New Biden Plan Would Offer Homebuyers More Houses at Affordable Prices

A 3-year plan

“The large and long-standing gap between the supply and demand of affordable homes for both renters and homeowners makes it harder for families to buy their first home and drives up the cost of rent,” the White House says, in a statement announcing the plan.

“Higher housing costs also crowd out other investments families can and should make to improve their lives," the announcement says, "such as investments in education."

The plan is to create, preserve and sell nearly 100,000 additional, affordable homes for homeowners and renters over the next three years. To make the 100,000-home goal a reality, the administration plans to:

1. Boost the supply of 'quality, affordable' rental units

When high home prices are forcing people to rent longer, and putting upward pressure on rent values, more rental units are necessary to keep the cost of housing down, officials say.

To get more rentals on the market, the departments of the Treasury and Housing and Urban Development (HUD) will restart HUD's risk sharing program, which provides low rates to housing finance agencies that provide funds for affordable housing.

Also, government-sponsored mortgage giants Fannie Mae and Freddie Mac are increasing their investments in low-income housing construction and rehabilitation. And the Treasury will make $383 million available in grants to nonprofit housing groups and community development institutions to produce affordable housing.

2. Increase access to manufactured homes and 'plexes'

The administration is targeting two specific property types to help buyers find homes of their own: manufactured homes and small multi-unit properties, or plexes.

Manufactured homes are built in factories, then installed on site. Fannie Mae has backed loans on manufactured housing since 2020, and Freddie Mac was recently given an OK to do the same, to increase access to those homes.

Meanwhile, Freddie Mac reduced the amount of financing available for 2-4 unit properties in 2020, but the company has now been authorized to make more credit available for buyers of duplexes, triplexes and four-plexes.

"The updates to the 2-4 unit mortgage eligibility requirements will add to the availability of rental units in these properties," the White House says in its statement. "They will also provide additional wealth-building opportunities for new owners of 2-4 unit properties who benefit from the rental income associated with these units."

3. Keep the new single-family homes out of investor hands

During this year's spring quarter, investors snapped up 1 in every 6 homes that sold, according to real estate brokerage Redfin. The Biden administration plans to keep hungry investors away from its new housing units by prioritizing sales to individual buyers, families and nonprofits.

It aims to do that by giving non-investors the first opportunity to bid on properties that wind up in "second chance" sales, where loan servicers sell foreclosed properties that had been bought with FHA loans. Those homes fall into the hands of large investors too often, according to the White House.

Also, up to 50% of the mortgage notes HUD holds on more than 1,700 defaulted properties will be offered to nonprofit organizations that commit to rehabilitating, and then selling, the related properties to non-investors.

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The new homes will be hard to get

Though the administration's plan for 100,000 homes is winning praise from people in the housing industry, it's a far cry from the number of houses the U.S. needs.

According to the National Association of Realtors, the U.S. is short at least 5.5 million housing units, and may need as many as 6.8 million.

Even if Biden can get his 100,000 units ready in the next three years, there's no guarantee you’ll get a crack at one of them, given the outsize demand. And who knows how much home prices will increase between now and then?

Freddie Mac’s latest quarterly forecast sees prices growing by another 8.9% between now and the end of 2022.

If you’re ready to buy

If you’d rather enter the market now, you can increase your buying power significantly by securing one of today's historically low mortgage rates.

Keep in mind that the best rates are offered to borrowers with the strongest credit. Taking a quick, free look at your credit score will tell you if it needs a little work before you approach a lender — and risk being offered a higher rate.

Lenders will be hesitant to work with you if you’re carrying several nagging, high-interest debts, like credit card balances. Consider rolling them all into a single, lower-interest debt consolidation loan, to reduce the cost of your debt and pay it off sooner.

If it's saving for the down payment that's proving difficult, you could try some low-stakes investing in the stock market. A popular app lets you build a diversified portfolio using just your "spare change" left over from everyday purchases.