Former FHA Chief Frank Cassidy on JPMorgan Chase housing pledge

JPMorgan Chase’s newly announced commitment to U.S. housing through 2035 drew qualified praise from former Federal Housing Administration (FHA) Commissioner Frank Cassidy — but also a warning that money alone cannot solve the nation’s housing shortage.

“Money isn’t the problem, supply is,” he told HousingWire. “There’s no shortage of capital looking to invest in housing, the biggest bottleneck isn’t financing. It’s the government process and the red tape and the bureaucratic tax to build. If it takes five years to approve a project, no amount of Wall Street capital can fix that. So we have to make it easier to build by modernizing zoning, permitting, environmental reviews and all these outdated regulations.

“Capital really flows where the opportunity is, so we need to create more opportunities to actually build.”

JPMorgan Chase announced Monday that it would deploy more than $750 billion into housing over the next decade as part of its American Dream Initiative.

The bank plans to finance one million affordable housing units and help 500,000 customers buy homes — including 200,000 first-time buyers.

Cassidy, who left the Trump administration in June after serving as FHA commissioner and HUD assistant secretary for housing, said the banking industry’s largest housing pledge reflects a growing recognition that housing has become critical economic infrastructure.

“Housing’s no longer just a real estate issue; it’s an economic infrastructure issue,” he said. “So, for decades we’ve treated housing as a social issue, but now it’s an economic competitiveness issue, too. Companies can’t attract workers if the workers have nowhere to live and can’t afford to live nearby. So, the communities that build housing will attract employers, and communities that don’t will lose jobs and investment.”

The 21st Century Road to Housing Act, which took effect last month after Congress passed it over President Trump’s refusal to sign, speeds up federal environmental reviews and removes restrictions on building manufactured homes.

What’s the ‘ideal’ public-private partnership?

Cassidy said the federal government’s most effective role is reducing barriers rather than replacing private capital.

“You can’t subsidize your way out of a housing shortage,” he said. “We have to build our way out of it. So the government has got to get out of the way and let builders build, and it’s got to be through public-private collaboration. Government shouldn’t replace the private capital; it should be unlocking it. So, I think government really works best when it reduces barriers instead of trying to replace the market.

“FHA has been around almost 100 years — started in 1934 by FDR during the Great Depression because people couldn’t get mortgages. FHA doesn’t actually lend a dime. FHA just guarantees a loan that a private lender makes. FHA gets paid for that and made $50 billion the last two years, so it brings in more money than it costs.”

First-time buyers and affordability

Cassidy said the rising age of first-time homebuyers — now averaging 40 years old according the National Association of Realtors, compared to the 20s in previous generations — is a troubling trend that federal policy must address.

FHA loans, which allow down payments as low as 3.5%, remain a primary financing vehicle for first-time buyers.

“We want to be a nation of homeowners. Homeownership is part of the American dream,” said Cassidy. “That’s why we have the 30-year fixed mortgage in this country. We need to incentivize younger Americans to start buying homes and building long-term equity earlier in life, and that’s something that I was really focused on when I was the FHA commissioner; using the platform to get more Americans into homes.”

A recent RAND study showed that median households would be earning roughly $29,000 more annually if income distribution — in terms of workers’ share of annual GDP — remained at 1970s levels today.

Cassidy was asked if those kinds of broader economic issues sometimes put too heavy an onus on the housing sector to create affordability.

“Absolutely, there’s deeper structural problems,” he said. “We need to build more housing. The way to make housing more affordable is to build more of it. I mean, we don’t have an affordability problem. We have a supply problem. There’s too much demand and not enough supply, and we’ve put so much government red tape in place that’s driven up the cost of housing. [Some] 20% to 40% of the cost of building new housing is some form of government bureaucratic red tape that ultimately gets passed to the consumer in terms of the bureaucratic tax.”

He recounted purchasing his first home at age 20 with an FHA-insured loan while in college, renting rooms to classmates.

“It’s those types of opportunities that we need to do a better job with, in terms of educating the public,” Cassidy said. “[You can] still own that house 17 years later, and it’s more than doubled in value. We need to educate the younger generation and get them back into it. When people own a home, they pay a mortgage, they pay taxes, they have skin in the game. It’s really part of the American dream.”

A beginning, not an end

Cassidy predicted JPMorgan’s commitment would not be the last major private-sector housing initiative — with other banks, pension funds and institutional investors watching closely.

“If they see successful projects, more capital will follow,” he said. “The biggest beneficiary should ultimately be first-time homebuyers and working families, but only as supply actually increases. So, we need to focus on more housing production that leads to lower price pressure over time.”

The bank’s initiative includes hiring 850 new home lending advisors and developing new loan products for modular and manufactured homes.

JPMorgan also announced nearly $200 million in financing for a 342-unit residential building on the San Francisco waterfront.

“Is 750 billion enough? I mean, it’s a lot of money,” said Cassidy. “It’s an important commitment, but money alone doesn’t solve a housing shortage. We need to reform local land use policies and streamline approvals. Much of that capital will remain on the sidelines if we don’t. So, what’s the government’s role? I think the federal government can’t solve the local housing problems on their own.

“We need to create an environment where housing gets financed faster, gets built quicker, regulations are modernized and private capital has the confidence it needs to ultimately invest.”