The collapse of the housing bubble have created a home ownership problem, where people are unwilling, or unable to buy expensive housing and sellers do not want to sell at much cheaper valuations unless absolutely needed to. The Obama Administration are doing what they deem to be the best course of action to undo this problem.
WASHINGTON – The Obama administration, in a major shift on housing policy, is abandoning George W. Bush’s vision of creating an “ownership society’’ and instead plans to pump $4.25 billion of economic stimulus money into creating tens of thousands of federally subsidized rental units in American cities.
The idea is to pay for the construction of low-rise rental apartment buildings and town houses, as well as the purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates.
Analysts say the approach takes a wrecking ball to Bush’s heavy emphasis on encouraging homeownership as a way to create national wealth and provide upward mobility for low- and working-class families, especially minorities. Housing and Urban Development Secretary Shaun Donovan’s recalibration of federal housing policy, they said, shows that the Obama White House has acknowledged that not everyone can or should own a home.
In addition to an ideological shift, the move is a practical response to skyrocketing foreclosure rates, tight credit, and the economic crisis.
“I’ve always said the American dream should be a home – not homeownership,’’ said Representative Barney Frank, chairman of the House Financial Services Committee and one of the earliest critics of the Bush administration’s push to put mortgages in the hands of low- and moderate-income people.
Conservatives, however, believe that President Obama and HUD shouldn’t head too far in the other direction; in some cases, rent can be more expensive than a mortgage payment.
Done properly, they say, homeownership can bolster the tax base and bring stability to neighborhoods and families, reducing crime and helping people achieve financial independence.
The $4.25 billion set aside for the creation of rental housing will come from $14 billion that HUD has received from the federal economic stimulus package. Another $4 billion of the money will be used to fix up the nation’s existing public housing stock of 1.2 million units.
The funds for new units will be available under competitive grants, and officials in Massachusetts said they will be among the states aggressively competing for the money.
In Boston, more than 20,000 households are on a waiting list for affordable rental housing, said Lydia Agro, a spokeswoman for the Boston Housing Authority. “There’s definitely a need out there,’’ she said.
City, state, and federal officials said they could not yet estimate how many new rental units will be created with stimulus money, but HUD said the “tens of thousands’’ of apartments and town houses it will produce nationwide will ease an increase in homelessness that has resulted from the foreclosure crisis.
Carol Galante, HUD’s assistant secretary for multifamily housing, said HUD will still be in the business of helping people buy homes using existing lending subsidies.