Editor's Letter

APARTMENT FINANCE TODAY • OCTOBER 2007

Owners Get Mine; Tenants, Shaft

By Andre Shashaty

If Dr. Peter D. Linneman’s prediction from this magazine’s conference in 2006 is correct, the next recession is right around the corner.

The recession would come when the federal government started trying to intervene in private markets, said Linneman, Albert Sussman professor of real estate at the Wharton School.

We all better prepare for the worst as Congress prepares to “reform” the mortgage market.

The Bush administration has already acted to have the Federal Housing Administration (FHA) start bailing out homeowners who took out risky adjustable-rate loans and can’t cover their new loan payments.

Congress is well on its way to passing a law intended to make FHA the nation’s biggest subprime lender, with new authority to make low- or no-downpayment loans and undertake other ventures that could put the whole agency at risk.

Even more unsettling is the effort to blame investors for the integrity of the process by which loans are originated.

In September, the House Financial Services Committee was considering a bill to make secondary mortgage market players liable for misrepresentations on the part of the originators of loans they buy. Never mind that the homebuying process is already heavily regulated, with mountains of paperwork containing required disclosures about various risks that few consumers bother to read.

All of this comes as Congress sees political points to be scored by addressing the rise in foreclosures among households who overextended to buy homes, and lenders who engaged in aggressive underwriting.

Congress passing stupid laws is nothing new. What really steams my glasses is how blatantly Congress favors homeowners over renters. I don’t understand why it’s good public policy to help overextended homeowners but to do almost nothing to help provide apartments at affordable rents for working people of modest means.

I think Congress should reconsider its single-minded focus on ownership. If they want to help people who made bad credit decisions, why not do the same for renters as they are doing for homeowners?

High credit card debt is even more burdensome than an adjustable-rate loan. Why don’t the feds refinance the accumulated credit card balances of tenants who may face eviction because they made bad decisions and ran up too many charge card bills for crazy things like food, health care, and car repairs?

Oh, yes, Congress did think about the plight of debt-burdened individuals in 2005. It passed a bankruptcy “reform” law making it much harder for moderateincome people to wipe out their debts by declaring bankruptcy.

The federal government’s bias is crystal clear. Homeownership is viewed as a winning political cause, worthy of unending government support, from mortgage interest deductions to mortgage bailouts. Making a bad decision on an adjustablerate loan is viewed as somehow noble, but overextending your credit cards at exorbitant interest rates is viewed as irresponsible. Homeowners are considered good citizens, and renters are not.

It’s time to say enough of this blatant discrimination against renters.

It’s time to pressure Congress to recognize that homeownership is not a panacea, and that they must pass a balanced housing policy that assists renters as well as buyers.

The National Multi Housing Council continues to fight to get Congress to adopt a more balanced housing policy. It’s an uphill struggle, and I hope you will join me in supporting them. Check out their arguments and their progress at www.nmhc.org.