Invigorating America’s Housing Market
Some Proposals for Consideration
By David Howard
This year’s State of the Union address featured a number of proposals designed to invigorate America’s housing market. Most notable among the proposals:
» A two-year mortgage relief credit of up to $10,000 for first-time homebuyers
» A one-year tax credit of up to $10,000 for homeowners who sell a starter home to owner-occupants
» Up to $25,000 in downpayment assistance for first-time homebuyers
» An expansion of the Housing Choice Voucher program for low-income renter households
» An expansion of the Low-Income Housing Tax Credit enabling the construction of more units of affordable rental housing
While the Administration deserves credit for its efforts to offer a real and constructive path forward to address the challenges facing America’s housing market, the political environment presents a high hurdle for any of the proposals to become law. Although the Administration is clearly attempting to strike a balance between the supply and demand sides of the housing equation, much of the emphasis is on the latter.
So, in the interest of putting forth policy ideas that have the potential to drive housing development and investment, and in the process support SFR renters, owners, and builders, following are proposals for consideration:
Allow the GSEs to Participate Fully in SFR Financing Activities
Currently, Government Sponsored Enterprises (GSEs), primarily Fannie Mae and Freddie Mac, are restricted by their regulator, the Federal Housing Finance Agency (FHFA), from providing financing for owners of more than 10 one-to-four-unit investment properties. Placing an arbitrary restriction on who can and cannot access a preferred source of capital makes for bad policy. FHFA’s restriction only applies to SFR owners while allowing unfettered access to multifamily owners, regardless of size.
Given the GSEs are charged with providing “liquidity, stability, and affordability” to the U.S. housing market it makes little economic — or intellectual — sense to exclude SFR owners merely because they are deemed to be “large.” At the very least, parity between the SFR and multifamily markets ensures the GSEs are better able to serve a broader, more diverse, universe of renter households and families.
Expand the Use of the Low-Income Housing Tax Credit to the SFR Market
Currently, the Low-Income Housing Tax Credit (LIHTC), exists almost entirely to enable the production of multifamily units, even though single-family rental homes of between one and four units account for nearly 40% of the nation’s rental housing. LIHTC provisions are notoriously complex, especially so for owners and developers of single-family rental housing. Adapting LIHTC to the needs of the SFR market could be an effective way to expand the stock of much-needed affordable rental housing.
Make Workforce Housing More Attainable by Supporting Build-to-Rent Development and Investment
Build-to-Rent (BTR) single-family housing is ideally suited to meet the workforce housing and economic development needs of communities large and small. BTR housing is often designed to attract residents with a need for more space than can typically be found in a standard multifamily building. But because workforce housing by definition is not “affordable housing,” policy incentives to spur development and investment are more limited. Making tax credits available for BTR projects can serve a useful purpose in expanding the stock of quality, well-located, BTR single-family workforce housing.
Incentivize SFR Owners and Developers to Embrace ‘Green Building’ Practices
Residential energy use accounts for approximately 20% of greenhouse gas emissions in the United States. With nearly 20 million single-family rental homes throughout the country, the opportunity for environmental and energy policy is substantial. Expanding the use of targeted tax credits and other tools to encourage the participation of SFR owners can likely have an immediate and lasting benefit.
Promote Homeownership through Lease-to-Own Programs
Single-family rental housing can serve as an important step on the path to homeownership. Government policy can play an important role in facilitating the transition to homeownership by offering tax credits and other incentives to encourage formal lease-to-own agreements between residents and SFR owners.
