Image source: Getty Images
Housing is the typical American's greatest monthly expense. But for many Americans, housing takes up an unreasonable amount of their income.
Part of the problem stems from a glaring lack of affordable housing on a national level. During the Great Recession, home construction slowed down as the housing market tanked. That led to a shortfall of roughly 1 million affordable housing units.
Meanwhile, since the start of the pandemic, the construction industry has faced its share of challenges. Not only have building materials gotten more expensive to procure due to supply chain backlogs, but labor has gotten more expensive. As such, it's become even more difficult to build affordable housing units to make up for that shortfall.
Now, the Biden administration wants to address the problem by tapping funds from the American Rescue Plan, which was signed into law in March 2021. The goal is to open up affordable housing and make zoning regulations less restrictive so as to allow for more affordable units to become available to those who need them.
A massive relief bill with an ongoing impact
Many people are familiar with the American Rescue Plan -- the $1.9 trillion relief package that sent the last round of stimulus checks into Americans' bank accounts and boosted the Child Tax Credit. Since that relief bill was so massive, there are still funds available from it that can be used for different purposes. And one such initiative the Biden administration is pushing for is affordable housing.
The goal is to not only build more housing units, but also to work with local governments to ease zoning restrictions and remove barriers to construction. That could include changing the rules with regard to things like minimum lot sizes and parking space regulations for multifamily properties.
Over the past couple of years, home prices have soared as mortgage rates dropped to record lows and housing supply dried up. These days, borrowing rates are far more expensive than they were from mid-2020 through the start of 2022. But the housing market still lacks inventory in a serious way, and that's driven up the cost of home purchases.
Because it's gotten so expensive to buy a home, more people are turning to rentals instead. But the cost of rentals has, in turn, skyrocketed as well. And now, many Americans are struggling to pay for housing at a time when inflation has made every expense under the sun cost more.
A good use of funds
The American Rescue Plan no doubt provided a world of relief to those who benefited from it. But the bill has also been a source of controversy over the past few months as inflation has soared. Many lawmakers (namely, those opposed the bill) blame stimulus policies on the rampant inflation consumers are grappling with today.
At this point, issuing another round of stimulus checks would, potentially, be disastrous as far as inflation is concerned. But allocating funds to affordable housing is a different story. And if the Biden administration is able to move forward with its plan, it could get us one step closer to solving a major problem.
The Ascent's Best Mortgage Lender of 2022
Mortgage rates are on the rise — and fast. But they’re still relatively low by historical standards. So, if you want to take advantage of rates before they climb too high, you’ll want to find a lender who can help you secure the best rate possible.
That is where Better Mortgage comes in.
You can get pre-approved in as little as 3 minutes, with no hard credit check, and lock your rate at any time. Another plus? They don’t charge origination or lender fees (which can be as high as 2% of the loan amount for some lenders).
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
