One of the nation’s most successful real estate developers is calling for a rethinking of federal housing policy.
With increasing demand for affordable rental housing, the nation must spend its limited resources more wisely and targeted to those most in need, according to Ron Terwilliger, former CEO of Trammell Crow Residential.
“Federal housing policies today are simply out of sync with current market realities,” he said in a keynote address at AHF Live: The Affordable Housing Developers Summit in Chicago.
Terwilliger spoke out on what he calls the “silent housing crisis.”
“A legacy of the great recession, the rental affordability crisis is often overlooked by policymakers, ignored by the media, and underestimated, at best, by the general public,” he said.
Terwilliger announced that he is launching a foundation that will work to better align public policies with housing needs. He has recruited Pamela Patenaude, former assistant secretary for community planning and development at the Department of Housing and Urban Development (HUD), to lead the J. Ronald Terwilliger Foundation for Housing America’s Families.
Patenaude, who recently served as director of housing policy at the Bipartisan Policy Center, was also at AHF Live.
As they begin their new foundation, they’ve received a piece of advice from Shaun Donovan, former HUD secretary and current director of the Office of Management and Budget. He’s told them to make it research based.
While affordable housing is a bipartisan issue, there’s little being said about it from our national leaders, according to Terwilliger. “When have you heard a candidate talk about housing?” he asked while taking questions from the audience.
The new foundation will be the latest housing initiative for the real estate leader. Chairman of the Enterprise Community Partners board of trustees, Terwilliger has served on the Bipartisan Policy Center Housing Commission. Philanthropically, he’s made a $5 million gift to establish the ULI Terwilliger Center for Workforce Housing in 2007 and a $5 million gift to Enterprise to create the Enterprise Terwilliger Fund, which is expected to create 2,000 affordable homes annually. In addition, his $100 million legacy gift to Habitat for Humanity International will help 60,000 families access improved housing conditions.
“Meeting this country’s considerable housing needs must not be an afterthought, but a top priority—a matter of urgent and continuous national concern,” he told the nation’s top affordable housing developers. “For most of our country’s history, housing has been on the policy backburner.”
Terwilliger said it makes no sense that about three-quarters of the federal government’s housing spending through tax breaks and direct appropriations is devoted to supporting homeownership when homeowners have more than twice the income of renters on average.
The largest subsidy for housing is the mortgage-interest deduction, with a projected cost of between $70 billion and $100 billion annually, he said, explaining that the deduction benefits homeowners with higher incomes while do nothing to help lower-income families.
At the same time, federal rental assistance is woefully underfunded, with only one in four eligible households receiving help.
Expand the housing tax credit
“As an immediate response to the nation’s considerable need for more affordable rental housing, Congress should preserve—and expand—the low-income housing tax credit (LIHTC) program,” Terwilliger said. ‘Without question, the LIHTC program is the nation’s most effective tool in supporting the production and preservation of rental housing for low- and moderate-income families.”
The Bipartisan Policy Center Housing Commission also called for the expansion of the housing tax credit.
During his address, Terwilliger said the demand for affordable rental housing will continue to balloon while the homeownership rate, which is about 64 percent, will shrink. “I predict the new paradigm for homeownership will be closer to 60 percent,” he said.
He called attention to significant demographic shifts that will lead to the increasing demand for affordable rental housing. This includes the growing number of Americans aged 65 or older, a group that’s projected to more than double from 35 million in 2000 to nearly 73 million in 2030.
Although seniors want to age in their homes, the reality is their homes were not designed for their changing needs. As a result, renting will become their housing choice.
On the other end of the age spectrum, young Millennials, who are often saddled with large student loans and are underemployed, do not have the resources to become homeowners, according to Terwilliger, who said the market share of first-time homebuyers is the lowest it’s been in 27 years.
He also cited the nation’s growing number of minority households, which are often much poorer than white renters.
“Developing sound and effective housing policy requires a deep understanding of these seismic demographic shifts,” Terwilliger said. “It will require fundamental changes to match the evolving realities in the marketplace.”
Connect with Donna Kimura, deputy editor of Affordable Housing Finance, on Twitter @DKimura_AHF.