What statement(s) related to housing—policy, or otherwise—would you want to hear in the presidential debates?
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As U.S. housing markets continue to creep toward recovery, it is critically important that our presidential candidates demonstrate an understanding of the root causes of the foreclosure crisis and bring forward policy solutions that will enable homeownership, reduce the stock of vacant homes and ensure the future health and resiliency of neighborhoods. The following are three simple statements that would indicate an understanding of the nature of the problem and its potential solutions.
- “Low-income homeowners did not cause the housing crisis and economic recession.” In spite of many policymakers’ and pundits’ claims to the contrary, lending to low-income families was not the primary driver of the housing crisis. In fact, the characteristics of mortgage loans have proved much better predictors of homeowner success than the income and credit profiles of borrowers. Recent research by the University of North Carolina’s Center for Community Capital has shown, for example, that loans by institutions covered by the Community Reinvestment Act (CRA) – often accused of being a key source of the housing crisis – represented less than 6 percent of the higher priced subprime loans that fueled and, ultimately, burst the housing bubble. Recipients of these CRA loans were 70 percent less likely to be in default than similarly situated borrowers who received subprime loans. Low-income borrowers holding affordable, conventional mortgages, including Habitat for Humanity partner families, have remained successful, even as their neighbors with subprime loans have fallen into default and foreclosure.
- “The long-term recovery and health of single-family housing markets requires broadening access to homeownership opportunities.” At the most basic level, housing markets will only recover when and where single-family vacancy rates are reduced. Marginal reductions may be achieved through the demolition of blighted housing stock and the conversion of owner-occupied housing to rental stock, but broad access to credit and to affordable homeownership opportunities remains the most viable and sustainable means to reduce single-family vacancy rates and to increase home values.
- “The federal government should continue to invest in strategies and programs that have been effective in enabling families to become first-time homeowners.” Although policymakers from across the political spectrum have used the housing crisis to justify reductions in government support for homeownership, there are effective programs supporting proven low-income homeownership models that should be expanded, enabling low-income households to build assets while supporting economic recovery by reducing the stock of vacant single-family housing. HUD’s Self-Help Homeownership Opportunity Program (SHOP), for example, has supported more than 15,000 families becoming Habitat homeowners since 1996. Even at the height of the foreclosure crisis, Habitat partner families performed exceptionally well, with foreclosure rates remaining at around 2 percent, outperforming subprime and even conventional foreclosure rates in many areas of the country.
There are many lessons to be gleaned from the housing crisis, but scapegoating low-income families neither reflects reality nor lays a foundation for the health of housing markets. With housing policy having played such an important role in the economic recession, the presidential candidates have a responsibility to make housing issues a priority in the upcoming debates and to support proven federal investments in homeownership, including low-income homeownership, as a long term strategy for housing market recovery and resiliency.
Jonathan T.M. Reckford is Chief Executive Officer of Habitat for Humanity International.
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