Mortgage rates have been so low for so long that it has created a lock-in effect where people don’t want to sell their homes to buy a new one for fear of losing their attractive rates.
This makes it “nearly impossible” for first-time buyers to enter the housing market, US Treasury Secretary Janet Yellen said in testimony before the House Ways and Means Committee.
“With housing prices rising and now with much higher interest rates and mortgages, it’s almost impossible for first-time buyers,” Yellen said.
President Joe Biden has proposed a pair of tax credits to help solve the housing crisis. The first proposed tax credit would provide $10,000 to first-time home buyers. A separate $10,000 tax credit is available to homeowners who sell their “first home” to move into a larger home.
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“We know that affordable housing and starter housing is an area where we really need to do a lot to increase availability,” Yellen said.
In 550 American cities, median home prices hit $1 million, according to a recent Zillow report. California tops the list with 210 cities – mostly around Los Angeles and San Francisco – with $1 million home values.
Part of the problem is that investors have been seizing affordable housing in America, purchasing 26% of the shares in the fourth quarter of 2023, according to a Redfin report. This is not only a record, it also represents a 24% increase in investor purchasing activity compared to the previous year.
Some lawmakers are looking for ways to deter the practice. Last July, U.S. Senators Sherrod Brown, Democrat of Ohio, and Ron Wyden, Democrat of Oregon, proposed legislation to reduce tax benefits for corporate investors who engage in property acquisitions. residential, which can lead to higher housing costs and rental rates.
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The Stop Predatory Investing Act aims to prevent investors who accumulate 50 or more single-family rental homes from claiming deductions on interest or depreciation related to those properties.
Another bill – the End Hedge Fund Control of American Homes Act – would prohibit hedge funds from owning residential properties and require the sale of at least 10% of their total inventory of single-family homes to families each year during the next decade.
The legislation would impose a $50,000 per year tax penalty on hedge funds for each property held above zero or a projected reduction of 10% per year over the 10-year period. It would impose a 50% tax on the fair market value of future acquisitions of single-family homes by hedge funds.
“Housing in our neighborhoods should be homes for people, not profit centers for Wall Street,” U.S. Sen. Jeff Merkley, Democrat of Oregon, said in a statement. “Yet in every corner of the country, giant financial corporations are buying up housing and driving up rents and housing prices. It’s time for Congress to put some common sense in place…
