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Our Homeownership Moonshot: Building 20 Million Homes By 2030

Just Economy Conference – May 12, 2021

The widening chasm between incomes and affordable homeownership has its roots in the single biggest problem affecting owned homes — a lack of affordable inventory.  The problem has gotten so severe that only an effort on the scale of this country’s rebuilding after WW2 will meet the need.  We can do this and we’ll explore how in this session. We will discuss President Biden’s infrastructure plan and cite other legislative issues that may be relevant, such as the NSP-2 revival in two pieces of recent legislation.

Speakers:

  • Phillip Bracken, Managing Director, VantageScore Solutions
  • Marisa Calderon, Executive Director, CDFI and Chief, Community Finance and Mobility, NCRC
  • Ed Gorman, Chief, Community Development, NCRC
  • Selma Hepp, Deputy Chief Economist, Corelogic
  • Kara Ward, Partner, Holland & Knight LLP

Transcript

NCRC video transcripts are produced by a third-party transcription service and may contain errors. They are lightly edited for style and clarity.

Gorman 00:05 

Good afternoon, welcome to the session entitled “Our Homeownership Moonshot: Building 20 Million Homes by 2030.” This session is designed to bring to the fore, and to discuss both the sort of status of the problem and solutions that we believe need to be brought to bear on what we think is one of the greatest problems affecting the American American economy, and opportunities for people to build wealth in this country, namely, the lack of homeownership inventory in the country and what we need to do about it. So this idea, that moonshot idea essentially tracks what President Kennedy did in 1961, when he announced that we put a man on the moon by our men on the moon by the end of the decade, we that we need that kind of an investment here. Because without it, we will continue to see an upside-down housing market, the likes of which I have not seen in my lifetime, even in the heyday of the bubble before 2008. I don’t think we had as much shortage of inventory as we do now. How do we get here we have four terrific speakers, for you to talk about how we got here, what the state of things is, and how we move forward. First Selma Hepp, who is one of the leading housing economist in the country, and is that core logic, I think she’s uniquely positioned to kind of give us a level set on where we stand right now with inventory. And sort of how we got here, followed by Kara Ward. Kara is a former Treasury official, who now advises folks on both sides of the political aisle about the need to do more in the housing and housing, finance space, and what kinds of policies she thinks we need to be thinking about. But she’s also tracking current policy now and we thought it’d be helpful to hear kind of what the state of current policy is followed by Marisa Calderon, our CDFI Executive Director. Before that, she was the executive director of the National Association of Hispanic real estate professionals. She is uniquely positioned to talk about homeownership, both from the need to build back better from an infrastructure level, but also in particular, to talk about communities of color, and how we need to focus on supporting communities of color in their efforts to get to gain homeownership opportunities. They are the principal victims of this current crisis. And then finally, Phil Bracken, a longtime friend of NCRC, former head of government affairs for Wells Fargo, currently, the head of government affairs for vantagescore. Really a guy who understands the mortgage industry understands the housing industry, as well as anybody in the country. So we have an all star panel for you. I am looking forward to this and we will when we finished Back to q&a. I hope we get a lot of questions from you. Because I think it should be a robust conversation. But now, if I may, let me start with Selma Hepp. Selma, take it away. 

Hepp 03:28 

I’m not sure if I was on mute or not. But thank you for having me. I have a number of slides to share with you. I hope you find this information. Interesting. But I do believe that this group is, is wonderful to be presenting on this topic. So I really look forward to participating a little bit later in our discussion. So with that, I’m going to share my slides here. Just give me one quick second. Okay, share my slides. Okay. Do you guys see my slides? I’m sorry. It’s kind of switching between the Yes. Okay, you can see my slides. Okay, going back to the slides. Alright. So what I’m going to talk about is, what’s going on with the inventory, I have some data on millennials and their affordability challenges as well as their participation currently in the market, I have some data on what’s happening with forbearances, and how they may play out in terms of future inventory. And that’s, that’s all from my slide. So I’ll pass it over back to Ed after that. But um, the slide you’re looking at here is the inventory of homes for sale number of single-family homes for sale in light blue line. So this is the MLS data, this is the number of homes that have been available going back to 1982. For Sale. You can see here that over the last few years, that number has been declining, and it actually has been declining over the last decade, but especially took a dip in the last year in 2020. When looking at what the average for an availability of single-family homes for sale has been historically, or at least going back to 1982, it averaged 1.9 million, which is the red line going across. And you can see here that we’re currently below even below the 1 million so we’re more than 50% below what the historical averages. On the other hand, if you look at the dark blue line, which represents the number of households in the US, that number has been trending up. Naturally, the more population we have, the more households we have. And so the discrepancy between the two, which I’m going to show you in this slide here is even more evident when you put it. It’s basically the same information in this slides just presented differently. But what I’m showing you here is, by decade, the change in housing inventory, this is all housing inventory available out there, and the change in population. And so where the picture becomes more stark is over the last three decades, where you can see that we’re adding 33 million people, 27 million people, 20 million people, but at the same time, we’re adding only about 10 to 13 million new households. So in other words, over the last two decades, we added twice more than twice as many people than the number of housing units. And that wasn’t the case prior to 2000. As you can see, on the left, the left three sets of bars, there was much more balanced relationship between housing inventory and total population. Now since the beginning of the pandemic, so this is now just focusing on the last couple of years of data. And it’s a year-over-year percentage change in new listings. So newly available inventory that comes online, and then active inventory. So that’s everything that’s available online. And a couple of things to point out here. First, the light blue line is active inventory, and suggests that even at the beginning of 2020, we were trending at about 10% below previous years. inventories and that’s consistent with the slider. couple slides I showed you previously. And then but then the darker blue line shows you what’s happening with new listings. And you can see that with the onset of the pandemic in March of 2020. The number of new listings drops precipitously down 50% on a year-over-year basis. And it starts picking up somewhere in later second part of last year. And this is again when you think on a year-over-year basis. So it’s not still contributing significantly to the active inventory because the active inventory is declining at the same time overall inventory. The listings take a dip again in the end at the end of the year. Ah, that has to do with more cases. You know, when we were ending last year, the beginning of the year, it was sort of height of the pandemic, new infections. And this is where the new listings took another large dip. And then in April of this year, we see a 41% increase in new listings, which, in theory is it’s a positive number. And it seems like we’re making progress. Nevertheless, this is comparing on a year-over-year basis. So this is comparing to last April. And if you look at that 50% of decline last year, it’s it’s you know, what they’ve been calling the base effects special now in recent discussion about inflation, they’re talking about base effects. So when you compare it to things that happened last year, you have to take into consideration that the economy and the housing market came to almost a full stop. So it’s not necessarily the most effective way to look at the inventory information by looking at last year’s level. So what I’m doing here in the next slide is I’m comparing the new listings to what they were they were in April of 2018. And picture unfortunately, is pretty much the same, where I’m showing the metros with largest declines metros with smallest declines overall, pretty much all the metros have had declines, compared even to 2018 numbers. But some metros obviously had a much, much larger decline as much as 50%. And those tend to be the areas where we’ve seen most increase in demand or lack of a new construction supply. So Kansas City has been one of those cities that fared pretty well during the recession, for various reasons. But then we have Texas, there is the affordability, the affordability opportunity for some people moving from other parts of the country. And then we have some markets in California that are relatively more affordable to say, LA and San Francisco. And then we have a markets where people generally have been attending to move out in recent years Tampa, Austin, Raleigh, North Carolina. And they’re on the other hand, here you’re looking at where, where lesser inventory declines are in there in areas that are either more expensive, such as San Jose, Silicon Valley, or you have, for example, New York City, and then you have, for example, baton, Baton Rouge, which actually has been hard hit by the five hurricanes last year, so so there’s been a lot of much more movement in terms of people moving in and out. So the inventory decline is lesser. Now, the slide that I’m showing you here is inch its inventory by price range. So 50 to 75% represents those homes that are in 50 to 75%, of median home price in that area. And then it goes all the way to 175 to 200. So our affordable range is highlighted here in yellow. That’s the entry-level supply. And you can see the decline from the pre-pandemic darker blue blue times to lighter blue March 2021. But what’s interesting here that even the higher-priced inventory, which is outside this yellow square, they have declined just as much or actually technically more on a relative basis. And all of them now are currently two months supply or less. So basically, that’s saying in two months, everything that’s currently available for sale would sell out. And why it’s important to look at the higher-priced inventory and decline in availability in that price range is because oftentimes, as the prices come down in higher price ranges, it trickles down to having more affordable more inventory at the lower price levels. But because inventory supply is tied at all price ranges, there is clearly no opportunity there even to hope for some trickle down to entry-level supply. Now, another thing, so we’re looking at most of the data up to this point has been about on existing home sales, there’s been quite a bit of new construction and new construction activity has picked up pace, particularly since the drops, or trough we saw post-Great Recession. And it’s only now at about the level at about our average level of last several decades. But there is quite a bit of discrepancy in the rate of new construction across the country. So in some markets, particularly in the south, it’s 50 it’s getting 50% of new construction and areas for example in on the west or mountain states where we’ve seen a lot of demand recently there hasn’t been A lot of new home construction. So that’s important to keep in mind when we’re thinking about new construction is that it’s not happening equally everywhere and in areas where we most needed. So the bars here on the right-hand side are showing you growth in new home. A new home construction, this is annual percent growth, this is at the last quarter of last year compared to 2019. And what stands out is that the metros that are affordable, that have high employment growth and have or have outdoor amenities to have had the highest growth in new home sales over the last year. So again, areas that there is more new construction are getting more employment, and hence are in the slide and I’m going to show you a sorry, I’m going to skip to this slide real quick because it’s it’s a very key slide. So it’s, this is a correlation slide with showing you on the bottom. on the x axis, it’s showing you the ratio of employment growth, to housing permit growth. And basically, the more the higher the ratio, the closer you’re coming to 200%. That means you’ve added more employment, then you have added housing units. on the y axis, its cumulative price growth over the last nine years. So the states that are highlighted in the red, in the red circle are areas that have more employment growth relative to number of housing units added and hence higher home price appreciation. So when we think for going forward in terms of where or how are we going to slow down the home price appreciation, the system in thinking about sustainability of home price appreciation they’ve seen over the last year, it’s not only coming, it’s not only going to come from existing inventory. But as you can see, new inventory is key in keeping that home price growth at a sustainable level. Um, I think I don’t have a lot of time. So I’m going to just skip the slides that I skipped earlier. But talking a little bit about what is the driver between behind these, these, this high demand for homes. Obviously, we’ve talked a lot about what’s happening with millennials. You’re looking at here population distribution by age. And in like last year, so last year, the bars in red represent millennial population that is between age 28 and 30. And they currently represent the largest age cohort in the country. The green bar is the median age of first-time homebuyers. So as you’ve heard, probably through many media reports recently, the millennial or just caught a millennial I just call age cohort being Millennials are approaching that key median first time home buying age. And that is why in addition to having a high demand from second-home buyers, we’ve seen a large increase from millennial buyers and first-time buyers. And this actually comes in a little bit more clear in this chart. We’re here on charting home purchase loan application by cohort over the last six years. And if you follow the red arrow, you can see the share of millennials went from 33% in 2014 to 54% in 2020. So now on an annual basis, that increase has been about three to four percentage points. But between 2019 and 2020, that increase was about seven percentage points. So on one hand, we would have anyway seen two to three to four percentage points because that’s where the trends were going in terms of millennial but potential you can think about it as demand that was pulled forward in 2020. From demand that would have happened later in later years, because of the pandemic because of the need for more space moving out to suburbs, low mortgage rates, and so a number of factors that really are provided for a very, very favorable environment for those that can afford. So that those were that the ones that can afford now let’s move to talk about the ones who are struggling. So the slide here is showing you what a household would need to come up with for three to 3% down payment for median price home in this areas versus 10% down payment for a medium price home. And then the red line is what the median financial asset holdings are families headed by those under 35 years of age. So you can see that generally they have only about 85 $100 in savings, but the amount of money that they need to come up for a down payment is much larger. Particularly if you’re thinking about 10% down payment. So the 10% down payment is the dark blue line. 3% is his lighter blue line.    

Gorman 18:25 

Selma Hi. On screen because they I think we need to transition. 

Hepp 18:34 

Okay. Okay, so I’m so sorry.  

Gorman 18:36 

No, no it is quite all right. Let me just say, folks, I mean, this is, first of all, some presentation is rich in detail. And some I hope we can share the slides with the audience. Is that all right? No, because it is an amazing presentation. And there’s so much more to it. But you know, I just as a segue to Kara. You know, I think what I folks should take away from this is, so we’re not building we haven’t been building since the 1970s. Particularly not affordable housing units. The last time I saw the numbers, it was 425,000 a year of affordable units back in the 70s. We’re only building 60,000 a year of affordable units now. So when you take that and couple it with what you’re showing in terms of demographics, this is like it’s almost like a tsunami crashing on the shore. Of course, you’re going to be these impacts. So anyway, so I thank you very much. 

Hepp 19:33 

And I would gladly share the slides. And anybody has any questions, 

 Gorman 19:36 

Folks should come back and ask questions at the end. I now want to introduce, thank you. I want to do care award. And I want to before I do just say Kara has been one of the folks that we have really leaned on very heavily over the last couple of years as we’ve developed the affordable homeownership coalition, which is a bipartisan coalition focused on homeownership and affordable homeownership, particularly, and, and sort of without her help and guidance. And Phil has been involved, and Kirk Wilson and of course, John Taylor, and others, and we’ve had the Home Builders at various times in the the the real estate professionals as well. But the but truthfully care has been a huge reason why we’ve had any success with AC. So let me introduce Kara Ward, Kara, thank you for your contribution here. And I’ll get out of get off screen. 

Ward 20:28 

Well, thanks for the warm introduction, Ed. One of the things I wanted to bring up with his audiences is for topics that are in the discussions about housing policy and homeownership in Washington, DC right now, I’m going to keep it to four, but there’s probably a lot more that we could talk about. I’m gonna start with the first two items, which is related to the late March released by President Biden. In his 38 page overview of the American jobs plan, some people were referring to this as the infrastructure package. embedded in that plan isn’t anticipated $200 billion of new spending on housing details were a little sparse in the proposal, but close observers are familiar with the concepts in the proposal, and recognize these ideas from draft legislation that’s been circulating in Congress for a couple of months or years. So while the $200 billion of new spending is doubling the amount that house democrats passed in a symbolic vote in June 2020, known as the housing it’s infrastructure act, provisions related to single-family housing and homeownership. Were not originally in that infrastructure package. So anything that we’re talking about here on homeownership is additive and a relatively new idea. So the first of the four things I’m going to talk about is the neighborhood homes Investment Act that’s embedded as a reference in American jobs planned and it’s a $20 billion program. That’s a tax credit program covering the gap between the cost of building or renovating the homes, and the price at which it could be sold to an owner-occupant of modest means. So under this plan, a private developer would rehabilitate or place a family home in a low-income neighborhood, and then receive a competitively awarded tax credit if the home is sold to an owner-occupant for less than the price at which the renovation costs added up to more specifically, if the developers sell the home at no more than four times the local area median income, they’re able to be eligible for this competitively awarded tax credit. So rehabilitation costs in excess of the sales price would be covered by the tax credit, capped at 35% of the eligible cost. There’s a lot of details in this program that are worth going through. But the bottom line is that people expect that it’ll produce $500,000 homes, and it could be renewed if the take up on this program is successful and substantial. The second provision in the American jobs plan is the barriers to affordable housing development. So this is a mirror of a concept in a piece of legislation that’s been kicking around for about two or three years known as the housing supply. affordability act. And what it’s trying to do is create a carrot for local states for local governments and states to compete for grants through HUD if and conditioned upon the removal of regulatory barriers to affordable housing, like parking restrictions, accessory dwelling unit restrictions, single-family zoning restrictions, those sorts of concepts or, or other kinds of, of impediments to developing housing at an affordable rate is believed to be one of the ways to help encourage and lower the price of developing new properties. One of the things that’s that’s tough about this program and that people are cautiously excited about the housing supply provisions is that it’s really using a quote from a different colleague, it’s a carrot when sticks are needed. So while it’s trying to incentivize local governments to do something about regulatory barriers, local governments are generally populated by politicians who feel personally responsible for their communities in a way that they can adopt sometimes known as a nimbyism, not in my backyard concept. So advocates are incredibly important here to help motivate their localities, you know, the first place to advocate is on is in your front yard, in your front, in the front of your neighborhood and talk about you know, where and what kinds of growth you’d like to see in your communities. So while these two provisions, there’s a tax credit for developers, which really operates more like an insurance policy for a developer who’s trying to develop properties in low-income areas, and rehabilitate or construct something that could be helpful for modest means, individuals, it’s really an insurance policy against financial losses in that transaction. And the second is a grant program to try to get state and local governments to release or relieve some of the regulatory burdens. The other two items I wanted to talk about are more current in the design guess because they involve legislation that’s already passed. So the first item is cares act forbearances. So if you recall, one of the early COVID relief measures included no dock, as I call them, forbearances for federal loans, so that’s FHA, VA, USDA, and then Fannie and Freddie loans. It offered 12 months of forbearance extended to 18 months, and for the most part MBA has been tracking the Mortgage Bankers Association has been tracking the take up of this program, and at its height was about 8% of those borrowers. Today, it’s down to about four or 5%. But what happens to the families that come off of the forbearance program when they start to owe their mortgage payment again, and need to figure out what’s next. Some of the concepts that are floating around is a streamline refinance product, which is a 20-year loan that amortizes at a 30-year rate. So that would be a lower monthly payment with federal subsidies to help bring that rate down. In this environment, we’re traditionally low-interest rates, that could be helpful, but it may be a modest assistance. The second item or a fourth item, I should say, the second item that’s kicking around currently on it may not require legislation or new interpretation of legislation and use of regulatory authorities is this idea about owner occupancy restrictions. So we do anticipate that the sad circumstances of the end of the forbearance period and the way that the economy will recover is that some homeowners are going to find the need to downsize, downsize or relieve themselves of their current mortgage obligations and find new housing. So that means their house is going to go up on the market? Generally, that’s good. I mean, there’s new inventory available. First-time homebuyers move up homebuyers, everybody starts turning back through the mortgage process. However, there’s a significant concern that these houses are going to get eaten up by all cash buyers and these houses are going to be turned into rental properties, which doesn’t accrete to the benefit of a homeowner building equity and wealth through the home. So federal policy is looking at ways to try to reduce the attractiveness of the all cash buyer. There’s ways to do that probably in the way that Fannie Mae Freddie Mac or FHA, USDA, VA, disposition properties that are in their portfolio once they’re sort of foreclosed upon or deed in lieu or some sort of short sell back to them where they could prioritize owner-occupants. But more likely than not, there’s going to probably need to be some significant reinterpretation of the ability to market these properties in a what’s sometimes called a first look to actual owner-occupants over the all cash buyer who could promise to close in 10 days so maybe slowing down closing so that there’s No advantage to the all cash buyer is one available option that would be kind of manipulated through rules that apply to servicers through the state and some federal requirements. Those are four concepts that I just covered. And all of those kind of touch on the inventory issues. The federal government, I’ll say this, in closing, and typically is done, not much on inventory, or as we would say, supply side issues, they’re much better on demand issues, pricing issues. So they’re much better at figuring out ways to lower interest rates or improve down payments through tax credit, or make down payments, perhaps available through tax credits, or just subsidizing a 30 year fixed rate loan, who has 30 years to pay off anything. But they have traditionally not done a great job on making sure that there’s hammer swinging, and putting up brand new houses that are available for owner-occupants. It’s something that hadn’t happened in the past, probably prior to my birth, and prior to some of our most of our births, here. But in the baby boom generation, there were a number of kinds of ideas to try to get people to buy houses, in at affordable rates. And with an inventory that was available, that kind of thinking has to happen again, and the government should probably get back in the business of thinking about how it can bring back inventory. That’s been the role of this group that you’re you’re talking to today, the affordable housing, homeownership coalition. And I’ll turn it back over to my colleagues to talk about how that’s coming together and what the coalitions of support looks like.  

Calderon 29:47 

Great, thank you so much, Kara. So I’ll also talk through just a few different things. I’ll give you some context for the affordable homeownership coalition, the genesis of the moonshot proposal, as well as the state of homeownership in the country and the role that the black and Latino populations have to play in that. So a few years ago and CRC assembled this bipartisan alliance of the nation’s leading home mortgage lenders, home builders, real estate professionals, community development groups, civil rights organizations, and consumer advocates, none of whom are typical bedfellows, but all of whom are certainly committed to expanding homeownership opportunities for low and moderate-income individuals. And they collectively, this group recognizes that we really need to be for the good of the country and for our overall economy, we need to lead creation of more homes and more homeowners to really lift up socio-economic conditions for it, especially for low to moderate-income households, and for communities of color. So, you know, as the pandemic raged on, the affordable homeownership coalition noticed that, that we were certainly in this moment of reckoning, and that it could be a catalyst for good if we seize this moment. So you know, combined with the pandemic, the groundswell to address sort of racism, and, and really a lot of unprecedented divisiveness that was taking place in the country and still is, we recognize that, you know, that this absence of inventory is connected to so many other things and is really complicating economic conditions for us in the country. And in really, the last great housing push was post-World War Two. So a lot of folks are familiar with the GI Bill that certainly helped to lift a lot of white households out of whatever their economic circumstance was into the middle class, that was not something that was really able to be taken advantage of, by communities of color, because they were expressly prohibited and, and really systemically left out. So that’s part of the impetus of doing something big and bold and systemic, because that’s really what helped to live so many families into the middle class. And that kind of big bold action is what’s going to need to take place for that to happen yet again, for the rest of Americans. So early on, in our conversation Ed mentioned, the moonshot is building 20 homes by 2030. So why 20 million? It’s really that number. It represents roughly 50% increase over the high watermark for homebuilding over this last decade. And it’s really what is needed to be able to satisfy demand and to lift the rate of homeownership for the black and Latino communities, from their current levels up to 60%. So that’s kind of the genesis of where that figure comes from. So why affordable homeownership in particular why is that our focus? And you know, if you if you think about it from a purely nietos perspective, certainly no one dreams of being a renter immigrants don’t come in this country dreaming of finding a better life that doesn’t involve having a stake in the ground, a piece of the pie. So homeownership is really a fundamental first principle in the American dream, and that something should be extended to communities and will help as a primary source of American wealth-building for all communities. So in terms of the black and Latino contributions in the state of American homeownership, right now, there has been, you know, really a shortfall of homebuilding to date is, you know, some will kind of walk through some of the stats of what it’s looked like over the recent years. And the overall homeownership rate is predicted to drop by at least three percentage points by 2040. Now, that’s complicated by the fact that, of course, there’s inventory shortages. The demographics, though, do play a role in that. And for the past decade, you know, communities of color led by Latinos have been responsible for homeownership gains in the country. And, in fact, between 2020 and 2040, Urban Institute predicts that 70% of new homeowners are going to be Latino, and the other 30% are going to be largely other communities of color. So the growth in the country is really being driven by nonwhite individuals. And so we need to be able to understand what the needs are for those communities and to address those needs. And, and certainly, you know, being able to find an affordable home is a primary because if we address all of the, the, you know, appetite for consumption and the credit needs, and there isn’t inventory to purchase, then that’s, that’s an incomplete solution. So to give you a little bit of context for where we are right now, with homeownership rates as of 2020, the black and white homeownership rates, the gap there is a staggering 31%. And, and though the gap has narrowed between Latino and white homeownership rates, it’s still 27% gap. So the absence of that homeownership is part of a wealth equation for these communities is, is something that we’d certainly would like to be able to address through these innovations that we’re talking about. So I’m just moving on from there. And really, the inventory shortage is something that we’d like to be able to address, both in terms of homeownership preservation and new construction. So I’d love to be able to turn it back over to the rest of our group to be able to talk through some of the rest of the content and then for us to kind of have that q&a session.  

Bracken 36:08 

Thank you, Marisa, and Kara, and Selma for your comments. As Ed, kick this session off, by the way, I’m Phil Bracken, I am the managing director of vantagescore solutions. And I’m going to come back to the name vantagescore solutions in a moment. This entire session is about illuminating this crisis, and asking for your assistance in delivering solutions for for the consumers of America that where the pent up demand is just not meeting the demand for homeownership is not meeting its need because of the supply shortage. So let me just for a moment, many of you know that vantagescore Solutions is a wonderful credit score model development company, as many of you know, we know that we can score provide a credit score to 40 million consumers that can’t get one through traditional sources. Nearly 10 million of those people might be mortgage eligible with scores of 620 up and about 2.4 million of them would be black and Hispanic. While that’s great, wonderful, we’re expanding that the pool of progressive opportunity for homeowners. It’s also, you know, just one of the things that illuminates and crystallizes this crisis that we are in. The demand for homeownership is at its highest level in the last 10 years, maybe ever, with the lowest mortgage interest rates nearly ever. And when you have a situation like that with extraordinary demand and limited supply. It is a magnet for investors to come into this marketplace to purchase with Single Family residential properties for investment that to use for rental. To the owner-occupants, that would have been the people that would be purchasing these properties. That phenomenon is honest, and it’s a it is a crisis, there are things that can be done with intervention. One of the things that I wanted to just crystallize for for all of you. I’m thrilled to be part of NCR C’s long history, having spent 20 years participating in the mortgage collaborative group and the bankers collaborative. And my good friend, John Taylor, and I decided, at the behest of the mortgage collaborative, to start the start this affordable homeownership coalition. This problem in America is not going to get fixed without intervention. The following things that I’m going to mention are not policy positions of vantagescore. But I just wanted to mention them as they have emitted from the work of this coalition that works hard on defining these difficulties and identifying some of the challenges and maybe solutions, I only want to highlight just three or four things here, the first of which is acquisition, development and construction financing. For most of you that know the way this process works. Regulators impose restrictions on banks that make loans available to developers and builders to develop, to do the acquisition of land and development and construction of single-family homes. That process takes a number of years. In the Great Recession, the regulator’s impose some incredibly stiff restrictions on banks, that in turn, when passed on to the homebuilders essentially said, require or force them to shut down much of the new construction of affordable property in America. Until recently, unfortunately, those restrictions were still in place. They have been lifted somewhat recently, but certainly not to a point where they have become stimulus. And this coalition would really embrace a new look by the regulators of you know, property values are not going down the risk of acquisition development, construction is nowhere near what it was three years ago, and certainly not what it was during the Great Recession. So just rethinking that relief for acquisition, development, construction financing so that homebuilders can be provided a real landscape to build affordable property is a really important piece of this. of our Ask, as many of you have just seen these recent articles about lumber costs going up. Two years ago, the average board foot cost for lumber was about $400. It’s now at about 16 $100. Part of that is because of these tariffs that are being imposed on Canada and other places to import lumber in the US, when compounded with some of the harvesting and environmental issues that we deal with in America. You know, it builds a shortage of lumber and inventory. To the extent that many of the builders in America are actually having to import lumber from Russia. And it just that doesn’t make sense. These tariffs and some of these other issues. We need relaxation of these so that we can actually meet the needs of the consumer in America. I might also just mentioned if you haven’t seen the reports, please go to the end HB the National Association of homebuilders website, the average compliance and regulatory cost for a builder to build the average home in America has just risen to $94,000 per house and up from $84,000 per house in 2016, there is no way we are going to have affordable housing built in America and meet the needs of affordable homeownership unless we cure this problem of extraordinary regulatory and compliance costs for homebuilders. I’ll just end with a couple of other things Kara mentioned a first look program. Boy that would be really great for the aspiring homeowner of America to be able to have government agencies whether it’s Fannie Mae, Freddie Mac, FHA, VA, rural housing, whatever the age GNC may be to extend a real first look program for owner-occupants that need financing, to be able to get access to these affordable properties that that today are being purchased. time and time and time again by institutional investors, I might just add mention two more quick things. Certainly, we would love to see a revitalization of the FHA 203 k mortgage program that allows for rehabilitation of construction and construction of properties in the urban markets of America, you know, many cities of America own real estate, single-family homes, from tax sale and other things. And it would be fabulous for those cities and other nonprofits as to be able to get access to an affordable program for rehabilitation of those properties, with 30 year fixed rate mortgages included in them, and those mortgages are assumable. So well, a wonderful program that we’re working hard to get reconstituted that last, Kara mentioned, all of the things that, you know, were being contemplated in Washington right now, we don’t want to leave this without just making sure everyone here knows that housing is infrastructure, and we must embrace that. And Gosh, wouldn’t it be great to have a tax incentive for sellers of property under $300,000 in America to stimulate motivate their, the supply of property, that would be available, I want to thank NCRC, for its leadership in all of this. It’s been wonderful. We’ve got a lot of work yet to do, but and we need your help. And we need your oar in the water with us. So with that, I’ll just turn it back over to Ed. 

Gorman 45:03 

Thank you, Phil. And let’s bring everybody up if we could, so that we can have a kind of round robin compensation. You know, there’s so much here to talk about that. It’s unfortunate, we only have an hour. But let’s get to a couple of quick points. You know, we said 20 million and mirus explained why. But honestly, when you look at the shortfall, I’m not even sure 20 million is going to be enough. But to do that, we have to build at a much higher clip than we’re building. And in order to get that done, we have to have a very different permitting zoning setup than we’ve got in the us right now. My question, I guess to the panel is, what kind of zoning and permitting changes do you think we need to have? And who’s doing it right now? Is there anybody that you think we can point to, to say, hey, there’s really good, innovative stuff happening here? 

Bracken 46:01 

It’s Phil, let me just take one quick point and then turn it over to the rest of the team. You know, it is unfortunate that a few years ago, the administration decided to do away with the Affirmatively Furthering fair housing responsibility of every city in America in order for them to get what are called Community block grant developer development block grants. Yeah. You know, if there were incentives for cities to receive that money, for them to inspire Affirmatively Furthering fair housing, wherever those cities are at if they want, funding from the government, it would be a great thing for them to maybe be pointed towards relaxation of zoning and other kinds of restrictions that would be that are today problematic for building single-family homes. 

Gorman 47:05 

Other folks? 

Ward 47:07 

Sure. So, one of the Vanguard’s in this area have been advocates, known as NIMBYs Yes, in my backyard, and they really started organizing in a major way out in Minnesota and importantly in Washington State and what they’ve done there is working to remove single-family zoning restrictions, sometimes called up zoning, which means that you’re allowed to build higher-density housing in an area now that doesn’t do much for homeownership, but it certainly does a lot for relieving the affordable housing crisis, which if you follow the breadcrumbs can relieve like red pressures, and allow people to save more for down payments because they’re not paying so much in rent. But in all in in the cumulative kind of impact of these different localities restrictions. The tools that the localities have used to exclude higher density living, or make it more expensive to get permits to build lower-cost housing, are as varied as public And I think one of the things that are very important is, is creating like a common set of terms so that we understand what is preventing homeownership from becoming more widely available, the National Association of homebuilders just put out a study that said that the regulatory overhang the regulatory cost to construct a new home right now is $93,000 per house, before you put a shovel in the ground, and 93,000, that’s up from about 80,000, you know, about half a decade ago, so the costs are increasing. And whether it’s, you know, not having enough sewer pipes running out to a new neighborhood, or having a hard time getting a county inspector to come look at the electrical grid, you know, who knows what exactly what the problem in your locality is, but being able to describe, it’s going to be important. I’ll pause there for one second to say that, you know, the idea of using carrots or incentives to get cities to change their mind is great. But a colleague and friend of mine said that like sticks are probably necessary. And the last time the federal government really wanted states and localities to do something different, is analogous to the times that they prevented federal housing or federal highway funds from going out the door until you raised your legal drinking age to 21. And there were a whole bunch of things that have laws that allowed people to be drinking at age 18 to 21, or what have you. And it seemed like every state, Louisiana excluded, are able to figure out a way to get back their highway funds. And perhaps that kind of stick the most, you know, regressive possible is needed here. But first, we have to understand the problem, like what is holding back this community, and what are the terms we use to define 

Gorman 49:58 

excuse me,  

Calderon 50:03 

and let’s get back to just add that your housing is complicated. it and it really is a sort of hyper-local issues. So understanding some of those, those location-specific complexities is incredibly important. And having that common vocabulary would be helpful in making sure that municipality to municipality state to state we’re all talking about the same thing. One of the thing I would mention is that the affordable homeownership coalition also put together a compendium of you noticed some innovations that are taking place across the country, that folks can download from our website, take a look at a variety of different, you know, note certainly approaches that are being taken at trying to solve for this problem. 

Gorman 50:51 

And perhaps we can add that to the chat so folks can access it that thank you for pointing that out for a So, you know, I’ve just I’m seeing some I hadn’t seen this until a few moments ago, during the presentation, that your company did an analysis for the wall street journal published today on the effect of the current housing market on houses in the $100,000 range, which is I think, what you were showing us that the rate of appreciation of houses, and we’re talking about in neighborhoods like Youngstown, Ohio, and Cleveland and Detroit, places that had not really seen the housing boom, until recently, suddenly are now the hottest markets in the country. So truly every single part of this country is now affected by this housing price search. Right. 

Hepp 51:37 

Right, right. Actually, yes, I actually submitted that, that that data was to join regulations. Oh, yeah. Yeah. This other question from the journalist was, you know, what, what’s been the impact on the sort of dilapidated areas from this current housing boom. And we did see, cumulatively, that appreciation has been larger for those areas, then then, you know, higher price areas. But that extra to me points to one important. One thing about this discussion is that until we have more housing in general, we won’t have more affordable housing, you know, so this is not just, you know, my move. Exactly. So, you know, we need more housing everywhere and across all price ranges, in order to be able to get to what we need for in terms of affordable housing. So there’s, you know, lots of noise here. 

Gorman 52:38 

Yeah, no, thank you. That’s a great point. Some, uh, you know, there’s so much to talk about here. But we did get a question. And I want to see who raised it. Stella, Sheila Sutton, was talking about how it is that if we do get a chance to finally build some inventory, that folks can make a move into the middle class, particularly bipoc communities. Because they are these are the folks that don’t have generational wealth don’t have the downpayment assistance. Don’t have the ability to sustain a hit in the case of a problem with a roof or HVAC. So what is it we can do? And what is being done? And maybe I start with numerous on this because as the head of the city of phi, you’re working on this. What are you seeing out there in the way of solutions to help people of color move into homeownership sustainably? 

Calderon 53:33 

Yeah, thank you. Well, I mean, I think that there’s There are a variety of different solutions that needs to be put into play. And they differ depending on, you know, honestly, on the segment of the community that we’re talking about. You know, one of the things that Selma noted is that the largest age cohort is 20 to 30. And that the median first-time homebuyer age is 33. Well, last year, nearly half of all Latino buyers are under the age of 34. So like, two-thirds of the Latino population are millennials or younger. And if we believe the data from Urban Institute that 70% of homebuyers are going to be Latino between now and 2040. What we have is an increasing demand from a population that already has appetite. That needs to be, you know, the inventory issue is sort of the most acute and need to solve for the complexity in the solutions for the black community is different. And, you know, there’s been about a 20 to 30% persistent gap in black homeownership over the last 100 years. And it’s not for lack of appetite. It’s for a lot of systemic inequities. And so, there are, you know, to the question that Sheila asked, there are a lot of other sort of financial innovations that need to take place to make homes more affordable for, especially for folks who, from the black community who are debt-burdened, who have lower wealth, because the situations that they face in terms of having to pay for emergency things that and they don’t already have a lot of wealth that they can lean into that sort of complicates that situation for them further. So you know, so there’s, there’s a variety of different things that are at play. But you know, certainly the inventory issue is most acute and needs to be solved for. And then a variety of different financial and financial services solutions need to be put into play.  

Gorman 55:39 

And we’re getting a comment on that point exactly. From NCRC’s General Counsel, Brad Blower, who says, One solution is for lenders to offer downpayment assistance to minority borrowers, as part of a special purpose credit program allowed under a COA. And I think this is a vehicle that folks are just kind of realizing is there, and that we can make these kinds of special purpose. You know, I think people worried about whether working with suspect classes would, you know, whether you could target specific suspect classes with help like this, and I think the answer is it looks as though we can carry you look like you’re about to make a comment on that.  

Ward 56:19 

Yeah. So this is a concept is downpayment assistance program. Some people are, are referencing it as first-generation homebuyer. So people who grew up without, with parents who couldn’t work with, you know, a family that didn’t have intergenerational wealth transfer couldn’t go to the bank of mom and dad for their downpayment. And I want to hear Phil’s position on it and talk about it. But there’s a concept for a special downpayment assistance program targeted, particularly to first-generation homebuyers in the administration right now and talking in DC, there’s a hesitancy to put forward another program that that would amp up demand in a place where there’s just no houses under $300,000. To buy, right? So there’s, there’s a desire to kind of like, hold off for a second until we figure out how to make more houses that are $300,000 available. And that may not involve construction, that may involve like getting people to move out of their first-time homebuyer house and into it. You know that the next house? Yeah. 

Gorman 57:20 

So want to say first of all, cuz I know we’re under a minute here. Thank you all for this terrific panel of folks. Help us at the affordable homeownership coalition, move the needle here, we really need your participation weigh in, let us know you’re out there, if we can be of any help and getting you the tools that you need in your local community will do it. And we’d love to see you participating more directly. This is a an idea whose time has come. We really do need to build this level of housing to have an impact, because there’s going to be a nation of involuntary renters if we don’t. with that. I thank the panel. And thank you all for listening. 

All 58:00 

Thank you 

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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