Explore the series | Wells Fargo recently committed $1 billion by 2025 to help solve the nation’s housing affordability challenges. In this special series, Wells Fargo brings together problem solvers to discuss the housing affordability crisis in America — and how to bring about systemic change.
Marc H. Morial, President, National Urban League:
When I think of affordable housing, you know, you can think of it in a public policy dimension, but I think of it as a place that people call home. A place that people can love and cherish and take care of. And a place that people can pay for without going broke.
Vince Toye, Wells Fargo Community Lending and Investment:
When you have a teacher or policeman, someone who works EMT, where they make pretty good money, but still it’s very difficult for them to find a place to live where they’re not spending 50 or 60% of their income on housing.
Keith Fairey, Enterprise Community Partners:
And we see far too many households, over 11 million renter households, severely cost burdened, paying more than 50% of their income for their housing costs. And that’s not sustainable for a family. That’s not sustainable for individuals. That puts people at the edge of crisis.
Cerita Battles, Wells Fargo Home Mortgage:
People want to live where they work, where they go to church, where they do different things, and we should have a choice as to where we should plant and build generational wealth.
Mark Vitner, Wells Fargo Senior Economist:
We have a huge affordability problem in America. It’s a legacy of the housing bust that does not seem to have gotten better. And it’s probably costing the U.S. economy one or two-tenths of a percentage point of growth each year. And on a $20 trillion economy, we’re talking, you know, billions of dollars of lost output.
We had a foreclosure crisis ten years ago. Now we have a bit of an affordability crisis. Because while the market has come back, people are simply paying more to buy and to rent than ever before.
Income is not rising at the same pace as some of the cost for homes, and so therefore you have a gap.
One of the most confounding aspects of this economic recovery has been that homebuilding, the new supply of housing in the U.S. economy, has generally lagged behind the growth of households. And as a result, we’ve seen that home prices have been rising very rapidly. In most cases, they’ve been rising two to three times faster than incomes and about two times faster than inflation. That’s not sustainable, and it’s really worsened the affordability problem. And that’s why the affordability problem is so much greater than what people have traditionally thought about affordable housing. It’s not just folks that need some sort of assistance from the government. Housing has become less affordable for a wide segment of the population.
You’re starting to see a lot of millennials continue to live with their parents. You’re continuing to see baby boomers not move out of the bigger homes. You’re seeing multiple families live in the same home just because rents are up.
It disproportionately effects people of color. It disproportionately effects those who are low income. I think it disproportionately effects the elderly.
Anyone, if they can afford to live close to where they work and have clean, affordable housing, only spend 35% of their income, I think most people would choose to do that. But a lot of times, the supply is just not there. So you have someone who may be working in San Francisco or L.A., where they have to live, have a tremendous commute. They could have an hour and a half commute one way just to live somewhere where they can afford and have the type of housing they want or school systems they want without paying nearly 50% of their income.
By our estimates, there’s about a million fewer homes turning over each year than there should be, given past norms with a growing economy.
When you look particularly at the affordable housing stock, we’re actually losing some of that stock. And some of the most precious stock that have some of the greatest public investment. Let’s start with thinking about public housing. Not only is that distressed in many communities with great amounts of deferred maintenance, but it also is, in some cases, becoming lost.
We’re living in an age now where we’ve got to be creative in our thought process. We’ve got to be creative in how we think about communities and what they should look like.
We need more supply. We need more housing. We have to make it easier and more profitable for builders to build homes. If we do that, we’ll get more housing. That’ll help bring down the cost.
We have to build it smart, we have to build it right, and it has to be affordable for all. Now, does that mean we have to subsidize it? Well, we’ve been subsidizing housing since the beginning of time. We subsidize homeownership through the mortgage interest deduction. We subsidize affordable rental through all sorts of low-income housing tax credits, loan guarantee programs, and also, if you will, demand side or consumer side subsidies like the Section 8 certificate. We subsidize the rental housing market. We have to put some of the same interventions into a new generation of affordable housing. Why can’t we create a Section 8 certificate that someone can use for a down payment, or a Section 8 certificate that one can use to pay a portion of their mortgage? We need new tools.
That will require legislative action. In some cases, that will require going to voters for more resources. And the exciting thing that we see on the state and local level is a lot of action there. The city of Minneapolis city council just approved eliminating single-family zoning. In the whole city. And say, well, why would you do that? What the new zoning change does, it allows them to create rental units on property, and go up to, at minimum, a three-unit zoning. It also allows people to be stabilized in their home if they want to stay in their homes long term. And it also opens up new pathways to homeownership for minorities and other marginalized groups who haven’t had those pathways in cities.
I think we ought to have ownership as a central tenet of our housing policy and as our domestic economic policy, because this is how people build wealth.
When you hear affordable housing in a neighborhood, some are well, I don’t want that, because that’s going to bring my property value down. Or has that negative connotation. I think that’s just not the case.
I think banks have to continue to strive to underwrite loans in a fashion that’s fair, even, and nondiscriminatory. I think banks also should double down on their investments in housing counseling and financial education to help people become prepared. I also think banks have to diversify those who are making the decisions in the bank. More people of color, more women in positions of responsibility.
Lenders need to think long and hard about how willing a community is to come up with a sustainable solution to the affordable housing problem. A lot of cities and a lot of counties need to figure out what they can do to make their zoning processes easier and what they can do to speed up the permitting process.
I think that what we see working amongst developers today and in communities is mixed-income housing. Housing where you have people of all incomes working or rather owning or renting and living side by side. I think that’s the future.
I mean, I think the things that work is when you have collaboration between the various stakeholders in those communities working together, having a plan in place, trying to make a difference.