Biden Administration Housing Programs

As President Biden jumps into his first 100 days, all industry eyes are focused on his economic policy proposals. Politicians are known for over-promising and under-delivering on the campaign trail, but many are wondering in this unprecedented moment of need due if he’ll actually make good on the proposals he set forth. He now has both houses of Congress behind him (if even by razor thin margins) which will make passing actual legislation easier, but not a sure thing. 

In this article we’ll look at the Biden administration’s plans for housing assistance. So far, his plans fall into two camps: aid for homeowners, and aid for renters. If you’re reading this, it’s likely you’re part of the latter group with aspirations on becoming part of the former. Many would-be homeowners’ dreams were paused due to Covid restrictions and subsequent job losses. Because of this, we’ll outline how Biden aims to assist renters currently struggling to stay afloat, and his plan for helping them achieve homeownership during this volatile time.

Down Payment Assistance

Biden’s most ambitious policy for homeowners is through a new down payment assistance fund. We’ve talked about DPA’s here before, but unlike many of the existing programs, this would be federally run and open to all Americans who qualify. The plan would offer a $15,000 first-time homebuyer tax credit to be used on the down payment. This credit can be taken during the closing process, so borrowers would not have to wait to file their taxes before claiming the credit. This could be great news for borrowers who may have good credit and a steady income, but have been unable to save enough for a down payment. Many first-time borrowers cite an inability to come up with a down payment as their number one reason for not purchasing a home.

Critics of the move claim that it would only serve to increase home prices, citing already rising home prices (up over 8% compared to this time last year), and a dwindling inventory (some estimates put it at 40% lower than a year ago.) These factors make it a seller’s market. If sellers know that buyers can obtain a free $15,000, what’s to stop them from raising their list price by $15,000 to take advantage of it themselves? 

Programs aimed at helping Americans to purchase homes are usually well received by both political parties, but this policy agenda will still have to make its way through legislation. While most lawmakers understand the need to promote homeownership, they could disagree on the best way to allocate these much needed funds. Some argue that borrowers who would be eligible (those with good credit and steady, uninterrupted incomes) are the very people who’ve weathered the pandemic the best and therefore don’t need a handout.

Enhance Availability of FHA Loans

Another push by the Biden administration is urging big banks to get back into FHA (Federal Housing Administration) lending. After the Great Recession of 2008 many bigger banks stopped offering FHA loans, leaving it mainly to smaller lending institutions. This was partly out of fear of losing more money and putting themselves in a vulnerable position by extending loans to riskier borrowers. It was also in no small part because they were attacked by the public and private sector for their outsized role in the housing market collapse, and are cautious about teaming up again with the federal government.

Biden believes by expanding the number of banks who are authorized to grant FHA loans, it follows that more borrowers will have access to them. He’s betting on the sense of stability within his new administration as added security for banks agreeing to FHA loan terms. FHA loans are the most popular kind of government-backed loan, opening up home ownership with reduced down payments to borrowers with low credit scores and higher than average DTI (debt to income ratio).

Encouraging New Home Construction

One major reason for the slump in homeownership is the lack of housing inventory. Inventory naturally goes up and down, but the recent pandemic mixed with Trump’s restrictive trade and immigration sanctions have increased costs for home builders, thereby decreasing the number of homes being built. Both material and labor costs increased under Trump’s watch, but many in the homebuilding industry are hoping that Biden’s more liberal policies will help to decrease these rising costs.

In addition to increased costs, there’s also the roadblock of local zoning ordinances that restrict certain types of homes (usually multi-family residences) from being built within city limits. Biden hopes to work with local legislatures to ease up these restrictions and encourage more high-density housing. While campaigning, Biden pledged to construct 1.5 million homes and public housing units over 10 years. He also said he would prioritize low income housing, and put forward $100 billion in an affordable-housing fund. This could be used to finance and subsidize builders wishing to construct and rehabilitate housing, with an emphasis on making homes more energy-efficient. More homes = more inventory = lower prices. 

Help With Student Debt

It may not seem intuitive to be talking about student debt in a home-buying blog, but debt figures in substantially on whether or not you’ll qualify for a home loan. Right now student debt accounts for 35% of all non-housing debt Americans carry, and it is taking up a larger and larger portion of borrowers’ DTI. If Biden’s plan can reduce or even eliminate debt for borrowers, this could significantly impact their creditworthiness and nudge them into a place where they would now qualify for a loan. 

The numbers and policy are still vague with some lawmakers on the progressive left calling for all student debt to be cancelled, while others on the center left (like Biden himself) entertaining a more realistic number, such as cancelling $10,000 per borrower. In the meantime, Biden has already extended a provision under the CARES Act (The Coronavirus Aid, Relief, and Economic Security Act) to extend suspension of student loan payments through September of 2021. 

Continued and New Rental Assistance

We know many of our readers are currently renters who have their sites fixed on homeownership. Know that there’s help out there for you which will add security to your existing housing situation, and may enable you to save and pay off debt faster so you can qualify for a home loan sooner. 

The CARES Act issued an eviction and foreclosure moratorium back in March of 2020 that Biden extended through September of 2021. This helps renters stay in their homes, as many have been severely affected by job loss or underemployment due to the pandemic. It doesn’t, however, offer a plan for the back rent due to many landlords. There’s an estimated $25 million in back rent owed by renters as of January 2021, which puts a strain on both renters and landlords alike.

Biden’s plan also calls for an additional $30 billion for the hardest hit families and individuals in the form of rental assistance, utility assistance, and legal assistance to those facing eviction or foreclosure. 

So What Should You Do?

Times are tough for everyone now, but there’s reason to believe they’ll start getting better. As more and more vaccines roll out, the job market should expand and people can start working again or working more. If you found yourself pausing your dreams of homeownership due to the pandemic, keep your eye on these policies as they could be just what you need to reach your goal. 


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