As the Biden Administration attempts to make affordable housing a key issue, some experts and lawmakers would prefer less federal intervention.
House Republicans would like to see changes in zoning, interest rates, and a reduced role for the Federal Housing Finance Agency.
“As we confront these affordability challenges, what seems to get left out of the conversation is that all of the expansive efforts of government have not solved this problem,” said Subcommittee Chair, Warren Davidson R-Ohio. ”We need market-based solutions where we remove government barriers to construction of housing and encourage greater private sector investment.”
The comments came during a House Financial Services Committee subcommittee hearing on Wednesday. The ideas proposed included reduced zoning restrictions to permit more multifamily buildings in neighborhoods dominated by single-family homes.
Additional proposed solutions include making it easier for private mortgage insurance firms to play a bigger role in financing homes with mortgages that don’t require a 20% down payment. The government sponsored enterprises (GSEs) including Fannie Mae and Freddie Mac which are run by the FHFA are the major players in those mortgages, which some see as unfair competition.
“Private capital is needlessly crowded out of the marketplace by government backed programs, it leads to increased risk for the taxpayer,” said Seth Appleton, president, U.S. Mortgage Insurers.
The House hearing is the latest in a series of moves attempting to untangle complex housing issues. In October, the Department of Transportation announced new efforts to funnel funding for housing from the Inflation Reduction Act, which includes provisions for energy and climate change-related efforts.
The Senate has been tinkering with housing policy via the renewed push of the Affordable Housing Bond Enhancement Act, which was reintroduced in June. That bill takes aim at expanding the use of mortgage revenue bonds and mortgage credit certificate programs.
In March, the Senate also introduced a bill that would boost the level of private activity bonds available each year and change the requirements for the amount of bond financing needed to quality for for the Treasury’s Low-Income Housing Tax Credit. Both moves could pay dividends for the muni market, but it was referred to the Senate Finance Committee and has not yet been taken up.
U.S. Agencies and the GSEs issue their own debt each year in the form of bonds and mortgage-backed securities. According to a report by Coalition Greenwich, and SIFMA Insights, the numbers for U.S. Agency Bonds Trading in 2022 shows an average daily volume of $2.8 billion that included 20,700 instruments with an outstanding value of $1.9 trillion.
In 2019 the first multifamily tax-exempt mortgage-backed bonds to qualify for the Fannie Mae Green Rewards came to market. The $74 million bundle was priced by Wells Fargo Securities Nov. 13 at a 2.35% and was quickly oversubscribed.
The GSEs have been operating under conservatorship and control of the FHFA since the World Financial Crisis of 2008. Efforts to reform and unleash the GSEs have been stymied by multiple competing interests in Congress.