Joe Biden has pledged to reverse President Trump’s deregulatory agenda and pro-growth accomplishments. “Joe’s Vision for America,” is an invasive, big government scheme that increases multiple financial regulators’ authority and conceals the tax hikes he would impose on the American people. His policy agenda includes reversing President Trump’s tax cuts while proposing to spend $640 billion on “housing” over the next 10 years without detailing the tax hikes needed to pay for his proposal.
Historically, concern for the wellbeing of low-and-middle-income Americans has been an excuse to expand government policies that have consistently failed to meet their stated objectives. Often times, these polices drive up prices for those who can least afford them and create artificial barriers that limit peoples path to prosperity. Ultimately, government intervention in the housing market has led to unintended consequences within the housing market, which includes contributing to the financial crisis of 2008.
Community Reinvestment Act is a 1977 law that forced financial institutions to lend in distressed areas, often times through providing loans to subprime borrowers. Starting in 1995 at the direction of President Clinton, federal regulators expanded their authority to force the government sponsored enterprises Fannie and Mae and Freddie Mac and financial institutions to meet new quotas for CRA loans. As a result, excessive loans were made to borrows who had more house than they could afford as banks were under threat to meet there affordable housing quotas or face government fines. As confirmed in a 2012 National Bureau of Economic Research “adherence to the act leads to riskier lending by banks” and contributed toward the recession.
Under the Trump Administration, two regulators that oversee CRA compliance, Joseph Otting and Jelena McWilliams at the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation, have successfully reduced burdensome regulations that prevented banks from extending additional credit to these communities and small business owners. Under Biden, these regulatory agencies will subsidize insurance and mortgage companies, reducing the efficiency of banks and President Trump’s deregulatory pro-growth agenda.
Within his expensive spending proposal, Biden calls for reestablishing the Office of Fair Lending and Equal Opportunity within the Consumer Financial Protection Bureau and establish a national standard that will force appraisers to incorporate race into the final assessment of home values. Under Obama-era appointee Richard Cordray, the office had a history of forcing financial institutions to heavily weigh race-criteria – rather than economic data such as credit scores – for loan applications. The department was eliminated three months after President Trump appointed Mick Mulvaney as the Acting Director of the CFPB.
Biden calls for the establishment of a “Homeowner and Renter Bill of Rights” based on a California law that bars mortgage servicers from foreclosing on homes. Under the policy, lenders or servicers must wait an additional 30 days after they have contacted the homeowner and attempted to negotiate a new mortgage before foreclosing on a property. Its nationwide implementation will price borrowers out of the market with higher interest rates or will reduce the number of mortgages that lenders will provide, due to the uncertainty of loans being repaid on time.
Biden also mandates zoning laws to increase “affordable housing” throughout cities. Such zoning forces municipalities to specifically re-zone land for affordable housing. It requires municipalities to engage in harmful rent control policies and reduces the autonomy of municipalities.
Biden also wishes to expand funding to the 1994 Community Development Financial Institutions Fund but remains quiet of where the funding will come from.
Biden calls for an increase in “affordable housing” through his proposed $100 billion-dollar Affordable Housing Fund. Within the Fund, $65 billion will go toward state housing authorities and the Indian Housing Block Grant, $20 billion of the fund will be spent on the Housing Trust Fund, a 1974 trust fund that has built and renovated low-income housing.
Another $10 billion of the potential Fund will be used to appease environmental groups by retrofitting affordable housing units with green energy furnishings like Rep. Alexandria Ocasio-Cortez calls for in her Green New Deal. Biden will spend the remaining $5 billion in the HOME Investment Partnerships Program, a federal block grant that subsidizes construction costs, and the Capital Magnet Fund, a CDFI grant fund. Again, Biden’s proposal fails to explain where he will collect tax revenue to pay for his Fund while throwing additional money at a government program hoping it will create efficiencies.
Separately, his plan will invest another $10 billion over the next ten years in the Community Development Block Grant. This program lacks oversight and has a history of not being transparent in how it spend its funds as noted by a recent City Journal article. Again, the pattern remains the same as to the actual cost to taxpayers.
Candidate Biden aims to raise the capital gains tax rate to 39.6%, almost double the current rate of 20%, but that is allocated to finance his healthcare plan. This raises the question, what other tax will be doubled to pay for his $640 billion-dollar housing plan?