By David Lawder
WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen announced $100 million in new funding on Monday to increase the supply of affordable housing as the Biden administration seeks to address high housing costs ahead of the Nov. 5 presidential election.
The measure is one of several steps by the Treasury Department to try to address a chronic housing shortage that has contributed to persistent inflation and been a source of voter dissatisfaction with President Joe Biden’s handling of the economy.
The additional $100 million over three years will come from payments the Treasury receives from previous COVID-era investments in community lenders to support small businesses, consumers and affordable housing projects, Yellen said in a speech at a development project for public housing in Minneapolis.
The 2021 Emergency Capital Investment Program injected more than $8.57 billion into community lenders, which in turn invested $1.2 billion in 433 affordable housing projects, according to Treasury Department data.
The additional funds could support financing for thousands more affordable housing units through a new program housed under the Community Development Financial Institutions (CDFI) Fund, Yellen said.
SHORTAGE OF HOUSING
The Treasury chief said she expects shelter inflation to moderate, but noted that average housing rents have exceeded average incomes between 2000 and 2020 in counties covering 97% of the U.S. population.
“But we are facing a very significant shortage of housing supply that has been increasing for some time. This supply crisis has created an affordability crisis,” Yellen said in excerpted remarks. She added that the burden was greatest on low-income and Black households.
Christopher Tyson, president of the National Community Stabilization Trust, which advocates for more affordable single-family home ownership, called the additional funding a good start to bridging the gap between what people can afford and where the market sets prices.
“Disruptions in the housing market due to the lack of supply have put homeownership out of reach for many potential buyers,” said Tyson, who estimates a U.S. shortage at about 2 million homes.
Yellen also called on the 11 federal housing loan banks to spend at least 20% of their net income on housing programs, up from the regulatory requirement of 10% and the banks’ voluntary commitment of 15%.
If this commitment had been made over the past five years, the 11 government-sponsored enterprises would have contributed nearly $2 billion more to housing programs than required by law, the Treasury Department said.
(Additional reporting by Gursimran Kaur in Bengaluru; Editing by Barbara Lewis and Stephen Coates)
