Weekly update from the National Housing Conference

Dear Friend,

This week NHC had the opportunity to discuss housing affordability with Neil Cavuto on his show Cavuto: Coast to Coast. Earlier in the day, Cavuto reported a growing withdrawal from housing investments by Chinese and other foreign investors and recent dips in housing prices in cities like London, New York and San Francisco. Could weakening foreign investment and falling prices lead to another collapse in housing prices, particularly given the failure of home buyers to be more responsive to lower interest rates? The short answer is no. In fact, in the area of single-family investment by foreign investors, less is more, especially first-time homebuyers. Here’s why.

In the multifamily market, global investors have been channeling tens of billions of dollars into U.S. commercial and multifamily properties in top tier markets like New York city, San Francisco, Los Angeles and Washington, D.C. But they play a much smaller role in most of the rest of the country. If Chinese investors are less active buying trophy properties in top tier markets, it could have an impact down the road if overall demand were to weaken, but it’s not now and it certainly isn’t in the affordable rental market.

On existing and new single family home sales, there’s more of an elastic impact between interest rates and home prices in the current market this late in a low interest rate cycle. It doesn’t take much of a rise in home prices to wipe out the value of a 25 basis point reduction in interest rates. And interest rates are only part of the equation. We simply aren’t building enough affordable housing. As long as that is the case; prices will continue to rise, fewer Americans will be able to afford homeownership; and we will have more renters, which drives up rents. It’s a simple case of the law of supply and demand.

In the broader single-family market, the presence of institutional and foreign investors has been a problem for years, and their exit is long overdue. First-time homebuyers and move-up buyers can’t compete with the cash offers that are routinely made by investors. Their presence drives up prices and cuts back on supply as homes that were owner-occupied are converted to rental properties. Because production of affordable single-family homes has never fully recovered from the crash, prices have continued to rise while mortgage credit has remained tight. The result is that consumers find renting easier than buying in the single family starter market.

This has hurt all first-time homebuyers, but especially African Americans, who have seen their homeownership rate plummet, even as other minority groups like Hispanic and Asian American homeownership rates have seen some recovery since the Great Recession. Today, the Black homeownership rate is lower than it was during segregation, which is a national shame. This is due to a variety of factors that NHC Policy Director Tristan Bréaux discussed in his April 16 blog. This year, NHC created a Black Homeownership Working Group to address the growing homeownership gap between African Americans and every other demographic group. Our aim is to develop and execute tangible, actionable, and impactful strategies to close the gap. We have identified several strategies to address the crisis and contribute to closing the gap, including:

This will be the subject of our trip to Detroit this week for the NAACP National Convention and our meeting of the NHC’s Black Homeownership Working Group when we get back. We hope to see some of you at either or both events as we work together to solve America’s growing housing shortage.

Sincerely,

David M. Dworkin

NHC President and CEO

Lawmakers advance housing-related legislation

Last week, the House Financial Services Committee approved several bills related to housing, including the Reforming Disaster Recovery Act, introduced by Representatives Al Green (D-Texas) and Ann Wagner (R-Mo.), which passed unanimously. The Committee previously approved another group of housing-related bills that would reform the way credit scores are calculated. In the full chambers, the past two weeks have been busy with several housing-related bills introduced, including the HUD Inspection Act from Representatives Al Lawson (D-Fla.), Alma Adams (D-N.C.), and Val Demings (D-Fla.); the Fair Chance at Housing Act from Senator Kamala Harris (D-Calif.) and Representative Alexandria Ocasio-Cortez (D-N.Y.); and the Carbon Monoxide Alarms Leading Every Resident to Safety Act, introduced by Senators Tim Scott (R-S.C.) and Robert Menendez (D-N.J.). Additionally, several bills were passed by the full House, including the Protect Affordable Mortgages for Veterans Act, introduced by Representatives David Scott (D-Ga.) and Rep. Lee Zeldin (R-N.Y.), and the Housing Financial Literacy Act, introduced by Representative Joyce Beatty (D-Ohio).

Calabria discusses GSE reform plans with Reuters

In an interview with Reuters published Wednesday, FHFA Director Mark Calabria said the Trump administration’s plan for removing Fannie Mae and Freddie Mac from conservatorship may not be published until September. Calabria also said he hopes to have accomplished GSE reform by the time his term ends in 2024, but “if in four years, nine months they’re not out of conservatorship, I’m not pushing them out.” Additionally, Calabria told Reuters that the GSEs will eventually halt purchases of mortgages linked to the London Interbank Offered Rate (LIBOR), which is set to be phased out. The Fed-backed Alternative Reference Rates Committee, which NHC is a part of, recently released a white paper proposing a framework for using the secured overnight financing rate (SOFR) instead of LIBOR for adjustable-rate mortgages.

July Restoring Neighborhoods Task Force meeting

July's Restoring Neighborhoods webinar is scheduled for this Tuesday, July 24 at 2:00 pm EDT and will feature a joint presentation on disaster recovery and housing by Seana O'Shaughnessy, president and CEO of Community Housing Improvement Program (CHIP), and Sonya Acosta, policy analyst at the National Low-Income Housing Coalition (NLIHC). The 2018 California Camp Fires killed at least 86 people, destroyed 14,000 homes and cost $8 billion in damages. Today, only 10 percent of the town of Paradise’s residents have returned. Seana and Sonya will discuss how Paradise and Butte County have recovered in the wake of the fires and efforts to improve natural disaster recovery at the federal level. Register here .

The Washington Post took a look at the phenomenon of people moving “from high-cost coastal cities to the middle of the country and the South.” This “reverse migration,” according to the article, is because of a lack of affordable housing in these cities. Read the article here .

In an in-depth article published Tuesday, the Sacramento Bee examined the impact that the Tax Cuts and Jobs Act had on affordable housing in California. According to the article, the tax cuts lowered the benefits of LIHTC for investors which resulted in at least 15,000 affordable housing units being delayed or killed. Read the article here .

In an op-ed for Affordable Housing Finance , Affordable Housing Tax Credit Coalition Executive Director Emily Cadik argued for the passage of the Affordable Housing Credit Improvement Act (AHCIA) of 2019, which she argues will “simplify regulations, further increase affordable housing production, and better reach rural areas, veterans, and other special-needs populations.” Read the op-ed here .

A new study from the Federal Reserve Bank of Philadelphia found that gentrification may lead to less widespread displacement than previously thought. According to the study, non-gentrifying neighborhoods saw 68 percent of original residents move out, compared to 74 percent for gentrifying neighborhoods. Read the full report here .

In the Cook Political Report , national editor Amy Walter wrote an op-ed on the role suburban voters will play in the 2020 election. Walter argued that Democrats should avoid going too far to the left on issues like immigration in order to appeal to these voters. Read the op-ed here .

Wednesday, July 24

Thursday, July 25

Friday, July 26