How We Unintentionally Created the Affordable Housing Crisis

Yuliya Panfil and frequent FLH collaborator Craig J. Richardson, Director of the Center for the Study of Economic Mobility at Winston-Salem State University, co-wrote an OpEd for the New York Times shedding light on a key piece of the housing affordability puzzle. Even though one in five U.S. homes is valued at less than $150,000, banks are increasingly unwilling to offer mortgages to finance the purchase of these homes. That’s in large part due to the unintended consequence of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which has made it unprofitable for banks to issue small mortgages. Panfil and Richardson recommend several policy changes that can improve accessibility to mortgage financing for small-dollar homes, which form a critical piece of America’s affordable housing stock.

We must make it easier for regular people to purchase these affordable homes that already exist.

We should make it easier for smaller community banks and credit unions, which have historically served low- and moderate-income buyers in rural areas, to write small loans. These lenders are struggling under the burden of Dodd-Frank even though they were far less likely to engage in risky practices that necessitated the regulation….No single fix will unplug the lending bottleneck on affordable homes. Rather, critical tweaks at each step of the home-buying process will improve the odds that regular families can buy the homes they seek.

Read the full essay here.