Washington’s bureaucracy is standing in the way of providing affordable housing in the U.S., former Speaker of the House Newt Gingrich said in his keynote address at the Bipartisan Policy Center’s 2014 Housing Summit.
“We have a unique advantage of being too disorganized to block the future," Gingrich said in his remarks, according to a report from Citylab.
It's clear that Gingrich believes that regulatory overreaction following the tech bubble and housing crisis has pretty nearly blocked the future, though. If all mortgage reinsurance was private, he said, "reinsurers would have an enormous incentive to police the system." Quis custodiet ipsos custodes, Speaker Gingrich? The market will watch itself: "A system in which people are watching their own money is much more ruthless, because the people with money are also the people with the risk."
Rob Couch, one of the commissioners for the BPC’s housing commission, echoed Gingrich’s message to HousingWire on Tuesday.
Couch said that increasing regulations, the Qualified Mortgage standard and other regulatory limits are indicators that the housing industry and mortgage finance industry are trying to be too safe.
“You have to give good people the opportunity to fail. We are setting the bar too low,” Couch said. “We should be shooting for higher delinquencies and foreclosures. We should be willing to run a little more risk.
“But the net result is home ownership is plummeting. First-time home sales are at their lowest in 40 years. The reason is the bar is so low that this loss level has the biggest impact on first-time, low- and moderate-income borrowers. The very people we are supposed to be trying to help and protect.”
In his remarks, Gingrich said that he was intrigued by a Canadian option, the Ontario Home Ownership Savings plan, which could help buoy first-time buyers.
Here's how it works, according to Mortgages.ca:
If you earn under $40,000 per year or a combined income with your spouse of less than $80,000, then you are entitled to a tax credit for contributions of up to $500 ($1,000 per couple). The credit is based on a maximum contribution of $2,000 per year, or $4,000 per couple and is on a sliding scale that diminishes with increased income. Those that earn a combined income of $80,000 will not be eligible for the credit.
These tax credits are available for five consecutive years. Clearly, $2,500 in tax savings is nothing to sneeze at. Combine that with savings from an RRSP and you could realize a significant reduction in your tax payable. There are stipulations though. You must close the plan and use the funds to buy a house by the end of the seventh year. If you do not, all the OHOSP tax credits must be repaid with interest.