Housing After Dark Episode 20: Ethan Handelman on What's Happening in Washington Today

This episode was recorded on Tuesday, April 15th, 2025.

About This Episode

In today’s episode we dive deeper into what is happening to our federal housing system. If you’re like me, you know enough about federal housing to get in trouble but not enough to follow every twist and turn of HUD, FHA, Fannie, Freddie, and Ginnie and many more. Thankfully, today’s guest, Ethan Handelman, does know enough and does follow it. His regular LinkedIn posts about what is being dismantled, paused, canceled or attacked in the federal housing world have been a lifesaver.

Ethan was Deputy Assistant Secretary for Multifamily at HUD in the Biden-Harris Administration and I hope you’ll enjoy our conversation, one that’s not entirely without hope. We talk about some kernels of hope in bipartisan legislation, areas of housing where change is possible, and we give more love to housing vouchers. Thanks to all of you who listen and subscribe. If your organization is able to sponsor us, reach out and say hello. We’d love to keep being able to bring you Housing After Dark and for that, we need some help.

This Episode’s Guest

Interview Transcript

Alex Schafran: Ethan Handelman, welcome to Housing After Dark. It’s great to have you.

Ethan Handelman: It’s great to be here. Thanks for having me, Alex.

Alex Schafran: So as is tradition here on Housing After Dark, we start with each houser’s history and I have written down in my notes that you “wandered” into housing, which is not uncommon on Housing After Dark and is neither a good nor bad thing about housing. So how did you wander into housing?

Ethan Handelman: It’s true for a lot of people as you say because if you’re in high school and you want to be a doctor or lawyer or engineer there’s an obvious path. If you want to do real estate maybe you had an uncle who did some and so you have a sense. But there isn't a clear way in housing. And if you want to work in the more specialized area of affordable housing, there is nothing. You’ve got to figure it out.

I didn’t even know that I wanted to. I was in graduate school, I was studying international relations, studying the allocation of satellite positions and I realized, I don’t want to be a professor. So I went and I took a job that had “research” in the title and it happened to be for a small consulting firm that worked on affordable rental housing. It’s called Recap Advisors back then. I got hired to work on their websites and their internal library because I had those skills at that time. I have since lost all ability to handle a website. I cannot help you with your website now but back then I was all over it.

But then, and as I was working on all this affordable housing stuff, I was reading it. and pretty soon they were like do you want to work on this. Fast forward ten years I was running the advisory practice, I was working for public sector clients, private sector clients doing all sorts of different things. Plenty of affordable housing policy stuff which I loved and then from there, I realized I wanted to do housing policy full time, not just when I could find clients so I eventually found a job with the National Housing Conference, which is old enough that it has this weird name.

Now we hear of conference and think of as a place to go eat rubber chicken and listen to speeches, but back in the 1930s, a conference was a group of people getting together to do stuff and the National Housing Conference was home builders and progressive reformers during the New Deal era who wanted to get together and do some housing stuff and they did. A whole lot of it. Our public housing dates from that period. A bunch of core affordable housing laws date from that period.

And today, 90 years later, it is a big tent organization devoted to affordable housing. I spent about 8 years there, doing policy and advocacy. Went from there into government because it’s one thing to write comments on regulations and legislation, it’s another thing to actually get to work on it. I went to the Federal Housing Finance Agency, one of several housing agencies that the United States has, and spent three years there. When I was there I got tapped by the Biden-Harris administration to go run the office of multifamily at HUD and that’s what I was doing during the four years of the Biden-Harris Administration.

Alex Schafran: So for those guests who know their way around the federal government, just a trigger warning that Ethan is actually going to give us a bit of a tour because this is actually a California housing podcast and I consider myself somewhat of an expert on California housing but not on the structures of the federal government and since this as much about my learning as much as it is about anything, Ethan’s going to give you a bit of a tour as we get into the basics of the housing system.

And that’s kind of inspirational for people like you and Brian McCabe who was on recently. The pathways into very prominent positions in our federal housing system are many which is one of the challenges of housing and one of the opportunities. I joke, my mother in law is Chinese and my child is about to turn one and there’s a tradition of putting them out there with a bunch of different things and they can choose their profession. If we’re going to do it, there’s definitely going to be a house there and I hope that my child can choose to be a houser from an early age.

Ethan Handelman: Or even an apartment building.

Alex Schafran: Yeah or even an apartment building. The problem is I’d probably never agree with myself on what structure should represent housing. I also want to put a pin in housing conferences that used to be places where people came and did business, now it’s a place where people come together, eat rubber chicken and listen to speeches. I think there's some deep truth to that, which maybe we’ll come back to or maybe we’ll do a whole episode on making our housing conferences better.

So we now understand a little bit about how you got housing, and one of the things I mentioned in my intro, and many of you who don’t know Ethan already may have seen his LinkedIn posts where he’s been doing as much as anyone i’ve seen out there documenting what is happening to our federal housing system right now.

Before we get into that, we both thought it’d be useful to take a step back. Partly because one of the things that triggered this conversation was the realization that the things at FHFA were really important and Ethan used to be at FHA and FHFA and so now we’re going to explain a bit.

Ethan - give us a breakdown about how the federal government is organized when it comes to housing.

Ethan Handelman: And organized, treat that term lightly.

Alex Schafran: Especially these days.

Ethan Handelman: Well there’s that but also housing policy happens in a whole bunch of places in the federal government. It’s something that not many people realize. Partly because the government is big and a little complicated and partly because a lot of housing policy gets done in subtle ways. Most people know about HUD and that it has a lot of functions for housing. It does mortgages through the Federal Housing Administration (FHA), that was some of the work I did. It administers grant funds, it administers rental assistance, things to help people who really need a lot of help with their housing. Our homelessness response is largely but not entirely HUD funded.

Public housing is also mostly funded by HUD, although some of it is funded at the state level too. Then there is the Federal Housing Finance Agency (FHFA). It’s more of a regulatory entity. It oversees Fannie Mae and Freddie Mac which help to make mortgages affordable and available to people and also the Federal Home Loan Banks which date back all the way to the 1930s and the New Deal and they help to provide capital for housing and keep a very stable housing system.

But there are a bunch of other agencies that also do housing work too. The biggest federal housing agency is the Department of Defense.

Alex Schafran: This is my favorite factoid. Can you explain that?

Ethan Handelman: Sure. There’s a whole bunch of on base and off base housing and the total dollars—way bigger than anything else in housing. They add up very quickly. The VA also does a lot of housing work. VA loans are some of the most beneficial and reliable ways to finance a home purchase. The Consumer Financial Protection Bureau does a lot of regulation to make sure that home loans are safe products that they’re not going to get you in trouble and that the folks doing the lending in the other work in the mortgage space are following the rules, and treating everyone fairly and addressing concerns as they arise. Rural housing also happens somewhere else. It happens in the Department of Agriculture (USDA) and they have a whole network of field offices and they do both single family homes work and they do multi-family rental housing work too. The other one we haven't mentioned but is huge is the Treasury Department because a whole lot of federal spending on housing happens through the tax code.

I work a lot with multifamily rental housing—not exclusively but a lot—and right now the biggest source of federal funds for preserving and creating affordable rental housing serving lower income households is the Low Income Housing Tax Credit. Administered by the Treasury, handled mostly by state agencies. California is special, you have two separate housing agencies, probably going to be reorganized again soon.

Alex Schafran: Exactly.

Ethan Handelman: So that’s the quick version. There are other parts of the federal government that touch housing too, some indirectly, but there’s a whole lot of ways. All that said we need to be doing way more.

Alex Schafran: The question of how everything is organized, how people understand the alphabet soup, all these different agencies. I’m curious when we get to the section of today's show where we talk a little bit about the good reforms you’d like to see, to what extent is changing some of this complexity important, changing how we do things. One of the reasons why HUD doesn’t do all the housing things that people think it might do is that HUD is a relatively recent creation when it comes to federal government, a product on the 60s, many of the other housing agencies go back to this original intervention of the federal government into the housing system in the 1930s . For a country that’s going to turn 250 next year, our federal housing system was born in the 1930s.

Ethan Handelman: And there are parts of HUD that go back that far. Like FHA effectively goes back that far.

Alex Schafran: So I’m curious how you see this complexity—and this is something that we’re seeing in California, and in other states I imagine as well. Are we thinking about the state’s role and how it interacts with the local role? We haven’t even talked about that and we probably won’t talk about that too much. But before we get there.

Let’s talk about what’s happening. We just went through this alphabet soup of all the agencies that are involved in housing, we do know that the current administration is going after every corner of the federal government. What you are seeing is happening on the ground even in your old agency or elsewhere cause I know follow the space really closely.

Ethan Handelman: Sure and the quick version is everybody is getting attacked. It is bad everywhere. It is worse in some places than in others. I'll give you some examples to try and make it concrete. So at HUD, which has roughly 8000 staff, which sounds like a lot but which actually means it’s not a very large agency and a lot of those folks are not in DC. A lot of them are in field offices across the country working directly with property owners and residents and rental assistance programs, states and localities, you name it. A lot of them are working with state and local agencies to help them do housing work.

The two ways HUD is getting squeezed 1) staff is being cut 2) funding is being proposed to be cut or it’s being frozen even though it has been authorized by legislation. On the staffing side we’ve seen probationary staff being illegally terminated. And noticed that I don’t use the word “laid off” because that’s an old term for when factories would be like “Hey we’re going to stop producing as many cars as we did but we might bring you back.” These are just firings, these are not layoffs.

That said, there have been court rulings saying “Hey, those terminations were improper and you need to bring people back.” There is for sure going to be more fights in the courts about it. But I also know that HUD is planning much deeper staffing cuts. Those cuts to probationary employees which just means they’ve been hired or promoted basically in the last year so there’s technically a trial period. They’ve terminated those folks quickly because they thought they had the right to do so even though there has to be a cause, performance still has to be bad in order to be terminated and for the most part these are folks with great performance doing essential work. One example, recently hired staff at Ginnie Mae which is the part of HUD that does mortgage securitization and creates mortgage bonds who had been hired to do cybersecurity, were terminated because they were recent hires. I think we all know we need cybersecurity right now.

Alex Schafran: Especially in the mortgage system.

Ethan Handelman: Yes, we would like that to be safe and secure pretty please. There is widely reported a plan within HUD that has not been made fully public yet to cut 50% of the current staffing. And that’s not a carefully calculated plan. I think we’re all clear that’s the case. This is just “how much can we cut” and let’s not worry about what happens after because what’s going to happen is a whole lot of things people depend on won’t happen. Rental assistance payments may not get paid out on time, mortgages will be slower to be endorsed or finance apartment buildings, funds that go to states and localities through block grants either may come slowly, may not work well, or may not come at all. Because that’s the other thing we’re seeing with funding right now is there are funds that Congress authorized in law and in the previous HUD (in the Biden-Harris Administration) we did all the steps required by law to take the authorized funds and obligate them, to attach them to a specific thing that someone in the economy is going to do under a contract which historically has meant those funds are being spent.

HUD with some of them has said we’re not going to do that, saying these are on hold or these are being canceled, even though there is no authority to do that. I expect there will be litigation about that, I expect there will be a lot of discussion around it, there is already a lot of activity around it. One thing that stands out to me in part because I worked a lot on it is the Green and Resilient Retrofits Program (GRRP), terribly acronym, great program. It was 1 billion dollars, which sounds like a lot but isn’t, which came from the Inflation Reduction Act, and it’s designed to make apartments that HUD supports with rental assistance safer to live in the face of natural disasters, more energy efficient, so they’re part of the solution to the climate crisis, and a result of those improvements, healthier to live in. It’s a preservation program. It’s making existing affordable housing safer, better, healthier.

We worked very efficiently to get that money obligated. Between August of 2022, when the law was signed and November 2024, we put out the notice of funding opportunity, collected applications, scored those applications in 12 separate rounds, and awarded funds to roughly 250 properties in 42 states plus the District of Columbia plus Puerto Rico. Totals about 1.4 billions dollars of assistance because we were allowed to make loans not just grants and you can stretch it a little farther with a loan so we really worked hard to get those out the door.

And a few of those the transaction closed and the money flowed but the vast majority of them are on hold and its radio silence from HUD.They have said to their staff internally, this program is on hold but you can’t talk to anyone about it. So everybody who is waiting for their grant or loan, is writing letters, writing emails and saying “Hey, we’re supposed to close, where's the money? Where’s the check?” and HUD just has to say “Shrug. Can’t tell you anything yet.” It’s bad.

So we’re seeing that in many areas, some of it is much bigger. We’ve all seen what happened at USAID, not a housing program for the most part but similar principles. And I think a lot of folks are watching to see what will happen to other funds. The Community Development Block Grants, the HOME Grants, all sorts of money that passes through HUD to states and localities, to property owners, to individual residents, to see what happens—cause it’s at risk.

We should also talk about what’s happening in the mortgage market because it’s also at risk because the Federal Housing Finance Agency regulates, like I said, Fannie Mae, Freddie Mac and the Federal Home Loans Banks. They oversee how the secondary mortgage markets, the bonds that provide the funds that flow into the home mortgage that you use to buy a home or the mortgage that a property owner uses to fix up or buy an apartment building. FHFA has experienced some staffing cuts already—some probationary folks—which is a real loss because it’s not a big agency, it’s a few hundred people. Mostly the examiners of the banks.

It has also seen a takeover of Fannie Mae and Fredie Mac by the FHFA Director who kicked off about two thirds of the board of each of those entities, and appointed himself and the FHFA General Counsel and a few other Trump administration loyalists to those boards, which doesn’t make any sense. Nowhere else in our economy or our government does the regulator of an entity sit on the board of that entity. It’s very strange and we’re all still trying to figure out what’s going on.

But we’re also really concerned about disruptions to the mortgage market because part of what makes home mortgages affordable here—and I recognize that for many folks it’s still hard to afford a mortgage and I don’t want to dishonor that at all—but what keeps mortgage rates as low as they are now, is that we have a whole lot of investors buying a whole lot of bonds that they have confidence in through Fannie Mae, Freddie Mac, Ginnie Mae and other sources. So we need to be watching what’s going on there too. There have been a lot of policy changes at FHFA, some of them pretty unpleasant like cancelling renter protections not sure that was needed. But the biggest thing to focus on is the safety and soundness of the secondary mortgage market.

Alex Schafran: Yeah. And that was one of the first things that I maybe at first when I started taking a look at your LinkedIn and learning more and more is, trying to understand that somebody who is a scholar of the impact of the global financial crisis, otherwise known as the foreclosure crisis in housing circles, and somebody who is a believer in homeownership as a central part of the system and we’ll talk about this in the second part today. Promises in some ways that they weren't going to rush the privatization but that doesn’t seem to have stopped them from creating really significant impacts on the systems independent of privatization.

Ethan Handelman: Well and that’s the thing. Talk of reprivatizing Fannie Mae and Freddie Mac, for those who don’t know, they are in conservatorship. Their regulator, FHFA, effectively controls them because it has conservatorship power. They can basically order them to do anything which is basically why there’s no reason to put someone on the board; they can just write a directive and tell them what to do. They also have warrants for the stock of the company. So they could take ownership or put them in receivership at anypoint when they choose.

The big concern with steps towards privatization which means exercising those warrants effectively selling the stocks to the private market would require a massive amount of capital. That capital requires a return. People want to make money when they invest. Realistically the only way for that to happen, is for the cost of mortgages to go up. I’m not sure that anyone wants that. People are both concerned about policy changes that are being made and if there is a move towards privatization, how does that affect your average homeowner, your average mortgage lender, your typical property owner who is buying or renovating apartments for people to live in. All of it depends on inexpensive mortgage capital.

Alex Schafran: Not that we need any proof that the current administration is doing this because it will in some ways benefit anybody to tell you the truth. At times there seems to be doing things that don't even benefit their key supporters because the only way to understand it is to see chaos as a core foundational goal but that uncertainty that they’re producing is intentional and it certainly isn’t to benefit anybody.

Ethan Handelman: And uncertainty has a long term cost. That’s something to keep in mind. I’m not going to speculate about anybody’s motive, but when you introduce uncertainty into something like the housing bond market, it means that someone who buys a bond, who effectively loans money for mortgages, is evaluating the risk of that money they have loaned. The more risk they perceive, the higher the return they ask for, the more their money costs to borrow. That has a long lasting impact. People see chaos and uncertainty today, a year from now two years from now, they’ll still remember that. They will still price that into the money they provide to mortgages. And this is happening in the treasury market too. Part of what we saw with the tariff announcement and this is April 15th, so the tariff announcement for us is very recent, but for you as a listener who knows, but part of what we saw with the tariff announcement is that it freaked out the bond market. The most patient, most level headed investors there are and you started to see real effects there and that’s when everyone takes a pause. Remember that housing relies on the bond markets too, it’s housing bonds which have federal backing.

Alex Schafran: That’s a really key point, and I don’t think it caught any housers or any housers who work on the finance side by surprise that I was finally some higher ups in the bond industry that got to him and made a U-turn on tariffs cause when the bonds freak out, they are such a foundational part of our financial system, I don’t think people appreciate that enough, if you work in housing or affordable housing especially you will appreciate that but not necessarily everybody does.

Ethan Handelman: The other thing to keep in mind on tariffs before we leave the subject is they have a huge impact on the costs of creating and preserving and operating housing and people don’t realize quite how far they reach. But almost every component of homes, whether those are single family or apartment buildings or some structure in between has imported aspects. A lot of lumber comes from Canada. A lot of manufactured products that go into all of those systems whether it is the wiring or the simple bathroom fan you’re going to put in every one of 100 apartments comes from overseas. If you make those inputs more expensive, it means the output is more expensive too. We’ve heard the homebuilders association and lots of other folks point to the very real costs of these tariff changes and that’s at the time when the costs of building and operating housing is already under stress from a lot of things, insurance being one of them but many others. We cannot afford to make housing more expensive to build and operate.

Alex Schafran: One of my clients is an organization that includes both for profit and non profit developers, it includes people in the market rate space and affordable space, because those are not mutually exclusive and you’re seeing people freaked out across the board whether it’s those who are concerned about the very specific cuts that we’re seeing in the affordable housing system that you mentioned at FHFA, etc. folks who are dependent on mortgage capital, as you mentioned. It’s not just our materials that come from overseas, it’s the humans who put those materials together who form it into a house who are often immigrants especially.

Ethan Handelman: Yep, construction labor.

Alex Schafran: Exactly. Especially when you get into single family and other spaces, smaller scale projects are all dependent on immigrant labor whom people are really scared of. ICE at the job site makes it scarier and harder and more expensive to build. You see it kind of across the board. I’m curious, as you’ve been doing this work to document what’s happening in housing, one challenge that I feel like I’m seeing is, despite the fact that all of us live in housing or all of us want housing, housing is such an integral part of our lives it’s not an integral part of our politics or our political system. I think some of the reasons why housing is so complicated and spread throughout the government is that no government is set up where housing is at the center of what they do, at least in the US. Perhaps overseas, I think in Singapore you’d argue the housing system is central to the Singaporean government and they know it and they treat it accordingly.

One of the ways that I feel like we’ve been able to get a little attention is by reminding people that tariffs, immigration restrictions, these also have major housing impacts. Since cuts to HUD or FHFA don’t get the front page of the New York Times. Are there any other cuts that you think are important that people should be aware of that are either ongoing or are threatened?

Ethan Handelman: So it’s a big question cause I’m sure there’s stuff happening now that I haven't seen the news report yet. It’s happening in all aspects. People should keep an eye on what they know and what they think is important to them. It’s important not to feel overwhelmed by all the bad things happening. It is important if there are things you understand and recognize and feel strongly about, that you let your elected representatives know that it is a problem. I’ll give you a small example which might make this easier to wrap one's head around.

So there's a small part of the Treasury Department that’s called the CDFI fund. Stands for Community Development Financial Institutions. One of the many many awful executive orders that came out said “Hey, here’s a list of small agencies that should be radically shrunk just to the statutorily required minimum” and it listed the CDFI fund. Almost instantly, a whole bunch of folks said “Hang on,” and called their members of Congress and other folks who have an interest in this and said “Do you realize what CDFI’s do? They help communities that don’t have good access to capital. They help provide housing, they help provide community development investments. They help small business incubators. All sorts of stuff, and have consistently had bipartisan support over many years.”

Pretty rapidly the Treasury Secretary said, “You know, we see this Executive Order but it turns out that everything the CDFI funds does is statutorily required so, don’t expect change right now.” So that was a win. It was small, but it shows that when people are upset, and they communicate it to their elected representatives, we can see a change of course. We just need to do that loudly on everything that we care about. And it can work. Will it work on everything, probably not, but it can probably work on a lot of things.

So things that folks should pay attention to right now. One is budget reconciliation and I promise you I will not do an overview on the budget reconciliation process cause I assure you that will put everyone to sleep, but it’s a way for Congress to pass a great big spending or revenue bill with bare majorities. It was how the Inflation Reduction Act got passed, and a bunch of good things happened. There is real risk that it will be used to gut spending on housing and a whole lot of other things including Medicare and Medicaid. So folks should be paying attention to reconciliation and speaking up because this is a key moment where members of Congress actually need to vote and do stuff and if they don’t vote for it won’t happen, and if they do, it will. Democrat or Republican alike, they need to hear what you’re concerned about in reconciliation. And me, affordable housing funding is very high up on the list.

Alex Schafran: Yeah it’s going to be really interesting to see whether Congress in many ways tries to take its role back that it was given in the Constitution.

Ethan Handelman: Wouldn’t that be nice.

Alex Schafran: As we’ve transitioned to this conversation to how things should be I’m glad you left us with the note about CDFI funds because the other thing for me watching from my bubble in California and trying to understand—who is an expert in housing but maybe not in federal housing—is that if chaos is the number one driver, the second is trying to erase any aspect of the civil rights era and any program that would potentially benefit someone who doesn’t look like the majority of the Trump administration.

Ethan Handelman: I’ll give you one example of that.

Alex Schafran: Special purpose credit?

Ethan Handelman: Actually I wasn’t going to go there but we can talk about that too. The staffing cuts at HUD. There was a leaked table of which departments of HUD, which parts of the agency would be cut the most, overall 50% cuts to staff but in the fair housing equal opportunity area, 80%. These are the people you call when your landlord discriminates against you. These are the people that provide tiny little grants in your city in your county to fair housing organizations that do testing and make sure that people are following the rules. These are the people to call when your rights are violated. If we cut 80% of them, there’s going to be a whole lot less enforcement.

Alex Schafran: And then again with the cuts to the Consumer Financial Protection Bureau, and all of the anti-fraud work all across the government, they are so clearly opening the door to the fraudsters, many of whom were in positions in the administration. And that’s one of the hardest things that’s so sad and maybe at some point in the future I’m going to do an entire episode on fraud in the housing system because one of the things that makes us do nice things is that it does tend to bring the sharks out of the woodwork. Every well intentioned thing they do can be turned

Ethan Handelman: Because there are great big sums of money involved.

Alex Schafran: Exactly because there are great big sums of money involved. What’s that old saying, “Why do you rob banks? Cause that’s where the money is.” Real estate is a whole other animal.

Ethan Handelman: And real estate appears in so many places we don’t realize. One of my anecdotes that I often use to help people realize is that if me you grew up watching Scooby Doo cartoons. Pause and think about it. Pretty much every Scooby Doo episode is about real estate. There’s a ghost who is trying to scare people away from a place, because that place has value. There’s a gold mine on it they want to build a mall, there’s buried treasure, whatever it is it’s all about real estate. So you’re right there’s a whole lot of economic activity focused on it. Most of it is good, people want to build homes, rent homes, create lives, create strong communities, but there is a certain amount of predatory activity that we need watch dogs to make sure doesn’t disrupt the good parts of real estate and housing.

Alex Schafran: I wish there were more people in the real estate system that were willing to take the hard truth of why so many Americans find it hard to trust real estate, why real estate is often the bad guy. I think you and I both know a lot of people who work in housing and real estate who are the most forthright honest hard working interesting committed people that you can find. From folks who swing hammers to folks who spring spreadsheets you get some amazing people who do work that is so hard and is so necessary but because there are so many sharks in the water it makes it hard for all of us an the distrust has built over centuries and communities inert that distrust from one generation to the next because of what’s happened.

Ethan Handelman: Well, and a bunch of that distrust is real. I worked at FHA. We went to work every day recognizing that the history of segregation and exclusion in this country came through FHA. It came through FHA maps. The term redlining, areas in red were marked as high risk and it was driven by racism, it was driven by segregation and it was wrong. A lot of what we are doing now still, and spent 4 years in the Biden Harris administration, is working to undo some of that damage and help rebuild trust and help capital flow equity into all the places that needed it.

When you mentioned earlier special purpose credit programs, that’s part of the goal there is to make sure that a housing and mortgage industry that historically discriminated against people of color, do less of that, maybe do not of that if we dream big and find ways to make sure that everyone has a chance to finance a home, and build it as part of their communist and really invest in the long term. Those have been pulled back by this administration. Does this mean it will all stop? I am hopeful that the many dedicated and smart people still in the housing sector and the lending sector will find ways to say look, we’re going to use our money to do lending in ways we know are right and when those loans get sold to Fannie Mae or Freddie Mac or other aggregators they will look like plain vanilla loans, and you won’t need to know that it’s a special purpose credit program. We don’t need to give it the name, but it’s still a valid loan and it ought to be funded but by the same token, it is to me, very frustrating and saddening that our current administration, federal government is saying we don’t want to acknowledge that change is needed in an ongoing way in a constructive way in a deliberate way. I think anyone who has lived in the world knows this change is needed.

Alex Schafran: It is sadly this kind of fundamental debate about history about what happened in history and how do you react to it now. I share your hope that we’ll find our ways around it. Speaking of it, this is a perfect segue. When Brian was on we talked a lot about his hopes, and some of things he had done on vouchers and about this challenge that a lot of have in this moment is that we’ve been advocating for change in the system. I don’t know anybody that goes to work in housing that I respect that thinks the housing system is working great. And even that their own agencies or organizations are working great. I know it’s hard to put aside the tsunami that is currently directly over our head, but what are some of the ways, either things you are working on or things you would like to see coming that feel like are really unimportant changes we can make in our housing system.

Ethan Handelman: It’s a big question. I’ll give you a few examples. All of them are in the context that we need to do a whole lot of things in parallel—I won’t say all at once—to make our housing system work better. It’s complicated and confusing. Anyone who says to you “Oh if we just do that one thing with mortgages, or if we just do this one thing with rentals everything will work fine.” They’re wrong. They’re missing a whole part of it. A lot of change needs to happen at the state and local level to allow housing to be created and preserved in response to demand. We spent way too many decades excluding people and excluding uses, and saying that the only thing that can happen on residential real estate is a single family home on a detached lot.

Turns out that if you use that sort of exclusionary policy, a whole lot of housing does not get built. And that means a whole lot of people looking for homes have to pay a lot of money, more than they can afford, to find housing that doesn't really meet their needs well. We need to change that at the state and local level and it will take a bunch of actions. We also need to do more to support housing for folks who cannot afford it just on their own. Of the people in this country who are eligible for housing help, they're making less than 60% of AMI, in many cases less than 30% of AMI. Think about folks on fixed income, people with disabilities, folks earning $25,000 a year maybe. No matter how much they spend, they’re never going to be able to spend enough to operate and maintain an apartment. So we need to provide some government help.

Right now, of the people that are eligible, between 20 and 25% actually get the help. Everyone has to wait in line, especially for years. So unlike something like Social Security where if you’re eligible you get it, housing help is a lottery and it’s not one with very good odds. We need to change that in a big way. There have been proposals over the years to do it in a variety of ways, it’ll take a bunch of action, some of it assistance that moves with families, some of it assistance tied to buildings so we create the homes that are needed.

We also need a whole lot more investment in communities to give them the capabilities to make smarter and better housing decisions. When they’re doing planning, when they’re doing enforcement codes, we know the stuff that gets built will be safe in the future and will be healthy to live in the future. They need those capabilities. One of the things we were working on in the Biden-Harris Administration was the floodplains rules so that in a world so we know here there will be increased flooding both from sea level rise and the rain events that we keep seeing, so it’s not just on the coasts, a whole lot of flooding (riverine flooding) and rain has a fun vocabulary if you even want to get into it, great words.

We need better rules so that the homes we build today won't get knocked out by a flood or hail storm in two years. We also need that so insurance rates can get back to affordable levels again. They’re way out of whack. Part of that is the recognition that there is a whole lot of risk in the system that no one paid for that no one knows how to deal with. The Trump Administration has already announced it’s pulling back those rules and I understand that but people can differ on the policy. But doing nothing? We know that’s the wrong answer.

Similarly, energy efficiency is another area where we need to be able to know that the homes we’re building today will not require more and more energy to operate. They need to be part of the solution to the climate criss not the cause of the climate crisis. Again we can differ about how, but just doing nothing and going back literally to the 2009 code, not the answer.

Alex Schafran: I want to add a bunch of things you said. Almost every episode I do this year is going to mention whether it’s vouchers or some direct financial assistance. There’s just no way to design a building in the current world for people who make 30% AMI, it’s just not possible. You have a better chance of walking to the moon. For folks who listen across the housing spectrum, if you really do want to make housing pencil for lower income people, we’ve got to find ways to provide those people the ability to consume more housing.

Ethan Handelman: I love that you said pencil out. Cause that’s a housing underwriting term. It’s also the title of a data visualization I created about ten years ago with a group of people when I was at the National Housing Conference, we teamed up with the Urban Institute. And we created this tool called “The cost of affordable housing: Does it pencil out?” that shows you visually with an apartment building that fills up from a wireframe into color as you assemble enough sources to make it pay off, and one of the biggest factors is how much can the resident pay in rent. Are they paying an affordable share of 30% of 60%? And it’s still out there and it’s still valid data on the housing system.

Alex Schafran: A big piece of it is that I hope we’ll be able to get a certain detente in the housing space, a basic understand that we can expect buildings to be able to provide space to folks down to a certain AMI (I think it’s probably 60% of AMI), and you can subsidize the buildings directly to get you from 60-100% AMI, that could be a subsidy to the building. But for folks below a certain point, the solution has to be a direct subsidy to that human and that you’re not expecting the buildings.

And then it becomes some sort of agreement that all of the housing producers agree to support politically giving lower income people the ability to pay for housing, and agree to find ways to open up space in their buildings whether it’s through cross subsidization or whatever the technique is that you’re using, or other forms of subsidy that you’re able to work. But you’re not expecting that buildings be designed to support 30% of AMI and that we’re not having this fight between subsidies for buildings and subsidies for people we need both.

Ethan Handelman: Right we need both.

Alex Schafran: But they can sort of serve different communities and different things in different ways. Also just appreciate you mentioning insurance, I think insurance will get mentioned in every single episode of 2025.

Ethan Handelman: Until we fix it, that’s right.

Alex Schafran: It’s like insurance and vouchers.

Ethan Handelman: And that’s largely a state question. Because insurance companies look to those state insurance commissioners, they do not look to the federal government for the most part.

Alex Schafran: Really traditionally it has been California and Florida that have been the leaders there because we are the biggest market and the biggest source of disasters. I think that’s starting to change, fires in New York and other places are changing the geography and floods.

Ethan Handelman: And floods in the Midwest, I mean it is hitting everywhere.

Alex Schafran: I want to come back to one thing you did mention on energy efficiency and the program you talked about with pride on retrofitting and it was part of housing preservation. I’m curious if we can dig a little deeper. In California, we’re three Ps—protection, preservation, production—I think I actually came up with 11 Ps. I actually don’t know if I can name them all off the top of my head which is probably a sign that I came up with too many Ps. But for both production and preservation there’s a constant struggle here with the role of using regulations and standards to get people to go to, but they don’t necessarily come with the funding to get there and it creates a bit of a challenge for housing providers who often push back on those things.

Especially on the preservation side. How would you like to see that mix of subsidies and regulations to kind of help nudge along this way of retrofitting our old buildings because that’s kind of underappreciated. Not only do we have a housing crisis in terms of being able to build enough housing, but a lot of the housing we have built is quite old, quite drafty, not quite ready for quality life, let alone any of the disasters that are coming. How do we nudge this space along?

Ethan Handelman: That’s a good question. And it is delicate. I will say too often we hear the two things said in opposition. That there are minimum standards that are too high that make the costs so high that we can’t build. What we really need to be doing is recognizing that building housing today, especially when we talk about new and I’m going to talk about preservation in a second, when we’re talking about new we should be building for the future we know is here and is coming. We should not be building the same way we did in 1970 or in 1950 because we see what those buildings look like now, we see how they operate now, we need to be doing this smarter.

When we did the proposed and final rules for minimum energy standards, and we did the math, we consulted with every stakeholder who wanted to give us a comment and there were a lot, and really, the higher standards that federal law required us to evaluate whether it made sense, made sense! There is a private, not governmental, all sorts of industry stakeholders that get together every few years that get together and do energy codes. There’s one for high rise buildings, one for single family and low rise buildings and both of those updated codes, which HUD had not adopted for many many years, even though federal law required it to do so, it pays. It makes sense on the numbers to do more efficient building. The challenge is, we don't want every builder to think, “Oh, if I do the more efficient thing, even if it pays over the longer term—10-15 years or the lifetime of a building.” someone else is not going to build to that standard. They're going to put up cardboard with nothing in between on the walls and say look at how cheap my house is, you should buy it. So it’s damaging competition.

A minimum standard helps everyone be sure that “Yeah we’re building safe housing, we’re doing it cost effectively and it’s going to last a long time.” And that’s really what the role of the minimum standards are. Then, you get both subsidies and privately funded enterprises to come in and say “Hey we’re not just going to do the minimum. We’re going to build a really efficient building. We’ll go to LEED platinum. We’ll build the spaceship of the future and it’s going to be right here on the ground and you can live in it.” and there’s a role for that too.

When we talk about preservation it is very much a building specific exercise. You go in and figure out okay do I need insulation, do I need to put a solar panel on the roof. Do I need to do better flood water management on the site so it’s not penetrating my building? Do I need to improve the indoor air quality? Usually that happens as a result of all the other stuff. Do I need to replace the windows, sometimes! I used to work with some building inspector guys and they would always joke that no matter how fancy a window you get it’s still a hole in your building. It is still a hole in the building, it is still a place where energy escapes.

There are all sorts of things one can do to an existing structure to make them better. There are great due-diligence tools out there. You can hire someone to do an energy assessment of your building. You can hire someone to do a resilience estimate of your building and identify what improvements make sense, what the payoff periods are, how you could potentially finance them, whether that’s with government help or a private loan. And all of it comes together to make buildings safer and healthier over the long term.

Alex Schafran: One of the things I always try to get folks to read, I’ve now met the author Mark Weiss, it’s The Rise of the Community Builders, I don’t know if you’ve ever read it. A sort of classic tome about some of the earliest home developers and what you learn is that a lot of the regulatory apparatus that many people are fighting against with zoning and planning, etc. Was created by the development industry itself from 1) to regulate out the shitty sharks and the bad actors, and 2) in some ways having a set of mutually agreed upon standards ensures that the competition and everybody is building to that and you can align the incentives in the right ways. That’s one of the key things. I hear sometimes from folks maybe more on the environmental side who don’t know things about home builders who try to think that they can put standards in without consulting with the special interests (these are the people that are actually going to have to do this stuff).

Ethan Handelman: Yes, you should talk to the people that are doing the work!

Alex Schafran: Yeah, and I sometimes hear people who are ideologically aligned with business who are not actually in the business themselves who are against any regulation. I think you see, and we see it successfully at times, when it works, you have all these different parties getting together to negotiate, a system that will work that will align the incentives, and that mixture of carrots and sticks and that federal government to help de risk especially the early adopters of these kind of programs. I think one of the long term impacts of something we talked about earlier of people’s distrust of the real estate industry we don’t have systems where effectively engaging the real estate industry so in some ways the real estate industry will go out and do it’s own thing, which isn’t also very effective and we end up with this sclerotic, difficult and contentious system that we have.

Ethan Handelman: And we have seen at the state level, a coming together like you described, to come together and adopt those energy codes. In Louisiana, which is not historically a place of extremely progressive politics, it has an interesting mix it has plenty of elected republicans but the home building sector came together broadly and said “Yeah, it turns out the flood risk is real, the storm risk is real and we need to set these minimum standards” and they adopted those updated codes that we were trying to get nationally as the minimum. You’ve seen it in other places too. It needs that coordination federally, it needs that leadership to make sure that everyone is rowing the same direction.

Alex Schafran: So in order to end on a positive note. I had emailed you about a couple of little bipartisan efforts in housing that maybe we could read as a position sign. I want to put them out there. One is the first product of the new YIMBY caucus, which is a bipartisan bill around local land use regulation and another is a tax credit bill to strengthen and grow LIHTC which is also bipartisan. So I’m curious to hear your thoughts on those two and any other hopeful spring -- itis spring—buds that are emerging that give you some hope.

Ethan Handelman: Let’s talk first about the YIMBY you mentioned. I haven’t studied it in great detail but I did take a look at it and it’s interesting that it is, as you say, bipartisan sponsorship, and it is from the practical, problem solving type folks -- the rare few still left in Congress right now who realize that “hey, housing is a real problem and a whole bunch of the challenges with it are local exclusionary policy that hasn’t been updated in a very long time and we shouldn’t expect every single county, council or town meeting to come up with its own plans for how to do housing.” Like yes, they need to ultimately govern land use, but maybe don’t reinvent the wheel every time. Let's give them some help and it instructs HUD to convene a whole bunch of industry participants and start developing a model code. I’m not necessarily using the language of the bill but that’s the idea.

Even as proposed it would take several years to go through that process, it’s not going to happen today. Ironically, one of the areas of HUD that would lead it, and the legislation specifically calls for it, is the Policy Development and Research Office at HUD to lead it, has been shuttered by the Trump Administration. It reminds us that policy is great but you need people to implement it. I think it’s a great direction. I will watch to see where that bill goes and hopefully it’ll push things in a good direction.

The tax side is really interesting to watch right now. I think it provides us real potential for hope right now, in part because tax legislation kind of has to happen right now. There are a bunch of expiring tax provisions right now, some bill is going to pass. It’s a question of what’s in it. There are two possibilities for inclusion. One is the Affordable Housing Credit Improvement Act (AHCIA) the other is the Neighborhood Homes Investment Act and both of these are important ways to put more federal resources into areas of affordable housing that really need it.

The Affordable Housing Credit Improvement Act would improve the Low Income Housing Tax Credit, it would expand how many dollars flow into it, it would make a whole bunch of changes to make the program itself easier to work with, which is useful both for new properties and preservation of old properties. It has a whole host of useful provisions in there.

The Neighborhood Homes Investment Act is targeted at areas that we would consider blighted. Places where there hasn’t been enough investment over time, and there may have been some disinvestment. It creates what’s known as an appraisal gap. It would be great to fix up some of these older dilapidated homes, but the amount of money it would take to fix them up is less than what you gain by selling the home so someone needs to bridge that gap because if someone can bridge that gap with enough homes in the neighborhood, suddenly the neighborhood turns around. And we’ve seen this in places. This has happened, some of this post financial crisis in 2008, where there was some disruption, and also in targeted places at other times.

So the neighborhood homes investment act is focused on single family homes. It would provide competitively awarded funds to help spark that reinvestment and help bring neighborhoods I would say “back” because they had thrived at one point, went through some real challenges but are ready to come back.

Alex Schafran: I’m just happy to see some sort of congressional action that is positively moving into the future, some kind of bipartisan support even if the low income tax credit isn’t my favorite policy that I would invent, it’s still useful it’s still important. I worry about its future if they cut the corporate tax rate too much and the tax credits no longer become as valuable as they once were but again all of those things, all of us are looking for any green shoots that we can find.

Ethan Handelman: And there are ways to tweak it in that event. The affordable housing tail is not going to wag the corporate tax rate dog. It’s just not. But we have seen the Low Income Housing Tax Credit adjust to different corporate tax environments. The real benefits of it, it has been around for a long time, coming up on 40 years, it was 1986. It endured with bipartisan support throughout, and President Reagan signed it. This was not a Democratic initiative, it was a recognition that we really need to invest in affordable housing as a regular every year thing. It’s not a “Oh, once in a while Congress spends money to do it.” No, it’s always needed, it is part of our economy that needs that level of help.

Alex Schafran: Well, thank you very much Ethan for being on the show.

Ethan Handelman: Thanks for having me!

Alex Schafran: We didn’t get to the subject of Ben Metcalf’s grandfather’s rug but we’re just going to have to hold that.

Ethan Handelman: Maybe for episode two.

Alex Schafran: Yeah maybe for episode two. Maybe when Ben comes on the show, if he’s listening.

Thank you so much for the work you have done, thank you so much for the work you’re continuing to do for housing in particular, just documenting what is happening in our federal government and just helping those of us who are not Washington housing insiders to follow along and understand. Appreciate you coming on and thanks so much for your time.

Ethan Handelman: Well thanks for having me. And I will just say, you don't need to be a housing insider to know that something's wrong and speak up and say “Hey, please don’t.” or “please fix it.” and I encourage everyone who is listening to do that.

Alex Schafran: Amen

Ethan Handelman: Thanks Alex. Take Care.