The scope of the plan is modest compared to industry estimates of how many new homes are needed to meet demand. The White House is aiming to make available 100,000 new homes, while a recent study released by the National Association of Realtors found home supply is lagging by between 5.5 million and 6.8 million units.
Policymakers have fretted for years about a housing supply shortage that has put homeownership out of reach for millions of Americans. The U.S. housing stock grew by an annual average rate of 1 percent in the last two decades, down from 1.7 percent from 1968 through 2000, according to the June report commissioned and released by the Realtors.
In a bid to restrict the volume of housing supply controlled by large, so-called institutional investors, the White House said Wednesday it will place limits on the sale of certain single-family homes insured by the Federal Housing Administration, an arm of HUD that insures mortgage loans to low- and middle-income borrowers.
Currently, large investment firms can buy foreclosed FHA-insured properties from mortgage servicing companies without HUD stepping in. In the wake of the subprime mortgage crisis, the Obama administration allowed the properties to be sold to investment funds, who would then convert them to rentals, as a way to limit losses on FHA’s books. But many of those buyers failed to sell the properties even after the market stabilized, decreasing the supply of affordable housing for individual homeowners.
In response, the White House said Wednesday that HUD will develop guidelines over the next year that will provide an “exclusive listing period” during which only governmental entities, non-profits and owner-occupant buyers may submit bids for the FHA-backed properties.
As part of the framework to boost housing supply, Treasury and HUD would also revive a joint risk-sharing program that lapsed in 2019 to give state housing finance agencies the ability to provide more low-cost capital for affordable housing developments.
Fannie Mae and Freddie Mac, which stand behind about half of the residential mortgage market, would be allowed to expand their investments in multifamily properties financed with the Low-Income Housing Tax Credit from $1 billion per year to $1.7 billion per year. FHFA is also increasing the minimum share of those investments Fannie and Freddie are required to make in rural areas.
In addition, the plan would enable Community Development Financial Institutions and housing nonprofits to access more money under the Capital Magnet Fund — which offers grants to finance projects that benefit low-income Americans — as another way to help spur the construction of more affordable housing. So-called CDFIs serve low- and moderate-income areas.
Democrats cheered Biden’s new plan.
“Housing has long been too expensive and too hard to find for many families,” Senate Banking Chair Sherrod Brown (D-Ohio) said in a statement. “Building more affordable homes — and keeping the homes we have in the hands of homeowners, not investors — is key to bringing down housing costs, including for communities that have been denied access to housing for too long.”
Industry groups like the National Association of Home Builders also praised the framework.
“It is important that the plan includes tangible policies to incentivize new residential construction,” said home builders association chair Chuck Fowke. “We look forward to working with the administration in the effort to boost the supply of affordable rental housing and single-family housing for America’s hard-working families.”
Home prices continued to soar during the pandemic, even as much of the rest of the economy sputtered. And they show no sign of slowing down: Home prices rose 18.6 percent in June compared to a year earlier, according to the S&P CoreLogic Case-Shiller national home price index — the highest annual rate since the index began in 1987.