In the face of a massive, nation-wide shortage of housing construction, the White House announced a new slate of initiatives Monday to try to speed up the building of new units.
“Today’s action plan includes legislative and administration – administrative actions that will help close America’s housing supply shortfalls in five years, starting with creation – the creation of preservation of hundreds of thousands of affordable housing units in the next three years,” White House Press Secretary Karine Jean-Pierre told reporters during a regular briefing yesterday.
The plan combines incentives for local jurisdictions to liberalize their zoning with administrative steps to make funding for multifamily development easier to come by.
First, the Department of Transportation has promised it will encourage communities applying for grants under the Biden administration’s $1 billion infrastructure program to adopt land-use reforms aimed at “density, rural main street revitalization, and transit-oriented development.” DOT will also give extra funding to communities applying for funding under certain other infrastructure grant programs when residential development is included in plans.
On the housing finance side, the Biden administration said it will ask Freddie Mac to explore how it would grow its purchases of mortgages for manufactured housing. Freddie Mac and Fannie Mae, the government-supported enterprises that act as buyers and securitizers of many mortgages, will also explore how they can expand their multifamily lending, including the purchase of construction-to-permanent multifamily loans. These products offer a simpler and therefore cheaper financing path for multifamily developers, who often have to first secure a short-term construction loan with is then refinanced into longer-term debt.
To help affordable housing developers, the Biden administration said it will work to “harmonize” the requirements for a slew of federal funding options, from the Low Income Housing Tax Credit (LIHTC) to various funding streams controlled by the federal Department of Housing and Urban Development, like the HUD HOME program. The aim is to shrink the work needed to assemble the often-complex financing packages subsidized housing projects need to begin construction.
These affordable housing developers will also get another boost by the end of September, the Biden administration promised, when the Treasury Department finalizes a new LIHTC “income averaging” rule. This will allow some developments to average the incomes of all tenants in a single LIHTC-funded project instead of making sure every tenant’s income is below a certain threshold.
The administration also said it was hoping to spur the construction of more small multifamily units with new initiatives. First, the Federal Housing Finance Agency and the Federal Housing Administration will “explore” how they can help lenders pilot mortgage products for the construction of accessory dwelling units or the renovation of existing homes into multiple units. Several banks and credit unions on Cape Cod have created similar loan products as the region turns to ADUs as a core part of its strategy to solve its own housing crisis.
The agencies will also explore how lenders can create more loan products for the construction of two- to four-unit multifamily buildings.
The new initiatives come on the heels of the Commerce Department’s recent decision to reduce tariffs on Canadian softwood lumber, a key component of most multifamily buildings.