Biden to propose new $5000 tax credit for first-time home buyers – The Washington Post

President Biden will propose a set of new housing initiatives in Thursday’s State of the Union address, including tax credits to offset high mortgage rates for first-time home buyers and encourage people to move out of starter homes and put them on the market. Get a curated selection of 10 of our best stories in your inbox every weekend. ArrowRight The proposals would provide middle-class, first-time buyers with $5,000 per year for two years. That would have the same effect as lowering a buyer’s mortgage rate by more than 1.5 percentage points for two years on the median home, according to the White House.Biden will also call on Congress to provide a one-year credit of up to $10,000 for families who sell their starter homes, so long as their houses are below the median price in their county. The idea is to free up a part of the market that has been effectively frozen, as thousands of homeowners cling to low mortgages of 2 or 3 percent and avoid buying a new home with a much higher rate.The proposals build on the administration’s prior moves to build more homes, tackle high rents and help first-generation buyers get a down payment. And the moves come as housing persists as one of the most out-of-reach parts of the economy, and remains a key issue for voters in this year’s election.Advertisement“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,” said David Dworkin, president and chief executive officer of the National Housing Conference and a former Treasury Department official.Dworkin stressed that the administration’s most consequential housing plan was its commitment to build and preserve 2 million homes.“We have a huge hole this would make a big dent in,” he said. “The supply side is driving housing prices, and this is the most ambitious housing supply agenda in recent history.”The housing market has been strained from many directions. The country faces a shortfall of millions of homes, with underinvestment going back decades. Rents also soared during the pandemic, quickly becoming a top driver of inflation. Plus, the Federal Reserve’s fight to tame inflation prompted a rise in mortgage rates that continue to push many buyers out of the market.AdvertisementZoomed out even further, Biden’s efforts will also be tested by the strange nature of the post-pandemic market. Hundreds of thousands of new units

finished construction last year. But much of it skews toward the higher end of the market, and housing experts have grown concerned about a simultaneous hollowing out of more affordable options. Senior White House officials argue many of the White House’s efforts target affordable housing and are designed to open up options for middle-class buyers.Share this article Share“President Biden will lay out the boldest plan to lower housing costs and expand housing access in decades,” Lael Brainard, director of the National Economic Council, said in a statement. “He’ll call on Congress to pass his plan to unlock the housing market by providing mortgage relief to first-time home buyers and homeowners selling their starter homes and to support private sector construction of 2 million homes, while taking new administrative actions to lower closing costs and make our rental markets fairer.”Meanwhile, some housing experts raise concerns that new credits could inject even more demand into the market while supply is still catching up — possibly pushing prices even higher.“This would probably have very limited impact on housing prices — increasing the number of buyers will, generally speaking, increase home prices for everyone,” said Kyle Pomerleau, senior fellow at the American Enterprise Institute, a right-leaning think tank. “It’s pretty straightforward.”AdvertisementBiden will also call for an expansion of the low-income housing tax credit to build or preserve 1.2 million more affordable rental units. He is also proposing a new neighborhood homes tax credit, the first tax provision to build or renovate affordable homes. And Biden will unveil a new $20 billion competitive grant fund as part of his budget, expected next week, which would support the construction of affordable multifamily rental units and remove barriers to housing development.As he has done before, Biden is also calling on Congress to provide up to $25,000 in down payment assistance to first-generation home buyers.While the home buyer program is unlikely to gain traction in Congress, the administration also pointed to several unilateral actions it is taking to provide home buyers and renters with financial relief.AdvertisementThose include steps taken to reduce closing costs for home buyers, which the White House stresses can add thousands of dollars to a purchase and put it out of reach. The Federal Housing Finance Agency has approved new pilots and policies to