Americans are facing a historic housing affordability crisis that’s left millennials feeling “disenfranchised”—and hindered Gen Z’s attempts to leave the nest. With sky-high home prices and burdensome mortgage rates weighing on buyers, the housing market is locked in a deep freeze. Meanwhile, rents have surged roughly 30% since the pandemic, forcing a record number of renters into unaffordable housing.
The Biden administration has introduced a number of measures meant to address these issues, including tax credits, down-payment assistance, and reduced closing costs. But a top Biden official admits the housing crisis can’t be controlled without a shift that many in the real-estate industry have been calling for: building more. A lot more.
“In order to be able to afford to buy homes, we need more homes in general,” Adewale Adeyemo, deputy secretary of the Treasury, told Fortune in an interview after President Biden’s State of the Union Address.
“We have a supply challenge in the economy,” Adeyemo explained. “Since the financial crisis, we’ve built too little housing here in the United States.”
Indeed, the U.S. needs between 2 million and 7 million homes to make up for its current supply gap, according to calculations from Realtor.com. Despite the U.S. starting construction on about 1.5 million new homes in each of the last three years, the nation’s housing supply remains far behind where it needs to be.
In his State of the Union Address on Thursday, Biden highlighted his moves to address the housing crisis, noting he had “cut red tape” to boost federal financing for housing projects and put forward a number of other measures to control housing costs.
This week, Biden proposed a tax credit that would give first-time homebuyers and sellers roughly $400 a month over the next two years to help with high mortgage costs. The new plan would eliminate title insurance fees for federally backed mortgages as well. “When you refinance your home, this can save you $1,000 or more,” Biden said.
Still, a savings of $1,000 is small potatoes against the backdrop of home prices that have surged roughly 40% since before the pandemic; for the average American, that would cover roughly two weeks’ worth of rent, according to Zillow’s latest figures.
So despite Biden’s mostly demand-related proposals, Adeyemo pointed to the President’s call on Thursday to build and renovate 2 million homes as evidence that he understands “the only way to deal with the supply challenge is to build more supply.”
Biden proposed building on his 2022 Housing Supply Action Plan before the State of the Union Address on Thursday with tax credits for home builders that construct affordable housing; a new $20 billion “innovation fund” for the construction of multi-family units, starter homes, and to “incentivize” the removal of barriers to construction; and doubling the Federal Home Loan Bank’s annual contribution to the Affordable Housing Program. And for renters, Biden pledged to crack down on rental “junk” fees and “fight rent gouging” by corporate landlords.
“The President’s fighting to do everything he can to lower costs using the authorities Congress has already given us,” Adeyemo said of the actions. “And we’re going to call for Congress to give more resources to allow us to build more housing supply.”
