Home Economy News Yellen says Biden’s proposed housing tax credits could boost supply

Yellen says Biden’s proposed housing tax credits could boost supply


Yellen says Biden’s proposed housing tax credits could boost supply By Reuters

Breaking News


Economic Indicators

Published Mar 08, 2024 10:04AM ET
Updated Mar 08, 2024 02:31PM ET

© Reuters. U.S. Treasury Secretary Janet Yellen delivers a speech during a visit to the Lithium Conversion plant of U.S. lithium producer Albemarle, in La Negra, Antofagasta, Chile, March 2, 2024. REUTERS/Cristian Rudolffi

By David Lawder and Susan Heavey

WASHINGTON (Reuters) -President Joe Biden’s proposed tax credits for certain home buyers and sellers could help boost the nation’s housing supply and make homes more affordable, U.S. Treasury Secretary Janet Yellen said on Friday, a day after the president unveiled the proposal in his annual State of the Union speech.

Yellen said in an interview on MSNBC that Biden’s top economic priority was helping Americans deal with higher prices and major living expenses, including the high cost of housing.

The White House said the proposed credit would provide middle-class first-time homebuyers with an annual tax credit of $5,000 a year for two years — the equivalent of cutting interest rates by more than 1.5 percentage points on the median-priced home.

To encourage more homeowners to sell their “starter homes” to these buyers, Biden is proposing a one-year, $10,000 tax credit, which would apply to homes below their area’s median home price. Many of these buyers are locked into low mortgage rates, and the credit is aimed at offsetting higher mortgage costs for a “trade-up” or downsized home.

According to a White House fact sheet, the credits will aid some 3.5 million first-time homebuyers and 3 million sellers. Based on credit rates, that would cost some $65 billion over two years.

Asked on MSNBC whether the credits could overheat the economy, Yellen said Biden wanted to make sure that middle-class families could afford to buy homes.

“He’s also proposing steps to expand the supply of housing,” Yellen said. “And I believe they would be very helpful: investing in refurbishment of properties, expanding the low-income housing tax credit that will be helpful to Americans deal(ing) with the shortage of affordable housing.”

But these credits would need approval by Congress, which is struggling to approve this year’s government funding amid Republican demands for spending cuts. Passage in an election year is extremely unlikely, but a major revamp of the tax code is expected in 2025, when the Republican-passed individual tax cuts expire.

Biden’s inclusion of the housing tax credit proposals in his address, along with a pledge to use other tools to encourage the development or renovation of over 2 million homes to close a housing supply gap, underscores the importance of housing affordability on the minds of voters.

“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,” National Association of Realtors President Kevin Sears said in a statement.

He added that the group was “grateful” that Biden was willing to explore new tax measures to help deal with a shortfall of 5.5 million affordable housing units in the U.S.

In his fiscal 2025 budget on Monday, Biden will also call for an expansion of the Low Income Housing Tax Credit and a $20 billion competitive grant fund to support development of affordable multifamily rental units, the White House said.

Moody’s (NYSE:MCO) economist Nick Luettke said in a research note that tax incentives to encourage more renters to jump into home ownership would free up apartment units, easing price pressure on that market.

Yellen says Biden’s proposed housing tax credits could boost supply

Our Apps

Terms And Conditions
Privacy Policy
Risk Warning
Do not sell my personal information

© 2007-2024 Fusion Media Limited. All Rights Reserved.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

Related News