What are some of the key characteristics of a healthy housing system? And how can the success of these features be measured?
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The recovery of the housing market will be a slow process and take time. The demand and supply for housing is seriously out of sync and bringing it back into balance will depend on whether policymakers act in a deliberative way to re-build the key characteristics of a healthy housing system. A healthy housing system is one in which:
- Economic growth is robust. Quite simply, only sound economic policies and robust growth will breathe life back into the housing market. Until the federal government as well as the states can deal with the crisis of long-term fiscal sustainability (i.e., reversing the current upward trajectory of spending, taxation and regulation), consumer confidence, business investment and jobs growth will remain sluggish. Federal programs crafted to drive recovery in the housing market have failed thus far because of the fundamental weakness of our economy.
- Housing finance is primarily provided by the private market. The federal government must no longer assume the primary role of mortgage guarantor. Private lenders will be the primary providers of mortgage credit and will do so responsibly with reasonable government oversight but without the federal safety net of a taxpayer bailout if they take risks and incur losses.
- A range of housing options exists. There must be a “continuum” of housing options from emergency shelter to rental housing and homeownership. The aging population and retiring baby boomers will likely drive future demand for multifamily and alternatives to single family owner-occupied housing. Governments will need to resist creating or better yet remove existing regulatory barriers that make it difficult to respond to such changes in demand.
- Housing affordability and accessibility are valued. For the poor, disabled and those in economically distressed communities, targeted support programs should be maintained. The federal government should monitor and work collaboratively with states and local governments to incentivize the availability of housing for these populations.
- Growth is managed locally. States in collaboration with their regional and local communities should be the primary drivers of policies aimed at shaping their growth. The federal role should not be to control growth, but to support state, local and regional efforts to effectively integrate housing planning into more comprehensive plans for regional economic development.
- The federal role is limited, streamlined and effective. Federal housing programs and regulatory agencies need to be consolidated and streamlined. Performance measures are sorely lacking to evaluate the effectiveness of public sector activities (many measures already exists to measure the other characteristics of the housing market). Such measures need to be developed (e.g., integrity of underwriting risk and securitization standards, consumer protection, transparency and disclosure, etc.) so the federal government can more competently and reasonably focus and be held accountable for what should be its primary functions –providing information and best practices and monitoring system risks.
Rebuilding a healthy housing system will require the federal government to reverse its role in the housing market. After years of misguided policies and programs intended to shape housing supply and demand, the federal government must return this role to the private sector while strengthening its ability to effectively measure and assess consumer and investor risks.
Angela Antonelli is a former Chief Financial Officer (CFO) for the U. S. Department of Housing and Urban Development (HUD)
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