How can housing policy be responsive to today’s urgent needs (e.g., foreclosures, a sluggish housing market, affordability, etc.) and simultaneously address long-term trends (e.g., an aging population, growth of younger households)?
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Clearly there are urgent needs that must be met. The numbers remain staggering. Today almost 3 million homeowners have not paid their mortgages in more than a year. These are the families and homes considered in the “shadow” of the worst economic and housing crisis since the Great Depression. They represent the potential next wave of foreclosures. This is in addition to the millions of others who have already lost their homes to foreclosure. The imbalances in the supply and demand for owner occupied and rental housing continue to grow with increased interest in rental housing and smaller, more affordable units.
The challenge for policymakers is to respond to these current urgent needs while preserving the flexibility of the industry and the market to respond to longer-term changes in the demand for housing driven largely by seniors (age 65+ and older) and the young Echo Boomers (adults under the age of 30) over the next twenty years. In the near term, the most effective actions to accomplish this include:
- Reducing the uncertainty about the future of the federal government’s role in the housing market. Too much uncertainty remains and this is one of the greatest threats to the recovery. Business uncertainty freezes action, investment, and job creation. It is imperative that Congress and the President settle the housing finance and regulatory environment, including deciding the fate of Fannie Mae and Freddie Mac and reducing the costly burdens of Dodd-Frank by resisting regulatory options that limit innovation, flexibility and affordability.
- Giving private investors greater opportunities to participate in existing programs. The recent decision by FHFA to implement a pilot program allowing private investors to buy bundles of foreclosed properties is a modest step to test its contributions toward clearing out the massive backlog of housing inventory and evaluating the market impact of such dispositions. However, it is unclear why greater efforts have not been made within existing HUD programs, such as the multi-billion dollar Neighborhood Stabilization Program, to be more open to investors.
- Preserving tax incentives. Now is not the time for Congress and the President to increase the cost of purchasing or building housing. Debating the elimination of the mortgage interest deduction or the future of the Low Income Housing Tax Credit are just two examples that create uncertainty and slow investment decisions.
There is little doubt that we have not yet seen the bottom of the housing market. The private sector is already working to correct the market imbalances and has the ability to do much more. Unfortunately, the constantly changing policy landscape creates uncertainty that impedes progress in solving the housing crisis. The federal government needs to stop experimenting with new programs or changing programs that have actually worked well and outline a decisive plan for the return of private capital to replace the dominant role government has played in housing finance. No plan will be perfect or entirely fair. But we must decide.
Angela Antonelli is a former Chief Financial Officer (CFO) for the U. S. Department of Housing and Urban Development (HUD)
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