Inequality, Opportunity, and the Housing Market
Julia Gordon, Director of Housing Finance and Policy at the Center for American Progress, testified before the Senate Committee on Banking, Housing, and Urban Affairs, Subcommittee on Housing, Transportation, and Community Development on December 9, 2014. Below is an executive summary of her statement.
This executive summary contains a correction.
Good morning, Chairman Robert Menendez (D-NJ), Ranking Member Jerry Moran (R-KS)*, and members of the committee. My name is Julia Gordon, and I direct the Housing Finance team at the Center for American Progress, a nonpartisan think tank dedicated to improving the lives of Americans through progressive ideas and action. Thank you so much for convening this hearing on the critical topic of inequality and opportunity in the housing market. I greatly appreciate the opportunity to testify today about the state of our housing recovery and its relationship to the well-being of families and the broader economy.
Research and our lived experience confirm the link between housing and opportunity in this country, from the many benefits of homeownership for families and communities to the central role of the housing economy in economic vitality. A healthy housing market, when coupled with appropriate protections to ensure responsible and sustainable lending, offers opportunities for young people to begin building wealth through homeownership, for growing families to access good schools and high-opportunity neighborhoods, and for older people to choose whether to age in place or seek a smaller or more supportive environment.
Yet at present, our nation’s housing recovery is neither strong nor equitably distributed. Not only has the mortgage market shrunk nationally, but many communities—especially communities of color—also lag far behind other parts of the country, with hard-hit neighborhoods continuing to suffer the ongoing effects of multiple foreclosures, negative equity, vacant homes, and blight. We have turned back the clock nearly 20 years on homeownership rates, and rental costs are soaring relative to incomes.
Historically, the housing sector has led economic recoveries following downturns. Unfortunately, the market is not yet strong enough to play that role, which is one of the reasons why the overall recovery still has a lot further to go. While we have had 57 months of consecutive private-sector job growth, too many people are still out of work or underemployed, small-business formation remains depressed, and consumer demand has not rebounded sufficiently. The combination of stagnant wages and rising costs for basic needs, including housing, has squeezed the budgets of all families in America, with the result that entering or even staying in the middle class has become increasingly difficult.
Despite this bleak picture, we see many options for policy choices that can help strengthen the housing market, aid struggling families, and revitalize hard-hit neighborhoods. In this testimony, we provide a set of recommendations to help. While no single recommendation is a silver bullet, taken together, we believe we could move the dial significantly. Many of these recommendations do not require legislative action and can be accomplished by regulatory agencies, while others would require Congress to act.
To increase access to safe and affordable credit, we recommend that the following steps be taken:
- Congress should complete comprehensive reform of the housing finance system.
- The Federal Housing Finance Agency, or FHFA, should play a powerful role in increasing access to credit.
- As a provider of credit to so many underserved populations, the Federal Housing Administration, or FHA, should continue to improve access to and affordability of credit.
- Congress and regulators should support alternative mortgage channels, innovative products to reach underserved borrowers, and effective housing counseling.
- Congress should extend the Mortgage Forgiveness Debt Relief Act, and it should convert the mortgage interest deduction to a tax credit.
- Regulators should collect better mortgage data to help identify problems and potential solutions in the market.
In addition, to assist struggling families and neighborhoods, we recommend the following:
- FHA should improve its Distressed Asset Sale Program to better promote home retention and neighborhood stability.
- FHFA should take additional steps to aid struggling homeowners and communities.
- The Consumer Financial Protection Bureau should continue to improve its servicing rules.
- Policymakers should take steps to help renters, particularly very-low-income renters.
Julia Gordon is the Director of Housing Finance and Policy at the Center for American Progress.
* Correction, April 14, 2015: At the time of publication, this testimony incorrectly identified the ranking member of the Senate Subcommittee on Housing, Transportation, and Community Development. The ranking member at the time of publication was Sen. Jerry Moran (R-KS).
The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.
Senior Director, Housing and Consumer Finance