DPC REPORTS
FACT SHEET | February 11, 2009
The American Recovery and Reinvestment Act of 2009 Takes Steps to Stabilize the Housing Market
Abuse by the subprime mortgage
lending industry and under-regulation by government officials during the last
eight years has led to massive foreclosures on primary residences, undermined
home values, and reduced home sales, which has, in turn, caused a domino effect
across every sector of the American economy and resulted in the worst economic
recession in decades. In 2008, foreclosure filings on properties increased by
more than 80 percent to 2.3 million, and additional foreclosures are expected
as more and more Americans find themselves unable to make their mortgage
payments.
As Congress works to get the economy working again by creating jobs, providing
tax relief, and making long-term investments, we have not forgotten the origin
of the current recession: the crash of the housing market. In the coming weeks
and months, we will build upon previously passed-legislation and propose new
solutions to prevent unnecessary foreclosures, stabilize the financial markets,
encourage new and responsible home purchases, expand affordable housing, and
help communities recover from massive home foreclosures.
The American dream of homeownership. According to Standard & Poor's
Case-Shiller Home Price Index of 20 metropolitan areas, home prices dropped by
more than 18 percent overall in November 2008 (the last month of available
data) from the previous year, making it more difficult for struggling
homeowners to refinance or sell their property at a profit. The silver lining,
however, is that reduced prices are leading to increased home sales, which rose
by 6.5 percent in December 2008 (the largest increase in years). In an effort
to stabilize housing prices, while still encouraging aspiring homeowners, the American
Recovery and Reinvestment Act of 2007 will extend and increase the homebuyer
tax credit. The plan will also expand more targeted homeownership and
foreclosure prevention programs, including: 1) the Homeowners Assistance
Program in the Department of Defense, which provides financial assistance to
military and civilian personnel who face the loss or severe devaluation of
their homes due to base closures; 2) rural housing programs, which help
stabilize the housing market in rural communities and help rural Americans
avoid foreclosure or purchase a new home; and 3) the Community Services Block
Grant, which helps community action agencies provide additional housing and
mortgage counseling, as well as other services, to Americans who need it.
Affordable housing. The home loan crisis has only exacerbated the
nation's ongoing affordable housing crunch. Despite dropping interest rates,
the heightened underwriting standards for obtaining a home loan have made it
more difficult for many Americans to purchase a home, and job losses and the
continued resetting of adjustable rate mortgages have made it more difficult
for existing homeowners to make their mortgage payments. The result has been
an increased demand and cost for rental housing, which has only made it more
difficult for non-owners to rent. To ensure that Americans have a safe and
stable place to live so that they can find a job and contribute to the local
and national economy, the economic recovery plan will invest billions in
affordable housing construction and opportunities for low-income Americans.
The Public Housing Capital Fund will provide formula and completive grants to
help local public housing agencies address the backlog in capital needs,
including improving energy efficiency in aging developments. It is estimated
that this investment will yield significant economic benefits, including
generating $2.12 in local economic activity for every one dollar spent and
reducing energy costs for tenants. The investment will also help to create or
preserve 140,000 much-needed jobs in the housing construction sector. The HOME
Investments Partnerships Program block grants will enable state and local
government, in partnership with community-based organizations, to acquire,
construct, and rehabilitate affordable housing and provide rental assistance to
poor families. The American Recovery and Reinvestment Act will also
invest billions to: 1) stabilize and ensure the availability of Section 8
project-based housing; and 2) to prevent homelessness through the Homelessness
Prevention Fund, which can help Americans keep a roof over their head by
offering short or medium-term rental assistance, first and last month's rent,
or utility payments. The plan would also
encourage private investments in affordable housing by accelerating the low
income housing credit.
DPC
CONTACTS
DPC
- Joi Chaney (224-3232)
PRESS
- Barry Piatt (224-0577)
- Communications Director
- Kati Card (224-1450)
- Press Assistant