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Cost of housing

President Biden kicked off the housing section of his State of the Union address with a simple acknowledgment: “I know the cost of housing is so important to you.”

Home prices in the U.S. surged during the COVID-19 pandemic, when record-low mortgage rates, accommodative monetary policy and new remote working trends caused the demand for homes to spike — while, at the same time, the supply of new housing dropped due to pandemic-related disruptions to supply chains and industry labor pools.

While that demand and supply equation is yet to strike a healthy balance, certain economic factors are starting to ease the tension.

Inflation keeps coming down,” President Biden said. He assured his audience that “mortgage rates will come down as well” — but they’ve so far proven sticky in 2024, teetering just below 7% for a 30-year fixed loan.

Mirroring the sentiment of the U.S. public, the president is eager to find a quick resolution to the nation’s housing crisis.

“I’m not waiting,” he said. “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 towards their mortgages when they buy their first home or trade up for a little more space.”

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Housing policies

According to a White House fact sheet published prior to the State of the Union address, this proposed mortgage relief credit of nearly $10,000 over two years would be the equivalent of reducing the mortgage rate by more than 1.5% on the median home.

But with the rates hovering near 7%, a 1.5% drop would do little to ease the financial pain of thousands of younger Americans who weren’t quite ready to buy their first homes and lock-in the historically low borrowing rates of 2-3% during the COVID-19 pandemic.

The White House has acknowledged the mortgage rate lock-in trend, which makes current homeowners more reluctant to sell and give up their low rate, even when their current home no longer fits their household needs.

To address this, the president is calling for a one-year tax credit of up to $10,000 to middle-class families who sell their starter home — defined as a home below the area median home price in the county — to another owner-occupant.

He is also seeking down payment assistance of up to $25,000 for first-time home buyers and has proposed to eliminate title insurance on federally-backed mortgages.

Mixed response

When the White House posted about the president’s proposed $400 monthly tax credit for homebuyers on X (formerly known as Twitter), the responses were mixed.

Some warmly welcomed the idea of extra help to cover what continues to be the highest household expense for many Americans, per Doxo’s 2024 U.S. Household Bill Pay Report.

Others questioned where the government would get this extra money from, considering that the U.S. is already $34 trillion in debt. Others suggested this move could actually damage housing affordability by increasing demand while the supply of affordable housing remains limited.

Through his time in the Oval Office, President Biden has endorsed various housing briefs and “action plans” to address the nation’s housing supply shortage — which can be blamed on several compounding issues like local and state zoning laws, mortgage financing and the supply chain disruptions caused by the pandemic, among other things.

In his State of the Union remarks, the president called on lawmakers to “pass” a policy proposal that would “build and renovate two million affordable homes” — but he did not elaborate further on his plan.

The White House fact sheet goes into more detail. The president wants to increase the number of tax credits available for low-income housing developers and approve a $20 billion innovation fund for affordable housing expansion.

He also announced plans to help millions of renters by “cracking down on big landlords who break antitrust laws by price fixing and driving up rents.”

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Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.

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