Common Woes Offer Hope for Housing

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Sadly, the days are already getting shorter here on the other side of the summer solstice.

We thought it a good time to shorten this issue of Capital Commentary, too, by a couple of hundred words while still providing an optimistic outlook.

1. Big Thing: Why My Travels Give Me Hope for Housing

One of the great benefits of my job at Arch Mortgage Insurance is the opportunity to travel throughout the country to meet with mortgage professionals and elected officials about the challenges facing housing.

Since early spring, I’ve been to Madison, Wisconsin; Irvine, California; Cincinnati, Ohio; Jeffersonville, Indiana; Garner, North Carolina; Denver, Colorado; Providence, Rhode Island; and Lynnfield, Massachusetts. In each community, I’ve discussed local housing challenges with industry practitioners.

There are a lot of differences among those locations. For instance, they are:

• Rural, urban and suburban locations.
• White-collar cities and blue-collar towns.
• Represented in Congress and state houses by Republicans and Democrats.

But they are also alike in that all have a shortage of affordable homes.

• Depressing, right? Not really. Instead, it gives me hope.

Why it matters: Voters in every part of the country are sending the message to elected officials that housing affordability needs to be a policy priority. It has become an election issue for candidates.

• Housing unaffordability isn’t restricted to blue states. It is a red-state problem and a purple-state problem, too. That means our elected representatives have reason to collaborate when addressing barriers to housing.

I’ve held housing roundtables with U.S. Reps. Erin Houchin, R-Ind., and Wiley Nickels, D-N.C., two freshman members of the House Financial Services Committee. I watched them pepper lenders, builders, real estate professionals and community advocates in their districts with hard-hitting questions in hopes of identifying solutions to the problems preventing many constituents from becoming homeowners.

• The bottom line: Neither promoted a Republican nor a Democratic answer for making housing more accessible and affordable. They were interested in solutions, no matter where they emanated.

Speaking out: In meetings on Capitol Hill, congressional aides say voters regularly bombard Senators and Representatives at town hall meetings with demands they do something about home affordability.

• What they’re saying: Massachusetts State Rep. Tom Walsh, D-Peabody, recently told me the lack of available housing is now the No. 1 reason constituents call his office. His colleagues are taking notice, too. The state legislature increased funds for housing this year.

Our thought bubble: There’s no overnight solution to housing affordability, but an engaged electorate, increasingly knowledgeable elected officials, technological innovations and bipartisanship at the local, state and national levels offer reasons for optimism that the problem can be solved in the long term.

2. Easing Down Payment Burdens

Capital Commentary previously addressed the significant burden first-time homebuyers face in saving enough money to make a sizeable down payment.

By the numbers: Arch MI calculates that it would take the typical renter buying a median-priced home 22 years to put down 20% to avoid paying for mortgage insurance. In some areas, such as San Francisco and Los Angeles, California, the typical renter would require the same amount of time to save for just a 10% down payment.

Why it matters: U.S. Rep. Maxine Waters, D-California, the ranking member of the House Financial Services Committee, wants to lessen that burden through her Downpayment Toward Equity Act, a bill first introduced in the previous Congress.

• The measure would provide up to $25,000 to first-generation homebuyers to cover the costs of down payment, closing expenses and/or rate buydowns.
• It targets borrowers who have incomes not exceeding 120% of area median income (or 180% in high-cost areas).

Alas, the outlook is bleak for the legislation.

What they’re saying: “This bill has no chance of becoming law in this Congress as Republicans control the House. Not only do they not support down payment help, but they are becoming more fiscally conservative,” wrote TD Cowen’s Jaret Seiberg in a recent report.

Yes, but: Seiberg sees some hope for passage in the future, however. The bill “could become law if the Republicans fail to keep the House or retake the Senate or White House next year.”

3. Mixed-Use Development?

There’s been a lot of discussion about converting commercial office buildings with high vacancy rates into residential units. But one Korean developer said, “Hold my beer; I’ve got a better idea.”