Yellen: Biden's Housing Tax Credits Could Boost Supply

President Joe Biden's proposed tax credits for certain home buyers and sellers could help boost the nation's housing supply and make homes more affordable, U.S. Treasury Secretary Janet Yellen said Friday, a day after the president unveiled the proposal in his annual State of the Union speech.

Yellen said in an interview on MSNBC that Biden's top economic priority was helping Americans deal with higher prices and major living expenses, including the high cost of housing.

The White House said the proposed credit would provide middle-class first-time homebuyers with an annual tax credit of $5,000 a year for two years -- the equivalent of cutting interest rates by more than 1.5 percentage points on the median-priced home.

To encourage more homeowners to sell their "starter homes" to these buyers, Biden is proposing a one-year, $10,000 tax credit, which would apply to homes below their area's median home price. Many of these buyers are locked into low mortgage rates, and the credit is aimed at offsetting higher mortgage costs for a "trade-up" or downsized home.

According to a White House fact sheet, the credits will aid some 3.5 million first-time homebuyers and 3 million sellers. Based on credit rates, that would cost some $65 billion over two years.

But these credits would need approval by Congress, which is struggling to approve this year's government funding amid Republican demands for spending cuts.

Asked on MSNBC whether the credits could overheat the economy, Yellen said Biden wanted to make sure that middle-class families could afford to buy homes.

"He's also proposing steps to expand the supply of housing," Yellen said. "And I believe they would be very helpful: investing in refurbishment of properties, expanding the low-income housing tax credit that will be helpful to Americans deal(ing) with the shortage of affordable housing."

Yellen also said she did not see evidence of inflationary wage pressures building in Friday's jobs data. She added that the data signaled a strong labor market without an acceleration of wage gains.

"Americans are getting ahead, they're getting solid wage increases that exceed inflation, but there's really no evidence of inflationary pressure coming from the labor market," she said.