https://seekingalpha.com/article/...p-should-end-gse-conservatorships...The Director of the National Economic Council Lael Brainard spoke at a housing symposium on December 7. This is notable in its own right because this is the first time she publicly talked about housing. In her prepared remarks I found two interesting snippets:
Our first major priority is increasing the supply of affordably priced homes in order to lower housing costs. We are using every lever at our disposal - legislative proposals, our administrative authorities, our convening power, and our bully pulpit - to do so.
But we cannot wait for Congress to act. Through our Housing Supply Action Plan, we are reducing barriers to housing and offering new and improved financing for affordable housing development.Housing Supply Action Plan
When you look at the Housing Supply Action Plan, it was announced in May 2022 to close the Housing Supply gap in 5 years. Although there are no explicit references to Fannie and Freddie, this plan was released a month after FHFA released its strategic 5-year plan for FY 2022-2026. Executing objective 1.3.3 ends the conservatorships:
Oversee the Enterprises' implementation of capital plans to achieve regulatory capital requirements
2021 Fact Sheet
The Housing Supply Action Plan is based on a September 2021 fact sheet where Biden says they will do everything they can to produce more affordable housing:
President Biden is committed to using every tool available in government to produce more affordable housing supply as quickly as possible, and to make supply available to families in need of affordable, quality housing - rather than to large investors.
This fact sheet addresses learning and listening sessions:
Launching Learning and Listening Sessions with Local Leaders: The persistent imbalances in the U.S. housing market have formed over many decades and it will take concerted effort and iterative policymaking to correct them. To this end, the White House, HUD, and FHFA will convene state and local officials and stakeholders for a series of peer learning and listening sessions. These sessions will allow for the exchange of best practices on locally led zoning reform to address supply and affordability challenges, including a virtual session on accessory dwelling units hosted by FHFA in September. The sessions will also identify the obstacles to implementation that remain, which the President's Build Back Better Agenda and potentially federal administrative action, can help address.
One such listening session was held in Franklin TN in October of this year.
FHFA's Sandra Thompson flew to Franklin TN to talk workforce housing in October. There she learned about how administrative action can help solve the affordable housing crisis. The Mayor of Franklin Ken Moore said this, "We are confident that Director Thompson will take these ideas and lead at a national level to enhance sustainable communities where everyone can live and work."
FHFA is engaged. Now Treasury is engaged. Treasury's Deputy Secretary Wally Adeyamo traveled to Georgia to talk about the importance of investments to increase housing supply:
At 7:30 AM ET, Deputy Secretary Adeyemo will convene a roundtable with financial institution leaders on the importance of an equitable and inclusive national financial strategy. This event is closed press.
At 1:00 PM ET, Deputy Secretary Adeyemo and Atlanta Mayor Andre Dickens will tour Two Peachtree, a former office building that is being converted into a multi-use space that includes affordable housing units and a housing assistance center thanks to federal support for cities during the pandemic and economic recovery. Following the tour, the Deputy Secretary and Mayor will host a roundtable to discuss the importance of investments to increase housing supply and lower rental costs. This event is closed press.
FHFA and Treasury are now talking with local Mayors about the importance of investments to increase housing supply. The Biden administration has said before that such listening sessions would potentially lead to federal administrative action to help address obstacles to implementation.
Housing Industry Leaders Call For End of Conservatorship
The day the White House leaders spoke at Solutions 2023,
David Stevens, Ted Tozer and Scott Olson published on HOUSINGWIRE that FHFA and Treasury should release the GSEs from conservatorship as soon as possible.David Stevens directly gave me the following quote:
I think the growing call to release the GSE's warrants attention by the administration. Clearly there is increased concern about the risks of an endless array of politically motivated FHFA Directors tinkering with these important companies. Release is the only option to protect them.
In their article, they emphasize the problems with continuing conservatorship:
Continued conservatorship makes it harder for the GSEs themselves to focus on long-term management and housing affordability objectives.
Continued conservatorship makes it harder to retain talent at Fannie and Freddie as senior executives keep leaving after concluding there is no end to conservatorship in sight.
Continued conservatorship puts taxpayers at risk in the event of a downturn when there is broad agreement around a true utility model.
The authors argue that FHFA has a duty to end the conservatorships:
But ultimately FHFA has the authority -
even a duty - under HERA to take the GSEs out of conservatorship, working with the Treasury which holds its preferred stock.
Continued conservatorships seem to undermine the administration's policy objectives stated earlier.
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