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2026-09-28

The Fed on why housing costs so much, two HUD fee increases, and California's bill deadline

US Real Estate Policy Weekly
US Real Estate Policy Weekly@Katharine Carlon
The Fed on why housing costs so much, two HUD fee increases, and California's bill deadline

Almost seven in ten first-time buyers told a Fed survey they couldn't come up with a down payment. A Federal Reserve governor used that number on Wednesday.

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The Federal Reserve's own account of why housing costs so much came from one of its governors this week, and land-use rules are the first cause he names. Two HUD loan programs get more expensive as the federal fiscal year turns on October 1. California's governor is working through the state's housing bills against a September 30 deadline.

The Fed's account of what shelter costs

Governor Michael Barr spoke on September 23 at the Chicago Fed's "Housing Affordability 2026" community development summit. His subject was the long-term cost of shelter, not the policy rate. 1
He cited the Atlanta Fed's Home Ownership Affordability Monitor, which reached 68 in July 2026, its lowest reading in 21 years. About half of renters are cost-burdened, he said — paying at least 30% of income for rent — and about a quarter pay at least half.
Barr puts the supply shortfall at roughly 2 million to 5.5 million units, or about 1% to 4% of a housing stock near 150 million. The share looks small, but he argues the effect is outsized, because housing markets need vacancy and available inventory to work.
He names four causes, land use first: local zoning, permitting, land-use and building rules, including single-family-only districts and minimum lot sizes, which he says have spread, especially in suburbs. The others are flat construction productivity since the late 1980s, the builders lost after the financial crisis, and pandemic-era cost growth.
One more pressure he flags is mortgage-rate lock-in. About half of all mortgages carry rates of 4% or lower and nearly 80% are below 6%, so moving means giving up a cheap loan — which reduces supply as well as demand.
The speech is analysis, not a rule. Barr said he supported the FOMC's September increase and expects further adjustments if inflation is to return to target in time. The next scheduled decision is October 27–28, with new projections in December.

Two HUD loan fees rise for fiscal 2027

HUD published both notices in the Federal Register on September 28, and the amounts and dates are final.
The Section 184 program guarantees mortgages for Native American borrowers, mostly for homes on tribal land. Its upfront loan guarantee fee rises from 1.00% to 1.50% of the loan for new Firm Commitments issued on or after October 1, 2026; the Skilled Workers Demonstration Program version goes from 0% to 1.00%. The annual guarantee fee stays at zero, and loans already guaranteed are unaffected. 2
Section 108 lets local governments borrow, with a federal guarantee, against future Community Development Block Grant allocations to pay for infrastructure and economic development. The fee HUD collects to cover credit subsidy costs rises from 0.58% of principal for FY2026 to 1.05% for FY2027 commitments, charged at disbursement. Its applicability date is October 28, 2026. 3
On a $300,000 loan, the half-point Section 184 increase is about $1,500 more up front.

California's housing bills at the deadline

California's legislature sent its final bills to Governor Gavin Newsom in early September. He has until September 30, 2026 to sign or veto them, and a bill he neither signs nor vetoes becomes law anyway.
He acted on housing bills on September 27. 4 AB 2118 amends the Affordable Housing and High Road Jobs Act of 2022, the law that allows mixed-income housing along commercial corridors to be approved ministerially. Local objective standards still apply, but under the amendment they can no longer prohibit or limit a mixed-use project. 5
AB 1573, the Unseen and Unheard Housing Act, adds victims of domestic violence, sexual assault, and human trafficking to the "target population" that housing-element law requires cities and counties to analyze as they plan for special housing needs, emergency shelter, and supportive housing. 6
Two bills were still awaiting action on September 28. AB 956 would require ministerial approval of up to two detached accessory dwelling units on a lot with a single-family home, up from one. 7 SB 1117 would calculate impact fees for an accessory dwelling unit only on interior space above 750 square feet. 8
Bills signed at this session take effect January 1, 2027 unless they carry an urgency clause. The governor's deadline for the remaining measures is September 30.

References

  1. 1
    Federal Reserve — Governor Barr, "A Long-Term View on the Costs of Shelter," September 23, 2026

    federalreserve.gov

  2. 2
    Federal Register — Section 184 Indian Housing Loan Guarantee Program: Increase in the Loan Guarantee Fee, September 28, 2026

    federalregister.gov

  3. 3
    Federal Register — Section 108 Loan Guarantee Program: Fee To Cover Credit Subsidy Costs for FY 2027, September 28, 2026

    federalregister.gov

  4. 4
    Office of Governor Gavin Newsom — Legislative update, September 27, 2026

    gov.ca.gov

  5. 5
    AB 2118, Affordable Housing and High Road Jobs Act of 2022: use by right: objective standards

    calmatters.digitaldemocracy.org

  6. 6
    AB 1573, Land use: housing elements: target population

    calmatters.digitaldemocracy.org

  7. 7
    AB 956, Accessory dwelling units and junior accessory dwelling units

    calmatters.digitaldemocracy.org

  8. 8
    SB 1117, Accessory dwelling units and junior accessory dwelling units

    calmatters.digitaldemocracy.org

US Real Estate Policy Weekly
US Real Estate Policy Weekly@Katharine Carlon

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