Fact Sheet: Increasing Affordable Housing and Expanding Homeownership

We live in a time of change, and our dynamic economy can create great opportunities for America's families to realize their dreams. During this time of change, President Bush believes that government should help families to have the security, dignity, and independence that comes with owning their piece of the American dream.

President Bush has a bold agenda for promoting an ownership society: giving young people the option of voluntary personal accounts under Social Security to give them more control over their retirement savings; Health Savings Accounts to give individuals expanded access and choice in health care; lower taxes and less burdensome regulations on entrepreneurs; and policies to eliminate barriers to homeownership.

President Bush supports homeownership, which gives Americans a greater stake in their communities. The President has been leading a three-part strategy for increasing homeownership by:

• Supporting low-income families who are saving for a downpayment, and ensuring that good financing options are available;
• Ensuring that the homebuying process is fair to consumers and that consumers understand their options; and
• Creating a larger supply of affordable housing units available for ownership.

The President's New Proposals for Affordable Housing and Increased Homeownership

To help more Americans achieve the American dream of owning their own home, President Bush set a new public-private goal of increasing the supply of affordable housing by seven million over the next 10 years. To meet this goal, the President is calling for passage of his Homeownership Tax Credit and encouraging communities to reduce regulatory barriers through the Department of Housing and Urban Development's America's Affordable Communities Initiative and the President's new Opportunity Zones initiative.

• The Homeownership Tax Credit. Under the President's plan, homebuilders that build affordable homes for middle-income purchases will receive a tax credit. Federal government estimates indicate that this Homeownership Tax Credit will result in an additional 40-50,000 affordable single-family homes annually. The Homeownership Tax Credit would allow state housing finance agencies to award tax credits to single-family developments located in a census tract with median income equal to 80 percent or less of area median income. The credits could not exceed 50 percent of the cost of constructing a new home or rehabilitating an existing property. The program would be limited to homebuyers who earn no more than 80 percent of area median income. Each state would have a homeownership credit ceiling adjusted for inflation each year and equal to the greater of 1.75 times the state population or $2 million.
• Regulatory Reform. Studies have shown that regulatory barriers can add to the costs of a home by 20 to 35 percent. Removing these barriers would reduce development costs and enable millions of American families to buy or rent suitable housing that they otherwise could not afford. Removing regulatory barriers that add to the costs of a home are integral to meeting housing needs for middle-income individuals such as teachers, firefighters, police officers, nurses, service sector employees, and others.
  • The America's Affordable Communities Initiative was launched by the Department of Housing and Urban Development (HUD) to focus more attention on the need for regulatory reform. The initiative is an aggressive effort to help communities across America identify and overcome regulatory barriers to affordable housing.
    • HUD has identified regulations contributing to higher housing costs and production delays, including: out-of-date building codes; duplicative or time-consuming design review or approval processes; burdensome rehabilitation codes; restrictive or exclusionary zoning ordinances; unnecessary or excessive fees or taxes; extreme environmental restrictions; and excessive or "gold-plated" land development standards.
    • While many of these regulations were well-intentioned and even useful in their early implementation, many have become outdated and cause unintended harm to local communities. By helping local communities remove these regulatory barriers, HUD seeks to open doors for millions of American families who want to buy or rent an affordable home in the community of their choice.
    • The Federal government will not become a super zoning authority. In fact, it is just the opposite. The President wants state and local governments to look at their laws and make changes that are best suited for their particular jurisdiction, just as the Federal government will lead by example by examining its own regulations.
• Challenging the Private Sector. The President is calling upon the housing industry, including the, Federal Home Loan Banks, the homebuilders, and the mortgage and finance industry to join with Federal, State, and local governments to help America meet the goal of increasing the supply of affordable housing.

Increasing the Supply of Affordable Housing Units Available for Ownership

The lack of affordable housing can be an insurmountable barrier for low- and moderate-income homebuyers in many parts of the country, especially along the coasts. Traditionally, affordable housing efforts have focused on the short-term goal of increasing the affordability and number of available rental units, and have not focused on ownership. As part of the President's plan to build an ownership society, he has focused on encouraging homeownership, particularly among minorities and low-income families. In 2003, the number of homeowners increased by 1.7 million as the number of renters declined in the United States by over one million families.

The President's Homeownership Accomplishments

Congress and the President have worked together to accomplish important elements of his strategy - providing downpayment support for low-income families and good financing options for rural buyers. Under President Bush's leadership, overall U.S. homeownership in the second quarter of 2004 reached an all-time high of 69.2 percent. Single-family housing affordability is at its highest level in 30 years, and minority homeownership set a new record-high of 51 percent in the second quarter.

The President has called on Congress to work with him on additional steps to promote homeownership in America. He has set bold goals for homeownership, including his challenge to the Nation to create 5.5 million new minority homeowners by the end of the decade - and he has now set an additional goal of 7 million new affordable homes.

• Downpayment Assistance and Homebuying Education:
  • American Dream Downpayment Initiative. To help low-income families overcome the hurdle of a downpayment, the President proposed the American Dream Downpayment Initiative in June 2002 and signed the American Dream Downpayment Act into law on December 16, 2003. In June 2004, HUD announced $160 million in funding for this initiative to 400 local and state governments across the country to assist low-income families with down payment funds. The President requested $200 million for the American Dream Downpayment Initiative in his FY 2005 budget, which will assist an estimated 40,000 families.
  • Zero-Downpayment Initiative. In his FY 2005 budget, the President proposed the Zero-Downpayment Initiative. Preliminary projections indicate this Initiative would help about 150,000 homebuyers in the first year alone. This proposal would eliminate the statutory requirement of a minimum three percent down payment for FHA-insured single-family mortgages for first-time homebuyers.
  • Housing Counseling and Homebuying Education. Since 2001, President Bush has doubled the funding for housing counseling for families. These HUD housing counseling grants help take the uncertainty out of home buying for thousands of Americans, empowering them to avoid predatory lending, make more informed home purchases, and understand the lending process more clearly. The President has also called for an increase in funding for comprehensive housing counseling and education, including pre-purchase and default services, and renter counseling to potential homeowners and tenants. The President's FY 2005 budget request for these important programs is $45 million, more than doubling the $20 million level in FY 2001.
  • America's Homeownership Challenge. In June 2002, President Bush issued America's Homeownership Challenge to the real estate and mortgage finance industries - to encourage them to join the effort to close the gap that exists between the homeownership rates of minorities and non-minorities. Due to the President's leadership, more than 2 dozen companies have made commitments to increase minority homeownership, including pledges to finance more than $1.1 trillion in mortgage purchases for minority homebuyers this decade.
• Affordable Housing:
  • Tripling funding for Self-Help Homeownership Opportunity Program. Since 2001, the President's Budget requests have tripled funding for the Self-Help Homeownership Opportunities Program (SHOP), which provides grants for land acquisition and infrastructure improvement to nonprofit organizations, such as Habitat for Humanity, that offer homeownership opportunities to families willing to contribute their own "sweat equity." The President has requested funding for the Program in each of his budgets.
  • Federal Regulatory Relief. In April 2004, the Environmental Protection Agency (EPA) announced that there was no need for a proposed national Effluent Guideline Limitation for stormwater runoff from construction and development sites. EPA determined that locally tailored programs can better account for the site-specific nature of stormwater management, and that imposing a one-size-fits-all federal approach - which would have cost an estimated $4.2 billion a year - would not be the most effective way to address post-construction stormwater runoff. Estimates were that this proposal could have raised the average cost of new homes by $1,000 to over $2,000; shut out 135,000 low-income families from owning a new home; eliminated up to 18,000 jobs; shut down as many as 800 construction firms; and unduly burdened 150,000 small businesses.