After years of bad news about the housing sector, the housing market is slowly recovering. Fewer families are facing the prospect of foreclosure. Investment in new home construction is on the rise and home prices are climbing upward.
Unfortunately, it’s too early to declare victory. Six years after the housing market’s collapse, it is now apparent that current policy, and the institutions that support it, remain outdated and inadequate to meet today’s housing challenges.
For starters, our nation’s housing finance system is dysfunctional. The government’s overwhelming presence in the mortgage market, supporting some ninety percent of mortgages through insurance and guarantees, crowds out private capital and places excessive risk on the taxpayers who are ultimately “on the hook” in the event of a future market decline. This government-dominated system is unsustainable over the long term.
The federal government placed Fannie Mae and Freddie Mac, the two mortgage giants, under its control nearly five years ago, yet there is no clear vision for the future of the two institutions. In recent weeks, comprehensive reform legislation has been introduced in both houses of Congress. These are welcome developments but much more work remains before a final plan emerges.
While homeownership is more affordable than at any time since the 1970s, too few families have been able to benefit from today’s record low interest rates and favorable home prices as underwriting standards have grown increasingly restrictive. High credit scores and downpayment requirements are now the norm. Tight credit conditions, in turn, are slowing our economic recovery.
Rental demand is increasing in many regions throughout the United States and the number of renters spending more than they can afford on housing is unacceptably high and growing. As rental demand increases, we can expect these burdens to grow as rents rise even further.
Our nation’s federal rental assistance programs meet only a fraction of the need. Nationally, only one in four households eligible for assistance actually receives it. As a result, these scarce rental subsidies are often allocated through lengthy waiting lists and by lotteries.
The BPC Housing Commission’s report, released earlier this year, provides recommendations on how to address many of these challenges. And today there are encouraging signs of legislative action and growing consensus that that our nation’s government-dominated housing finance system is unsustainable.
The Housing Commission recently hosted a policy forum at the George W. Bush Presidential Center in Dallas, Texas, at which Representative Jeb Hensarling, chairman of the House Committee on Financial Services, shared – thoughtful remarks about his bill for housing finance reform, and we are encouraged that he plans to continue to prioritize housing finance reform when his colleagues return from the August recess. At an upcoming forum in Columbus, Ohio, Representative Pat Tiberi, chairman, Select Revenue Measures Subcommittee of the House Ways and Means Committee, will discuss critical issues in affordable rental housing policy.
Despite the good news of late, the challenges we face in housing are so significant and urgent that inaction is no longer an option. It is our hope that our nation’s leaders will finally give housing the sustained policy focus it deserves.
Visit the event page to learn more about past and upcoming forums.