Thursday, August 30, 2012

Top articles for August 2012

This month's blogroll included several popular stories that we worry may have been missed since August is such a popular vacation time. Our new monthly top articles listing will remedy that. From here on out, we'll highlight the most popular articles of the month to make sure you're caught up on the conversation.

Please read, see what you've missed, comment and share. As always, if you have a great idea for a piece and are an NHC member, a partner of NHC or the Center or are an expert in the housing field, please contact bwarenik@nhc.org to discuss guest blogging opportunities. We'd love to have you.


Top Articles for August 2012

"For young adults, does the American Dream still mean homeownership?" — by Blake Warenik, August 9

The challenges young adults face in entering the homeownership market are considerable, but are they enough to derail a whole generation from reaching the promised land? Media coverage, the latest data and polls and a personal story paint the picture of the future of homeownership.



"Millennials are shy of the homebuyers' market. The problem is access, and here's how to fix it." — by Sarah Jawaid, August 14

To close this month's most widely read conversation, Sarah Jawaid responds to Blake Warenik's piece on the challenges first-time homebuyers face in today's tough market and offers practical policy solutions to the problem of access to credit, financially unprepared buyers and a mismatch between existing housing stock and demand.



"Moving Forward: Revitalizing the HUD headquarters building (a thought experiment)" — by Jeffrey Lubell, August 15

Center for Housing Policy Executive Director Jeffrey Lubell paints a picture of a headquarters that puts the "UD" in HUD in his monthly Moving Forward column. Like many who have served in the building, affectionately known as "ten floors of basement," Lubell dreams of a building that is not only more pleasant on the inside, but also one that reflects the mission of the agency that calls it home. He looks toward a future HUD headquarters seamlessly integrated with the surrounding community, rich with retail and transit options and even affordable housing.



"Treasury moves forward with wind-down of Fannie and Freddie" — by Ethan Handelman, August 17

Our top hard-news story of the month, as it surely was for the rest of the housing world, was the news from Treasury and FHFA that Fannie Mae and Freddie Mac would no longer pay dividends to repay their bailout, but rather that all profits would go to Treasury. This development effectively ends any chance that a return to profitability would enable the GSEs to buy their way out of conservatorship. Ethan Handelman outlines other changes to the agreement governing conservatorship and what it means for the future of mortgage finance.



"Congress passes continuing resolution, sequestration still uncertain" — by Sarah Jawaid, August 1

The other piece of big news relevant to housing to emerge from Washington this month was the agreement between Senate Majority Leader Harry Reid and House Speaker John Boehner to avert a government shutdown before the election. However, automatic budget cuts scheduled to take effect in January without a deficit reduction deal mandated by the Budget Control Act of 2011—a component of the "fiscal cliff" analysts fear may plunge the country into a new recession—still loom on the horizon.




Wednesday, August 22, 2012

New Massachusetts Resource available on HousingPolicy.org

by Emily Salomon, Center for Housing Policy

Through a collaborative effort between the Center for Housing Policy, Citizens’ Housing and Planning Association (CHAPA) and the Massachusetts Housing Partnership (MHP), HousingPolicy.org visitors now have access to an online housing policy Toolbox with strategies, policies, and examples developed specifically for the State of Massachusetts.

Launched in 2008, HousingPolicy.org is a “one-stop shop” for housing practitioners looking for guidance on how to increase the availability of homes affordable to working families. The Toolbox section of the site provides information on a range of housing policies and tools – from adaptive reuse to zoning ordinances – available to states and localities.

The newly-launched Massachusetts Housing Policy Tool Box provides easy access to principles and best practices related to the preservation and production of a full range of housing choices for Massachusetts families. Click here to visit the Massachusetts Housing Policy Tool Box, or click here to learn more about the project.

Tuesday, August 21, 2012

New short sale process offers hope to struggling borrowers

by Ethan Handelman, National Housing Conference

It should soon get easier to do short sales—welcome news for underwater homeowners looking to sell. The Federal Housing Finance Agency (FHFA) announced today that Freddie Mac and Fannie Mae are issuing a consolidated set of short sale guidelines to their mortgage servicers. The changes promise to make short sales quicker to process and with fewer separate approvals needed, making them a more useful tool for preventing foreclosures and reducing the housing debt burden. Quick, fair, and effective implementation is critical.

Changes as summarized by in the FHFA announcement:
  • Reduced or eliminated documentation of need required for borrowers who have missed several payments, have low credit scores, or have serious financial hardships. 
  • Quicker processing for borrowers who are current on their payments and are experiencing hardship qualifications such as death, divorce, disability, or distant employment transfer or relocation. Servicers can process these without separate Fannie Mae or Freddie Mac approval.
  • Fannie Mae and Freddie Mac will waive the right to pursue deficiency judgments in exchange for a financial contribution when a borrower has sufficient income or assets to make cash contributions or sign promissory notes.
  • Service members with Permanent Change of Station (PCS) orders will be automatically eligible for short sales without any obligation for the shortfall.
  • Consolidated program with clearer processing guidelines.
  • Fannie Mae and Freddie Mac will offer up to $6,000 to second lien holders to expedite a short sale. Previously, second lien holders could slow down the short sale process by negotiating for higher amounts. (It is unclear from the summary whether this is a cap or how effective it will be in reducing delays from second lien holders.)
These guidelines, if implemented well, could well be an important step forward for struggling borrowers. Previously, FHFA had only permitted Fannie Mae and Freddie Mac to reduce payments for struggling borrowers via principal forbearance, but it had forbidden a reduction of principal. If the short sale process is applied fairly and transparently via the updated guidelines, it provides, in effect, a way to reduce principal. Although it is likely not as effective as shared appreciation modification for many borrowers, an effective short sale process combined with principal forbearance is a workable second choice. Implementation will be critical—this will only make a difference if Fannie Mae, Freddie Mac, and their mortgage servicers implement it in a timely, fair, an effective way.

Monday, August 20, 2012

Hindsight on housing from the New York Times

by Ethan Handelman, National Housing Conference

Looking back to 2009, the New York Times’ Binyamin Appelbaum points to a “cautious response to the housing crisis” by the Obama Administration as a mistake with far-reaching implications. Few would dispute that the federal government has not done all it could have to stabilize neighborhoods, prevent foreclosures, and revive housing markets—though many would disagree about what should have and still could be done.

Applebaum’s article addresses (but perhaps underemphasizes) the political limitations in the housing conversation that continue to plague us. Congress and the Administration together spend disproportionate energy trying to perfectly target assistance only to the most deserving, even as the foreclosure crisis continues and the cost of rental housing rises. Housing is too critical to families, communities, and the economy to let the perfect be the enemy of the good. Read the New York Times piece and decide for yourself.

Friday, August 17, 2012

Treasury moves forward with wind-down of Fannie and Freddie

by Ethan Handelman, National Housing Conference

The Treasury Department announced today that it had agreed with the Federal Housing Finance Agency (FHFA) to modify the agreements that govern the conservatorship of Fannie Mae and Freddie Mac. The changes to the Preferred Stock Purchase Agreements (PSPAs), include:

  • Replacing the 10% dividend with a sweep of profits. This is a valuable clarification. Until this change, Fannie and Freddie paid an annual 10% dividend to Treasury based on the advances received, but also received periodic infusions of capital to cover losses, including the cost of paying the dividend. In effect, Treasury was advancing money to pay dividends back to itself. Now the relationship is much clearer, and we can better evaluate choices made for the GSEs, such as whether targeted principal reductions make sense or how to address the multifamily part of the GSE business.
  • Accelerating the sell-off of the portfolios. The revised PSAs set a new target of 15% per year for the sell-off of the GSEs' retained portfolios. The sooner the portfolios are wound down, the easier it will be to move to the next stage of mortgage finance reform. Key will be to achieve this quicker rate of sell-off without depressing prices for the assets. We will likely see market reactions soon.
  • Annual plan from FHFA on taxpayer protection. This should help FHFA explain how the choices it makes as conservator reduce the overall exposure of taxpayers.
This announcement also reaffirms the Administration’s commitment “that the GSEs will be wound down and will not be allowed to retain profits, rebuild capital, and return to the market in their prior form.” In other words, there will be a next step to mortgage finance reform. We’ll still have to wait until after the election to get more detail, but at this point that’s no surprise.

For excellent and thoughtful analysis, see NHC Board Member Barry Zigas’ blog post.

Thursday, August 16, 2012

Why I am a houser

by Maya Brennan, Center for Housing Policy

In the Center for Housing Policy's mission statement, our first goal is to expand awareness of the nation's housing needs. Along with our policy affiliate National Housing Conference, we refer to this part of our work as elevating housing to a top-tier national issue.

Housing became a top-tier issue for me while I was working as a landlord-tenant counselor. The stories I heard on the hotline showed me clearly that housing challenges undermine a household’s opportunities for success. Some stories, especially those featuring rats in places you don’t want to imagine, are permanently etched into my memory and serve as a balance if anyone claims that housing quality isn’t a serious problem.  The constant stream of calls about nonpayment of rent makes me see more than just numbers in affordability reports like Paycheck to Paycheck or Housing Landscape. And the fear in people’s voices as they contemplated an involuntary move adds weight to research on the detrimental effects of housing instability for individual health and children’s wellbeing.

And this was before the mortgage crisis.

Restoring a well-functioning housing market and ensuring that all Americans have access to safe, decent, and affordable housing should be among our top national priorities (see this blog’s recent post on the 2012 presidential election).

We all have a story about how we became housers. Let’s tell these stories. It’s time to put housing back on the agenda and keep it there.

Wednesday, August 15, 2012

Moving Forward: Revitalizing the HUD headquarters building (a thought experiment)


by Jeffrey Lubell, Center for Housing Policy

DISCLAIMER: In this challenging budget environment, I would never propose taking funds away from low-income housing programs to invest in upgrading the HUD headquarters.  But if NASA can dream of sending people to Mars, I can dream of a revitalized HUD headquarters building that fully represents the values for which HUD proudly stands.

People tend to have strong opinions about the Brutalist architectural style of the HUD headquarters building. In my three years at HUD, I found the concrete interior and long maze of hallways to provide an uninspiring and depressing work environment. Of equal concern, though, is how the building stands wholly apart from (rather than integrated into) the local environment of Southwest D.C. Where is the ground floor retail? Where are the mix of uses and the inspiration of attractive urban form?

With HUD striving to put the "UD" (Urban Development) back in HUD, it would be worth considering how the revitalization of the HUD headquarters building could serve as a showcase for modern urban development strategies as well as an opportunity to highlight for Congress and the general public the various obstacles to this type of development and how they can be overcome.

HUD Headquarters Building. Photo by Flickr user joseph a.
Imagine for a moment that a private donor offered to provide HUD with dedicated funding specifically for revitalizing the HUD headquarters. What should HUD do? Certainly, the feasibility of rehabilitating the existing structure should be evaluated. But given how much change is needed to produce the first-class work environment that HUD employees deserve and the urban design statement that needs to be made, I suspect rehab is unlikely to be an effective solution. More effective choices including demolishing the current structure and rebuilding onsite (an option complicated by the building's national landmark status) or selling the building and relocating somewhere else.

Relocating to another site would allow for the retention of the HUD building if another entity found continued value in preserving it. It also would have the advantage of facilitating a dialogue about how well-planned development can contribute to stronger communities. Would the presence of HUD's headquarters in one neighborhood rather than another be more valuable from a community development standpoint? What impact would the development have on local housing prices? Would it increase demand for housing nearby, and if so, what steps would be taken to preserve affordability of existing affordable housing and ensure supply were increased to keep up with demand? How much red tape would HUD have to go through to obtain the necessary zoning changes and permits to implement its redevelopment plan?

HUD headquarters looms behind a row of houses. Photo by flickr user dbkingThere would likely be considerable educational value in involving Congress and other stakeholders in this dialogue. What better opportunity could there be to showcase the benefits of mixed-use, mixed-income development, the importance of developing strong policies to preserve affordability in the area surrounding new development, and the value of integrating housing, land use, transportation and environmental planning?

Especially if some affordable housing were included in the final development—and why not?—this would also be a good opportunity to highlight some of the challenges involved in mixed-use and mixed-income development. Are our existing mortgage insurance products adequate for insuring a complicated mixed-use development? How hard is it to develop a low-income housing tax credit property that serves a mix of incomes? Does the tax credit allocation process adequately assess whether there is demand for affordable housing in this particular location? Do project-based vouchers allow for the long-term affordability needed to preserve affordability in gentrifying neighborhoods? How do you pay for the infrastructure costs associated with place-making?

Of course, redevelopment would pose a major disruption in the working environment of HUD staff. In evaluating the pros and cons of redevelopment, HUD would definitely want to consider the human costs of relocation in terms of lost productivity and expense. The HUD building is also particularly well-located relative to public transit, with access to four Metro lines and the Virginia Railway; would a new site be as accessible by transit and bicycle? As with the dialogue about urban form, a public dialogue about the human costs of development would also have educational value, underscoring the importance of this sometimes overlooked component of the development process.

Just as we involve residents in the planning process for major urban development, we would want to involve HUD staff in the process of planning a new office environment. It would be important to hear what current staff think about the pros and cons of redevelopment, but my view is that HUD staff deserve an attractive work environment that enables them to operate at full productivity and develop the world-class housing policy we need in this country.

The U.S. Department of Transportation moved several years ago. Take a look at their new headquarters—it provides a far more productive work environment than the old office ever did. In 2009, the District of Columbia's Department of Housing and Community Development (DHCD) relocated to Historic Anacostia, a predominantly African-American and low-income community in Southeast D.C. whose development DHCD was interested in fostering. As former DHCD Director Leila Finucane Edmonds told me, "the move to Anacostia led to a new understanding of the agency, internally and externally, as a catalytic resource for community development." Among other outcomes, the move led DHCD to increase its focus on customer service, leading to a re-envisioned Housing Resource Center that better served the community.

The physical headquarters of the nation's Department of Housing and Urban Development is more than just a building. It's also a symbol. Thoughtful redevelopment could give us an opportunity to clarify the values we wish that symbol to represent.

Tuesday, August 14, 2012

Millennials are shy of the homebuyers’ market. The problem is access, and here’s how to fix it.

by Sarah Jawaid, National Housing Conference

Last week my colleague Blake Warenik wrote a piece, “For young adults, does the American Dream still mean homeownership?,” that contextualized the challenges that might keep young adults from owning a home in the near future. Homeownership continues to elude young adults due to barriers such as low wages, high unemployment, a tightened credit market and looming student debt. It’s not just the harsh economic reality keeping them out of the homebuyers’ market. This generation has seen family and friends get trapped in underwater mortgages, foreclosures and ultimately loss of wealth from the same asset that was perceived to build it.

While a majority of young people still want to own a home for reasons of financial independence, many question whether this is a housing stock that will be sustainable or even appealing as they experience delays in career development, household formation and asset-building. Cultural preferences are also shifting towards a return to the city with increased demand for planning and design that emphasizes density, transit accessibility, access to entertainment and services 24/7 and lower energy emissions.

Let’s focus on the many young adults who continue to see homeownership as a marker of success and as a natural next step, whether that home is in the city, the suburbs, or a rural town. There are policy options that could make the dream of owning a piece of the pie more real for them.
  • Access to Credit. Since the housing crisis in 2008, the credit market has tightened making it difficult to get a mortgage. Lenders are skittish and the shape of future regulation remains unclear. As the larger debate on mortgage finance reform continues, policymakers should continue to be mindful of how tightening the market prevents access to homeownership as well as puts pressure on the rental market to catch the windfall.

    For example last year, U.S. Department of Housing and Urban Development (HUD) along with the four bank regulators, the Security and Exchange Commission and the Federal Housing Finance Agency released this risk retention proposal, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule would require that sponsors of asset-backed securities retain at least five percent of the credit risk of the assets. The proposal also defines qualified residential mortgages (QRMs) which are loans that are exempt from the risk retention requirement. The underwriting standards for QRMs laid out in the proposal include 20% downpayment, strict debt-to-income ratios, and borrower credit history restrictions. Affordable housing stakeholders including NHC rallied to fight these burdensome requirements that would have unnecessarily thwarted access to credit for low- and moderate-income families.

    NHC submitted a comment letter outlining why unduly restricting the definition of a QRM to exclude low-wealth borrowers could therefore exclude them from access to affordable mortgage finance for years to come. The housing community must continue to ensure that Congress and regulatory agencies do not overcorrect the mortgage market, restricting credit too much in pursuit of safety.
  • Shared Equity. Shared equity is describes options that give homeowners a middle ground between owning and renting. Owning provides long-term fixed costs, requires up-front capital for a downpayment, helps to build household wealth, and allows less mobility. Renting exposes the household to year-to-year rent increases, , and requires little capital up front. Subsidy, often from federal block grants like HOME or CDBG, helps a family to offset the cost of a home, allowing a purchase with an affordable 30-year fixed-rate mortgage. When the family sells the home, they benefit from the home appreciation value and the property stays affordable.

    The Center for Housing Policy’s Jeffrey Lubell explains the concept: “Let’s say the price of a decent-quality market-rate home in a particular market is $250,000, but using appropriate underwriting criteria a buyer at the target income level can only afford a 30-year fixed-rate mortgage of $200,000 and a down payment of $10,000. Under this model, a $40,000 subsidy is provided, reducing the first mortgage amount to $200,000.” Using Lubell’s example, here are some hypotheticals to further explain how the model works.
    • Different programs have different resale formulas, but let’s say the program in our example calculates the resale price as the original price plus an increment tied to increases in the area median income. So if the area median income has gone up 20 percent in seven years, the family can sell the home for 20 percent more than the original $200,000, or $240,000. 
    • Because the increase in home price has tracked increases in income, the home remains roughly affordable to the next buyer at the same income level (subject only to fluctuations in interest rates), while the original buyer earns $40,000 on the sale, which is augmented by roughly $24,000 in paydown of principal (assuming a mortgage at 5-percent interest). While the buyer’s recovery is reduced by transaction costs, which will vary depending on the method of sale and the jurisdiction, the buyer nevertheless sees a very high rate of return on his/her initial $10,000 investment.
    • There are different types of shared equity homeownership programs that provide the in-between as described above, including community land trusts, deed-restricted homeownership, and limited equity cooperatives and others. 
    • Shared equity is a proven way to get folks into homes even if they haven’t built up the wealth beforehand to put down a hefty downpayment. Upon sale, the owner can build up enough wealth to potentially make a downpayment on a market-rate house. It also provides reliable occupancy in a community, fixed monthly costs and greater financial independence because as families can build equity that would otherwise have eluded them. In addition, such families also gain the opportunity to live in a location-rich neighborhood with access to good transportation and jobs because many shared-equity homes are located in hard-to-access housing markets.
  • Housing Counseling. Pre-purchase housing counseling is a proven tool to help homebuyers understand if they are ready for homeownership. Studies show that pre-purchase housing counseling decreases borrower delinquency by 19-50 percent. It’s not just a good policy for new homeowners; it can help existing ones as well. If facing delinquency post-sale, counseling can be a positive intervention to avoid foreclosure and give families an opportunity to connect with safer and more affordable mortgage products. Learn more about the benefits here from a national study conducted by the National Foreclosure Mitigation Counseling (NFMC) Program.
    • Housing counseling faced an uphill battle in the federal budget the last few years, with HUD’s housing counseling program zeroed out in FY 2011. After heightened advocacy in FY 2012, the program was authorized at $45 million. Advocates must show members of Congress how instrumental this program is in making potential homeowners feel comfortable with the largest investment they will likely make in their lives. 
    • Even though housing counseling has proven to prevent delinquency, homeowners do not see the benefit of taking a housing counseling course reflected in their access to credit. An obvious area for policy improvement would be to provide a tangible credit benefit to those who undergo counseling proportional to the drop in delinquency risk connected with counseling.
These are just some policy ideas that could make the dream of owning a home more achievable for young adults. As we continue to think about providing different types of housing stock for people with different preferences, stages in life and changing cultural preferences, pushing housing out of its silo will be critical. Housing professionals should build connections to transportation and education professionals to navigate policy that reflects changing city patterns, education reforms, and the burden of debt. The housing industry will need to engage further on the combined cost burden of housing and transportation. Only together can we create housing options that fit with educational and employment opportunities being created in changing neighborhoods.

Thursday, August 9, 2012

For young adults, does the American Dream still mean homeownership?

by Blake Warenik, National Housing Conference and Center for Housing Policy

It's become an article of faith in post-recession America: young adults aren't buying homes. Media outlets aren't the only ones reporting falling homeownership among young people, either—a Fannie Mae survey from October noted that the homeownership rate for 25-34 year-olds has declined by nearly 10 percentage points since 1980. Bottoming home prices, climbing rents, record-low mortgage interest rates flirting with three percent and a glut of affordable foreclosed homes on the markets. If there were ever a time to buy, it would seem that time is now. Yet more and more young people rent, move in with roommates, delay leaving home or move back in with parents.

When I was your age...

Boomers have a variety of explanations—some sounder than others—for why their children aren't starting careers, building assets and buying homes. The data, however, show that it is not aimlessness, Facebook addiction or commitment-phobia holding young adults back. They simply face a different economic reality than their parents.
  • Low real wages. For all but the wealthiest Americans, median wages are falling compared to inflation. The highest-earning fifth of Americans are seeing their fortunes improve; everyone else is staying roughly the same even as housing, energy and other expenses grow. "Everyone else," of course, includes most young people. While real wages fall for all but higher-income Americans, housing costs for working households continue to grow by comparison.
  • High unemployment. Young people are contending with rates of unemployment higher even than the stifling national average. In 2011, 9.5 percent of 25-34 year-olds and a whopping 14.6 percent of 20-24 year-olds were unemployed. A tough employment market is also eroding job security for young workers.
  • Access to credit. In a February Ellie Mae survey, the average FICO credit score for approved home loans was 764, an impeccable score in most other credit environments. Furthermore, the average accepted borrower put down 22% and average debt-to-income ratios of 21/34. (Even FHA loans required an average 701 credit score.) Many young people have short or blemished credit histories, high student loan and credit card debt and are unable to save enough for a down payment, making mortgages all but impossible to obtain. (See Ethan Handelman's May blog post on some of the factors still making mortgages so hard to get.)
  • Growing student loan debt. Many young college graduates would love the opportunity to start out with nothing. The Project on Student Debt reported that the average college senior who graduated with student loans in 2010 owed more than $25,000, up five percent from 2009. This is to say nothing of the growing numbers of student loan borrowers who drop out without finishing a degree. The Washington Post reported in May that nearly 30 percent of students who took out loans dropped out without a degree, up from 23 percent in 2001.
Of course, other factors contribute to falling rates of homeownership among young adults, such as delaying marriage. All told, though, the economic data makes it hard to argue that young adults have as easy a road to homeownership as their parents did.

A dollar spent, a dollar kept

Perhaps the best question is not whether most young adults can become homeowners; in general, the answer is at least "not yet." The more important question is whether young adults should become homeowners. The Center's own Jeffrey Lubell provided one answer in an interview with U.S. News in October: "I think if I were a youth in that age group, I'd be focused more on maintaining my ability to move and be mobile."

Lubell alludes to the reality that homeownership is a long-term financial and geographical commitment, all the more so in current market conditions where it's so hard to sell a home. For many young people, the ability to move where the jobs are and enjoy the flexibility to absorb early-career hiccups is well worth paying rent. At least for a while.

For homeowners, at least part of a monthly mortgage payment potentially builds personal wealth, a benefit renters cannot enjoy. A dollar spent paying down a mortgage stays in part with the homeowner as equity, which eventually grows into real wealth, if you stay in your home long enough and property values increase enough.

The real American Dream is about more than just homeownership in the abstract; it is about building the wealth to achieve financial independence. For decades, most Americans saw the shape of building wealth: it had four walls and a roof and it couldn't come soon enough. The next generation of first-time homebuyers has good reason to be skeptical of starting something they're not sure they're ready for.

Shifting plans, same goals

Boomers typically see homeownership as a rite of passage, along with marriage, children and other big steps. For their generation, these major life decisions served to separate adults from young people. But many experts, including Lubell, would like to put homeownership in the broader context of challenges and shifts affecting this cohort.

"What you are seeing is a delay in all the kinds of decisions that require a long-term financially stable future," Lubell said in an interview with Bloomberg published yesterday. "That's home purchases, that's marriage and that's having kids."

However, recent reports would suggest that delaying these steps is not a "seismic shift" in the long-term goals of so-called "Echo Boomers"—also called Millennials or Generation Y, roughly defined as Americans born between 1979 and 2000—but rather a push back in the timeframe in which these steps can and should be accomplished.

One such report came from the National Association of Home Builders in a survey of 1,500 likely voters released in January. Key among the findings were the responses of non-homeowners to the question of whether they have a goal of eventually buying a home. Perhaps counterintuitively, young adults polled as far more likely to have a long-term goal of homeownership than did the general population of non-homeowners. While 68 percent of all respondents answered "yes," the rate for respondents under 35 was even higher, with a vast majority of 85 percent responding that they would eventually like to buy a home. (A 2011 study from the Urban Land Institute put the number even higher, at 90 percent.)

Additionally, voters under 35 are just as likely to agree that "owning a home is the best long-term investment they can make and is worth the risks of ups and downs in the housing market"—with 74 percent of both groups agreeing. Incredibly, 82 percent of women under 35 agreed with the statement. Clearly the goals of members of this generation include homeownership and do not represent a revolutionary shift away from their parents' goals.

Despite delayed household formation, tight credit markets, housing market vicissitudes and employment woes, such overwhelming demand is a force to be reckoned with. Young adult homeownership may be falling for now, but it will not become a thing of the past. It is very unlikely that such huge demand will go untapped by mortgage lenders and home builders. Echo Boomers are now the single largest age cohort, with more than 80 million individuals making up a full quarter of the American population. A 2009 study by RCLCO, a real estate consulting and research firm, found that Generation Y's earning power then stood at about $200 billion annually, far outpacing Gen X, whose earning power stood at about $125 billion. That demand will be met; it's just a question of how quickly and how well.

From an Echo Boomer's point of view

For the sake of full disclosure and good narrative, may the reader note that I am a member of the generation in question. I, like many of my peers, have no regrets about not "buckling down," buying a house, getting married and having children as soon as possible. (The failure to accomplish these tasks by the age of 28 can be added to the litany of disappointments my parents have, by now, ceased to update regularly.) My long-term plans include all of these things—at least, I'm pretty sure they do. But I am absolutely sure that, before this point in my life, I was not ready for them and, like many of my peers, this was primarily for economic reasons.

Some, but certainly not most, of my peers have decided they are ready for these challenges. Their struggles have only recently become attractive enough to overcome the obvious foolhardiness of taking them on for myself. Yes, I am starting to explore the idea of buying a home someday soon, but not too soon. The biggest practical impediment to my doing so is, as it is for many, the tight credit markets. I could get a stellar loan with great terms—if I had 20 percent to put down. In most markets, saving that much while renting is nearly impossible for a first-time buyer. In a market like Washington, D.C., where I live, high home prices and higher rents make saving 20 percent for a downpayment the very definition of impossible, unless a wealthy parent simply cuts you a check in the high five-figures as a gift.

The housing market will correct eventually. While we won't, and honestly shouldn't, see the rates of homeownership we saw in the mid-2000s—nearing three-quarters of all households—there are a lot of young people with incomes high enough and credit risks low enough to merit a home loan who just aren't being served. Until the credit markets unclench and the job markets improve, a whole cohort of folks my age and a little older are renting when they might otherwise be buying. This trend is driving rents higher and hurting our ability to save for a downpayment (or for anything else). We are living in times of self-fulfilling prophecy.

Whether policymakers build the framework the future demands—a plan to encourage safe, broad access to mortgage credit and the development of high-quality, affordable housing with access to jobs, transit and amenities—is up to the housing community to ensure. My NHC colleague Sarah Jawaid's next blog project is to provide policy answers to the quandaries I've laid out.




Monday, August 6, 2012

Advocates offer counsel on rental housing reform at Senate hearing

by Sarah Jawaid, National Housing Conference


The Senate Banking, Housing and Urban Affairs Subcommittee on Housing held a hearing August 1, “Streamlining and Strengthening HUD’s Rental Housing Assistance Programs.” The intent of the hearing was to discuss and hear from experts on the challenges facing previously introduced bills that would make major reforms to HUD’s voucher programs, including the Section 8 Voucher Reform Act, the Section 8 Savings Act and the Affordable Housing and Self-Sufficiency Improvement Act.

Testimony included:
  • Keith Kinard, Executive Director, Newark Housing Authority
  • Dianne Hovdestad, Deputy Director, Sioux Falls Housing and Redevelopment Commission
  • Howard Husock, Vice President for Policy Research, Manhattan Institute
  • Will Fischer, Senior Policy Analyst, Center on Budget and Policy Priorities
  • Linda Couch, Senior Vice President for Policy and Research, National Low Income Housing Coalition
Panelists gave recommendations to members of Congress on how to improve the programs by simplifying rent setting, recognizing the impact of reduced voucher administrative fees, and by focusing on efficiency and effectiveness of the programs. For a detailed analysis of the hearing, visit the National Low Income Housing Coalition’s website. Also, view archived webcast of the hearing here.

Subcommittee Member Senator Jack Reed (D-RI) introduced legislation to make improvements to HUD’s Family Self-Sufficiency (FSS) program August 2, after announcing it at this hearing, which would “put into statute the existing method of funding HUD’s Family Self Sufficiency (FSS) program through administrative fees for Housing Choice Vouchers.” Read the NLIHC’s summary for more information.

Wednesday, August 1, 2012

Congress passes continuing resolution, sequestration still uncertain

by Sarah Jawaid, National Housing Conference

Senate Majority Leader Harry Reid (D-Nev.) and Speaker John Boehner (R-Ohio) reached a deal to continue funding the government at current levels through March 2013, with no threat of shutdown at fiscal-year end Sept. 30. The deal is being drafted and will come up for vote after the August recess with little controversy expected.

The deal wards off a potentially partisan spending debate during election season, punting the ongoing deficit reduction talks to the new year. Funding levels overall would be consistent with the 2011 Budget Control Act of $1.047 trillion, higher than the Rep. Paul Ryan’s (R-Wi.) $1.028 trillion proposed 2013 budget. Details of how specific housing accounts would be affected have yet to emerge.

As for the sequestration debate—the automatic $1.2 trillion across-the-board cuts to discretionary programs starting Jan. 2013 as part of the Budget Control Act of 2011—it continues on. Thus far, both Houses of Congress have passed H.R. 5872, the Sequestration Transparency Act of 2012, requiring the Office of Management and Budget to provide in detail how programs would be affected by the cuts. President Obama has yet to sign the bill, perhaps because as stated in an OMB memo “the president remains confident Congress will act” to overturn the sequester. It remains to be seen how the sequestration will unfold. Read more on Politico and The Hill.