While many Americans are aware that demographics and increased demand are at the heart of the housing affordability crisis, it is still a national pass-time to point fingers at the leaders in power when the economy isn’t going the way the public would like. In response to pressures from the voting public, President Joe Biden has been increasingly vocal about his concerns regarding the skyrocketing costs of housing in the United States.
Latest Budget
Biden’s policy as conveyed in his recently released budget for Fiscal Year 2024 reveal the tools he intends to implement to return to an affordable housing market, and are contrasted here with former President Trump’s tools he relied upon in his prior Administration and would likely revisit if reelected in November.
Administration’s Response to Housing Affordability
In a bid to address housing affordability concerns, the Biden Administration recently proposed an array of expanded tax credits and funding mechanisms designed to ease the construction and affordability of housing. These proposals, part of the President’s annual budget, are aimed at laying down a roadmap for more accessible housing solutions.
Legislative Proposals for Housing Support
The Biden Administration is pushing for legislation that includes bulked-up tax credits to incentivize homeowners to sell their starter homes, which could increase the availability of affordable housing options. Additionally, there are proposals to expand rental assistance and provide more support for lower-income buyers with their down payments.
Incentives for Localities To Build and Overcome Land-Use Restrictions
Additionally, Biden’s budget proposes setting aside $20 billion for localities that find innovative ways to boost their housing supply. This fund aims to combat municipal land-use restrictions that often slow down the pace of building, addressing one of the critical barriers to increasing the housing stock. In this vein, Democratic Oregon Governor Tina Kotek has been a recent champion of relaxing, for a limited period of time, restrictions on building in certain metropolitan areas to relieve the pressure on the housing market.
Executive Actions and Proposals
Beyond legislative efforts, Biden has taken executive actions to support the housing market amid the pandemic recovery. These actions include proposals to crack down on rental fees and predatory landlord practices, aiming to protect renters and potential homebuyers from unfair practices that can exacerbate housing costs.
Trump’s Initiatives While In Office
During his presidency, Donald Trump took several actions aimed at the housing market, but his approach to affordable housing specifically garnered mixed reactions. Trump’s administration focused on deregulation and tax reform as primary methods to stimulate economic growth, which indirectly impacted the housing market.
Rollback of Obama-era Fair Housing Rule
One of Trump’s notable actions regarding affordable housing was his move to roll back the Affirmatively Furthering Fair Housing (AFFH) rule, an Obama-era policy designed to enforce the Fair Housing Act of 1968. The AFFH required municipalities to identify and address patterns of racial segregation in housing and submit plans to HUD on how they would actively desegregate. Trump argued that the rollback would lead to an increase in local control over housing policies and remove what he and his administration considered to be excessive federal mandates. Critics, however, viewed this as a step back from efforts to combat systemic racism in housing.
Tax Cuts and Jobs Act
Although not directly aimed at housing, the Tax Cuts and Jobs Act of 2017 had implications for the real estate market. By reducing corporate tax rates and altering individual tax brackets, the act aimed to stimulate economic growth. For the housing market, changes to mortgage interest deduction caps and state and local tax deductions (SALT) had a mixed impact. While the tax reform sought to benefit taxpayers and stimulate economic activity, it also led to concerns about its effect on higher-cost housing markets where homeowners were more likely to exceed the new deduction limits.
HUD Funding and Policies
Under Trump’s administration, there were proposals to significantly cut funding to the Department of Housing and Urban Development (HUD), which oversees federal affordable housing programs. Although Congress did not enact the most severe proposed cuts, the budgetary focus suggested a prioritization of reducing federal involvement in housing. The administration also proposed changes to public housing policies, including increased rent contributions from tenants and work requirements, aiming to encourage self-sufficiency among recipients of housing aid.
Deregulation Efforts
Trump’s broader economic policies included a significant emphasis on deregulation, with the aim of reducing the costs and barriers to business and development, including housing construction. The administration argued that cutting back on federal regulations would lower construction costs and, in turn, make housing more affordable. However, critics contended that without specific mandates or incentives for affordable housing, deregulation alone would not adequately address the affordability crisis.
The President’s Inquiry into Housing Costs
As can be seen in frequent discussion on the topic in media from the State of the Union to White House press briefings, Biden has been proactive in seeking ways to mitigate housing expenses, frequently consulting his senior staff for innovative solutions. His inquiries have spanned topics from mortgage rates to the impact of housing inflation on family budgets, illustrating his deep engagement with the issue.
Voter Concerns Echoed by Biden and Trump
The difficulty of affording housing is a primary concern among voters, a sentiment both Biden and Trump have echoed. The President’s and former President’s dialogue with advisers and media on this issue underscores the salience of housing costs for voters.
Complexities in Addressing Housing Affordability
Despite any current or future Administration’s earnest efforts, solving the housing affordability crisis is fraught with complexities. The scarcity of available homes, due in part to a past slowdown in construction and a surge in demand during the pandemic, has significantly contributed to this challenge. Neither candidate can address past decisions and increase supply overnight. However, the next four years will likely see the expansion of home building no matter which party wins in November.
Mortgage Rates and Market Dynamics
The crisis is further compounded by mortgage rates that are higher than the public has seen in the recent past, and have now reached a 15-year peak. This situation has deterred first-time buyers and made existing homeowners hesitant to sell, fearing they will not secure similarly low rates elsewhere.
The Role of the Federal Reserve
The Administration holds out hope that the Federal Reserve (Fed) will soon cut interest rates, a move anticipated to positively influence the housing market, specifically by incentivizing individuals holding onto their homes to either move up or downsize, as is demographically expected. The turnover will benefit those looking to purchase a home. While the Federal Reserve’s decision to cut rates would be positive for the housing market, Biden has emphasized the importance of the Fed’s independence, steering clear of exerting pressure for expedited action.
Messaging and Voter Sentiment
The White House plans to ramp up its messaging on housing, aiming to connect with voters by acknowledging the problem and outlining a vision for the future. This approach is intended to align with Biden’s economic platform and address rising prices more aggressively. Voters should expect to see the same from Trump in coming months.
Looking Ahead
The administration’s focus on housing reflects a broader economic strategy, one that Biden hopes will resonate with Americans. By tackling the housing affordability crisis head-on, Biden aims to demonstrate his commitment to improving the lives of everyday Americans and securing a more prosperous future.
