George McCarthy, director of Ford’s Metropolitan Opportunity Unit, opened the event by saying he thought that this might be the most urgent year for housing since Ford began supporting the annual report on housing market performance and affordability. Referencing the impending double dip in the economy, “driven by our inability to get a grip on what’s happening in the housing market,” McCarthy said that “Housing is built into the DNA of the the American character,” and the question before us will be whether we take the DNA apart and rebuild it with housing in a different role or whether it can be stabilized.
Eric Belsky, managing director of JCHS, gave an overview, noting that while supply is contracting, demand for ownership housing is still low, given low consumer confidence, falling prices, slow household formation, and tight underwriting. Meanwhile, a record high number of households report spending more than half their income on rent.
“The outlook is cloudy,” he said, referring to unknowns in immigration patterns, household formation rates (which have dropped dramatically), changing attitudes, and housing and mortgage finance policy.
Chris Herbert, research director, before going over some of the details of the report, said that while it’s good that it’s no longer hard to get media attention for housing issues, “We need to not lose sight of longer term problems of affordability and access because of the broader housing crisis” and the foreclosure and vacancy problems it brings.
Alfred A. DelliBovi, the president of New York Federal Home Loan Bank, noted the silver lining of increased recognition of the need for rental housing, emphasized the value of counseling and the low default rates the FHLB’s matched savings program to increase low-income homeownership, and quipped: “There is hope in the demographics. When all is said and done, people are still going to want to live in houses.”
Foreshadowing a major push to come with a bill later this summer, Sheila Crowley of the National Low Income Housing Coalition spoke of an “elegant” way to address the affordability issues highlighted in the State of the Nation’s Housing report: Convert the mortgage interest deduction to a 15 percent credit and lower the cap from $1 million to $500,000. This would simplify the tax code, increase the number of people who get a benefit, and free up $30 billion to build affordable rental units (and create jobs in the process), all while being deficit neutral. We look forward to seeing that proposal move forward.
In an unfortunate choice of order, Bob Mitchell, chair of the National Housing Endowment, the philanthropic arm of the National Association of Home Builders, concluded the event by blaming the increase in risky/predatory loan products that got us here on the last two decade’s federal goal of increasing the homeownership rate. If only Wall Street were actually that responsive to federal domestic policy objectives!
But no. In point of fact, affordable housing advocates had been decrying predatory products and terms for years. Meanwhile, default rates among responsible programs (including one that DelliBovi referenced) to assist low-income families into homeownership with counseling, good underwriting, and post-purchase support are very low, far lower than the rates for market-rate homeowners, even higher income ones.
It was greed, fraud, and lack of appropriate oversight in lending, not misplaced noble goals, that led to this crisis.
It was a policy problem to obsess over ownership and ignore rental. It is true that ownership is not the right answer for all families. But repeating a mistaken story about how we got here will not help us move on.
Read the report here