Remarks by National Economic Advisor Lael Brainard Addressing the Challenge of Housing Affordability At the National Housing Conference’s 2023 Solutions for Affordable Housing (As Delivered)
Good morning. It’s great to be here to kick off today’s conference and speak to one of the most important issues in the President’s economic agenda – lowering costs and increasing access to housing for Americans.
President Biden knows that too many Americans feel the path to the middle class is out of reach. He is fighting to lower costs on everything from prescription drugs to a gallon of gas.
For many Americans, housing expenses are the biggest of their monthly costs, which is why housing affordability is at the center of having a little breathing room at the end of each month.
Housing that is affordable provides a vital foundation to achieve other goals, such as securing a good job, engaging in training and education, providing for children, and building a financial cushion.
Our agenda has been guided by the goal of lowering housing costs. During the pandemic, that meant ensuring Americans could afford to remain in their housing despite the disruption to incomes. Since the recovery, our agenda has focused on increasing the availability of housing that Americans can afford, lowering costs for homebuyers, and lowering costs and promoting competition and fairness for renters. I will discuss each in turn.
Ensuring Americans Could Afford to Remain in Their Housing During a Global Pandemic
During the lengthy course of the COVID-19 pandemic, businesses laid off tens of millions of workers and millions of Americans could have faced the possibility of eviction or foreclosure. President Biden came to office committed to preventing that from happening. Working with many in this room, the Administration and state and local governments delivered more than 10 million emergency rental or utility assistance payments, provided financial assistance to nearly 400,000 homeowners at risk of foreclosures, and worked to provide unified and consistent mortgage modification options for millions of borrowers. As a result of these actions, today, foreclosures and evictions remain below or at pre-pandemic levels, and the Black homeownership rate has actually increased above pre-pandemic levels.
Increasing the Availability of Housing Americans Can Afford
While job opportunities are much brighter, and many things have gotten more affordable in recent months, we know that affording a quality place to live is still a challenge for too many Americans. Ever since the subprime crisis, there has been a shortfall in affordable housing construction and preservation. That accumulated shortfall, combined with the disruptions around the pandemic, means that the average renter pays 30% of their income on rent every month and around half of renter households are considered rent burdened.
Our first major priority is increasing the supply of affordably priced homes in order to lower housing costs. We are using every lever at our disposal – legislative proposals, our administrative authorities, our convening power, and our bully pulpit – to do so.
Achieving the greatest improvement in supply will require Congress to act. The President’s Budget proposed housing tax credits that increase the number of households that have access to affordable rents by 1.2 million over the next decade. That means rents set at less than 24% of area median income, with rent increases tied to area income gains. These provisions are also in the Affordable Housing Credit Improvement Act.
On top of this, the Neighborhood Homes Investment Act proposal in the President’s Budget would promote homeownership for an additional 500,000 households while increasing neighborhood revitalization investments.
225 bipartisan members of Congress have sponsored these bills. We should get them done.
But we cannot wait for Congress to act. Through our Housing Supply Action Plan, we are reducing barriers to housing and offering new and improved financing for affordable housing development.
We are promoting local zoning reforms that will mean more quality, affordable housing near good jobs and transportation hubs. Communities across the country – from Minneapolis and Massachusetts to our neighbors in Alexandria and Arlington – have enacted zoning reforms that will encourage denser housing, make certain funds contingent on building more affordable housing, and promote housing development near public transportation.
These programs work, so we are standing up a first of its kind PRO Housing Grant Program to support communities in identifying and removing barriers to housing production. We’ve already embedded incentives to reduce barriers to affordable housing into about $10 billion in transportation funding. And our Department of Transportation is making billions of dollars in low-cost loans available for developing housing near transportation.
Given the shift to greater teleworking and high office vacancy rates in some downtowns, we are also supporting conversions as a win-win solution to promote affordable housing and downtown revitalization. That is why we recently announced actions to encourage the conversion of underutilized commercial buildings to housing.
In the months ahead, we will be examining other forms of federal financing in order to ensure they are being maximally utilized to increase the supply of affordable housing – from HUD’s HOME program to the Federal Home Loan Bank Affordable Housing Programs.
The banking agencies’ first rewrite of the Community Reinvestment Act rule in 25 years will also provide a critical boost to the supply of affordable housing. The new CRA rule will increase investment in communities that are currently underserved, specifically low- and moderate-income communities and communities of color. The new rule will encourage increased investments in affordable housing and, according to independent analysis, encourage banks to make more LIHTC equity investments in underserved rural areas and small cities. And the new evaluation framework, increased transparency about qualifying investments, and inclusion of special purpose credit programs will help address persistent racial homeownership and wealth gaps, and bring much needed capital, including mortgage credit, to credit deserts.
Addressing Barriers to Homeownership and Helping First Time Homebuyers
Our second major priority is to lower costs for homebuyers and promote access to homeownership, including for communities that have faced persistent barriers to it. The recent increase in interest rates has intensified the challenges facing these aspiring homeowners.
President Biden understands that we must do more to support families who want to become homeowners but face affordability challenges. And he also understands that for some communities, barriers to homeownership are longstanding.
Our Administration has acted to lower housing costs for first-time homebuyers who disproportionally rely on the Federal Housing Administration program. For example, earlier this year, FHA lowered their mortgage insurance premiums by 0.3 percentage points, which will mean savings of around $1,200 per year for a homebuyer buying a median home.
But there is more to do across the federal government, state, and local governments, and industry to lower costs associated with homebuying. For example, a number of key homebuying costs allow for little consumer choice but can add up in a significant manner. That’s why federal agencies are currently examining whether there are actions that can be taken to lower costs, promote competition, and encourage homeownership.
We also must take action to promote homeownership for those who have faced persistent barriers. The President’s Budget includes a first generation down payment assistance program to help make homeownership a reality for families who do not have the advantage of previous generational wealth building from homeownership. Passing this legislation could begin to close the stubborn racial gap in homeownership.
Addressing this persistent gap – in addition to other instances of housing discrimination – is central to all of our housing efforts. HUD is currently working to finalize an Affirmatively Furthering Fair Housing rule that reflects the principle that communities that receive federal housing aid must take meaningful, affirmative steps to overcome patterns of exclusion.
Promoting a Fair and Affordable Rental Market
Finally, I’d like to discuss what we are doing to promote fairness in the rental market and access to affordable rents for the lowest-income Americans. The President recognizes that for many low-income families, rental affordability is a longstanding challenge.
Our Administration has secured rental assistance for an additional 100,000 low-income households – guaranteeing rents at 30% of those families’ incomes. The President’s Budget proposes expanding rental assistance to more than 200,000 additional households, including a first-of-its kind rental assistance guarantee for low-income veterans and former foster youth.
But our commitment to fairness and competition in the rental market goes beyond vouchers. Through our Blueprint for a Renters Bill of Rights, the Administration has acted to ensure renters can address inaccuracies in tenant screening reports and has enhanced eviction prevention efforts. We are going after rental junk fees, from repeated rental application fees to surprise “convenience fees,” which raise rental costs for millions of families and prevent comparison shopping.
And we working to ensure that renter protections evolve with changing market dynamics among housing providers. For example, the Department of Justice has identified “algorithmic price-fixing” as the “new frontier” and explained that “given the amount of information an algorithm can access and digest, this new frontier poses an even greater anticompetitive threat” than ones in the past.
Closing
In closing, we must do more – at all levels of government and with partners across the housing landscape – to lower housing costs and ensure all Americans have access to affordable and quality housing. Congress should act. Our Administration will continue using all available authorities, in addition to the bully pulpit. And as always, state and local governments, the non-profit sector, and industry have an outsized role in housing. We’re pleased to work in partnership with so many of you to meet this shared goal and look forward to continuing our efforts together.