Terner Center Blog: No Limits

Author Archives: Carol Galante

A Reform Proposal for the Federal Housing Administration

Posted on by Carol Galante

Media reports and other sources in Washington, D.C. suggest momentum is building for housing finance reform. According to a recent piece in National Mortgage News, “the White House and congressional GOP are eyeing a tight window between tax reform and the 2018 midterms to pass housing finance reform. And with key policymakers readying their exit, the effort could be the most concerted push yet.”

As policymakers debate the future of the nation’s housing finance system, I urge them not to overlook both the importance of the Federal Housing Administration and the improvements it needs in order to fulfill its mission and be an effective steward of government backing.

The FHA was founded in 1934 during the Great Depression with the goals of increasing homeownership and stimulating the building industry and the economy. FHA fueled a rise in middle class homeownership and helped to spur suburban growth. While advancing these goals for decades, FHA deployed direct exclusionary and discriminatory practices that favored some communities over others - practices that only began to be addressed legally in the 1960s and 1970s.

However, in more recent decades FHA’s legacy has been turned on its head: it has become a central point of access to homeownership for lower wealth and minority borrowers. In 2015, 47 percent of African-American, and 49 percent of Hispanic homebuyers using a mortgage to purchase a home did so with an FHA-insured mortgage. Now playing such a crucial role in creating access to homeownership (especially for those who have been traditionally underserved) we must ensure this new legacy is preserved; future generations of families must be adequately served by FHA and be able to equitably pursue the American Dream of homeownership.

But to do this, FHA must be modernized in its structure, operations, policies and governance.

Today we are releasing a paper intended to start a conversation about these needed reforms, and about the future of the Federal Housing Administration. As a former Commissioner of the FHA, I know well the important role FHA plays in providing access to homeownership and counterbalancing a sometimes volatile housing market. However, I have also seen firsthand the enormous challenges FHA faces in carrying out this role. 

The paper proposes a number of changes that will better equip FHA to complement the conventional mortgage market and operate effectively for American families. This is crucial for the for the broad objectives of housing finance reform to be realized: a failure to modernize FHA and ensure its complementary role would threaten access to homeownership for many and could also increase risk to taxpayers – precisely the opposite of the intended goals of housing finance reform.

The changes we propose include more refined targeting of FHA homeownership programs, greater operational and risk management capabilities for the agency, and new and better ways of funding FHA’s required administrative functions. A summary of the proposed reforms can be found here.

My hope is that the recommendations offered in this paper spark a conversation about the administrative, policy, and structural changes needed to make FHA a fitting complement to the conventional market while reducing unnecessary risk to U.S. taxpayers. We look forward to engaging with others on these ideas, and together refining them into the most promising and workable solutions to make the Federal Housing Administration even more effective in supporting the American economy.  We know it’s time for a new housing finance system; it’s also time for a new FHA. 


A Golden Rule for the Golden State? How State Action Could Help Solve California’s Housing Crisis

Posted on by Carol Galante, Carolina Reid

In the United States today, over 20 million households are spending more than 30 percent of what they earn just to pay the rent or mortgage on their home. Both locally and nationally, the repercussions of this affordability crisis are taking center stage. In recent weeks, the resignation of one local leader over housing costs and frustration with chronic political inaction in her community set off a flurry of media coverage and social media conversation. Meanwhile, recent poll results have elevated the issue of housing affordability onto the national stage as well. Underlying these recent events is the reality that the…


State Policy Solutions to the Short Supply of Housing

When it comes to a lack of affordability in housing, it’s no secret that California is outpacing the nation. Average home prices are about two and half times more expensive than the rest of the country, and rents are about 50 percent higher. A shortage in supply is a key contributing factor, and we need both public policy and private sector solutions that will help expand housing production to better meet demand. This week, the Terner Center is sharing an analysis of one important avenue to meeting this challenge in California: improvements to state land use regulations to promote an…


Putting the Tool to Work: Takeaways from the Housing Development Dashboard

Posted on by Carol Galante

The Terner Center’s recent release of the Housing Development Dashboard was met with enthusiasm from media outlets, practitioners, and policymakers, all commenting on its important contribution to our understanding of local housing production and related policies. I want to share some of my biggest takeaways from the Dashboard, to illustrate why and how I think it can provide critical insight into these issues, and help to pave a way forward in addressing our housing challenges in the Bay Area and eventually, nationwide. In many ways, the Dashboard validates, and provides evidence for, much of my intuition (honed from a career in…


Launching the Housing Development Dashboard

Posted on by Carol Galante

In the short time since we launched the Terner Center for Housing Innovation, I have been inundated with requests to weigh-in on the issue of how to best address the housing affordability crisis- not just at its epicenter in the San Francisco Bay Area- but in similarly situated high job growth regions from Boston to San Diego. While there are multiple contributing factors to the crisis, I keep coming back to one simple premise: supply matters, and we need to expand housing supply in equitable and environmentally sustainable ways.  This statement rarely makes anyone happy.  Most want to hear answers…


Why By-Right Affordable Housing in California is the Right Thing to do

Posted on by Carol Galante

The following piece was originally drafted as a letter of support for Governor Jerry Brown’s proposed legislation to streamline local housing approvals. The original letter, with citations, can be found here.   The Permit Streamlining Act. On May 13, 2016, Governor Jerry Brown proposed a change to state law that would streamline affordable housing proposals and spur much needed housing production. Introduced as a part of the administration’s May Revision to the 2016-17 Budget, the by-right bill would effectively change the way local jurisdictions approve housing projects. In doing so, Brown has acknowledged that in order to facilitate more building throughout…


Federal Housing Administration Delivers Success

Posted on by Carol Galante

Today, the Federal Housing Administration (FHA) delivered its Annual Report to Congress and the report demonstrates that FHA met and exceeded the 2% capital reserve requirement for the Mutual Mortgage Insurance Fund (MMIF) and improved the Fund value by over $40 billion since it went negative in fiscal year 2012. This good news validates that the policies put in place by FHA over the last 7 years have enabled FHA to strengthen its financial position while also strengthening the economy and providing access to mortgage credit to millions of families. The FHA team deserves tremendous credit for this achievement. The…


Housing: The Silent Crisis?

This piece was originally published on the J. Ronald Terwilliger Foudation for Housing America's Families Blog on June 30th, 2015. The original post can be found here. June 18th marked the official launch of the J. Ronald Terwilliger Foundation for Housing America’s Families. As a member of their National Advisory Committee, I was in attendance for the event, and had the opportunity to share some thoughts on the “Silent Housing Crisis.” The subject is of particular interest as I prepare to launch The Terner Center for Housing Innovation, which shares many of the goals of JRT Housing. Both JRT Housing…


Coming To Berkeley

Posted on by Carol Galante

As many already know, I have started my new appointment as I. Donald Terner Distinguished Professor in Affordable Housing  and Urban Policy in the Department of City and Regional Planning with the College of Environmental Design here at UC Berkeley. I  would like to introduce myself, say “hello” and share a bit about what I’m working on and looking forward to in the coming  semesters. As an alumni of the Master’s in City Planning program, this is somewhat of a homecoming. I have returned to the Bay Area from  my role in the Obama Administration as Assistant Secretary for Housing and…


On Housing, Good News for Families and Communities

Posted on by Carol Galante

President Obama’s announcement that the Federal Housing Administration will lower the cost of its home loans by one-half of a percentage point (.50 basis points) should be very welcome news. Home loans will now be within reach for many more hard working and responsible families who have been left on the sidelines of the economic recovery. This cost reduction is good for homeowners and would-be homeowners, communities still struggling to recover from the recession, and the economy more generally. The National Association of Realtors reports the first-time homebuyer has been largely absent during the economic recovery. The inventory of homes…