This Crazy Election And Our Crazier San Francisco Housing Market


Posted by Arjun Dhingra

So much attention has been on the debates and the campaigns of two of the most polarizing candidates to run for President.  But what will be the impact on housing if either is elected?   Republicans and Democrats have approved party platforms with fundamentally different views on the role of government in housing and housing finance. As the presidential election shifts into high gear, I’ve looked at what both parties and the presidential candidates have to say about the future role of government in housing finance.

The Republican platform makes the case for cutting regulations and the government’s role in housing. The document sharply criticizes the sweeping financial reforms under Dodd-Frank, calling the 2010 law the Democrats “legislative Godzilla” that is “crushing small and community banks and other lenders.” It also singles out the consumer watchdog agency created by Dodd-Frank, the Consumer Financial Protection Bureau (CFPB). According to the Republican platform, the CFPB is “a rogue agency” that if “not abolished, it should be subjected to congressional appropriation.”

Republicans also directly blame the government-sponsored enterprises Fannie Mae and Freddie Mac for sparking the 2008 housing crisis. “The utility of both agencies should be reconsidered as a Republican administration clears away the jumble of subsidies and controls that complicate and distort home-buying,” the document says. Republicans also say the Federal Housing Administration (FHA) should not be involved in guaranteeing loans for high-income earners. Policies should be put in place to encourage market-based solutions that promote sustainable homeownership and reduce the government’s footprint on lending.

Republicans want to end the lending quotas placed on Fannie and Freddie meant to encourage affordable housing. Republicans also want to put a stop to the use of disparate-impact theory in anti-discrimination cases, which basically has allowed the government to sue companies, including several lenders, if it can be statistically proven that the companies have underserved minorities.

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As for the candidate himself, Trump has said little about housing or housing finance while on the campaign trail. His seven-part strategy “to Make America Great Again” doesn’t address housing policy. Trump has been critical of Dodd-Frank. A Trump administration would support actions “close to dismantling Dodd-Frank,” he told Reuters in May. During that interview, however, he declined to provide specifics. Trump previously has criticized Obama-era regulations that he says ceded control of the banks to federal regulators and limited access to credit. His revisions to the tax code would keep the deduction on mortgage-debt interest intact.

Democrats, on the opposite end, make the case for tough regulations on banks and lenders, and aggressive government intervention in the housing market, particularly to expand opportunities for minorities and lower-income residents. “Disparities in wealth cannot be solved by the free market alone, but instead, the federal government must play a role in eliminating systematic barriers to wealth accumulation for different racial groups and improving opportunities for people from all racial and ethnic backgrounds to build wealth,” the platform says. Democrats also say they will vigorously defend, and build on, Dodd-Frank to “tackle dangerous risks in big banks and elsewhere in the financial system. Democrats will not hesitate to use and expand existing authorities as well as empower regulators to downsize or break apart financial institutions when necessary to protect the public and safeguard financial stability, including new authorities to go after risky shadow-banking activities.”

Democrats will also fight Republican attempts to weaken the Consumer Financial Protection Bureau. Democrats oppose the Republican calls to change the CFPB’s structure from a single director to a commission, and oppose eliminating the Bureau’s independent source of funding by making the agency’s budget subject to Congressional approval. Democrats also say the federal government should intervene to stop predatory lending and protect minorities against discrimination.

Hillary Clinton rolled out a housing plan in February while still battling Sen. Bernie Sanders for the nomination. One priority is to address the low homeownership rates among black and Hispanic families. Clinton said she would invest $25 billion to promote sustainable homeownership. She would continue the Obama Administration’s federal initiatives, such as the Neighborhood Stabilization Program, which provides grants for communities to move foreclosed properties back on the market.

Her plan also calls for providing up to a $10,000 down payment match for first-time homebuyers who earn less than an area’s median income. As for supporting affordable-rental units, Clinton said she will defend the current level of Low Income Housing Tax Credits, which has been the primary tool for propelling development of affordable-apartment units. She said she will provide additional credits in communities where the demand for these credits far exceeds the supply. As for the financial industry, Clinton said she will fight a rollback of Dodd-Frank and favors expanding its reach. She also supports policies that expand access to credit, particularly in poorer neighborhood.

Of course, congressional action and process is sure to add to or amend some of these platforms, so we shall see what the future holds.  For now, let’s just see who wins this crazy race and what it will ultimately mean for our crazier SF housing market.

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6Arjun Dhingra