The Surprising Way the Government Is Making Housing More Affordable For Homebuyers
Written by
Josephine Nesbit
Edited by
Nicholas Morine
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Over the past several years, rising housing prices and mortgage rates have pushed many would-be homebuyers out of the real estate market. Homeownership is unaffordable for many, but the U.S. Treasury Department recently announced plans to increase the supply of affordable housing in the year ahead using unspent COVID-19 funds.
The Treasury Department said it would allow state and local governments to use unspent funds from the $350 billion State and Local Fiscal Recovery Fund on housing projects serving families earning up to 120% of the area’s median income, an increase from 65%.
These funds can now be spent on projects that meet the terms of federal housing programs as well as those supported by Fannie Mae and Freddie Mac for essential workers — including teachers, firefighters, nurses and other workers priced out of certain markets.
Biden Moves To Attempt Improvement Regarding Housing Crisis
According to Reuters, the initiatives are part of the Biden administration’s drive to address Americans’ lack of housing affordability. The publication noted that this has contributed to inflation and negative voter sentiment on Biden’s economic management.
Based on Reuters calculations, the amount of funding still available for these projects could be as high as about $40 billion. The funds are part of the 2021 American Rescue Plan Act, a $1.9 trillion stimulus package meant to help the nation recover from the effects of the pandemic. According to Reuters, the Treasury estimated that about 12% of the $350 billion has not been budgeted by states — and the largest cities and counties — as of Sept. 30, 2023.
The Treasury will also allow communities with unspent funds from the Emergency Rental Assistance Program to reallocate them to support “pre-development” and land acquisition costs for low-income affordable housing projects, as well as construction and rehabilitation costs, Reuters added. As of June 30, 2033, about $6.9 billion was left in the original $46 billion rental assistance program.
Additionally, the agency is extending the Federal Financing Bank‘s support for a housing project initiative between the Department of Urban Housing and Development (HUD) and local housing agencies.
Tax Break on Starter Home Sales Gets Mixed Reviews
President Biden has also proposed a $10,000 tax break for first-time buyers and middle-class families who sell their “starter homes” to another owner-occupant. However, CNBC reported that experts have mixed opinions on whether this proposed tax credit will make it easier for prospective buyers to afford a home.
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