afford to raise a family in a comfortable way while sending the children to a decent school after they have had breakfast and not sending them to school hungry due to the cost of the home, taxes, and food.
“Single one family homes need to be separate from all other ” Real Estate Business ”…”
Why? Many of us rent SFH’s and there is a legitimate need for that.
“…one family homes should be for “raising a family”…”
Generally that is what occurs and nobody really disagrees with that.
“…and not used to make large profits by “Flipping ” them …”
And what do you mean by “large” profits? Flipping is a legitimate service; people with the means and ability take distressed homes, clean, refurbish and resell them and make money doing it; so what? I’m sure we could find many instances of flippers that did not have “large” profits or even lost money, just like any other business.
“…or in some cases by purchasing a “Foreclosed Property” from the courts or a lender then adding a large percent on the purchase price then selling it…”
Again, what do you consider to be a “large” percent? I do have some sympathy on this issue; the person (and the lender) losing the property should receive a fair market value on that property, and the current system likely does not provide for that. If the process were treated more like a normal RE transaction without all of the additional legaleez involved in these kinds of sales, the sales price would likely be better. As it is, with all of the additional complications involved, only some investors and few home buyers are willing to purchase such properties, limiting the buyer pool resulting in a reduced sales price, and then resulting in what you call adding a “large percent” on the purchase price when it goes on the general market, where it should have been in the first place.
“…then selling it in some cases when the purchaser has not even cleaned the home out of it’s trash.”
Yeah, well, that’s on the purchaser (and their agent) to do due diligence and inspections, etc.
“A single family home is where a young couple can afford…”
It would be nice, wouldn’t it? Life doesn’t work like that. Housing prices and taxes are ridiculous. But they are so primarily due to government medaling and overspending (prompting the need for ever higher taxes) which also drives up rents. Additionally, and I hate to say it but it’s true, many people do not understand money and how to handle it. Even when they have adequate incomes, they will always struggle. That’s just the way it is. Government cannot fix this and almost always exacerbates the problem when it tries.
I would like to suggest that the eight million illegal immigrants that have come into the country over the last 3 years have obsorbed a great deal of affordable rental housing. It has to have a negative effect on supply. I find it interesting that I’ve never seen any discussion about it as part of the problem.
Definitely!
The “commoditization” of residential real estate is the single biggest reason we’ve had to battle high inflation, post-Covid. One-third (or more) of the typical American household budget goes towards housing. Wall Street hedge funds and multi-national corporations
have single-handedly soaked-up significant quantities of FIRST-TIME-BUYER priced USA Single-Family Residential (SFR) properties – especially in coastal cities and urban sunbelt areas. This began when we were coming out of the great recession. And now these FOR-PROFIT entities, with their sophisticated algorithms and deep pocket ALL CASH
offers, (never a fair match for the typical first-time FHA buyer) have increasing control over other aspects of the R.E. market as well. If Congress really wanted to battle inflation, they would stop this and disallow the commoditization of single-family residential real estate. Housing is not orange juice or pork bellies.