The Way Forward for Affordable Housing
The fate of low-income and minority families under housing finance reform remains at the heart of negotiations over a Senate bill, highlighting a longstanding split between advocates pushing for affordable rental options and those urging access to homeownership.
A movement to jump-start affordable-housing development is gathering momentum in New York and elsewhere, and bankers are concerned that new mandates would cut into their profits on loans for such projects.
The dismantling of state agencies that funded affordable housing had upended nonprofit development in California.
As Congress struggles to determine the appropriate role for government in the mortgage market, affordable housing may prove a politically charged hurdle on the path to reform.
"When you think you know what you're doing in affordable housing, you're wrong," Sister Lillian Murphy once told Fannie Mae's National Housing Advisory Council. She was referring to the constantly shifting landscape of affordable housing, which she'd experienced first-hand as the chief executive of the nonprofit Mercy Housing.
Sister Lillian, who recently retired from her role at Mercy Housing, was being modest. She has been a leader in doing affordable housing the right way, helping Mercy to achieve a presence in over 200 cities, serving more than 152,000 people in over 45,000 homes. During her tenure at Mercy, she emphasized the need to build whole communities that offer working people not only a place to live but the opportunity to provide for their families, the resources to raise and educate children, and access to health care.
On the occasion of her retirement, it is important to take stock of where we are in affordable housing and consider what else can and should be done.
The country is emerging from a deep and difficult recession. Working families have borne the brunt of the foreclosure crisis, along with rising rents, stagnant wages and meager job growth. Finding a place to call home, whether you own or rent, has rarely been more difficult for many families and working people in America.
As a country, we must ensure that mortgage lending is safe and sound while also accessible to a broad spectrum of creditworthy borrowers.
We are making progress. Increasing clarity from Fannie Mae about credit standards, in combination with lender improvements in their loan manufacturing process, has resulted in a fuller range of potential homeowners having access to credit. Lenders have been removing some of the additional credit restrictions that they implemented on top of the standards set by Fannie Mae and other investors. Some lenders have begun originating loans with lower down payments or offering mortgages to borrowers with a broader range of credit scores than in recent years.
At Fannie Mae, we believe this is a good thing. If lenders meet our full spectrum of allowable credit characteristics, then more families who can afford a sustainable and responsible mortgage will be able to get one.
There is also more work to be done in the area of affordable rental housing. As Sister Lillian has emphasized, we must focus on preserving and building rental homes that are close to job centers, transportation, good schools and quality health care. Renters need quality housing that helps them support their families.
With limited available federal and state support for affordable rental housing in recent decades, it is harder to preserve affordable units. Builders are understandably motivated to construct market-rate apartment buildings in sought-after areas. But new construction of affordable properties is much less frequent, especially in lower-profile markets.
Despite these challenges, there are ways to preserve affordable rental units. Fannie Mae and Freddie Mac offer a range of options to finance existing affordable properties. For example, Fannie Mae offers Green Preservation Plus, a product that allows owners of affordable properties to access additional equity to use for energy and water efficiency upgrades. This allows apartment building owners to improve the property's quality while reducing energy and water expenses, making the property more profitable for the owner and maintaining affordability for tenants.
Sister Lillian has shown us that what is good for communities can also be good for business. There is a growing and compelling need for affordable housing, and lenders, building owners, Fannie Mae and Freddie Mac, governments and nonprofit organizations must work together to meet it. We should honor Sister Lillian's good work by building on her legacy in affordable housing.
Jeffery Hayward is senior vice president and head of Fannie Mae's multifamily business, leading the company's work to support the rental housing market, as well as serving as executive sponsor of Fannie Mae's work to expand access to mortgage credit. Anne McCulloch is Fannie Mae's senior vice president for credit and housing access, leading efforts to ensure access to sustainable mortgage credit for homeownership and quality, affordable rental housing.