Affordable, Sustainable Homeownership:
Affordable, sustainable homeownership is essential to a functioning housing market and is an important foundation for economic stability and a source of wealth-building. Owning a home can provide a stable place to live and remove significant economic uncertainty in the form of fixed housing costs. However, worsening housing market conditions are impeding economic opportunity, especially for Black, Latino, and Hispanic borrowers as well as people earning low incomes.
Never in recent history has there been the combination of such an acute shortage of affordable homes coupled with high interest rates and high inflation? As a result, soaring home prices, rising insurance premiums, potential risk of loss, and a widening racial homeownership gap continue to impede household financial health and put sustainable homeownership further out of reach for more Americans.
Important measures—some permanent—were taken to help bolster homeowner resilience in the face of pandemic economic challenges. Forbearance allowed struggling borrowers to pause their mortgage payments temporarily, while expanded loss mitigation helped make mortgages more affordable. These and other policies underscore the important partnership between the government, community organizations, and financial institutions in maintaining stability in the mortgage market and promoting sustainable homeownership.
Still, homeowners continue to find themselves in a precarious place. Historic inflation, high interest rates, and rising rates of economic insecurity threaten the housing security and financial well-being of millions of homeowners, especially those who were economically fragile before COVID-19. Now is the time for renewed urgency. Policymakers, the private sector, and community organizations should come together to build on COVID-19 protections and transition to a more robust and sustainable housing ecosystem that promotes homeowner access, affordability, and stability.
A profound shortage of affordable homes undermines access to homeownership for young families and long-term middle-class renters. Freddie Mac estimates that the housing stock deficit increased by approximately 52 percent between 2018 and 2020, which has been exacerbated by the long-term decline in the construction of single-family homes. The lack of available homes for purchase or rent further constraints affordability and prices potential homeowners out of the market, particularly Black, Latino, and Hispanic borrowers and people earning low incomes. Policymakers should prioritize opportunities to increase the supply of affordable homes for purchase, including:
• The Neighborhood Homes Investment Act (S. 657 and H.R. 3940), which would create a new federal tax credit valued as the cost-based difference between market value and the redevelopment or construction of a home. This reinvestment tool could help homeowners renovate one- to four-unit properties in low- to moderate-income neighborhoods. The proposed bill would be an especially important tool to spur redevelopment and address long-term deferred maintenance in communities that for decades have grappled with economic disinvestment challenges.
This builds on prior policy research to develop solutions for housing redevelopment in distressed neighborhoods, as well as a $3 million grant from JPMorgan Chase to the Housing Partnership Network to support the Community Aggregators Group—a group of nonprofits that bids on government-owned home mortgages, acquires and rehabs homes, and makes them available primarily to first-time, low-income homebuyers at affordable prices.
• Continuing to update industry underwriting guidelines to permit Accessory Dwelling Unit (ADU) rental income in property underwriting. In 2023, the Federal Housing Administration (FHA) proposed underwriting policy changes to allow the consideration of the use of projected ADU rental income to qualify for FHA-insured financing. JPMorgan Chase supports this positive step forward and encourages the finalization of the policy and adoption of consistent income qualification standards for rental income by government-sponsored enterprises (GSEs) and government agencies.
• Accelerating efforts to modernize the manufactured housing ecosphere and implementing public policies to elevate manufactured housing as a viable homeownership pathway. Reforming the financing and legal infrastructure underlying manufactured housing could increase the flow of mainstream capital to developers and consumers. In 2022, Congress enacted the Preservation and Reinvestment Initiative for Community Enhancement (PRICE) Fund, a $225 million investment to preserve and revitalize manufactured housing. Lawmakers should build on this progress to further strengthen and modernize the manufactured housing sector.