When Hurricane Sandy hit, the federal and state government picked up the tab. Now, the private sector must step up

According to new data from the Center for Responsible Lending (CRED), states across the country rely on federally supported credit programs to provide affordable housing options. Housing programs like Section 8 federal housing and Veterans Choice loans provide low-income households with valuable housing support, while also aiding schools and neighborhoods across affected areas. If the home value for affected homes were to go into decline, that effect on local property taxes and school funding could be crippling.

CRED recently released comprehensive analysis on the relative strength of 5,834 neighborhoods affected by Hurricanes Harvey, Irma and Maria. The data shows that while most federal support is served by multifamily public housing programs, housing lending agencies, and banks who have resiliency programs and restoration plans have taken the lead in the disaster recovery community. However, these lenders would still have to take on major tax burdens if affected communities had fewer tenants paying property taxes and homeowners paying their mortgages.

“Federal, state, and local governments are all supportive of housing finance when there is a strong financial foundation, but it can be just as important to provide the tools for private sector lenders to support communities with valuable programs,” said Alexander Jernigan, CFP®, CFP®, CPA and Executive Director of the Center for Responsible Lending. “States have done a great job working together to assess each new data point to assess what program activity is needed to move on. But it will ultimately be up to the private sector to step up and build support for these communities, including by providing tax incentives or funds for housing assistance that will go back into communities.”

There is a significant opportunity for private lenders to step up and provide a framework to help support recovery efforts for communities that need it most, but right now the landscape for recovery may still be far from ideal. One of the biggest challenges is coordinating home and property ownership among federal home rehabilitation loans, such as the federal mortgage foreclosure program called Making Home Affordable, which is in run to recover $59 billion from a 2008 financial crisis that led to 2.5 million home foreclosures.

Several states are being watched to see how they plan to fund these funds for housing recovery. According to CRED’s data, Kentucky, Louisiana, and South Carolina’s housing infrastructure is already at risk due to decades of declining populations and the potential loss of public housing public assistance programs for elderly residents. All of these homes would require major investment from private lenders, and fast.

“As people impacted by the recent storms look for relief, they should not have to make unreasonable sacrifices in order to find good housing options,” said CRED’s Alex Richardson. “That means making available programs like mortgage modifications, borrower counseling, and insurance reimbursements that serve both the homeowner and the community by reducing the risk of unrepairable home damage.”

Leave a Comment