America’s Affordable Housing Crisis
There is a lot of discussion over the lack of inventory plaguing home buyers across our country. The lack of inventory is causing home prices to surge as home buyer demand remains sky-high due to near historic low mortgage rates. While this is a problem for home buyers in general, it’s impacting different groups of home buyers more than others. First-time home buyers, as well as low-income or moderate-income home buyers are feeling the inventory crunch more than other groups. Traditionally, first-time home buyers purchase a starter home and then eventually save up for their dream home. However, an overall lack of affordable homes is making it difficult for first-time home buyers to find starter homes. First-time home buyers are having to choose whether they should buy what is available or continue renting. New programs are hoping to help the affordable housing crisis and provide opportunities for first-time home buyers.
Biden Administration Announces Plans to Tackle Affordable Housing Crisis
The Biden Administration has already made announcements that indicate they have a strong interest in increasing the amount of available housing. In May, they announced details for the American Jobs Plan, which forms the backbone of the infrastructure bill that is currently being shaped in Congress. Included in this legislation is $318 billion that is earmarked toward increasing the supply of available housing throughout the United States. There are several ways they intend to use the $318 billion that is proposed. First, $45 billion would be spent on building and preserving affordable housing in the Housing Trust Fund, which helps low-income Americans with housing. Second, they would use significant dollars to improve and expand public housing throughout the nation. These are the largest proposed expenditures, but there are many other programs they hope to fund to improve affordable housing options.
This legislation also includes $2 billion for project-based vouchers that are supposed to create long-term affordable housing for low-income Americans. Additionally, $35 billion is proposed for the HOME Investment Partnership. They are also looking to boost the supply of affordable homes by spending $10 billion on redevelopment. In addition to these various programs, additional funds will be spent on making sure that rural communities also get a new supply of affordable homes. While all of these proposals might help to boost affordable housing in the future, none of them are guaranteed. The American Jobs Plan is not law and it is not a certainty that Congress will ever come to an agreement on infrastructure spending. Even if they do, there is no guarantee that the Biden administration’s affordable housing wish list will make it into the final bill.
Biden Administration Takes Immediate Actions
While the White House is holding out hope that a bulk of their proposals to solve the affordable housing crunch will be passed, they’re taking immediate action in other ways. The White House just announced that they are reallocating existing funding to build 100,000 affordable homes over the next few years. They intend for these homes to be sold through HUD directly to low-income families or to nonprofits. Their hope is that this will prevent these homes from being purchased by large investment firms, who will then sell them at increased prices. This is far short of the 2 million homes that Biden wants to build thanks to the proposals in the American Jobs Plan, however, it is an immediate action that can get the ball rolling.
Affordable Housing Crisis is Hurting Renters and Home Buyers
Renters and home buyers, especially first-time home buyers, are hardest hit by the current lack of affordable housing. It is no secret that home prices have been rising in nearly every market in the United States. What is getting less coverage is the fact that rent prices have also been rising dramatically. This is an interesting predicament for those who are renting, but it also presents some unique opportunities. In many markets, rent is far more expensive than the cost of monthly mortgage payments. Even though home prices have risen, it still makes sense for many renters to buy a home rather than continuing to pay rent. While an influx of affordable homes would be welcomed, especially for low-income families and first-time home buyers, buying at today’s prices still makes sense.
Final Thoughts
The Biden administration is correct that there is a lack of affordable housing in our nation. While it would be fantastic if the supply of affordable housing were to increase in the near future, renters should not wait for that to happen to plan for buying a home. Even though home prices are high, low mortgage rates make buying a home more affordable than continuing to rent in most places. When accounting for rising home prices, security deposits, and providing first-month, as well as last-month rent, making a down payment is reasonable. Additionally. Low mortgage rates mean that mortgage payments are often lower than monthly rent payments.
All this is to say that there is no reason to wait for government increases in affordable housing to plan for buying a home. With the help of a trusted mortgage broker like the professionals at Peoples Choice Mortgage, you can start working toward the dream of homeownership today. If you are tired of renting and want to buy a home of your own, contact us and let’s put the plans in place to make your dream a reality.
