PolicyCast: Government Can Help, Hinder Aspiring Homeowners

Kirk Willison: [00:00:10] United States Senator Thom Tillis could be a character out of a modern-day Horatio Alger story. Born in Florida, he and his family moved 20 times before Thom graduated from high school in Nashville, Tennessee. He was a fine student, but he couldn’t afford to go directly to college. Instead, he set out for Chattanooga and took a job with a life insurance company computerizing records in conjunction with Wang Laboratories. That eventually led to his being hired by Wang, and a few years later by the accounting and consulting firm, Pricewaterhouse. Just Six years later and still without a college degree, that would come later, Tillis was named a partner in the firm. His rise in politics was just as meteoric. In 2002 he was elected to the Park Board in the town of Cornelius, North Carolina. By 2007, Thom was serving in the North Carolina House of Representatives. And four years later, he was Speaker of the House, elected to the US Senate by just 45,000 votes in 2014. Tillis won reelection this past November by 95,000 votes. Senator Tillis is a member of the Senate Banking, Housing and Urban Affairs Committee, which is why PolicyCast was eager to hear about his housing policy priorities. Nice to see you, sir. Thank you very much for taking the time today to join us on the Arch Mortgage Insurance Policy cast. It’s a real treat to have the junior senator from North Carolina here for a company that’s based in Greensboro and has a lot of constituents in your state.

Thom Tillis: [00:01:56] Yeah, I’m happy to be here. Sorry, we can’t be in person.

Kirk Willison: [00:02:00] Well, we’re all faced with that where I think the forthcoming future for a while anyway, huh?

Thom Tillis: [00:02:06] That’s right.

Kirk Willison: [00:02:07] Well, the focus, Senator, of the Policy cast is housing policy. But before we actually get in and dig into some of the details there, I thought there might be some value in a lot of our viewers getting to know a little bit more about Senator Thom Tillis.

Thom Tillis: [00:02:25] Fair enough.

Kirk Willison: [00:02:26] All right. Thank you. I appreciate it. You had quite a nomadic childhood. From what I understand, you moved about 20 times before you graduated from high school as your parents searched for jobs around the country and that had to be very difficult. I wonder if you could share, I’m very curious. How has that experience or those experiences shaped the person you are today?

Thom Tillis: [00:02:51] Well, you know, I grew up with a family of six kids, two parents, neither graduated from high school, my father went back and got a certificate as a draftsman. And, he was a draftsman mainly doing boat components. And so we moved where the projects were, where from really shipyard to shipyard and then up to the dredge industry and Nashville, Tennessee back in the early 70s. But I think what I was always struck by, I tell people that you know, our family, both my mom and my dad worked and sometimes my mom was at home. My mom was at home and we lived in houses when the government made good decisions and made housing affordable. My mom was at work, and we lived in trailer parks when the government made it out of reach. And I saw it firsthand and I can track back if I have, and i have, i’ve gone back and taken a look at the few instances where we owned a home versus instances where we rented a home versus instances where I lived in trailer parks that are still standing in Jacksonville, Florida and Nashville, Tennessee. It almost invariably tracks to when the government made decisions that caused the economy to suffer. And when the economy suffers, people on the economic bubble, like my family, were the ones who felt the brunt of the suffering.

Kirk Willison: [00:04:16] I don’t want to sound too syrupy, but you really are a testament to the American dream. You’re a partner at the, with the world’s largest consulting firm before you even had a college degree. You then became involved in the and became head of the PTA of a high school with a kind of what was your way to enter into the public service. And before long, you were the Speaker of the House of Representatives in the state of North Carolina and today, you’re one of fewer than 2000 Americans who have ever served in the United States Senate. I wonder, do you ever wake up and just say, wow, it’s just unbelievable and only in America.

Thom Tillis: [00:05:02] Every single day. And you know, I was just on the, on the phone with the chancellor of UNC Charlotte yesterday and I was talking about the education opportunities that really laid the groundwork for me to do it. I got my degree when I was almost 37 years old, a year after I was admitted to the partnership at Pricewaterhouse and had not had a community college that was in reasonable driving distance when I was working in that warehouse in Nashville, and then another community college in Chattanooga, and a semester at UTC, UT Chattanooga, and then time that night school that I did at Georgia State and ultimately finishing up at University of Maryland, University College, I had that access to those educational opportunities, it’d be very, very different, but I did. The opportunities were out there and that’s what we have to provide this generation.

Kirk Willison: [00:05:54] I mentioned kind of the American Dream earlier and you know, Arch Mortgage Insurance actually exists in many ways to deliver the American Dream by helping those people who can’t put 20% down, become homeowners and in fact, in the state of North Carolina, more than 46,000 borrowers thanks to Arch are now homeowners. And I’m wondering just reflecting on your own life. What’s it been like when you’ve had a chance to either be in a family that’s owned its home or today with you and your kids, having been raised in a situation where you were homeowners versus the nomadic life that you had to exist before?

Thom Tillis: [00:06:33] Yeah, you know, I think that aspiration, to own your own home, is hopefully a dream that every American shares and feels like that it’s within reach. But the reality is it’s not enrage for a number of people for a variety of reasons. That’s why back when I was Speaker of the House, when I’ve been up here I’ve supported initiatives for affordable housing to give people to you know, it’s just like education opportunities for young people and let’s say middle school or junior high school, making even a degree seem within reach for some of these kids who may have been like me that didn’t have parents who graduated from high school. Making housing affordable and making it an aspiration is a key part of individuals making that extra effort so that it is within their grasp.

Kirk Willison: [00:07:30] So you spent your early career in business, very successfully in business. What drew you to public service and elective office?

Thom Tillis: [00:07:40] Well, actually, the thing that started my political career is I’m an avid mountain biker, you can’t see it on the camera, I’ve got a I’ve got an injury on my foot that I just got operated on a couple of weeks ago related to serious bad outcomes on a single track mountain bike trail. But when I moved to North Carolina in 1998, that’s when I picked up mountain biking and a couple years later, I made a proposal to the town of Cornelius to build a single track environmentally sustainable trail. They, the chairman of the park and rec advisory board coaxed me into thinking that if I joined the Park and Rec advisory board, I had a better shot at getting the mountain bike trail built. So I joined the Park and Rec advisory board. Few Years Later, I was PTA president and then ran for the legislature and I think I became Speaker of the House roughly the same timeframe that that mountain bike trail got built about eight years later.

Kirk Willison: [00:08:43] Government moves slowly even when it’s doing the right things. Senator who has been your mentors in your career up and including the US Senate?

Thom Tillis: [00:08:56] Well, I you know, I shared with a lot of people, in fact I do, with all my staff, I do professional development planning and sat down and I always share with them the story of a mentor that I had back when I was working in a warehouse and going to school at night at Nashville State now Nashville Community College who encouraged me to join a professional association. I hadn’t thought about it. I was 20 years old, 21 years old, and joined a professional association that actually had a journal that published an article or published a position opening in Chattanooga that led me to my next mentor who was somebody who knew I didn’t have a degree, the position required a degree. He took a chance on me, I moved up to Price Water House and had a partner. I was the only person in the practice in Atlanta that didn’t have a degree and then became one of only a handful of partners who’ve ever been admitted without a degree. Just a constant succession of mentors that knew that I’d take on as many responsibilities that they get me and I didn’t expect to be, continued to be employed unless I delivered and exceeded their expectations. But they gave me a chance and those mentors stick in my mind. Since I’ve been in the Senate, one of the great things about the Senate is you build so many good relationships and across the aisle, I can think of Patrick Leahy, as somebody that I was just talking about yesterday, a number of discussions I’ve had with him in between votes, or Senator Grassley, some of the senior members of the senate, and they don’t have to tell you, specifically, if you take time to just observe them. You can learn a lot from people who are mentors, and you may have never really had a mentoring discussion with them. There’s a lot of good behaviors here and there on both sides of the aisle. And if you mimic those behaviors, it’s probably going to help you be successful up here.

Kirk Willison: [00:10:49] Excellent. Well, since the focus of the Policy cast is housing, why don’t we dig into some of those subjects because I know that, you know, you are a member of the Senate Banking, Housing and Urban Affairs Committee, and you’re also a member of the Committee on Armed Services. I know that a particular interest of yours has been military housing, and I wondered if you could just share some thoughts about why that’s important, what some of your priorities are in regard to military housing.

Thom Tillis: [00:11:17] Well, I’ve been down to Fort Bragg and Campbell June when some of the reports came in about unsafe housing. I went down there and went through a number of houses . It was disgusting to think that’s where we had military families. The problem that we have there, though, it’s very easy just to place the blame on the housing provider. We went to privatized housing in the military in about the mid 90s and we did that because they had despicable conditions, the DOD wasn’t doing a good job of providing good safe, clean housing for people who choose to live on base. Then we left these contracts but we did there, I think about 80 or 82 individual contracts for military housing across the globe now, most of those in the United States, but not all. And what I saw there is you know, there’s a, there’s a base of private housing providers. But what I saw there were 80 distinct contracts that were base specific to where you’re only able to manage the finances within a given base. So if you go to an installation like Bragg our Campbell June, you got moisture issues, you’ve got hurricane aftermath, those kinds of things. That same housing provider may have a contract in the desert, which has a very different dynamic in terms of the challenge of ongoing operations and maintenance. And so what I’ve really tried to do in my capacity, past capacity, as chair of the personnel subcommittee, I said, let’s rethink the entire framework and recognize that the problem isn’t, doesn’t rest on any one player. Obviously, customer service is an issue with the vendors, they’ve gotten better, they’ve got more work to do. But let’s rethink how the base of providers, there are 82 contracts, there are probably fewer than 15 providers, how can we look at those differently and provide more flexibility to manage across installations? What can we do to make sure that we’re able to rate the housing providers performance by real time feedback from the residents, and we’re going to continue to work on that. And that’s somewhere I’ll be ranking member and the next Congress, Senator Gillibrand will be the chair and there’s no daylight between us on this particular issue. We want to improve it, it still has to be economically viable, right? Because these housing projects were bonded, they’ve got investors, we’ve got to figure out how we can work within those constraints and rethink the contracting, but if we want long term sustainable, positive progress, we have to do that.

Kirk Willison: [00:14:10] You’ve become pretty notable for your focus on bipartisanship. And then I wonder if, you know, maybe part of it is the fact that gosh, North Carolina is an awfully competitive state politically. You’ve won two elections, won by about 45,000, the other by about 95,000 votes. Is that part of your thinking about really a need to be bipartisan and work through all possibilities for passing legislation?

Thom Tillis: [00:14:37] Yeah, yes. And I didn’t arrive at being bipartisan because of the voter demographic. That’s just my nature. I was a management consultant for almost 27 years, much of what we did when I did engagements was to come in and settle disputes between different management team members who had a difference of opinion. And the goal was, what’s the outcome, and then how do we reconcile The challenges between the parties. That’s what I did as speaker of the house is what I did as a minority whip. The term before I became speaker, it’s, it’s, you know, obviously answering to what we think satisfies the most people in North Carolina, and now most of the people of the country. And I think that if you’re, if you’re moving something largely on partisan lines, what you’re doing is paying a target on something that’s going to be reversed. So you have to be prepared to find the 80%, or the 70% that you can agree on and live to fight another day for the other issues where you don’t have consensus. And if you do that this is a relatively easy job. Even in the, in the State House, when I came in as the second republican speaker in about 100 years, anybody that thought just because we got the majority, that there had been a seat change and thinking in North Carolina, they weren’t paying attention to the voters, they just wanted to state it was well run. That got out of the fourth quarter towel and up into the top quarter and we did that with significant bipartisan support.

Kirk Willison: [00:16:04] There’s probably nothing more prominent these days in talking about bipartisanship than the COVID relief bill, and you’ve been at the center of that. You were one of the 10 GOP senators who met just this past week with the president in the White House to talk about that topic. And clearly, it’s a topic that we had at Arch have an interest in as well, because, for example, the extension of the borrower forbearance period could be very significant to a company like Arch to lenders in North Carolina throughout the entire country because there’s still so many people who are suffering and struggling to pay their mortgage payments. Do you think that this Congress as it’s been newly reconstituted, and with the 50/50 split now in the senate, can actually show the way on bipartisanship in a way that previous congresses haven’t?

Thom Tillis: [00:17:01] I hope so, the reason I decided to join the group of members who were, who, we wanted to go and make it clear to the president that we wanted to work together is that the election changed the administration. We have to understand that this President is going to have priorities, some we’re not going to support. But I do think that the response to the pandemic is one where we need to continue a tradition. Five different COVID related bills have passed to the President’s desk in the prior administration with large bipartisan support. I think the thing that we have to do, though, is not use the pandemic response as an opportunity to solve all the issues that we need to discuss in the next Congress. I was on a call earlier today and I asked the moderator of that call, I said, have you been unemployed over the last year and he said no. I said, has your income gone down over the last year, he said no. I said, do you believe that you should get a COVID relief package check. He’d like to get one, but he knows he doesn’t need one. So when we’re talking about COVID relief, what we have to do is just make sure that we’re relieving those who are impacted by COVID, we can have another discussion about reducing the tax burden, which is one of my favorite subjects, I did a lot of it when I was Speaker of the House, did one here with the jobs and tax cut act. But I know, I fall short of having a negotiation in COVID response that deals with things that have nothing to do with the direct negative impact of COVID. You can have that discussion about trying to shore up some of the education system, local governments that have documented shortfalls either in revenue or in the sometimes exorbitant cost of the distancing the CDC guidelines complying with them. I hope that we can just get people to look at that, use this as an opportunity to show that we come together when we have a national crisis that the likes of wedge COVID has brought about. Don’t use it as a vehicle to advance an agenda that’s more rooted in ideological differences. We can have a discussion and see who best you know, satisfies the American people. But there’s a lot of stuff that we can do, we have to have more to accelerate vaccine distribution. We need to continue to evolve our testing. You know, we’re at a point now where we’ve just gotten approval for a home test for COVID. Think about that there was a test didn’t exist in February of last year, right, and now we’re at a point where we’re going to have a test at home that’s as accurate as some of the laboratory tests that you can get a result in about 15 minutes. Let’s focus on stuff like that and let’s focus on hardening the areas that we found vulnerable, that the stress, the stress test of COVID told us that our supply chains need to be rethought. Our distribution capabilities in a crisis need to be rethought. Our stockpiles need to be thought through fully, we can learn a lot from this. And then also make sure that we keep in place some of the things that have worked in an emergency environment. I was talking about this this morning, I hope that we don’t go back to the old days thinking telemedicine was a bad idea. It’s been an enormous success and we were able to break through barriers that should have never existed. But now we’ve got a lot of examples where it’s helped more people gain access to behavioral health. It’s allowed us with a triage mechanism to get people to a point of care sooner. And all those are things that we should learn and those are the things that we should focus on when we’re talking about a measure coming to the US Senate that has to do with responding to the pandemic. And then let’s have a discussion about everything else.

Kirk Willison: [00:21:01] Let’s speak to one of the favorite subjects for those of us in housing in Washington, that the future of the GSEs, or Fannie Mae or Freddie Mac, you know, they’ve been in conservatorship since 2008. One of the really great successes of the last seven years has been the ability of the GSEs and the willingness to transfer credit risk off their books or the taxpayers’ backs, and into private investors’ hands and have them take the risks. And in fact, about 70% of the new credit risk they’ve taken on on their books has been transferred successfully since 2013. Now comes the FHFA, the regulator of the GSEs, they promulgated a new capital rule that is going to cut in half the capital relief value of making those credit transfers. And I wonder if there’s a concern, certainly among a number of policy makers, that this may return the GSEs to that failed model of buy and hold mortgages, with all the risks going on to the taxpayers, thoughts on that?

Thom Tillis: [00:22:12] Yeah like with CRT’s, we just got to, we got to strike a balance, we need to learn a lot from what happened in 2008. I’m sure that in the banking committee, we’ll have a number of oversight hearings on the subject and hopefully come up with a consensus. You know, I know that there are some concerns with the rule that was promulgated. The, I think the key is just to strike the right balance and not expose ourselves to risk, particularly for the people that ultimately are purchasing the bonds that are issued after the fact. So I think it’s just a matter of going in, being honest, identifying where we have the risk areas, and let that be instructive to whatever policy comes out of the Senate.

Kirk Willison: [00:22:55] Let’s close with a couple of questions about an issue that you spoke about earlier, affordable housing. We see in this country that there’s still a pretty wide gap between majority or white homeownership, and black homeownership, Hispanic homeownership. The gap is as large as 30 points, 30 percentage points. Does the federal government have a role in trying to solve that issue?

Thom Tillis: [00:23:21] I think we do, but I also think we have to understand the underlying factors that cause affordable housing to not be affordable, or basically not achieved the goal of affordable housing. And I use this story because it just sticks in my mind, it’s as if I had the meeting earlier this morning. I was, when I was in the state legislature I think it was my first or second term. I met with a town council in my district who wanted to talk about access to affordable housing up in North Mecklenburg and it was an hour long meeting and 45 minutes of it was spent on, you know, doing what we could as a matter of state politics to make it more within reach. And then the last 15 minutes of the meeting, it was spent trying to encourage me to file a local bill that would give this particular town authority to mandate, mandate that every single family housing unit and multifamily housing unit have sprinkler systems, fire suppressants in every home. Well, if you’ve got a $100,000 home, you just added about $10,000, I think at the time, to the cost of the home. How many people did that just become an unaffordable housing opportunity? And I say that because I brought it up in the confirmation hearing with Congresswoman Fudge, that a part of what we have to do in HUD is I think do a review of all the programs that are out there and modernize them, maybe consolidate some of them but Then I think that to the extent that we provide funding grant opportunities to state and local government, that we have to look at what regulatory burden exists in the jurisdiction where the permits are issued, where the environmental studies are executed. And there has to be some sort of a circuit breaker, when we’re about to invest $1 of American taxpayer money for the laudable goal of affordable housing, it needs to go with a priority towards the jurisdictions that are getting it right. You know, we have federal standards, we have local standards, the permitting process, it can take years to get some of these projects approved today. And if it, at one jurisdiction, you’ve got a county or a town that has a track record of getting that those things done in a matter of months, or a year, and you’ve got another jurisdiction where the average is two or three years, then I’m going to favor the jurisdiction that’s going to put the money to the best and most productive use. So when we’re talking about affordable housing, we need to go back and look at, and I had this discussion with Dr. Carson. We need to look, number one, do a top to bottom review of every affordable housing program that’s in existence in HUD today. Does it make sense anymore? Can it be consolidated? Can it be modernized? Can we streamline the process of actually getting the resources on the ground. But then we also have to look at these municipalities and say you can regulate as much as you want to, but understand when you go beyond what are the generally accepted norms for responsible environmental transportation, whatever the measure may be, when you go beyond that norm, you’re no longer qualified for the resources. So you decide, don’t make our job, help us help you don’t make our job more difficult by making it more difficult to provide access to affordable housing. And we’ve got a problem in the state in urban areas and rural areas equally, this is not just an urban challenge. In fact, I’d go so far as to say it’s an equal or greater challenge in the rural areas. And we’ve got to go in with that mindset, let’s streamline and get the most out of scarce dollars, we’re never gonna have enough of what we’d like to spend. So let’s make absolutely certain that what we are spending is spent as quickly as possible and as productively as possible in the areas of need.

Kirk Willison: [00:27:22] And even if we move beyond, let’s say federal support, and financial dollars for affordable housing, how do we get through the fact that there’s just a shortage of homes being built in this country? And again, does the federal government have a role to play, is there a role, let’s say, in providing some of the infrastructure dollars for new housing developments that could reduce the burdens on developers encourage them to build, lower the cost to the ultimate consumer who purchases the house?

Thom Tillis: [00:27:57] Well, I think that’s one part of it, but I think there are other things that government does that makes it more difficult. Number one, even in COVID, I can’t tell you how many phone calls I feel that last year, when unemployment was moving up and millions of people were out of work, the number of people in the building industry to say I just can’t find workers. And then you hear a discussion about increasing the minimum wage. If you do that, number one, you’re going to add to the cost of housing and certain jobs, not all of most of the jobs in construction exceed minimum wage, but they have their supplier networks and indirect jobs that would be affected by that increase in underlying costs. So when we look at it, I think if anybody looks at well, if the federal government just spends a little bit more money, if the federal government spends 10%, more money but then they implement policies that increase the cost of doing business by 10%, you push to a tie, you haven’t made any ground. And that’s why you have to take a look, I think the whole of the problem versus what we tend to do here is just find our favorite part and not look at the entire value chain. I think if we do that, then you can build a case. Even if it’s not a direct investment in housing, there’s so much that we can do from an infrastructure standpoint that can lay the groundwork for that project to be funded by the private sector, but we have to do our part to make it accessible, provide transit, provide roads, make sure bridges are saved, do those sorts of things so that these areas that may be suited to housing, actually have the underlying infrastructure that are going to make them successful long term.

Kirk Willison: [00:29:41] Senator Tillis, you’ve been very frank with your answers. I really appreciate the time today. Arch MI certainly look forward to working with you and your staff over the next six years of your term. Thanks again for the time today.

Thom Tillis: [00:29:53] Thank you. I appreciate the time