President Joe Biden’s budget proposal for fiscal year 2025 includes over $250 billion in funding to boost housing supply as housing unaffordability continues to plague Americans.
The $258 billion proposal would be used to build or preserve over two million housing units, catering to lower- and middle-income households, according to the White House. Home prices climbed by 7% year-over-year in December, up from 6.3% in November, as constraints on supply, sustained inflation and high interest rates burden both suppliers and consumers.
The proposal includes $20 billion in mandatory funding for the Innovation Fund for Housing Expansion, which aims to provide subsidies for the construction of multifamily rental homes as well as remove barriers to housing development, according to the White House. The budget calls for another $7.5 billion in mandatory funding to be given to rental assistance project contracts for “the development of new climate-resilient affordable housing.”
The average rate for a 30-year mortgage neared 8% in October, reaching its highest level in 23 years, while housing prices also reached an all-time record in October after climbing for nine straight months. As a result, sales for existing homes fell to the lowest level since 1995 in December.
Some economists point to Biden’s high spending policies for the inflation that the U.S. has seen under his tenure, which peaked at 9.1% in June 2022. The president signed the American Rescue Plan in March 2021, authorizing $1.9 trillion in new spending, and the Inflation Reduction Act in August 2022, which added $750 billion in new spending.
In response to the high inflation, the Federal Reserve placed its federal funds rate in a range of 5.25% and 5.50%, the highest in 23 years. Treasury yields trail the federal funds rate, which in turn trails mortgage rates, resulting in hikes to the federal funds rate having huge effects on broader mortgage rates.
The price of rent has also seen a dramatic rise in recent years, increasing 6.1% year-over-year in January, far higher than the general rate of inflation. A lack of supply and the long-term lengths of leases have led to slower, more sustained price increases.
The White House did not immediately respond to a request to comment from the Daily Caller News Foundation.
Will Kessler on March 11, 2024
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