The Obama administration, through the Department of the Treasury, has given a statement addressing problems with the availability of rental housing. Currently, only 32 out of every 100 low-income families have access to affordable housing. The administration believes that this may be directly related to the housing and financial crisis.
Jeffery Goldstein, Treasury Under Secretary, stated that the administration is considering government intervention, although very limited, to help investors finance and make available lower income properties. They believe that this will boost the housing market and relieve a large burden on low-income families that need affordable housing.
The current investors market has seen little interest in multi-family accommodations (apartment buildings) since the real estate bubble burst. This is for two very distinct reasons. The first reason is quite simple, higher-end properties have flooded the market at incredibly low prices and investors cannot overlook the future profits in such deals. The second problem is the availability of financing.
The Dodd-Frank Wall Street Reform Bill has gone into effect, and there are some repercussions from these regulations. The new bill states that banks must shoulder at least 5% of the responsibility of the performance of a loan that they bundle and sell to investors. The only exception to this rule is if the loan has had 20% or more placed as a down payment on the mortgage.
The banks have made it clear that they are not interested in taking even a 5% interest in the performance of the loans they grant, and many have opted to require the large down payments. This has caused many investors to think carefully about which properties to purchase because their down payment money cannot be spread over several properties.
Many economists believe that the Dodd-Frank Bill will hinder other areas of the mortgage market, especially for first-time homebuyers who will need to pay significant down payments or very high interest to get their first loan.
The Treasury Department has stated that it supports all the changes taking place in the financial industry right now, and that these new regulations are necessary to stop the financial crisis. They also stated, however, that there would be some type of program created to ensure that lower income families are not left out in the cold.
There has been no definite answer from the Treasury, the administration or from any of the financial industries on what this program may entail or how soon it is to be enacted.
While the Treasury firmly believes that lax regulations on the lenders and the securitization market led to the recession and the following housing market crash, they also understand that tightening credit is necessary to avoid further market instability. It is the hopes of the administration and the Treasury Department to help the financial market balance itself between good lending practices and flowing credit.
Until that balance is found, however, the administration will investigate ways to assist investors in purchasing properties that are used to rent to lower income families.