On November 10th, the Liberty over Lunch students hosted Craig Richardson where he presented his work on housing availability and affordability. Through a discussion of his paper, “Did the 2010 Dodd–Frank Banking Act Deflate Property Values in Low-Income Neighborhoods?” published in Public Choice, Professor Richardson reveals that the Dodd-Frank Banking Act had the unintended effect of reducing the mortgage funds available for low priced homes. The Dodd-Frank Act caused this by increasing the cost of loan processing by increasing the regulatory requirements, such as a more detailed income verification process that led to the closure and consolidation of many community banks. By increasing the cost of every loan, banks needed higher value mortgages to cover the increasing cost of loan origination. Second, Dodd-Frank limited the revenue banks could generate through loan origination. These combined effects made it nearly impossible for potential borrowers to find a lender for homes under $100,000.
Professor Richardson also chatted with the students about how to look for policy questions that can help improve the lives of low-income families.