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39 July 2024 July 2024 » C O V E R S T O R Y Biden's administration and former Presi- dent Trump's. The Biden administration has focused primarily on programs and policies in- tended to improve affordability—both for homebuyers and renters. These programs have typically featured subsidies to renters and tax incentives to first-time homebuy- ers or homebuyers from underserved populations. While well-intentioned, the latter are more likely to exacerbate affordability issues than improve them. The funda- mental problem in today's housing market is lack of supply—especially entry-level homes—partly because builders have under-built for the past decade and over 60% of current homeowners are locked into their homes with sub-4% mortgage rates and simply cannot afford to sell their home and buy another. The type of tax incentive programs the Biden administration is proposing are intended to make it more affordable for buyers to purchase a home, but these types of programs tend to bring more buyers to market, increasing demand against an already-insufficient supply, which will ul- timately cause home prices to rise further, making homes even less affordable. More recently, the Biden administra- tion has begun discussing ways to increase supply. In fact, it recently released $85 million in funding to 21 state and local governments to have them remove barriers to the construction of affordable housing. This is a step in the right direction but is likely to add only a minimal number of homes to the nation's inventory, which, unfortunately, will not make a dent in the massive, multimillion-unit shortage of homes across the country. But it at least shows that the administration is recog- nizing the need to address the supply/ demand imbalance and is moving toward doing what it can to address it. Q: What do you anticipate will be the primary impact on mortgage and housing if Donald Trump returns to office? Pete Carroll: We expect President Trump's housing and mortgage policy pri- orities to be marked by a broader narrative of the continuing erosion of the inde- pendence of federal regulatory agencies and encouraging more private capital to re-enter the housing system. A Trump administration will also need to address the expiration of the Tax Cuts and Jobs Act, which may incorpo- rate supply-side stimulative tax credits, for which there is bipartisan support. We expect leadership changes at key indepen- dent regulatory agencies, including the Consumer Financial Protection Bureau (CFPB) and Federal Housing Finance Agency (FHFA). We expect new FHFA leadership to re-frame and de-emphasize the Government-Sponsored Enterprise (GSE) Equitable Housing Plans in favor of a renewed focus on recapitalizing and releasing the GSEs—Fannie Mae and Fred- die Mac—from conservatorship. Amend- ments to the GSE Preferred Stock Purchase Agreement (PSPA) between the Treasury and FHFA would likely limit GSE activities and risk-taking parameters post-conserva- torship, encouraging greater private capital participation in mortgage markets. This would include the cancellation of certain pilot programs: for example, Freddie Mac's pilot program to purchase single-family, closed-end second mortgages. Jacob Channel: In the past, the Trump administration's housing policy was somewhat vague and contradictory. On one hand, the COVID-era protections passed while Trump was in office did place limits and freezes on evictions and foreclosures (albeit only temporarily). The Trump administration also tried to attract investors to rundown neighborhoods by creating so-called "Opportunity Zones." "The most likely scenario —no matter which party occupies the White House in 2025—is that it will take several years to work through these issues ... several years of sluggish home sales, gradually declining mortgage rates, and slowly improving affordability resetting the market into a 'new normal.'" —Rick Sharga, President & CEO, CJ Patrick Company