Reasons to be concerned with unanimously passed Condo Bill

In early February, the House of Representatives passed H.R. 3700, “Housing Opportunities through Modernization Act.” Proponents of the bill claim that it “updates” and “streamlines” many policies and programs at the Department of Housing and Urban Development (HUD) as well as the Department of Agriculture’s Rural Housing Service (RHS). But what the bill really does is expand access to Federal Housing Administration (FHA) mortgage insurance, particularly in condominium financing.

While expanding “affordable housing policies” for low-income earners may sound like a good idea, these policies lead to bad outcomes for the people they are trying to help. Expanding access to FHA loans incentivizes low-income earners to purchase homes before they can afford them, undermining the stability of the housing market and saddling low-income earners with debt.

If this sounds familiar, it should. This is the same kind of policy that led to the housing bubble in 2007-08. Government sponsored enterprises artificially raised homeownership rates to unsustainable levels. When the economy went south, homeowners defaulted on their mortgages and those with little equity in their homes lost them.

Instead of repeating the mistakes of the past, Congress should concentrate on removing the government incentives that caused the last collapse. This will ensure real estate agents build their business on a sure foundation and that potential home buyers will have confidence to buy a home. Speeding the home buying process along for those who should wait sacrifices long term stability in exchange for short term gain. This is bad for realtors, potential home buyers, and the housing market as a whole.

 

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