Terner Center Blog: No Limits

Category Archives: Expanding Access to High Quality Homes and Communities

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. 


From Small Steps to Giant Leaps: What Must Come Next for the California Housing Agenda?

On Friday, September 15th, the California Legislature approved a package of 17 bills aimed at putting a dent in the state’s housing crisis. While the votes came down to the wire, in the end, the need for solutions won the day, and in the coming weeks the Governor is expected to sign each piece of legislation, officially ushering in the most significant housing policy changes in recent memory. You can read our recap of these bills in an earlier blog post here. Drafting, amending, defending and eventually passing these bills was no small feat, and the legislature, the Governor and…


Modular Construction in the Bay Area: The Future is Now

This post originally appeared on the ULI San Francisco Blog on August 2, 2017. After years of abstract discussions and false starts, modular building may finally be gaining the momentum it needs to make an impact in the Bay Area. Why now? And why here? On Tuesday, July 18, the San Francisco District Council of the Urban Land Institute hosted “Modular Construction in the Bay Area: The Future is Now”, an event moderated by Terner Center for Housing Innovation Faculty Director Carol Galante. The panel discussion featured four leaders committed to bringing this innovative housing method to scale in the Bay Area: Developers Rick Holliday of Holliday…


Highlights from the Terner Center Promoting Affordability Conference

Though U.S. cities like Boston, New York, San Francisco and Los Angeles are important engines of the American economy, their rapid growth in jobs and populations has not been met with a comparable pace of growth in housing. The result? Increasing pressure on both the rental and for-sale housing markets, and skyrocketing costs of living for a larger and larger proportion of the people who live in these cities.  On Thursday June 1, the Terner Center hosted a special convening intended to delve into this issue, exploring solutions to that could help expand the supply of housing, lower the cost…


Opening Doors to Homeownership Series Part 1: Lease-Purchase

Posted on by Carol Galante, Carolina Reid, Rocio Sanchez-Moyano

A number of recent studies suggest that the American Dream, with its promise of upward mobility, is diminishing for current and future generations as the racial wealth gap grows and access to opportunity shrinks. This troubling trend is most evident in one of the dream’s most potent symbols: homeownership. In recent years, alongside widening inequality, rates of homeownership among young adults and minority families have declined precipitously and, in 2016, the national homeownership rate fell to its lowest level in more than 50 years.  What explains this trend? Working families (and especially lower-income and minority households) seeking to buy their…


Balancing the Burden: Proposing a FAIR Tax Credit for Renters Facing Affordability Challenges

Posted on by Carol Galante, Carolina Reid, and Nathaniel Decker

By most accounts, rents have never been higher. In the United States, over 21 million people see more than 30 percent of what they earn go to rent each month. And over 11 million Americans are paying more than 50 percent of their income to rent their home, leaving little left over for other essentials like healthcare and food, and leaving too many facing a precarious stretch of days until their next paycheck. And this is not just a problem of poverty: because rents have risen faster than incomes, even renters who are working full-time and earning modest wages are…