Thursday, April 2, 2020

Housing Policy Ideas from the Presidential Platforms: Homebuyer and Renter Assistance

This post continues a review of the 2020 Democratic presidential candidates housing policies.  The full review I conducted is available on SSRN here.  Today, I excerpt a portion of the review that looks at ideas for homebuyer and renter assistance.  Of course, some of this has now changed dramatically in light of Covid-19 and the CARES Act; however, much remains highly relevant.  Here is the review:

A number of policies sought to assist both renters and those transitioning into becoming a homebuyer.

Renter’s credits.  Renter’s credits, some of which also implicated homebuyer assistance, were a popular proposal.  Hickenlooper supported a renter’s credit of up to $5,500 per year.  Harris’ Rent Relief Act would create a refundable tax credit for renters who pay more than 30% of their gross income for the taxable year on their rent including utilities.  Under Harris’ proposal, people who live in government-subsidized housing would be able to claim the value of one month’s rent as a tax credit to provide relief from rising costs.  Similarly, Booker’s proposed Housing, Opportunity, Mobility and Equity (HOME) Act would provide a renter’s credit to cap rental costs at 30% of income for working and middle-class Americans.  Castro supported a Renters Tax Credit that would assist individuals with incomes up to the area median income (AMI), and would allow the credit to be placed in tax-advantaged savings accounts for down payments.  Inslee supported a renter’s credit for households under 50% of AMI paying more than 30% of income on rent.  Steyer supported a quarterly tax credit to directly help low-income and middle-income families based on the local area Small Area Fair Markets Rents designations.  Those who qualify could choose to use this credit either for rental payment assistance or to save for a down payment on a home mortgage.  Patrick supported a rent credit with an associated special savings account.

Personal financing accounts.  There were also several proposals for personal accounts that could be used for long-term planning or in times of crisis, which several platforms deemed to include housing-related emergencies or down-payments.  For instance, Klobuchar proposed UP Accounts, which could be used for rent payments in emergencies.  O’Rourke proposed Kickstart Accounts, which he described as a matched savings program to save for a down payment or other asset building activity in which the government would match personal savings.  An example was as follows:  “A married couple with three kids wants to save for a down payment. They earn $45,000 and save $2,000 each year out of their tax refund to obtain the full $4,000 match. After three years of saving, they will have accumulated $18,000 in their Kickstart savings account. They would be able to purchase the median priced home ($250,000) with an FHA loan (3.5% down payment or $8,750) and cover the closing costs ($8,750).”  Booker proposed Baby Bonds.  In this proposal, every child at birth receives a $1,000 savings account, which could grow by up to $2,000 every year thereafter depending on the family's income.  At 18, low-income account-holders would have access to nearly $50,000 for things including a down payment on a home.

Credit history.  There were several platforms that sought to make it easier to get prove a credit history, which can be problematic for some homebuyers.  (Klobuchar, Castro).  One proposal would require issuers of FHA-backed mortgages to account for a greater variety of indicators when assessing creditworthiness, including crediting on-time payments for rent, cell phone payments, utilities, student loans, and other transactions prioritized by low-income individuals and families (Castro).

Other proposals.  A variety of policies were proposed to extend the availability of mortgages and problems of those with bad mortgages.  Proposals included: $2 billion to assist those with negative equity on their mortgages caused by the financial crisis (Warren) and reducing premiums for FHA-backed mortgages to boost access to affordable mortgages (Castro).   A revolving fund to assist public servants with down payment assistance (first responders, doctors, nurses, and teachers) was proposed (Steyer).

Increasing first-time home-buyer and renter education was a priority for several platforms (Klobuchar, Castro).  Proposals included supporting housing counseling, renter education, and financial literacy programs that are proven to help homebuyers, homeowners and renters achieve more favorable terms.

A refundable mortgage down payment tax credit was also proposed to help families get over the hurdle of a down payment into homeownership (Bennet). 

Expanding small mortgage access and utilizing better appraisal methods in rural areas and small towns were also discussed (Bennet).  An extra $100 million in annual funding to CDFIs for mortgage lending activities through the CDFI Fund was also proposed (O’Rourke).

Warren proposed a $4 billion Middle-Class Housing Emergency Fund, which she claimed would build middle-class homes for buyers and renters where there's a supply shortage and housing costs rising faster than incomes.

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