Temporary Loan Limits as a Natural Experiment in Federal Housing Administration Insurance

The Economic Stimulus Act of 2008 dramatically but temporarily increased the mortgage loan amount eligible for insurance through the Federal Housing Administration (FHA). We use the implementation and expiration of these loan limits as a source of exogenous variation in the availability of FHA insurance to measure the impact on the overall mortgage market and conventional lending. We find that the introduction of higher loan limits increased the number of loan originations, but that the expiration of those loan limits roughly 6 years later did not significantly decrease affected loan originations. The substitution between loan products and small net impact on the overall mortgage market when the ESA loan limits expired may be explained by the return of a stronger conventional lending industry than existed during the housing crisis.     

FHA restructuring proposals: Alternatives and implications

Abstract

This article evaluates problems of the Federal Housing Administration (FHA) under its current structure, develops criteria for judging alternative structures, and suggests one alternative—an assigned risk pool—that encourages efficiency in the insurance function while still promoting low‐ and moderate‐income housing. A historical introduction explains how the current institutional relationships came about and created FHA's problems.

FHA's decline resulted from the mixing of a heavy social agenda with the basic insurance objective, a destructive reorganization of the Department of Housing and Urban Development that caused FHA to lose control and focus, and government's inherent inability to respond to market signals. Yet the economic rationale for government involvement in FHA functions is strong. An FHA organized as an independent government agency, a government‐sponsored enterprise, or even a privatized entity structured as an assigned risk pool could improve efficiency of underwriting, pricing, and administration while achieving the redistributional objectives.     

Mortgage Choice in Rural Housing

Rural homeownership is promoted in the United States by mortgage insurance programs administered by the federal government. We analyze the choice between assistance offered by two such agencies: the Federal Housing Administration and the Rural Housing Service (RHS). We find applicants are sensitive to the relative annual mortgage insurance premiums and guarantee fees. However, there are also persistent racial differences as well as institutional effects. We also find the application and origination process is substantially longer in the RHS program, but variation in closing times does not clearly impact mortgage choice.     

Outlook: The subprime lending crisis: Focus on the problem: Subprime borrowers in trouble

Abstract

Public policy should be directed at serving the large number of borrowers who have recently taken out subprime loans and who are at serious risk of losing their homes when their mortgages reset. Practicing forbearance and providing counseling for defaulting homeowners, as well as allowing them to refinance into a Federal Housing Administration loan, can be particularly helpful. Broad changes in housing programs and in the structure of the mortgage market should be considered on their merits as good or bad public policy for the long term, not simply as solutions to the subprime problem.     

FHA: Recent History and Future Prospects

The Federal Housing Administration (FHA) deserves considerable credit for helping support the housing market during the recent financial crisis by increasing its own market share. However, as the recovery continues, the FHA can gradually return to its “traditional” role as an insurer of low-down-payment home mortgages for low-to-moderate-income and first-time homebuyers. A major concern going forward is susceptibility to increased adverse selection if it continues in nontraditional markets. Indeed, the modest market share of the FHA going into the housing collapse was important both in limiting its losses and in allowing it to maintain the market when other traditional secondary market makers failed.     

Housing vouchers in the United States,great Britain,and the Netherlands: Current issues and future perspectives

Abstract

We compare the current U.S. housing voucher program with the British housing benefit and the Dutch housing allowance programs. After presenting the theory behind income‐related housing support, which underpins both the U.S. and European systems, we compare the three programs with respect to their scope (the budgeted versus the entitlement approach), the relationship between housing support and rent levels, the poverty trap, moral hazards, and administrative problems.

The United States can learn from Great Britain and the Netherlands that a full entitlement program can best promote equity, but given the present political and economic climate, it is unlikely that Congress will adopt such a program anytime soon. Great Britain and the Netherlands can learn from the United States how to design a more efficient tenant subsidy program, one that provides incentives to find less expensive units and promotes family self‐sufficiency through enhanced job‐seeking behavior.     

Homeownership,the Great Recession,and Wealth: Evidence From the Survey of Consumer Finances

The owned home is central to both the American Dream and the financial lives of U.S. households. This article explores the typical financial trajectories of homeowners during the Great Recession, assessing the viability of positioning home equity at the core of a household's balance sheet. Using the 2007–2009 reinterview panel of the Survey of Consumer Finances, we describe the diverse balance sheets of groups of homeowning households. While some homeowners lost equity and wealth in the Great Recession, we find that an owned home introduced severe risk of loss, but homeowners were less likely than renters to lose very large proportions of their wealth. The experience of homeowners' balance sheets during the downturn was diverse, and the typical experiences of different groups are compared and contrasted.     

Surviving the Great Recession: Nonprofit Housing Developers Through the Lens of Organizational Theory

This study identified factors that influenced California nonprofit housing development organizations’ (NHDO) survival and financial stability during the Great Recession. NHDO typically develop and manage affordable housing, while providing social services. During the recession, NHDO financial issues were exacerbated and compounded by the elimination of state redevelopment funds. This research tested organizational theories through bivariate and multivariate analyses from Internal Revenue Service 990 tax forms for nearly 800 NHDO. In many ways, the factors that influenced NHDO sustainability and performance were similar to those affecting for-profits and other nonprofits. For example, older and larger organizations with more staff and revenue fared better. Other factors were unique to this sector (e.g., the region and type of housing developed affected outcomes). An important finding was that reliance on government funding was negatively associated with survival and revenue. The lessons learned from NHDO inform other organizations about surviving and thriving during tough economic times.     

The cost‐effectiveness of the low‐income housing tax credit relative to vouchers: Evidence from six metropolitan areas

Abstract

How expensive is the Low‐Income Housing Tax Credit (LIHTC) program relative to vouchers? Are there any market conditions under which the supply‐based LIHTC could be more cost‐effective than demand‐based vouchers? This article examines these questions in six metropolitan areas—Boston, New York, San Jose (CA), Atlanta, Cleveland, and Miami. Controlling for family income and unit size, I compare the development subsidies of new‐construction LIHTC projects with the alternative 20‐year voucher cost in each area.

In general, the LIHTC is found to be more expensive than vouchers. The premium, however, varies significantly by voucher payment standard and local housing market. Assuming a payment standard of 100 percent of fair market rent, the LIHTC is only 2 percent more expensive than vouchers in San Jose, but more than twice as expensive as vouchers in Atlanta. Many factors account for these regional variations. This study emphasizes two: local market conditions and program administration.     

Comment on Kerry D. Vandell's “FHA restructuring proposals: Alternatives and implications”

Abstract

New Orleans, a highly segregated city with low homeownership, experienced a tremendous number of housing foreclosures between 1985 and 1990. This study highlights the process and impact of foreclosure in the urban housing market, which contributes to an understanding of their impact on the spatial structure of the city. Two aspects of foreclosure are examined: the differential impacts of foreclosure on low‐income and African‐American householders and changes in socioeconomic conditions (neighborhood change and the spatial structure of the city) resulting from foreclosure.

Conventional wisdom holds that urban neighborhood transformation is driven largely by white flight. The data presented in this article suggest a counterhypoth‐esis. Middle‐income professional whites employed in businesses impacted by recession who had recently bought housing with high loan‐to‐value ratios were forced to sell or have their houses foreclosed upon. The depressed market, in turn, made such housing affordable to middle‐class blacks interested in homeownership. Thus, black economic opportunity, rather than white flight, dramatically transformed the racial composition of many New Orleans East neighborhoods.     

Breaking the Double Impasse: Securing and Supporting Diverse Housing Tenures in the United States

What might be described as a double impasse characterizes debate on U.S. housing tenure with advocates fighting for rental or ownership housing on one side and Third Way or mixed-tenure solutions on the other. Breaking this impasse requires disengaging from conceptions of an idealized form of tenure and instead advocating making virtually all tenures as secure and supported as possible, so that diverse households are able to live in homes that best fit their changing needs over their life cycles. This essay (a) presents data on the variety of tenures in the United States; (b) conveys a new two-dimensional map of tenure according to their degrees of control and potential for wealth-building; and (c) shows how U.S. institutions shape their risks and subsidies. Most U.S. tenures are at least somewhat risky, including those that receive the greatest federal subsidies. A new housing system is needed to secure and support as many tenures as possible.     

The young and the restless: housing access in the critical years

Abstract

How do governmental housing policies affect the ability of young people to exit the parental home? This paper makes three claims. First and most important, governments that create accessible and liquid mortgage markets make it easier for young people to launch from the parental home. Second, even in those countries with more liquid housing markets, younger generations today still have an increasingly difficult time realising their preferences compared to prior generations. Third, increasing income and wealth inequality interacts with housing markets to create this uneven playing field both within and across generations. This paper examines these relationships in 20 high-income OECD countries. Fewer adult children live in the parental home in countries with deep mortgage markets, high levels of social rented housing, tax relief for ownership, low buyers' transaction costs and high residential mobility. These countries cut across the traditional housing regime typologies, highlighting the need for additional housing-specific theory building.     

Supporting low-income homeowners: lessons from a program to coordinate weatherization and rehabilitation services

Homeownership is the primary way most families build wealth in this country. Low-income homeowners are less likely to get that benefit because they are more likely to own older houses that are more costly to operate and need more essential maintenance. Rapidly escalating home energy costs are straining the budgets of many low-income homeowners, increasing the likelihood of under maintenance and mortgage default. This paper presents an evaluation of a demonstration program designed to coordinate weatherization and rehabilitation programs in order to assist low-income households, decrease energy costs, and to improve the condition and value of their homes. The experience of 11 local non-profit organizations, funded to develop programs to coordinate weatherization and housing rehabilitation services, were studied over a five-year period. The results of the evaluation indicate that there are many obstacles to coordinating weatherization and rehabilitation programs, but that it can be accomplished under the right conditions. Major gaps exist between program eligibility thresholds and in the types of assistance available to low-income homeowners. Policy recommendations for facilitating coordination are presented.     

Putting the Supplier in Housing Supply: An Overview of the Growth and Concentration of Large Homebuilders in the United States (1990–2007)

As housing production was ramping up in the 1990s and 2000s, some of the industry’s largest firms experienced remarkable growth primarily through mergers and acquisitions and the issuance of debt; the market share of the 10 largest firms tripled between 1995 and 2005. This article describes the role of financial firms in encouraging that growth and some of its consequences. Drawing on financial filings, news reports, investor analyses, and other relevant data, this article offers an overview of the relationship between homebuilders and investment firms, as well as a new explanation of the oversupply of housing in the 2000s. In doing so, this article seeks to bring attention to homebuilders as a missing feature in analyses of housing supply and housing markets, and proposes directions for future research.     

Lists and Lotteries: Rationing in the Housing Choice Voucher Program

This article investigates how the Housing Choice Voucher (HCV) program rations subsidies. HCV is the largest low-income housing assistance program in the United States. Despite the program’s size, millions of HCV-eligible households go without subsidy each year. Because the demand for support exceeds the supply of subsidies, HCV assistance is rationed through several mechanisms. These mechanisms and their relationship with the HCV system from both the client and administrator perspectives will be discussed. Implications of HCV rationing will also be discussed.     

Renting the Dream: The Rise of Single-Family Rentership in the Sunbelt Metropolis

In the aftermath of the foreclosure crisis, there has been a marked shift toward renting in the United States, with a large increase in households renting single-family homes. In the 50 largest metropolitan areas, the number of detached, single-family rental homes (SFRs) increased from 3.8 million to 5.8 million from 2006 to 2015. Single-family rentership rates increased in all 50 large metro areas, with the percentage of single-family units that are rented increasing from 11.3% to 16%. Notably, the nine metropolitan areas with the largest increases were all located in the Sunbelt. Given expected neighborhood sorting, it is important to consider neighborhood increases in SFRs. In one large Sunbelt metro area, Atlanta, increases in SFRs from 2010 to 2015 were particularly large in older, inner-county diverse suburbs. Regression results show that, controlling for other neighborhood characteristics, neighborhoods with larger Asian, Latino, and black populations saw larger increases in SFRs. The effects were particularly high in neighborhoods with larger Latino and, especially, Asian populations. Another key finding is that, in neighborhoods with lower property values, more foreclosures during the crisis were associated with sizeable increases in SFRs. However, more foreclosures in neighborhoods with high property values were not associated with increases in SFRs. This is possibly due to the exclusionary nature of high property-value suburbs and the strong demand in such neighborhoods for owner-occupied housing. Implications for policy and research are considered.     

Originating lender localness and mortgage sustainability: an evaluation of delinquency and foreclosure in Indiana's mortgage revenue bond program

Originating lenders play a vital role in selecting and preparing borrowers for homeownership, directly and through partnerships with community entities. While previous research demonstrates the importance of originating lenders for mortgage access to low- and moderate-income borrowers, this analysis evaluates the influence of the originating lender, and in particular the localness of the lender, on mortgage sustainability (reduced delinquency and foreclosure). Employing data on more than 5,000 low- and moderate-income borrowers participating in Indiana's Mortgage Revenue Bond (MRB) program from 2004–2006, this analysis finds that the localness of the originating lender is significantly predictive of mortgage sustainability. After controlling for borrower, mortgage, and market characteristics, an increase in the localness of the lender is associated with a decrease in the probability of delinquency and foreclosure, particularly for higher risk (lower credit score) borrowers participating in the MRB program.     

Changing occupant characteristics in rural public housing in the Great Plains: 1977 to 1996

Abstract

Housing quality and affordability are growing concerns in rural areas, particularly in regions affected by economic restructuring and population decline. This article uses data from the U.S. Department of Housing and Urban Development to assess changes in the characteristics of nonmetropolitan public housing residents in the Great Plains between 1977 and 1996.

Results indicate that public housing occupants were younger and more racially diverse in 1996 than in 1977. Also, a larger proportion received welfare benefits in addition to housing supplements. (In 1977, few households received both types of assistance.) Regression models reveal a significant positive relationship between changes in county population, unemployment rates, and economic designation and minority representation in public housing. Implications include the need for flexible measures that meet the changing needs of subsidized households. The characteristics of these households in the Great Plains region indicate the need for both region‐specific and coordinated housing and welfare policies.     

Recalibrating Policy Orthodoxy: The IMF Since the Great Recession

This special issue reviews patterns of policy stability and change at the International Monetary Fund (IMF) since the Great Recession and attempts to explain their causes. The contributors show that the crisis ignited a reassessment regarding how the IMF would position itself as a pivotal player in global economic governance. Some new ideas and evidence definitely found their way into IMF decision making, but this process was often tempered by the nature of the institution and the powerful interests that control its governing structure. Where change did occur, its causal generators could be found in some combination between IMF staff politics, a string of innovations coming from academic and IMF economists, and the emerging economic powers' creative leveraging of institutional fora both within and inside the Fund.