legislative regulations by the federal, state and local levels in housing
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Housing Reform
There are currently various legislative regulations by the federal, state and local levels aimed at impacting on the multifamily housing industry. This has led to many trade associations that are interested in the multifamily housing industry to form groups that oversee legislation. Examples of such groups include NAA, NMHC and IREM that present the views of the industry regarding legislation in congress. Such groups also offer alternatives to the current proposals regarding multifamily housing. Among the most paramount issues on multifamily industry is the housing finance reform, which is being closely observed by various groups in the industry. The following paper discusses the issue of housing finance reform and its effect on the multifamily housing industry using the report by NMHC 2013 on legislative issue.
According to last year report by NMHC, the major issue in the legislative agenda regards the housing finance and reforms in taxation. However, this issue is difficult to resolve because the congress has focussed on a sustainable budget plan. From the hearing on October 9 named “housing finance reform” that discussed the multifamily housing finance system and its key elements, NMHC was represented by Bozzuto group under the chairmanship of Tom Bozzuto. In the hearing, the main industry stakeholders and policy enforcers discussed on the challenges of the ongoing enterprises by the government in resolving issues on the problems of financing mortgage system for single families. This was addressed carefully not to negatively affect the $862 billion financing system in support of multifamily housing mortgagee (Goetze, 1994).
NMHC under the representation of Bozzuto group outlines the elements of multifamily financing that worked well in the previous economic year, which did not result into additional tax to the taxpayers. The group therefore emphasized on the need for the federal government to support the system and join effort with the private capital in supporting the multifamily housing. NMHC argued that even though the private capital should shoulder the responsibility in protecting the taxpayers it has proven its unwillingness or inability in meeting the entire financing needs for the multifamily financing. This includes the $100 billion required to be financed annually in mortgages (St. John and Associates, 1993).
In a separate meeting with HUD secretary Shaun, Bozzuto emphasized on the importance of a unique solution to the housing reforms and the need for continued support by the federal government in sustaining mortgage liquidity in the entire markets. In the meeting, the president’s view on the importance of supporting rental housing was given emphasis as well as supporting the families that earned lowly. In the meeting it was indicated how the government was committed on supporting multifamily financing such as establishing field offices to monitor the development of multifamily housing system.
The view of NMHC received support from the president through his speech on August 6, which indicated success of the group. NMHC observed that prior to the housing bubble burst, most policy makers only appeared to focus on homeownership on issues regarding housing policy. The importance of multifamily housing system was much felt when the NMHC testified before the housing energy on June 4 indicating the close link among job creation, manufacturing industry and multifamily housing system in the apartment industry worth trillion dollars.
According to NMHC, multifamily housing system is guided by various principles, which form a reform coalition. The principles are a motivation for policy makers to embrace the needs for multifamily housing system. According to NMHC, finance system to support multifamily housing should mainly be funded through private capital. Secondly, it should be the sole responsibility of the federal government to see that liquidity is available in every market cycle. In addition, the government should carefully craft securities to back mortgage in order to ensure that there is enough liquidity for multifamily housing. Finally, there should be a strong framework to regulate and protect taxpayers as well as the mortgage finance system. In addition, there should be a series of layers of private capital. Officials entrusted with making policies should ensure that the current resources are well protected and preserved. Transparency is also paramount in the transition process in the overall housing finance system (Pollakowski, 1989).
Transition from homeownership to multifamily housing would affect the way the capital flows in the housing market. The most probable effects on legislation would be as follows: Fannie and Freddie would require to be wound on a five year term terminating the current GSE charters and ensuring rest of the assets are liquidated. A new entity would be necessary where all the remaining securitization avenues at the GSEs would be transferred. The entity would be referred to as the National Mortgage Market Utility to help easy access to the secondary market for the entities to issue loans. The new entity would be assigned the role of developing best practises standards, collection of data as well as pooling and monitoring securities for mortgages. It would also be important to set up a separate FHA from the department of housing and urban development to ensure that the system sustain itself. Rent restrictions and occupancy would be met by FHA multifamily loans, which would also oversee regulations on affordability requirements in line with median income in a particular area. Sections of the Dodd-Frank Act correlated to real estate as well as capital markets would require to be repealed. Basell III capital rules would require to be instituted, waiting a two-year study on the value, effect and complexity that arises from the rules used by financing institutions.
A vote of Financial Services Committees was set and the two letters sent by NMHC to the panel advocating for several revisions paramount for the multifamily system. Among the revisions include the fundamental concern regarding the failure of the proposal in recognizing the difference between single-family and multi finance. This is considered a point of weakness because it leaves the multifamily mortgage market venerable to the opposing forces. NMHC has therefore been invited by the house financial committee to give impute to ensure an active engagement in the whole process to see that the multifamily housing system is not faced with disruptions. Lawmakers are also not being left out. This is to ensure more workable solutions for the problems in the PATH act when the bill proceeds to the full house for more debate. The bill faces strong opposition and chances for some lawmakers pushing the bill for amendments are high before the bill reaches a final vote. It is evident that the republican majority is sufficient to push the bill outside the committee. However, there are doubts if the republicans would secure enough votes for the bill to be passed to the house (National Apartment association, 2013).