Federal Government Awards $85 Million for Affordable Housing Construction

White House continues string of housing-related announcements.

Vice President Kamala Harris speaks at South Carolina State University ahead of the South Carolina Democrats' primary election in Orangeburg, S.C., on Feb. 2, 2024. Madalina Vasiliu/The Epoch Times

Vice President Kamala Harris and administration officials said on June 26 that they are awarding $85 million to 21 state and local governments as part of a new program to support the construction and preservation of affordable housing.

Funding will come from a Housing and Urban Development program created in the fiscal year 2023 appropriations bill.

The administration’s latest housing affordability measure aims to assist state and local officials in updating their housing agendas by removing barriers to development, adjusting zoning laws, and speeding up the permitting process for new construction.

Nearly 200 communities applied for the funds.

The chosen beneficiaries consist of a diverse array of jurisdictions, including Los Angeles County ($6.7 million), Hawaii ($6.6 million), Denver ($4.5 million), and Milwaukee ($2.1 million). Ketchum, Idaho, will also receive $2.5 million.

Portions of the funding will be used as subsidies for homebuilders to develop vacant lots and as low-cost loans to property developers to construct utility connections.

It is unclear when shovels will be in the ground. However, the vice president told reporters in a conference call that the recipients had already started employing “housing-forward strategies” to bolster supply.

Later this summer, the federal government plans to announce an additional $100 million worth of grants.

This, the White House says, will further support the administration’s goal of building 2 million affordable housing units.

“Part of the reason for the high cost of housing is a lack of supply. In many communities, there’s simply not enough affordable housing available, and significant barriers prevent more from being built,” the vice president said.

“The investment is part of a larger strategy to lower rents and help more Americans buy a home.”

While the U.S. real estate market has been facing years of under-building, also applying pressure on the housing supply is the number of homeowners staying put.

New research by the Federal Reserve Bank of New York shows that homeowners who locked in extremely low mortgage rates at the onset of the coronavirus pandemic are not moving.

“In considering how mortgage rate lock-in is affecting mobility, it is also worth noting that moving rates are currently quite low in the United States,” staff economists wrote in a May paper.

In response to the public health crisis, the Federal Reserve slashed interest rates to nearly zero, sending Treasury yields crashing and mortgage rates plummeting.

Zillow chief economist Skylar Olsen suggested that the effects of rate lock “appear to be lessening over time,” which could provide price relief soon.

“Home sellers are returning to the market but finding buyers hesitating. Fresh listings of houses rose significantly over last year, outpacing sales and cooling buyer competition and home price appreciation,” he said in a report last month.

“Zillow forecasts further price relief on the horizon—further injections of inventory and mortgage rates expected to stay elevated through the year should temper competition.”

Since hitting a bottom of 2.77 percent in August 2021, the average 30-year fixed-rate mortgage rocketed to 7.79 percent in October 2023.

According to the Freddie Mac Primary Mortgage Market Survey, mortgage rates declined for the third consecutive week, sliding to 6.87 percent for the week ending June 20.

The trend could ease pressures in the wider U.S. housing market, says Sam Khater, the chief economist at Freddie Mac.

“These lower mortgage rates coupled with the gradually improving housing supply bodes well for the housing market,” he said following the latest rate data.

Median existing home sales prices have surged 38 percent since January 2021, and rents have increased 21 percent over the same period.

Administration Announces Efforts to Combat Record Home Prices

The latest announcement was made soon after the National Association of Realtors reported that median existing-home prices climbed to an all-time high of $419,300 in May.

U.S. rents rose to $1,653 in May, the highest level since October 2022, according to Redfin data.

In a separate report, the residential real estate brokerage and mortgage origination services firm discovered that renters must earn $66,120 to afford the typical apartment, but only 39 percent earn enough income to afford the median-priced apartment.

In February, Realtor.com noted in a report that the nation has a shortage of 7.2 million homes.

Over the past week, senior administration officials have unveiled or highlighted the federal government’s measures to reduce housing costs.

Treasury Secretary Janet Yellen revealed on June 24 a $100 million fund over three years to finance affordable housing projects. Additionally, the newest White House framework to put forward “a broad affordability agenda” includes pushing 11 Federal Home Loan Banks (FHLB) to increase their spending on housing programs and encouraging federal, state, and local agencies to support financing new housing development.

“We face a very significant housing supply shortfall that has been building for a long time,” Ms. Yellen said in prepared remarks. “This supply crunch has led to an affordability crunch.”

Since peaking in April 2022, housing starts for single-family homes and buildings with five or more units have been trending downward, according to Census Bureau data.

Fannie Mae projects that total housing starts will fall 3 percent this year before rebounding by 3.1 percent in 2025.

Lael Brainard, the director of the National Economic Council, appeared before the Urban Institute on June 20 to emphasize actions taken by the president to extend relief to homeowners, first-time homebuyers, and renters.

These measures have included a string of sizable tax credits for buyers and developers.

Gene Sperling, the senior adviser to President Biden and the American Rescue Plan coordinator, is scheduled to travel to Detroit on June 27 to announce new actions the White House is taking to lower costs for new homeowners.

Some Republicans consider these actions too little, too late.

“The Biden administration’s misguided policies hurt housing affordability,” Rep. Warren Davidson (R-Ohio), who serves on the House Finance Committee, wrote on social media platform X. “Now, due to massive inflation and high rates, Americans can’t afford to buy a house or rent an apartment.”

House GOP lawmakers have outlined a draft $73.2 billion spending bill for Transportation, Housing, and Urban Development.

It includes an increase of $115 million to the Housing Choice Voucher program, lifting its total price tag to $32.3 billion. This federal program helps low-income families and seniors lease or buy rental units.

Inflation, including housing costs, is expected to play a major part in the first presidential debate between President Joe Biden and former President Donald Trump on June 27.