Scotsman Guide reports relief is coming: Affordable Housing efforts.
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Published on May 17, 2022

Scotsman Guide reports relief is coming: Affordable Housing efforts.

Arnie Aurellano, with Scotsman Guide writes: With U.S. home prices still sky high and inflation hamstringing the economy, President Joe Biden announced a new plan to gradually improve housing costs by increasing the supply of affordable housing.

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Noting that home prices are a major upward pressure on inflation, a statement from the White House introduced the executive branch’s Housing Supply Action Plan, which includes legislative and administrative steps aimed at addressing the country’s inventory shortfall in five years. The first step will be the “creation and preservation of hundreds of thousands of affordable-housing units in the next three years,” the release stated.

The plan includes a raft of new policies and changes to existing ones. The Biden administration, for example, seeks to incentivize construction of affordable housing by eliminating regulatory roadblocks and rewarding jurisdictions that have reformed policies regarding zoning and land use. The plan seeks to ramp up such incentives without increasing spending by leveraging existing federal funds, including transportation funding from the Bipartisan Infrastructure Law.

Reforms also are in the works for the Low Income Housing Tax Credit (LIHTC) program, which provides credits to investors who develop affordable rental housing. Meanwhile, the U.S. Department of the Treasury is urging state, local and tribal governments to allocate more COVID-19 pandemic recovery funds for the building of additional affordable-housing units and other housing-related activities.

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Another barrier the new plan seeks to address is the shortage and increased cost of both building materials and labor that has hampered residential construction. To that end, administration officials will meet with representatives from the construction industry to explore potential steps that the government and the private sector can take to increase the number of completed homes this year.

Many of the other policies outlined in the plan are heavily tied to the mortgage lending industry by targeting the development of new financing mechanisms to build and preserve housing. The White House statement, for instance, touted steps from both Freddie Mac and Fannie Mae aimed at increasing their purchases of manufactured-home loans. The two government-sponsored enterprises (GSEs) also are working to determine how to expand and promote financing for affordable multifamily development and rehabilitation projects.

Moreover, the Federal Housing Administration (FHA) and Federal Housing Finance Agency (FHFA) are exploring avenues to help lenders pilot and scale more financing for accessory dwelling units. And the U.S. Department of Agriculture will embark in the coming months to ramp up education on its construction-to-permanent loan program, which encourages more rapid building of single-family homes in rural areas.

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Finally, the White House plan seeks to stem the tide of investor purchases of single-family homes, which ramp up competition and drive up prices for potential homebuyers. Steps taken to that end include the GSEs extending the period when available real estate-owned (REO) properties are available only to owner occupants and nonprofit organizations.

Response to the plan from the real estate and mortgage industries has so far been positive. Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), commended the administration “for announcing steps to alleviate the acute shortage of single-family and multifamily housing for prospective homebuyers and renters.

“Eliminating the regulatory barriers to new construction, including manufactured housing, in underserved markets; expanding affordable financing for multifamily development and rehab projects; and a commitment to more private and public sector partnerships will help address the housing supply and affordability challenges that continue to burden families,” Broeksmit stated.

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Jerry Konter, chairman of the National Association of Home Builders (NAHB), said that the plan has several positive elements for addressing affordability challenges and creating improved financing options. The plan acknowledges ongoing market headwinds, such as supply chain delays and chronic labor shortages, that have been identified by NAHB members as the factors holding back home construction.

“We agree with the White House that the key to resolving our nation’s housing-affordability challenges is to build more homes,” Konter said.

Diane Yentel, president and CEO of the National Low Income Housing Coalition, praised the plan as a step forward, but called on Congress to take additional action.

“As rents rise, homelessness increases, public housing deteriorates, and millions of families struggle to keep roofs over their heads, robust federal investments and actions are badly needed and long overdue,” Yentel said. “I commend President Biden for taking significant and decisive action, but the administration cannot solve the crisis on its own. Congress must also act with similar urgency. … Only through a combination of administrative action and robust federal funding can the country truly resolve its affordable-housing crisis.”

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