Why affordable housing is critical in financial inclusion strategy

America has a national housing problem: Simply put, there are too few homes to meet the demand from potential buyers. That mismatch in supply and demand has created an affordability problem, as home prices have increased rapidly in many places nationwide.

That may be good news for homeowners, who understandably are pleased to see the value of their properties rise, and sellers, who can realize a windfall. But for low- and moderate-income families, and for younger buyers seeking their first home, this dynamic threatens their ability to purchase a property and start building wealth.

We need more affordable housing — and since it will take time to address the supply shortage, we must get started on the needed reforms now. As we observe National Homeownership Month in June, it’s worth pausing to consider the scope of the housing crisis, and what steps we can take to address the problem.

According to a recent economic analysis by Freddie Mac, the current supply of new and existing homes for sale is at a historic low, with a shortage of some 3.8 million homes needed to meet the current demand. This deficit stems from variety of factors, including a shortage of construction labor, high costs for lumber and other materials, and low mortgage rates. As a result, asking price for available homes have skyrocketed, with prices up by 12% in the last year alone, according to Freddie Mac.

This same analysis notes that the most severe shortfall is in the stock of “entry-level single family homes, or starter homes.” As a result, many younger and first-time buyers are having difficulty securing their first home, which slows their ability to get established in the market and start accumulating wealth. For historically marginalized populations like Black and Hispanic families, the challenge is even more severe, setting them even further behind. Freddie Mac’s analysis forecasts that the supply shortage is likely to persist for the foreseeable future.

At a time when we’re all increasingly concerned by the inequities that plague our nation, the inability of many younger and minority Americans to secure affordable housing only threatens to heighten those inequities. The question is, what can we do to make the dream of homeownership more affordable for a more diverse population?

This spring, National Credit Union Administration Chairman Todd Harper appointed me to serve on the board of directors of NeighborWorks America, a congressionally chartered nonprofit organization dedicated to increasing access to homeownership and affordable rental housing in communities across the nation. I’m grateful for this opportunity to represent the NCUA on the board, and for the opportunity to work on issues of affordable housing and financial inclusion that have been an abiding concern for me throughout my career.

NeighborWorks has been a longtime leader in supplying creative and innovative solutions to affordable housing challenges. Funded in part by federal appropriations, NeighborWorks has a number of tools at its disposal, including direct investment in new housing development and redevelopment ($9.3 billion invested in fiscal year 2020); providing counseling services on housing needs for families and individuals; and working with local entities to address community needs for housing solutions.

In addition, I plan to urge my fellow board members to look at advocating for changes to regulations that currently limit the supply of affordable housing. Regulatory reform isn’t the only answer to the shortage of affordable housing, but sensible changes to regulatory barriers where appropriate could go a long way toward boosting the supply of homes. Likewise, from my position on the board of the NCUA, I intend to examine reforms that will help more credit unions to extend lending for affordable housing development.

Of equal importance, I’m looking forward to using the bully pulpit to emphasize the message that affordable homeownership must be a critical component of our national commitment to financial inclusion. Financial inclusion is the civil rights issue of our generation — and getting more Americans, especially younger and minority families, into decent, affordable housing is a critical step on the ladder to financial capability.

The deficit of affordable housing did not arise overnight, but over decades, and there’s no single cause for this crisis. Thus there will be no single, “one size fits all” solution — we need a prudent mix of investment, incentives and regulatory reforms to spark more construction of new units, and redevelopment of existing homes and rental units, to meet the demand for housing.

I encourage credit union leaders and other financial services industry players to give special consideration to the affordable housing crisis — and to consider how we can play a meaningful role in helping solve the problem.