MW Biden administration to award nearly $250 million to develop nearly 30,000 affordable housing units

By Aarthi Swaminathan

The quarter-of-a-billion dollars comes from a fund set up in 2008

The Biden administration will award nearly $250 million to financial institutions and nonprofits in an effort to create nearly 30,000 units of affordable housing across the U.S. Treasury Secretary Janet Yellen said Wednesday.

The effort comes as housing costs for both renters and home buyers have surged to all-time highs over the last few years.

The median sale price of a home sold in the U.S. in mid-October was $384,400, which was 4.7% higher than the same period a year ago, according to data from real-estate brokerage Redfin $(RDFN)$. At current mortgage rates, that translates to a monthly payment of roughly $2,600.

Housing affordability is a major concern for voters, especially younger ones, as they head to the polls in the Nov. 5 presidential election. Both Democrat Kamala Harris and Republican Donald Trump have touted policies that they say will rein in housing costs.

Related: What Trump and Harris say they'll do to fix the high cost of housing - and what's worked in the past

What the Treasury Department's money will do

The $246.5 million in awards is expected to result in more than 26,400 affordable-housing units, of which 25,600 will be rentals and the remainder to be occupied by homeowners, the Treasury Department said.

The money is expected to support both home buyers and to create more housing supply. The funds will finance the preservation, rehabilitation and development of affordable housing, the Treasury Department said, as well as enable individuals to purchase affordable housing.

The money can also be used to finance economic development and community service facilities such as daycare centers, and healthcare clinics, Treasury officials added.

The money announced today "will increase affordable housing supply and expand access to child care and health care for families across America," Yellen said in a statement.

Related: How the U.S. economy became so hostile to parents - and who benefits

"These awards are projected to leverage nearly $9 billion in private and public sector resources to spur development in communities that need additional investment to create opportunities for communities to get ahead," she added.

The quarter of a billion dollars comes from the Treasury's Capital Magnet Fund program. The program was created in the depths of the Great Recession in 2008 and its funding stems from Fannie Mae (FNMA) and Freddie Mac (FMCC), government-sponsored enterprises that back the bulk of residential mortgages in the U.S.

Related: Fannie Mae CEO says she has never seen a housing market like this before

The Capital Magnet Fund awards grants annually to groups such as nonprofit housing organizations and Community Development Financial Institutions, which are credit unions, banks and other financial institutions that serve underserved communities.

They use the grant money to develop, rehabilitate, or purchase affordable housing targeted to service low income families, the Treasury Department said.

The 48 recipients of the money have five years to complete projects after receiving the award. To date, the Capital Magnet Fund has created more than 63,000 affordable homes, which include 55,600 rentals and 7,400 homeowner-occupied units, according to the agency.

A lack of inventory is one of the factors making the housing market particularly challenging for would-be home buyers.

The U.S. is short 3.8 million homes to meet home-buying demand from a growing number of households, Freddie Mac estimated in 2021.

Buyer are also contending with mortgage rates near 7%, which, on top of record-high sales prices, make monthly housing costs even more expensive.

For renters with extremely-low incomes, the U.S. is short of 7.3 million rentals that are affordable and available, according to the National Low Income Housing Coalition, a D.C.-based left-of-center housing advocacy group.

-Aarthi Swaminathan

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October 23, 2024 11:39 ET (15:39 GMT)

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