Researchers from mortgage buyer Freddie Mac estimate that the United States needs an additional 3.8 million homes to meet housing demands, the Associated Press reported.
A persistent shortage of available homes in the U.S. has caused home prices to increase faster than incomes, the researchers said. The price of housing has skyrocketed over the past year, making it difficult for first-time buyers to save for down payments and keeping them renting for longer periods.
Nearly half of people who rent spend more than 30 percent of their income on housing, which is the recommended amount, the AP said.
The Biden administration has outlined plans to spur the building and restoration of more than 2 million homes to help ease the shortage, including offering increased mortgage availability through Freddie Mac and Fannie Mae for manufactured houses and buildings with two to four units.
For more reporting from the Associated Press, see below.
Millions of Americans are getting priced out of ownership or stuck spending the bulk of their income on rent. The S&P CoreLogic Case-Shiller 20-city home price index climbed a record 19.1 percent in June from a year ago, as too few homes are available to buy and low interest rates have enabled affluent buyers and real estate investors to pay more for homes.
The jump in prices is a threat to President Joe Biden’s vision of centering the U.S. economy around the middle class, a group that has defined itself in large part through homeownership. Americans’ desire to own homes has also altered regional politics as suburbanites aligned with Democrats in 2020 to help give Biden key victories in Arizona and Georgia, two states that have added population through new home construction.
The White House Council of Economic Advisers on Wednesday posted on its blog a detailed analysis of the affordability problem and the administration’s plans to relieve it. Its analysis notes that housing supply has fallen short of population growth for four decades, so many of the challenges predate the disruptions caused by the coronavirus pandemic.
To increase home construction, Biden’s economics team proposes a series of policy shifts.
First, it intends to deliver 100,000 affordable housing units over three years through a series of administrative changes. The government also intends to make it easier for would-be owners and nonprofits to buy homes that failed to sell in foreclosure auctions, as well as expand outreach to local governments and nonprofits to buy federally held homes.
The government also plans to increase the financing options for apartment buildings through tax credits, loans and grants.
Secondly, the Biden administration estimates that its economic agenda would lead to the construction and renovation of 2 million homes. This would include the use of federal subsidies, the low-income housing tax credit, a new tax credit for construction in economically vulnerable neighborhoods and incentives to remove exclusionary zoning and land use policies by local and state governments that limit new construction.
Still, the blog post cautioned that a supply crunch could linger.
“There is no magic formula to quickly relieve the supply constraints,” it concluded.