HOUSING POLICY BEYOND 2012:PROSPECTS AND PERILS

Larry A. RosenthalUC Berkeley

NACCED OrlandoOctober 1, 2012

Berkeley Guy's Uninvited Subtitle:

"HOUSING POLICY 2012:THE PRESIDENTIAL DEBATEBOUND NOT TO HAPPEN"

The (Dis)Advantages of Being Headline News

• Housing markets and shelter stability:Star power for four+ years!

• BUT neither major party has policy prescriptions sure to work and sure to fire up their base.

Many say the bottom is behind us …

Source: RealtyTrac (US data)

But risk of a new bottom persistsin many places …

Source:RealtyTrac (US data)

Conditions remain dire

• FL: 14% of mortgagesare in foreclosure

• NV: 6% foreclosure,6% seriously delinquent

• Nationally, three millionHHs in foreclosure or seriously delinquent

Plan for remarks• Obamney:

Rough Comparison of Obama's Record & Romney's Positions

• Convergence and Consensus: Policy Frontiers to Come

• What IF?Concluding Thoughts

DISCLAIMER: Rosenthal/BerkeleyHas Nothin' On You• NACCED members have lived Obama's

housing and community development policies

• '09-'12, on balance: a blend of drastic measures, genuine vision & creativity, and steady-as-she-goes

• BUT politically: "It's the recession, stupid" (apologies to James Carville)

Obama's Mixed Record: Examples

• Foreclosure Prevention, Or Facilitation?

• Distressed Homeowner Assistance:Some Helped. Many Frustrated.

• Homeless Preventionand Rapid Rehousing (HPRRP)

• Neighborhood Stabilization (NSP)

HUD Shortchanged Under FY2013 Proposal

Obama and Cities: Murmurs of Genuine Federal Leadership• "Strong cities are building blocks

to strong regions"

• "Interdisciplinary approach that appreciates the interdependent nature of issues affecting urban communities"

• "Takes into account how cities, suburbs, and exurbs interact"

• "Revitalize urban areas holistically"

Age of HUD Innovation? (examples)

• "Rental Alignment" conferences

• "Rental Assistance Demonstration"(RAD)

• FHA LIHTC Pilot

• Sustainable Communities

• Energy efficiency programs

Source: Census SOMA

ARRA: LIHTC "Exchange" Saved Buildings

Romney + Ryan = ?? predictions

• If landslide (control of Congress): –Voracious cuts-only deficit reduction–Across-the-board slashes • HCVs (sec8 & PBV) • CDBG• Aid to seniors, homeless• Full elimination of "unproven" HUD

innovation activities (pilots)

If narrow GOP victory …

• White House + control of one or fewer houses of Congress:

–A decidedly more nuanced picture

– Little signal on housing/urban policy leanings

–Until …

Romney on housing:Five key ideas• Reform Fannie/Freddie

• Liquidate the US REO-foreclosure portfolio (>200k units)

• Make foreclosure alternatives easier

• Replace Dodd-Frank

• Jobs jobs jobs

"Reform Fannie & Freddie" (I)

• Overwhelmingly complex challenge – Obama punted out of necessity

• Policy intricacies approach health-care-reform levels

• Moderate Proposal: decoupling investment and market-stabilization elements of GSE's (UK "covered bonds" approach)

"Reform Fannie & Freddie" (II)

• Privatize riskiest elements of portfolios; soften affordability obligations

• Retain some CRA-style incentive system for sustainable-communities investments

• "End Too-Big-To-Fail" --> verbiage appeals to independents, but could involve "End GSEs"

• Details lacking ...

Responsibly Liquidate 200,000+ Vacant Foreclosed Homes Now Owned by the Government

• Dems presumably agree

• Government's a bad landlord(consider public housing's fate)

• Owner/operator "foreclosure investment" firms springing up, particularly in higher-cost metros

• Caveat: fast offload can derail the recovery and shortchange lowest-income HHs

"Make foreclosure alternatives easier"

• Benefits banks and buyers, or current owners?

• "Short sales, deeds-in-lieu-of-foreclosure, shared appreciation vehicles"

• Raises serious concerns(local-law variation, tax implications)

• Independent voters may disfavor another round of "robo-signed" dispositions

"Replace Dodd-Frank To GetMortgage Credit Flowing Again" (I)

• Is Dodd-Frank really to blame for the credit crunch?

• Expansion in the home-lending sector will require upward adjustment in interest rates

• Stock markets are fully recovered mortgage capital should have followed suit by now ... no one really knows why

• Heightened lending standards implement fiduciary "suitability" thresholds

• Implementation still underway

• Can Romney win on a financial deregulation platform?

• President Obama's "let's not go backward" plea resonates here

• Details lacking ...

"Replace Dodd-Frank To GetMortgage Credit Flowing Again" (I)

Improve the job market

• Many unemployed Obama-Biden '08 voters may wish to give the GOP a chance

• Despite Obama's current momentum, languid jobs recovery is indeed a weakness

• Q: What does this have to do with housing?

A: "Everything."

Convergence & Consensus:Policy Frontiers To Come (I)

• Deregulate local land use restrictions: reduce barriers to new multifamily

• Reform mortgage interest deduction

• Add renter's tax credit

• Revisit multifamily disinvestment policies:can LIHTC be strengthened by more favorable tax treatment (vis-à-vis pre-TRA86)?

• Maintain "chronic" homelessness focus, coupled with housing referrals/assistance

• Expand Family Self Sufficiency Program

• Expand Project Based Vouchers

• Streamline Section 8 Habitability Inspections

• Portable Vouchers: Location Matters

Convergence & Consensus:Policy Frontiers To Come (II)

What if …

• What if housing & urban policy actually influenced the 2012 Outcome?

• Not such a far-fetched notion --> remember, we're headline news now!

• Consider what our fellow rational, common-sense voters are asking themselves

Are foreclosures avoidable? Should government intervene? Can that ever succeed?

What part of our ongoing economic struggles are the President's fault? George W. Bush's fault? Nobody's fault? Our own fault?

If you believe government can heal the housing economy, does Gov. Romney deserve a chance to lead that effort?

The Tea Party and Occupy Wall Street agree on at least one thing:

Government-as-usual helped get us into this mess, and may never be able to get us out.

What if existing policy tools aren't suitable for addressing new, fundamentally different challenges?

THANK YOU.

LAR@BERKELEY.EDU

HTTP://URBANPOLICY.BERKELEY.EDU