To increase the supply of affordable housing, I proposed a $2.54 billion, five-year Single-Family Affordable Housing Tax Credit for up to 50% of the project costs of rehabilitation and construction of affordable homes, provided they are offered to home buyers with incomes of not more than 80% of area median income. The tax credit would eventually result in an additional 200,000 affordable single-family homes becoming available through construction or rehabilitation.
When I launched my Homeownership Initiative, I challenged the entire real estate and mortgage finance industry to do their part to help close the gap that exists between the homeownership rates of minorities and non-minorities. In response, more than two dozen industry leaders made commitments to help achieve this goal.
My initiative is producing results. The latest Census estimate of the number of minority home owners is 1.6 million higher than it was when the initiative was launched. And homeownership rates are at record levels. Overall homeownership reached a record 69.2% in the second quarter of 2004, while minority homeownership is at a record high of 51%.
With more Americans employed and able to take advantage of home-buying opportunities, the housing market should remain a key contributor to America’s strength and prosperity.
SENATOR KERRY: Housing has been a pillar of strength for our economy, even while many other industries have been experiencing difficulties. We must ensure that our housing sector remains strong while we work to create new jobs and growth in our economy.
As Ranking Member of the Senate Banking Committee’s Housing Subcommittee for a number of years, and as a current member of the Senate Finance Committee, I understand the important role housing plays in developing our economy. That is why I have worked to promote the whole spectrum of housing opportunities, including: the preservation of existing affordable housing; the construction of new affordable housing; protecting and expanding the Low Income Housing Tax Credit; introducing legislation to increase homeownership through the rehabilitation of existing homes and the construction of new homes; protecting and expanding the multifamily and single-family FHA programs; and producing elderly and assisted housing.
John Edwards and I will strengthen the economy while keeping interest rates lower by restoring fiscal discipline and putting sound economic policies in place. Our plan will help encourage homeownership and result in a sustainable boost to the housing market.
Creating and maintaining a finance system that provides an ample supply of mortgage credit at affordable prices has always been one of the cornerstones of this nation’s housing policy. How would you describe Fannie Mae’s and Freddie Mac’s role in the development of a strong secondary mortgage market, and what value have Fannie and Freddie added to today’s housing finance system?
SENATOR KERRY: Fannie Mae and Freddie Mac have played a critical role in the development of both the rental and homeownership markets in the United States. These institutions have helped millions of Americans achieve the dream of homeownership, raise their standard of living, increase their savings and build wealth. Moreover, the United States has the deepest, most liquid mortgage markets in the world. Despite a number of crises in international capital markets over the past several years, there has never been a lack of mortgage credit, thanks in large part because of the role played by the Government Sponsored Enterprises (GSEs). The predominance of the 30-year, fixed-rate, pre-payable mortgage is a tribute to the importance of the housing GSEs in our marketplace. Very few consumers outside the United States have access to such mortgage products.
PRESIDENT BUSH: Government Sponsored Enterprises (GSEs), such as Fannie Mae and Freddie Mac, and the Federal Home Loan Banks, make important contributions to the strength and resilience of the U.S. housing markets. The GSEs’ leading role in the development of the secondary mortgage markets has helped make homeownership a reality for more Americans.
Following up on that question, where do you stand on the debate over how best to regulate Fannie Mae and Freddie Mac?
PRESIDENT BUSH: Government Sponsored Enterprises — Fannie Mae, Freddie Mac and the Federal Home Loan Banks — are important players in the U.S. economy. They are in need, however, of a regulatory structure that is worthy of their considerable size, complexity and importance. And they must remain focused on their special public mission. My Administration is committed to GSE reform consistent with these twin goals: increasing homeownership opportunities for low- and middle-income Americans and ensuring the long-term strength and resiliency of the housing finance system.
I have called on Congress to create a new regulatory regime that establishes a single financial regulator with the full range of supervisory and enforcement powers that are comparable to other world-class financial regulators. For example, a strong and effective regulator must have the authority to review new and ongoing activities being undertaken by the GSEs. In addition, the regulator should have authority to establish appropriate capital requirements to ensure long-term safety and soundness, and must have the necessary tools to deal with a GSE that encounters significant financial or management difficulties.
My Administration is committed to ensuring that the GSEs are strong and serve their public mission of promoting homeownership. The American people deserve no less.
SENATOR KERRY: I support maintaining the GSEs’ government-sponsored status because housing holds a special place in both our economic and social policy in this country. I am, however, concerned about recent governance and accounting problems at Freddie Mac. I would work with Congress and the top experts to carefully examine these issues and develop legislation that provides for strong, effective supervision and regulation of Government Sponsored Enterprises within a framework that assures their safety and soundness. We must also increase the focus of GSEs on affordable housing. This will help expand homeownership in the future and ensure the continued strength of the home mortgage market in the United States.
Another cornerstone of federal housing policy is the nation’s very favorable tax system. From time to time, however, some in Congress and elsewhere have suggested restructuring the tax code and eliminating the deductibility of mortgage interest and property taxes. Where do you stand on this issue?
SENATOR KERRY: I strongly support the deductibility of mortgage interest and property taxes. Many middle-income families have been able to afford their first home in part because they are able to deduct mortgage interest and property taxes. Owning a home can lead to a better quality of life and provide families with greater financial security.
PRESIDENT BUSH: Homeownership has always been at the heart of the American Dream and central to the health of the U.S. economy and the wealth of families. It also yields a variety of strong social benefits. I support tax incentives that enable more Americans to achieve the goal of homeownership.
While the housing market has performed very well in recent years, it is becoming increasingly difficult for many first-time buyers and working families to buy or rent homes in the communities where they work. How do you view today’s housing affordability problem, and what specifically would your Administration pursue to help close the gap between those who can afford a home and those who can’t?
PRESIDENT BUSH: My Administration has made increasing homeownership a priority and is working to give more Americans the opportunity to achieve the dream of owning a home. With the national rate of homeownership reaching record levels, we have already made this dream a reality for millions of Americans. And the Department of Housing and Urban Development will continue to reduce barriers to homeownership in the years ahead.
The availability of affordable housing is an enormous barrier for low- and moderate-income home buyers. To address this need, I have proposed a five-year Single-Family Affordable Housing Tax Credit. The tax credit is for up to 50% of the costs of constructing or rehabilitating affordable homes, provided they are sold to home buyers with incomes of not more than 80% of area median income. Tax credits awarded in the first five years will result in an additional 200,000 affordable single-family homes becoming available through construction or rehabilitation.
I signed into law the American Dream Downpayment initiative, which authorizes $200 million a year to assist an estimated 40,000 low-income families with downpayment funds. In this year’s budget, I proposed the Zero Downpayment Initiative which would eliminate the statutory requirement of a minimum 3% downpayment for Federal Housing Administration (FHA)-insured single-family mortgages for first-time home buyers. Preliminary projections indicate that the new FHA mortgage product would generate about 150,000 home buyers in the first year alone. In March of this year, HUD launched the America’s Affordable Communities Initiative to remove regulatory barriers to affordable housing.
SENATOR KERRY: Today, too many low- and moderate-income families living in urban and rural areas across our nation have not been able to share in the dream and benefits of homeownership due to the lack of available housing or the high cost of the housing that is available. I have made a number of proposals in the past to increase homeownership. For example, I have previously introduced legislation, the First Time Homebuyer Affordability Act, which would allow families to borrow up to $10,000 from their IRAs (or from their parents’ IRAs) for a downpayment on their first home without paying any taxes. I have also introduced legislation to encourage the construction and rehabilitation of for-sale homes that will both create new opportunities for low-income home buyers and help revitalize distressed communities. Finally, I have strongly supported efforts to increase FHA loan limits to help more families become first-time home buyers.
In many cases, federal environmental laws and mandates are developed with little regard to potential economic consequences. How do you feel about this, and do you believe consideration should be given to the potential costs and economic risks of environmental protection?
SENATOR KERRY: I believe that formulation of environmental policy must consider a range of interests, including both environmental protection and economic impacts. A Kerry-Edwards Administration will work with all interested stakeholders in developing environmental policy.
PRESIDENT BUSH: HUD has launched the Americans’ Affordable Communities Initiative to reduce the burden of federal, state and local regulation on the home builders industry. And my Administration will continue to develop innovative, market-based solutions that strengthen and improve environmental protections. Federal environmental policies must be integrated with efforts to grow our economy and create jobs, because the greatest environmental progress will come about through new technologies that are created and nurtured by a robust private market. The government and the private sector have already combined efforts to protect the environment and promote growth, and we will continue to do so.
My Administration has also worked to reduce the regulatory burden on businesses to reduce excessive costs that can hinder the ability to do business. Regulatory reform is part of my six-point plan to strengthen the economy.
In some highly regulated markets, it can take three years or longer for a builder to obtain all the approvals and entitlements required before he or she can move ahead with construction on a new housing development. Such delays add tens of thousands of dollars to the cost of homes. What would your Administration do to encourage local and state governments to eliminate excessive fees and regulations?
PRESIDENT BUSH: Decreasing the regulatory burden on our nation’s businesses — including construction and building associations — is a critical part of my plan to stimulate the economy, create jobs and promote prosperity for all Americans. Excessive paperwork and bureaucratic regulations can hinder a company’s ability to do business by diverting funds that could otherwise be used to invest in new equipment, expand operations, hire new workers or increase wages. I am committed to pursuing a “smart” regulation agenda, which involves modernizing existing rules and adopting rules only when justified by sound science, economics and law. By providing a national policy for reducing excessive regulations and fees, we are setting a good example for states and localities. I will continue to pursue the policies at the federal level that will further serve to encourage state and local government to follow suit and reduce unnecessary regulations and fees.
We are seeing results in the way of reduced regulatory costs and increased savings for business owners. The average annual economic cost of new regulations under my Administration is $1.6 billion. Under the Clinton Administration, the annual cost of new regulations was about four times higher, averaging $6.1 billion each year.
SENATOR KERRY: I am interested in hearing from all interested parties about whether states and municipalities are inappropriately using their regulatory structure to delay housing development and increase tax revenues. Obviously, this is primarily a state and local issue, but I believe we should reduce unnecessary red tape. Our state and local governments are currently facing billions in budget deficits, forcing layoffs, education cuts and tax increases. At the same time, they are facing dramatic increases in costs required to secure our homeland. John Edwards and I will create a new State Tax Relief and Education Fund that will provide $25 billion to help states balance their budgets, meet their homeland security needs and help limit excessive fees on builders.
Is there anything else that you want to say to the 215,000 members of the National Association of Home Builders, who collectively employ 8 million workers?
SENATOR KERRY: John Edwards and I will implement sound economic policies that create a favorable climate for the housing market. We will cut the deficit in half in our first term by rolling back the Bush tax cuts for families making over $200,000 and restraining the growth of spending. In contrast, the Administration’s economic plan would continue to explode the deficit, keeping interest rates higher, raising mortgage payments and reducing homeownership.
In addition, John Edwards and I will jumpstart job growth with a New Jobs Tax Credit, enforce our trade agreements, bring down the spiraling cost of healthcare and education and invest in the industries of the future. This economic program will increase jobs, incomes and economic growth — contributing to strong demand in the housing market.
PRESIDENT BUSH: Over the last three years, my Administration has created an environment that encourages economic expansion and job growth. With almost 1.5 million new jobs created since last August, GDP on the rise, and inflation, interest rates and mortgage rates at near historic lows, there is significant evidence that my economic policies have been a success. American families are now able to use their savings to meet their own priorities — like putting a downpayment on a new home or building an addition on an existing home.
Now, we must build on this progress and extend prosperity to every community in America. My six-point plan to strengthen the economy focuses on: reforming the legal system to prevent frivolous lawsuits that increase the cost of doing business; promoting domestic energy development and energy security; streamlining government regulations, especially for small businesses; pursuing free and fair trade agreements that open new markets for American workers; making tax relief for families and small businesses permanent; and expanding access to affordable health care. Taken together, these policies will lower the costs of doing business, which will lead to rising salaries for workers, thereby allowing Americans to keep more of their hard-earned money.
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