Affordable housing shortage may be fueling the Las Vegas payday loan industry

Inside Subprime: February 14, 2018

By Alex Huntsberger

In a recent guest column for the Las Vegas Sun, Las Vegas Latino Chamber of Commerce President Peter Guzman called for Congress to help the affordable housing crisis by encouraging more private investment.

Guzman specifically pointed to Congress “dragging its feet” on reforming Fannie Mae and Freddie Mac, the government-chartered affordable housing lenders that were placed under conservatorship during the 2008 financial crisis.

He wrote:

“Unfortunately, the two are in limbo … While the Federal Housing Finance Agency (FHFA) has instituted positive change, the legal status is still complex … Congressional action is required to lock in the gains made at Fannie and Freddie. Enacting such legislation would offer lawmakers a once-in-a-generation opportunity to strengthen home financing and spark affordable-housing construction.”

Sadly, the recent tax reform law passed by the Trump Administration might only exacerbate the current crisis. By dramatically slashing the tax rates on corporations, the law devalued the federal tax credit that has fueled a great deal of affordable housing construction – three million low income apartments –since it was passed in 1986.

An article in the Las Vegas Review-Journal cited an estimate from national accounting firm Novotrac and Company that the tax reform bill would lead to 1,730 fewer affordable housing units being in built in Nevada over the next decade.

According to that same article, the state’s two most populous counties, Clark and Washoe, together need about 197,000 more affordable housing units.

In his column, Guzman called for a government-facilitated increase in private investment to help alleviate the shortage:

“This could all change if Congress created a fair system to invite various well-vetted businesses to do the important work of guaranteeing loans for affordable home purchases and rental unit construction. The move would inject trillions of dollars into housing. And as new stock came online, prices would stabilize and families could more easily afford a home or apartment.”

The nationwide lack of affordable housing is one of the factors exacerbating income inequality. According to a 2017 report from Harvard’s Joint Center for Housing Studies, 11 million U.S. households currently pay more than 50 percent of their income towards housing.

The more money Americans must spend paying for a place to live, the less money they have to put towards things like saving, debt repayment, medical costs, investing, or childcare. This can mean that, during times of financial hardship, low-income people must turn to predatory payday loans and title loans to make ends meet.

Guzman acknowledged that fostering private investment in low-income housing is not something to be done haphazardly. That’s how we could end up with another nationwide market crash and recession. But “these details can be worked out” he wrote, “if only elected officials would get serious about taking action.”

Guzman is calling upon Nevada senator Dean Heller, a member of the Senate Banking Committee to take the lead on this important issue: “He may be the voice it takes to move Congress over the finish line on a real solution,” Guzman wrote.

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