Affordability remains a critical issue in virtually all conversations about housing, and few people understand that reality better than leading housing and mortgage industry advocacy groups.

HousingWire sat down with three industry leaders to discuss the housing affordability landscape in 2024: Mortgage Bankers Association (MBA) President and CEO Robert Broeksmit, National Housing Conference (NHC) President and CEO David Dworkin and Community Home Lenders of America (CHLA) executive director Scott Olson.

Biggest affordability developments of 2023

When asked what they see as the biggest developments on the housing affordability front, all three cited the paltry level of inventory

“[The inventory issue] is made worse by today’s high interest rate market,” Broeksmit said. “We’ve seen some rollback in interest rates, but it was a fast and large increase and the market is still clearly absorbing that. So, we’re working with Congress and government agencies to reduce regulatory burdens and pass legislation that boost housing supply.”

For Dworkin, an attribute of the moment is a broad recognition among lawmakers that affordability challenges constitute a crisis.

“This is not just about poor people, although poor people have certainly been hammered in terms of housing affordability,” Dworkin said. “Those on the lowest rungs of the economic ladder have actually been forced into working homelessness. So, it’s not just people who are unemployed or mentally ill, but people who are actually going to work every day after they’ve woken up in a tent or a car.”

But the affordability challenges also afflict middle-income Americans as well, evidenced by a greater number of people living with friends or loved ones or with multiple roommates well into later life, he added.

Olson zeroed in on the rate environment, saying the pricing challenges make for a very difficult moment for a lot of people.

“Rates went from 3%, and they’ve bottomed back down to the 7% range, but that’s just been a killer,” Olson said. “Because if you just look at the math, prices have been sort of sticky. They haven’t really fallen in some areas, or they keep going up in some areas. They may be softer, but you’re doubling the expenditures on a mortgage with similar prices. That’s a formula for a huge step backward in terms of affordability.”

An alarming and unusual moment for affordability

When asked if this moment for affordability could be characterized as especially alarming, Dworkin agreed with the statement, relating his own situation to the one faced by many first-time homebuyers in the current environment.

“I’m one of those old guys who says that I got my first mortgage at 10%, which I’m assuming is very annoying to people who are under 40,” he said. “Because for their entire lives, mortgages have been dramatically lower than that. But what we’re seeing now is people are paying 8% on a mortgage, and that is completely out of context.”

When he was paying 10%, Dworkin’s father paid “as low as six and as high as twenty,” he said. That trajectory helps contextualize the mortgage market and affordability for young people.

“I had a context that rates go up and down, and you ride them,” he said. “But for most people who are buying their first home today, they’ve never experienced anything like this. There’s no context for them. This kind of inflation, there’s no context for it. And so, it has a disproportionate impact on how they see the economy and how they judge their political leaders.”

The current moment has “the most unusual set of circumstances” in his long career, Broeksmit said.

“You’re seeing a resilient but cooling economy, and unaffordability because of high interest rates,” Broeksmit said. “And in that environment, you would generally expect to see slowing demand for homes and therefore, falling — or at least stable — home prices. But home prices have been stubborn and gone up about 5% this year, and the supply of housing just hasn’t recovered from years of underbuilding following the financial crisis.”

Assessing political leadership, life of loan in 2024

When asked about the stewardship of the federal government’s housing programs, agencies and responses to current affordability challenges, all three leaders agreed that the Biden administration is giving housing a high level of attention. Broeksmit offered particularly “high marks” to FHA Commissioner Julia Gordon, while Dworkin said HUD and FHA are doing “as much as they can do without more statutory authority and appropriations.”

The attention given to housing issues by HUD and FHA has pleased CHLA, with Olson crediting the mortgage insurance premium cut at the start of the year as a move with “a lot of benefit” for its members. Olson also expressed appreciation for the performance of Ginnie Mae in its responses to liquidity challenges, and to the U.S. Department of Veterans Affairs for allowing the expiration of increased fees that military veterans and active duty personnel pay for VA mortgages.

All three leaders appeared open to another mortgage insurance premium cut, but the bigger issue was FHA’s “life of loan” premium policy. Reinstituted a decade ago to improve the performance of the Mutual Mortgage Insurance Fund (MMIF), recent data indicates the MMIF is healthy.

“We think that FHA should consider further changes to the mortgage insurance premium, perhaps including the elimination of the life of loan premium requirement,” Broeksmit said. “On an FHA loan, you keep paying the mortgage insurance premium until you pay the loan off whereas in a conventional loan, once your equity reaches a certain point, you can get the mortgage insurance dropped.”

When asked about another MIP cut, Dworkin said the “bigger issue” is the life of loan requirement, and that the MIP is currently “at a reasonable level.”

“[Life of loan] makes FHA a much more negative execution for the consumer,” Dworkin said. “Let’s say I have more than 20 or 25% equity in my house. I shouldn’t be paying mortgage insurance to FHA; I would not have to be doing it if I had a loan that was bought by Fannie Mae or Freddie Mac. And so I think that I’d like to see that addressed before we talk about another MIP cut.”

There are ‘if we’re lucky, four months’ in an election year

Adding to the complexity of addressing these challenges is the fact that 2024 is a presidential election year, which gives all of these organizations a far more limited timeframe to work from before lawmakers focus their efforts on reelection.

“Frankly, [2024] is not a legislative year,” Broeksmit said. “It’s a legislative — if we’re lucky — four months.”

Compounding the time challenges, Congress’ strategy to avoid a federal government shutdown at the end of 2023 with dueling funding deadlines also increases the pressure on lawmakers, making conversations about housing issues more difficult for any advocacy group, he explained.

“We may still be talking about government funding into the spring,” Broeksmit said. “And if we are, it sucks the oxygen out of the room for much else to happen legislatively. So put simply, we think we have about four months of the actual window to legislate in 2024. So of course, we’ll be trying to frontload our priorities, but we also have to be realistic about how much legislation is likely to pass.”

Not only is the legislative session condensed by electoral politics, but the election itself is expected to be very competitive, and the balance of power between both chambers of Congress could be reversed according to certain pundits and analysts, Broeksmit said.

Affordability ‘wins’ could motivate lawmakers

For NHC, the timeline feels compressed with some potential opportunities for broader action in certain pockets of the year.

“I think that clearly it’s going to be easier to get things done during the first quarter of the year,” Dworkin said. “Once the election takes place, there’s always an opportunity at the end of the year. The summer is difficult but not impossible, and I’m hoping this [affordability] problem will be recognized as serious and broad enough that members of Congress will say this is an area where they have to compromise. Because they all share the need to show their constituents they’re doing something.”

At CHLA, Olson said that the election year could actually make certain priorities a little easier to achieve.

“I think it helps on some of these consumer issues,” he said. “We’ve been really big on things like trying to clamp down on trigger leads, focusing on the FICO, which is a big problem. They’re charging for soft credit pulls now, and making it harder for a loan originator to work with borrowers that need to work with them to get their credit scores up to improve their standing.”

At the end of the day, politicians running for re-election may find it beneficial to address some of these housing challenges that may count as wins for their constituents, which could then provide fuel for their campaigns, he explained.