In this issue, Capital Commentary puts housing policies favored by Joe Biden and Kamala Harris under the magnifying glass. Follow links to learn more about topics. Share the newsletter with colleagues and clients.
Build Housing, Rebuild the Middle Class
Joe Biden pledges, if elected President, to spend $640 billion over 10 years to increase both the stock of housing and its affordability as part of his “Investing in Communities” plan.
“The middle class isn’t a number but a value set which includes the ability to own your own home and live in a safe community,” says the Biden-(Kamala) Harris campaign website. Here’s some of the ways Biden plans to achieve the goal:
- 30% Solution. The campaign aims to increase the inventory of affordable housing so mortgage or rent payments don’t exceed 30% of income.
- Diversity & Inclusion. To combat racial segregation and discrimination, Biden promises to promote legislation requiring states to develop a strategy for inclusionary zoning if they want to be eligible for Community Block Grants from HUD. It is likely a Biden administration would encourage more cities to follow the lead of Minneapolis in eliminating single-family-only zoning.
- Tougher Fair Housing Laws. The Obama-Biden administration implemented the Affirmatively Furthering Fair Housing (AFFH) rule requiring communities receiving certain federal funding to examine housing patterns and address any problems that have a discriminatory effect. The Trump administration recently repealed AFFH, which it contended “threatened our nation’s suburbs.” If Biden is elected, watch for its return.
- Money to buy homes. Biden is proposing a new First Down Payment Tax Credit worth up to $15,000 that would be advanceable — that is, it would be available when a buyer purchased a home rather than having to wait until taxes are filed.
Washington Insiders See Even More Changes if Biden Wins
Mortgages could be restructured in bankruptcy, something not permitted today. It may not turn out to be a big deal since lenders are already under incredible pressure to modify mortgages when borrowers are in trouble.
Reform of Fannie Mae and Freddie Mac might pause, particularly if the Supreme Court rules that as president, Biden could replace FHFA Director Mark Calabria before the end of his five-year term. Then again, investor advisory firm Cowen Washington Research Group thinks the Democrats preferred it when the GSEs were private and not under government conservatorship, so it wonders if Biden would want to change the course currently being charted by the Trump administration.
The GSEs may be charged with creating more affordable housing units under a Democratic administration (and Congress). Look for a big boost in multifamily housing.
FHA might reduce its insurance premiums to spur more affordable lending. Cowen calls this a negative for private mortgage insurers like Arch MI, but adds, “mortgage insurers would offset any lost business as Fannie and Freddie would grow by bringing in more first-time buyers.”
Running Mate Reflects On Redlining
When Kamala Harris was still a candidate for president herself, she proposed a $100 billion grant program aimed at the racial gap in homeownership rates. The gap between white and Black homeownership currently exceeds 30% and historic “redlining” is said to be one cause for the disparity.
Government-sanctioned discrimination: Redlining is the practice of refusing loans to borrowers in minority neighborhoods due to lower home values. When the Federal Housing Administration (FHA) was created in 1934, it refused to insure loans in or near Black neighborhoods. The practice is now outlawed yet the impacts of redlining are still being felt today. Harris’ plan centered on providing up to $25,000 or 20% of the loan value to people of color who have lived in historically redlined neighborhoods for at least 10 years.
Closing the homeownership gap would be a priority for a Biden-Harris administration and a new HUD Secretary.
Who are Biden and Harris Listening To?
Their most prominent economic advisers are veterans of the Obama-Biden administration. That’s the conclusion of Beacon Policy Advisors, according to HousingWire. Those advisers include:
- Jeffery Zients was a director of the National Economic Council and acting director of the Office of Management and Budget who played a key role in negotiating tax legislation with Congress.
- Jared Bernstein was the former vice president’s chief economist (a role that current FHFA Director Mark Calabria held under Vice President Pence) and was also executive director of the White House Task Force on the Middle Class. Beacon Policy Advisors thinks Bernstein would be a natural fit at the Federal Reserve in a Biden administration.
- Heather Boushey is best known for her advocacy to reduce income inequality as CEO of the Washington Center for Economic Growth.
- Felicia Wong may be the most progressive economic voice advising the ticket. In her role as president of the Roosevelt Institute, she opposed the House-passed $3.5 trillion HEROES Act economic relief bill because she felt it didn’t go far enough to help people impacted by COVID-19.
A Biden administration would likely overturn capital standards for the Government Sponsored Enterprises adopted by the Trump administration, argues former Freddie Mac CEO Don Layton in the current episode of the Arch MI PolicyCast. Click here to listen.