Midterms Were Good News for Housing

Welcome to our end-of-the-year review of the 2022 midterm elections and their impact on housing and homeownership in America.
Here are my takeaways.

1. Midterms Were Good News for Housing

Democrats kept control of the U.S. Senate.

Republicans gained control of the U.S. House.

But the big winner in the 2022 midterm elections at the local level might be affordable housing. Rarely is housing a hot topic in election season, but in a nation where average rent and mortgage payments are now considered “unaffordable” in 99% of U.S. counties, voters are at a breaking point.

To quote newscaster Howard Beale from the 1976 movie “Network,” voters are “mad as hell and [aren’t] going to take it anymore.”

2. Look to Voters for Housing Answers

The bottom line: In city after city and one state, too, voters approved measures to provide more dollars for adding homes to target homelessness and affordability.

• Colorado passed Proposition 123 to set aside tax revenue for affordable housing by dedicating 0.1% of state income tax revenue for affordable housing programs, including aid to develop more housing and assistance for certain renters and homebuyers. It could help build 170,000 more housing units over the next two decades.
• In Austin, Texas, and Kansas City, Missouri, voters approved $350 million and $50 million bonds, respectively, to help low-income residents with their housing needs.
• Voters in Los Angeles, California, approved one measure to add 5,000 low-income housing units per council district (up to 75,000 citywide) and another to slap a “mansion tax” on homes selling for more than $5 million, with the proceeds dedicated to affordable housing.
• Palm Beach, Florida, Charlotte, North Carolina, Berkeley, California and Baltimore, Maryland were other cities where voters passed housing measures.

3. Expect More of the Same from Congress

More stalemates, that is. Congress wasn’t successful in enacting affordable housing legislation or appropriations in the 117th Congress, and we shouldn’t expect much that’s different over the next two years. No consensus could be reached on such proposals as:

• Additional funding for down payment assistance.
• Tax credits for builders renovating aging housing.
• Interest-rate buydowns for first-generation homebuyers.

New leadership. The House Financial Services Committee will be chaired by Patrick McHenry, R-North Carolina. McHenry’s priorities are expected to be digital assets, data privacy and capital formation. Subcommittee chairs will be selected later. The committee will drop its current Diversity and Inclusion Subcommittee.

Expect at least one subcommittee to conduct oversight hearings on regulatory decisions at FHFA or HUD.

Returning leadership. The Senate Banking, Housing and Urban Affairs Committee will continue to be chaired by Sherrod Brown, D-Ohio. Brown, who is up for re-election in 2024, can be expected to keep his focus on housing policy in the upcoming Congress.

Key question: Will the House or Senate attempt to create a roadmap for Fannie Mae and Freddie Mac to exit conservatorship?

4. Gridlock Will Empower Housing Agencies

Regulators will wield the power, given the political split in Congress.

“Equitable Housing” will drive their policy agendas.

The Federal Housing Finance Agency (FHFA) made it clear that increasing housing opportunities for minorities tops its agenda for Fannie Mae and Freddie Mac.

• The GSEs are putting their final touches on their Equitable Housing Finance Plans.
• Some large lenders, including Chase, Bank of America and Wells Fargo, have all announced Special Purpose Credit Programs to target historically underserved minority households.

The Department of Housing and Urban Development will keep its focus on eliminating racial bias in appraisals. To address a lack of diversity in the appraisal industry (it is 97% white, 67% male), Wells Fargo and the National Urban League recently announced a $5 million initiative to reduce industry barriers and attract more minorities to the profession.

The Federal Housing Administration (FHA) is expected to announce a cut in mortgage insurance premiums (MIP) soon, given that the November 2022 actuarial report showed a capital level of 11% — far above the statutory 2% level for the mutual mortgage insurance fund.