It took four long, additional days of counting ballots and tabulating results, but Joe Biden has emerged as the winner of America’s protracted 2020 presidential election — pending state vote certifications and the Electoral College vote in December. But while the smoke may have cleared on the election itself, speculation now turns to what Biden’s pending victory means to a housing market that has shown remarkable strength in the midst of a slow economic recovery from the pandemic-induced downturn.
It’s a question that may not have been top of mind for most Americans, given the contentious litany of polarizing issues — COVID-19, climate change, racial politics, and the state of the economic rebound, just to name a few — that have dominated the election cycle. And on balance, it’s a question whose answer will largely depend on the makeup of Congress; while the Democrats have retained a majority in the House, the Republicans appear on track to maintain their hold on the Senate, pending the results of a pair of upcoming runoff elections in suddenly politically crucial Georgia.
A Senate controlled by the opposite party would, in theory, curb a President Biden’s capability to fully enact his housing vision. Still, while on the campaign trail, Biden brought his housing agenda to the forefront numerous times, and the plan is an ambitious one.
The president-elect has pledged to invest $640 billion over a decade to provide Americans with affordable, safe, energy-efficient housing within reasonable distances to education and employment. Biden outlined his strategy as a multi-pronged plan, acknowledging that the challenges of the housing market in 2020 are rooted in various areas and require diverse potential solutions.
A big to-do list
For one thing, Biden’s presidency will begin with a real estate landscape burgeoning with demand but very short in supply. Record low interest rates have brought house hunters into the buyer pool in droves, but those buyers have been competing for historically scant amounts of for-sale listings, driving up home prices and spawning affordability issues in many areas of the country. Builders, buoyed by all-time highs in market confidence, have been hard at work in replenishing supply, but the shortage and ensuing affordability crunch have nonetheless been stubbornly persistent.
True to many of his Democratic predecessors, Biden has vowed to meet the affordable housing problem head-on. Biden has promised to put $100 billion toward an Affordable Housing Fund, including new incentives for building where affordable housing is in especially short supply and expanding HUD programs for supporting first-time homebuyers. Meanwhile, he has also alluded to zoning reform and pledged to cut back restrictive local and state regulations to encourage new development.
Biden has also promised more directly to help more Americans achieve homeownership via a downpayment tax credit of up to $15,000. The refundable credit would be received by homebuyers at the time they buy their home, offering more financial flexibility after a major purchase rather than forcing them to wait to receive the benefit until they file taxes the next year. Biden also seeks to expand downpayment assistance and offer more housing discounts to educators and first responders, offering such benefits to eligible workers who buy either in disadvantaged communities or neighborhoods with low affordable housing stock.
Such measures, if successful, could be good news for lenders by boosting activity at the lowest price tiers — a market segment more conventionally supported by the left than the right. On the flipside, however, Biden also seeks to address re-establish the government’s regulatory reins on lending, a position sure to elicit groans from many in the mortgage community.
Throughout his campaign, he has touted a “Homeowner and Renter Bill of Rights,” modeled after the California Homeowner Bill of Rights that the Golden State enacted into law in 2013. Biden’s version, among other things, looks to safeguard buyers from mortgages deemed to be overpriced and provide redress against lenders who infringe upon consumer protections. It also looks to up the ante on loan process transparency, granting borrowers “the right to timely notification” on the status of loan modifications, as well as the right to appeal modification denials.
Biden also looks to support tenants, with his Oval Office entry coming as the pandemic continues to place a disproportionate amount of strain on renters. Biden — a former public defender — has vowed to make legal assistance more accessible to renters facing eviction and encourage the creation of eviction diversion programs to help struggling renters get their housing payments back under control. He has promised to work with Congress to craft a new tax credit for renters, aimed at cutting back rent and utilities to 30% of income for needy households. Such a credit, Biden said, would receive $5 billion in federal funding yearly.
What of Fannie and Freddie?
Of course, while Biden will have a range of executive powers at his disposal, it bears repeating that much of the above agenda needs Congressional signoff. That’s a tough proposition with the GOP favored to win the two Georgia runoff elections and retain Senate control. One thing, however, that Biden could attempt to do without the legislative branch is to remove Mark Calabria — and that could have dramatic impacts on the mortgage lending market.
Calabria, head of the Federal Housing Finance Agency (FHFA), has a term that runs through 2024. But a June ruling by the Supreme Court (ironically driven by the Court’s conservative side) determined that the president has broad authority to choose and remove agency heads. That ruling was specific to the director of the Consumer Financial Protection Bureau, a power Biden is likely to exercise to replace Donald Trump appointee Kathy Kraninger. But the ruling could also be interpreted to apply to Calabria, giving Biden a pathway to remove him from office.
Doing so would deal a big blow to the current FHFA directive to move Fannie Mae and Freddie Mac out of government conservatorship, a stated goal of Calabria’s since before his official appointment. Biden could instead look to keep the two government-sponsored entities (GSEs) under federal control as policy instruments to aid his stated goal of expanding affordable housing. And even if Biden were unable to remove Calabria, there are still ways he can exert sizeable influence on the FHFA via the appointments he makes to the Treasury Department. At the very least, the path to releasing the GSEs from conservatorship just became much more difficult.