WASHINGTON — The Biden administration announces new steps to increase access to affordable housing as continued high prices for groceries and other necessities and high interest rates shifted up dramatically the cost of living in the years following the pandemic.
Treasury Secretary Janet Yellen will promote the new investments during a visit to Minneapolis on Monday. They include providing $100 million through a new fund over the next three years in support affordable housing financing, which will encourage financing of affordable housing and other measures through the Federal Financing Bank.
The increased focus on house prices comes as the housing crisis becomes a growing issue in this year’s general election campaign.
“We are facing a very significant housing shortage that has been growing for a long time,” Yellen said in remarks prepared for delivery Monday afternoon. “This supply crisis has led to an affordability crisis.”
Yellen says the administration is “pursuing a broad affordability agenda to address the price pressures families are feeling.”
Homebuyers and renters alike are facing rising housing costs, which have skyrocketed after the pandemic. According to the Case-Shiller 20-city composite home price indexHouse prices increased by 46% between March 2020 and March 2024. A new analysis from the Ministry of Finance shows that housing costs have risen faster than incomes over the past twenty years.
Meanwhile, the sale of previously occupied American homes fell for the third month in a row in May While rising mortgage rates and record high prices discouraged many potential home buyers during what is traditionally the busiest time of year in the housing market.
For low-income Americans, statistics from the National Low Income Housing Coalition show that there is a national shortage of more than 7 million affordable homes for the more than 10.8 million American families with extremely low incomes. And there is no state or province in the country where a renter working full-time at minimum wage can afford a two-bedroom apartment, the group said.
In some cities it is becoming a crisis. For example, on Martha’s Vineyard in Massachusetts, the cost of housing has increased a public safety issue as it becomes difficult to attract and retain correctional officers and 911 dispatchers.
President Biden and presumptive Republican nominee Donald Trump have put forward a variety of proposals on how to make life more affordable for the average American. proposals to make tips tax-free for workers and Biden pursuing a plan to reduce student loan payments for borrowers. A representative for the Trump campaign did not respond to an Associated Press request for comment.
But some economists predict the crisis won’t end until the Federal Reserve cuts its key interest rate, which remains at 5.3%.
Sal Guatieri, senior economist at BMO Capital Markets Economic Research, wrote Friday that little change is expected in the housing market “until the Fed cuts policy rates.”
Diane Yentel, president and CEO of the National Low Income Housing Coalition, said the White House has made efforts to prevent evictions and address the housing crisis, “but there is much more work to be done.”
Yentel said congressional action is needed to “rapidly achieve transformative and much-needed investments in housing. Only through a combination of administrative action and robust federal funding can the country truly solve its affordable housing crisis.”
In her speech, Yellen calls on Congress to approve the proposal Biden’s proposed budgetreleased in March.
The budget calls on Congress to provide a tax credit to first-time homebuyers and includes a plan to build more than 2 million homes. It would expand tax credits for low incomes.
The Biden administration has taken other steps to boost housing supply launching a multi-agency effort to encourage states and cities to convert more vacant office buildings into housing, with billions of federal dollars available to fuel such transitions.
In July 2023, the Department of Housing and Urban Development provided communities with $85 million to address barriers to affordable housing, such as zoning restrictions that have become a barrier to increasing the supply and density of affordable housing in some places.