Affordable Housing

Finance: The Role of Tax Incentives in Affordable Housing, July 20, 2022

WM: Nowhere to Live: Profits, Disinvestment, and The American Housing Crisis, July 13, 2022

HOUSING ISSUES

The Housing Market

Building scientist Belinda Carr highlights why the current economy is similar to 2005 in a recent YouTube video at 

https://www.youtube.com/watch?v=77g6jRBG1cI&list=WL&index=4&t=570s 

Her five main points against an actual housing shortage are:

1. Declining population growth: Low birth rate, higher death rates. Permits are meeting population growth rates
2. People per unit has declined
3. Number of rental units - large number of investor units, especially in minority neighborhoods. Investors driving out individual buyers.
4. Low interest rates have driven up prices, driving up investor incentives
5. Mismatch of housing types and locations. The rise of remote work and possibility of large firms  linking wages to housing prices if a recession occurs (because, as monopsonies, they can).

I recommend asking her for comments or testimony. At least circulate the YouTube link.

Her research is in keeping with other analyses, including my own, on the prospect of a housing recession.

Starting in 2009, properties that have been seized in foreclosure have been purchased with private equity and are so heavily leveraged that they cannot be sold until the holding company files for bankruptcy in the next Great Recession. See Homewreckers: How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks, and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream by Aaron Glantz. The C-SPAN Book TV discussion with Mr. Glantz will give the committee a heads-up on what such testimony would include. See https://www.c-span.org/video/?465567-1/homewreckers

The long and short of it is that many now have to rent or own leveraged properties. Our absentee landlords have cashed out and left servicing companies to bleed us dry. They essentially own us because we have to work harder and longer to have a place to live while those who have cashed out live in gated and high-end assisted living communities. In the last year, Exchange Traded Funds have been all the rage. Who wants to bet on where the latest pool of junk is hiding?

In 2008, the Troubled Asset Recovery Program was enacted, promising aid to homeowners. The next year, CNBC Rick Santelli had his “rant of the year” which put the kibosh on any aid to homeowners, although there was little appetite to provide it from the Larry Summers wing of Obama economic team anyway. They did, however, stay behind bailing out the holders of the bad paper. 

Let us not repeat (or rather continue to repeat) the bad practices that left the economy in the doldrums. During the pandemic, the Federal Reserve has purchased bad paper, but without benefit to those whose debts are held in those bonds.

This time around, credit card balances and back rent should be forgiven when the Federal Reserve buys the bonds that hold the debt. Loans could also be written down, which would stop bondholders from benefiting from issuing bonds that should never have been issued in the first place. Renters of both commercial and residential property should be offered the chance to purchase their locations and homes, with assistance from Government Sponsored Enterprises, with their paper replacing the debt paper that has been securitized in Exchange Traded Funds.

ETFs may take a hit, but what was falsely sold as AAA paper would actually become what was sold. Bad landlords, and Glantz demonstrates that Mr. Mnuchin and Mr. Ross truly are bad landlords, degrade properties so that the bonds that were issued for them to cash out are nowhere near the value at issue.

In 2009, the United States aided and abetted those who created the crisis. We are currently repeating the mistake. When the inevitable crisis occurs again, doing the right thing will also be the right medicine for the economy.

The Opportunity Zone Program and Who It Left Behind, (November 16, 2021)

Video 

Fair Housing Enforcement

There is a similar matter that needs mention – Fair Housing (especially considering recent campaign bloviating). In light of recent Supreme Court rulings including sexual orientation in sex for employment law – there is no reason to believe that this revised definition does not apply to every part of the Civil Rights Act – as well as the Fair Housing Act. 

Are civil penalties enough to force compliance? Experience shows that they do not. A former roommate, who got his Section 8 before I did, was exposed to possible discrimination couched in the language of credit. He complained to the Housing Office and the landlord caved in. This was 2018 in liberal Montgomery County. The continued need for training by the Patricia Roberts Harris National Fair Housing Training Academy (where I also worked) is a less anecdotal.

When I was the Ward 3 Community Relations Representative in the D.C. Office of the Ombudsman, we were given a talk by the Solid Waste Management office. Their motto was that there is no better education than a ticket. This would be equally true in fair housing, as well as all other civil rights enforcement. It is time to quit talking about reform and to actually start doing it.

Bias in Housing Policy

When dealing with federal housing, and income support in general, the desire for economic justice and environmentalism sometimes conflict. Anti-poverty programs are notorious for not funding those with the father in the home. This is the result of both racism and the desire to limit the number of clients. In short, the Zero Population Growth mentality has made it into housing policy.

There should be no conflict here. The ZPG/racist and cost control arguments are simply unworthy of American Society, while being endemic within them. All people of good conscience should resist such nonsense and I will do so with my last dying breath.

Prior to the Wars on Drugs and on Poverty (the Poor?), the model for housing in modern America was the three bedroom house. This included a bedroom for parents, one for the boys and one for the girls. An oldest child may eventually get his or her own room at some point if there were a four bedroom or basement/attic space that could be used as a bedroom.  

Aside from the war on the poor, there is no reason that publicly funded housing should have departed from this norm. This includes Section 8 assistance. If public housing included three bedroom units, there would not be a drive toward driving families toward ownership that they cannot afford over the long term. 

Federal low and moderate income housing, including the low income housing my family participated in during the 2000s, gave generous assistance to get us in, but was not adequate to keep us there. We mistakenly borrowed using a step-up mortgage. This would have been fine if the payment itself, rather than the mortgage rate, had “stepped up” by inflation each year. What we received was unsustainable, which ended in foreclosure, bankruptcy and divorce. I doubt we were the only ones. See the above discussion on the 2008 bailout for other difficulties which could have been dealt with via public policy.

Federal rental and purchase support should be two sides of the same program. As with Medicare, some participants should be dual eligible for both downpayment assistance and rental assistance. Indeed, everyone approved for one must be declared eligible for the other. If this were the case, my family may have stayed in more affordable housing.

The surest way to help federal housing beneficiaries escape the need for rental assistance, indeed any assistance - including bankruptcy protection - is to make sure that families have adequate incomes. The entire low income housing program - from mortgage subsidies to Section 8, as well as most other statutory low income support benefits - could be decreased or curtailed with adequate support for families through adequate wages, training programs, child tax credits, and the other elements of the Build Back Better proposals.

Fix income inequality with higher minimum wages and child tax credits and the free market will respond to the real needs of families. Two parent families with more than two kids should be able to demand three bedroom apartments, all things being equal. End the bias against two-parent families in current programming and creativity will take care of the rest.

Part II - Income Security Video

Part I Video