Federal YIMBYs?

Some interesting stuff seems to be going on at the federal government.

The House passed the “Housing for the 21st Century” Act. It has some streamlining for manufactured homes and HUD programs. And, it includes some regulatory relief for local banks! I tend to focus on changes in 2008 at the federal mortgage agencies because their mission was, in part, to be a countercyclical source of mortgage funding, the federal government has the capacity to serve that role, and I can document the changes at the agencies and their effects on the housing market.

But, the crackdown on local mortgage banking was more severe. Local banks basically simply stopped lending at all where there is default risk in the mortgage market. As the 2008 crisis played out, issues with dissipating capital may have been an important part of their initial retraction from the market. But, their permanent retraction was caused by a plethora of regulatory straightjackets around underwriting, capital mandates, and other controls. It is especially ridiculous because nobody really ever even blamed local banks for the 2008 crisis. The blame was mostly focused on securitized mortgages where the default risk was not borne by the originator.

Reforms along these lines would have to include changes aimed at loosening underwriting to be effective, but it is nice to see the direction things seem to be going.

The bill also addresses construction lending, which has become very difficult for small scale builders.

Then, Tuesday, the House Committee on Financial Services held a hearing about housing. And, you could almost think that the Erdmann Housing Tracker narrative about housing was mainstream. Among both the speakers and the committee members, there seemed to be bipartisan recognition of over-regulated mortgage lending. The focus was firmly on supply. Detailed conversations about the problems with zoning, permitting, and lending filled much of the hearing’s time.

Meanwhile, New York City left wing mayor Zohran Mamdani has pledged to streamline permitting and regulations for small businesses and to speed up the process for building new homes. Some who support deregulation in housing have been skeptical of Mamdani’s plans, given his political leanings. But, so far, his heart seems to be in the right place, and he seems to have built a team with some of the right sorts of reform-minded advisors to make changes that could work.

Some glimmers of light in a dark time.