Vice President Kamala Harris and administration officials said on June 26 that they are awarding $85 million to 21 state and local governments as part of a new program to support the construction and preservation of affordable housing.
Funding will come from a Housing and Urban Development program created in the fiscal year 2023 appropriations bill.
The administration’s latest housing affordability measure aims to assist state and local officials in updating their housing agendas by removing barriers to development, adjusting zoning laws, and speeding up the permitting process for new construction.
Nearly 200 communities applied for the funds.
The chosen beneficiaries consist of a diverse array of jurisdictions, including Los Angeles County ($6.7 million), Hawaii ($6.6 million), Denver ($4.5 million), and Milwaukee ($2.1 million). Ketchum, Idaho, will also receive $2.5 million.
Portions of the funding will be used as subsidies for homebuilders to develop vacant lots and as low-cost loans to property developers to construct utility connections.
It is unclear when shovels will be in the ground. However, the vice president told reporters in a conference call that the recipients had already started employing “housing-forward strategies” to bolster supply.
Later this summer, the federal government plans to announce an additional $100 million worth of grants.
This, the White House says, will further support the administration’s goal of building 2 million affordable housing units.
“Part of the reason for the high cost of housing is a lack of supply. In many communities, there’s simply not enough affordable housing available, and significant barriers prevent more from being built,” the vice president said.
“The investment is part of a larger strategy to lower rents and help more Americans buy a home.”
While the U.S. real estate market has been facing years of under-building, also applying pressure on the housing supply is the number of homeowners staying put.
“In considering how mortgage rate lock-in is affecting mobility, it is also worth noting that moving rates are currently quite low in the United States,” staff economists wrote in a May paper.
In response to the public health crisis, the Federal Reserve slashed interest rates to nearly zero, sending Treasury yields crashing and mortgage rates plummeting.
Zillow chief economist Skylar Olsen suggested that the effects of rate lock “appear to be lessening over time,” which could provide price relief soon.
“Zillow forecasts further price relief on the horizon—further injections of inventory and mortgage rates expected to stay elevated through the year should temper competition.”
Since hitting a bottom of 2.77 percent in August 2021, the average 30-year fixed-rate mortgage rocketed to 7.79 percent in October 2023.
The trend could ease pressures in the wider U.S. housing market, says Sam Khater, the chief economist at Freddie Mac.
“These lower mortgage rates coupled with the gradually improving housing supply bodes well for the housing market,” he said following the latest rate data.
Administration Announces Efforts to Combat Record Home Prices
The latest announcement was made soon after the National Association of Realtors reported that median existing-home prices climbed to an all-time high of $419,300 in May.Over the past week, senior administration officials have unveiled or highlighted the federal government’s measures to reduce housing costs.
“We face a very significant housing supply shortfall that has been building for a long time,” Ms. Yellen said in prepared remarks. “This supply crunch has led to an affordability crunch.”
Since peaking in April 2022, housing starts for single-family homes and buildings with five or more units have been trending downward, according to Census Bureau data.
Fannie Mae projects that total housing starts will fall 3 percent this year before rebounding by 3.1 percent in 2025.
These measures have included a string of sizable tax credits for buyers and developers.
Gene Sperling, the senior adviser to President Biden and the American Rescue Plan coordinator, is scheduled to travel to Detroit on June 27 to announce new actions the White House is taking to lower costs for new homeowners.
Some Republicans consider these actions too little, too late.
It includes an increase of $115 million to the Housing Choice Voucher program, lifting its total price tag to $32.3 billion. This federal program helps low-income families and seniors lease or buy rental units.
Inflation, including housing costs, is expected to play a major part in the first presidential debate between President Joe Biden and former President Donald Trump on June 27.