Ben Carson, the former presidential candidate known for his calm demeanor who was appointed by President Trump to be the Secretary of Housing and Urban Development, is trying to make it easier for millennials to purchase their first home.
Young Americans are facing a housing crisis. Their average wages are falling, while housing in most areas is rising quickly. Federal Reserve data shows that millennials are earning 20 percent less than baby boomers were earning at the same ages. Average wages have fallen since the recession, according to Census data. A recent ATTOM study says, “Annual home price growth outpaced annual wage growth in 363 of 447 counties (81 percent) analyzed in the report.”
Chinese and Mexican millennials have much higher homeownership rates than American millennials. China’s homeownership rate among young people is 70 percent, double the 35 percent rate in America.
In a speech to the National Housing Symposium, Carson said millennial homeownership is a “lost dream.”
“All of us have heard the stories about millennials living at home, renting, or sharing rooms, and many of these people are creditworthy but feel excluded from the possibility of homeownership. You can understand the frustration. It cuts across an entire age group,” he said.
“I worry that millennials may become a lost generation for homeownership. We must find a reasonable, prudent path to link millennials with investors and lenders – and the housing market itself.”
So, what is Carson doing to fix it?
He says “we must create a viable entryway for more creditworthy millennials.” Specifically, Carson believes the easiest way to enter the housing market for millennials is to buy condos, units that have lower prices and allow young people to build equity for future purchases. Carson said his department will “allow more people, including millennials, to use FHA to buy a condo.”
In November, the Federal Housing Administration (FHA) changed their owner-occupancy standards to make it easier for developers to finance projects, meaning more condo and rental units will be built.
Fannie Mae will also be increasing their allowed debt-to-income (DTI) ratio for private borrowers, raising it from 45 percent to 50 percent starting at the end of July. This will allow private banks the freedom to give more loans to millennials.
“Such an action would help millennials, although FHA loans would remain an attractive, powerful option,” Carson said. “Lenders, bankers, and mortgage providers need to do everything possible to help creditworthy millennials buy their first home. The taxpayer cannot be the sole solution.”
For millennials with student debt, this DTI change alone will make a big impact on the ability to buy their first home. Carson’s efforts show the Trump administration is listening to the real struggles of young Americans and is willing to take pragmatic positions to help the next generation.