President Biden proposes action plan to increase affordable housing supply

The White House.
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Last week, President Biden announced his administration’s plan to lower housing costs by spurring the development of thousands of new affordable homes.

The Biden-Harris Housing Supply Action Plan orders immediate steps the federal government can take to get more housing built. It also makes several proposals that would need congressional approval.

First, there are the immediate actions for federal agencies to take to increase the supply of affordable housing without requiring action by Congress.

The executive orders are mostly focused on improving regulations, and doing a better job of enforcing current regulations. These actions also tap into funding already approved for these uses by Congress in prior years.

Provide Incentives for Local Land Use and Zoning Reform

Planning and building affordable housing is very expensive and takes a long time. Local land use regulations and restrictive zoning often add cost and delays to new projects.

The administration’s housing supply action plan provides incentives for state and local governments to update their local regulations so that they are more friendly to new rental housing.

The president has ordered the Department of Transportation to “leverage” transportation funding from the recently passed bipartisan infrastructure law. This legislation funds improvements to highways, bridges and other national infrastructure needs. It did not include affordable housing money, but did benefit low-income households with $40 billion to expand access to broadband internet.

The administration has ordered DOT to target affordable housing in all of its programs. Competitive grant programs will include promotion of affordable housing as a factor when choosing who gets the awards.

Pilot New Financing for Housing Production and Preservation

President Biden’s housing plan calls for the Department of Housing and Urban Development to support new financing tools for manufactured housing, home renovations, and adding accessory dwelling units (ADUs, often called “mother-in-law” apartments).

Manufactured housing is most often paid for with personal loans. These are the same kinds of loans people use to buy cars. They are often more costly than standard home mortgage loans, with higher interest rates and shorter repayment terms.

The Biden plan calls on HUD to create better mortgage loan products for manufactured housing. Because manufactured housing is usually less expensive than site-built housing, the new loan products will help more low-income renters and new homebuyers get into affordable homes.

The housing plan also calls on the Department of Agriculture to boost rural single-family home construction. USDA’s Section 502 guaranteed loan program helps low- and moderate-income homebuyers purchase homes in rural areas. The Biden plan requires USDA to work on using these loans to construct the homes as well.

Improve and Expand Existing Federal Financing Programs

The affordable housing plan calls on federal agencies to promote more rental housing development through a range of current programs. The plan directs HUD to work with state and local governments to use pandemic relief funds for affordable housing. 

The American Rescue Plan provided flexible state and local fiscal recovery funds. State and local governments can use these funds for a wide range of affordable housing needs, including:

  • Developing new multifamily housing
  • Creating permanent supportive housing
  • Providing rental subsidies
  • Providing homeowner assistance

The U.S. Treasury oversees the Low-Income Housing Tax Credit program. This program has produced most of the new affordable housing over the last couple of decades. The Treasury Department is revising several program regulations that will produce more affordable apartments in years to come.

The Biden housing plan also calls for making the requirements of many federal housing programs more compatible with each other. Different program requirements make applying for funding more complicated and time-consuming.

Conflicting program requirements drive up project costs and delay construction. If programs share core application requirements, it will lower the cost of new housing and apartments will get built sooner.

Preserve the Availability of Single-Family Homes

When homeowners default on federally backed mortgage loans, HUD and USDA will sell these properties at auction. Large investors, often hedge funds, have been buying up more and more of these properties.

Large investors now purchase more than 25% of all single-family properties for sale, not just those held by the federal government. In many cases, these companies will convert these homes to rentals, only some of which are affordable to low-income renters. 

Often, large scale investor purchases remove a lot of starter homes from the market. In some cases, low-income renters have faced problems dealing with more inflexible, corporate landlords.

The president’s plan directs HUD to target the sale of at least half of all foreclosed mortgage notes to owners who will live in the homes or to mission-driven nonprofit organizations. This will ensure that these properties continue to serve low- and moderate-income households.

Disposing of Federal Properties to Create Housing for Homelessness Persons

The federal government has a process to sell properties it owns directly, like office buildings or vacant land it no longer needs. Under Title V of the McKinney-Vento Homeless Assistance Act, the federal government must target the sale of some of these properties to help people experiencing homelessness.

President Biden’s plan calls for revising the disposition process so that more of these properties will be converted to permanent supportive housing.

What Does the White House Want from Congress?

The president’s affordable housing supply action plan does not just order direct action by federal agencies. The plan also proposes measures that require legislative action by Congress.

Many of the plan’s proposals were included in the Build Back Better Act reconciliation bill passed by the House of Representatives. Progress on the reconciliation bill has been stalled in the Senate by opposition from moderates Joe Manchin (D-WV) and Kirsten Sinema (D-AZ).

The midterm elections are also looming in November. It is very hard to pass major legislation in an election year. If the Democrats lose control of either the House or the Senate in the midterms, it is highly unlikely that any new affordable housing investments will be made until 2024 or after.

Here are some of the things the president’s plan requests from Congress:

  • Provide Housing Supply Fund grants to state and local governments to reduce barriers to affordable housing.
  • Provide Housing Supply Fund financing to develop 500,000 units for low- and moderate-income renters.
  • Provide new tax credits to build or renovate 125,000 affordable homes.
  • Expand the LIHTC program to develop 800,000 additional affordable housing units.
  • Provide $65 billion for Public Housing capital needs and major repairs.
  • Preserve over 100,000 affordable homes in urban and rural areas.

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