Today, the Biden-Harris Administration announced a new Housing Supply Action Plan to ease the burden of housing costs faced by millions of people nationwide with a bold goal of helping close the supply shortfall in 5 years. The plan includes both legislative and administrative actions and builds off the Administration’s announcement last September on immediate steps to increase the affordable housing supply.
The Housing Supply Action Plan points to the serious issue of rising housing costs burdening families of all incomes, but especially low- and moderate-income families. Across the country, nearly 11 million renter households are severely cost burdened, spending more than half of their income on housing. Additionally, the supply of affordable housing falls short of demand in nearly every state and major metropolitan area in the United States.
These challenges can be partially explained by the imbalance between housing supply and demand across the nation, underscored by recent research from the National Low-Income Housing Coalition that found only 36 affordable and available homes exist for every 100 extremely low-income renter households. These issues have been exacerbated by the pandemic and resulting increased construction costs, supply chain issues and inflation.
Enterprise is pleased that the administration highlights several of our key tax and appropriations policy priorities as solutions to help increase and strengthen our nation’s housing supply, including the Low-Income Housing Tax Credit (Housing Credit), Neighborhood Homes Tax Credit and the HOME Investment Partnerships Program (HOME).
Key Tax and Appropriations Policy Priorities
The Housing Supply Action Plan calls for the expansion and improvement of existing forms of federal financing, including reauthorizing and providing updated guidance for the HOME Program. HOME is a critical affordable housing program because it provides flexible dollars to communities to support homeownership, construction and rehabilitation and rental assistance. It is also a critical source of gap financing that is often paired with the Housing Credit. Enterprise applauds the administration’s efforts to strengthen HUD’s flagship program for the production and preservation of affordable rental and homeownership housing.
The plan also calls for the financing of more than 800,000 affordable rental units by expanding the Housing Credit, which is the nation’s primary tool for the production and preservation of affordable rental housing, by asking Congress to pass the House-passed reconciliation legislation as well as the additional proposals in the Administration’s Fiscal Year 2023 budget proposal. To further strengthen the program, the plan supports increasing funding for successful housing subsidies that pair well with the tax incentive, including Housing Choice Vouchers, the Housing Trust Fund and Project Based Rental Assistance, in addition to HOME.
There are also several regulatory recommendations included in the plan to strengthen the Housing Credit program, including finalizing the proposed rule on the Average Income Test (AIT) – a rule that allows developers to take the average income of tenants in order to more easily target extremely low-income individuals and families – and encouraging Fannie Mae and Freddie Mac to increase Housing Credit investments. Enterprise has been eagerly awaiting updated guidance, working with Congress and partners to provide feedback on the final rule. We most recently signed a letter in December with recommendations to Treasury on AIT.
To address the homeownership side of the equation, the plan calls on Congress to pass the bipartisan Neighborhood Homes Investment Act (NHIA). The original NHIA legislation would create a tax incentive modeled after the Housing Credit to build and rehabilitate 125,000 homes for low- and middle-income homebuyers. Called the Neighborhood Homes Tax Credit, the proposed tax incentive aims to revitalize distressed urban, suburban and rural neighborhoods by covering the gap between the cost of building or rehabilitating homes and the price at which they can be sold, thereby making this development possible in communities that typically would not see this investment otherwise.
State and Local Strategies to Increase Affordable Housing Supply
Enterprise is pleased to see a range of proposals in the Housing Supply Action Plan that would support state and local jurisdictions in easing their housing affordability and supply challenges. The plan includes strategies to incentivize jurisdictions to explore and address regulatory barriers to affordable housing production, as well as integrating affordable housing into the U.S. Department of Transportation (DOT) programs.
Easing prominent regulatory barriers to housing production at the state- and local-level, including excessive minimum lot size and off-street parking requirements, helps address housing supply and affordability challenges. Enterprise research also highlights that some federal transit programs, such as the Federal Transit Administration’s Joint Development program, can support creating affordable housing near transit.
New Financing Mechanisms to Build and Preserve Additional Housing
The plan also calls for deploying new financing mechanisms to build and preserve more housing where financing gaps exist, including manufactured housing, off-site development, accessory dwelling units (ADUs) and smaller multifamily properties. Enterprise commends the Administration for proposing actions that federal agencies that back mortgages, such as Freddie Mac, Fannie Mae and the Federal Housing Administration, can take to address barriers to financing these types of housing.
The actions outlined include launching and supporting pilots that expand lending products tailored for off-site construction; ADU development, especially lower- and moderate-income homeowners; and small and medium multifamily housing, which are housing production strategies that have been examined by Enterprise’s Policy Development & Research team. Based on our findings, we concur with the administration’s assertion that boosting these housing production strategies has the potential to increase supply in constrained markets, as well as create location-efficient, gentle-density development that can reduce greenhouse gas emissions.
As millions of people struggle with accessing affordable, decent housing, coupled with rising inflation, the call from the Biden-Harris Administration to bolster the supply of affordable housing should be heeded immediately. With the deadline to pass reconciliation legislation approaching and the midterm elections nearing, the window for action is shortening for several of the proposals that require Congressional approval. However, there are also a number of regulatory proposals within the plan that can be completed independent from Congress. We applaud the Administration’s initiative to address the need for more affordable homes and look forward to the opportunity to advance these priorities with Congress and federal agency decision-makers.