Unemployment may be taking center stage during the presidential election, but home values and the housing market woes affect more people, according to a policy brief from the Progressive Policy Institute, a Washington think tank.
While fewer than 1 in 10 Americans are unemployed, more than two-thirds are home owners, PPI says. In 16 presidential election battleground states (Nevada, Arizona, Colorado, New Mexico, Minnesota, Iowa, Wisconsin, Missouri, Michigan, Indiana, Ohio, Pennsylvania, New Hampshire, Virginia, North Carolina, and Florida) home values have fallen an average of 16%.
With the exception of Nevada, all those battleground state have higher home ownership rates than the national average, so it’s likely that more of their voters are also home owners.
“No doubt, every contender for the White House will have a jobs plan,” writes PPI Senior Fellow Jason Gold. “But no economic plan can be complete without an equally robust plan to rebuild housing — and in particular, to rebuild housing wealth. Policies that address this loss of wealth, even for those not at immediate risk of losing their homes, makes sense both politically and economically.”
PPI thinks candidates should focus on three solutions that appeal to home-owing voters and also have bipartisan support:
1. Shared appreciation mortgages
A shared appreciation mortgage is a refinance where — in exchange for a reduction in how much you owe on your mortgage — you agree to give your lender a share in any future appreciation when you sell your house.
Say you owe $200,000 on a home that’s now worth $150,000. Your lender changes what you owe to $125,000. You later sell the house for $175,000, so you have $50,000 left after paying off your $125,000 mortgage. You would have to share some of that $50,000 with the lender.
“This approach is not only intuitively ‘fair’ but could actually work. It should also be broadly appealing because it is cost-effective and led by the private sector,” PPI says.
2. HomeK accounts for first-time home buyers
Congress could create “HomeK” accounts — set-aside accounts in existing 401(k) retirement accounts — to help first-time home buyers save for a down payment. You’d to set aside 50% of your 401(k) contributions, up to a limit of $50,000, to use as a down payment.
3. Protect prospective home buyers from onerous down payment requirements
A proposed bank regulation that would make it more expensive for home buyers and mortgage refinancers to get a loan with less than 20% down should be eliminated. The rule would stifle demand for housing, PPI says, because it would take the average consumer far too long to save a 20% down payment.