With the J. Ronald Terwilliger Foundation for Housing America’s Families’ Housing America’s Families Forum coming up on November 15, HousingWire sat down with Ron Terwilliger, the founder and chairman of the Foundation, to discuss the challenges in today’s housing market.
Note: HousingWire is a media partner for the event.
HousingWire: How would you rate our nation’s housing policy?
Ron Terwilliger: Truth be told, we don’t have a coherent, strategic national housing policy. If there is a policy, it can be found in our spending priorities. The federal government spends about $200 billion annually on housing, most of it through the tax code. About 70% of this $200 billion supports higher-income homeowners through tax expenditures like the mortgage interest deduction. Approximately 30% benefits renters, who have median incomes about half that of homeowners. Support for renters primarily occurs through the Congressional appropriations process.
Tax reform provides the opportunity to adjust and rebalance these priorities. When you have limited funds, I believe our focus should be to help those families who need help the most – that’s primarily lower-income renters who live on the economic margins.
We will see how tax reform plays out. If there are savings generated through modifications to tax expenditures like the mortgage interest deduction, it is critical these savings remain in the housing account to meet urgent housing needs.
HW: So, how would you describe an effective national housing policy?
RT: An effective housing policy responds not only to today’s conditions but also anticipates the conditions that are likely to shape and define the housing market in the foreseeable future. Over the next decade, I see three main trends affecting housing demand.
First, the United States is becoming increasingly diverse. The Urban Institute projects that minorities will account for 88% of new household growth from 2020 to 2030. Unfortunately, two minority groups – African-Americans and Hispanics – historically have lower incomes and homeownership rates than other groups. At least initially, most of these new minority households will seek housing in rental homes.
Second, like many other industrialized countries, the United States is becoming older with the aging of the 75 million Baby Boomers. By 2030, more than one in five Americans will be a senior, up from less than 10% in 1970. Seeking to simplify their lives, many older Americans will downsize from homeownership into rental homes that don’t require the same level of upkeep and maintenance.
Third, a large percentage of our workforce is in the service industry, a fact that is unlikely to change anytime soon. The American Enterprise Institute estimates that service and line workers account for 38% of the overall workforce and earn wages that average just $26,000 annually. That means these workers can afford a monthly rent of just $650, using the 30%-of-income affordability standard. I can assure you there aren’t many apartments in the market with rents that low.
As I see it, these three trends mean that rental demand, already intense, will grow even stronger. We need to really ramp up our efforts through tools like the Low-Income Housing Tax Credit to produce enough affordable rental homes to meet this demand.
HW: What do you hope to accomplish at the Housing America’s Families Forum on November 15?
RT: The Forum is an opportunity for all elements of the broader housing community to come together, share experiences, learn from each other, and become even stronger advocates for affordable housing. The Forum is taking place in Detroit, a city that has suffered its share of blows over the years but has now turned the corner. Today, home prices in Detroit are rising, neighborhoods are being revitalized, the downtown area is attracting new businesses, and the city’s population has stabilized after years of decline. My hope is that those attending the Forum will leave Detroit with the same can-do attitude that seems to be permeating the Motor City.
