November 17, 2020

Now We Know: It’s Joe

Housing Policy
Capital Commentary

1,472 words.  Six-minute read.

Two hundred seventy-eight days after the Iowa caucuses, America knows who its next president will be. In this issue of Capital Commentary, we look at the policies and people that will shape and decide housing policy in the administration and Congress for the next two years. Click on the links in blue to dig deeper on the topics.

1. Biden Wins. Will Housing Win, Too?

The address of former Vice President Joe Biden’s new house appears certain: 1600 Pennsylvania Avenue. The future of housing policy in a Biden administration is not so clear.
Back in September when Capital Commentary first reviewed the Biden-Harris plan for housing, we noted a key proposal is a $15,000 down payment tax credit to help first-time homebuyers.

  • Lawrence Yun, Chief Economist of the National Association of Realtors®, embraced the concept in an interview with Housing Wire as a way to help first-time and minority households.

But given the likely makeup of the Senate for the 117th Congress, the tax credit proposal is now a long shot to be enacted any time soon.

  • Isaac Boltansky of Compass Point LLC told me, “It will be part of the conversation,” but he contends there will be growing pressure to address budget concerns over the next two years that could imperil the proposal. (See his comments from the latest Arch MI PolicyCast video podcast, beginning at the 19:20 mark.)

Which housing policy issue is likely to be quickly addressed?

  • Reversing the Trump administration’s repeal of the Affirmatively Furthering Fair Housing rule is a good bet. It promotes integrating affordable housing in urban, suburban and rural communities. This is low-hanging fruit for a new HUD Secretary eager to signal a focus on addressing racial inequities.

Will housing finance reform be a priority of the new administration?

  • Jaret Seiberg of Cowen Washington Research Group doesn’t foresee it being a top policy goal. “I don’t think Fannie and Freddie will be anywhere in even the Top 25 list of priorities,” he told me on the latest PolicyCast, at the 13:55 mark.
  • Bob Broeksmit, President and CEO of the Mortgage Bankers Association, told National Mortgage News (subscription required) that Trump-administration progress on preparing Fannie Mae and Freddie Mac to exit conservatorship might continue under the new administration. “The open question is whether [there might be a deal struck that could permit the GSEs to exit conservatorship,] even as soon as between now and Jan. 20,” Broeksmit said.

2. Personnel Is Policy

Step one for a new administration is putting people in place throughout the government who will best represent the Biden-Harris vision. It is instructive, then, to take note of people appointed to serve on agency review teams during the transition between the Trump and Biden administrations.

  • The Urban Institute, a think tank with a long history of advocating for increasing homeownership opportunities for minority and lower-income households, placed three executives on the agency review team for the Department of Housing and Urban Development, including the team leader, Erika Poethig, who is Chief Innovation Officer at UI. Another person on the 18-member team is Eric Stein, who has a long association with Durham, North Carolina-based Center for Community Self-Help.

Media speculation around the HUD Secretary to replace incumbent Dr. Ben Carson includes U.S. Rep. Karen Bass, D-California; former Jacksonville, Florida Mayor Alvin Brown; Maurice Jones, a former top HUD official in the Obama administration; and Diane Yentel, who leads the National Low-Income Housing Coalition.

3. Georgia On My Everyone’s Mind

Politicians and pundits have a message for Georgia voters already exhausted from the 2020 elections: “You ain’t seen nothin’ yet!”

With two U.S. Senate races to be decided by runoff on Jan. 5, 2021, an entire nation’s worth of campaign experts and political advertising mavens will descend upon the Peach State over the next seven weeks. As the political analysis website FiveThirtyEight notes, Georgia is unique in that it requires election winners to claim at least 50% of the vote or face a runoff against the closest-finishing challenger.

  • Why it matters: Control of the Senate rests on the outcome of these two elections. One pits Republican David Perdue against Democrat Jon Ossoff. The other pairs Democrat The Rev. Raphael Warnock against appointed GOP incumbent Kelly Loeffler.

As a result of the Nov. 3 elections, Republicans hold at least 50 of the 100 Senate seats when Congress convenes next year.

Should the Democrats capture both of Georgia’s runoff races, they would hold the balance of power in the Senate because Vice President-Elect Kamala Harris (as president of the Senate) would break any tie votes. (For more on what might happen with a 50-50 split, see item #4, below.) The Democrats maintained control of the U.S. House of Representatives.

  • “Get ready for … more weeks of nasty campaign rhetoric, non-stop political advertising and even more visits from political VIPs” warns the Atlanta Journal-Constitution (AJC).
  • Jim Martin, the Democrat who lost Georgia’s most recent Senate runoff in 2008, confirms that prediction to the AJC: “I was accused of favoring drunk drivers, selling drugs to children, child prostitution and domestic violence. That’s not a winning ticket for a human being, much less a politician.” No surprise, Martin lost.

Warnock, at least, is ready for whatever comes his way. In a humorous online ad posted immediately after Election Day (view it here), he tells voters to expect to hear he eats pizza with a fork and hates puppies.

4. A 50-50 Senate: “Outcome No One Wants.”

Question: Who’s in power if the Democrats and Republicans each have 50 votes in the Senate?

  • Answer: Everyone, and no one.

Technically, the Democrats would hold majority power since, as President of the Senate, Kamala Harris would break all ties.

In reality, power could be held by several Senators of both political parties who might be persuaded to help the opposition party on certain votes.

  • “It’s an outcome practically no one wants,” wrote Politico. “Any one Senator could determine the fate of critical nominations or key pieces of the party’s legislative agenda. And in an era of already deep polarization, it could lead to even worse gridlock, as inconceivable as that sounds.”

While New York Democrat Sen. Chuck Schumer would likely be elected Majority Leader in a 50-50 scenario, he would need to “broker a deal with Sen. Mitch McConnell about everything from floor procedures to committee seats,” reports Axios.

The Senate’s operating budget and its committee makeup would be evenly divided, as well.

New power brokers such as moderate Democrats Joe Manchin of West Virginia and Kyrsten Sinema of Arizona; and Republicans Mitt Romney of Utah, Susan Collins of Maine and Lisa Murkowski of Alaska will likely hold outsize influence on key votes. Some expect the GOP would put an all-out blitz on Manchin to persuade him to switch parties to restore Republicans to power.

An evenly split Senate hasn’t happened since 2001, immediately following the hotly contested Bush vs. Gore presidential race.

  • But those were the bygone days of bipartisanship, reports The Hill. “The 2001 Senate included at least 11 members who would either switch parties during their career, work in the opposing party’s administration or campaign actively against their party’s presidential nominee.”

5. Meet the New Senate Banking Committee Chair

I can’t tell you exactly who it will be. At least not until those races in Georgia are decided.

Current Senate Banking Committee Chairman Mike Crapo, R-Idaho, served the maximum six years allowed under Republican rules. So, while he might choose to remain on the committee, it will be chaired by someone else.

  • Pat Toomey, R-Pa., will take the gavel if the Republicans win at least one of the two races in Georgia. Toomey is a second-term Senator who was first elected to Congress in 1998 as a House member. If he gets the chair, Toomey figures to work fast. He won’t have six years as chair — he has already announced he will not stand for re-election in 2022.
  • Sherrod Brown, D-Ohio, will be chairman if the Democrats sweep the Georgia races. He is serving his third term in the Senate and currently serves as the Ranking Member (senior-most member of the minority party) on the Banking Committee. He would figure to focus on the plight of renters struggling due to COVID-19 and helping the homeless.

A President Biden figures to govern from the middle, given congressional election results that saw the GOP hold on to at least 50 seats in the Senate and pick up seats in the House. “Split control of government is the most negative outcome because it would be difficult to get much done,” writes Arch Capital Services Inc.’s Global Chief Economist Ralph DeFranco in his latest Housing and Mortgage Market Review (HaMMR). The new Fall HaMMR report is chock-full of data and information about what’s driving the housing economy.

Do you think Capital Commentary offers valuable information on housing policy and its potential impacts? If you do, share your comments with us. Your feedback will help ensure Capital Commentary covers the stories that have the most impact on your business.

Insights Logo

About Arch MI’s Capital Commentary

Capital Commentary newsletter reports on the public policy issues shaping the housing industry’s future. Each issue presents insights from a team led by Kirk Willison.

About Arch MI’s PolicyCast

PolicyCast — a video podcast series hosted by Kirk Willison — enables mortgage professionals to keep on top of the issues shaping the future of housing and the new policy initiatives under consideration in Washington, D.C., the state capitals and the financial markets.

About Kirk Willison

As VP of Government and Industry Relations for Arch MI and a mortgage finance expert with more than 25 years in government relations, Kirk speaks candidly with an array of the most influential industry and policy thought leaders in the nation.

Stay Updated

Sign up to receive notifications of new Arch MI PolicyCast videos and Capital Commentary newsletters.