With the dismal housing outlook weighing on family budgets, President Joe Biden used his State of the Union address Thursday to showcase plans to help Americans obtain mortgages and to push down monthly rents.
Times are tough for homebuyers and renters. Between high mortgage rates, lack of availability, skyrocketing home prices and dire rents, housing costs are devouring the American pocketbook.
The median home price in January was $379,100, an increase of 5.1% from one year ago, according to the National Association of Realtors, and the share of first-time buyers dropped from 31% to 28%.
“I want to provide an annual tax credit that will give Americans $400 a month for the next two years as mortgage rates come down to put toward their mortgage when they buy a first home or trade up for a little more space,” he said.
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Mortgage relief credit
Biden called on Congress to pass a mortgage relief credit that would provide first-time middle-class homebuyers an annual tax credit of about $5,000 for two years. This would effectively reduce the mortgage rate by more than 1.5 percentage points, the White House said, and will help more than 3.5 million middle-class families purchase their first home over the next two years.
Currently, more than 85% of mortgage holders are paying rates under 5%, anchoring them to homes they might have otherwise sold to upgrade to a bigger house − if not for today’s high rates. The 30-year fixed-rate mortgage averaged 6.88% for the week ending March 7, according to data from Freddie Mac.
“The mortgage relief credit is particularly relevant as mortgage rates continue to rise,” Lisa Sturtevant, chief economist for Bright MLS, said of Biden’s plan.
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Building housing with private sector incentives
The president also addressed the high cost of renting. Rents are a whopping 29.4% higher nationally than they were before the pandemic, though growth seems to have slowed from the major spikes of 2021, according to Zillow.
Part of the reason for the increase has been a lack of inventory, and the president called on Congress to pass legislation to build and renovate more than 2 million homes to close the housing supply gap.
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“Now pass my plan to build and renovate 2 million affordable homes and bring those rents down!” he told members of Congress.
The president’s proposed building boom stands a good chance of getting made into law, Sturtevant told USA TODAY.
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“There is more attention being paid to housing at the federal level and finally a realization that the primary reason why housing is becoming less affordable is that we are simply not building enough housing,” she said. “So proposals that build on the Biden Administration’s Housing Supply Action Plan seem likely to pass, as they provide incentives to the private sector to build more housing, which has broad bipartisan support.”
Lowering costs for renters
The White House’s multi-agency anti-price-gouging “strike force,” launched on Tuesday to curb unfair and illegal pricing across the economy, will also work to combat egregious rent increases and other practices driving up rents. Corporate landlords and private equity firms across the country have been accused of price fixing and inflating rents.
“For millions of renters, we’re cracking down on big landlords who break antitrust laws by price-fixing and driving up rents,” said Biden.
Swapna Venugopal Ramaswamy is a White House Correspondent for USA TODAY. You can follow her on X @SwapnaVenugopal
