NAHB Advises Obama Transition Team on Housing Policy
Along with its efforts to lead a national campaign to "Fix Housing First" with a stimulus plan to restore home buying demand, NAHB has prepared an analysis of key housing policy issues for President-elect Barack Obama so his Administration can hit the ground running next month in addressing the worst housing downturn since the Great Depression.
“As we have seen in previous business cycles, housing has led the general economy into recession and it will be needed to lead the economy back on the road to recovery,” said NAHB Chairman Sandy Dunn. “Unfortunately, the financial turmoil experienced this fall has dealt a terrible blow to consumer confidence and it is seriously eroding the credit home builders must have to survive the coming year. Without a helping hand from Washington, we are facing even more perilous times.”
“Key data on gross and net home sales, housing starts, building permits, residential construction activity and inventory overhang still paint a downbeat picture of the U.S. housing market,” NAHB says in its analysis for the Presidential Transition Project.
“The recent downward momentum in housing markets is bound to extend into 2009, aided by a weakening national economy and stringent financial market conditions,” the report notes. “And, of course, there is still a daunting overhang of vacant housing units on both for-sale and for-rent components of the housing market. Consequently, NAHB has recently trimmed its estimates of new-home sales and housing starts for the balance of this year and for 2009.”
The slump in residential construction and related activity — which in normal times account for about 14% to 15% of the gross domestic product — will continue to exert heavy downward pressure on U.S. economic activity through the middle of next year, NAHB analysts warn. Based on the assumption that housing conditions will begin to show signs of improvement in the second half of 2009, housing growth should then begin to provide “mild support” to GDP growth.
However, “that switch in direction is essential to the beginnings of economic recovery in the latter part of next year,” the report to the incoming Administration says. “The situation cries out for a second stage of temporary economic stimulus, directed squarely at the sector that is at the root of the daunting problems facing the U.S. economy and the financial system: housing.”
Restoring the Housing Finance System
In addition to addressing the crisis at hand, the NAHB report to President-elect Obama lays out a broad range of policies — in housing finance, tax policy, minority homeownership, energy, land use and more — that will be needed to restore the health of the nation’s home building industry over the longer term.
Of particular concern, the report finds, are efforts to restore the housing finance system in the aftermath of the “jolting dislocations” in 2007 and 2008.
“It is essential for the federal government to continue to provide a sound underpinning for the U.S. housing finance system,” the report says. “As demonstrated in the current financial crisis, the private sector cannot be counted on to provide and maintain a consistent and reliable flow of affordable housing credit.
“As the Administration considers changes to the U.S. housing finance system, NAHB urges it to consider the following:
- Fannie Mae and Freddie Mac should retain sufficient federal backing to allow them to reduce mortgage rates and fees.
- Fannie Mae and Freddie Mac should focus on the core business of securitizing mortgages and holding portfolio loans that do not have a secondary market outlet in order to provide reliable mortgage market liquidity and ongoing support for affordable housing initiatives.
- FHA should be restructured as an independent government corporation, within HUD and separate from Ginnie Mae, that would continue its current mission of supporting liquidity, innovation and continuity in the housing finance markets by providing mortgage insurance backed by the full faith and credit of the U.S. government.
- FHA should be freed from federal government constraints on hiring, personnel management and procurement, and should have flexibility to develop and modify programs to react promptly to market developments and needs.”