The Biden era housing crisis
The Biden administration announced on Monday new measures that could exacerbate housing shortages in the U.S., experts told the Daily Caller News Foundation.
Treasury Secretary Janet Yellen released new measures Monday that aim to increase the housing supply by expanding financing opportunities through continued subsidization in an effort to bring down costs. The U.S. continues to run a housing deficit year-over-year, driving up costs, with the latest measures adding to the list of market interventions in the housing sector under Biden that have ultimately exacerbated the problem through inflationary spending, crowding out of private investment and the encouragement of risky lending, according to experts who spoke to the DCNF.
There was a shortage of around 4 to 7 million homes as of November 2023, according to an estimate from The Pew Charitable Trusts. In a separate estimate from Zillow, the shortage grew by 200,000 from 2021 to 2022.
“Based on prices, it’s very hard to say that supply has been sufficient to meet demand,” Norbert Michel, vice president and director of the Cato Institute’s Center for Monetary and Financial Alternatives, told the DCNF. “The best thing to do, as has been the case for many, many years, is to stop the demand-side subsidies and intervention. If we don’t, we will continue to see high housing costs primarily because housing supply is always constrained to some degree.”
The latest effort from the Treasury includes a push to have all 11 Federal Home Loan Banks (FHLB), government-sponsored operations that aim to subsidize and assist in housing finance and community lending, increase the portion of their net income used for housing programs from 15% to 20%. The FHLB’s are currently required by law to use just 10% of their net income for housing finance and community lending.
The U.S. has been dealing with a housing shortage since the 2008 financial crisis that burst a housing bubble due broadly to overzealous lending, but that shortage was further exacerbated by COVID-19 pandemic shortages of both construction materials and workers to build the housing units, according to Fannie Mae. The U.S. is still dealing with the cumulative effect of the long-running housing deficit, setting the stage for the current housing affordability crisis.
“The US housing market is stagnating, but I think a bigger risk to homebuilders and related industries is the tinkering that the Biden administration has promised to do,” Peter Earle, senior economist at the American Institute for Economic Research, told the DCNF. “One part of the plan is having the Federal Home Financing Association (FHFA) order Fannie Mae and Freddie Mac to lower the interest rate on high-risk borrowers by raising the interest rate on low-risk borrowers. They’ve also been instructed to increase the amount of credit extended to high-risk borrowers.”
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If the Biden response to the problem sounds crazy, you are on to something. Texas has some of the largest growth in the country and one of the reasons is that it makes it easier for developers and builders to build new subdivisions.
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