The Treasury Department is taking steps to address the shortage of affordable housing in the US — a problem that has only been exacerbated by pandemic complications, rising interest rates and rising inflation. Treasury announced Wednesday that it is making more money available for affordable housing loans as part of the nearly $2 trillion U.S. bailout (ARP) fiscal stimulus package passed in 2021.
The department’s new guidelines allow state and local governments to use ARP financing to “finance long-term affordable housing loans, including the principal amount of such loans, under certain conditions. These changes will allow for significant additional funding for affordable housing projects, including projects that would qualify for additional assistance under the Treasury’s low-income housing loan.
Treasury’s rule changes also expand the range of federal programs that can use the funding, “allowing more options for how states and local governments can presumably use money for affordable housing.”
“Treasury continues to strongly encourage state and local governments to devote some of the historic funding available through President Biden’s US bailout plan to build and restore affordable housing in their communities and the actions announced today, will make it even easier for them to do this,” Deputy Treasury Secretary Wally Adeyemo said in a statement Wednesday.
The latest initiatives come after the inventory of affordable housing was plagued by a decline in construction activity during the height of the pandemic and rising interest rates in response to inflation. These factors have led to a red-hot housing market that is taking on a bigger cut in Americans’ salaries and forcing people to live further away from where they work.
According to government lender Freddie Mac, the standard 30-year fixed-rate mortgage stands at 5.54 percent — double what it was a year ago. The 15-year fixed-rate mortgage is now 4.75 percent and the standard floating-rate mortgage is now 4.3 percent for the first five years.
But whether states, counties and municipalities will heed the Treasury Department’s call to build cheaper homes is another matter.
Attempts to build more affordable housing are often thwarted by local zoning laws and building restrictions designed to make real estate values high and keep low-income owners away from wealthy neighborhoods.
This phenomenon is known as “NIMBYism,” a modern term derived from an acronym that stands for “not in my backyard.”
sen. Tim Kaine (D-Va.) told The Hill that he encountered NIMBYism while drafting some of his housing bills, but the reason a major housing package hasn’t been passed recently has more to do with Senate dynamics. and in particular the resistance of centrist Senator Joe Manchin (DW.Va.) to large spending bills.
“There’s that aspect,” Kaine said, referring to local opposition to low-income housing. “We hear it, but we also hear employers and local officials say we need more, we need more housing that our staff can afford. So yes, there is the occasional NIMBYism, but that doesn’t keep housing plans out of the reconciliation. It’s more, you know, Manchin’s concern about overall size.’
Developers and construction companies are also often discouraged by market forces from listing lower-income homes, as profit margins on more expensive homes are usually greater than margins on more modest homes.
The low-income housing tax credit program aims to overcome those forces by making up for those lost profits, and several legislative packages are pending to expand its scope.
“I am a big fan of the program. You see [Sen.] Maria Cantwell, she and I have sponsored an effort to expand that program for years because it’s very focused on giving states complete flexibility to expand the stock of low- and middle-income housing,” Kaine said.
“A challenge right now is undersupply, so programs to expand inventory are very, very helpful. [The low-income housing tax credit] is a good program, so I’ve certainly been in favor of trying to make it more robust. It was our hope that we could have done some of that in an atonement law that wouldn’t be. But that doesn’t mean we’ll stop looking for other ways to make that happen,” he added.
Senate Finance Committee ranking member Mike Crapo (R-Idaho) said in an interview that he also supports creditworthiness.
“Especially on the low-income tax break, I’m a big supporter of it,” Crapo said. “I’m not going to go into any proposals to modify or change it yet, other than to say we need to strengthen our access to low-income housing in the United States, and it’s a very important issue.”
“Efforts have been made to get it into the Chinese account, which is not happening at the moment. Some efforts have been made to find other avenues to introduce some facilities,” he said.
sen. Mike Rounds (RS.D.) said he expects the tug-of-war between federal and state governments over the issue of affordable housing to continue.
“It will always be an ongoing battle,” Rounds said in an interview. “You’re not going to solve all those challenges with a tax credit. What you should be able to do is go to those zoning plans and say, “You need the housing, and if you want development in your area, you have to recognize that not everyone can put up the Taj Mahals that everyone would like to see in.” their developments.’ ”
sen. Bernie Sanders (I-Vt.) suggested that governments should skip the private sector and build affordable housing themselves.
“There is no doubt that there is a crisis not only in about 600,000 Americans who are homeless, but also in about 18 million families who spend half of their income on housing. We need a massive building program to build low-income, affordable housing. It’s one of the top priorities in this country,” he said on Wednesday as he headed for a vote in the Senate.
Bankers said mortgage rates may have peaked in June and sounded hopeful that hesitant consumers would start buying more homes.
“Mortgage rates may have already peaked and could remain between 5 and 5.5 percent through the rest of 2022,” Mike Fratantoni of the Mortgage Bankers Association said in a statement. “If that were the case, potential buyers, who had been put off by the rate spike, might find their way back into the housing market.”