Julián Castro: Affordable housing needs new approach
Former New York City Mayor Fiorello LaGuardia once said"there is no Republican or Democratic way to clean a street . . . but merely a right way and a wrong way." As a former Mayormyself, I know that getting things done requires partnership, not partisanship.
Today, our economy is growing and American businesses are hanging help wanted signs again. At the same time, we're seeing encouraging signs of recovery in our housing markets with home sales, housing starts and property values all rising in recent years. But far too many families are being locked out of this recovery.
A few years ago, bad loans and risky investments prompted our nation's housing crisis. It is certainly true that during these boom years, it was too easy to get a home loan — today, it's too difficult. Clearly, the pendulum has swung too far in the other direction, pushing the dream of home ownership out of reach for too many credit-qualified Americans. This has to change.
According to the Urban Institute, the average credit score for loans sold to Fannie Mae and Freddie Mac this year is roughly 750. Currently, there are 13 million people with credit scores ranging from 580 to 680 which would leave many qualified borrowers out in the cold in today's credit environment. Even former Federal Reserve Chairman Ben Bernanke recently admitted to having trouble refinancing his mortgage. If a former Fed chair is having trouble getting a decent mortgage loan, imagine the frustrations of an average American working family.
To improve our housing market and our economy, Congress needs to act to reform our nation's housing finance system. Policymakers on both sides of the aisle agree that we need to attract private capital back to the market, establish certainty for lenders and protect taxpayers from future market downturns. The Senate Banking Committee has taken a huge step forward by passing the bipartisan Johnson-Crapo bill. Now we must keep pushing until housing reform legislation gets over the finish line once and for all.
In the meantime, we are doing all we can at HUD to get capital flowing again. The Federal Housing Administration launched a program that will allow homeowners who commit to housing counseling to qualify for reduced mortgage insurance premiums. FHA is also improving the way it does business and clarifying its rules to reduce uncertainty for mortgage lenders. I'm committed to working across all boundaries to make it easier to do business with FHA and to provide the clarity the mortgage industry needs to work with a wider range of creditworthy borrowers. But HUD can't do it alone. Lenders need to come to the table and help expand credit for responsible folks.
Of course, expanding home ownership can't be our only focus as we continue to struggle with an unprecedented rental affordability crisis. In most of our largest metropolitan areas, renting is more expensive than ever. Whether you're a young professional, or the new HUD Secretary suffering from sticker shock over the rents being charged in Washington, D.C., finding a decent home you can afford to rent is a challenge. For lower income families, it's nearly impossible.
Much of our nation's public housing stock is in desperate need of improvement and millions of households are spending more than half their incomes on rent or living in substandard conditions. HUD is seeking greater authority from Congress to allow local public housing agencies to do what every private owner can already do: to access financing through the substantial equity they already have in their properties. We need to switch gears and tap into the power of the marketplace to preserve our dwindling supply of affordable rental housing in this country.
Government can't address these problems alone — nor do we want to. As a former mayor, I know that progress often begins from the ground up, and we're going to support innovative solutions wherever they can be found. As HUD Secretary, I will work closely with partners across the board to make this an era of expanding opportunity for all Americans. With the stakes so high, we can't afford to fail. Housing is not a Republican or Democratic issue. It's an American issue.
Julián Castro is secretary of the U.S. Department of Housing and Urban Development
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