Senator Elizabeth Warren has introduced an ambitious package of reforms and improvements for the United States’ affordable housing system. The bill, if passed, would represent the largest legislative change to the nation’s housing since the Community Reinvestment Act (CRA) in 1977.
Senator Warren, a Democrat from Massachusetts, has long been a favorite of the party’s progressive wing and is viewed as a potential 2020 presidential candidate.
The bill, as audacious as it is comprehensive, deals with CRA reform, Fair Housing, downpayment assistance, and more. It would cover its $450 billion price tag by reinstating the estate tax at its level under the Bush Administration, a move that would impact only the country’s top 10,000 earners. We’ll break down a few of the bill’s top features below.
Community Reinvestment Act reform
Up until 1968, the federal government actively encouraged segregation by only backing home loans made in exclusively white neighborhoods. The practice, known as “redlining” because of the maps showing red-lined neighborhoods of color where banks should not lend, plays a large role in today’s racial wealth gap.
In 1977, Congress passed the Community Reinvestment Act, which requires banks to lend in all the neighborhoods they serve and scores them based on their community lending activity. The CRA has resulted in billions of dollars of (safe, profitable) lending that would never have otherwise happened.
However, the CRA does not have authority over all mortgage lenders. Non-bank mortgage lenders—the Rocket Mortgages and Loan Depots of the world—are not covered. Since these non-bank lenders now originate half of all mortgages, that’s a problem.
Sen. Warren’s bill extends CRA enforcement to these lenders, ensuring that they too are lending in previously redlined communities. What’s more, CRA enforcement across the entire industry would get a boost, with tougher penalties for lenders who fail to meet their legal obligations.
The National Community Reinvestment Coalition recently released research indicating that weakening the CRA, as the Trump Administration has proposed, could result in over $20 billion of lost lending each year. NCRC has yet to calculate the impact of Sen. Warren’s bill, but their work makes clear the magnitude of the potential impact from CRA reform.
A map of redlining in Philadelphia
To further combat the history of redlining, the bill would institute a sort of national version of the Home Purchase Assistance Program. First-time homebuyers in communities that had faced redlining or other intentional segregation would be eligible for downpayment assistance from the federal government.
As HPAP has in DC, this downpayment assistance program could open homeownership to families for whom it would never otherwise have been possible and start building the generational wealth that so many families of color were locked out of in the 20th century.
The bill also would provide financial relief for homeowners whose properties are underwater. Since communities of color were targeted for predatory mortgages at higher rates than white families regardless of income, this also would serve to decrease the racial wealth gap in homeownership.
National Housing Trust Fund
Again following DC’s lead, the bill would dramatically increase funding for the National Housing Trust Fund. The Trust Fund, established in 2008 and funded in 2016, has so far distributed less than a billion dollars. Sen. Warren bill would make an investment of $445 billion.
That, along with additional federal investments to leverage private funds, is estimated to create or preserve up to 3.1 million affordable units across the country. That’s roughly how many units the Low-Income Housing Tax Credit, the government’s current number-one tool for affordable housing, has produced in the last twenty years.
The bill would expand the Fair Housing Act to cover sexual orientation, gender identity, and the use of a housing voucher. In many places across the country, it is still legal for housing providers to deny tenants based on any of these factors.
The bill also places a special focus on the creation of affordable housing on Native American tribal land, an area of housing that is currently severely underserved.
As the affordable housing crisis continues to gain recognition at the national level, Sen. Warren’s bill will be an important one to watch. And if Sen. Warren does decide to run for president, it could prove influential in the 2020 election and beyond.