The Biden administration announced new measures Monday to help prospective homebuyers get closer to their dream of owning a home.
Some of the measures include allowing buyers to use potential or actual income from units connected to a home, so-called accessory dwelling units (ADUs) such as garage apartments, as leverage when applying for a Federal Housing Administration-insured mortgage. The policy, the White House says, can help reduce the cost of a mortgage for a new homebuyer.
“The flexibilities will help more first-time homebuyers, seniors, and inter-generational families leverage ADUs to build generational wealth through homeownership while creating new affordable housing in their communities,” a White House statement said.
The new measures come at a time when mortgage rates inch closer to 8 percent, the highest they’ve been in more than 20 years, while the lack of supply of new homes has elevated prices, scaring off new buyers from the market.
The government also said that the U.S. Department of Agriculture (USDA) will grant $9 million in loans to help Native American prospective homebuyers.
“The program provides capital to Native Community Development Financial Institutions (NCDFIs) to be relent to low- and very low-income people who live on tribal lands and are in need of affordable single-family homes,” the statement added.
The U.S. Department of Housing and Urban Development through the FHA could revamp a program aimed at people looking to buy or refinance mortgages for houses that need to be rehabilitated.
“FHA is considering potential policy changes that could increase the funds available to borrowers to make renovations and repairs,” the White House said. “These and other program changes will increase the use of FHA-insured mortgages to finance renovations that will improve existing homes and restore them to viable use, adding to the supply of housing in communities across the country.”
Other measures announced Monday include efforts to help struggling homeowners on their mortgages, such as veterans, so they don’t lose their houses.
Monday’s action items suggested that the White House was willing to address housing challenges confronting Americans.
“For the active-duty military servicemembers, Veterans, low-income families, and other Americans whose homeownership is supported by these initiatives, the Administration’s efforts are a signal that they are committed to moving the market in the right direction,” Mike Calhoun, president at the Center for Responsible Lending, told Newsweek.
Potential buyers looking to own homes with accessory dwelling units (ADUs) like garage apartmentsNative Americans looking to own affordable single-family homes on tribal landsBuyers who want to refinance or buy homes in need of rehabilitation
Borrowing costs have soared following the Federal Reserve’s rate hikes, which began in March 2022 to fight off high inflation. With inflation still above the Fed’s target of 2 percent, economists expect the high-rate environment to remain through next year, making the prospect of high mortgage rates a continued problem for prospective buyers.
The rise in rates has also forced prospective sellers to pause their plans as they worry that rates on a new home will be higher than their current rates. The dynamic has stifled new-for-sale housing inventory for a market that is already struggling to supply properties for prospective buyers.
The Biden administration acknowledged on Monday that this reality has made it a challenging environment for home buyers, an ambition that is key to the social mobility of Americans.
“For millions of Americans, homeownership is a foundation for so many parts of their lives, and for many it is also their primary source of wealth,” the White House said.
The White House urged Congress, which is paralyzed because the House has been without a speaker since October 3, to pass proposals that ease the burden on prospective buyers, a move that CLR’s Calhoun said would add more heft.
“The Administration’s actions also signal to Congress that to adequately address the housing challenges that many families face, Congress must provide additional tools and funding,” he told Newsweek.
Update 10/16/23, 7:01 p.m. ET: This story has been updated with comment from Calhoun and more context.