Kilpatrick Carries Housing Message to Mortgage Bankers
Detroit Mayor Calls for Even Stronger Alliance to Promote City Investment
By Dave Gatton
November 4, 2002
Speaking before the nation's mortgage bankers in Chicago on October 22, Detroit Mayor Kwame M. Kilpatrick urged that mayors and real estate finance officials forge an even stronger partnership to promote more housing production and commercial investment in America's cities.
Kilpatrick, Chair of the Conference's Council for Investment in the New American City, told the bankers, "We need to work towards a comprehensive housing production initiative that will provide concrete incentives for more housing development, encourage higher rates of homeownership, especially among minorities, and more housing for people with special needs."
Those housing priorities are part of the U.S. Conference of Mayors Affordable Housing Agenda, developed over the last year by Conference President Boston Mayor Thomas M. Menino, and unanimously endorsed by the nation's mayors.
At the heart of Menino's efforts is creation of a national housing trust fund to spur housing production and to give cities flexible funds to address a growing housing crisis among working families.
In echoing the importance of a trust fund, Kilpatrick told the mortgage bankers that housing production incentives must be developed in tandem with a trust fund.to meet the variety of housing needs in cities. "At a minimum, there should also be tax incentives to encourage more private sector housing development," he said.
In the past the mayors and mortgage bankers, when allied, have made significant changes to the nation's housing and redevelopment laws. Just last year, the two organizations successfully worked together to raise the Federal Housing Administration's multifamily loan limits, and both were central players in passage of brownfield cleanup legislation early in the Bush administration. Both organizations agree that housing should be put back on the front burner of Congressional priorities and have agreed to work together to make housing a higher priority. The two are also pushing federal legislation to ensure that the insurance industry properly covers commercial and urban properties against terrorism.
John Courson, the new Chairman of the mortgage bankers group, said the nation's bankers were ready to strengthen their partnership with the mayors.
"We have achieved many accomplishments through our partnership with the mayors. As a founding private sector member of the Council, we look forward to strengthening our relationship with the nation's mayors and working closely with our Council Chair, Mayor Kilpatrick, in the coming year," Couron said.
Investment and Metro Economies
Originally the mortgage bankers and the mayors joined forces when they created the Council for Investment in the New American City, which Kilpatrick chairs. The Council consists of mayors, the financial community, developers, and non-profit organizations committed to increasing investment in cities.
Kilpatrick urged the bankers to promote the Council's work to increase investment in metropolitan economies by touting their importance to the nation's future economic growth. The Council created and publishes annually gross metropolitan product (GMP) figures which measure the economic output of the nation's 319 metro areas.
The report shows that metro economies represent over 85 percent of gross domestic product; 84 percent of national employment; and over 88 percent of labor income. During the 1990s, U.S. metro areas accounted for 86 percent of national economic growth, or over $3.9 trillion.
"Our report confirms that cites are the engines of the American economy. If we are to secure our future economic prosperity, we must therefore invest in these engines," Kilpatrick told the bankers.
"The public is just beginning to understand that cities are the new place to do business, and that our future markets for investment, homeownership, and small business rests within our cities," he said.
"Our U.S. metro economy report shows this: cities are no longer the weakness of America, we are its strength, its future, its diversity, its economic prosperity."
The Council and the bankers plan to expand their metro economy reports and further develop investment strategies that will be unveiled at the Winter meeting of the U.S. Conference of Mayors in January of 2003.
The New American City
Kilpatrick encouraged the bankers to also promote the idea that American cities have taken on a "new" character.
"I am here to tell you that the city of Detroit is a new American city," he said, describing the city's new airport, new football and baseball stadiums, a newly renovated theatre district, a new African-American museum, a new downtown world headquarters, and a recently announced new riverfront development plan.
The bankers too are beginning to view cities as their new market for homebuyers who need mortgages. The nation has now achieved a homeownership rate of nearly 68 percent, but 74 percent of current homeowners are white. Many experts in the industry wonder just how much higher that rate can realistically go.
Therefore, the industry, historically viewed as traditional and suburban, is seeing its future in an ability to reach out to minorities and immigrants whose current homeownership rate is below 50 percent. Both organizations have viewed this as an opportunity to forge alliances around increasing homeownership for minorities and cities.
Following Kilpatrick's remarks, Department of Housing and Urban Development Secretary Mel Martinez addressed the group to announce that FHA will not require insurance coverage against acts of terrorism as a condition of its multifamily mortgage insurance.
"Our policy will result in reduced costs for existing and future FHA-insured multifamily properties, and will continue to encourage the construction of new projects," Martinez told the bankers.
Following the attacks of September 11, primary insurance companies began excluding or limiting coverage for acts of terrorism in catastrophic loss insurance policies, including those of multifamily properties. According to HUD, where such coverage is available, costs are exorbitant, terms are restrictive, and coverage limits are low.
Martinez- announcement will in essence commit HUD to paying the partial or full claim to the lender when terrorism results in the destruction, or partial destruction of an FHA-insured multifamily property.