The Most Underappreciated Part of the Bipartisan Housing Bill

Source: The New Republic · Bias: Left

Summary

President Donald Trump surprised just about everyone in Washington, Republicans and Democrats alike, when he announced on Wednesday that he was canceling an afternoon signing ceremony for the biggest housing bill to pass Congress in decades. He’s holding the bill hostage over his unreasonable demand that lawmakers first pass the Save America Act, the Republicans’ voter suppression bill, which doesn’t have the votes to pass the Senate. As Democratic Senator Elizabeth Warren, a key supporter of the bill, said, “He could be over here trying to claim a victory lap. And instead, he’s saying no, no he doesn’t want anything to do with it.”The bill will automatically become law in ten days if Trump refuses to sign it. (He could also veto it, but it passed with veto-proof margins.) So one way or another, more than 60 measures will take effect with the goal of increasing housing by waiving some regulations, increasing grants to communities that encourage building, updating rules on manufactured homes, and preventing large investors from buying single-family homes. Much of the provisions were big asks from the abundance movement.Proponents of these measures hope that they will increase housing supply and therefore lower prices, putting homeownership back within reach for middle-class families. But there’s a smaller provision that could be just as important. The bill includes pilot programs to address a gap in the housing market which keeps families from getting mortgages on already inexpensive homes because it’s often not profitable for lenders to issue smaller mortgages. Addressing this gap could bring the best idea of the abundance movement—that public policy should focus more on increasing housing supply—to distressed and rural communities where aging, inexpensive homes already exist.The provisions deal with “small-dollar mortgages,” defined as those less than $100,000, for homes that are often called “naturally affordable”—which is to say, cheap. They’re often priced affordably because they’re small, old, in a less expensive neighborhood, or some combination of the three. Such homes are not a big part of the market, but they could be exactly what working-class families who want to move from renting to homeownership need, especially in certain areas of the country.“These small-dollar, or low-cost, homes comprise only about 3 percent of active listings, that’s about 32,000 homes that are under $100,000 today,” said Aniket Mehrotra, a policy coordinator at the Urban Institute’s Housing Finance Policy Center​. “However, in rural areas of the country the share of active listings is greater.”Yuliya Panfil, director of the Future of Land and Housing program at the nonpartisan think tank New America, calls this “affordable housing hiding in plain sight.” While many homes are simply too expensive for low- and moderate-income families to buy, these are well within their price range but difficult if not impossible to get mortgages approved for. “The result of these often-invisible challenges is that millions of starter homes sit in a financing no-man’s-land — too complicated for most buyers to access and too overlooked by policymakers to fix,” Panfil wrote at Bloomberg CityLab. “We are struggling to build new homes fast enough as millions of existing affordable homes quietly go to waste.”Researchers at The Urban Institute in 2018 documented the problems families face when trying to buy these less expensive homes. “Lenders weren’t originating small-dollar loans even where affordable properties existed, locking out working-class families not because of creditworthiness, but because the loan economics didn’t work for lenders,” said Alanna McCargo, a Senior Fellow for Inclusive capitalism at the Clinton Foundation and non-resident Fellow at the Urban Institute who worked on the original report. This dynamic keeps families out of homeownership, pushes them into less secure loans, or encourages them to buy more expensive homes they struggle to afford.It’s unclear what banks need in order to issue more of these loans, so the bill creates pilot programs to study and implement possible fixes, including requiring the Consumer Financial Protection Bureau to study compensation rules and caps on fees to mortgage lenders to potentially encourage more small-dollar lending, and a Housing and Urban Development pilot program to increase access to these loans.But encouraging more lending isn’t the only solution. Much of this housing stock is in smaller cities far from the booming coastal megalopolises where abundance proponents live, and the homes are also aging. Even if families find willing lenders to buy an older home, the houses may not appraise or pass inspection.

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The Most Underappreciated Part of the Bipartisan Housing Bill
The New Republic

The Most Underappreciated Part of the Bipartisan Housing Bill

Left

President Donald Trump surprised just about everyone in Washington, Republicans and Democrats alike, when he announced on Wednesday that he was canceling an afternoon signing ceremony for the biggest housing bill to pass Congress in decades. He’s holding the bill hostage over his unreasonable demand that lawmakers first pass the Save America Act, the Republicans’ voter suppression bill, which doesn’t have the votes to pass the Senate. As Democratic Senator Elizabeth Warren, a key supporter of the bill, said, “He could be over here trying to claim a victory lap. And instead, he’s saying no, no he doesn’t want anything to do with it.”The bill will automatically become law in ten days if Trump refuses to sign it. (He could also veto it, but it passed with veto-proof margins.) So one way or another, more than 60 measures will take effect with the goal of increasing housing by waiving some regulations, increasing grants to communities that encourage building, updating rules on manufactured homes, and preventing large investors from buying single-family homes. Much of the provisions were big asks from the abundance movement.Proponents of these measures hope that they will increase housing supply and therefore lower prices, putting homeownership back within reach for middle-class families. But there’s a smaller provision that could be just as important. The bill includes pilot programs to address a gap in the housing market which keeps families from getting mortgages on already inexpensive homes because it’s often not profitable for lenders to issue smaller mortgages. Addressing this gap could bring the best idea of the abundance movement—that public policy should focus more on increasing housing supply—to distressed and rural communities where aging, inexpensive homes already exist.The provisions deal with “small-dollar mortgages,” defined as those less than $100,000, for homes that are often called “naturally affordable”—which is to say, cheap. They’re often priced affordably because they’re small, old, in a less expensive neighborhood, or some combination of the three. Such homes are not a big part of the market, but they could be exactly what working-class families who want to move from renting to homeownership need, especially in certain areas of the country.“These small-dollar, or low-cost, homes comprise only about 3 percent of active listings, that’s about 32,000 homes that are under $100,000 today,” said Aniket Mehrotra, a policy coordinator at the Urban Institute’s Housing Finance Policy Center​. “However, in rural areas of the country the share of active listings is greater.”Yuliya Panfil, director of the Future of Land and Housing program at the nonpartisan think tank New America, calls this “affordable housing hiding in plain sight.” While many homes are simply too expensive for low- and moderate-income families to buy, these are well within their price range but difficult if not impossible to get mortgages approved for. “The result of these often-invisible challenges is that millions of starter homes sit in a financing no-man’s-land — too complicated for most buyers to access and too overlooked by policymakers to fix,” Panfil wrote at Bloomberg CityLab. “We are struggling to build new homes fast enough as millions of existing affordable homes quietly go to waste.”Researchers at The Urban Institute in 2018 documented the problems families face when trying to buy these less expensive homes. “Lenders weren’t originating small-dollar loans even where affordable properties existed, locking out working-class families not because of creditworthiness, but because the loan economics didn’t work for lenders,” said Alanna McCargo, a Senior Fellow for Inclusive capitalism at the Clinton Foundation and non-resident Fellow at the Urban Institute who worked on the original report. This dynamic keeps families out of homeownership, pushes them into less secure loans, or encourages them to buy more expensive homes they struggle to afford.It’s unclear what banks need in order to issue more of these loans, so the bill creates pilot programs to study and implement possible fixes, including requiring the Consumer Financial Protection Bureau to study compensation rules and caps on fees to mortgage lenders to potentially encourage more small-dollar lending, and a Housing and Urban Development pilot program to increase access to these loans.But encouraging more lending isn’t the only solution. Much of this housing stock is in smaller cities far from the booming coastal megalopolises where abundance proponents live, and the homes are also aging. Even if families find willing lenders to buy an older home, the houses may not appraise or pass inspection.

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