Uncertainty ahead for housing finance reform with Republican surge
With Republican congressional and gubernatorial candidates racking up victories across the nation in yesterday’s midterm elections, pundits will spend weeks discussing what our further-divided government will mean for policy between now and 2016.
One issue that will likely fly under the radar is housing finance reform, an area the Obama administration and congressional leaders have spent significant energy on in the past several years. Will the spate of Republican victories halt movement on that front?
At today’s Urban Institute-CoreLogic housing finance symposium, former US Representative Rick Lazio (R-NY) and President Obama’s former chief economic advisor Gene Sperling discussed midterm politics, the state of the housing finance market, and the future of reform.
In a conversation moderated by Urban Institute President Sarah Rosen Wartell on the impact of yesterday’s election, Lazio and Sperling agreed on several points.
“Rick [Lazio] is right about one thing,” said Sperling. “Neither side should be happy with the [housing finance] status quo.”
Conservatives worry, he said, because taxpayers are currently responsible for potentially large losses in the housing market, a position antithetical to small government. Many, including liberals, worry that the “credit box” is too tight, making it overly difficult for low- and middle-income borrowers to get credit, and driving up both house purchase and rental prices.
Together, those concerns suggest that the state of the economy may depend on significant housing finance reform. “We have to make it clear that our economy is on the hook,” said Lazio.
With a newer, more conservative Congress, will the consensus forged in recent years on GSE reform dissolve? Again, Sperling and Lazio agreed: generally, they said, we just can’t say for sure.
“I think a lot of the major [new] players haven’t tried on the clothes of their new world yet,” said Sperling of last night’s political victors. “It’s hard to say what’ll happen.”
The problem going into the 2016 presidential election is that these issues are just not on the public’s radar. “It’s not a part of the conservative American consciousness that taxpayers are totally on the hook right now, and don’t need to be,” Lazio said.
Sperling agreed: “This is such a complicated issue and there’s so little clarity about what’s at stake that it’s unlikely that it’ll become a central issue.”
Both experts had a word of advice for the other side. Lazio urged President Obama to make the case to the American people that the housing finance status quo puts taxpayers at risk. And Sperling explained that Obama, like any president, wasn’t going to spend political capital on an issue without some back-door indication from the Republicans that they are really willing to get something done.
A final point of agreement between Lazio and Sperling was the critical need on this complicated topic for rigorous, evidence-based research from organizations like CoreLogic and Urban Institute.
Photo by Adrienne Hapanowicz, Urban Institute. From Left: Sarah Rosen Wartell, President Urban Institute; Former Rep. Rick Lazio; Former Obama Economic Advisor Gene Sperling.