Affordable Housing on the Obama Radar
Nicolas Retsinas, director of Harvard’s Joint Center for Housing Studies–an inductee Friday into the Affordable Housing Finance magazine Hall of Fame in Chicago–accepted the same honor on behalf of Congressman Barney Frank (D-Mass.).
“Had Barney been able to be here with you, he would have,” said Retsinas. “Other than ‘thank you,’ he asked me to offer his support with the comment, ‘we have to stop being Marie Antoinettes.’ I said, with all due respect Congressman, but what do you mean, ‘we have to stop being Marie Antoinettes?’ Barney said to me, ‘For too long now, our answer to all our nation’s economic challenges has been to respond, “Let them own homes.” We have to stop doing that.’”
2008 Inductees
AFFORDABLE HOUSING FINANCE inducted five deserving individuals into its Affordable Housing Hall of Fame in November. These inductees were honored at a luncheon at the conclusion of AHF Live: The 2008 Tax Credit Developers’ Summit, held Nov. 5-7 at the Hyatt Regency Chicago.
Conrad Egan
• June: Conrad Egan, president and CEO of the National Housing Conference
• July: The late Clara Fox, founder of the
Settlement Housing Fund
• September: U.S. Rep. Barney Frank
• Silicon Valley Bank
• October: Nicolas Retsinas, director of
Harvard University’s Joint Center for
Housing Studies
• November: Carla Hills, former secretary
of the Department of Housing and
Urban DevelopmentAFFORDABLE HOUSING FINANCE created its Affordable Housing Hall of Fame in 2006 to recognize outstanding achievement in the industry. Past inductees have included leaders instrumental in the establishment of the low-income housing tax credit program and the Community Reinvestment Act.
Washington Post columnist and MSNBC political commentator Eugene H. Robinson addressed the same business community this past week at the AHF Live Conference, offering observations about what a Barack Obama presidency means–historically and for the moment. Where housing winds up among priorities that include healthcare, national security, infrastructure needs, and the immediate need to stimulate the economy, Robinson would not speculate. He did say that it makes sense that Obama’s focus on the less privileged middle class population would translate into housing initiatives as part of a strategic program he puts together once he forms his braintrust for both transition and a new administration.
However, in Multifamily Executive, senior editor Rachel Z. Azoff, zeroes in on expectations among multifamily and affordable community business leaders, who are counting on the President-elect to catalyze new momentum toward affordable housing solutions.
NLIHC's Linda Couch
“The expansion and implementation of the new national housing trust fund should be the No. 1 priority for the new administration,” says Linda Couch, deputy director of the Washington, D.C.-based National Low-Income Housing Coalition (NLIHC). “The resources serve the lowest income households and those are the households most in need of affordable housing.” Couch also expects Obama to push for increased funding for the Section 8 voucher program and to help combat homelessness.
Like every other part of the housing [and broader] economy, affordable development and finance has hit a hard wall as key parts of the complex layering of private and public finance have been sucked into the vortext of credit paralysis and risk aversion.
Multifamily Executive senior editor Les Shaver reports on how even market rate apartment deals have stalled amid wrenching credit and finance uncertainty in his report, Confidence in Apartment Sales, Credit, Even Occupancies Declines, NMHC Reports.
Considering what’s happening on the equity and debt markets, its little wonder deals aren’t going down. Among the other indices, the Equity Financing Index, fell to four, the lowest result on record, while the Debt Financing Index also declined to four—another record. A whopping 93 percent of respondents said financing conditions have worsened compared to three months earlier; one-sixth of respondents said that the crisis hadn’t affected their current activities.
Rescue Logic
The question of the moment: Who to save and from what?
This week, we’ve had hardly needed confirmation that the economy’s in recession, consumer confidence is at an all-time low, housing prices are still plummeting, and rescue and stimulus plans are proliferating. Volatility is so engrained now in equity and commodities markets that keeping track of where everything is has become “like watching a National Basketball Association game,” says one housing and financial services industry observer. “It doesn’t matter what happens for most of the four quarters,” he says. “The part you have to see always happens in the last two minutes. It’s getting that way with the stock market.”
In the 11th Hour, as U.S. Treasury Secretary Henry Paulson begins to map a transition plan for over $1 trillion in rescue monies the U.S. will borrow vs. the $52 trillion in total U.S. wealth and as voters take their final moment to consider who to put into the Oval Office for the next four years, an issue at the crux of trying to prioritize focus is as simple as this: The American Dream. The global economy’s listing now relates more to those who have in the past five years joined the ranks of America’s 76-million-plus homeowers than many of us would like to admit.
There are hugely significant decisions and initiatives to make around what can and should be done about growing numbers of housing units in financial distress, and the real families dwelling in many of them. Here’s two critical facts to remember as healthy debate about plans takes place. One is that of almost 130 million households and 76 million-plus homeowners, one in three of the homeowner group does not even have a mortgage (51 million homeowners do have a mortgage, according to U.S. Census 2007 American Community Survey data). The other is that an all-time high of 14% of housing units are counted as vacant. That’s 7 empty places for every 100 housing units. It’s a lot of those places that are among the 10 million “homes” apparently underwater on mortage loans, and among the 3 million “homes” counted as either in or headed for foreclosure.
It’s important to realize this because a goodly number of so-called homeowners in distress are actually investors who bought and don’t live in their now-vacant housing units. So we should not imagine a family put out on the street for each and every one of the homebuyers in trouble on their distressed deeds. New Strategist editorial director Cheryl Russell analyzes the data to try to pry apart myth and reality in looking at the mortgage mess.
- A Wall Street Journal analysis sums up the latest GDP reading, and the political traction news of a deep downturn may offer the respective presidential campaigns leading into Tuesday’s election.
- CNBC reports on consumer spending declines in September 2008, the first in two years.
- Barry Ritholtz’s “The Big Picture” takes on the issue of moral hazard amid the dueling homeowner rescue packages circulating in and around The Hill.
- Builder editor Boyce Thompson reports on efforts among leading home building companies to get the new home construction industry’s interests–a sizeable tax credit and a mortgage buy-down–reflected in rescue and stimulus packages that get consideration in Congress.
In fact, a question that may need to be asked and answered is how much the increase in homeownership rates from 63% or 64% in the mid-1990s to almost 70% in 2005 is worth. Expanding the sphere of American Dream was going to have its price as well as its value. How do we look in a realistic way at the risks and liabilities involved as well as the benefits and opportunities of bringing America’s homeownership rate closer to many nations of the world?
A necessary vantage point on this issue for all those in residential real estate and construction is one Multifamily Executive editor Shabnam Mogharabi raises in her essay, “Which One are You?,” about the need to count people in rented homes as equally critical parts of housing’s equation.
Her assertion?
Unfortunately, renting gets a bad rap—one that it doesn’t deserve. In an age where high density and anti-sprawl are the drivers, proximity to transit and walkability the amenities, and sustainability the ultimate goal, the multifamily industry has a responsibility to educate consumers about the benefits of renting in live/work/play hubs throughout the country. Homeownership may be the fastest way to wealth creation for many families in the country, but homeownership is not for everyone.
Among the most important factors in how the correction will ultimately sort out may not be who’s model works best in a spreadsheet. Human behavior and psychology weigh too heavily in the balance for even the most excellent econometric solution to fully apply. The important thing is to make a plan that will keep its head as the 800-pound gorilla of misplaced trust tosses its weight around in the middle of things.
People want their homes, and the logic of building trillions of dollars of global business upon the premise that the loss of one’s home would be too devastating for people to let that occur is showing its flaws in all their glory. Too many variables came into play with that bet.
What people also want now is not so tangible as a home, its safety, security, and protectiveness. They want revenge and they want justice, big motivators in who’ll support which rescue plan in the last two minutes of the game.
Props and Sources:
The Wall Street Journal, Data Stoke Campaign Battle Over Economy, October 31, 2008, http://online.wsj.com/article/SB122536898235884019.html?mod=testMod
CNBC, Consumers Cut Spending For First Time in Two Years, October 31, 2008, http://www.cnbc.com/id/27470443
The Big Picture, Barry Ritholtz, Moral Hazard of the Coming Mortgage Bailout, October 31, 2008, http://bigpicture.typepad.com/comments/2008/10/moral-hazard-of.html
American Consumers Newsletter, Cheryl Russel, October 14, 2008, Hot Trends: DON’T BLAME MAIN STREET http://www.newstrategist.com/store/index.cfm/feature/35_15/dont-blame-main-street.cfm
Multifamily Executive, Shabnam Mogharabi, Which One are You?, October 1, 2008, http://www.multifamilyexecutive.com/industry-news.asp?sectionID=537&articleID=782831&refresh=true
Image source: Bloke’s Blog, What Do you Call an 800 Lb. Gorilla? http://www.strategicmarketingmontreal.ca/otherbb/2005/09/what-do-you-call-800-lb-gorilla.html
Multifamily to the Rescue? Not so Fast
From MultiFamily Executive, by Les Shaver: If you want to get the straight story on why not to get too bullish on multifamily for-rent as an antidote to acute for-sale pathology–at least for a while–have a gander at Multifamily Executive senior editor Les Shaver’s account of a forecast of 2009 and beyond by two industry economists.
Shaver reports on how the industry’s fortunes may lag the dislocation in other parts of residential construction and development thanks to already-financed projects late in the come-to-market pipeline. Once the recent implosion in credit availability and other economic convulsions wind into multifamily development’s landscape, starts will feel gravity. Shaver, reporting from the National Association of Home Builders’ Fall forecast conference in Washington, D.C. , took in the predictions of outgoing NAHB chief economist David Seiders and multifamily research consultant Ron Whitten. He writes:
Ron Whitten
The decline in starts will likely come soon. Witten predicts that by 2011, starts could fall to around 125,000 units—numbers not seen since 1993. “We’re going to be in for a couple of years of deterioration in multifamily starts,” Witten added.
At the core of this drop-off is financing. The amount of equity needed to completed apartment construction deals has risen significantly. During the boom, apartment developers could get by with 25 percent equity or less on deals. Now, lenders are asking for around 40 percent equity. And even with financing, apartment owners don’t know what the economy will look like when the properties open in a year or two.
“A decision to start today exposes me to a lot of risk going forward,” Witten said.
Risk everywhere you look, at least for the moment. A fact of life. Anybody can be justified in having been thrown back on one’s heels in this environment. Still, it’s no time to shift to inertia. All the good ideas won’t fly right now. So pick two or three of them and run like hell.