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Low Income Housing: Obama's Legacy and Trump's Plan

The Trump administration took office promising radical change, and families receiving government housing assistance are wondering how they will be affected. We look at some of the early signs.

The US Government takes an active role in promoting home ownership, opening ways for low to moderate income Americans to own homes and helping distressed homeowners and renters. The US Department of Housing and Urban Development (HUD) is responsible for government efforts to build strong, sustainable, inclusive communities and affordable homes for all. HUD's $50 billion mandate includes strengthening the housing market and economy, meeting the need for affordable rental homes, and building discrimination-free communities.

Obama's HUD
The Obama administration took office at the peak of a catastrophic real estate crash. Home values plummeted, foreclosures soared, and millions of homeowners found themselves "underwater": owing more money on their homes than the homes were worth in the new market. Given those realities, housing policy was a natural priority.

For the eight years under the Obama presidency, Americans have built nearly $7 trillion in housing wealth through HUD programs. The Federal Housing Administration (FHA) has provided new purchase mortgages to 5.7 million homebuyers and refinance mortgages to 3.4 million homeowners since 2009. This includes more than 1.2 million borrowers, of which included more than 720,000 first-time homebuyers, in 2016. HUD has provided rental assistance to five million households, and over $18 billion of recovery investment to communities hit by natural disasters.[1]

Major HUD Programs
The Fair Housing Act of 1968 prohibits discrimination in the sale, rental and financing of dwellings based on race, color, religion, sex or national origin. A 1988 expansion of the Act included disability and familial status.[2]

Affirmatively Furthering Fair Housing (AFFH), an Obama-era initiative, expands on the Fair Housing Act in an effort to prevent and end housing segregation. HUD provides communities with resources and technical assistance to complete fair housing assessments prior to receiving HUD funds. AFFH requires cities to evaluate the presence of fair housing in their communities and to look at racial and financial segregation. Communities are required to report instances of segregation and report what they plan to do to correct the situation. AFFH requires cities to complete this assessment in order to receive federal funds from HUD. The initial round of assessments has included 15 communities.[1]

Federal Housing Administration Loans and the Mutual Mortgage Insurance Fund have been helping Americans become homeowners since 1934. FHA loans provide access to mortgage loans with low down payments and reasonable terms to qualified low and middle-income buyers. Borrowers purchase mortgage insurance to protect lenders from default and make the program sustainable. The Obama administration reduced the premium that borrowers pay for mortgage insurance, lowering costs for FHA loan holders.

Housing and Rental Assistance provides housing assistance for millions of America's poorest citizens, including children, the elderly, and the disabled. Over five million households receive help through rental assistance, but 14 million are eligible for it.[3] Programs like privately owned subsidized housing, public housing, and Section 8 vouchers do their part to give assistance to families seeking housing.

Connect Home began over the summer of 2016, connecting thousands of public housing residents to high-speed internet. Connect Home strives to close the "homework gap" by working with internet service providers in 27 cities and one tribal nation to grant free or low cost access to high speed internet for students in low income housing.

Opening Doors, also an Obama-era initiative, was the first federal program designed to prevent and end homelessness. Since its beginning in 2010, overall homelessness has dropped by 14 percent. Homelessness by veterans is down nearly 50 percent. These results are due to the collaboration between HUD and the US Interagency Council on Homelessness.[1]

The housing market has grown and stabilized since the crisis of 2009, but housing problems persist in both urban and rural America. What changes can we expect as a new administration turns its attention to housing issues?

Donald Trump and Dr. Ben Carson
The Trump administration has nominated former Presidential candidate Dr. Ben Carson as Secretary of the Department of Housing and Urban Development. Carson is a retired neurosurgeon. He has not worked in government or led a very large department. His personal experience with housing policy includes living as a youth in a poor community and needing government food assistance.[4] Carson has made it clear that he is still learning about his new position, and it is far too early to draw any clear conclusions about the direction he will bring to the agency. He has already promised to defend HUD's budget rather than slash it, as some feared.

We can gain some indications of Carson's beliefs and policy preferences from his statements to date. In a 2015 opinion piece in the Washington Times, Carson accused Obama of practicing "social engineering", referring to a program designed to encourage the development of affordable housing "primarily in wealthier neighborhoods with few current minority residents."[5] Carson closed his argument with this statement:

"...government-engineered attempts to legislate racial equality create consequences that often make matters worse. There are reasonable ways to use housing policy to enhance the opportunities available to lower-income citizens, but based on the history of failed socialist experiments in this country, entrusting the government to get it right can prove downright dangerous."[5]

Carson's article offered no clear indication of what he believes to be "reasonable ways to use housing policy", but the statement does suggest that he has some specific policy plans. One general statement of intent suggests that Carson intends to continue HUD's support for low-income housing projects:

"Simply put, it's difficult for a child to learn at school if he or she doesn't have an adequate place to live. In these situations, government can and should help".[6]

During Carson's confirmation hearing, he indicated support for affirmative action and integration, but stated:

"I do have a problem with people on high dictating it when they don't know anything about what's going on in the area. What I believe to be the case is that we have people sitting around in desks in Washington, D.C., deciding on how things should be done."[7]

Carson stated at his confirmation hearing that he supports essential HUD programs, including rental assistance and community development block grants. When asked by North Carolina Republican Senator Thom Tillis, "What's the best thing we can do for people with government assistance?" Carson replied, "Get them off of it."[7]

These comments present a mixed picture. On one hand, Carson clearly believes that the government has a role to play in helping low-income Americans find acceptable housing. At the same time, he is skeptical about the effectiveness of the methods currently employed, and is opposed to any proactive government effort to change racial mixes or other demographic features of neighborhoods. It is simply too early to reach any conclusion on how this will affect housing policy. Aside from the questions over Carson's own policy preferences, we have to understand that direction from the White House and Congress will also play a major role in determining policy directions and available funding. We cannot reach conclusions on direction until more clarity emerges from all branches of government.

Initial Moves
The first official act of the Trump Presidency, only hours after the inauguration, was to sign an Executive Order rescinding Obama's reduction of mortgage insurance rates for FHA loan holders. The practical outcome of that move will be higher mortgage payments: an FHA borrower with a $200,000 mortgage will pay $500 more in 2017 than they would have without the rule change. It is not clear whether this is an indication of long-term policy or a simple one-off move.

The Bottom Line
The housing market has grown and stabilized since the crisis of 2009, which saw millions of homeowners lose their homes to foreclosure. New challenges face the Trump Administration, including an aging population, soaring income inequality, an affordable housing crisis that remains in many areas of the country, and new environmental threats to health such as lead-contaminated homes and water. How these factors will affect the emerging housing policy, and what specific policies will emerge, is at this point an entirely speculative question. Low-income homeowners will have to monitor the emerging policy landscape carefully and respond according to their political beliefs.