Yellen touts new affordable housing efforts
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U.S. Treasury Secretary Janet Yellen in Minneapolis, Minnesota, on Monday. Photo: Nicole Neri/Bloomberg via Getty Images
U.S. Treasury Secretary Janet Yellen announced Monday a new Biden administration effort to increase the supply of affordable housing that includes a $100 million fund to address the matter.
Why it matters: Housing costs remain stubbornly high — and the Consumer Price Index shows shelter costs are still rising at a rapid rate, helping keep overall inflation elevated.
- Inflation is expected to emerge as a key topic during the first televised presidential debate between President Biden and former President Trump on Thursday.
- The Biden administration's new effort is an attempt to signal to voters ahead of November's presidential election that it's trying to address the housing affordability crisis — though any efforts to make a dent in the years-long shortage may not pay off for years to come.
Driving the news: "I expect that shelter inflation will moderate," Yellen said during a speech in Minneapolis on Monday afternoon.
- "But we face a very significant housing supply shortfall that has been building for a long time and this supply crunch has led to an affordability crisis," she said.
- Making life "more affordable" is Biden's "top economic priority and we are pursuing a broad affordability agenda to address the price pressures that families have been feeling," Yellen said.
Details: In addition to the Treasury's three-year plan to support the financing of affordable housing via the Community Development Financial Institutions (CDFI) Fund, Yellen announced a new "how-to guide" to support state and local governments in using recovery funds to construct housing.
- Yellen said the CDFI Fund was updating a rule for the Capital Magnet Fund, the existing affordable housing investment program, "to reduce administrative burden and allow recipients to focus their resources on the production and preservation of housing," per a Treasury statement.
- The Treasury chief revealed an effort to provide greater interest rate predictability to state and local housing finance agencies borrowing from the Federal Financing Bank to support new housing development.
- Yellen also called on the 11 Federal Home Loan Banks to increase their support for housing programs to 20%.
State of play: The U.S. housing shortage has been worsened by the "lock-in" effect. That is, existing homeowners staying put to hold onto low mortgage rates.
- As of last week, the average 30-year mortgage rate was 6.9% — more than double the rate four years ago, according to Freddie Mac.
- Many homebuilders are hesitant to break ground on new homes, as they face higher interest rates for construction loans, labor shortages and a shortage of lots to build on, the National Association of Home Builders said last week.
Go deeper: Health insurers take on the affordability crisis — in housing
