After nearly a decade of US overspending on largely non-green, energy-inefficient, low-density housing, our nation is in the midst of the largest bank bailout since the 1980s Savings and Loan crisis. Congress is responding by rushing through legislation that would allow the US Treasury to lend up to $300 billion to Fannie Mae and Freddie Mac, two gargantuan government-sponsored enterprises that now guarantee nearly 45 percent of the nation’s $12 trillion in mortgages.
No one has any idea how much this crisis will cost, because that depends on housing prices, which are still plummeting. But the ultimate cost to taxpayers will almost certainly make last March’s $29 billion Bear Stearns bailout look like spring training.
In this context it is entirely appropriate for the public to demand that Congress not just give the highly paid managers of Freddie and Fannie yet another blank check. Instead, we should seize the opportunity provided by this debt crisis to attack another dire problem–the energy crisis and the threat of catastrophic climate change.
Now is the time to create a green Fannie Mae and Freddie Mac. We need to be farsighted as we look to the next generation of houses. The goal must be to shift from underwriting energy-guzzling McMansions to a green lending strategy that protects us from energy inflation and the impacts of rapid climate change.
The idea of green mortgage lending is simple and straightforward. Over time, Fannie Mae and Freddie Mac should reward mortgage lenders who finance homes that meet two basic sustainability tests: green building design and “sustainable locations,” sites for new homes that take into account commuting costs and other costs associated with housing locations.
Green Home Design
The energy waste by homes and office buildings in the United States is enormous–according to the US Green Building Council, buildings account for more than two-thirds of electricity and wasted energy, and nearly forty percent of our national carbon dioxide emissions.
Given these basic facts, it is not surprising that interest in green building design is soaring, with builders exploring an astonishing variety of new, earth-friendly building materials, as the New York Times recently reported. Now is the time to reinforce this trend by ensuring that government mortgage lending supports this goal rather than undermines it.
Since at least the 1930s, encouraging universal home ownership has been an important national goal, which has received hundreds of billions of dollars in direct and indirect subsidies, by way of institutions like GSEs and the tax deduction for mortgage interest. With home ownership now exceeding 70 percent of the adult population, it is clear that we have made strong progress.