A cross section of federal agencies tinkered with policies in an effort to boost affordable housing and the middle class, according to the White House. For example, homesteading buyers will have more exclusive time (30 days) to buy foreclosed homes under FHFA.
WASHINGTON – The Biden Administration announced a number of changes intended to boost the availability of affordable housing, including a broad goal to deliver 100,000 units within three years. The White House provides an overview of the changes on its website.
The change starts with manufactured homes and buildings with two to four units, and a promise to make it easier to get a mortgage. Changes to make that happen will fall under Fannie Mae and Freddie Mac, which currently back over half the mortgage homes in America. Those enterprises are under the control of the Federal Housing Finance Agency (FHFA).
Another push will make it easier for homebuyers to secure a home if they plan to live in it, with the White House release noting how many homesteaders have to compete with investors. Part of this will be accomplished by new limitations on foreclosed real estate-owned (REO) foreclosed home sales if they’re owned by government agencies – a number that could rise as forbearance ends and more homes are expected to enter the foreclosure process.
For renters, federal agencies plan to boost financing options for apartment buildings, largely through tax credits, loans and grants.
The White House also says its economic agenda will help build and renovate two million homes. That agenda comes in the form of low-income housing tax credits, a new tax credit for specific at-risk neighborhoods, and incentives that entice local governments to change exclusionary zoning and land-use policies.
According to the White House release, “One out of every six homes purchased in the second quarter of 2021 was acquired by investors, and reports indicate that in some markets, that number is one in four. … Large investor purchases of single-family homes and conversion into rental properties speeds the transition of neighborhoods from homeownership to rental … making it harder for aspiring first-time and first-generation home buyers, among others, to buy a home.”
FHFA “First Look” period
Buyers seeking a home for themselves – along with public entities and nonprofits – will now have 30 days (up from 20 days) for exclusive access to buy Fannie Mae and Freddie Mac real estate owned (REO) properties before investors have a chance to buy them. FHFA says this gives individual and families more time to find adequate financing.
“Extending the amount of time owner occupants have to bid on a REO property, without competition, is especially important for neighborhood preservation while the supply of homes for sale is severely limited,” says FHFA Acting Director Sandra L. Thompson.
Increase in the Fannie Mae and Freddie Mac’s LIHTC Cap
FHFA announced that Fannie Mae and Freddie Mac can each invest up to $850 million annually in the Low-Income Housing Tax Credit (LIHTC) market as equity investors, effective immediately. Previously, each was limited to $500 million.
Within the $850 million, any yearly investments above $425 million must be in areas identified by FHFA as markets that have difficulty attracting investors – and increase in the cap. This money must either support housing in Duty to Serve-designated rural areas, preserve affordable housing, support mixed-income housing, provide supportive housing, or some other affordable housing objectives.
Specific changes included in the White House announcement
Boost the supply of quality, affordable rental units by relaunching the partnership between the Department of Treasury’s (Treasury) Federal Financing Bank and the Department of Housing and Urban Development (HUD) Risk Sharing Program in order to enable eligible state housing finance agencies (HFAs) to provide low-cost capital for affordable housing development; raising Fannie Mae’s and Freddie Mac’s (the Enterprises) equity cap for the Low-Income Housing Tax Credit (LIHTC), the largest federal program for the construction and rehabilitation of affordable rental housing; and making more funding available to Community Development Finance Institutions (CDFIs) and non-profit housing groups for affordable housing production under the Capital Magnet Fund.
Boost the supply of manufactured housing and 2-4 unit properties by expanding financing through Freddie Mac. Along with Fannie Mae’s and the Federal Housing Administration’s (FHA) existing policies, these steps will enable more Americans to purchase homes and increase the availability of rental units throughout the country.
Make more single-family homes available to individuals, families and non-profit organizations – rather than large investors – by prioritizing homeownership and limiting the sale to large investors of certain FHA-insured and HUD-owned properties, in addition to expanding and creating exclusivity periods in which only governmental entities, owner occupants, and qualified non-profit organizations are able to bid on certain FHA-insured and government-owned properties.
Work with state and local governments to boost housing supply by leveraging existing federal funds to spur local action, exploring federal levers to help states and local governments reduce exclusionary zoning, and launching learning and listening sessions with local leaders.
Even with the changes, however, the announcement also concludes that there’s “no magic formula to quickly relieve supply constraints.”