On March 9 President Joe Biden released his proposed budget for the upcoming fiscal year. Facing significant uncertainty around a possible recession and an upcoming political fight over the nation’s debt ceiling looming just around the corner, the proposal will inevitably evolve as the administration negotiates with Republicans in Congress—but serves as a starting point that could shape the final deal. The budget includes plenty of familiar items that Biden or other Democrats have championed in recent years, as well as some new programs focused on housing or related issues.
Here are the items most directly affecting real estate:
A $59 billion investment in affordable housing
Not quite analogous to the proposed $300 billion in housing-related spending that was part of the failed Build Back Better bill previously championed by Biden and Democrats, this investment would focus on bolstering existing programs with the goal of “making it easier to build and preserve affordable, multifamily supply; advance the production and preservation of homes like accessory dwelling units and manufactured housing; and incentivize state and local governments to reduce barriers to affordable housing development.”
This includes a one-time $7.5 billion investment to preserve and rehab existing public housing and a $300 million increase in funding for the HOMES Program, which funds state and local efforts to create more affordable housing. An additional $258 million will go to support 2,200 units of new permanently affordable housing for disabled and elderly folks, and $10 billion to incentivize local governments to reform land-use restrictions and create more affordable housing.
Another notable new proposal—the budget guarantees housing vouchers for low-income veterans and youth aging out of foster care, two groups that are “acutely vulnerable to homelessness.”
New programs to encourage homeownership
Focused on first-generation and minority homebuyers, these programs are similar to Build Back Better programs and other legislation. About $10 billion would fund a program providing first-generation homebuyers with down payment assistance—money that could also be used for closing costs and mortgage points. The budget would also eliminate a requirement that certain borrowers in rural areas repay subsidies from the USDA, encouraging rural homeownership. Affecting both existing and prospective FHA borrowers, the budget lowers insurance premiums on FHA mortgages, which the proposal claims will lower borrowing costs by an average of $800 a year.
Closing the like-kind loophole
The National Association of REALTORS® (NAR) has lobbied hard against this change, which was discussed (but not included) ahead of Build Back Better. Like-kind exchanges allow investors to avoid paying capital gains taxes by reinvesting money made from selling a property in another property that is broadly similar. Economists have debated how much this loophole is used by wealthy individuals to avoid tax liabilities, or whether it facilitates broader economic activity. NAR calls like-kind exchanges “an essential part of the real estate sector” that “promotes investment, job growth, and can greatly benefit underserved markets.”
Additionally, the budget would increase the corporate tax rate to 28% and raise overall tax rates on Americans at the highest income levels, including a brand-new “billionaire’s tax” on people with a net worth of $100 million.
Investments in training for homebuilding trades
Homebuilder advocates have long decried a lack of skilled labor, which is desperately needed to address the ongoing housing inventory crunch. The budget proposal provides $335 million in an “earn-to-learn” program, which would provide debt-free education toward careers in construction, manufacturing and clean energy. Another $200 million will go to the new SECTOR program, which was created by the American Jobs Act, funding public-private partnerships for training in a broader range of industries, defined as “high-growth” jobs—though it was unclear if these could include training for construction jobs.
