Mortgage Relief Merits Only Brief Appearance in Obama’s SOTU

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January 21, 2014; Brookings

We had the same kind of reaction as Brookings visiting fellow Norm Eisen: “If you blinked during the SOTU, you missed it” when the president said the administration would lower mortgage premiums.

What President Obama was referencing was a plan to reduce the mortgage insurance premium on FHA-insured mortgages from 1.35 percent to 0.85 percent. Eisen reports that this change would put “$900 dollars in the pocket of every homeowner who finances, or refinances, with an FHA mortgage in the next year alone—an estimate 800,000 people.” He writes that this will allow 250,000 families over the next three years to become first-time homebuyers, the same numbers mentioned in a White House fact sheet. In his pre-SOTU speech in Phoenix, President Obama said that the FHA change “is going to potentially have an impact over millions of families all across the country.”

Why the negligible mention and completely absent explanation of the FHA mortgage proposal? Eisen notes that the mortgage premium plan had already been announced by the White House Press Office on January 7th and then mentioned by the president in a speech on January 8th.

Moving a million households into homeownership fits the president’s middle-class strategy, but the missing element in federal housing policy is programs that stabilize the housing situation of low-income renters who aren’t likely to become homeowners. All that is needed is to compare the White House’s emphasis on homeownership (with a fact sheet that devotes only one paragraph, the last paragraph, to “strengthen[ing] access to affordable rental housing”) with the comprehensive 2015-2016 policy agenda of the National Low Income Housing Coalition. The three goals of the Coalition’s policy agenda, adopted in November, are as follows:

  •  “Goal 1: To preserve existing federally assisted homes and housing resources. There will be no further loss of federally assisted affordable housing units or federal resources for affordable housing or access to housing by extremely low-income people.
  • “Goal 2: To expand the supply of low income housing. The federal government will increase its investment in housing in order to produce, rehabilitate, and/or subsidize at least 3,500,000 units of housing that is affordable and accessible to the lowest income households in the next ten years.
  • “Goal 3: To establish housing stability as the primary purpose of federal low income housing policy. Housing stability in the neighborhood of one’s choice will be understood and accepted as the desired outcome of federal low income housing programs and as foundational to good health, employment, educational achievement, and child well-being for people with the lowest incomes.

The elements of a policy agenda that addresses those goals include the preservation and improvement of public housing, protecting tenants during mortgage foreclosures, maintaining assisted housing with expiring contracts or mortgages in the affordable inventory, funding housing choice rental vouchers, and providing additional options for reaching low-income tenants through the Low Income Housing Tax Credit. This isn’t a “middle class economics” agenda, but a focus on lower income working families and families dependent on income subsidies such as TANF.

Given the poll-tested political themes in the SOTU, low-income housing programs simply don’t sell, even if in their implementation they generate jobs, boost economic conditions and, in the words of the late Jim Rouse, the visionary founder of the Enterprise Foundation, provide a platform for people up and out of poverty. It is striking that housing received only a half-dozen words in the State of the Union and is just about never spoken of by federal candidates on the campaign trail. Perhaps the 2016 elections, which begin in 2015 with a cacophony of potential candidates, will see nonprofit advocates succeeding in getting the issue of affordable housing into the presidential wannabes’ campaign platforms and stump speeches.—Rick Cohen