Affordable Housing Takes Center Stage for 2014

NEW YORK ( TheStreet) -- The debate over housing reform heated up in 2013, as policymakers introduced various proposals to wind down bailed-out housing giants Fannie Mae ( FNMA) and Freddie Mac ( FMCC).

But the future of the government sponsored enterprises, or GSEs as they are more commonly called, is unlikely to be determined in 2014.

Given the considerable disagreement in Congress over the role the government should play in the mortgage market in the future and worries that a change from the status quo would derail the housing recovery, few political analysts expect any legislative action until at least 2015.

Instead, the conversation in Washington might shift towards what can be done to increase housing affordability, as the cost of housing soars.

"We are really not making any progress on affordable housing reform," said Rick Lazio, the former Republican Congressman from New York, in an interview with TheStreet. Lazio, who famously ran against Hillary Clinton for the U.S. Senatein 2000 and also ran for Governor of New York in 2010, was formerly Chairman of the House Financial Services Subcommittee on Housing and Community Development.

He now heads the housing and housing finance team at Jones Walker and focuses on affordable housing issues.

"There are no federal tools to deal with the affordable housing problem," says Lazio. "Only one out of every four households eligible for rental vouchers actually receives them. Many of the public housing units are aging and are not being replaced and the HUD (Department of Housing and Urban Development) budget is not growing."

Low interest rates over the last few years have made homes more affordable, but only for those who can actually get mortgage loans. Under current credit conditions, few Americans can qualify for a mortgage. With interest rates rising from their lows and incomes remaining flat, homeownership appears even more out of reach.

Sure, homeownership is not for everyone. It is more a privilege than an entitlement.

But what is less talked about is the fact that the cost of housing has become too high even for renters. A recent report by the Harvard Joint Center for Housing Studies highlighted the growing affordability crisis in housing.

The study found that more than half of all U.S. renters spend more than 30% of their income on rent, considered a threshold for affordability. That is up from a share of 19% a decade earlier. Twenty seven percent of these renters are severely burdened, spending more than half their incomes on rent. That leaves far less for food and other basic necessities.

The cost of housing has increased on the back of rising rents and falling incomes. Between 2000 and 2012 real median rents (adjusted for inflation) nationally increased by 6 percent, while real median income of renters dropped by 13 percent, according to the report.

Meanwhile, the foreclosure crisis, tight credit conditions and economic uncertainty have forced more Americans to rent. The share of Americans who rent has jumped to 35% in 2012 from 31% in 2004.

Supply has not been able to keep pace with demand. Despite a recent pickup in construction activity, the numbers of completed projects are well below levels seen a decade earlier.

For extremely low-income earners, the numbers are particularly stark. In 2011, 11.8 million renters with extremely low incomes (less than 30 percent of area median income, or about $19,000 nationally) competed for just 6.9 million rentals affordable at that income cutoff -- a shortfall of 4.9 million units. These renters have been crowded out by higher-income households.

Housing policy in the years following the crisis has been focused on providing mortgage relief to struggling borrowers. But policymakers have made little headway in ensuring that more borrowers have access to credit and the plight of renters has been largely ignored.

A game changer for housing policy could be the appointment of Mel Watt (D., NC) as head of the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac.

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