Though the presidential conventions are still a year away, the nation is already getting its first glimpse of the Democratic contenders as they face off in their first debates on NBC.
Interest rates are falling, and some two million mortgages are primed for refinance — yet the affordable housing market is ailing. As the primary season starts for the Democrats and the Trump administration digs in to GSE reform, here’s an initial take on where things stand.
Will Affordable Housing Be a Campaign Issue for Democrats?
Those of us in the housing industry have been itching to see our issues debated on the national stage. From the real estate inventory challenge to the minority ownership gap, and from the conservatorship of Fannie Mae and Freddie Mac to the plight of the still largely missing first-time homebuyer, the nation’s housing issues should be first-course servings at the kitchen table.
Yet it appears unlikely that we will find a moderator on a nationally televised debate digging deep enough to query on housing. Instead, to understand where the candidates stand on today’s critical housing issues, one must search each candidate’s website.
Democratic senators Warren, Booker, Harris and Gillibrand (to name just a few) have etched out thorough housing plans, but there should be more focus on public policy solutions to the homelessness gripping the nation’s larger cities.
Former HUD Secretary Julian Castro has the chops to debate the government’s role in ensuring low-income housing for the 38 million or more ‘cost-burdened’ families in America, but even adding $50 billion annually to the Housing Trust Fund does not solve the scarcity of housing supply.
Can the Trump Administration Tackle GSE Reform and Affordable Housing?
While the primary process ensues for the Democrats, the Trump administration has set a course for resolving the decade-old conservatorship of Fannie Mae and Freddie Mac. The runway may still be years in the making, but newly installed FHFA Director Mark Calabria has said in no uncertain terms that it is time to take action.
In concert with FHFA, the Departments of Treasury and Housing and Urban Development (HUD) have drafted a Housing Blueprint that they say they will publish this summer. The plan is reported to outline the steps the Administration will take to remove Fannie Mae and Freddie Mac from government control. While continuing to seek Congressional action on broad housing reform, FHFA will take a series of administrative steps to incent private capital. These actions may include innovating the current Credit Risk Transfer offering to disseminate more credit risk; shrinking the GSE footprint by eliminating certain products from the menu (with the side effect of curtailing any new mortgage innovation); and creating a market for competition to the GSEs.
As the difficult task of GSE reform plays out, the Administration is also hammering on regulatory reform. This week President Trump convened a cross-agency council to address the root cause of our nation’s lack of affordable housing. By Executive Order, the president created the White House Council on Eliminating Barriers to Affordable Housing and charged the Council with taking steps to eradicate the overly burdensome regulations on housing development to drive down costs so that more affordable housing can be created.
The Council’s efforts harken back to similar efforts by Bush Administrations whose research found that more than 25% of the cost of a new home is the direct result of Federal, State and local regulations. With household formation beginning to grow and more millennials now seeking homeownership, a lack of inventory is further contributing to the current run-up in costs. As a result, Americans have fewer opportunities to achieve sustainable homeownership, which is the number-one builder of generational wealth for most American families.
The Mortgage Industry Prioritizes Affordable Housing
Credit is due to the Mortgage Bankers Association (MBA) for its efforts to promote affordable housing as a critical issue. Within the MBA, a new office on Affordable Housing Initiatives has been formed under the leadership of SVP Steve O’Connor. Steve is well credentialed to lead this effort, and it makes sense to this author that each of the major housing trade associations should follow the MBA’s lead in this much-needed area of focus.
The MBA effort could serve as a catalyst to drive public policy discussions within both the for-profit and nonprofit sectors. The housing shortage is a generational issue that requires the type of all-hands-on-deck approach that O’Connor can muster. However, it will require a sustained commitment and an open-minded solution set from all sides of the housing finance industry.
Looking toward 2020, notwithstanding politics or party, the industry must raise the affordable housing issue at every debate, every local community forum and in every interaction with the candidates and Administration officials to promote safe and decent housing for all.