2020 GDP Drop of 3.5%

Update 502 – 2020 GDP Drop of 3.5%
Really Hits Home… Owners & Renters

The economy shrank by 3.5 percent in 2020, the largest contraction since 1946 and the first annual decline since 2009. Consumer spending specifically took a major hit, decreasing from Q3 to Q4 — an alarming anomaly and a reminder that disposable income, the key to recovery, is steadily shrinking.

Despite a strong housing market, the drop in consumer spending means renters are in trouble too. A new administration and Democratic control of Congress ensure that housing policy will be at the forefront of the immediate debate. We have a look at the housing sector, the policy problems it raises, the Biden administration’s response, and the congressional perspective below.

Good weekends all, 

Dana

——-

Yesterday, the Senate Banking, Housing, and Urban Affairs Committee held a confirmation hearing for Rep. Marcia Fudge, President Biden’s nominee for Secretary of Housing and Urban Development. The longtime Ohio representative would become the first woman in more than 40 years to lead HUD and only the second woman of color in its history. 

If the Senate confirms Fudge, she will be tasked with reinvigorating the enforcement of anti-discrimination laws, delivering relief, and developing Biden’s housing policies moving forward. Below we examine the challenges Biden will face and his plans to address them.

Pandemic Relief for Renters

With more than 10.5 million families behind on rent and another 8.7 million homeowners behind on mortgage payments, the United States faces a housing crisis eclipsing that which took place during the Great Recession. Thanks to a federal eviction moratorium, the impending crisis has been temporarily forestalled, but $57 billion in back rent remains unaddressed. Without major financial relief for renters, our economy is likely to plunge into a double-dip recession when the bill comes due and millions of families are unable to stay in their homes.

The COVID relief bill passed in December partially alleviated this problem by distributing $25 billion to landlords or utility companies on behalf of renters hit worst by the pandemic. While this action is projected to cut the number of renters facing eviction by around three million by June, it does not fully resolve this crisis. The Biden administration’s American Rescue Plan includes an additional $30 billion for renter assistance and $5 billion to address homelessness. The plan also extends the eviction moratorium, scheduled to expire in March, through September. 

If enacted, the American Rescue Plan would reduce back rent to pre-COVID levels, but does not address the structural housing inequalities from before the pandemic. Black and Hispanic renters are currently 3 and 2.4 times more likely to be underwater on rent than white renters. Additionally, while homeowners’ saving rates have increased dramatically during the pandemic, the savings of all renters have barely budged. 

Biden’s Plan…

Biden’s stimulus plan may offer some short-term relief, but the administration faces a much longer-term affordability crisis. Following the 2008 financial crisis, the affordable housing stock plummeted, resulting in higher prices for renters and homeowners. Per a report from the Joint Center for Housing Studies, 46 percent of renters and 21 percent of homeowners spent more than 30 percent of their household incomes on housing in 2019. 

These trends have only worsened during the pandemic. To address the affordability crisis, Biden has proposed a $600 billion housing plan that includes: 

  • Creating a First-time Buyer and Renter’s Tax Credit: Biden proposed an advanceable and refundable tax credit of up to $15,000 to help first-time homebuyers with their down payment. The plan also assists renters who earn too much to qualify for housing vouchers by allowing them to write off housing costs that exceed 30 percent of their income. Vice President Kamala Harris introduced a similar proposal last Congress in the Rent Relief Act. 
  • Eliminating Certain Local and State Housing Regulations: Under Biden’s proposal, states and localities wishing to take advantage of new federal investments in housing will be required to eliminate certain regulations that reduce affordable housing availability.
  • Expanding the Low Income Housing Tax Credit (LIHTC): The LIHTC subsidizes the construction, rehabilitation, and acquisition of affordable rental housing. 
  • Establishing an Affordable Housing Fund: Biden’s plan would establish a $100 billion fund to build and upgrade affordable housing for renters and buyers. The policy would also provide $20 billion to the Housing Trust Fund, which offers affordable housing construction grants to states. 

Beyond issues of affordability, systemic housing discrimination contributes to severe racial disparities in homeownership. Black homeownership today is at its lowest level since at least 1970. Biden’s housing plan seeks to increase enforcement of existing laws, including the Fair Housing Act and the Community Reinvestment Act. This week, the administration took its first step to fight redlining. The executive order instructs HUD to review the impact of harmful fair housing rules adopted by the Trump administration and reinstate the disparate impact and fair housing rules. 

… and Congress’ Approach

Last Congress, House Financial Services Committee Chair Maxine Waters made housing reform a centerpiece of her agenda. At the beginning of this year, the Chairwoman praised Biden’s first steps to reinstate the Fair Housing Act.

To further housing justice, the Place to Prosper Act and the Housing Fairness Act provide starting points for future legislation. To address the issue of affordability, the following housing bills will likely be reintroduced in the 117th Congress:

  • American Housing and Economic Mobility Act (H.R.1737)
  • Affordable Housing Credit Improvement Act (H.R.3077)
  • Ending Homelessness Act (H.R.1856)
  • Housing is Infrastructure Act (H.R. 5187)
  • Rent Relief Act (S.4519)

Housing Finance Reform

Days before President Biden’s inauguration, then-Treasury Secretary Mnuchin and Federal Housing Finance Agency (FHFA) Director Calabria permitted Fannie Mae and Freddie Mac to retain all of their earnings for the first time since entering government conservatorship. The agreement puts Fannie and Freddie on track to meet the requirements of the FHFA’s post-conservatorship capital framework. Per Calabria, Fannie and Freddie could build up the capital needed to exit conservatorship as soon as this year, but it’s unlikely that this timeline will be met as President Biden takes the reins.

The Biden administration must decide whether to follow the path set forth by the Trump administration or forge a new one. Incoming Senate Banking Committee Chairman Brown has suggested transforming the two GSEs into government utilities. This policy would allow the GSEs to continue providing broad access to affordable mortgage credit with little risk. But the proposal would come at a cost to Fannie and Freddie shareholders who have not received dividends for over a decade. 

The fate of the GSEs is not just up to the Biden administration. The Supreme Court is expected to rule on a case this spring regarding the leadership structure of the FHFA and the legality of an agreement that required Fannie and Freddie to deliver nearly all their profits to the Treasury. The outcome of the case may grant Biden the ability to fire Calabria and nominate a new director, providing the administration with even more power to determine the GSEs fates. 

Fudge To Lead HUD

Rep. Fudge appears set for a quick confirmation. Though some Republicans are skeptical of her progressive record in Congress, her home state Republican senator spoke glowingly of Fudge, calling her a friend and noting their collaboration over many years. 

As a former mayor, Marcia Fudge brings a progressive perspective back to HUD, particularly ob urban housing disparities. If confirmed, Fudge will use her powers to expand rental assistance, increase access to Section 8 vouchers, and create more homeownership opportunities. She will also play an important role in developing, promoting, and implementing Biden’s legislative housing agenda.

61 thoughts on “2020 GDP Drop of 3.5%”

  1. Thanks for the sensible critique. Me and my neighbor were just preparing to do some research about this. We got a grab a book from our area library but I think I learned more clear from this post. I’m very glad to see such excellent info being shared freely out there.

  2. The other day, while I was at work, my cousin stole my apple ipad and tested to see if it can survive a twenty five foot drop, just so she can be a youtube sensation. My iPad is now destroyed and she has 83 views. I know this is totally off topic but I had to share it with someone!

  3. Very nice post. I simply stumbled upon your blog and wanted to say that I have really loved browsing your weblog posts. In any case I will be subscribing on your rss feed and I am hoping you write again soon!

  4. What i don’t realize is if truth be told how you
    are no longer actually much more neatly-liked than you might be right now.
    You’re so intelligent. You realize thus considerably in relation to this subject, made me personally imagine it from numerous
    various angles. Its like women and men don’t seem to be fascinated except it is something to accomplish with Girl gaga!

    Your personal stuffs excellent. At all times handle it up!
    0mniartist asmr

  5. Good day I am so excited I found your site, I really found you by accident,
    while I was browsing on Digg for something else, Regardless I am
    here now and would just like to say thanks for a tremendous post and a all
    round entertaining blog (I also love the theme/design), I don’t have time to read through it all at the moment but I
    have bookmarked it and also added your RSS feeds, so when I have time I will
    be back to read more, Please do keep up the fantastic b.
    asmr 0mniartist

  6. Hey there! I know this is somewhat off topic but I was wondering which blog
    platform are you using for this website? I’m getting fed up of WordPress because
    I’ve had problems with hackers and I’m looking at alternatives for
    another platform. I would be awesome if you could point me in the
    direction of a good platform.

  7. We’re a group of volunteers and starting
    a new scheme in our community. Your web
    site offered us with valuable information to work on. You have done a formidable job and our whole community will be grateful to you.

  8. Does your blog have a contact page? I’m having problems locating it but,
    I’d like to send you an email. I’ve got some creative ideas for your blog you might be interested in hearing.

    Either way, great website and I look forward to seeing it develop over time.

  9. If some one wishes expert view concerning running a blog then i propose him/her to pay
    a quick visit this blog, Keep up the nice work.

  10. scoliosis
    Hello would you mind letting me know which web host you’re using?
    I’ve loaded your blog in 3 completely different web browsers and
    I must say this blog loads a lot quicker then most. Can you recommend a good hosting provider at a
    fair price? Thank you, I appreciate it! scoliosis

  11. scoliosis
    Hey there excellent blog! Does running a blog similar to this require a large amount of work?
    I have very little understanding of programming
    however I had been hoping to start my own blog soon. Anyhow, should you have any ideas or techniques for new blog
    owners please share. I understand this is off topic but I just wanted to ask.

    Thanks a lot! scoliosis

  12. Write more, thats all I have to say. Literally, it seems as
    though you relied on the video to make your point. You clearly know what
    youre talking about, why throw away your intelligence on just posting videos to your site when you could be giving us
    something enlightening to read?

  13. I’ve been surfing online more than 4 hours today, yet I never
    found any interesting article like yours. It’s pretty worth
    enough for me. In my view, if all web owners and bloggers made good content
    as you did, the web will be a lot more useful than ever before.

  14. When I initially commented I clicked the “Notify me when new comments are added”
    checkbox and now each time a comment is added I get
    three e-mails with the same comment. Is there
    any way you can remove me from that service? Cheers!

  15. It is the best time to make some plans for the future
    and it’s time to be happy. I have learn this submit and if I may just I want to recommend you some fascinating things or advice.
    Perhaps you can write subsequent articles referring to this
    article. I want to learn more things approximately it!

  16. Undeniably believe that which you stated. Your favorite justification appeared
    to be on the internet the simplest thing to be aware of.
    I say to you, I definitely get annoyed while
    people consider worries that they plainly don’t know about.
    You managed to hit the nail upon the top as well as defined out
    the whole thing without having side-effects , people can take a signal.
    Will probably be back to get more. Thanks

  17. Hey would you mind letting me know which webhost you’re working
    with? I’ve loaded your blog in 3 different web browsers and I must say this
    blog loads a lot quicker then most. Can you recommend a
    good hosting provider at a honest price?
    Thanks, I appreciate it!

Leave a Comment

Your email address will not be published. Required fields are marked *