All the posts this week have focused on the Obama Administration's Housing Plan presented last Friday. Today, I will explore the final major piece of the housing plan--a commitment to rental housing. The plan stresses the importance of a renewed commitment to rental housing from the introduction--"Our plan champions the belief that Americans should have choices in housing that make sense for them and for their families. This means rental options near good schools and good jobs." And while the plan proclaims that mortgage loans will still be available for middle class families who want to own their own homes, in reality in a world of tightened FHA guidelines which will exclude many middle class families, and 20% down payments with increasingly stringent guidelines regarding credit scores and debt for those who do not qualify for an FHA loan, home ownership is going to slip further out of reach of many working and middle class families. This may be one reason that the paper dedicates several pages to the importance of the rental market.
"As we move forward to address the challenges of affordability and access, we must address how those issues impact renters. Today, renters often face significant affordability challenges...Promoting a housing finance market that provides liquidity and capital to support affordable rental options can alleviate the high rental burdens that many low-income households face. It can also expand rental options for low-income households in urban, suburban and rural communities of opportunity, with good jobs for parents and quality schools for children."
"Private credit markets have generally underserved multifamily rental properties that offer affordable rents, preferring to invest in high end developments. By contrast, Fannie Mae and Freddie Mac developed expertise in profitably providing financing to the middle of the rental market, where housing is generally affordable to moderate income families. As we wind down Fannie Mae and Freddie Mac, it will be critical to find ways to maintain funding to this segment of the market."
Everywhere we turn now, we see a greater emphasis on rental housing, and that has actually been true for several years. And some of the initiatives we are seeing today sound a lot like Chris Dodd's "Livable Communites" Act which he tried to get voted through last year. The Livable Communities Act called for voluntary participation with heavy incentives from the federal government to locate housing, schools and businesses within walking distance of each other and to make sure that they were conveniently located to public transit. In fact, here in El Paso, Texas, a consulting firm hired by the city of El Paso is holding a series of meetings in various parts of town about how to implement the "livable communities" concept here. The idea is to create "walking neighborhoods" where buildings are mixed use--maybe apartments on the upper levels and grocery stores and shops on the ground level. Residents would be able to walk to and from most areas to shop and would be able to access public transportation conveniently, but the communities are not designed for individual cars. In livable communities, parking is on the street because the lots are exceedingly small, but the streets are also very narrow to discourage driving.
In my travels, I have been in a number of major metropolitan areas with good public transit, and rental units on top of grocery stores and drycleaners. My brother lived in Chicago, Illinois, for several years and he walked from his apartment on the 32nd floor of a high rise in downtown Chicago to his job at CNN which was housed in the Chicago Tribune building. He told me that he could take the "L" to be anywhere else in the city he wanted to go. He was within walking distance of excellent dining and shopping and lived in the center of an exciting cosmopolitan city. I enjoyed visiting him there thoroughly, but I could not help but think whether I would want to live in such a city, or whether I would want to try to raise a family there. He lived in a studio apartment with an amazing view, but surprisingly few comforts and he paid almost $1000 a month in rent to do so. I could not help but compare that lifestyle to the one we enjoy in Texas where $1000 a month payment allowed people to own their own homes with more room, greater amenities and places to park their own cars.
Yesterday I had lunch with a friend I had not seen for a while. She lived in Europe for many years and she was explaining to me what housing is like in Italy. She said that young couples in Italy rent an apartment and live there for many years saving as much money as they can. When they have saved up enough money, they ask their parents to help them with the rest of the downpayment and then they buy their own apartment, which costs them "a small fortune." They have an expectation of living in that apartment for the rest of their lives, knowing that when their own children are grown they will be helping with the downpayment for their children's apartment. My friend loved Italy and the Italian way of life, but she said that the expectations are very different there from our own expectations in the U.S.
More than anything else, what I am seeing from the federal government today is a push to adjust our expectations and to get us accustomed to a standard of living that is more European and less what we have always known as Americans.
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