Update: This story was updated on March 8, 2024, to include statements from President Biden’s State of the Union address and a response from the National Association of Realtors.
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President Biden revealed a set of new housing initiatives during the State of the Union address on Thursday after the White House announced his intention to do so during a press release earlier that day. The proposal included tax credits to help ease high mortgage rates for first-time homebuyers, as well as encourage current homeowners to put their starter homes up on the market.
“I want to provide an annual tax credit that will give Americans $400 a month for the next two years as mortgage rates come down to put toward their mortgage when they buy a first home or trade up for a little more space,” the president said during his speech on Thursday night.
Through the proposed program, “middle-class, first-time homebuyers” will receive an annual tax credit of $5,000 per year for two years. That credit adds up to lowering the mortgage rate by more than 1.5 percentage points on a median-priced home, the White House said in its press release, which has the power to aid more than 3.5 million middle-class potential buyers in purchasing their first home over the next two years. The announcement did not specify how “middle-class homebuyers” would be defined.
Biden also asked Congress to pass legislation that will provide a one-year tax credit of up to $10,000 to households that sell their starter home if that home is below the median home price in their county, with the hopes that the incentive will free up more affordable inventory. He also recommitted to cracking down on big landlords who “break antitrust laws by price-fixing.”
“Now pass my plan to build and renovate two million affordable homes and bring those rents down,” he said during the address.
Much of the median-priced inventory in the U.S. has been in deadlock in recent years, with buyers who purchased during the pandemic unwilling to relinquish 2 percent and 3 percent mortgage rates in the process of transacting for a new home.
Previously, the Biden administration tackled initiatives to build more homes, cut down on high rents and assist first-generation homebuyers with down payments.
The National Association of Realtors applauded the president’s commitment to remedying some of the major challenges plaguing the industry in a statement released Thursday night.
“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,” 2024 NAR President Kevin Sears said in a statement.
“NAR first sounded the alarm on this issue with original research showing a nationwide shortage of 5.5 million affordable housing units,” Sears continued. “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.”
Sears also thanked the president for exploring new tax initiatives and said that NAR is likewise concerned about the lack of affordable rental housing available, but that increased housing production could help remedy this issue.
Barriers to homeownership, including high mortgage rates, high home and rental prices and low inventory, remain a struggle for many Americans and will be a key issue during the 2024 election.
“This plan is the most consequential set of housing recommendations in a State of a Union in over 50 years, and I say that because I’ve looked them all up,” David Dworkin, president and CEO of the National Housing Conference and a former Treasury Department official, told The Washington Post.
However, there is also the threat that new tax credits may generate more market demand and serve to push home prices up even further, some market experts say.
“This would probably have very limited impact on housing prices — increasing the number of buyers will, generally speaking, increase home prices for everyone,” Kyle Pomerleu, a senior fellow at the think tank American Enterprise Institute, told The Washington Post. “It’s pretty straightforward.”
