The Housing Commission of the Bipartisan Policy Center (BPC) recently released proposals for reforming federal housing policy. The Housing Commission report, issued on February 25, 2013, proposes a number of changes to address the challenges faced by the housing sector. The Housing Commission focused on:

Housing Finance Reforms

The Housing Commission proposes the following policy reforms to create a new system of housing finance that will support homeownership and provide for a vibrant affordable rental housing market:

• A reduced government footprint and the encouragement of greater participation by risk-bearing capital will protect taxpayers while diversifying funding sources.
• Fannie Mae and Freddie Mac would be replaced with an independent, wholly owned government corporation, the "Public Guarantor," that would provide a limited catastrophic government guarantee for both the single-family and rental markets. The Public Guarantor would not buy or sell mortgages or issue mortgage-backed securities; rather, it would guarantee investors with the timely payment of principal and interest on the securities, similar to Ginnie Mae.
• Originators, issuers of securities, credit enhancers, and mortgage servicers would be private-sector entities fully at risk for their own finances with no government guarantees. The limited catastrophic guarantee would only be triggered after all private capital ahead of it has been exhausted. The Public Guarantor also would have significant standard setting and counterparty oversight responsibilities.
• The size of the government-sponsored enterprises' (GSE) portfolios would be reduced, and GSE pricing structures would be moved closer to private capital. In addition, the report recommends that Congress should gradually lower the GSE loan limits to allow larger loans to flow to the private sector.
• A more targeted Federal Housing Administration (FHA) would return to its traditional mission of primarily serving first-time homebuyers.

The Housing Commission has identified a number of regulatory obstacles that restrict mortgage credit and inhibit the housing market's recovery. The report recommends that the President and the Department of the Treasury, along with various federal banking agencies, assess the impact of current and pending regulatory requirements on the affordability and accessibility of mortgage credit. The report also recommends counseling for prospective borrowers, exploration of alternative homeownership models, and improving the availability of financing for mobile homes.

Affordable Rental Housing

To respond to the increasing need for affordable rental housing among the most vulnerable households, the Housing Commission recommends the following:

• Reformed Housing Choice Voucher program that, over time, limits eligibility to those with extremely low incomes (at or below 30 percent of area median income (AMI)); currently, the program serves families earning up to 80 percent of AMI, but focuses 75 percent of new admissions on families earning incomes at or below 30 percent of AMI
• Expansion of the Low-Income Housing Tax Credit (LIHTC) by 50 percent beyond current funding levels and the provision of additional federal funding to help close the gap between the costs of producing or preserving LIHTC properties and the equity and debt that can be raised to support them
• Additional federal funding beyond current levels to address the capital backlog and ongoing accrual needs in public housing to preserve the value of prior investments and improve housing quality for residents
• Short-term emergency assistance for low-income renters (those with incomes between 30 and 80 percent of AMI) who suffer temporary setbacks
• A new performance-based system for delivering federal rental assistance that focuses on outcomes for participating households, while offering high-performing housing providers greater flexibility to depart from the program rules, similar to the flexibility provided to participants in the Moving to Work (MTW) program

Aging in Place for Seniors

To address the growing number of seniors, many of whom desire to age in place, the Housing Commission recommends better coordination of federal programs that deliver housing and health care services to seniors and better integration of aging-in-place goals into HUD programs. The report also recommends that Congress and the Office of Management and Budget take into account savings to the health care system made possible by the use of housing programs with supportive services.

Rural Housing

The Housing Commission recommends enhancing the capacity of the U.S. Department of Agriculture (USDA) to serve more low-income rural households through incremental funding for the Section 502 Direct Loan program. The report recommends that any additional funding for the Section 502 Direct Loan program should be conditioned on a program evaluation.

Ballard Spahr will continue to follow reactions to and potential implementation of the Housing Commission's recommendations. For more information, please contact Sharon Wilson Géno at 202.661.2218 or genos@ballardspahr.com, Amy M. Glassman at 202.661.7680 or glassmana@ballardspahr.com, or Nydia M. Pouyes at 202.661.2216 or pouyesn@ballardspahr.com.