Terner Center Blog: No Limits

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. 


Scaling Off-Site Production in the United States: Lessons Learned from Swedish Leader Lindbäcks

Posted on by Mark Trainer and Carol Galante

When it comes to innovation in housing, what does the U.S. have to learn from Sweden? More than you might think. Though they have different histories, economies and social contexts, Sweden and the United States share many housing market challenges – including significant barriers to new construction and high cost of production leading to rapidly appreciating housing prices, especially in urban centers. The Terner Center recently published a policy brief providing a detailed examination of the Swedish housing system, and a companion summary outlining key similarities and differences with the United States. And last month, the Terner Center for Housing…


Lessons for the Future of Public Housing: Assessing the Early Implementation of RAD

Posted on by Carolina Reid

In its 2018 budget, the Trump Administration is proposing to slash public housing funding by $1.8 billion. This cut represents a 29 percent decline from 2017, and will compound a longstanding trend of underinvestment in public housing and worsen an already dire situation. Over time, these shortfalls in federal funding have resulted in a $26 billion backlog in needed repairs, leaving many residents in public housing units across the country with untenable living conditions and a precarious housing future. In addition, every year we lose valuable units of public housing to demolition because of this lack of investment: HUD reports…


Paying For Dirt: Where Have Home Values Detached From Construction Costs?

Posted on by Terner Center

Home prices reflect the value of the land and the value of the structures and other improvements on that land. In high-cost metro areas of the United States, the exorbitant cost of a house may not seem to be justified by its appearance, suggesting that homebuyers are paying a premium for their location. In a recent blog post “Paying For Dirt: Where Have Home Values Detached From Construction Costs?,” Issi Romem, Chief Economist at BuildZoom investigates the disparity between the appearance and price tag of homes, identifying the places in which home buyers pay mostly for the location. The main…


Richard Rothstein Lecture on The Color of Law at the Terner Center

Posted on by Terner Center

On Thursday, September 28, the Terner Center, in partnership with the UC Berkeley Department of City and Regional Planning, hosted Richard Rothstein, author of The Color Of Law: A Forgotten History Of How Our Government Segregated America. Rothstein spoke to a standing-room only crowd in Wurster Hall about the legacy of the many government policies that fueled segregation in American cities for decades, and discussed the implications of his research with Terner Center Faculty Director Carol Galante. We invited Rothstein to provoke our collective thinking about important, challenging, and uncomfortable issues in housing policy. We believe it is critical to…


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…


California Steps Forward for Housing

Posted on by David Garcia and Carol Galante

On Friday, September 15th, the California legislative session ended with the passage of 17 individual pieces of legislation aimed at alleviating the state’s ongoing housing crisis. While three particular bills have received the most attention—SB2, SB3, and SB35—several other bills headed for the Governor’s desk are also likely to have an important impact on the landscape of the state’s housing policy. We have compiled a brief overview of each bill that passed, organized into policy categories. While the passage of these newly approved policies is certainly a milestone, we also know there is much more work ahead. Stay tuned for…


Legislation for Information: Sacramento’s Role in Filling Housing Data Gaps

Posted on by Carolina Reid and Echo Bergquist

As California’s lawmakers return to Sacramento next week, it is worth paying attention to current legislative efforts to improve access to data that can inform our understanding of the state’s housing crisis. While the final package of housing legislation is still to be determined, some of the original bills -- including SB 35, AB 1397, and AB 879—have the potential to improve housing data quality throughout California.   Why focus on data?  Despite the severity of California’s housing crisis, and the importance of the housing sector to the overall health of the state’s economy, we lack basic data on many…


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…


Too Big to Hide: The Importance of Public Data on the Mortgage Market

Posted on by Carolina Reid and Echo Bergquist

Fair lending is the foundation of a thriving economy, both locally and nationally. Access to credit drives home purchases, revitalizes neighborhoods, and allows families to build wealth for future generations. Since the financial crisis, however, tighter credit standards have made it increasingly difficult to obtain a mortgage, especially for low-income and minority borrowers.  A key challenge facing policymakers is how to reform the housing finance system in a way that provides access to credit for a broad range of households, yet at the same time ensures that homeownership is sustainable over the long-term.  Striking this balance is critical, not only…