Washington CNN  —  Americans are in the throes of the worst housing affordability crisis in decades. Baby Boomers aren’t parting with their homes, insurance costs are skyrocketing, mortgage rates are sky-high and half of renters say they can’t afford their monthly payment. Some have given up on ever owning a home. The problem has been years in the making and economists agree it can’t be easily solved. But President Joe Biden said during Thursday’s State of the Union address that the government has a fix up its sleeve. “I know the cost of housing is so important to you. If inflation keeps coming down, mortgage rates will come down as well. But I’m not waiting,” he said. Affordable housing advocates praised Biden’s plan to help would-be homeowners afford to buy. But critics say Biden’s plan could only exacerbate the problem by creating even more demand for homes without sufficiently addressing the key factor behind the crisis: America just doesn’t have enough homes. Tax credits and other homebuying initiatives Biden proposed Thursday several actions to improve housing affordability and increase the number of homes to buy or rent. He announced a pair of new tax credits, which would require congressional action before they go into effect. The first is a $10,000 refundable credit for middle-class homebuyers – essentially an interest rate buy-down. The administration estimates this program would help more than 3.5 million buyers close a deal on their first home over the next two years. For homeowners, there is a $10,000 tax credit aimed at getting people to put their starter homes on the market. This would be a one-year tax credit to middle-class families who sell a home priced below the area’s median home price to someone who will live in the home. It is estimated to serve about 3 million sellers. Additionally, the president is calling on Congress to pass legislation that he says could result in the building and renovation of more than 2 million homes to close the housing supply gap and lower housing costs. The proposals, Biden argues, would address the two primary factors behind the home affordability crisis: Decades of under-building means there aren’t enough homes on the market, and mortgage rates have surged to multi-decade highs – more than double what they were before Biden took office. Rent is 30% higher today than it was before the pandemic, and home prices are now more than 40% higher. Meanwhile, homeowners who refinanced or bought into pandemic-era ultra-low mortgage rates of 2% or 3% are very reluctant to sell their homes and buy a new one at the prevailing rate of close to 7%: More than 90% of current homeowners have mortgage rates at 6% or below. Housing experts agree there are not enough homes available to rent or own, compared to demand. Estimates of the gap range from 1.5 million to as many as 7.2 million, depending on who is calculating it and what assumptions are being made. Housing industry not in agreement Housing advocates celebrated Biden bringing the challenges of renters and homeowners to the forefront. “This is the most consequential State of the Union address on housing in more than 50 years,” said David Dworkin, president and CEO of the National Housing Conference, a nonprofit organization that supports affordable housing. “President Biden’s call for Congress to tackle the urgent matter of housing affordability through tax credits, down payment assistance initiatives and other measures is warranted and represents a crucial step in easing the burden of high rents and home prices,” Dworkin said in a statement. Others in the housing industry disagree, saying individual tax credits that promote more demand for housing and place limits on closing costs would further increase home prices and the cost of credit. “Simply put, demand continues to outpace supply; and subsidizing more demand inflates house prices,” said Ed DeMarco, president of the Housing Policy Council, a trade association of lenders, insurers and data companies in the housing industry. An underlying housing shortage A home available for sale is shown on October 16, 2023, in Austin, Texas. Brandon Bell/Getty Images Related article Americans’ cost of living remains a massive headache, even as recession fears fade The supply of housing is simply not keeping up with demand, which drives up prices, and the Federal Reserve’s latest monetary policy report attributes that to “both short- and long-term factors.” “In the short term, higher interest rates and tighter underwriting by banks significantly increased builders’ costs of financing, discouraging new construction,” the report said. “In the long term, despite a surge in construction in late 2020 and 2021, it appears that a variety of factors — including zoning and other regulatory hurdles — have prevented construction from keeping up with underlying demand, resulting in a gross housing vacancy rate that is at a historical low.” Fed Chair Jerome Powell in testimony this week said a growing housing shortage is likely to result in continued housing inflation. But that’s something Congress has been well aware of for some time. Both the House and Senate have held several hearings to discuss issues in the housing market such as affordability, zoning reform and price fixing. The Senate is hosting one next week to discuss possible solutions. Why the Fed can’t do enough Mortgage rates fell dramatically in the early days of the pandemic when the Fed slashed rates to stimulate a battered economy. They began to rise in the spring of 2022 when the Fed began to ratchet up its key interest rate, which influences borrowing costs across the economy, in a bid to combat the highest inflation in decades. Federal Reserve Board Chairman Jerome Powell speaks during a news conference after a Federal Open Market Committee meeting on September 20, 2023 at the Federal Reserve in Washington, DC. In the face of slowing inflation and strong consumer spending, the Federal Reserve announced that it will keep the interest rate steady, holding the benchmark borrowing rate to a range of 5.25% to 5.5%. Chip Somodevilla/Getty Images Related live-story Markets end the day higher after Fed Chair Powell’s testimony before Congress The average 30-year fixed mortgage rate reached 7.79% in late October, the highest level in more than 20 years, according to Freddie Mac, but it has steadily retreated since, registering at 6.88% in the week ending March 7. Influencing borrowing costs is the Fed’s main tool — but it only functions on the demand side. So, when inflation is too high, the only thing the Fed can do is jack up interest rates to slow demand. Powell said that means there’s nothing the Fed can do to address the under-supply of housing. “I think there are two things going on. One is a longer-term housing shortage and the other is the pandemic effects and the associated higher interest rates, which are things that will pass through when all that passes through and rates are normalized,” Powell told senators Thursday. “We’ll still have the underlying housing shortage and and it’s going to be causing upward pressure on housing prices,” he said.