Yellen announces efforts to increase housing supply as high prices create crisis

WASHINGTON (AP) — The Biden administration is announcing new measures to increase access to affordable housing as still-high prices for groceries and other necessities and high interest rates rise. dramatically pushed up the cost of living in the post-pandemic years.

Treasury Secretary Janet Yellen will promote the new investments on Monday during a visit to Minneapolis. They include providing $100 million through a new fund over the next three years to support affordable housing financing, boosting financing from the Federal Bank of Affordable Housing Finance and other measures.

The growing attention to house prices comes as the housing crisis becomes a growing issue in this year’s general election campaign.

“We face a very significant shortage in housing supply that has been increasing for a long time,” Yellen said in remarks prepared for delivery Monday afternoon. “This supply crisis has led to an affordability crisis.”

Yellen says the administration is “pursuing a broad affordability agenda to address the price pressures that families have been feeling.”

Both buyers and renters face rising housing costs, which have skyrocketed in the wake of the pandemic. According to Case-Shiller 20-City Composite Home Price Indexhome prices rose 46% between March 2020 and March 2024. New Treasury analysis shows that over the past two decades, housing costs have been rising faster than incomes.

Meanwhile, sales of previously occupied homes in the U.S. fell in May for the third consecutive month as rising mortgage rates and record prices discouraged many potential homebuyers during what is traditionally the housing market’s busiest time of the year.

For low-income Americans, statistics from the National Low Income Housing Coalition show that nationally there is a shortage of more than 7 million affordable homes for more than 10.8 million extremely low-income American families. And there is no state or county in the country where a renter who works full-time and earns minimum wage can afford a two-bedroom apartment, according to the group.

It’s becoming a crisis in some cities. For example, on Martha’s Vineyard, Massachusetts, the cost of housing has become a matter of public safety as it becomes difficult to attract and retain corrections officers and 911 dispatchers.

President Biden and presumptive Republican Party nominee donald trump have presented a variety of proposals on how to make life more affordable for average Americans, from Trump proposing to make tips tax-free for workers and Biden seeking a plan to reduce student loan payments for borrowers. A representative for the Trump campaign did not respond to a request for comment from The Associated Press.

But rising housing costs have some economists predicting that the crisis may not end until the Federal Reserve cuts its key interest rate, which remains at 5.3%.

Sal Guatieri, senior economist at BMO Capital Markets Economic Research, wrote Friday that little change is expected in the housing market “until the Fed lowers policy rates.”

Diane Yentel, president and CEO of the National Low Income Housing Coalition, said the White House has made efforts to prevent evictions and address the housing crisis, “but there is still a lot of work to be done.”

Yentel said congressional action is needed to “rapidly enact transformative and critically needed housing investments. Only through a combination of administrative action and robust federal funding can the country truly solve its affordable housing crisis.”

In her speech, Yellen is expected to call on Congress to approve Biden’s Proposed Budgetreleased in March.

The budget calls on Congress to provide a tax credit for first-time homebuyers and includes a plan to build more than 2 million homes. This would expand the Low Income Housing Tax Credit.

The Biden administration has taken other steps to increase housing supply, including launching a multi-agency effort encourage states and cities to convert more vacant office buildings into housing units, with billions of federal dollars available to help spur these transitions.

In July 2023, the Department of Housing and Urban Development provided communities with $85 million to reduce barriers to affordable housing, such as zoning restrictions that, in some locations, have become an obstacle to increasing supply and density of affordable housing.