The federal government needs to respond in the next year to nationwide housing supply and affordability challenges, public and private sector officials say, with steps that include stabilizing the property insurance market in the face of escalating costs, expanding support for the construction of factory-made homes and encouraging lease-to-own programs.
Those are some of the 40 recommendations for the next presidential administration and Congress from a National Housing Crisis Task Force report released this week. The group's co-chairs include Utah Gov. Spencer Cox, a Republican, and Democratic mayors Andre Dickens of Atlanta and Justin Bibb of Cleveland, as well as Susan Thomas, president of Fifth Third Bank Community Development Corp. The other 24 task force members include Henry Cisneros, who was President Bill Clinton’s secretary of housing and urban development and is now chairman of New York-based American Triple I, an infrastructure investment manager.
State and local leaders have been trying to address the growing housing crisis but now it’s time for the federal government to coordinate an action plan, according to the report. The task force estimates that the ideas in the report if implemented could help the U.S. build more than 750,000 new homes annually.
“Homeownership should not cost half a million dollars, nor should monthly budgets be so burdened by housing costs that they crowd out other essentials,” the report said. “But that’s where we are headed, absent serious action by the federal government to correct market failures and invest in the workforce and American innovation for the housing industry.”
The 40 proposals are divided into several categories, starting with the need for the federal government to take the lead. The current federal approach to housing is disjointed, the report said, divided among numerous agencies but without a coordinator in charge. There should be a housing “czar” who answers directly to the president, the report argues.
Once a leadership structure is in place, the report said, the White House and legislators could take certain steps quickly. For example, competitive grants for infrastructure or new roads should be conditioned on states and cities reforming their rules to make it easier to build housing, according to the report. It also recommends that Congress recommend policy fixes to address home insurance premiums that have risen as much as 60% in some states since 2018 because of natural disasters. One idea the report supports is a program to harden homes against weather-related impacts.
Reducing barriers
Reducing barriers to building more homes is a key focus of the report. Manufactured housing is critical because it serves so many households with low incomes, but buyers of these homes can’t use traditional mortgages. The report says government-sponsored companies such as Freddie Mac that underwrite home loans should be required to buy personal property loans used for manufactured housing. That would make it easier for additional lenders to enter the market and encourage more construction.
Another tool to reduce barriers is for the government to ease up on credit standards for home mortgage borrowers. Even people with near-prime credit scores often haven’t qualified for mortgages since lenders’ criteria became much more strict after the Great Recession, the report said.
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“Some analysts have estimated enabling this large group to qualify for mortgages as they did in the 20th century would spur the construction of large amounts of starter homes because builders would have buyers again for them,” the report states.
The report also encourages the federal government to “innovate with an industrial policy lens,” somewhat like it has in the past with manufacturing and artificial intelligence. One proposal is for the government to create a building code for factory-built or modular housing that preempts state and local codes to lower costs for developers. Another idea is for the U.S. Department of Housing and Urban Development to have a housing innovation unit with the power to invest in companies that can reduce housing production costs.
In addition, the report calls for the government to effectively use subsidies and other strategies to provide a safety net for low-income renters and homeowners. The current definition of affordable housing is that a family doesn’t spend more than 30% of its income on housing costs; the report suggests that a better measure would also account for what that family spends on transportation to work and services. The government should also create a pilot lease-to-own initiative to help renters buy their homes that would incentivize better-quality programs in the private sector, according to the report.
“A lease-to-own homeownership program would also position entities to transition investor-owned single-family rentals to homeownership opportunities, a likely crucial issue in the coming years,” the report said.