We are seeing renewed legislative interest in reforming America’s housing finance system, interest that is long overdue. That interest attracts perspectives from all over the map, from pure privatization to a focus on the past GSE goals regime. We know change is coming, so NHC is working hard to offer a nonpartisan approach that moves housing finance reform forward in a way that harnesses the energy of private enterprise to serve the full range of housing need in America.
The status quo in housing finance is neither static nor sustainable. Access to home mortgages is still extremely limited for those who do not have much accumulated wealth or pristine credit. Rents continue to rise while capital remains a constraint on new multifamily production. Years of action by the Federal Housing Finance Agency (now under new leadership with potential to change direction) has already begun scaling back the government’s involvement in housing finance without creating channels that draw private capital in. We need to move forward with reform.
The House Financial Services Committee has marked one outer boundary with its so-called PATH Act. It focused exclusively on private securitization and would have left housing markets vulnerable to the ups and downs of capital markets without any countercyclical backstop. Thus far, the bill hasn’t made it to the House floor, likely because too many legislators on both sides of the aisle know it simply wouldn’t work.
An entirely different perspective comes from the National Community Reinvestment Coalition (NCRC). They have rightly championed the needs of low-income households and communities of color, both of which were hit hard by the housing crash and have been largely left behind in the recovery. But a recent NCRC policy paper gave pride of place to preserving the old affordable housing goals regime (and by implication, possibly Fannie Mae and Freddie Mac themselves). The second part of that same paper looked to develop a new means of encouraging private enterprise to create more affordable housing—a more useful avenue for policy development.
Housing finance reform must be forward-looking to succeed, both practically and politically. A reformed system has to keep what worked from the old system, like the multifamily GSE operations and the To-Be-Announced market. It also has to fix what didn’t work, and first on the list is the structure of the government guarantee. In doing both, it has to craft the right incentives to get private enterprise to serve all qualified borrowers and renters in all communities before turning to subsidy to fill the gap. Otherwise, we’re asking far too much of a limited resource.