Federal government must support the housing finance system
<<< Back: Abolishing other important tax measures would also harm home owners
Some members of Congress are actively pushing to abolish Fannie Mae and Freddie Mac and end the federal backstop for housing. Absent a federal role to help absorb market risk, private lenders would increase interest rates and fees on all types of available financing options for low- and moderate-income borrowers and for affordable rental housing. The 30-year, fixed-rate mortgage, the major housing finance tool for most Americans, would become increasingly scarce and much more costly, pricing many creditworthy borrowers out of the marketplace.
Complicating the situation, the federal government is looking to trim back the Federal Housing Administration’s participation in the market, which would further limit the availability of low downpayment mortgages. And in the wake of the financial crisis, FHA, Fannie Mae and Freddie Mac have become the primary sources of financing for rental housing.
Even with the current high level of federal support, fewer mortgage products are available now than in the past, and these loans are being underwritten on much more stringent terms. At present, almost a quarter of all borrowers who apply for loans are turned down, according to the Federal Reserve. As the private market assumes a greater role in the mortgage marketplace, maintaining an appropriate level of government support is essential to preserve financial stability, promote investor confidence and ensure liquidity and stability for homeownership and rental housing.
Next: Housing production credit crisis will have harsh consequences >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
Abolishing other important tax measures would also harm home owners
<<< Back: The Low Income Housing Tax Credit helps provide affordable rental housing
As for other homeownership-related tax code provisions, abolishing the deduction for state and local property taxes would not only depress home values and raise taxes for home owners, it would also shrink the local tax base of many communities, causing already cash-strapped state and local governments to further cut jobs and essential services.
Repealing the capital gains exclusion on the sale of a principal residence would saddle home owners with a 15 percent (or the applicable capital gains rate) tax on the profit from the sale of their homes, hampering their ability to enter the move-up market or to fund a secure retirement.
For members of the baby boom generation looking to retire, this would be especially harmful. It would wipe out a significant portion of their housing wealth just when they need it most.
Proposed Qualified Residential Mortgage Requirements Could Delay or Prevent Homeownership
Six federal agencies are proposing a national standard that would require a minimum 20 percent downpayment, which would keep homeownership out of reach of most first-time home buyers and many middle-class households. About 62 percent of first mortgages taken out to purchase a home last year would not have qualified under this standard because they had downpayments of less than 20 percent, according to LPS Applied Analytics, a mortgage data firm, as reported in The Wall Street Journal.
Borrowers unable to make a 20 percent downpayment or to obtain FHA financing would be expected to pay a premium of up to two percentage points for a loan in the private market to offset the increased risk to lenders, according to NAHB economists. This would annually disqualify about 5 million potential home buyers, resulting in 250,000 fewer home purchases each year. Such a drastic cutback would have a disproportionate impact on minorities and low-income families struggling to achieve the dream of homeownership.
Moreover, low-downpayment loans have been originated safely for decades, and low downpayments are not what drove the housing lending crisis, according to the Center for Responsible Lending, a non-profit, non-partisan research and policy organization. “Low downpayment home loans have been a significant and safe part of the mortgage finance system for decades, bearing little resemblance to subprime and other alternative mortgage products that crashed our economy. And responsible low downpayment loans are also a key to the
recovery of our nation’s housing market and economy.”
The Administration and federal regulators need to offer a new plan that ensures a safe and healthy mortgage market, lowers the risk of default and keeps homeownership affordable for working American families.
The Center for Responsible Lending estimates that it would take 14 years for the typical family to save enough money for a 20 percent downpayment on a median-priced single-family home.
Next: Federal government must support the housing finance system >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
The Low Income Housing Tax Credit helps provide affordable rental housing
<<< Back: The threat to housing
The Low Income Housing Tax Credit (LIHTC) is the most successful affordable rental housing program in our nation’s history. However, it has also been targeted by lawmakers. Eliminating the LIHTC would bring production and rehabilitation of affordable rental housing to a standstill.
Since its inception, the program has enabled the production of more than two million affordable apartments. More than 40 percent of the nation’s renters are already paying at least 35 percent of their household income toward rent, and they need affordable options. The LIHTC serves households earning 60 percent or less of the area median income with rents restricted to keep the units affordable.
The program creates approximately 90,000 new full-time jobs, adds $6.8 billion in income to the U.S. economy and generates approximately $2 billion in federal taxes each year. In recent years, the LIHTC has produced about 75,000 new apartment homes annually. The program is essential to address the shortage of affordable housing options in our cities and towns.
Next: Abolishing other important tax measures would also harm home owners >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
The threat to housing
<<< Back: New home construction and remodeling can generate millions of jobs
Washington policymakers are threatening to eliminate our nation’s long-standing commitment to homeownership, which would have repercussions for generations to come. This broad-based attack on homeownership is being waged in the tax, legislative and regulatory arenas. Such a radical policy shift would negatively affect every family in every community across the land.
Millions of first-time home buyers and middle-class households would be left out in the cold with only the faintest hope of ever owning a home, the production of affordable rental and new single-family housing would grind to a halt, and countless jobs would be lost.
In the wake of the worst financial crisis since the Great Depression, it makes sense to encourage prudent underwriting and effective consumer education to make sure that buyers select homes they can afford and mortgages they can pay over the long term. But it does not make sense to attack the mortgage interest deduction that is so important to the American middle class, or to tighten credit so much that many households that can afford homeownership simply cannot qualify for a mortgage. Such ill-advised actions would devalue housing and prolong the nation’s economic pain for years to come.
An Unjustified Attack on the Mortgage Interest Deduction
One of the primary targets of this unjustified attack on homeownership is the mortgage interest deduction (MID).
This cornerstone of American housing policy has been in place since the inception of the tax code nearly 100 years ago and supports the aspirations of families at all income levels to become home buyers. Americans overwhelmingly oppose any action by Congress to tamper with the mortgage interest deduction, according to the results of an NAHB poll conducted in the spring of 2011. However, many lawmakers have expressed a willingness to eliminate or curtail this vital housing tax provision.
Cutting the tax benefits associated with owning a home would impose a huge tax increase on millions of middle-class home owners and send shockwaves through the economy. Eliminating or limiting the MID would further depress home values, leaving more home owners with mortgages larger than the value of their property and fueling even more foreclosures.
A study by the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution, found that limiting the deduction to a 28 percent maximum tax rate--as the Administration proposed--would cause housing prices in large metropolitan areas to fall by as much as 10 percent. At a time when stabilizing housing prices is of paramount importance to restoring the economy, a deliberate action by the nation’s elected leaders would devalue homes and force even more home owners underwater.
The mortgage interest deduction primarily helps middle-class home owners and is consistent with the principles of a progressive income tax. The deduction is most valuable for younger households who tend to be recent home buyers with large mortgages, small amounts of home equity and growing families. IRS data indicate that the largest deduction dollar amounts go to people aged 35 to 44. As a share of household income, the largest amounts go to those aged 18 to 34. Almost 75 percent of the total deduction is claimed by those under age 55; those aged 35 to 44 claim 30 percent.
John Weicher, director of the Center for Housing and Financial Markets at the Hudson Institute, characterizes the proposal to eliminate the mortgage interest deduction as “bad economic policy” that would create a new bias in the tax code. Weicher served as assistant secretary for housing and federal housing commissioner at the U.S. Department of Housing and Urban Development from 2001 to 2005.
A Home Owner is a Landlord and a Tenant
"Your house is an asset, an investment, as well as a place to live. A home owner is both an investor and a consumer, both a landlord and a tenant, someone who owns a house and is renting it to himself or herself. Like any other business person, a landlord can deduct business expenses. For rental housing, these include interest on the mortgage, property taxes, maintenance expenditures, and depreciation on the property. At the same time, the landlord has to pay tax on the rent he or she receives, after deducting these business expenses. A home owner/investor has the same business expenses, but can’t deduct all of them. The home owner can deduct mortgage interest and property taxes, but not maintenance or depreciation. The home owner also doesn’t have to pay taxes on the rental value of the home. So home owners have a tax advantage over landlords because owners don’t pay taxes on the rental value of their home; and landlords have tax advantages over home owners because they can deduct maintenance and depreciation, and home owners can’t. But home owners and landlords are treated equally with respect to mortgage interest and property taxes. Both can deduct these expenses." -John Weicher, Hudson Institute
Next: The Low Income Housing Tax Credit helps provide affordable rental housing >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
New home construction and remodeling can generate millions of jobs
<<< Back: Housing is a key element in the nation’s economy
It’s also important to note that the employment effects of new home construction and remodeling extend far beyond the actual structure. About half of the jobs created by building new homes are in construction. They include framers, electricians, plumbers, finish carpenters and all of the other workers who contribute to preparing the land and building the home. The rest are in housing-related industries that produce building materials and provide services to both home builders and home buyers. They include:
- Furniture, lighting and appliance industries
- Metal products industries
- Plastics and carpeting production
- Architecture and engineering
- Real estate agents, brokers and appraisers
- Wood products industries
- Concrete, gypsum and paint production
- Manufacturing construction equipment and other products
- Selling, moving and storing products
- Management, administration, government and law
- Finance and insurance
Perhaps more than any other consumer product, housing is “Made in America.”
New homes and apartments don’t arrive here on container ships from other countries, and most of the products used in home construction and remodeling are manufactured here in the United States.
More than 1.4 million jobs in residential construction have been lost since employment peaked at 3.45 million in April of 2006, according to the Bureau of Labor Statistics. To date, less than two percent of those jobs have been restored.
Next: The threat to housing >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
Housing is a key element in the nation’s economy
<<< Back: Policies should not create barriers to housing choice
Just as each home is important to the family that lives in it, housing is important to local, state and national economies and accounts for about 15 percent of the nation’s Gross Domestic Product.
Included in that total are new construction of single-family and multifamily homes, remodeling and the countless products and services that are related to those activities.
NAHB analysis of the broad impact of new construction shows that building 100 average single-family homes generates:
- 305 jobs
- $23.1 million in wage and business income
- $8.9 million in taxes and revenue for state, local and federal governments
Building 100 multifamily rental units has a similar impact on the nation’s economy. It generates:
- 116 jobs
- $8.7 million in wage and business income
- $3.4 million in taxes and revenue for state, local and federal governments
Like new construction, remodeling of both owner-occupied homes and rental properties contributes billions of dollars to the nation’s economy each year as property owners update and improve residential properties.
Every $10 million in remodeling expenditures yields the following economic benefits:
- 111 jobs
- $8.3 million in wage and business income
-
$3 million in taxes and revenue for state, local and federal governments
Next: New home construction and remodeling can generate millions of jobs >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
Policies should not create barriers to housing choice
<<< Back: Rental housing is essential to a well-housed population
Consumers should be able to choose the type of housing that best meets their needs, whether that means purchasing a home or renting an apartment, condo or single-family home.
Policies and regulatory actions should not create arbitrary and unreasonable barriers that effectively prevent people from living in the type of housing they prefer.
"Rental housing serves a large and diverse population of nearly 39 million households ... Renters defy common perceptions that they are all young and have low incomes. Indeed, half of all renters are over age 40. Although
the median renter income is low, about 10 million renters are in the top half of the income distribution and 3.8 million are in the top quartile." —Joint Center for Housing Studies of Harvard University
Next: Housing is a key element in the nation’s economy >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
Rental housing is essential to a well-housed population
<<< Back: Homeownership contributes to household wealth
In addition to homeownership opportunities, an adequate stock of rental housing is essential to a well-housed population. Many people aspire to homeownership, but owning a home is not a universal goal. Some people prefer to rent, and others are unwilling or unable to take on the financial responsibility of owning a home.
According to “America’s Rental Housing: Meeting Challenges, Building on Opportunities,” by the Joint Center for Housing Studies of Harvard University, renting offers many benefits.
“First, moving to and from rental housing involves much lower transaction costs than homeownership. Although renters do incur moving costs and landlords typically demand the last month’s rent plus a security deposit, these outlays are smaller than the fees associated with buying and selling homes.
“Second, renting transfers primary responsibility for upkeep and maintenance to a landlord. And third, renting does not tie up funds in the form of a downpayment, nor does it expose households to the risk of loss of that investment. While renters do face the risk of rent inflation and the loss of their security deposits, rental housing provides a safe haven during times of falling home prices or job insecurity,” the report states.
During their lives, most people will both rent and own a home. Typically, young adults just forming their own individual households rent an apartment or house. As they become settled in a career and their family grows, they may opt for homeownership. Later in life, after their children have flown the nest, some people again find that renting best suits their needs, especially if they need to live close to shopping and community services.
About 34 percent of the nation’s 112 million occupied homes are rental properties in a broad range of housing styles, including garden apartments, high-rise apartments, condos, and singlefamily homes.
Next: Policies should not create barriers to housing choice >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
Homeownership contributes to household wealth
<<< Back: National policy should support homeownership
For most home owning households, the home is a primary source of wealth and financial security. And even though many homes have lost value in recent years, the nation’s home owners have more than $6 trillion in home equity and they still believe in homeownership.
Home owners often tap the equity in their homes to pay for education, to cover health expenses and to help fund retirement. They also use the equity to help pay for improvements that increase the value of their homes and make them safer and more resource-efficient. Homeownership also can shield households from the risk of large increases in housing expenses.
Next: Rental housing is essential to a well-housed population >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
Voters: National policy should support homeownership
<<< Back: Homeownership puts families in homes and Americans in jobs
Home owners and non-owners alike consider owning a home essential to the American Dream, and believe that it is reasonable and appropriate for the federal government to provide tax incentives to promote homeownership.
They also oppose eliminating the mortgage interest deduction and view saving for a downpayment and closing costs as the most significant barrier to homeownership.
Those are among the key findings of a survey of 2,000 people likely to vote in 2012. It was conducted on behalf of the National Association of Home Builders in May of 2011 by Public Opinion Strategies of Alexandria, Va., and Lake Research Partners of Washington, D.C.
The poll results showed that 73 percent of all respondents--both owners and renters--believe the federal government should provide tax incentives to promote homeownership. This support for housing runs strong among all party affiliations, with 71 percent of Republicans, 79 percent of Democrats, 68 percent of independents, and 68 percent who support the Tea Party agreeing with this statement.
Moreover, 71 percent of voters oppose proposals to eliminate the mortgage interest deduction. The majority also oppose limiting the mortgage interest deduction or eliminating the deductions for interest on home equity loans and mortgages on second homes.
The polling data also showed:
- 95 percent of the home owners said they are happy with their decision to own a home.
- 73 percent who don’t own a home said that owning a home is one of their goals.
- Homeownership and a retirement savings program are considered by voters to be their best investments.
- 80 percent of home owners would advise a close friend or family member just starting out to buy a home.
The NAHB survey findings are consistent with the results of other public opinion surveys. In a New York Times/CBS News poll conducted in June of 2011, 89 percent said that homeownership is an important part of the American dream. More than 90 percent indicated that it is important for the federal government to continue the mortgage interest deduction.
According to a Pew Research Center study conducted in March of 2011, 81 percent of adults agree that buying a home is the best long-term investment a person can make. Among the renters who were surveyed, 81 percent said they would like to buy a house.
In an Allstate/National Journal Heartland Monitor Poll conducted in March of 2011, the respondents also said that buying a home and investing in a retirement savings program are their best investments. Among those who own homes, 89 percent said that if they had the chance to make the decision again, they would still choose to buy a home.
"Americans still see homeownership as a core value and a key building block of being in the middle class and creating strong jobs in their communities. Owning a home isn't just a policy to people. It isn't just a commodity. It is a core value." — Celinda Lake, President, Lake Research Partners
Next: Homeownership contributes to household wealth >>>
Author: CRBRA Admin | On: October 04, 2011 | In: Government Affairs · Politics · Consumers | No Comments
CRBRA - 1202 Troy-Schenectady Road, Latham, NY 12110
Phone: 518.690.0766 | Fax: 518.690.0767
