Saturday, January 16, 2021

Could Affordable Housing Bring on the Next Housing Recession?

Nobody would ever want to experience another Housing Crisis as we had in 2008. Not intentionally anyway.

One theory why it happened was the Government programs that helped low-income households purchase houses led to widespread defaults on the subprime loans they held, sparking the entire financial meltdown.

The U.S. subprime mortgage crisis was a set of events and conditions that led to a financial crisis and subsequent recession that began in 2007. 

It was characterized by a rise in subprime mortgage delinquencies and foreclosures and the resulting decline of securities backed by said mortgages. Several major financial institutions collapsed in September 2008, with significant disruption in the flow of credit to businesses and consumers and the onset of a severe global recession.

Government housing policies, over-regulation, failed regulation and deregulation have all been claimed as causes of the crisis, along with many others.

Hopefully, everyone has learned some hard lessons from these past mistakes. 


Housing Crisis Warning #1

However, there is a fish in the construction industry that could begin to smell bad and that’s the rush to fill affordable housing in cities across the US. 

The problem of workers doing essential jobs such as teachers, police and fire personnel not earning enough to live in the neighborhoods they work in, forcing them to either pay high rents or buy houses beyond the city’s suburbs causing long commutes should be addressed.

Affordable housing can mean government-backed guaranteed mortgages and most likely higher taxes and added regulations. Giving more people home loans that hadn’t previously qualified for a mortgage can be accomplished by lowering down payments, subsidies, tax relief and lowering qualifying credit scores.

Isn't this similar what happened in 2007?

COVID-19 renter giveness legislation has already seen lots of people defaulting on their rent payments with many landlords now falling behind on mortgage payments on their investments. 


Housing Crisis Warning #2

Currently, there is a huge demand for all types of housing. Affordable rentals, affordable homeownership, build to rent housing as well as revised zoning to allow tiny houses and ADUs into more neighborhoods.

City, local, state and Federal government agencies have all pledged to make changes to zoning to allow more people to live in affordable housing while at the same time ever more stringent state and national building codes and rising building material costs keep skyrocketing homeownership beyond “affordable”.

As stated above, nobody wants to see another housing crisis but have we begun to put ourselves in the position that it could be inevitable?


Gary Fleisher, the Modcoach, writes Modcoach News and Modular Home Coach blogs as well as the best site for off-site consultants, Modcoach Connects


Contact Gary at modcoach@gmail.com

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