April 2016 - Tech Revolution

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20 | TH E M R EP O RT FEATURE through changes to the MID liter- ally "stay at home" within housing and are used to fund and support critical housing priorities—most prominently, first-time homeowner- ship and affordable rental housing. The pressure to sweep these savings into deficit reduction or to pay for overall tax-rate reductions will be great, so developing an effective strategy that achieves this stay-at-home objective must begin now. We must make the case that promoting first-time homeowner - ship and affordable rental hous- ing directly helps families and provides major macroeconomic benefits as well. Resuscitating First-time Homeownership S ince the subprime debacle, the national homeowner- ship rate has plunged more than five percentage points. It now stands at a 21-year low. During this period, the homeownership rates for younger adults and minorities have also registered dramatic declines. Perhaps even more alarming is the percent - age of first-time homebuyers has reached its lowest level in 29 years, according to a recent survey by the National Associa- tion of Realtors. What's behind these declines? Years of wage and income stagna- tion, regulatory uncertainty that has encouraged lenders to adopt restrictive credit overlays to their underwriting policies, a limited inventory of affordable new and existing homes, and record levels of student loan debt have all put downward pressure on the home - ownership rate. America's changing demograph- ics will also present a major challenge. The bottom line is that minorities will be the driving force behind new household for- mation over the next 15 years. According to the Urban Institute, from 2010 to 2020, 8.9 million net new minority house- holds will account for 77 percent of overall household growth. From 2020 to 2030, an additional 9.1 million net new minority households will form, compris- ing an astounding 88 percent of projected household growth. Unfortunately, the median in- comes of African-American and Hispanic families continue to lag significantly behind those of whites, a circumstance that will complicate the ability of many to become homeowners. Consequently, new approaches to promote sustainable homeown - ership for first-time homebuy- ers will be essential. One such approach would be to adopt what has already been suggested—to convert the MID into a tax credit so that moderate-income and lower-income families, most of whom do not itemize on their federal tax returns and account for a significant share of first–time homebuyers, can benefit. But other ideas are certainly worth considering and pursuing. It's time for the housing industry to put these ideas on the table and insist they be considered if and when Congress reexamines the MID. Making Rental Housing More Affordable W ith the decline in the homeownership rate, we have witnessed an enormous surge in demand for rental housing. Unfortunately, the sup- ply of affordable rental homes in many communities has not kept pace. The result: a rental afford- ability crisis with rising rents consuming increasingly larger shares of household incomes. According to Harvard's Joint Center for Housing Studies, in 2014, a record number of renter households, 21.3 million, paid more than 30 percent of their income on housing (the federal affordability threshold), while 11.4 million renter households paid in excess of 50 percent. Those families with the lowest incomes are suffering the most from exces - sive rent burdens, forcing some to choose between paying the rent or spending less on essentials like nutritious food and medical care. Less appreciated is the negative correlation between rising rents and homeownership. In particu - lar, many younger renters bur- dened with high monthly housing costs are finding it increasingly difficult to accumulate funds for a mortgage down payment. Strategies to relieve these pres- sures should be viewed through a homeownership lens—after all, today's renters are tomorrow's first-time homebuyers. Increasing the supply of af- fordable rental homes is a critical national need. A substantial ex- pansion of federal support for the Low Income Housing Tax Credit, our nation's most successful housing production program for low-income renters, must be a top priority. As recommended by the Bipartisan Policy Center Housing Commission, increased funding for the Housing Credit must also be tied with additional federal support for the "gap" financing that is often required for Housing Credit properties. Without question, responding to today's rental affordability crisis with adequate supply-side and demand-side solutions will require a significant expenditure of federal funds, a difficult "ask" during a time of severe budget pres - sures. But, as highlighted by the Bipartisan Policy Center Housing Commission, Congressional con- sideration of tax reform provides an opportune moment for this conversation to occur. Come Together Right Now A plunging homeownership rate and skyrocketing rents are challenging our nation's housing system like never before. With comprehensive tax reform on the horizon, it is time for the housing industry to come together to develop a coherent, unified strategy to best position itself for the potential changes ahead. At the core of this strategy must be the recog- nition that homeownership and rental housing are complemen- tary, not competing, elements of the same system. We are all in this together. RON TERWILLIGER is Chairman Emeritus of Trammell Crow Residential. He is the Founder and Chairman of the J. Ronald Terwilliger Foundation for Housing America's Families. The views expressed in this article are exclusively his own. "With comprehensive tax reform on the horizon, it is time for the housing industry to develop a coherent, unified strategy to best position itself for the potential changes ahead." 3MReport.indd

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