President Joe Biden called for a $10,000 tax credit for first-time homebuyers and the construction of two million homes during his State of the Union address Thursday.
WASHINGTON – President Joe Biden called for legislation that will lower homeownership costs, build millions of new homes nationwide and reduce rental costs. Biden, in his State of the Union address, also announced new steps to lower homebuying and refinancing closing costs and highlighted his efforts to protect renters from burdensome fees.
Biden called on Congress to create a $10,000 tax credit for first-time homebuyers and people who sell their starter homes. His proposed mortgage relief credit would provide middle-class first-time homebuyers with an annual tax credit of $5,000 a year for two years, which is the equivalent of reducing the mortgage rate by more than 1.5 percentage points for two years on a median home, the White House said.
“I know the cost of housing is so important to you. If inflation keeps coming down mortgage rates will come down as well. But I’m not waiting,” Biden said in his address. “I want to provide an annual tax credit that will give Americans $400 a month for the next two years as mortgage rates come down to put toward their mortgage when they buy a first home or trade up for a little more space.”
The White House said Biden is taking aim at specific housing issues:
Boosting the housing supply:
- Building and renovating more than two million homes to close the housing supply gap and lower housing costs for renters and owners.
- Expanding the Low-Income Housing Tax Credit to build or preserve 1.2 million additional affordable rental units and creating a new Neighborhood Homes Tax Credit, a tax provision to build or renovate affordable homes for homeownership.
- Creating a new $20 billion competitive grant fund that will support the construction of affordable multifamily rental units, incentivize local actions to remove unnecessary barriers to housing development, create pilot innovative models to increase the production of affordable and workforce rental housing and spur the construction of new starter homes for middle-class families.
- Proposing that each Federal Home Loan Bank double its annual contribution to the Affordable Housing Program – from 10% of prior year net income to 20% – which will raise an additional $3.79 billion for affordable housing over the next decade and assist nearly 380,000 households.
Creating homeownership opportunities:
- Reducing the mortgage insurance premium for Federal Housing Administration (FHA) mortgages, saving an estimated 850,000 homebuyers and homeowners an estimated $800 per year.
- Calling on Congress to provide up to $25,000 in down payment assistance to first-generation homebuyers whose families haven’t benefited from the generational wealth building associated with homeownership.
Assisting renters:
- Expanding rental assistance to more than a half million households, including by providing a voucher guarantee for low-income veterans and youth aging out of foster care.
- Calling on federal agencies to stop anti-competitive, deceptive or fraudulent business practices in residential rentals, including stopping rental price collusion.
- Cracking down on fees incurred during the rental application process and throughout the duration of a lease, from fees to pay rent online to fees charged to sort mail or collect trash.
In response to Biden’s address, housing associations, including the National Association of Home Builders (NAHB) and the Mortgage Bankers Association (MBA), provided mixed reviews.
NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan., commended Biden for “making housing and homeownership a top national priority.”
“Many of the initiatives proposed by the president to build and preserve an additional 2 million homes — including a new $10,000 tax credit for first-time home buyers, strengthening the Low-Income Housing Tax Credit and up to $25,000 in down payment assistance to first-generation home buyers — are important steps forward to address a national housing shortage of roughly 1.5 million units and to boost housing affordability,” he said.
MBA President and CEO Bob Broeksmit said the association welcomes the Biden administration’s focus on reforms to the single-family and multifamily housing supply, but also has “significant concerns that some of the proposals on closing costs and title insurance could undermine consumer protections, increase risk and reduce competition.”
“In 2015, the industry implemented final rules from the Consumer Financial Protection Bureau making comprehensive reforms to mortgage disclosures to increase clarity and transparency and to help facilitate consumer shopping. In 2020, the CFPB reviewed and praised its own rules. Suggestions that another revamp of these rules is needed depart from the legal regime created by Congress in the Dodd-Frank Act and will only increase regulatory costs and make it untenable for smaller lenders to compete,” Broeksmit said
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