The plan to reshape HUD has to:
• Link national housing tools to state & local housing tools;
• Insure HUD has a passion for preservation; and
• Recognize that the risk management of the system for raising residential capital has to be heavily regulated. Thus, the oversight and regulation of the delivery system for residential capital has to be removed from HUD.
Until the 2008 mortgage meltdown, we never understood the role that housing has in the overall economy. As a result, we have avoided creating a national housing policy because it was both too hard and overridden by local market conditions and political interests. Demand is a local issue but supply has to be the national priority. We have learned that, as it is with utility power, it is too risky not to have government insuring uninterrupted ‘power’ to the housing market.
(a) Create a policy for housing the next generation. Markets move faster than government, and policy is needed to stay ahead of supply issues. The national housing policy has to articulate a balanced approach, elevating rental housing as a more viable option. It should declare that shelter is an entitlement, that housing capital has to be regulated, and that tax policies need to support supply. The preamble of this policy should provide guidance for a residential capital system.
(b) Improve and update the national tool box for lowering the cost of housing for the nation, 80% of whom cannot afford full market cost of shelter. Along with setting the standards and managing the risks of housing affordability and quality, designing the most powerful and relevant set of tools are HUD’s primary functions.
(c) Expand the primary reach of HUD. Create a network of regional linkages between HUD and State and local housing agencies.
(d) Remove anything to do with capital formation and management of its risks from HUD to permit its focus on creation of relevant tools and risk management.
(e) Create the federal housing finance bank. Bundle together the entities in the business of residential capital creation and all forms of insuring the instruments for raising capital. Move them into a bank and regulate like heck. The nation’s economic health is at stake, and it can contaminate the world.
Only then can we make decisions about the relevance of the government entities that are key to delivering capital to the residential industry, i.e. the Federal Housing Administration, Fannie, Freddie, and the Federal Home Loan Bank.
Douglas Moritz is a Principal at JMB Preservation Advisors, a consulting firm in Rockville, Maryland.