Real estate expert Kenneth Rosen testified before the Financial Crisis Inquiry Commission last week and said the current U.S. housing market will continue a slow recovery of three to four years.

Rosen is chair of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley’s Haas School of Business. The FCIC is a bi-partisan, 10-member panel established by Congress to examine the causes of the financial crisis. Rosen presented the commission with several policy and reform proposals to combat the crisis.

“The embryonic recovery in housing has been highly dependent on massive federal government intervention rather than an organic increase in buyer demand,” said Rosen. However, he said, the termination of several federal programs will stunt the market’s recovery. His recommendations for residential and commercial real estate included:

• A loan modification plan to address “underwater” mortgages when a home’s value is well below the mortgage balance;
• A shared appreciation second mortgage that allocates part of the future appreciation of the home to the government and to the private lender to encourage loan modification;
• A government-sponsored unemployment bridge loan to address unemployed households who do not qualify for a loan modification;
• Maximum loan to values set counter-cyclically to minimize the number of borrowers becoming overextended at the market’s peak;
• Construction and development loans restricted to 50% of costs to ensure developers have a greater financial stake in their projects; and
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The amendment or repeal of the Foreign Investment in Real Property Tax Act in order to attract much needed capital to the domestic real estate market.