A “future-of-housing” forum sponsored by the National Association of Home Builders (NAHB) in Washington, D. C., with housing industry experts and Senators Bob Corker (R-TN), Jon Tester (D-MT) and Johnny Isakson (R-GA) indicated most participants agree the private sector should play a greater role in mortgage financing, but with some level of government support to ensure stability and liquidity. Peter Wallison of the American Enterprise Institute says lowering the conforming limits of the government sponsored enterprises (GSEs) will make a path for the private sector to take that business. “If you simply made those changes and authorized the withdrawal of the GSEs, you would find we would gradually move to a completely private system, which is where I think we should be going,” he states. Others say during a tough time for the housing industry private credit would simply disappear, and that the Federal Housing Authority (FHA) saved the day during the recent crisis. Sens. Corker and Tester are among ten bipartisan sponsors of the Housing Finance Reform and Taxpayer Protection Act (S. 1217), which provides a federal backstop to mortgage lending. Isakson says every provision in the Tax Code must be thoroughly examined to determine if it is viable in the long term. Eric Belsky, managing director of the Joint Center for Housing Studies at Harvard University says household formation is particularly slow, as many over 30 children remain with their parents due to economic necessity. NAHB Chief Economist David Crowe says the housing market is about half-way back, as credit remains tight and buildable lots are scarce. On the topic of tax reform, several housing experts agree the mortgage interest deduction plays an important role in shaping housing demand. NAHB Economist Robert Dietz says, “The nonpartisan Tax Foundation found that if we repealed the mortgage interest deduction and lowered marginal tax rates then GDP would decline by $100 billion annually,” plus it would cause home values to decline. AS MHProNews learned, he added, “Considering it only takes a 6 percent drop in home values to wipe out $1 trillion in household wealth, the economic consequences could be significant.”
