How Biden’s Proposed Housing Tax Credits Could Impact Homebuyers and Sellers
Boosting Housing Supply and Affordability
U.S. Treasury Secretary Janet Yellen believes that President Joe Biden’s proposed tax credits for home buyers and sellers could play a significant role in enhancing the nation’s housing supply and making homes more affordable. Yellen stated that Biden’s primary economic focus is aiding Americans in coping with rising prices and major living expenses, particularly the escalating cost of housing.
Details of the Proposal
The White House shared specifics of the proposed tax credits, which include a $5,000 annual tax credit for middle-class first-time homebuyers over two years. This credit is equivalent to reducing interest rates by more than 1.5 percentage points on the median-priced home. Additionally, Biden is suggesting a one-year, $10,000 tax credit to incentivize homeowners to sell their “starter homes” to these buyers, targeting homes below the area’s median price.
Expected Impact and Costs
The proposed credits aim to benefit around 3.5 million first-time homebuyers and 3 million sellers, with an estimated cost of $65 billion over two years. Yellen reassured that these measures were vital in ensuring middle-class families can afford homes while emphasizing the importance of expanding the housing supply through refurbishment projects and increased low-income housing tax credits.
Congressional Approval and Future Outlook
However, the implementation of these credits hinges on congressional approval, with challenges arising due to ongoing debates on government funding. While passage this year seems unlikely, a significant tax code overhaul is anticipated in 2025. Biden’s housing tax credit proposals underscore the pressing need to address housing affordability and supply shortages, resonating with voters concerned about these issues.
Further Initiatives and Economic Implications
Biden’s forthcoming fiscal 2025 budget will introduce an expansion of the Low-Income Housing Tax Credit and a $20 billion grant fund to support the development of affordable multifamily rental units. Economists anticipate that encouraging renters to transition to homeownership could alleviate price pressures in the rental market, thereby fostering a more balanced housing landscape.
