The Fed crashed the housing market.  Builders and banks want help.

The Fed crashed the housing market. Builders and banks want help.

“Anyone who wants to do anything in a bipartisan way will have to do it in this lame session or it won’t happen,” said National Housing Conference President and CEO David Dworkin, who believes that tax legislation has a chance before 2023. “Next year is going to be chaotic.”

The housing crisis is the economy’s biggest casualty so far from a series of Federal Reserve rate hikes aimed at tackling inflation. Mortgage lenders, including Wells Fargo, have already laid off thousands of employees this year, and the cuts are expected to continue.

The emerging lobbying campaign by builders, lenders and other housing groups to gain support from the federal government is a preview of the political debates to come if other sectors begin to suffer slowdowns as rate increases continue. .

For now, housing advocates are holding their fire when it comes to the Fed. But they are growing increasingly frustrated that their pleas are not gaining ground on the Hill.

“The most bipartisan issue facing a Congress is housing,” said Jerry Howard, CEO of the National Association of Home Builders. “This congress and previous congresses should be embarrassed.”

Making a real dent in the crisis would require an increase in housing supply to help ease price pressure and spur more activity in the market – and that would require new investments from Congress, advocates say , lobbyists and government officials.

President Joe Biden and Democratic lawmakers had planned to spend $150 billion on housing — including building new homes in addition to expanded housing assistance — under the Climate Act and health that Biden signed in August. Spending plummeted during negotiations for a lightened Sen bill. Joe Manchin (DW.Va.) could argue.

“If during Build Back Better you had housing provisions left on the cutting floor with [Rep. Maxine] Waters and Biden, how is it going to be in the lame duck? said a lobbyist who spoke on condition of anonymity to speak candidly about his industry’s chances of success. “There’s no way.”

Administration officials said the White House has taken regulatory action to encourage more construction, but meaningful progress would require more congressional funding and zoning reforms at the state and local levels to remove some of the pressures on prices on new developments. The Biden administration is backing two bipartisan bills that would expand tax breaks for developers of affordable housing.

“At the end of the day, it takes resources,” said a White House official who spoke on condition of anonymity about interactions with the housing lobby and Congress. “This is a resource issue where the solutions are plainly clear, and that’s why congressional action is certainly important.”

Critics argue that pouring more federal dollars into affordable housing often fails to deliver the people it’s supposed to help.

“These programs tend to attract a massive amount of fraud,” said Ed Pinto, senior fellow at the American Enterprise Institute and former Fannie Mae executive. “It’s just an open book on potential fraud and poor workmanship. These neighborhoods have been ripped off too many times by these types of programs.

Howard, one of the few industry lobbyists and affordable housing advocates to meet with senior White House officials in September, said his message to the Biden administration is simple: “Make it easy for us to rebuild the supply and the housing market will decline, and inflation will fall.

HUD Secretary Marcia Fudge was present at the Sept. 21 meeting, along with National Economic Council Director Brian Deese, Domestic Policy Council Director Susan Rice, and Federal Security Agency Director. housing finance, Sandra Thompson.

Fudge and Treasury Secretary Janet Yellen wrote an op-ed after the meeting calling on state and local governments to channel unused US bailout funds toward housing construction and rehabilitation.

Dworkin, another industry representative at the White House meeting, also tied ground for building more homes to inflation. The cost of housing is about a third of the official measure of inflation. Dworkin said building more affordable housing is “counter-inflationary” because higher rents will persist without additional units to meet demand.

“It’s painfully clear that we need more money for housing production because if we don’t address the housing shortage, we’re not going to adequately fight inflation,” he said. . “We are going to fight inflation for a long time, it is time to build housing in order to reduce housing costs.

The industry is pinning its hopes for increased supply on two bipartisan bills – the Neighborhood Homes Investment Act Art. 98 (117) and the Affordable Housing Credit Enhancement Act Art. 1136 (117) – which would expand the tax credits available to developers who build affordable housing. The Fudge-Yellen op-ed called the bills “the fastest way to increase the production and preservation of affordable rental and owner-occupied housing in communities across the country.”

Passing the legislation would lead to the creation of more than 2 million housing units over 10 years, according to housing industry groups.

The hope among advocates is that Congress will pass the bills as part of a year-end fiscal package when lawmakers return after the midterm elections.

“We are for a comprehensive approach to making housing more accessible, available and affordable,” said Shannon McGahn, advocacy manager at the National Association of Realtors. “The lack of inventory is where we think Congress, the administration, and state and local governments can act as well.”

The Improving Affordable Housing Credit Act would revise and expand the current Low-Income Housing Tax Credit, a tax incentive for the construction of affordable rental housing. The Neighborhood Homes Investment Act would establish a new business tax credit to help finance the construction and rehabilitation of homes in economically disadvantaged areas.

Whether the bills are included in any year-end tax bill will likely depend on negotiations surrounding larger items like the child tax credit. Realtors also want lawmakers to pass a bill that would give home sellers a greater reduction in capital gains taxes.

With Congress an uncertain bet, mortgage industry lobbyists are looking to federal agencies for action.

The Federal Housing Finance Agency announced Oct. 24 that Fannie Mae and Freddie Mac, the government-controlled companies behind about half of the nation’s residential mortgage market, will eliminate upfront fees for some first-time homebuyers and loans. – a decision that the industry applauded. .

Industry trade groups have also repeatedly called on the administration to reduce the annual premium charged on Federal Housing Administration-insured loans, which go mostly to low-income homebuyers and first-time buyers.

The annual income needed to buy the home at the median price less than three years ago was $64,400 and now exceeds $120,000, a coalition of housing lobbyists and civil rights groups noted in a letter on last month calling on HUD to reduce premiums for FHA loans.

The group of mortgage lenders is also pushing the FHA to increase lending limits for multi-family dwellings. But lobbyists recognize that the regulatory changes they seek are no panacea for housing market woes.

“These are grassroots successes,” Mortgage Bankers Association senior vice president Mike Flood said. “But after a while, a few basic hits get you a few points on the board.”

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