- President Joe Biden unveiled a new plan to tackle rising housing costs.
- The initiative aims to boost housing supply by enticing cities with federal dollars to construct more affordable units.
- The goal is to close the nation's tremendous housing supply gap within the next five years.
President Joe Biden on Monday announced the White House is launching a new initiative to address the nation's worsening housing affordability crisis. It comes as their economic agenda remains stuck in neutral in Congress.
Much of the effort is centered around boosting housing supply by using federal dollars to entice cities to construct additional affordable units. The Biden administration cited a 2021 Moody's analysis that the housing shortfall amounts to 1.5 million homes.
The Administration intend to leverage existing funding from last year's infrastructure law to encourage cities to overhaul their zoning and land-use policies. It also seeks to smooth out the federal funding process for single-family and multifamily homes, and manufactured housing.
Homebuilder activity has remained lackluster as supply shortages stemming from the Covid-19 pandemic slow construction. Builders can't find basic materials like lumber or steel and it's delaying and increasing the price of construction for the millions of homes needed to meet this year's buyer demand.
The administration's plan underscores the White House's own limits to addressing the problem without Congress. The bulk of housing, land, and other regulatory decisions take place at the state and local level.
The House-approved Build Back Better plan contained $175 billion for new federal housing initiatives. But the package was squashed by Sen. Joe Manchin of West Virginia, and Democrats can't advance a smaller bill without his support.
As Congress twiddle their thumbs, housing affordability is plummeting. Home prices grew at a double-digit annual pace of 15.6% in April while rents jumped 8.3% year over year. As the Spring homebuying season heats up, housing costs are likely to continue mounting as rising mortgage rates, inflation and a tremendous lack of housing supply put additional pressure on American wallets.
Although the Biden administration hopes to close the housing supply gap within the next five years — time may be running short for the nation's renters and buyers. As the lack of supply pushes housing prices to new highs, housing affordability has already fallen to a decade low.