Yellen says Biden’s housing tax credits may increase supply

President Joe Biden’s proposed tax credits aim to assist certain home buyers and sellers, potentially boosting the nation’s housing supply and increasing affordability, according to U.S. Treasury Secretary Janet Yellen. Yellen made these remarks in response to Biden introducing the proposal during his State of the Union address.

Yellen emphasized in an interview on MSNBC that Biden’s primary economic goal was to assist Americans in coping with rising costs, particularly in housing expenses.

The White House detailed that the proposed credit would offer middle-class first-time homebuyers an annual $5,000 tax credit for two years, essentially reducing interest rates by over 1.5 percentage points on the median-priced home.

In an effort to incentivize more homeowners to sell their starter homes to these buyers, Biden’s proposal includes a one-year, $10,000 tax credit for homes below the median home price in the area. The aim is to offset increased mortgage expenses for buyers seeking to trade up or downsize their homes.

The White House estimates that these credits could benefit around 3.5 million first-time homebuyers and 3 million sellers, with a projected cost of $65 billion over two years based on credit rates. However, approval from Congress is necessary for these credits, which is currently facing challenges in passing this year’s government funding amid Republican calls for spending cuts.

Yellen addressed concerns on MSNBC regarding potential economic overheating due to the credits, asserting that Biden’s focus was on ensuring that middle-class families can afford to purchase homes. She also highlighted Biden’s proposals to expand housing supply through property refurbishment investments and the expansion of the low-income housing tax credit.

Regarding Friday’s job data, Yellen noted that there was no evidence of inflationary wage pressures building up. She described the data as indicative of a robust labor market without a notable acceleration in wage increases.

© 2024 Thomson/Reuters. All rights reserved.

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