Housing, for purchase or rental, is a top priority for everyone and is problematic for those who need help to get affordable housing. Different countries have different methods for achieving the goal of affordable housing, but it is such a vast topic that we can only explore a few of the approaches in this article.
In the United States, most influential programs start at the Federal level. The most well known of these programs are Fannie Mae (FNMA) and Freddie Mac (FHMLC). Both are government sponsored enterprises whose purposes are to expand the secondary mortgage market. Typically they are both involved in lower priced housing.
Fannie Mae is the leading source of residential mortgage credit in the U.S. secondary market. It exists to provide large-scale access to affordable mortgage credit in all communities so people can buy, refinance, or rent a home.It allows lenders to reinvest their assets in more lending and thus increasing the number of lenders in the mortgage market by reducing the reliance on locally based savings and loan associations. Freddie Mac (FHLMC) buys mortgages on the secondary market, pools them, and sells them to investors on the open market. This secondary mortgage market increases the supply of money available for mortgage lending and increases the money available for new home purchases.
MHA (Making Homes Affordable) is a joint program of HUD (Housing and Urban Development) and the Department of Treasury that works with families and their lending institutions to reduce monthly mortgage payments when the owner is going through a rough time financially.
The HOME Investment Partnerships Program is the largest Federal block grant to state and local governments designed exclusively to create affordable housing for lower income households. The intent is to fund a wide range of programs which include (1) building, buying, and/or rehabilitating affordable housing for rent or homeownership or (2) providing direct rental assistance to low-income people.
A similar program, partnering federal funds with a local organization, provided rehabbed rental property in low to low middle income areas. They took a fairly substantial sized older building (but not a skyscraper) and gutted and rehabbed the building. The rehabilitations were done well, but not to a luxurious standard so that the rents could be kept low. The program accomplished a secondary purpose to provide a stimulus for further investment in the neighborhood, because the properties selected were substantial enough and visible enough that they had an influence on the whole neighborhood.
To aid low income families, rent regulation in New York State takes the form of rent control and rent stabilisation programs. New York City’s current rent control program, which began in 1943, is the longest-running in the United States and New York is the only large city in the United States that has strong rent control laws. Over one million apartments are rent-regulated. These rent regulations affect rent increases and prescribe rights and obligations for tenants and landlords.
In Australia, a program called AUSTRALIANS FOR AFFORDABLE HOUSING defines what governmental influences are needed at all levels, to include:
- Investment in more low cost rental housing and financial assistance for low income renters
- More opportunities for low income households to get into home ownership
- Initiatives to make home ownership more achievable for first home buyers
- Changing the housing investment tax arrangements that drive up house prices
- A single cabinet level housing minister who is responsible for delivering these changes.
- Tax incentives and grants to first home owners
The NRAS (National Rental Affordability) is an Australian Government initiative, in partnership with the states and territories, to invest in affordable housing. It offers financial incentives to individuals, businesses and community organizations to build and rent affordable homes. These homes are targeted towards low to moderate-income households and the rents charged are up to a maximum of 80% of the market rate. The applicants for affordable housing are assessed by Mission Australia Housing. Each of these housing programs have specific criteria depending on the program and funding source.
The United Kingdom provides equity loans which are available to first-time buyers of new homes with a purchase price up to £600,000. The prospective home owner must contribute at least 5% of the deposit and the government will contribute up to 20%. The loan must be repaid either when the home is sold or after 25 years, whichever comes first, and what the homeowner pays back depends on the market value at that time. The percentage that the government loans to the purchase price is then applied to the new sales price. Thus if the government paid 10% of the original purchase, they will receive 10% of the sales price. The government makes money or, doesn’t lose money, on its deposit and the homeowner gets a new home for as little as 5% down.
Also in the U.K, they have shared ownership programs which are provided through housing associations. The prospective homeowner takes out a mortgage for his percentage share of the home’s purchase price (between 25% and 75% of the home’s value) and pays rent on the remaining share. Shared ownership properties are always leasehold. This program is limited to those within a certain income or those that cannot afford a house now. There are separate specifications for the elderly and the disabled.
A New Buy program allows the purchaser to buy a newly built home with a deposit of only 5% of the purchase price and, like its name, it is limited to new homes sold for the first time, under a certain price level, which must be used as a primary residence, and can’t be shared with another person or entity.
People interested in other programs and initiatives (which are so widespread and varied) should investigate the Federal, State and Local programs in their respective countries.