By Teresa Welsh |
For generations, affordable homeownership has provided a primary means for families to climb the economic ladder and achieve financial stability. Homeownership results in a host of positive externalities both for families and for their neighborhoods, ranging from better health and education outcomes to safer streets and more small-business development.
At the same time, approximately one-third of all households in our country rent. Rental homes provide a starting place for new households, mobility for people who move with their work, convenience to transit, a transition for older adults who no longer need a large home and affordable shelter for many Americans of low and moderate income. Rental housing is in urban, suburban and rural communities.
Overall, the housing market represents one-fifth of the U.S. economy and is critical to many other areas of economic activity – from finance to construction and manufacturing.
By providing explicitly priced, limited government support for the housing finance system, we can provide credit to a broad and diverse population and ensure that we will never again see millions of people lose their homes to foreclosure unnecessarily. Cutting off all government support, on the other hand, will result in a system in which credit and housing choices are more costly, more limited and less sustainable, especially for people of color and low- and moderate-income households.
Specifically, a government backstop to the market will enable continued availability of the 30-year fixed-rate mortgage, now a pillar of the U.S. mortgage market. Government involvement also can help deploy a range of tools to ensure all creditworthy borrowers access to safe, affordable mortgages, including harder-to-serve populations such as Millenials, rural residents and people of color; increase access and affordability by supporting standardization and lowered costs; and test and adopt responsible, targeted product innovations that can be made widely available throughout the mortgage market.
A limited government role also can support affordable rental housing, enabling families who are not yet ready to buy or who prefer to rent to thrive and invest in their families’ economic future through other means.
Just about everyone agrees that the current level of government support to the housing market is too high, and that private investors should assume more risk in the mortgage market. In our view, by having the federal government assume a role as a backstop to the market in the case of catastrophe, we can reduce the government’s footprint in the market while still offering broad and consistent access to safe, affordable mortgage credit across all communities.
About Julia Gordon Director of Housing Finance and Policy at the Center for American Progress
Chris Estes President and CEO of the National Housing Conference and Center for Housing Policy
David Min Assistant Professor at the University of California, Irvine School of Law
Scott Garrett Republican Representative From New Jersey
Mark Calabria Director of Financial Regulation Studies at the Cato Institute