White House Introduces Housing Affordability Plan

September 4, 2021

Earlier this month, the Biden administration unveiled a plan to shift policy in order to expand affordable housing. The administration’s plan comes in response to a severe housing shortage that existed prior to the COVID-19 pandemic and is exasperated by rising lumber costs, shortages in labor markets and an uptick in city dwellers moving to suburbs. As a result, housing prices continue to rise for both renters and buyers and Americans are priced out of markets. Investors have taken note as well—one out of every six homes purchased from April to June 2021 was purchased by an investor.

The administration stated that it is “committed to using every tool available in government to produce more affordable housing supply as quickly as possible, and to make supply available to families in need.” The Biden administration hopes that, by injecting capital and financing, restricting investor access and reducing exclusionary zoning, 100,000 affordable homes will be created over the next three years.

Injecting Capital to State and Federal Agencies

First, the administration proposes to inject capital to state and federal agencies. The Department of Treasury’s Federal Financing Bank and the Department of Housing and Urban Development’s Risk Sharing Program will again partner to enable eligible state housing finance agencies to provide capital for housing development. Fannie Mae and Freddie Mac’s equity cap for the Low-Income Housing Tax Credit will see an increase, which will allow more construction and renovations to rental housing. Community Development and Finance Institutions and non-profit housing groups will also have increased access to funds under the Capital Magnet Fund. Essentially, under this prong, the administration will make more capital available to prospective builders and operators to generally increase available housing.

Increasing Manufactured and Multi-Family Homes

Second, the administration aims to increase manufactured homes and multi-family dwellings. With expanded financing through Freddie Mac and other agencies’ existing policies, the administration hopes that the supply of manufactured homes and multi-family properties will increase. Fannie Mae and the Federal Housing Administration already have existing policies in place for loan advantages and other expanded financing options. Now, those businesses engaged in constructing or renovating manufactured homes or 2-4 units should find it easier to obtain financing and capital.

Curbing Investors from Entering the Home-Buying Market

Third, the administration hopes to curb investors from entering the home-buying market. In so doing, the plan proposes to limit the sale of homes to individuals, single families and non-profit organizations while restricting investors who already have FHA or HUD-owned properties. Additionally, the administration will expand and create new exclusive periods where only government entities, owner occupants and qualified non-profits can bid on certain FHA-insured and government-owned properties. As a result, large investors may find it difficult to obtain financing and capital for single family homes.

Reducing Exclusionary Zoning

Last, the administration outlines a plan to reduce exclusionary zoning. Over the years, real estate properties have become subjected to increased lot restrictions, which are enacted by local or state governments. As a result, developers and builders are limited as to what a real estate property can become through a new build or renovation. The administration states that it will “leverage[e] existing federal funds to spur local action, explor[e] federal levers to help states and local governments reduce exclusionary zoning, and launch[] learning and listening sessions with local leaders.” While this may prove useful for builders and renovators, the administration could be seen as reaching into a state or locality’s decision-making abilities and wrongfully restricting access to federal funds if state and local governments refuse to comply with reducing exclusionary zoning.

Again, the administration’s statement comes in response to soaring housing prices and a lack of affordable housing for middle to low-income individuals and families. The plan presents new opportunities for builders and developers to enter new markets or take advantage of already existing resources. To discuss your options and eligibility under the administration’s new policies, please contact a KJK attorney at (216) 696-8700.