Kriston Capps is a staff writer for CityLab covering housing, architecture, and politics. He previously worked as a senior editor for Architect magazine.
The nation's foremost futurist tackles one of housing's principal frustrations.
For someone who aims to establish a permanent moon colony and stage a manned mission to Mars by the end of the decade, Newt Gingrich hasn't lost sight of the problems that face those of us living here on Terra. At a conference on Tuesday in Washington, D.C., the former Speaker of the House, onetime presidential candidate, and budding sci-fi novelist addressed a frustration that affects all humans: shelter. It should come as no surprise that his solutions for reforming the housing market were nothing less than radical.
Gingrich, who delivered an early keynote address for the Bipartisan Policy Center's 2014 Housing Summit, kicked off his talk with remarks about an Italian-designed 3D-printed electric car being produced by an Arizona company in Chicago. "This is so hard for Washington to grasp as a city," Gingrich said. "You are discussing policy reform in a world where people are taking something like
3-D printing and beginning the process of building cars."
Technology was a central theme of his talk. He asked attendees to marvel at the humble automated teller machine. The ATM "lights up with 6 to 8 languages. You pick one of the ones you’re good at,” Gingrich said. You may not know the exchange rate, but you can guess that it's better than the one at the hotel. A transaction takes about 11 seconds—"3 seconds to do the transaction, actually," he observed. "Typing takes up the rest."
We don't have 3-D printed cars inside the Beltway yet, but even politicos can handle ATMs. What's this got to do with housing? "It takes 277 days to transfer a medical record from the Defense Department to the [U.S. Department of Veterans Affairs]," said Gingrich, to gasps and scattered applause from the crowd.
Reduce the bureaucracy: That's Gingrich's No. 1 prescription for providing affordable housing in America. The former Speaker noted that despite rumors to the contrary, Millennials also hope to own homes—same as every generation that has come before them. He went on to make some off-topic remarks about cutting the Pentagon down to a Triangle by eliminating thousands of jobs at Department of Defense. Then he returned to a topic that nearly every panel in the two-day conference touched on in some way or another: risk.
“We have a unique advantage of being too disorganized to block the future," said Gingrich, in the most delicious bon mot of the day. (“Any institution that’s too big to fail is too big to manage" was another one.) It's clear that Gingrich believes that regulatory overreaction following the tech bubble and housing crisis has has pretty nearly blocked the future, though. If all mortgage reinsurance was private, he said, "reinsurers would have an enormous incentive to police the system." Quis custodiet ipsos custodes, Speaker Gingrich? The market will watch itself: "A system in which people are watching their own money is much more ruthless, because the people with money are also the people with the risk."
Gingrich isn't standing alone on housing-finance risk—not exactly. "I think we should be reducing the profitability of the GSEs"—Fannie Mae and Freddie Mac in this case—"by reducing their risk-taking and replacing it with private risk-taking," said former House Representative Bruce Morrison, who is now chairman of the Morrison Public Affairs Group, during a panel on housing finance reform. That's not a divisive view, although Morrison and others would agree that GSEs do some things right. Wholly doing away with government oversight, on the other hand, can lead to the kind of mortgage-reinsurance kickback schemes that the Consumer Financial Protection Bureau has already detected, thanks to the Dodd-Frank act.
Gingrich didn't come back to the subject of how bureaucracy specifically hampers the U.S. Department of Housing and Urban Development, if it does at all. But later in the afternoon, HUD Sec. Julián Castro delivered his own keynote. "In 1981, HUD had roughly 16,500 employees—almost enough to fill the Verizon Center just a few blocks away," Sec. Castro said. "Today, we have 8,500 employees—not even enough to fill half the arena."
Sec. Castro's address didn't appear to indicate that he expected or even wanted to return to those staffing levels. Instead, he said that "smart government" would be the focus of his administration, whether that takes the form of a greater reliance on evidence-based practices or the codeathon that Castro says HUD is planning.
Does that put former Speaker Gingrich and current Secretary Castro on the same page? Probably not, but that can't be ruled out on some of the finer policy prescriptions. For example, Gingrich said that he is intrigued by the Ontario Home Ownership Savings Plan—and now that I've looked that up, so am I. Here's how it works, according to Mortgages.ca:
If you earn under $40,000 per year or a combined income with your spouse of less than $80,000, then you are entitled to a tax credit for contributions of up to $500 ($1,000 per couple). The credit is based on a maximum contribution of $2,000 per year, or $4,000 per couple and is on a sliding scale that diminishes with increased income. Those that earn a combined income of $80,000 will not be eligible for the credit.
These tax credits are available for five consecutive years. Clearly, $2,500 in tax savings is nothing to sneeze at. Combine that with savings from an RRSP and you could realize a significant reduction in your tax payable. There are stipulations though. You must close the plan and use the funds to buy a house by the end of the seventh year. If you do not, all the OHOSP tax credits must be repaid with interest.
It's too bad that Gingrich would rather sneer at Washington's obsession with policy than suggest ways that it might effectively craft it. His Canadian tip seems like the kind of proposal that would help thousands of would-be first-time home-buyers who could afford to pay a mortgage but can't afford to get a mortgage. How many more shovel-ready ideas does he have that he feels we aren't taking seriously?
Earth to Newt Gingrich: If Congress can't pass housing-finance reform, then that will only happen through executive action, and if executive action isn't enough, then it won't happen at all.