As is the case with many policy topics, when President Joe Biden was inaugurated on Jan. 20, many began to wonder how housing would be impacted under a new president. How will existing plans change and new issues be addressed, particularly as it relates to the affordability crisis exacerbated by the COVID-19 pandemic?
Similarly, while the private purchase and sale of homes across the U.S. are decisions made by consumers, federal policy can have an impact on mortgage interest rates, tax-related incentives, the overall economy and consumer confidence.
Here’s how experts predict the Biden administration will shape housing in the next four years.
Eviction Prevention and Rental Assistance
For a year, the coronavirus pandemic has pushed the rent affordability crisis to the forefront among politicians. “The Biden administration, rightfully so, when entering office is very much focused on the immediate crisis at hand, which is the pandemic and the economic downturn it has caused,” says Doug Rice, senior fellow specializing in housing policy at the Center on Budget Policy and Priorities, based in Washington, D.C.
On Feb. 16, Biden extended the current foreclosure moratorium and mortgage forbearance for homeowners with federally backed mortgages through the end of June, while the eviction moratorium currently lasts through the end of March. The moratorium and forbearance, initially established by the Centers for Disease Control and Prevention on Sept. 4, 2020, halts evictions and foreclosures for nonpayment when it is related to financial difficulties caused by the pandemic.
For tenants and landlords, in particular, eviction moratoriums are only a partial solution. The eviction moratorium does not cover all renters, landlords do not receive payment to continue to maintain their rental properties and the rent is still due for tenants, so unpaid rent continues to pile up.
However, on Feb. 25, a federal judge in Texas ruled the eviction moratorium in place through the CDC is unconstitutional. In his ruling, U.S. District Judge J. Campbell Barker did not issue an injunction on the eviction moratorium, so the federal moratorium currently remains in place while the U.S. Department of Justice appeals the ruling.
Congress has taken action to provide funding that can help relieve both renters and landlords, at least somewhat. The second coronavirus relief bill, passed in December 2020, allotted $25 billion for rental aid, to be disbursed to state governments and provided through state programs.
Biden’s American Rescue Plan Act, which was signed into law on March 12, provides a third stimulus check to individuals, extends federal unemployment benefits, designates $21.6 billion for rental assistance, $5 billion for emergency rental assistance vouchers for those experiencing homelessness or those who are fleeing domestic violence, sexual assault or human trafficking, and $10 billion for homeowners who need assistance paying mortgages, utilities and property taxes.
“Millions of people are going to be helped by this and avoid eviction as a result. Whether it will cover everyone is still unclear,” Rice says.
In the U.S. Census Bureau Household Pulse Survey for the week of Feb. 27 to March 1 documenting effects of the COVID-19 pandemic, more than 9.5 million respondents reported their household is not caught up on rent, about 17% of respondents. For the same week, more than 4.5 million respondents said it was either very likely or somewhat likely they would leave their home due to eviction in the next two months.
While large-scale efforts seem to be the best bet at getting necessary assistance to renters and landlords alike and avoiding evictions or foreclosures on rental properties, it’s still unclear if aid can help avoid evictions on a larger scale later on.
“What happens when you start to lift these moratoriums? … How much of that back rent is gone, and how much stays there?” says Phillip Kash, partner at HR&A Advisors, a real estate and economic development consulting firm, where he focuses most often on affordable housing and policy issues.
Rice notes that with the possibility of eviction moratoriums being ruled unconstitutional in a higher court, it becomes “a race” between the judicial system issuing a definitive ruling and local and state governments issuing the federal rental assistance to reduce the number of people under threat of eviction.
Aside from the affordability issues caused by the pandemic, access to affordable housing for low-income households remains an ongoing crisis.
While states and cities provide varying levels of affordable housing options, the U.S. Department of Housing and Urban Development is responsible for affordable housing at the federal level, in addition to many other tasks. Biden has appointed Marcia Fudge, a former congresswoman from Ohio, for the HUD secretary position.
At her nomination hearing before the U.S. Senate Committee on Banking, Housing, and Urban Affairs on Jan. 28, Fudge noted her dedication to providing affordable housing options both for low-income families receiving assistance now, as well as those in need of it, including for those experiencing homelessness.
“On any given day we have 8 million people who need housing, so not only do we need to protect those who are currently in housing, but we need to ensure those who are without housing get it,” Fudge said at the hearing.
While campaigning for president, Biden included in his platform the proposition of ensuring that all households that qualify for the Housing Choice Voucher Program receive it. The voucher program, commonly referred to as Section 8, subsidizes housing costs to ensure renters do not have to pay more than 30% of their household income in rent. Prior to the pandemic, as many as 10.4 million people in 5.2 million households received federal rental assistance, according to a report by the Center on Budget Policy and Priorities at the end of 2019, though 23 million people in 10.7 million low-income households still paid more than half their income to cover rent.
“That would be the most exciting thing for housing,” Kash says. “If (Biden) actually funded housing for everyone who qualified, that would change housing.”
The biggest obstacle in being able to achieve this aim, of course, is funding. Section 8 funding takes up the largest portion of HUD’s budget from year to year, and it continues to climb in costs because the cost of housing increases over time, without necessarily widening its reach in the share of eligible households receiving vouchers. Providing vouchers for more than 5 million more households would require a major influx of money to the HUD budget.
Another of Biden’s campaign platforms addressed the continued ramifications of discrimination in housing and mortgage lending that occurred both prior to and after the Fair Housing Act of 1968 was originally passed. Federal Fair Housing law prohibits housing discrimination based on race, color, national origin, religion, sex, familial status or disability.
Since then, HUD has been tasked with investigating cases of perceived discrimination and pursuing legal action against individuals or companies when evidence of a Fair Housing violation is found, though private organizations also take on the charge. There were 28,880 reported acts of housing discrimination in the U.S. in 2019, according to the National Fair Housing Alliance, and 73.12% were processed by private fair housing organizations.
“We’ve had fair housing laws in place since 1968 that require communities to take steps to affirmatively promote fair housing, especially among groups that have faced discrimination in the past and today. We expect (the administration) to take steps to further that … and expand fair housing opportunities today,” Rice says.
Thus far, executive and legislative steps suggest fair housing and the end of discriminatory housing practices are a priority for the administration. On Jan. 20, Biden signed a memorandum to the incoming HUD secretary calling for a deep dive into the full scope of housing and lending discrimination in the past, the ongoing effects and identifying steps to “lift barriers that restrict housing and neighborhood choice, to promote diverse and inclusive communities, to ensure sufficient physically accessible housing, and to secure equal access to housing opportunity for all.”
For many experts in the field, the steps taken thus far are encouraging, though eliminating racial bias and long-term discriminatory practices in housing will take a long time.
“It certainly signals the administration is open to a shift in policy. Housing discrimination is disturbingly common, and I hope that the new administration will invest in a significant increase in enforcement of fair housing and fair lending laws already on the books,” wrote Danielle Samalin, CEO of Framework, an online platform focused on empowering homeowners, in an email. “But further progress in addressing the legacy of racist housing policy and practice requires a broad focus on affirmatively furthering fair housing, as well as a holistic approach to systems change.”
A major factor to help people buy a home for the first time — or even for the second or third time — is the mortgage interest rate. “Interest rates are the No. 1 driver of buyer activity,” says Nick Bailey, chief customer officer for national real estate brokerage Re/Max.
The Federal Reserve has expressed its plan to keep interest rates low while the economy continues to endure and recover from the effects of the pandemic. The Fed’s current benchmark federal funds rate is at the lowest possible point, between 0% and 0.25%.
However, while the Fed can influence mortgage interest rates, banks and lenders determine their interest rates independently. In the last year, the average interest rate for 30-year, fixed-rate mortgages has hit repeated historical lows, reaching 2.65% in January, according to Freddie Mac. However, the average rate has since risen and reached 3.09% as of March 18. While this average rate remains historically very low, some would-be buyers may be more skittish at the sight of a week-to-week rate increase.
In an effort to make first-time homeownership a bit less of a financial struggle, Biden has proposed a tax credit up to $15,000 for first-time homebuyers that can go toward the down payment on the home.
“It’s a consumer confidence booster for first-time homebuyers,” Bailey says, though he adds that it’s not likely to make major swings in the market to incentivize new buyers to enter the market.
If the goal is to help more people become homeowners for the first time, however, Samalin stresses that the program must benefit racial and ethnic minorities, which are underrepresented in homeownership. While the overall homeownership rate in the U.S. in 65.8%, the homeownership rate for Black householders is just 44.1%, and for Hispanic householders just 49.1%, according to the U.S. Census Bureau. Comparatively, white, non-Hispanic householders have a 74.1% homeownership rate.
“I would like to see a proactive analysis to ensure down payment programs aren’t simply maintaining the status quo. I think there are promising discussions of alternatives to a tax credit that would more directly address the racial homeownership gap,” Samalin says.
On whether the Biden administration will work to focus on helping underrepresented groups achieve a greater homeownership rate, Kash says the discussion of the issue means it’s more likely to be addressed. “I’m cautiously optimistic that they will move on that, and that hasn’t been moved in 12-plus years,” Kash says.
A major factor in making it easier to become a homeowner, of course, is the supply of available homes. Many parts of the U.S. — particularly suburban markets — are experiencing a seller’s market, where there are fewer houses for sale than the number of active buyers. This means that home prices are frequently driven up, and first-time buyers, who often don’t have as many financial resources for cash to increase their offer, may be priced out of the market.
“The No. 1 challenge we have right now is low inventory across the country,” Bailey says. “There are more Realtors than listings right now.”
Getting more existing homeowners to sell their property doesn’t necessarily solve the issue — selling a home, in most cases, means they’ll be buying another to live in. Instead, many markets need more active home construction. However, zoning and permit approval for construction is up to local governments, and while state laws can have an impact on how local governments allow or restrict new housing, the federal government doesn’t play a direct role.
Discussion at a national level, however, has appeared to encourage more local changes in recent years. Bailey says he has seen signs of pockets of zoning changes, where providing new housing at more affordable prices has become the focus. “I think that we will see some of that continue to happen under the Biden administration,” Bailey says.
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