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Senators Kamala Harris and Cory Booker —both representing states with high housing costs and both presumed Democratic presidential candidates—have put forward separate proposals for a federal tax credit for cost-burdened renters. These proposals draw more attention to housing affordability. Yet the suggested policies are mostly partial fixes that do not address the underlying problems in U. In two previous pieces, I have outlined broad housing policy goals and discussed limitations of our current policies.

This final piece in the series offers some recommendations on how federal, state, and local governments could work together to improve the affordability, availability, and equity of housing outcomes for U. Current policies are heavily stacked in favor of owners, from federal tax subsidies for homeowners to local zoning that favors single-family houses over apartments. Using public policy to penalize tenure choice is both unfair and economically inefficient.

Renting allows more geographic mobility , which is especially important for young households still moving around for work or before settling into permanent family arrangements. Senior households may choose to downsize or get rid of the home maintenance burden in later years. Moreover, a tax code that gives preference to wealth-building through homeownership compared with other financial assets penalizes families who live in regions where house prices are stable or declining over time. This includes many small towns and rural areas, as well as some big cities.

A key part of leveling the playing field is eliminating preferences for homeownership in the federal tax code, namely the mortgage interest deduction and the capital gains exclusion for owner-occupied housing. Policy experts across the political spectrum have offered detailed proposals to implement such changes. At the local level, cities and towns should revise their land use regulation and development process to be neutral to structure type. For instance, land zoned to allow by-right development of three-story single-family homes without requiring special reviews or conditions should also allow by-right development of three-story apartment buildings.

Requiring conditional use permits or other procedural hurdles for multifamily development but not single-family houses—a zoning trend that emerged in the s —essentially discriminates against renters. In well-functioning housing markets, supply will expand to accommodate population and job growth. But there is widespread evidence that housing supply in some high-demand regions—like California and much of the Northeast corridor—is artificially constrained by excessive local land use regulation.

Excess zoning increases housing prices by limiting the quantity of new housing and by making the development process longer, more complex, and more costly. High prices are especially tough on younger families, who earn less at the start of their careers. Because of persistent income and wealth gaps, high housing costs disproportionately hurt people of color. Excess zoning is especially prevalent in some of our most productive regions, which hurts U. When housing costs rise, individual businesses have difficulty attracting and retaining workers.


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Overly restrictive zoning reflects policy choices of local governments—and many of their citizens. Meanwhile, potential residents who are priced out of restrictively zoned communities exert no political influence over local governments. Zoning reforms would allow communities to build more housing and to use less land per housing unit e. Building smaller, less expensive housing units, such as townhouses and apartments, would open up communities to a more economically diverse group of residents.

Zoning reforms should also reduce the complexity and cost of development. Potential residents who are priced out of restrictively zoned communities exert no political influence over local governments. State and federal governments have an interest in reducing local barriers to economic growth. However, every potential homeowner intends to leverage on these categories of real estate finance options to achieve his objectives Kuye, Type of Project Financed Subjective evidence suggests that borrowers consider the type of project financed by financial institutions before seeking for a housing loan.

Housing construction and development is complex and involves many skills and resources including huge financial commitments.

Homeowner Affordability and Stability Plan

As such, financial institutions hardly provide loans for all the categories of housing development. There is evidence that prospective borrowers may want to borrow a loan for different purposes.

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Nwanekezie observe that the probability of borrowers securing loans depends to a large extent on the type of project the financial institution finances. It is for this reason that Ojo, posit that a borrower is attracted to housing loan if such an arrangement helps him to achieve his purpose. Location Factors It has been said that one most important factor that influences access to housing finance is site and location-related factors.

For example, site and location of the property such as neighborhood location, accessibility to popular places of employment, adequate availability of utilities and transportation as well as compliance with applicable federal, state or local land use law and zoning regulations improve the chances of prospective borrowers to obtain housing loan Nwanekezie, According to the author, location determines accessibility while accessibility determines demand and consequently profitability.

The implication is that financial institutions may be reluctant to finance any project; its location would not add any economic value to the property owner. Perhaps, this is why Ojo observed that properties located in urban and rural areas are rated differently by financial institutions. For example, banks prefer properties located in urban areas than the rural areas Ojo, This is because pieces of property may have different values just because of the difference in location. Moreover, financial institutions perceive that there is general apathy among insurance firms to provide borrowers with mortgage indemnity guarantee insurance premium for properties located in rural areas Ojo, ; However, it has been argued that when the provision of housing loan is greatly and strictly hinged on location attributes, potential borrowers are often discouraged from accessing the loan Nwanekezie, Specifically, those whose properties are located in rural areas or are not in good locations may have their loan application rejected Ojo, ; Available data from the regional offices of the banks as of the time of the survey shows an estimated population of 1, documented loan applications.

A total of sets of questionnaires were distributed among the classes of respondents. For those who borrowed, questionnaires were distributed, out of this number, were returned representing For those who did not borrow, questionnaires were distributed while representing Questionnaires were administered face-to-face to the participants. Several visits were made, and reminders sent including phones calls to the respondents. The questionnaire was limited to two parts. Part 1 contained general demographic questions of the participants designed to know their background information.

The distributed questionnaires tapped into the perception of the homeowners those who borrowed and those who did not on the seven 7 identified factors in the literature. Discriminant analysis was used in this study. The justification for the adoption of discriminant analysis is that the study covers two respondents — homeowners who borrowed and homeowners who did not borrow. Thus, the study involves the analysis of the differences in perception of two groups of sample populations.

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Discriminant analysis as described by Hair et al. It involves creating a liner mixture or blending of two or more discriminating variables that differentiate best between groups. This could be done by applying a statistical decision rule of maximizing between-group variance relative to the within-group variance Ramsover, ; Hair et al.

Results and Discussion The data gathered in filed survey were analysed using the discriminant function and the results are presented in tables 4. The Table 4. Thirty-four 34 variables were used to determine their perceptions. Table 4. However, the group means values and difference of the respondents were too high to make significant differences.

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Thus, it could be said that access and affordability criteria variables constitute greater factors that influence housing finance particularly those who did not borrow. On appropriate collaterals, a look at Table 4. This implies that the variables have a strong influence in determining access to housing finance. But a glance at the group mean shows that five variables exhibited strong discriminant power, which suggests there were significant group mean differences in perception between the two respondents on the variables.

Furthermore, a look at the Table indicates that those who did not borrow recorded higher group mean value on variable AC5 4. It suggests that rural properties do not constitute major determinant of access to housing finance and largely both respondents do not see rural properties as key collateral to housing finance. However, this perception is not balanced as those who did not borrow have a stronger view on the influence of the repayment scheme and criteria in determining access to housing finance. Those who did not succeed in borrowing or had their application rejected recorded higher group mean values 4.

Again, the fact that the repayment scheme and criteria are perceived by those who did not borrow as having a strong influence on access to housing finance requirements is not surprising. Thus, applicants who did succeed in borrowing may be more aware of this having known the practical implications of not fulfilling the conditions for loan repayment on a record time.

Despite this perception, the group means values as shown in the Table 4. The mean differences are significant enough to support these differences in perception. This suggests the variables have a strong influence in determining access to housing finance.

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It also shows that both respondents agree that this factor determines their motivation to apply for housing finance. However, this perception is not balanced. For example, evidences from the group mean scores show that the three variables exhibited strong discriminant power, which suggest significant group mean differences in perception between the two respondents on the variables. Thus, the type of loan provided constitute a greater obstacle in accessing housing finance by those who did not succeed or had their loan application rejected or suspended.

The explanation for this may not be far-fetched. Some financial institutions are often in a hurry to recover their money within a short period. Thus, they provide a short or medium term for their customers. Findings from the study show that borrowers are averse to this arrangement. This suggests that the variables create strong effects for both those who borrowed and those who did not borrow in accessing housing finance. However, this perception is considered more stringent by those who did not borrow or those who had their loan application rejected.

The five variables displayed strong discriminant power which suggest there were significant group mean differences in perception between the two groups on the variables. Thus, the 34 variables in Table 4. The Table reveals a canonical correlation CCr of 0. Conclusions The study concludes that there are significant differences in perception between those who borrowed loan for housing finance and those who did not on the identified variables. It revealed that both those who borrowed and those who did not borrow perceived lenders requirements for housing finance as harsh based on their total mean score and values alone.


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  • It is also concluded that measures of access and affordability criteria, possession of registered title collateral title deed is perceived as the most difficult of lenders requirements for financing housing from those who have borrow.