Toomey: Misguided Government Policy Is Making Housing Unaffordable
– At today’s U.S. Senate Banking Committee hearing, Ranking Member Pat Toomey
(R-Pa.) said that to reduce inflation and make housing in America more
affordable, the government should pursue reforms that leverage the power of
free enterprise to increase housing supply and make markets more competitive.
Toomey also reiterated his desire to work with his colleagues in Congress and
with the administration to seek consensus on housing finance reform. In March
2021, Senator Toomey released
a set of principles to help end the government sponsored enterprise
(GSE) duopoly and foster a liquid secondary mortgage market while protecting
taxpayers and promoting equitable access for all lenders. These principles
share considerable overlap with the principles Chairman Sherrod Brown (D-Ohio)
outlined during a hearing back in January.
Member Toomey’s opening remarks, as prepared for delivery:
you, Mr. Chairman.
had at least six hearings on housing this Congress, including even two just on
private equity’s minor role in housing. There has been, however, one
conspicuous omission. We have not had a single hearing on the government’s role
in driving up housing costs.
the last 16 months, Democrats and the administration dropped hundreds of
billions in helicopter money to stimulate an already strong economy. $80
billion went to rental assistance, vouchers, and other housing subsidies. And
that’s above and beyond the hundreds of billions in ordinary housing subsidies
we spend every year. Despite record demand, the Fed continued to hold mortgage
rates down at near record lows.
as this administration has given us the highest inflation in 40 years, it has
also given us astonishing increases in housing costs. House prices skyrocketed
almost 17 percent in the last year, while rents jumped 12 percent.
of my colleagues seem to be willfully blind to government’s role in driving
this inflation. But the problem is actually bigger than that. Across these six
housing hearings, this Committee has spent most of its time grasping for
justifications to spend even more of the taxpayers’ money and expand
aside the question whether the federal government should have a role in the
housing market, we should at least ask ourselves do we really need to spend
even more taxpayer money on housing. A more skeptical framework should guide us
in these hearings.
in housing or otherwise, we should ask, “where is the market failure?” And we
should ask whether the taxpayers’ already generous safety net is somehow still
inadequate. In answering these questions, we should bear in mind the risk that
the government solution will be worse than the problem. That risk of government
failure is particularly acute when it comes to housing.
number and cost of housing subsidies boggles the mind. There is the mortgage
interest deduction, capital gains exclusion on home sales, tax deduction on
property taxes, FHA, VA, and USDA mortgage insurance and Ginnie mortgage-backed
securities guarantees, down payment assistance, and the Low Income Housing Tax
also an overlapping array of HUD programs, including project-based rental assistance,
tenant-based rental assistance, public housing, section 202 housing for the
elderly, section 811 housing for persons with disabilities, section 521 rural
rental housing, CDBG, HOME block grants, and homelessness assistance.
then we have the GSEs, which subsidize more than half of single-family mortgage
debt. After 50 years and many hundreds of billions of dollars in subsidies,
there’s been no meaningful change in homeownership rates. In 1970, the
homeownership rate in America was 64%. Now, it’s 65%. Black homeownership
levels are similar to when the Fair Housing Act was passed in 1968.
government policies have mostly just made housing more expensive. The inference
is inescapable. When it comes to housing, government has often been the problem,
not the solution.
we will likely hear that the government should further subsidize senior
citizens’ ability to “age in place.” To the extent seniors want to stay in
their homes, that’s certainly their right.
we shouldn’t lose sight of the fact that it often makes perfect sense for
seniors to decide to move out of the three- or four-bedroom, two-story home
where they raised their children. Many seniors downsize to apartments,
mother-in-law suites, or smaller houses.
many cases, the seniors had already built up significant home equity. By
selling their home, they have new and sometimes very significant resources that
they can use for any purposes they see fit. And so downsizing can be a good
a senior downsizes, a new home comes on the market. Perhaps the buyer will be a
young couple looking to start a family. This turnover matches a scarce resource
to its highest and best use. We should be careful that any government
interventions do not, as they so often do, tend to further ossify the market
against these dynamics.
reduce inflation and make housing more affordable we should pursue reforms that
leverage the power of free enterprise to increase housing supply and make
markets more competitive. In January, the Chairman reiterated the housing
finance reform principles that he released in 2019. His principles overlap
considerably with the reform principles I’ve released.
hope to be able to work with the Chairman to develop consensus on this critical
issue. Meanwhile, I hope the administration will finally engage on reform.
Treasury has still not met its obligation to deliver a reform plan to
Congress—it’s now 6 months overdue.
of seeking out any excuse or pretext to regulate and spend, the administration
should look to opportunities for bipartisan legislation, like housing finance
reform, that relies on free enterprise—not government—to make housing
affordable for all Americans, including seniors.
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