America needs to build more housing to lower rental costs and increase access to homeownership, according to President Biden's State-of-the-Union address on March 7.

The President is calling on Congress to pass legislation to build and renovate more than 2 million homes, which would close the housing supply gap and lower housing costs for renters and homeowners.

His proposed initiatives is meant to help low- and middle-income families purchase homes. The president will ask Congress to establish a Mortgage Relief Credit to provide middle-class first-time home buyers with an annual tax credit of $5,000 a year for two years. The administration estimates such a credit would help more than 3.5 million middle-income families purchase homes. To address the lack of affordable homes for sale, President Biden will suggest Congress enact a one-year tax credit of up to $10,000 for middle-class families who sell their starter home (defined as a home priced below the area median home price) to another owner-occupant.

"Now pass [my plan]," Biden said to the Congress, "and build and renovate 2 million affordable homes and bring those rents down."

NAR's response

The National Association of Realtors thanked President Biden for raising awareness of the affordable housing crisis during his State of the Union address.

The following is a statement from 2024 NAR President Kevin Sears:

"The lack of affordable housing supply is hurting the middle class and depriving first-generation and first-time homebuyers of the financial security that homeownership and the American Dream provide.

NAR first sounded the alarm on this issue with original research showing a nationwide shortage of 5.5 million affordable housing units. We commend President Biden’s commitment to an all-of-government approach to solve this problem. NAR has proposed and advocated for many of these proposals, which together would make serious headway toward fixing this crisis. 

Tax incentives can help close the affordable housing gap, and we are especially grateful for the President’s willingness to explore new tax measures. NAR also supports an all-of-the-above approach to this crisis--from tax incentives to zoning reforms to expanded financing.

NAHB applauds proposals

Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita Kan., attended tonight’s State of the Union address and issued the following statement regarding President Biden’s remarks:

“NAHB commends President Biden for acknowledging that homeownership and housing are critical to a strong and prosperous nation and that quick action must be taken to aggressively increase the supply of attainable, affordable housing by building 2 million more homes. With a nationwide housing shortage of roughly 1.5 million housing units, boosting the supply of housing is the only way to tame inflation, achieve a measure of price stability in the for-sale and rental markets, and ease the nation’s housing affordability crisis.

“By announcing several proposals to enable more families to achieve homeownership or have access to suitable rental housing, the president has made it clear that housing is an urgent national priority. NAHB looks forward to working with the administration and Republican and Democratic leaders in Congress to help in this effort by eliminating excessive regulations; opposing restrictive, costly national energy code proposals that will raise housing costs while providing little energy savings to consumers; promoting careers in the skilled trades; and alleviating permitting roadblocks.

“These common-sense solutions will bend the housing cost curve, reduce housing inflation and the overall inflation rate, enable builders to boost attainable housing production and put the economy on a firmer footing.” 
 
AEI: Watch your wallet

The American Enterprise Institute, a public policy think tank, said that Biden’s housing proposals would be "harmful, not helpful."

Edward J. Pinto, Senior Fellow and Codirector, AEI Housing Center, said the federal government's previous plans to increase the housing supply and decrease the financial burden on homebuyers have been failures. 

"President’s State of the Union proposals are no different,' he said. "They would create programs that promote house price and rent inflation or fund programs that have a troubling history of scandal and failure."

For instance, Pinto said that the $10,000 tax credit over two years to middle-class first-time homebuyers would increase demand for starter homes, which are already in short supply, thereby driving up prices. In addition, many of the 3.5 million beneficiaries would have been able to buy a home without the credit. However, since money is fungible, these families will have additional purchasing power to bid up the price of homes.