For the first time in more than a decade, housing has received more than passing attention in the Republican Party’s national platform.
Indeed, in his acceptance speech, GOP standard-bearer George W. Bush pledged to “transform today’s housing rental programs to help hundreds of thousands of low-income families find stability and dignity in a home of their own.”
And to back up that promise, the Republican agenda includes several “next steps” to help more families “climb the opportunity ladder,” including a federal fund that would match $3 to every $1 put up toward a down payment, closing costs or a “soft” second mortgage.
For the Democrats, on the other hand, it’s mostly more of the same. But that isn’t bad. Not hardly.
As the Democratic Party’s platform writers point out, under President Clinton’s leadership the country has “achieved an all-time high in homeownership, including among groups that have historically been left out.”
And they commit to keeping up the charge under Al Gore because “homeownership is a foundation for building wealth and economic security for families, and it provides a vital anchor enabling neighborhoods to thrive.”
For the most part, though, the planks of the two major parties are full of the usual political rhetoric. And they are remarkably similar.
For example, both reaffirm their opposition to housing discrimination, both mention the importance of rental housing and both champion the mortgage interest deduction.
“Affordable housing is in the national interest,” the Republicans say. “That is why the mortgage interest deduction for primary residences was put into the federal tax code, and why tax reform of any kind should continue to encourage homeownership.”
The other side simply notes that “Al Gore and the Democrats have long defended” the write-off.
But notice that the GOP mentions only “primary residences” and the Dems don’t even go that far.
That could mean the deduction for interest paid on mortgages for vacation homes and investment properties may one day be in play when lawmakers start searching for ways to pay for more-favored programs.
(Remember, too, that neither candidate is bound to uphold his party’s platforms. So there’s nothing to stop Bush or Gore — or others — from going after the whole shebang.)
Both parties also call for an expanded local role in housing. The Democrats, for example, “believe communities know best and that they should have the resources and tools they need to act on their decision, to have the ability to create communities of which families can be proud.”
In particular, the Gore team proposes a new round of Empowerment Zones, which would spread tax incentives and seed money to more underserved communities, particularly medium-sized cities and smaller towns. And it supports “Better America Bonds,” a financing tool first floated as part of the Clinton administration’s fiscal 2000 budget proposal.
The bond program would provide bondholders with tax credits instead of interest payments, thereby allowing local authorities to raise money at a lower cost.
And the proceeds would be used to preserve open space, create or restore urban parks, clean up abandoned industrial sites, or do whatever else a locality decides is its most pressing environmental need.
“We must help communities reconnect to the land around them,” the Democratic platform says. “We need to help save farms from being turned into strip malls and parks from being paved over. We should acquire new lands for urban and suburban forests and recreation sites and set aside wetlands, coastal and wildlife preserves.”
While Gore has made smart growth a key part of his agenda, Bush is against federal involvement in local growth issues. But the GOP platform exhorts state and local governments to void regulations that drive up building costs.
“Some regulation is, of course, necessary, and so is sensible zoning,” the plank says. “But we urge states and localities to eliminate unnecessary burdens that price many families out of the market.”
The Republicans see “no role for any federal regulation” of home building, either. But they do see a larger role for state and local governments in controlling the federally assisted housing that “has been so poorly managed from Washington.”
Toward that end, the Bush forces would turn over to local communities foreclosed and abandoned government-owned properties for urban homesteading, “a citizen renovation effort that has been remarkably successful in revitalizing neighborhoods.”
To help more people become owners, the GOP calls for several new federal subsidies, including the American Dream Down Payment Fund and a tax-credit-funded mechanism to encourage building and redeveloping houses for low- and moderate-income buyers.
The down payment fund would provide assistance to first-time owners with incomes at or below 80 percent of their area’s median income. Uncle Sam would match $3 (up to $1,500) for every $1 contributed by a bank or other private agency or individual toward a down payment, closing costs or a soft second mortgage that would not have to be repaid if the borrower met certain conditions.
The tax-credit would be allocated to states in much the same way that low-income housing tax credits are distributed. Builders would compete for the credits and then use them against future tax liability or sell them to investors for cash to fund construction or reconstruction of houses that could be sold at a discount to qualified buyers.
Republicans estimate the down payment fund would help as many as 650,000 families become homeowners over five yearsat a cost of about $1 billion. The tax credit would produce about 100,000 new or rehabilitated units over five years at a cost of $1.7 billion.
The GOP platform also supports a House-passed proposal that would allow families receiving rental assistance to use their vouchers to purchase homes. They would be able to use up to a year’s worth of the vouchers as a lump-sum down payment and up to five additional years worth of assistance to supplement their mortgage payments.
Because families would simply be redirecting their current assistance payments, the program would not increase federal expenditures. But the Bush faithful also would spend $1 billion to help very-low-income individuals start savings accounts so they can accumulate money tax-free to buy a house, start a business or pay for education.
The Democrats, on the other hand, have even larger expenditures in mind, including $1 billion for Gore’s “Livability Agenda,” $2 billion over 10 years to combat sprawl, $1 billion for smart growth initiatives, $5.7 million in grants over 10 years for new low-income housing and $690 million for housing vouchers.
While the candidates push the party lines, the federal agency charged with implementing most of the government’s housing policies, the Department of Housing and Urban Development, has come up with an ambitious agenda of its own.
HUD is aiming for a 70 percent homeownership rate by 2006, a goal some observers believe is unreachable.
To meet the federal government’s newest target, an estimated 3.8 million more families would have to join the ranks of the 70.8 million households who already own the roofs over their heads.
“Is it doable? Yes. But are we going to get there? No,” says David Lereah, the new chief economist at the National Association of Realtors.
To boost the ownership rate by 3 percent (the current ratio was at a record 67.2 percent at the end of the second quarter) Lereah points out that interest rates have to remain low and the economy must stay strong for six more years.
And that, the economist, believes is “extremely doubtful.”
“We’ve already been pretty fortunate over the past six years,” Lereah says. “The goal is certainly worth pursuing, but six more years is a long road.”
Douglas Duncan, Lereah’s counterpart at the Mortgage Bankers Association, doesn’t think the chances are very good, either, explaining that large numbers of households have already become owners earlier than normal because of significantly more favorable loan terms and easier qualifying standards.
“They’re not going to be buying because they already have,” Duncan said.”They may be buying up, but they won’t be adding to the ranks of homeownership. So it’s going to be a stiff challenge.”
HUD admits its objective is a “bold target.”
But in a draft of its latest six-year strategic plan, which must be delivered to Congress by Sept. 30, it says the goal can be reached by reducing the ownership gaps between minorities and whites and between lower- and higher-income families.
If the ownership gaps between minority and non-minority families and low-income and higher-income households were trimmed 15 and 25 percent, respectively, the department says, the 70 percent target could be reached.
At last count, 73.4 percent of all white households were homeowners, compared to 47.2 percent of African-Americans and 45.4 percent of Hispanics. Also, the ownership rate in the suburbs is 73.8 percent versus 50.7 percent in central cities, and the rate among households earning less than the median family income is 50.8 percent.
HUD’s plan — which sets the direction for the department’s policies, management and budget resources over the next six fiscal years — promises to reduce the disparities in ownership rates among racial and ethnic groups by earmarking a larger share of FHA-insured loans for minorities, first-time buyers and buyers in central cities.
HUD said it will chase the objective by, in part, increasing the availability and affordability of FHA mortgages and by placing even greater affordable housing requirements on Fannie Mae and Freddie Mac, the two secondary mortgage market companies thatchannel most of the money for home loans to local lenders.
Other strategies include convening homeownership fairs and recruiting local businesses, government and non-profits to help in the effort.
Fairs “have proven a valuable tool to increase understanding of the home-buying process and to motivate saving for down payments,” the draft report says.
