Treasury Secretary Janet Yellen Announces $100 Million Plan To Expand Affordable Housing

U.S. Treasury Secretary Janet Yellen announced a $100 million plan on Monday to expand affordable housing nationwide over the next three years, as part of the Biden administration’s efforts to address rising living costs.

The initiative, unveiled during Yellen’s visit to Minneapolis, aims to support affordable housing financing through a new fund and increased Federal Financing Bank involvement. This move comes as housing affordability has emerged as a central issue in the 2024 election campaign, with home prices rising 46% from March 2020 to March of this year, according to the Case-Shiller 20-City Composite Home Price Index.

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"We face a very significant housing supply shortfall that has been building for a long time," Yellen said during her speech. "This supply crunch has led to an affordability crunch."

The Treasury’s new program is expected to generate thousands of affordable housing units under the Community Development Financial Institutions Fund. It builds on the department’s 2021 Emergency Capital Investment Program, which previously allocated $8.57 billion to community lenders, resulting in $1.2 billion being spent on affordable housing projects.

According to Treasury officials, the program will reduce costs for housing finance agencies by allowing them to borrow funds at rates close to those of the U.S. government. The extension will create or preserve roughly 38,000 additional rental homes over the next decade.

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The announcement comes amid broader concerns about housing accessibility and affordability across the U.S., just three days before President Biden and former President Donald Trump are set to meet for their first in-person debate of the 2024 election cycle.

Both major-party candidates have addressed affordability issues in their campaigns. Yellen’s announcement also previews elements of Biden’s proposed budget, which includes provisions for first-time homebuyer tax credits and a plan to construct over two million new homes.

According to Freddie Mac figures, the U.S. faces a shortage of approximately 1.5 million homes (both single-family and rental units). Constructing two million new homes would effectively create a surplus.

"With house prices having gone up and now with much higher interest and mortgage rates, it’s almost impossible for first-time buyers," Yellen said during testimony before the House Ways and Means Committee in May. "We know that affordable housing and starter homes are an area where we really need to do a lot to increase availability."

Recent home sales data reflects Yellen's concerns.

According to figures issued by the National Association of Realtors, sales of existing homes declined for the third consecutive month in May, typically the busiest season for real estate transactions. Despite the slowdown in sales activity, home prices continue to rise.

The national median sales price was $419,300 in May, reflecting a 5.8% increase year-over-year and a 51% rise over the past five years. 

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