The Bipartisan Policy Center (BPC) released a report Monday calling for the eventual elimination of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.
The report, "Housing America's Future: New Directions for National Policy," proposes a reformed housing finance system with a greater influence from the private sector and a limited government role.
In fact, the BPC Housing Commission proposes eliminating the GSEs over time, deeming the GSE business model, private companies directly regulated by the government, as a failure.
During the time which Freddie Mac and Fannie Mae are phased out, the Federal Housing Finance Agency should work to reduce the size of the GSE portfolios, the report suggests.
The report calls for the creation of an independent government corporation, referred to as a “public guarantor," which would not buy or sell mortgages, but would guarantee investors payment of principal and interest on securities.
The commission also suggests the creation of a more sustainable approach to making homeownership a reality for creditworthy households; pushing the private sector to take more responsibility in bearing credit risk; a more focused approach in providing rental assistance to those who need it most; and a greater focus on how to serve the nation’s growing senior citizen population.
Former Department of Housing and Urban Development (HUD) Secretary Henry Cisneros served as a co-chair of the commission and led the presentation of the report at the Newseum in Washington, D.C., Monday morning.
Cisneros said the two most urgent issues are restructuring the housing finance system and rebalancing government spending to help focus on vulnerable households.
He said as he and the commission members were putting together the report, he was able to visit California and attend a hearing at a local public housing authority, as well as visit many low-income housing communities in San Antonio.
“I saw the effects of high prices on rentals for folks,” he said. “Situations like those are what really drives it home in a persuasive way, for me to see that there’s a need for affordable housing.”
George Mitchell, a former senator and co-founder of the BPC, was also a co-chair and said only about one in four renter households eligible for assistance actually receive it. Many of those in need are forced to apply for long waiting lists or enter into lotteries for the scarce affordable rentals.
“Problems in housing remain severe and urgent,” he said.
According to the report, about 80 percent of the lowest-income households in the country spend about 30 percent of their income on rent.
“There are far more extremely low-income renters than available units they can afford,” the report states.
Mitchell called on the government to create more help for those involved in the current “rental crisis.”
The commission also looked at the nation’s changing demographics and how the ever-diversifying population will change the game of affordable housing.
The number of Americans age 65 and older will rise to more than 90 million in 2060 compared with about 40 million in 2010, Cisneros noted in the presentation. As the baby boomer generation ages, the echo boomers, people born between 1981 and 1995, are driving the present rental market, according to the report. However, by 2020, the commission estimates many echo boomers will be ready to buy homes.
The commission suggests the nation will need to increase the supply of affordable homes and should expand the low-income housing tax credit and create additional federal funding to address housing quality.
Other co-chairs included Mel Martinez, former HUD secretary and senator, and Christopher “Kit” Bond, former governor of Missouri and senator.
The entire report is available online at: http://bipartisanpolicy.org/library/report/housing-future.