October 28, 2015
Wednesday’s Academic Roundup
- Foiled by the Banks? How a Lender’s Decision May Support or Undermine a Jurisdiction’s Environmental Policies that Promote Green Buildings, Darren A. Prum, Michigan Journal of Environmental & Administrative Law, 2015, Forthcoming.
- The Numerus Clausus Principle, Property Customs, and the Emergence of New Property Forms, Yun-chien Chang & Henry E. Smith, Iowa Law Review, Vol. 100, 2015.
- Building Self-Sufficiency for Housing Voucher Recipients: Interim Findings from the Work Rewards Demonstration in New York City, Stephen Nunez, Nandita Verma & Edith Yang, New York: MDRC, June 2015.
- Size Signals Success: Evidence from Real Estate Private Equity, Sebastian Krautz & Franz Fuerst, Journal of Portfolio Management, Vol. 41, No. 5, 2015.
- Debt, Poverty, and Personal ‘Financial Distress’, Stephen J. Ware, 89 American Bankruptcy Law Journal 493 (2015).
- Household Debt and Crises of Confidence, Thomas Hintermaier & Winfried Koeniger, CEPR Discussion Paper No. DP10865.
- Trend-Spotting in the Housing Market, Nikos Askitas, IZA Discussion Paper No. 9427.
- Large-Scale Buy-to-Rent Investors in the Single-Family Housing Market: The Emergence of a New Asset Class?, James Mills, Raven Molloy & Rebecca Zarutskie, FEDS Working Paper No. FEDGFE2015-84.
- How House Price Dynamics and Credit Constraints Affect the Equity Extraction of Senior Homeowners, Stephanie Moulton, Samuel Dodini, Donald R. Haurin & Maximilian D. Schmeiser, FEDS Working Paper No. FEDGFE2015-70.
- Real Estate Fund Openings and Cannibalization, David H. Downs, Steffen P. Sebastian & Rene-Ojas Woltering.
October 28, 2015 | Permalink | No Comments
October 27, 2015
Primer on NYC Affordability Crisis
Enterprise has released a report, 2015 New York City Housing Security Profile and Affordability Housing Gap Analysis. Its conclusions are not shocking, but they are sobering:
- Of 2 million renter households in New York City, nearly 640,000 are low-income and severely cost-burdened.
- There is not a single neighborhood in NYC that provides enough affordable housing to match the number of very low-income households in that community.
- Both the regulated and unregulated rental housing markets of NYC are not meeting the affordable housing needs of low-income renters.
- Even though the market added rent stabilized units between 2011 and 2014, the stock affordable to lower income families declined.
- Competition exacerbates the gap between the number affordable units and the number of low-income renters, forcing many to pay beyond their means. (33)
As with many such studies, it offers a cogent analysis of the problem but offers very little by way of possible solutions. It hints at one such solution when it notes that
By any measure, the demand for affordable housing in New York City outstrips supply – even on the rent regulated market. Low-income households are squeezed even further by competition from higher income households for the cheapest units. The acute shortage forces the majority of lower income households in housing that costs beyond their means. (27)
Increasing the supply of housing will, if everything else is equal, reduce the cost of housing. The de Blasio Administration is certainly on board with an approach to increase density in NYC but many other elected officials are not — or at least resist it when it comes to their own backyards. While more housing is not a sufficient solution to the affordability problem in NYC, it is certainly a necessary component of a solution.
The report also does not deal with the big elephant in the affordable housing policy room — the social demographics of NYC are undergoing a secular shift as the city gets hotter and hotter for global elites. It is unclear how much government can affect that trend, particularly at the local level.
October 27, 2015 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Round-Up
- The Department of Housing and Urban Development has proposed a new rule, Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices Under the Fair Housing Act. HUD seeks to clarify the standards for use in investigating and adjudicating accusations of harassment on the basis of race, color, religion, national origin, sex, familial status or disability under the Fair Housing Act. The proposed standards would specify how HUD would evaluate complaints of quid pro quo (“this for that”) harassment and hostile environment harassment and provide for uniform treatment of Fair Housing Act claims raising such allegations in the federal courts. According to the rule “quid pro quo” and “hostile environment harassment,” as prohibited under the Fair Housing Act, it also adds illustrations of discriminatory housing practices that constitute such harassment.
- The U.S. Treasury’s Community Development Financial Institutions (CDFI) Fund has announced the availability of $5 billion for the 2015 allocation round for New Market Tax Credits (NMTC) Program (applications are available until 12/16/2015). The NMTC program is used to offer 7 year tax credits to attract private investment in the development of low income housing and is widely considered to be a very effective tool for the development of affordable housing.
October 27, 2015 | Permalink | No Comments
October 26, 2015
What’s Pushing Down The Homeownership Rate?
S&P has posted a report, What’s Pushing Down The U.S. Homeownership Rate? It opens,
Seven years after the Great Recession began, a number of key economic factors today have reverted from their short-term extremes. Home prices are rebounding, unemployment is declining, and optimism is rising among economists if not among financial markets that the U.S. economy may finally be strong enough to withstand a rate hike from the Federal Reserve. All these trends point to reversals from the recession’s dismal conditions. Even so, one telling trend for the nation’s economy hasn’t yet reverted to its historic norm: the homeownership rate. The rising proportion of renters to owner occupants that followed the housing market turmoil has yet to wane. Compound this with tougher mortgage qualifying requirements over recent years, and it’s not surprising that the homeownership rate, which measures the percentage of housing units that the owner occupies, dropped to a 50 year low of 63.4% in first quarter 2015. However, the further decreases in unemployment and increases in hourly wages that our economists forecast for the next two years may set the stage for an eventual comeback, if only a modest one. (1)
S&P concludes that many have chosen not to become homeowners because of diminished “mortgage availability and income growth.” (8) Like many others, S&P assumes inthat the homeownership rate is unnaturally depressed, having fallen so far below its pre-bubble high of 69.2%. While the current rate is low, S&P does not provide any theory of a “natural” rate of homeownership (cf. natural rate of unemployment). Clearly, the natural rate in today’s economy s higher than something in the 40-50 percent range that existed before the federal government became so involved in housing finance. And clearly, it is lower than 100% — not everyone should be or wants to be a homeowner. But merely asserting that it is lower than its high is an insufficient basis for identifying the appropriate level today.
I think that the focus should remain on income growth and income inequality. If we address those issues, the homeownership rate should find its own equilibrium. If we push people into homeownership without ensuring that they have stable incomes, we are setting them up for a fall.
October 26, 2015 | Permalink | No Comments
October 23, 2015
Systemic Servicing Failure
Joseph A. Smith, Jr.
Joseph A. Smith, Jr., the Monitor of the National Mortgage Settlement, issued An Update on Ocwen’s Compliance. It opens,
I filed a compliance report with the United States District Court for the District of Columbia (the Court) today that provides the results of my tests on Ocwen’s compliance with the National Mortgage Settlement (Settlement or NMS) servicing standards during the third and fourth calendar quarters of 2014. (2)
The Monitor found that Ocwen (which has been subject to numerous complaints) failed at least four metrics and a total of ten metrics are subject to some type of corrective action plan. As with many of these reports, the prose is turgid, but the subject is of great concern to borrowers who have mortgages serviced by Ocwen. Problems were found with
- the timeliness, accuracy and completeness of pre-foreclosure initiation notification letters
- the propriety of default-related fees
- compliance with short sale notification requirements regarding missing documents
- providing the reason and factual basis for various denials
The Monitor concludes, “The work involved to date has been extensive, but Ocwen still has more work to do. I will continue to report to the Court and to the public on Ocwen’s progress in an ongoing and transparent manner.” (5) This sounds like bureaucratic understatement to me. Each of these failures has a major impact on the homeowners who are subject to it.
The Kafka-esque stories of homeowners dealing with servicers gone wild are graphic and frightening when a home is on the line. And when I read the corrective actions that the Monitor is implementing, it reads more like my 6th grader’s report card than like a plan for a massive corporation. One of them is “ensuring accuracy of dates used in letters.” (Appendix ii) Hard to imagine a grown up CEO needing to be told that.
I have wondered before how a company under court-ordered supervision could continue to behave like this. I remain perplexed — and even a bit disgusted.
October 23, 2015 | Permalink | No Comments
Friday’s Government Reports Roundup
- The National Housing Conference released its 2015 “Paycheck to Paycheck” report, which reports how the gap between housing and wages has increased.
- The National Bureau of Economic Research released a working paper, Housing Booms and Busts, Labor Market Opportunities, and College Attendance, which reports a correlation between the state of the housing market and college attendance.
- CoreLogic released its August 2015 National Foreclosure Report, showing that, since August 2014, there has been a decrease in the amount of foreclosures.
- Center on Budget and Policy Priorities released “How Housing Vouchers Can Help California’s Rental Crisis”.
October 23, 2015 | Permalink | No Comments
