In the run-up to the 2020 presidential election, there are a number of issues being discussed. Everything from the economy, health care, immigration, national security and many others frequently take center stage on the campaign trail for the numerous Democratic candidates and President Donald Trump alike.
But there’s one major issue that isn’t discussed enough: housing.
And that’s a big problem.
Housing accounts for roughly one-sixth of the nation’s total gross domestic product, making housing one of the most important segments of the entire U.S. economy.
But you wouldn’t know it by listening to the candidates on the campaign trail. The talk mainly focuses on the “sexier” issues like those mentioned earlier.
Case in point: Housing got nary a mention during Trump’s 2020 State of the Union address, nor in the Democratic response.
Why is that? It’s complicated.
On the whole, housing has been stable and relatively boring since the housing crisis. Not for those who live it every day, of course, but for the public at large. Housing is no longer front and center as one of the main causes of an economic meltdown, and in the grand scheme of things, that’s a good thing.
But that doesn’t mean that housing isn’t important. Nor is it perfect as is.
The issues facing housing
Housing in this country has real issues that need to be addressed. First and foremost, there are simply not enough houses on the market to sustain what would be considered a healthy housing market.
A recent report from realtor.com showed that there are now fewer homes for sale than there have been in two years. That’s a big problem.
Housing is in a full-blown inventory crisis, and as CJ Patrick Company Founder Rick Sharga noted in December, there a number of causes, including a lack of construction and a dearth of existing homes on the market.
As Sharga said, new home sales only account for 10-20% of all sales, while the other 80-90% of sales are existing homes. And these days, homeowners are staying in the homes longer, meaning there are fewer homes coming onto the market.
“In fact, the average length of time a homeowner has stayed in the same home has more than doubled over the past 20 years – from a little under 5 years in 2000 to almost 12 years in 2019, according to findings from DataTree,” Sharga wrote.
Beyond that, a significant number of homeowners are also likely marrying themselves to their interest rate, either by buying a home in the last year when interest rates reached three-year lows or by refinancing their existing mortgage into a much lower rate than they had before.
Complicating things even further is the fact that home prices have continued to rise while wages have not kept pace, making it harder for many people to afford the house they’d want, if it ever hits the market at all.
And while a recent report from Black Knight shows that housing affordability is actually at a two-year high right now, housing is still not as affordable as it historically has been.
Think about this example: Let’s say a family bought a house four years ago for $400,000 with an interest rate of 4.5%. They refinanced last year and dropped their interest rate by 75 basis points to 3.75%. Even if they wanted to move, a similar house to the one they bought four years ago could now cost as much as $500,000.
So, do they move into a more expensive house that’s basically the same thing they have now? Or do they stay and make it work in their existing house? And what happens if interest rates actually rise? They’re certainly not going to sell their home and lose their sub-4% interest rate. Especially not for a more expensive house.
Combine those factors with a number of other ones, highlighted by HousingWire’s own Brena Nath here, and you have a housing ecosystem that looks very much like a duck on a pond: calm on the surface, but flailing wildly underneath.
So, how do we fix it? For starters, it would be nice to see it discussed in the election cycle this year.
Plans from the Democrats
As HousingWire has written over the last year, a number of the Democratic candidates have released affordable housing plans, in some form or another.
Sen. Bernie Sanders, I-VT, for example, has a plan called “Housing for All.” In his plan, Sanders emphasized cost of living, building more affordable housing units and combating gentrification.
Sanders, who as of Wednesday morning was trailing South Bend Mayor Pete Buttigieg in the still-somehow-not-yet-final Iowa Democratic Caucus by less than two percentage points, is no stranger to rolling out sweeping housing and/or finance plans.
In the last presidential election cycle, Sanders rolled out a broad housing agenda that would have brought significant changes to the country’s housing system.
As part of that plan, Sanders proposed a five-point plan to “promote homeownership,” as in Sanders’ eyes, wages in the U.S. have not risen in accordance with housing prices, making the prospect of owning a home “out of reach” for millions of families.
Sanders has also repeatedly called for the nation’s biggest banks to be broken up, which would likely have a substantial impact on the nation’s mortgage market.
Beyond Sanders on the Democratic side, Sen. Elizabeth Warren, D-Mass., is another candidate that could bring housing to the forefront. The architect of the Consumer Financial Protection Bureau is no stranger to proposing solutions to what she sees as ongoing financial issues.
Warren, like Sanders, released an affordable housing plan. Warren’s plan would expand the National Housing Trust Fund and provide $445 billion over 10 years to build, preserve and operate rental homes affordable to families with the greatest needs. Warren would also seek to lower the cost of renting.
Warren also has former Department of Housing and Urban Development Secretary Julián Castro actively campaigning on her behalf.
Buttigieg, for his part, is considered by observers to be a positive for housing should he win the election.
But both Warren and Buttigieg are currently considered longshots to secure the nomination, with Sanders and former Vice President Joe Biden still the betting favorites to be the choice to take on Trump.
Biden has not discussed housing much during his campaign so far, and if he ends up being the nominee, housing likely won’t be a big topic during the general election. If Sanders is the nominee, it would likely be a different story.
The Trump administration’s actions
As for Trump, his administration is actually making progress on releasing Fannie Mae and Freddie Mac from their seemingly interminable status as wards of the state.
Just this week, the Federal Housing Finance Agency, the federal agency that oversees the government-sponsored enterprises, hired Houlihan Lokey Capital to serve as its advisor for a public stock offering of Fannie and Freddie stock.
That offering will likely be the largest public share offering in the history of this country.
The Trump administration has also cut numerous regulations and has set both the FHFA and the CFPB on a path to change the nation’s mortgage lending rules.
The release of Fannie and Freddie from conservatorship should not be underscored in terms of both its potential impact and the difference between the Trump administration’s efforts and those of the Obama administration.
The Obama administration seemed content with the status quo at the GSEs, allowing them to rebuild business and send profits to the Department of the Treasury to pay back the bailouts given to the companies during the crisis.
Under the direction of former FHFA Director Mel Watt, the government appeared comfortable with allowing the GSEs to rebuild and regrow their businesses.
Watt, unlike his successor Mark Calabria, tried to push Congress to act on GSE reform.
But Calabria and other officials in the Trump administration took the opposite approach of its predecessors on GSE reform, in both words and actions.
Treasury Secretary Steven Mnuchin, for example, said early on that the Trump administration was committed to ending the GSE conservatorship, a sentiment echoed by Calabria. The rest of the administration, meanwhile, formally called for the end of conservatorship on several occasions.
And last year, the Trump administration released a sweeping housing finance reform plan that calls for Fannie and Freddie to be privatized, which Calabria has long indicated is the plan.
And with each passing day, the FHFA moves the GSEs closer to exiting conservatorship. In fact, late last week, the FHFA announced that it was realigning its structure to “ensure that the Agency is well-positioned for the Enterprises to responsibly exit conservatorship.”
Included among those changes was renaming the FHFA’s Division of Conservatorship to the Division of Resolutions, a clear indication that the goal of the FHFA under Calabria is to engineer the resolution of GSE conservatorship.
But what happens to those plans if Trump loses in November? Calabria has a five-year term as FHFA director that lasts until 2024, although an incoming president of a different party could theoretically end Calabria’s term before it’s stated end. But that process could get messy.
On the other hand, if the Trump administration plan is far enough down the road, it’s possible that the incoming administration would choose to let things play out as opposed to trying to reclose Pandora’s box.
What’s the solution?
So, to answer our original question, what’s it going to take to make housing a topic of conversation in this election? The candidates on both sides need to start loudly and publicly giving a damn about something that effects every single person in this country and accounts for more than 15% of our economy.
Plans and platitudes aren’t enough. It needs to be brought to the forefront and talked about in the same way that health care is talked about. In the same way that immigration is talked about. Loudly and energetically. At rallies. In stump speeches. In every interview. At every campaign stop, every time.
Because if the public can’t get behind a message of “let’s make housing work for everyone,” then what exactly are we doing here?
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