President Joe Biden’s housing tax credit proposal aims to provide financial relief while mortgage rates remain high but risks worsening existing imbalances by solely focusing on demand-side incentives. A comprehensive strategy for making homeownership accessible must include a supply-side approach to address the affordable housing shortage.
Reinvigorating the Low-Income Housing Tax Credit (LIHTC) program and implementing radical supply-side reforms are essential. The Affordable Housing Credit Improvement Act of 2023, which aims to remove constraints on tax credits and private activity bonds for affordable housing, has stalled in Congress.
The proposed tax credit could inadvertently favor buyers who can afford higher mortgage payments upfront, putting lower-income buyers at a disadvantage. Moreover, the credit’s effectiveness in increasing homeownership may be limited without a corresponding strategy to address the housing supply shortage.
To truly make homeownership more accessible and equitable, policymakers must adopt multifaceted policies that address both short-term aids and long-term housing affordability. The end goal should be an environment where homeownership is attainable for all, not just a privileged few.
