EDITOR'S NOTE: GUEST COMMENTARY

APARTMENT FINANCE TODAY • MARCH 2008

Make Your Voice Heard

By Doug Bibby

2007 will long be remembered as the year the housing bubble burst. What began as a meltdown of the subprime mortgage sector quickly spread to the broader economy and caused what may be the worst financial crisis since the Great Depression. Before the year was over, foreclosures had reached their highest level ever, and experts were predicting as many as 2.2 million subprime borrowers have already, or will soon, lose their homes.

Cities were hit hard as tax revenues plummeted along with property values at the very time when they were being called on to increase services to control blight and crime in now emptied neighborhoods.

We take little pleasure in having predicted this outcome as far back as early 2005. For nearly three years we have been warning that our government’s irrational embrace of a “homeownership at any cost” housing policy was a problem waiting to happen. Now we see the disastrous outcome of this misguided policy. People are losing their homes. Cities are struggling to control blight and crime, as once-thriving neighborhoods are being replaced with vacant houses. And elected officials are struggling to figure out how to fix something that would have been a whole lot easier to prevent than it will be to correct.

The situation is made all the more frustrating by the fact that apartment owners were not party to the speculation and frenzy that led to the current downturn. Apartment firms resisted the temptation to overbuild as the economy heated up. Nevertheless, 2008 will be a more difficult year for apartment firms thanks to overflow from the “shadow” rental market, significant credit market disruptions, and, most importantly, the possibility of a recession looming in the background.

Despite these short-term challenges, there is much to be optimistic about for apartment executives. Apartments remain a prized asset class for investors. The number of renters leaving to buy a house has fallen dramatically. And longterm demographics are on our side as the echo boomers enter prime renting age.

In addition, the nation’s focus on climate change should help create a new appreciation for more compact development, such as apartments. Increasingly, experts are saying that changing our country’s land development patterns to emphasize compact, mixed-use, walkable neighborhoods—in other words, the kinds of places we build—could do as much to lower greenhouse gas emissions as many of the climate policies being promoted by state and national politicians.

At the National Multi Housing Council (NMHC), we will resist the urge to tell politicians, “I told you so,” but we will use the lessons learned from the housing market turmoil to strengthen our calls for a more balanced housing policy.

If there is a silver lining in this cloudy situation, it is the hope that our elected leaders can learn from these mistakes and truly come to understand that housing our diverse nation requires having a vibrant rental market along with a functioning ownership market. The time has come to adopt a balanced housing policy that doesn’t measure success solely by how much homeownership exists.

Policymakers are starting to hear our message. But there is so much more to be done.

This is the year to make our case that apartments play an important role in creating strong and healthy communities.

Help us do that. Get involved in the upcoming presidential and Congressional election. Tell your favorite candidates and your incumbent members of Congress you favor a balanced housing policy. If you are not an NMHC member, join now and support our political action committee. In this election year, with housing so much in the news, your voice can and must be heard.