The United States has no housing policy. And there's none on the horizon either. That's a scary thing, given the centrality of housing to domestic economic woes.  

Once upon a time, the US had a housing policy. It was focused on increasing homeownership. It might have been a misguided policy or at least a policy taken too far, but it was a policy and everyone understood that. It meant that programs were designed to work toward that goal.

Today, 4 years into a housing crisis, we still have no housing policy. There's no plan to clean up the legacy of the housing bubble and no plan to build the future of housing finance. This sad state reflects a singular failure of political leadership.  It also reflects a deeply fragmented housing finance world in which no one is in a position to call the shots. 

Let's start with the legacy problems, namely the foreclosure crisis and the collapse of home prices. The Administration has never really figured out where it stands on these issues. It makes nods to the need to fix the housing market as part of economic recovery, yet it has assiduously avoided confronting the foreclosure crisis and housing price collapse as a macroeconomic issue. Instead, it has come up with a stream of poorly integrated, small-bore programs that it has greatly overhyped, even as the programs under-deliver. This is HAMP, HARP, FHAShortRefi, etc. 

HARP 2.0 and the proposed multi-state foreclosure settlement don't even qualify as manque housing policy. They are just continuations of the small-bore approach. The reason it feels like there is no plan is because there is no plan.  The problem here isn't just that people are losing their houses. It's that we've lost control of the ship. We've lost a policy vision. 

Why this non-commital approach? Because there is simply no way of dealing with the legacy problem without dealing with negative equity, and that means forcing loss recognition somewhere in the system, either on banks or on taxpayers. That's a painful move politically, and the Administration has kept trying to avoid manning up to the problem. As a result, it looks a lot like Greece, where there's lots of energy spent denying the inevitable. From a good government perspective, however, it's horrendeously irresponsible. 

So who is calling the shots? I was just on a panel about this at the fabulous AmeriCatalyst housing conference, and it is painfully obvious that no one is calling the shots. The ship is rudderless on housing. Part of this is because of the fragmented administrative authority.  HUD would seem to be the go-to office, but HUD's authority is over FHA and VA and Ginnie Mae, all a limited part of the market. FHFA has authority over the GSEs, but it is as a receiver, and the FHFA Director is an acting director and a career civil servant. The prudential bank regulators each have their own sphere and they aren't interested in housing policy. They are interested in the safety-and-soundness of their regulatory charges. Treasury and the Fed would both seem to have a macro-view of the world, but neither is really expert in housing. Prior to 2008, Treasury had never done anything with housing, while the Fed has only ever approached housing in terms of interest rate manipulation and as a bank regulator. The Council of Economic Advisors and the Domestic Policy Council in the White House would seem to be places where one would find a larger cross-market view and a policy focus, but they aren't staffed with "housies". There's no one in a position to see the whole market and with the expertise and authority to craft a policy.  One of these entities could step forward to try and take some leadership, but the personalities just don't seem to be there for that to happen. Instead, housing policy on legacy issues is being made one case at a time in the courts with foreclosure suits. Is that how a national market should work?

One suggestion has been for a national "foreclosure czar".  The right person in such a job could help corral the various disparate interests at play, but I would not be overly optimistic. A foreclosure czar would have a convening power proportionate to his or her personal prestige, but no ability to impose a policy vision. The leadership here needs to come from the White House, I think, but it hasn't been forthcoming. 

Future of Housing Finance 

We also have no plan for the future of housing finance. There are several well-developed future of housing finance plans circulating (including one from the Center for American Progress's Mortgage Finance Working Group, of which I am a member), but that proposal is just a proposal. It isn't policy. We've gotten a non-committal set of options from Treasury and HUD, but haven't seen things move beyond that.

In fairness to the Administration, the lack of forward-looking housing finance reform isn't solely its fault. Housing finance is a political 3d rail. There's deep, deep ideological divide on the solution, and the hybrid public-private nature of the past system has given everyone ammo for their position.

The ideological right blames everything on the role of government in the system and wants to privatize, damn the torpedos. Never mind that there isn't the private-risk capital in the world to support our $6T in securitized residential housing assets.

There's a left position that wants to see something more like nationalization or at least a very prominent government affordable housing role.  And then there's the non-engaged left, that just doesn't give a damn about the future of housing finance. In their view, the ability of homeowners to buy a house in 10 years doesn't matter much when people are losing their houses today. 

There's a fair amount of consensus on the big picture between the craven right and the moderate left that there needs to be a continuation of the public-private system in some form, but no consensus on the details. The extremes on both ends of this debate have prevented the moderate consensus from solidifying or advancing, at least until after the 2012 election. 

Is There a GOP Alternative?

So if the Administration doesn't have a housing policy, do any of the GOP contenders?  No, sadly. Watching the GOP debate this evening, it was clear why none of the candidates has emerged as a front-runner:  none of them are ready for prime time. Romney seemed a notch or two more polished than the rest (he also looked like he just got off the red-eye), but it was hard to ignore the pointed question posed to him about why his 59 point economic plan has nothing on housing. The response that it's a "jobs plan" not a housing plan just underscored that he doesn't have any ideas on how to address the elephant in the room for the economy. If he had a housing plan, that was the time to present it.