Rising real estate prices are affecting people all across the United States. If you’re a home buyer or an investor, you know how hard it is to buy real estate right now. Everything is extremely expensive, with low supply and high-interest rates. With rising high inflation and no end in sight, something has to give. Let’s talk about Biden’s Affordable Housing Action Plan and it can potentially impact investors.
What Is the Affordable Housing Action Plan?
On May 16, 2022, President Biden announced an action plan for combating the affordable housing crisis. His Affordable Housing Action plan aims to boost the supply of affordable housing and ease the burden of housing costs in the US over the course of five years.
The Affordable Housing Action Plan addresses the issue of rising house costs, weighing down families of all incomes, especially those with lower incomes. After all, nearly 11 million families are struggling with the cost of living, spending more than half their income on housing.
Some challenges within the housing market have to do with supply and demand issues. Currently, there is increased demand with not enough affordable supply to go around. So ultimately, Biden’s plan is aimed to address that.
His plan starts with creating and preserving hundreds of thousands of affordable housing units over the next three years. Combined with other action steps, like rental assistance and downpayment assistance, closing the housing supply gap will mean more affordable rent and more attainable homeownership. Let’s go over some of the steps of Biden’s Affordable Housing Action Plan.
What Is Included In the Action Plan?
The Affordable Housing Action Plan is designed to reduce prices and inflation, as housing costs make up around one-third of the market basket for inflation, according to the Consumer Price Index. The four main points the plan will address include:
- Land Use and Zoning Reforms
- Financing Reforms
- Preserving Access for Owner-Occupants
- Managing Building Material and Labor Costs
Land Use and Zoning Reforms
One of the biggest issues with housing supply and production is the lack of available and affordable land. One large reason for this is that many state and local zoning and land use laws limit housing production. For example, exclusionary zoning constrains land use and artificially raises prices in some areas.
The Biden Administration will leverage transportation funding from the Bipartisan Infrastructure Law (BIL) to improve in this area. Additionally, they will integrate affordable housing into Department of Transportation (DOT) programs and include land use within the Economic Development Administration’s investment priorities.
Another large issue within the housing market is a lack of low-cost financing for new construction and rehabilitation, especially for affordable housing units. As such, the new plan calls for streamlining existing federal programs to allow developers to fund eligible projects and promote the construction of affordable housing.
The federal government offers a range of financing options for multifamily development. However, there are gaps for single-family homes, 2-4-unit properties, accessory dwelling units (ADU), smaller multifamily properties, and more. To address this issue,
Preserving Access for Owner-Occupants
In recent years, investors have taken over the housing market. In fact, large investors account for over 25% of all single-family home purchases nationally in some months in 2021. Over half of these purchases were made by investors with over ten properties, and investors made a quarter of these purchases with over 100 properties.
Huge investor purchases of single-family homes cause prices to rise, making it harder for first-time and first-generation homebuyers to access homeownership opportunities. To combat this issue, the Affordable Housing Action Plan aims to direct a larger supply of housing assets to owner-occupants and mission-driven entities instead of large investors.
Addressing Building Material and Labor Costs
During the pandemic, the price of goods used in construction increased tremendously, delaying many housing completions. Additionally, the delays in supplies and challenges in construction have made it difficult to retain workers.
As such, the Administration is partnering with the private sector to address supply chain disruptions for building materials. Furthermore, they will promote modular, panelized, and manufactured housing to increase productivity and housing supply.
How Will the Plan Make Housing More Affordable?
Now that we’ve gone over the main focuses of the Affordable Housing Action Plan, you may be wondering–how will it make housing more affordable?
There are several action steps throughout the plan that will potentially make housing more affordable for citizens of the United States. For instance, slowing the rising rent costs and increasing the housing supply can help low-income families stay in their homes and make it easier for lower-income families to obtain housing.
However, it’s important to note that this is a long-term plan. It will likely take years for any changes to be implemented and even longer for any new construction to be completed. So, it will take a while to see the effects of the Affordable Housing Action Plan in the United States.
Next, let’s go over the plan’s potential impacts on investors and developers.
Potential Impacts on Investors and Developers
Inevitably, the Affordable Housing Action Plan will impact investors and developers in several ways. For example, large investors may find it more difficult to find investment opportunities, as the Administration will be focusing on providing assets to owner-occupants instead of investors.
On the other hand, the Action Plan has the potential to impact smaller investors and developers positively. For example, the new tax credit will incentivize developers to build more affordable housing, creating more investment opportunities. In addition, the zoning laws and other regulations reforms could make it easier to develop density, which would also create more opportunities for investment.
Furthermore, the supply of rental properties is likely to decrease as more units are converted into affordable housing. This could lead to even higher rents and increased competition for tenants. We know that the plan will take time to put in place. So in the meantime, the demand for rental properties is likely to increase. In turn, this may lead to higher rents and increased occupancy rates.
Protect Your Investments with Property Management
One of the best ways to protect your rental investments is by hiring property management services. Bay Property Management Group offers comprehensive rental management services, including tenant screening, maintenance, rent collection, eviction services, and more. With a strong team on your side, landlords don’t have to stress about the day-to-day operations of running a business.
If you’re looking to run a stress-free business, contact BMG today. We offer full-service rental management in Baltimore, Philadelphia, Northern Virginia, and Washington DC. We look forward to working with you on all your management needs.