Joe Biden and a row of suburban homes
Consolidated News Photos / Shutterstock

Biden plan aims to boost housing supply, improve affordability 

Proposals announced by the Biden administration ahead of the State of the Union earmark billions in tax credits and grants to increase homeownership.

March 7, 2024
3 minutes

Key points:

  • President Biden will ask Congress to provide $20 billion in grants to build and remodel 2 million homes.
  • The administration also wants to offer tax credits for first-time buyers and owners of starter homes who want to sell.
  • Policy changes include waiving lender’s title insurance on certain refinances and finding ways to lower closing costs.

The Biden administration has announced several proposals to address housing market challenges, including two that continue to plague buyers: low inventory and affordability.

The new initiatives were revealed ahead of the president's State of the Union address on March 7, and include a $5,000 first-time homebuyer tax credit, a $10,000 tax credit for owners of starter homes who are willing to sell, down payment assistance grants, and a combination of tax credits and $20 billion to encourage the construction or remodeling of more than 2 million homes.

  • The first-time buyer credit, aimed at middle-income buyers, would be valid for two years. The credit would equate to a 1.5 percentage point mortgage rate reduction on a median priced home, according to the White House news release.

  • The $10,000 starter-home credit is intended to incentivize owners of homes below the area median price to sell — but the buyer must be another owner-occupant, not an investor. The initiative could convince some potential sellers, hesitant to give up their locked-in low mortgage rates, to put their homes on the market, boosting inventory.

  • The down payment assistance grants are the core of a program known as the Downpayment Toward Equity Act, which was first introduced in Congress in 2021 but has yet to be enacted. The program would provide up to $25,000 in down payment assistance to first-generation homebuyers.

  • The $20 billion in building grants — the Innovation Fund for Housing Expansion — is intended to spur the construction of both rental and for-sale housing.

Many of the proposals would need congressional approval, which President Joe Biden plans to ask for during the State of the Union Address.

Some of the proposed policy changes aren't dependent on Congress, however, including a pilot program to waive lender's title insurance on certain refinance loans.

In an effort to improve affordability by lowering closing costs, the Consumer Financial Protection Bureau will also be addressing "anticompetitive closing costs imposed by lenders on home buyers and homeowners," according to the news release.

Initial reactions

The title insurance waivers drew some praise from consumer groups, who say the program could help with housing affordability.

"The title insurance market has been broken for decades, and homeowners and new homebuyers have paid the price," said Douglas Heller, director of insurance for Consumer Federation of America. 

"At the moment when consumers are finalizing a consequential financial decision — buying or refinancing a home — they are forced to purchase title insurance to protect the lender in a market built on kickbacks to the agents who direct consumers toward an overpriced title insurance policy," Heller said.

As for the $20 billion building and renovation fund and other grant programs, it's too soon to know if they are just well-intended or will actually move the needle on housing supply, said Ali Wolf, chief economist at Zonda

"The proposed plan by the administration is aimed to at least help alleviate some of the housing shortage," Wolf said, noting that grants could encourage housing construction, particularly for entry-level homes.

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