As the cost of living in America continues to rise, with record-breaking housing prices and increased rental rates, millennials and Gen Z are feeling the pinch. The financial burden is causing a delay for many young adults to leave their parents’ nests, and the so-called American dream of owning a home is becoming more of a distant fantasy.
According to a report by Zillow, rents have surged by an alarming 30% since the pandemic began, pushing an unprecedented number of renters into unaffordable housing situations. The housing market is in a deep freeze, with home prices soaring and mortgage rates placing further strain on potential buyers. This has led to a historic housing affordability crisis, with many feeling “disenfranchised”.
Government Interventions To Mitigate The Crisis
The Biden administration has taken note of this pressing issue and has introduced several measures to combat the crisis. These include tax credits, down-payment assistance, and reduced closing costs for home buyers. However, there’s a consensus among top officials that the solution lies beyond these interventions. The Deputy Secretary of the Treasury, Adewale Adeyemo, expressed this sentiment in a recent interview with Fortune.
“In order to be able to afford to buy homes, we need more homes in general,” Adeyemo explained. “We have a supply challenge in the economy. Since the financial crisis, we’ve built too little housing here in the United States.”
Adeyemo’s sentiment is supported by data from Realtor.com, which suggests that the U.S. needs between 2 million and 7 million homes to bridge the current supply gap. Despite construction starting on approximately 1.5 million new homes each year for the past three years, the housing supply is still far from meeting the demand.
Biden’s Plans To Address The Housing Crisis
In his recent State of the Union Address, President Biden outlined his plans to tackle the housing crisis. He highlighted his efforts to cut red tape to boost federal financing for housing projects and proposed several measures to control housing costs.
Among the proposals was a tax credit that would provide first-time homebuyers and sellers with roughly $400 a month over the next two years to help with high mortgage costs. The plan also included the elimination of title insurance fees for federally backed mortgages. “When you refinance your home, this can save you $1,000 or more,” Biden said.
However, Adeyemo acknowledged that such savings are a drop in the ocean against the backdrop of home prices that have surged by approximately 40% since before the pandemic. Therefore, he emphasized the President’s call to build and renovate 2 million homes as evidence of his understanding that “the only way to deal with the supply challenge is to build more supply.”
Additional Measures To Aid The Housing Crisis
Besides the measures outlined in his State of the Union Address, Biden proposed other initiatives as part of his 2022 Housing Supply Action Plan. These include tax credits for home builders constructing affordable housing, a new $20 billion “innovation fund” for the construction of multi-family units and starter homes, and incentives for the removal of barriers to construction.
Furthermore, Biden pledged to crack down on rental “junk” fees and “fight rent gouging” by corporate landlords. “The President’s fighting to do everything he can to lower costs using the authorities Congress has already given us. And we’re going to call for Congress to give more resources to allow us to build more housing supply,” Adeyemo stated.
While these measures are a step in the right direction, it remains to be seen whether they will be sufficient to thaw the frozen housing market and make home ownership a reality for more Americans. As the situation unfolds, it’s clear that bold solutions are needed to address this historic crisis.
