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National Press Club Luncheon
"Homeownership: Myth vs. Reality"

Remarks as prepared for delivery by
Secretary Alphonso Jackson

Washington, DC
Thursday, June 17, 2004

Thank you for that very kind introduction, Shelia. You've brought great credit to the National Press Club as its President.

We've been joined today by representatives from nearly every sector of the housing industry - from builders, to bankers, to buyers. Thank you for coming. And thank you for working in such close partnership with the Bush Administration to create affordable housing opportunities for America's families.

I appreciate the National Press Club's invitation to address this historic institution. Since 1932, speakers have been coming here to take part in these weekly luncheons. You've sparked national debate on most of the great issues of the day, and a lot of headlines have been generated from this podium.

I'm glad to have this opportunity to talk about our work at HUD and shine a light on our achievements. I want to focus specifically on what we're doing to create more homeowners, because this is a priority of mine, it's certainly one of the President's priorities, and we have a great story to tell during National Homeownership Month.

The phrase "American Dream" has been around since historian James Adams coined it in 1931. He described it as a dream "in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the circumstances of birth or position."

Adams gave it a name, but the idea of America as a land of unlimited possibility and opportunity has been with us since this nation's earliest days. Immigrants have been coming to our shores for nearly 400 years, searching for something better than the life they left behind.

The wonderful thing about the American Dream is that the individual defines it. It doesn't come with a government mandate or "how to" manual. Your dream is going to be different from everyone else's. You - and only you - are its architect, builder, landlord, and tenant.

Many of these dreams have a common theme, however: the pursuit of "ownership."

At first, "ownership" meant land, and in America's early days, a person's social status was measured by the acre. But today, the pursuit is more often defined not by land itself, but by what we build upon it. We don't aspire to be only landowners; we aspire to be homeowners. Homeownership and the American Dream are tied tightly together.

In the mid 1800s, miles of open land and the allure of gold drove settlers west by the tens of thousands. Many found their motivation in the Homestead Act of 1862, which promised free land to anybody who agreed to plant it and build a home. These settlers stretched the nation's borders and remade America. By the 1890s, nearly half of all Americans owned a home.

When the Great Depression struck, a quarter of the workforce lost their jobs. Homeownership slid. Banks failed. More than 40 percent of all home mortgages were in default by 1933. Lawmakers in Washington recognized that homeownership was vital to both families and the national economy. They understood that not all people were as capable of realizing the dream as others. And so the federal government made a formal commitment to expanding the ranks of homeowners.

In a flurry of activity during the 1930s, Congress and the President created the Federal Home Loan Bank System to encourage lenders to make loans to homebuyers, the Federal Housing Administration and FHA-insured mortgages, Fannie Mae, and public housing.

The G.I. Bill enacted during World War II stimulated homeownership by offering government-backed mortgages to veterans. But soldiers returning from the front - many of them newly married and looking for a first home - found a housing shortage instead.

Washington responded with the Housing Act of 1949, which promised "a decent home and suitable living environment for every American family." The quality of housing improved. The quantity of housing improved.

Not everyone shared in these advances, however. And so the struggle for equality in housing opportunities prompted a new assessment of the American Dream in the 1960s.

Minority and low-income citizens were being shut out. Oftentimes, they didn't have the same opportunities as others to live in the homes of their choice. Congress and the President responded with a decade of federal action intended to preserve civil rights and fairness in housing. The creation of the Department of Housing and Urban Development in 1965 was a hallmark of the era.

Today, more than two-thirds of Americans live in homes they own. Homeownership has come to symbolize the American Dream.

In fact, we have such a long tradition of homeownership in this country that most people don't stop to question it. Why the continued focus on homeownership? Rental housing in this country is affordable and plentiful - why don't we promote rental housing with the same enthusiasm we have for homeownership?

Rental housing has a very important place, and I'll say more about that later. But the benefits of homeownership for families, their communities, and for the nation are simply too profound to ignore.

Owning a home is the foundation of wealth creation for families and is their quickest path to self-sufficiency. Last year, Americans took $139 billion out of the equity they'd accumulated in their houses and invested it in new businesses, consumer goods, their children's educations, and so on.

Homeownership offers children a stable living environment that influences their development in many positive ways. The children of homeowners score an average of 9 percent higher in math and 7 percent higher in reading ability. They're 25 percent more likely to graduate high school. They have a 116 percent better chance of graduating college.

Homeownership also provides a source of tremendous strength for the entire nation.

Over the past three years, the housing market has driven the national economy, as Americans bought and refinanced homes in record numbers. Many regions were spared the worst of the recent recession because the local housing market was so strong.

Today, the housing sector directly accounts for about 14 percent of the nation's total Gross Domestic Product and involves the efforts of builders, bankers, mortgage lenders, realtors, and numerous others. For every 1,000 single-family homes built, we see 2,500 jobs created, $75 million in wages earned, and $37 million in tax revenues generated.

The robust housing market continues. As the government reported just yesterday, housing starts remained strong in May, and building permits for single-family construction rose to their highest annual level since reporting began 44 years ago.

A nation of homeowners provides stability and strength, and because we have focused so much attention throughout our history on creating better housing, America today is the best-housed nation on earth. A record number of Americans - nearly 69 percent of us - are homeowners. For the first time ever, more than half of all minority households own homes in their communities.

Despite that success, minorities still aren't sharing equally in the homeownership dream. In fact, there's a "homeownership gap" in this country, and minority families are far less likely to own a home.

President Bush believes that homeownership should be accessible to everyone. So he took a bold step two years ago and challenged the nation to close the homeownership gap and create 5.5 million new minority homeowners by the end of this decade.

I'm pleased to tell you that we're making tremendous progress. Since the President issued his homeownership challenge, more than 1.5 million minority families have taken out a mortgage on a new home.

One of the homeownership myths I want to challenge this afternoon is the idea that homeownership is unaffordable, especially for low-income families and first-time buyers who have limited means and little credit history.

The reality is that owning a home is an affordable option for more families than ever before. In many markets, a family can find a home that requires a monthly mortgage no bigger than the amount they now pay in rent. A buyer who takes time to research their options and seek out information will find countless programs on the local level dedicated to helping new consumers find a first home.

The Federal Housing Administration is celebrating its 70th anniversary this month. Over the course of those 70 years, FHA has made it possible for nearly 33 million families to join the ranks of the nation's homeowners. And a person can't be denied an FHA-backed loan because they make too much money. That's another homeownership myth. If they meet the credit requirements, if they can afford the mortgage payments, and if they plan to make the property their primary residence, anyone can apply for an FHA-insured loan.

Suppose a person could afford a monthly mortgage payment, but hasn't been able to save money for a downpayment. Is homeownership out of reach for them?

The myth says yes. The reality says maybe not.

I announced recently that more than 400 state and local government agencies will share $162 million in funding through the American Dream Downpayment Initiative. These grant dollars will help first-time homebuyers with their downpayment and closing costs, which researchers tell us represent the single greatest obstacle to homeownership.

President Bush proposed the American Dream Downpayment Initiative as a candidate for the White House in 2000, and made it the centerpiece of his homeownership agenda once he took office. We worked with Congress for three years to enact it.

Now that the funds are available, we can begin helping thousands of families chart a course toward homeownership - families like the Telore family of Boston.

Ramesh and Sheba Telore came to the city of Boston as immigrants from India. Ramesh became a minister at the Emmanuel Gospel Center. Sheba works as a secretary.

Sheba's great dream was to own a home, but the family couldn't manage the finances, especially a downpayment. But they took a homebuyer education course and finally had the opportunity last year to purchase a three-bedroom home in the Mission Hills area. Working through one of HUD's lending partners, they received $2,800 in downpayment and closing cost assistance, which made the home affordable.

Today, they live in a brand-new house. "It's amazing," says Ramesh in describing the family's journey to homeownership. "Our long-cherished dream has come true."

Let me tell you about another innovative plan we've developed to help families jump the hurdle of high downpayments. The Administration has proposed legislation called the Zero Down Payment Mortgage. It would allow buyers to qualify for FHA loans without having to come up with cash at the closing table. The downpayment would be rolled into the total cost of the mortgage at a slightly higher interest rate than a standard FHA loan.

We estimate that our proposal would generate 150,000 new homebuyers in the first year alone.

The Zero Down plan has strong and bipartisan support in Congress. The House Financial Services Committee recently approved it, and we're hoping that President Bush will be able to sign it into law this year.

First-time buyers sometimes think there's nobody out there to help them navigate the process. They often don't know their rights as homebuyers. They don't fully understand their responsibilities either.

But the reality is that homeownership education is available in every large and medium-sized city in America. With the help of HUD-approved counseling agencies, families are making more informed home purchases, learning how to budget for home expenses and a regular mortgage payment, and they're finding the lending process less intimidating.

Our Administration is significantly boosting funding for housing education. The budget we've proposed for the coming year provides a record $45 million to help more than a half-million homebuying families with counseling services. We've more than doubled the funding for housing education since 2001.

When I was with President Bush in suburban Philadelphia this spring, we saw what housing counseling can do for a family that once considered homeownership out of reach.

For almost four years, Pearl Cerdan had been thinking about buying a home for herself and her six kids. The homebuying process always scared her off, though, and she was worried that her credit rating wasn't good enough to qualify her for a mortgage.

But Pearl heard about the services offered by a local counseling agency and she began taking homeownership classes. She learned money-management skills, too, and how to repair her damaged credit. The counseling service helped her find low-interest financing. Soon she was signing the papers that made her a first-time homebuyer.

On March 15th, Pearl greeted the President of the United States at her front door. And it was with tremendous pride that she said, "Welcome to my home."

Counseling works.

We're taking many steps to help Americans become homeowners, and we're working specifically to promote the production of affordable homes.

We've been pressing Congress to enact what I believe will be our most effective tool for spurring affordable housing production, especially in areas where affordable homes are hard to find. I'm talking about the Single-Family Affordable Housing Tax Credit.

The budget President Bush proposed in February would provide developers with nearly $2.4 billion in tax credits to build new homes or rehabilitate existing structures. We have two goals: to create homeownership opportunities in distressed neighborhoods and to revitalize those neighborhoods through increased homeownership.

Legislation to create the tax credit has been introduced in the House and Senate. The bills have strong support from both sides of the political aisle, including 277 cosponsors in the House. We're hoping that Congress will enact the tax credit this year - it's an opportunity to make homeownership a reality for 200,000 families in communities where affordable homes are needed most.

There's no question that some communities face an acute shortage of affordable housing. That's a reality. But there's no basis to the myth that the solution to the problem rests entirely with the federal government.

It's no accident that many of the cities facing affordable housing shortages also have the tightest restrictions on growth. Boston, for example, is one of the most expensive housing markets in the nation. According to a report published last year, a major cause of the city's affordable housing shortage is what the study calls "the almost impenetrable thicket of barriers formed by Massachusetts state and local regulations."

Regulatory barriers on the local level end up delaying construction and driving up costs. The barriers include out-of-date building codes, approval processes that are duplicative and time-consuming, restrictive zoning ordinances, unnecessary or excessive fees and taxes.

Removing these barriers is key to meeting the housing needs of our nation's families. Experts estimate that if the barriers were dismantled, development costs on average could drop as much as 35 percent. This would allow millions of Americans to buy or rent housing they can't afford today.

In response, we created America's Affordable Communities Initiative. Through it, we're working with communities and local organizations to highlight these regulatory problems and the need for reform.

Perhaps most importantly, HUD is leading by example. We're reviewing the Department's internal regulations, looking for barriers that we've unintentionally created over the years. And when we find them, we're dismantling them.

There's one final myth that I want to dismantle today. Given the Administration's focus on homeownership, this one was probably inevitable, and it goes something like this:

"By focusing so much attention on homeowners, you're ignoring those who rent."

Let me say this in response. Since coming to HUD, I've spoken passionately about the importance of increasing homeownership, especially among minorities - and I make no apologies for it. Expanding the ranks of the nation's homeowners will continue to be a priority for this Administration because the benefits of homeownership are too numerous to ignore.

Having said that, I know that we can't meet today's housing challenges through homeownership alone. A growing need exists for affordable rental housing, too.

I've devoted a large part of my career to helping families find decent and affordable rental housing. I understand - from the success stories I've seen first-hand - that rental housing can serve as a bridge to self-sufficiency. So let me personally assure you that on my watch, HUD will remain committed to meeting the needs of the nation's renters.

Today, HUD's rental assistance programs help 4.5 million households nationwide. Three-quarters of our $30 billion budget is dedicated to meeting the nation's rental housing needs, and that figure is climbing, as rental assistance programs continue to consume more and more dollars. For instance, Section 8 itself takes up over 50 percent of HUD's 2004 budget, compared to 36 percent just five years ago.

In order to continue funding all of HUD's critically important programs, we're looking for ways to improve Section 8. Whatever action we take, I can assure you that HUD's commitment to its rental families will remain strong.

America is not a perfect place, but there's perfection in her promise. It's that promise that continues to inspire people like Calloway Leffal. He turned 67 years old recently, and even though that's an age when most people start slowing down, he chose to fulfill a dream by becoming a first-time homebuyer in Dallas.

It inspires people like Carlos and Jane Arias. They came here as immigrants from Peru. They spoke no English, had no credit history, and knew nothing about the process of buying a home. Just 18 months after arriving in this country, they became proud homeowners.

And it inspires people like Kim Berry of Central Islip, New York. She's a Native American who was left without any kind of family support system when she separated from her husband and got laid off in the same year. But Kim was determined to buy a home. With the help of HUD and an entire community support system she built on her own, Kim lifted herself out of government-subsidized housing and into her own home.

It's perhaps a testament to the continuing power of homeownership that it has provoked so many myths over the years. I hope I've successfully batted down a few of them this afternoon. But the American Dream of homeownership itself is not a myth. From the suburbs to the inner cities, the dream of homeownership endures, and it belongs to every American.

In a great country where people are different from one another in so many ways, the American Dream is one of the strongest ties we share with one another. North to south, east to west, across all lines of ethnicity, color, religion, and gender, people share in the aspiration to own a home.

America has good reason to make homeownership accessible and available to everyone who seeks it. And good reason, during this National Homeownership Month, to rededicate ourselves to this very worthy task.

Last Modified: June 21, 2004
Content Archived: January 20, 2009
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