Due to the high prices of food and essential living items, the post-pandemic high interest rates have significantly increased housing costs, leading to a growing housing crisis. The focus on housing prices during this year’s election has prompted the Biden administration to take new measures to increase the supply of affordable housing.
The Associated Press reported on Monday that U.S. Treasury Secretary Janet Yellen will announce a new investment during her visit to Minneapolis on Monday afternoon. This new initiative involves providing $100 million over the next three years through a new fund to support financing for affordable housing, enhancing federal financing for affordable housing through the Federal Financing Bank.
Yellen is said to have stated in her speech on Monday: “We are facing a very severe housing supply shortage problem that has been ongoing for a long time. This supply squeeze has led to decreased affordability.”
She stated that the Democratic administration is “pursuing a broad affordability agenda to address the pricing pressures that families have been feeling.”
Currently, both home buyers and renters are facing the issue of skyrocketing housing prices post-pandemic. According to the U.S. Case-Shiller 20-City Composite Home Price Index, housing prices in the United States rose by 46% from March 2020 to March 2024. A new analysis from the Treasury Department shows that over the past twenty years, housing costs have grown at a faster rate than income.
Additionally, rising mortgage rates and record-high housing prices have caused many potential home buyers to hesitate during what is typically the busiest season in the real estate market, leading to a third consecutive monthly decline in existing home sales in the United States in May.
For low-income individuals, statistics from the National Low-Income Housing Coalition show that over 10.8 million extremely low-income households in the U.S. lack over 7 million affordable housing units. The organization states that there is not a single state or county in the country where a full-time minimum wage worker can afford a two-bedroom apartment.
In some cities, this situation has become a crisis. For example, in Martha’s Vineyard, Massachusetts, housing costs have become a public safety issue due to difficulties in attracting and retaining corrections officers and 911 dispatchers.
President Biden and former President Trump have proposed various ideas on how to make everyday Americans live more affordably, with Trump suggesting tax-free tips for workers and Biden implementing a student loan repayment plan.
The increase in housing costs has led some economists to predict that the housing crunch may not end until the Federal Reserve lowers the key interest rate (currently at 5.3%).
Diane Yentel, President and CEO of the National Low-Income Housing Coalition, stated that Congress needs to take action and “swiftly enact transformative, urgently needed housing investments. Only through a combination of executive action and robust federal funding can the affordable housing crisis be truly resolved.”
Yellen will urge Congress to pass the budget proposal issued by Biden in March. The proposal calls for tax credits for first-time home buyers and an expansion of low-income housing tax credits. The budget also includes a plan to construct over 2 million housing units.
The Biden administration has also taken steps to increase housing supply, such as encouraging states and cities to convert more vacant office buildings into housing units and providing billions of dollars in federal funds to drive this transformation.