The Most Underappreciated Part of the Bipartisan Housing Bill

Proponents of these measures hope that they
will increase housing supply and therefore lower prices, putting homeownership
back within reach for middle-class families. But there’s a smaller provision
that could be just as important. The bill includes pilot programs to address a
gap in the housing market that keeps families from getting mortgages on
already inexpensive homes because it’s often not profitable for lenders to
issue smaller mortgages. Addressing this gap could bring the best idea of the
abundance movement—that public policy should focus more on increasing
housing supply—to distressed and rural communities where aging, inexpensive
homes already exist.

The provisions deal with “small-dollar
mortgages,” defined as those less than $100,000, for homes that are often
called “naturally affordable”—which is to say, cheap. They’re often priced
affordably because they’re small, old, in a less expensive neighborhood, or
some combination of the three. Such homes are not a big part of the market, but
they could be exactly what working-class families who want to move from renting
to homeownership need, especially in certain areas of the country.

“These small-dollar, or low-cost, homes
comprise only about 3 percent of active listings; that’s about 32,000 homes
that are under $100,000 today,” said Aniket Mehrotra, a policy coordinator at
the Urban Institute’s Housing Finance Policy Center​. “However, in rural areas
of the country the share of active listings is greater.”