Policy Points: National Summit Yields Calls for Bipartisan Solutions to Housing Challenges

Published by Peter Lawrence on Wednesday, October 1, 2014
Journal thumb October 2014

Congress adjourned Sept. 19 and won’t return to Washington, D.C. until after the November election. Before leaving as expected, Congress passed a stopgap government funding bill, the continuing resolution (CR), to keep the government going and programs funded at their fiscal year (FY) 2014 levels until Dec. 11, which is 11 weeks into FY 2015. Depending on how the election affects control of the Senate, Congress will return Nov. 12 to consider whether to further extend the FY 2015 CR to mid-February or early March, or pass an omnibus spending bill for the entire FY 2015.

Another item on the to-do list is widely expected to be another bill to extend expired or expiring tax provisions, aka the tax extenders. As noted previously, each chamber of Congress has taken differing approaches on the tax extenders. The House has passed legislation to make some tax extenders permanent but unfortunately not the 9 percent and 4 percent acquisition low-income housing tax credit (LIHTC) minimum rates, new markets tax credit (NMTC), renewable energy production tax credit (PTC) or investment tax credit (ITC) in lieu of the PTC. The Senate Finance Committee approved the EXPIRE Act to extend most extenders, including the LIHTC minimum rates, NMTC, PTC and ITC through the end of 2015. Recent discussion with policymakers suggest negotiations between the House and Senate on extenders will focus on which extenders in the EXPIRE Act to make permanent, not whether to drop items that the House did not consider to make permanent. If true this would be good news for the LIHTC, NMTC, PTC and ITC. As with the FY 2015 spending bills, the outcome of the election will likely affect which and how many extenders, if any, are made permanent. While it’s possible that Congress could choose to make the LIHTC minimum rates and NMTC permanent, it’s unlikely to do so, given that the neither House nor its tax-writing Ways and Means committee have passed bills that would those extenders permanent. Similarly, while it’s possible that Congress would choose not to consider or pass extenders legislation in the postelection lame-duck session at all, it appears unlikely at the time of writing this column that it would do so.

As the 113th Congress slowly and unceremoniously approaches its conclusion after 20 months marked by plenty of incidents of partisan acrimony, there was an attempt by hundreds of housing policy stakeholders to reassert housing’s traditional bipartisan history and support in a recent national conference in Washington, D.C. On Sept. 15 and 16, the Bipartisan Policy Center (BPC) hosted its 2014 Housing Summit, which brought together these policymakers, industry leaders, advocates and other housing and community development stakeholders. Among other topics, the summit considered many key rental housing-related policies under debate– including increasing the reach of the LIHTC and other ways to increase affordable rental housing production, as well as innovative new policy approached to rental subsidies. In addition, many discussions addressed the perennial issue of how to advance housing finance reform.

Amid the plenary, panel and roundtable discussions on these issues, there were several themes that emerged from the summit.

A more balanced housing policy is needed
While the new U.S. Department of Housing and Urban Development (HUD) Secretary Julian Castro urged attendees not to “let the pendulum” of housing policy “swing too far” against homeownership, he and many speakers at the summit argued that the federal government should bring housing policy into greater balance between support for homeownership versus rental housing. These speakers noted the fact that federal government supports homeownership through hundreds of billions of dollars of tax subsidies and spending programs while offering less than a fifth of that support to rental housing. With over a third of Americans renting—and that percentage increasing—the federal government should shift some of its support from homeownership to affordable rental housing.

The affordable rental housing challenge has increased precipitously
Affordable rental housing has been a long-standing problem, often going unrecognized by key federal housing policymakers. In recent years the challenge has gotten much worse in the wake of the recession and wave of foreclosures affecting many communities across the nation. Many speakers brought up the fact that combination of the surge of former homeowners entering the rental market, the lack of affordable and market-rate rental housing production, the steady erosion of the existing affordable rental housing inventory, and stagnant or declining renter household incomes, have resulted in a marked increase in rents and a corresponding lack of affordability in communities throughout the country. More than a quarter of renters of all incomes, or roughly 11 million renter households, pay more than half of their monthly income on housing, the highest level since such data have been recorded.

Housing policy needs to adjust to significant demographic changes
Another focus of the summit was the implication of the nation’s changing demographics, which will pose significant housing challenges in the coming years. Demographers project that the total number of renter households will grow by at least 4 million over the next decade, led mostly by an increase in millennials and older American renters in retirement. Each of these demographic segments has different housing needs, and neither is particularly well served currently. The Harvard Joint Center of Housing Studies recently released a report that found a clear majority of Baby Boomers hope to age in place, but the current housing stock is not well equipped for the specific needs of this population, especially a significant percentage of older Americans with physical or mental impairments. And many millennials, scarred by the recession and the foreclosure crisis, aren’t able to or don’t desire to access homeownership at the same rates as previous generations. Furthermore, the projected growth in minority populations, which have much lower rates of homeownership and thus can’t use home equity to help access homeownership, will also place greater pressure on the rental housing market. New policies will be necessary to meet these demographic drivers in housing demand.

Housing finance and tax reform need to be a top priority in the next Congress
While many speakers across the political divide all acknowledged that some very modest advancement, both housing finance and tax reform are stalled and won’t be addressed until next year. Furthermore, they admitted there exist significant, genuine and difficult-to-overcome policy disagreements on both issues. Despite this, several members of Congress from both parties – including senior Senate Banking Committee Member Bob Corker, R-Tenn., Senate Finance Committee Member Johnny Isakson, R-Ga., House Financial Services Housing Subcommittee Chairman Randy Neugebauer, R-Texas, and House Financial Services Committee Ranking Member Maxine Waters, D-Calif. -, said that the current government conservatorship of Fannie Mae and Freddie Mac is unsustainable over the long term and housing finance reform should be a top priority for the next Congress, no matter who controls Congress after the midterm elections. Speakers also acknowledged that, despite the even greater hurdles it faces, tax reform also should become a greater priority because of the influence of tax policy on housing.

Housing needs a bipartisan approach to solve challenges
Lastly, despite the superficial assumption by some that it is only supported by Democrats, housing policy has always been – and should continue to be – a bipartisan issue. All significant housing legislation was sponsored and supported by both parties, from today’s Johnson-Crapo housing finance reform bill, to the McKinney-Vento Homeless Assistance Act, to the Tax Reform Act of 1986, which created the LIHTC. As noted by BPC Cofounder and Housing Commission Co-Chair Sen. George Mitchell, D-Maine, the LIHTC was signed into law by President Regan. Mitchell was joined by Sen. John Danforth, R-Mo., Reps. Charles Rangel, D-N.Y. and Jack Kemp, R-N.Y., in expressing support of the LIHTC, Nearly three decades later, it remains the nation’s most successful affordable rental housing production program.