As the November elections draw near, the focus sharpens on President Biden’s housing plan and budget for 2025, announced in his State of the Union address. Promising a historic investment of $258 billion, the plan is designed to ease inflationary pressures across the housing market. Here, we delve into the specifics of this plan and assess its potential ripple effects across the market-rate apartment segment. We also consider the impact to multifamily owners and investors, as well as major U.S. apartment markets.
President Biden’s vision encapsulates a bold $258 billion investment ($175 billion for FY2023) aimed at constructing or preserving over 2 million housing units. This initiative not only seeks to expand the supply of affordable housing but also to ensure its sustainability and resilience against climate challenges. By building on previous investments and actions taken by the Administration, the plan targets a crucial reduction in housing costs, especially for lower- and middle-income households.
President Biden’s proposed housing plan could benefit the conventional multifamily sector. By increasing the supply of affordable housing, this initiative is set to stimulate significant growth and open up investment opportunities for multifamily investors, owners, and developers. The plan includes an expansion of tax credits and assistance programs, aimed at catalyzing the development of new projects and enriching the market with a diverse range of housing options.
Furthermore, the allocation of $32.8 billion in discretionary funding for the Housing Choice Voucher Program could potentially benefit multifamily investors by enhancing occupancy rates and providing a stable source of rental income. This stability is likely to offer a more predictable return on investment for those involved in multifamily properties.
Anticipating the increased demand for rental units, developers and investors may be more inclined to initiate new multifamily projects. This could lead to a revitalization of certain areas and the expansion of the rental market, including the construction of more affordable and mid-tier rental options.
While the Biden administration’s housing plan includes many positive proposals, it also introduces potential market distortions, particularly impacting landlords. The plan’s focus on combating “price fixing” among landlords could lead to several unintended consequences:
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The Republicans have introduced “Project 2025,” a proposal that seeks a comprehensive transformation of the Department of Housing and Urban Development (HUD), aiming to reverse many policies of the current administration. The plan, which does not detail specific policy measures, suggests a budget of $71.9 billion and includes a series of revisions to existing housing policies. A central aspect of this initiative is the call to abolish climate change initiatives and the Housing Supply Fund. The rationale provided is that solving the U.S. housing supply issue involves more than just constructing lower-end units. Instead, it promotes the idea that investors and developers are better positioned to create housing units that support upward mobility in both rental and ownership sectors, with a particular focus on mid-tier rentals. Additionally, the plan recommends that local governments reevaluate land use and zoning laws that impede new housing development. It emphasizes that federal policy should reduce its interference in local housing markets and mitigate the unintended price inflations caused by demand-stimulating, loose lending practices, thereby supporting those seeking entry into affordable housing.
As the November 2024 elections approach, the multifamily sector must prepare for potential shifts in housing policy. President Biden’s 2025 housing plan promises a substantial $258 billion investment to enhance affordable housing, potentially benefiting multifamily investors through increased rental demand and expanded assistance programs. However, it also poses risks of market distortions and increased regulatory burdens for landlords.
On the other hand, the Republican “Project 2025” plan advocates for reducing federal interference and focuses on promoting mid-tier housing developments, potentially easing the process for investors and developers.
Multifamily sector stakeholders need to stay informed and adaptable, as the election outcomes could significantly influence both the regulatory environment and market opportunities. Strategic planning and flexibility will be essential for navigating the evolving landscape and capitalizing on emerging investment prospects.
