Stock

: Tax Credit and Rental Help: How the Biden Authorities May Reshape the Nation’s Housing Market

From the beginnings of the democratic primaries to
Debates between Joe Biden and Donald Trump, the presidential candidates for 2020
I've spent a lot of time talking about housing – and that's a little unusual.

As various Democrats battled for their party's presidential nomination in the last few months of 2019 and earlier this year, many of the candidates, including Biden, released ambitious housing plans, calling for anything from a tax on property speculators to building millions of homes nationwide new rental units. That summer, President Trump bragged about his administration's decision to withdraw a fair housing rule from the Obama era, claiming that people in the suburbs would see higher house prices and less crime as a result.

"I've been involved in previous campaigns, and it's usually a tough challenge to get housing policy into the mix anywhere other than the campaign website," commented Jim Parrott, a non-resident of the Urban Institute, commenting on how rare housing is to be seen as a central political issue that candidates regularly discuss.

Biden has spoken on since the election victory
on housing-related questions. While announcing his decision to nominate Janet Yellen
As his finance minister, Biden noted the uneven economic recovery from
the pandemic and how that has affected housing construction.

"Like the two lines that emerge from a K, some people watch their prospects rise while most others watch their economic well-being plummet," Biden said. He later said luxury home sales were up 40% year-over-year, but every sixth renter was behind on their rental payments as of October.

See also: What a Biden government will mean for real estate finance reform

What can Americans expect from the Biden government?
in terms of housing policy? What the experts say:

Economic recovery from the pandemic will be a priority

Had the recession triggered by the COVID-19 pandemic
serious consequences for tenants and homeowners alike. Millions of tenants
could be evicted early next year if the statewide moratorium
imposed by the Centers for Disease Control and Prevention is not extended.

And even then, the moratorium is just a stop-gap measure – without emergency aid, these tenants could still be without housing if the moratorium ends after months of not paying rent. Meanwhile, many mom and pop landlords are struggling to stay afloat after many months without receiving payments from their tenants.

Homeowners are arguably in a better position than renters, but many also have problems. Millions of homeowners are still in mortgage forbearance programs that are allowed under the CARES Act that allow them to skip monthly payments for up to a year. In March, many homeowners could be forced out of these indulgence plans without Congress doing anything. At this point, they can negotiate a loan modification with the lenders, but many will still have difficulty.

Banking regulators must ask lenders to differentiate
between those mortgage borrowers who can recover and those who are unlikely to do so,
and then develop exit strategies for those in difficulty. "The longer you
The greater the loss, the greater the loss, ”said Karen Shaw Petrou, managing partner at Federal Financial
Analytics.

Although most Americans have seen their home equity grow significantly during the pandemic, some struggling homeowners will end up in foreclosures. "The households hardest hit by foreclosures are low and moderate homeowners, and they are the ones who have not seen such a surge in house prices," Petrou said.

If the Biden administration does not guarantee a larger one,
comprehensive stimulus package that addresses the needs of tenants and tenants
Homeowners alike: "You will potentially get a tremendous amount of money
Stress emanating from the real estate market and affecting the entire economy
in general, ”said Parrott.

However, Biden's government could include pandemic relief in its broader housing agenda, experts said. "The pandemic has presented us with a new opportunity to connect with members of Congress, which really highlights why housing is so important," said Sarah Saadian, vice president of public policy for the National Low Income Housing Coalition. "And so I hope it helps us build the political pressure we need to get big things done."

Both views housing
as the key to economic prosperity

One of the main reasons so many candidates focused on housing policy this election cycle is affordability concerns. Even before the COVID-19 pandemic, tenants were struggling to afford the roofs over their heads. In 2019, according to the Joint Center for Housing Studies at Harvard University, over 20 million rented households across the country had spent more than 30% of their income on housing.

Beyond the issue of affordability, Biden sees housing as an integral part of other, broader societal issues that he wants to address. For example, as part of his broader proposal to tackle climate change, Biden called for the construction of 1.5 million sustainable homes and units.

"
They are far more likely to include housing policy on their broader, high-priority economic agenda in ways that we have not seen in a long time.

– Jim Parrott, a non-resident of the Urban Institute

“He's really trying to listen to various disadvantaged people
Communities and ensure that fair policies are woven between all aspects
its administration, ”said Melody Zimmerman, Program and Policy Director
the National Housing Resource Center, an organization dedicated to the
Housing advice industry and consumers.

Another example of this are Biden's plans too
close the racial wealth gap. The historical lack of access Black and Latino
Americans had to have home ownership hampered their ability to build and build
Transmitting generational wealth, adding to the gulf identified today.

For the Biden team, "solving some pretty big existential economic problems means solving some major housing issues," said Parrott, who also owns Parrott Ryan Advisors, a consultancy that advises financial institutions on real estate finance issues. "It means they are far more likely to embed housing policy into their broader, high-priority economic agenda in a way that we have not seen in a long time."

Tenants could get help with high housing costs

Also in contrast to earlier administrations, the Biden administration
seems ready to take a closer look at the housing situation of tenants,
and not just the dilemmas that homeowners face.

Several key components of the housing plan that the Biden campaign released earlier this year are aimed at alleviating affordability concerns among tenants. For starters, Biden has suggested adding funding to the Section 8 Housing Voucher program, which subsidizes rental housing costs for low-income families. Currently, only one in four eligible households receives these vouchers due to insufficient funding.

"If we had universal housing vouchers, we wouldn't see them
as many households close to eviction as we are now, ”Saadian said
said.

"
We already have many tax credits going to homeowners, so this is also a way to smooth the playing field for renters.

Sarah Saadian, vice president of public policy for the National Low Income Housing Coalition, on the value of a renter's tax credit

Additionally, Biden proposed two tax credits aimed primarily at renters. Tenants who earn too much would be allowed to qualify for vouchers to write off housing costs in excess of 30% of their income, much like a proposal made by Vice-President-elect Kamala Harris during her presidential campaign. The other would provide up to $ 15,000 of refundable, prepayable credit to cover the cost of a down payment on a home.

“We already have many homeowner tax credits.
and so this is also a way of smoothing the playing field for tenants, ”said Saadian
said.

All of these measures would require legislative action, but some could get bipartisan support in Congress, real estate experts said. In particular, the tax credits proposed by Biden could appeal to conservatives who are more inclined to cut taxes than to increase them.

Continue reading: The Trump administration could privatize Fannie Mae and Freddie Mac – and disrupt the country's real estate finance system

The Biden administration will concentrate the agencies on fair living

One area where the Biden government can take action without the support of Congress is overseeing existing regulations – particularly those related to fair living and lending. The Trump administration has withdrawn a number of Obama-era measures aimed at reducing residential segregation and housing discrimination against colored people.

“The place where the Trump administration did the most
Damage is the undermining of civil rights and fair housing protection. And so it has
to be a major focus of the Biden government over the next year, ”argued Saadian.

Fair housing advocates have found Biden's election of Ohio Democrat Rep. Marcia Fudge to head the Department of Housing and Urban Development is an encouraging sign in that regard. In a statement following Fudge's nomination, Lisa Rice, President and CEO of the National Fair Housing Alliance, noted that Fudge is “a tireless advocate for civil rights” and “is a strong advocate for fair access to credit, education, healthy food , clean environments, and other resources that come with access to housing. "

But Biden's team will likely do more than reset the fair living rules to what they were before Trump took office. Biden himself has suggested that he will take action against discrimination as part of the house valuation process, for example.

Certain suggestions could backfire if not implemented correctly

Addressing the issues facing the country's real estate market
is not foolproof and could have unintended consequences.

For example, Biden's proposed down payment aid tax credit could increase the number of Americans who could afford to buy a home. However, the country is already facing a shortage of homes for sale and rapidly rising property prices. If more people are suddenly entering the home purchase market, it could be a recipe for disaster with no additional action.

"You have to find a way to solve a supply-side problem," Parrott said. "If you don't, efforts to expand demand may gradually help more people [in the home purchase market], but it will also make housing less affordable."

To that end, Biden has proposed a $ 100 billion fund
Construction or modernization of affordable housing, as well as the removal of local ones
Building regulations that prevent further houses from being built. Both suggestions
could increase the number of homes in the market if implemented.

“Hopefully they can develop a package that gets a response
with both sides, ”said Parrott.

Related Articles