Few things are more important to Americans than their homes. Most Americans consider homeownership to be the single best long-term investment and a primary source of wealth and financial security. Countless generations of Americans have counted on their homes for their children's education, their own retirement and a personal sense of well-being.
Yet, a home is so much more than an investment. In good times and in bad, the opportunity to own a home has been a cherished ideal and a source of pride, accomplishment, social stability and peace of mind.
The nation's housing and homeownership policies over the last century have contributed to the growth of the middle class and helped the United States become the most dynamic economy the world has ever seen.
In normal times, housing accounts for more than 17 percent of the nation's economic output and nothing packs a bigger local economic impact than home building. Constructing 100 new homes creates more than 300 full-time jobs, $23.1 million in wage and business income and $8.9 million in federal, state and local tax revenue.
A healthy housing industry means more jobs and a stronger economy. Home building increases the property tax base that supports local schools and communities. Housing, like no other sector, is "Made in America." Most of the products used in home construction and remodeling are manufactured here in the United States.
Changing housing policy now to make owning a home more expensive is unfair and would hurt those that have played by the rules and made the sacrifices to get where they are now. It would harm millions of Americans who are struggling to make their monthly mortgage payments and those who aspire to one day own a home of their own.
Yet, the nation now faces an unprecedented assault on housing that threatens to derail nearly 100 years of national policy promoting the value of homeownership, and the public remains largely unaware of the potential catastrophe that lies ahead:
- Higher taxes for home owners
- A sharply limited availability of long-term, fixed-rate mortgages
- A huge jump in the cost of mortgages
- Minimum downpayments of 20 percent or more
One of the primary targets of this unjustified attack on housing is the mortgage interest deduction. This cornerstone of American housing policy has been in place since the inception of the tax code in 1913 and supports the aspirations of families at all income levels to become home buyers.
Although Americans overwhelmingly oppose any action by Congress to tamper with the mortgage interest deduction, according to the results of a May, 2011 poll conducted by the Republican and Democratic polling firms of Public Opinion Strategies and Lake Research Partners for the National Association of Home Builders (NAHB), some lawmakers have expressed a willingness to curtail this vital housing tax provision. And specific proposals have emerged to do just that in order to reduce the federal deficit. Such a move would result in a huge tax hike for millions of middle-class home owners and further depress home values, leaving more home owners with "underwater" mortgages larger than the value of their property and fueling even more foreclosures.
The polling also found that home owners and non-owners alike consider owning a home essential to the American Dream. An overwhelming 75 percent of those surveyed said that owning a home is worth the risk of the fluctuations in the market, 95 percent of the home owners said they are happy with their decision to own a home and 73 percent of renters said that owning a home is one of their goals.
Other national polls validate these findings. According to a Pew Research Study conducted earlier this year, 81 percent of adults agree that buying a home is the best long-term investment a person can make. An Allstate/National Journal Heartland Monitor Poll conducted in March of 2011 revealed that 89 percent of home owners said they would buy their home again. And a June 2011 New York Times/CBS Poll shows that nearly nine out of 10 Americans say that homeownership remains an important part of the American Dream.
These survey results speak volumes about the importance of homeownership for the American public.Finance Proposals Would Harm Millions of Potential Home Buyers
Meanwhile, six federal agencies are proposing a national Qualified Residential Mortgage standard that would require a minimum 20 percent downpayment and other stricter qualifications, which would keep homeownership out of reach for most first-time home buyers and middle-class households. NAHB estimates that it would take 12 years for a typical family to save enough money for a 20 percent downpayment on a median-priced single-family home and other research has found it would take even longer.
Some members of Congress are actively pushing to abolish Fannie Mae and Freddie Mac and end the federal backstop for housing. Absent a federal role to help absorb market risk, private lenders would increase interest rates and fees on all types of available financing options. The 30-year, fixed-rate mortgage, the major housing finance tool for most Americans, would become increasingly scarce and much more costly, pricing many credit-worthy borrowers out of the marketplace.
Complicating the situation, the federal government is looking to trim back the Federal Housing Administration's participation in the market, which would further limit the availability of low downpayment mortgages.
An even more immediate concern are the lower conforming loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration scheduled to take effect on Oct. 1. This will reduce housing demand and place downward pressure on home prices, further exacerbating the current housing downturn.
Home buyers and home owners are also grappling with problems with the appraisal process, particularly the inappropriate use of foreclosed and distressed properties as comparables. This has negatively affected property values and remains an obstacle to the recovery of the housing market.
Regulators, appraisers, lenders and all of the stakeholders in this debate must come together to discuss this issue and try to find solutions. Major reforms in appraisal practices and oversight are needed to ensure that appraisals accurately reflect true market values and don't contribute to price volatility or harm aspiring home owners and move-up buyers.Lack of Credit Hurts Home Buyers, Hampers Job Growth
Meanwhile, credit conditions remain extremely tight for home buyers and home builders alike. Potential buyers who lack sterling credit are unable to take advantage of record-low mortgage rates and builders who are being denied credit for new housing production are unable to meet pent-up demand for homes in parts of the country that are on the mend.
Unfortunately, when lenders refuse to make loans for new home building projects, and under pressure from banking regulators, are even calling in performing loans, everyone suffers. Workers get laid off, sound projects go uncompleted and economic growth is stifled. This lack of credit is crippling the housing industry and preventing construction of new homes in markets that need and want them.
Restoring the flow of credit to home builders will not only help to put America back to work, it will provide badly needed tax revenues that local governments need to recover and thrive, and strengthen the economic health of countless communities across the land. NAHB is urging Congress to advance H.R. 1755, the Home Construction Regulatory Improvement Act of 2011. The bill would unlock these small business bottlenecks and put people back to work.Housing Can Act as a Jobs Catalyst
As policymakers debate the housing finance and budget issues that will impact job creation and future growth, they must understand the important role that housing plays in the U.S. economy.
More than 1.4 million residential construction workers have lost their jobs since April 2006.
Factoring in the effect of the housing plunge on industries that provide materials and services to home builders, the total impact of the housing slump has been the loss of more than 3 million jobs and $145 billion in wages in all housing-related industries.
Further, more than 2 million household formations were delayed during the past four years as a result of the Great Recession. Young people are doubling up with roommates or living in their parents' basements to withstand the weak economy.
These potential households represent future demand - and jobs.
As of August 2011, U.S. single-family housing starts were running at an annualized rate of 417,000 units. This is well below the long-run trend of 1.4 million new single-family homes that are necessary to accommodate population growth and replacement of older housing stock.
Do the math. The construction of each new home results in three full-time jobs. The gap between current production and potential housing construction is about 1 million homes. That represents 3 million untapped American jobs.
The federal proposals now under consideration would reverse national housing policies that have helped generations of American households to own their homes, enter the ranks of the middle-class, build strong and stable neighborhoods and communities and provide a steppingstone to greater long-term financial security.
For these reasons, it is important that policymakers be fully aware of the depth and breadth of housing's many contributions to American society and that owning a home is a strong core value for most American households. To keep our economy moving forward, the Administration and Congress must make restoring housing and creating jobs a top priority.