There are myriad agencies, committees, and task forces in the federal government that focus on an aspect of housing. From major institutions like the U.S. Department of Housing and Urban Development to the U.S. Senate Committee on Banking, Housing, and Urban Affairs to the U.S. Interagency Council on Homelessness, there are a lot of distinguished people who spend at least a portion of their professional lives thinking about housing.
Rep. Denny Heck, a Democrat from Washington State, has a keen interest in housing. “It’s the single most important investment families ever make, it’s the most important element of their retirement security,” he says. “We also know that it is vitally important to the health of the overall economy, and as such fits into the pro-growth rubric of New Democrats.”
He is one of 52 members of the New Democrat Coalition and is a co-chair of its new task force on housing along with Reps. Juan Vargas of California and Stephanie Murphy of Florida. Heck went to the coalition’s leadership shortly after session got underway in January and got the green light to put the task force together.
Over the next 18 months the task force will conduct hearings and gather research in order to deliver a report. “The hope is a pretty full-throated expression of the principles to guide us, but I also hope, and I’m pretty optimistic, that we can have a handful of very specific and innovative approaches,” Heck says. “We want to think outside the box, we want to think about how is it that we can approach these things that are not hide-bound.”
Of the government bodies that already focus on housing, Heck says, none are looking at the total picture. Each has its own goals and marching orders but don’t take into account how each action, no matter how seemingly small, causes a reaction.
“The provision of housing is part of an ecosystem and that policies in one area affect outcomes in other areas,” he says.
“Let’s never have another housing policy before us or an appropriation for a program where we don’t ask ourselves how does it affect the rest of the housing market?” he adds.
In a conversation with BUILDER, Heck shared his thoughts on key issues in the housing world, including government-sponsored enterprise reform, which he says best captures his ecosystem approach.
BUILDER: What are your thoughts on a potential GSE reform?
Heck: There isn’t a lot of consensus on GSE reform yet, although I’m very interested to see that Secretary (Steven) Mnuchin said GSE reform is high on his list.
The one piece of GSE reform that seems to have consensus is that we need to get more private sector risk bearing on the front end of this stuff. That necessarily would increase long-term mortgage costs, and the best estimates I’ve read is 25-50 basis points. If you ask the private sector to bear it on the front end and then the federal government is the backstop for the rest, then the overall cost is going to ratchet up. If you increase the cost of a 30-year fixed(-rate) mortgage by 50 basis points you just kicked to the curb a whole bunch of people who could’ve qualified but no longer can. So there’s a consequence of looking at that situation and seeing that that is emerging consensus on GSE reform.
So what are we doing for the people we’re kicking to the curb? And the answer is nothing.
There’s another element to this that I think really speaks to the complexity of housing. This isn’t just federal. This is federal, state, and local. We’re principally concerned about do people have access to the ultimate icon of the American dream, home ownership? And what are the policies that relate to that that cause the market to become so imbalanced that they don’t? One of the biggest is supply and demand and the local land use practices of the local government. So it’s not just GSE reform that kicks people to the curb and creates imbalance, it’s also if local governments are not paying sufficient attention to it.
We’ve got a billion levers out here, there are 9 billion federal programs, so it would seem…is there a way to use them as levers to incentivize local government to mitigate imbalances when they become egregious? Can we incentivize local governments who are allowing this imbalance to become so difficult?…at the end of the day this affects our bottom line. Because if they don’t deal with imbalances, what they do is they create more people who are rent burdened and more people who are rent burdened create more people who are homeless. If they choose not to (make the right decisions) maybe they’re less rewarded, if they choose to, maybe we have a mechanism that helps them out.
B: What can be done about the high cost of housing in many markets?
H: I’m a market-based guy and I believe that there will always be varying degrees of imbalance that cause absence of supply when there’s too much demand that will drive up prices, the issue is how egregious do we allow that to be before we have some policy that seeks to mitigate it.
Often times local governments are not willing to take up the policies that will deal the access to dirt issue, and I say that more broadly because I don’t just mean subdivisions, because of NIMBY pushback. They don’t accept responsibility for what else they’re causing to happen. If you don’t allow mother-in-law apartments, or you don’t allow tiny houses, or if you don’t allow denser housing to be built in an area that begins to encroach upon a traditional neighborhood, what you’re doing, city councilman, is you’re driving up the cost of housing. And it may be fine for all your friends who can afford the down payment on that ever-increasing cost of a house, but that cascades down. You’ve now increased rents as well. Now you’ve got a whole category of people who are paying an increasing share of their income for rent so now they’re all living together until they’re 33 years old, or staying with mom and dad, but you’re also really jamming the people on the low end of the totem pole. Accept responsibility for that now, city councilman, because you’re doing that.
B: How do home builders factor in?
H: Home builders are greatly frustrated by quite simply a lack of access to dirt. I think that’s a very fair criticism on their part. Basically what they’re saying is this is a supply and demand issue. How are we going to meet the demand with an adequate supply of housing? Unless local governments are willing to build a wall, the fact is people want to live here and how are you going to provide for it?
B: The costs associated with building a home have risen in recent years. In some states, the push to build sustainably has come to the forefront, which then increases costs for builders. How do you balance building sustainably with offering affordable homes?
H: I don’t know the answer. It’s an example of when policy makers take up an issue they shouldn’t reach a conclusion on until they’ve asked and answered that question.
All of the concerns about building more sustainably are valid. Does that mean you should adopt them in toto? Not until you’ve [determined] how’s this is going to cost burden the house. What’s that going to do to availability? The argument on the other side of it would be an argument against any building code. Then the costs go way up for everybody.
What can be done about the issue of homelessness?
H: In recent years the country has upped its pledge to reduce veteran homelessness. Out of that came a multitude of lessons that tell us we can do this, we can end homelessness.
Putting housing first is big. If you’ve got a substance abuse or mental health issue, we’re not going make any material progress on those issues if you don’t have a pillow to put your head on, a blanket to put over your body, and a roof over your hear. We will not. I am a big believer that we don’t put enough priority on just getting people what I call “pillow, blanket, roof.”
B: What are your feelings on Ben Carson as secretary of the U.S. Department of Housing and Urban Development?
H: I was very eyebrow-raising surprised at his absence of any experience in this field. So it think it’s T.B.D. all in uppercase letters. It’s hard to react to what he’ll intend to do in housing when there’s really, for all practical purposes, zero paper trail.
B: What are your thoughts on the potential repeal of the Dodd-Frank Act?
H: We’ve sent this movie before and it didn’t work out very well.
Some responses were edited for clarity.
