    [House Hearing, 110 Congress]
    [From the U.S. Government Publishing Office]

                         H.R. 6078, THE GREEN RESOURCES
                              FOR ENERGY EFFICIENT
                           NEIGHBORHOODS ACT OF 2008

    =======================================================================

                                    HEARING

                                   BEFORE THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JUNE 11, 2008

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 110-119

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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                     BARNEY FRANK, Massachusetts, Chairman

    PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
    MAXINE WATERS, California            DEBORAH PRYCE, Ohio
    CAROLYN B. MALONEY, New York         MICHAEL N. CASTLE, Delaware
    LUIS V. GUTIERREZ, Illinois          PETER T. KING, New York
    NYDIA M. VELAZQUEZ, New York         EDWARD R. ROYCE, California
    MELVIN L. WATT, North Carolina       FRANK D. LUCAS, Oklahoma
    GARY L. ACKERMAN, New York           RON PAUL, Texas
    BRAD SHERMAN, California             STEVEN C. LaTOURETTE, Ohio
    GREGORY W. MEEKS, New York           DONALD A. MANZULLO, Illinois
    DENNIS MOORE, Kansas                 WALTER B. JONES, Jr., North
    MICHAEL E. CAPUANO, Massachusetts        Carolina
    RUBEN HINOJOSA, Texas                JUDY BIGGERT, Illinois
    WM. LACY CLAY, Missouri              CHRISTOPHER SHAYS, Connecticut
    CAROLYN McCARTHY, New York           GARY G. MILLER, California
    JOE BACA, California                 SHELLEY MOORE CAPITO, West
    STEPHEN F. LYNCH, Massachusetts          Virginia
    BRAD MILLER, North Carolina          TOM FEENEY, Florida
    DAVID SCOTT, Georgia                 JEB HENSARLING, Texas
    AL GREEN, Texas                      SCOTT GARRETT, New Jersey
    EMANUEL CLEAVER, Missouri            GINNY BROWN-WAITE, Florida
    MELISSA L. BEAN, Illinois            J. GRESHAM BARRETT, South Carolina
    GWEN MOORE, Wisconsin,               JIM GERLACH, Pennsylvania
    LINCOLN DAVIS, Tennessee             STEVAN PEARCE, New Mexico
    PAUL W. HODES, New Hampshire         RANDY NEUGEBAUER, Texas
    KEITH ELLISON, Minnesota             TOM PRICE, Georgia
    RON KLEIN, Florida                   GEOFF DAVIS, Kentucky
    TIM MAHONEY, Florida                 PATRICK T. McHENRY, North Carolina
    CHARLES WILSON, Ohio                 JOHN CAMPBELL, California
    ED PERLMUTTER, Colorado              ADAM PUTNAM, Florida
    CHRISTOPHER S. MURPHY, Connecticut   MICHELE BACHMANN, Minnesota
    JOE DONNELLY, Indiana                PETER J. ROSKAM, Illinois
    BILL FOSTER, Illinois                KENNY MARCHANT, Texas
    ANDRE CARSON, Indiana                THADDEUS G. McCOTTER, Michigan
    JACKIE SPEIER, California            KEVIN McCARTHY, California
    DON CAZAYOUX, Louisiana              DEAN HELLER, Nevada
    TRAVIS CHILDERS, Mississippi

            Jeanne M. Roslanowick, Staff Director and Chief Counsel

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        June 11, 2008................................................     1
    Appendix:
        June 11, 2008................................................    53

                                   WITNESSES
                            Wednesday, June 11, 2008

    Bernstein, Scott, President, Center for Neighborhood Technology..    39
    Freedberg, Michael, Co-Chair, HUD Energy Task Force, and
      Director, Division of Affordable Housing Research and
      Technology, Office of Policy Development and Research, U.S.
      Department of Housing and Urban Development....................    14
    George, Alan W., Executive Vice President and Chief Investment
      Officer, Equity Residential, on behalf of the National Multi
      Housing Council (NMHC) and the National Apartment Association
      (NAA)..........................................................    37
    Hicks, Tom, Vice President, International Programs and Leadership
      in Energy and Environmental Design for Neighborhood
      Development, U.S. Green Building Council.......................    35
    Howard, Jerry, Executive Vice President and Chief Executive
      Officer, National Association of Home Builders.................    33
    Koo, Doris W., President and Chief Executive Officer, Enterprise
      Community Partners.............................................    30
    Lawler, Patrick J., Associate Director and Chief Economist,
      Office of Federal Housing Enterprise Oversight (OFHEO).........    16
    Purnell, Marshall E., FAIA, President, American Institute of
      Architects.....................................................    31

                                    APPENDIX

    Prepared statements:
        Carson, Hon. Andre...........................................    54
        Putnam, Hon. Adam H..........................................    56
        Waters, Hon. Maxine..........................................    59
        Bernstein, Scott.............................................    62
        Freedberg, Michael...........................................   113
        George, Alan W...............................................   131
        Hicks, Tom...................................................   185
        Howard, Jerry................................................   212
        Koo, Doris W.................................................   230
        Lawler, Patrick J............................................   243
        Purnell, Marshall E..........................................   248

                  Additional Material Submitted for the Record

    Frank, Hon. Barney:
        Written statement of Fannie Mae..............................   258
        Written statement of Freddie Mac.............................   262
        Written statement of Ward Hubbell, President, Green Building
          Initiative.................................................   272
        Letter to Chairman Frank and Ranking Member Bachus from the
          Manufactured Housing Institute.............................   285
        Letter to Chairman Frank and Ranking Member Bachus from the
          National American Indian Housing Council...................   288
        Written statement of Stewards of Affordable Housing for the
          Future.....................................................   289
    Perlmutter, Hon. Ed:
        Letter from various organizations in support of H.R. 6078....   295

                         H.R. 6078, THE GREEN RESOURCES
                              FOR ENERGY EFFICIENT
                           NEIGHBORHOODS ACT OF 2008

                                  ----------

                            Wednesday, June 11, 2008

                 U.S. House of Representatives,
                       Committee on Financial Services,
                                                       Washington, D.C.
        The committee met, pursuant to notice, at 10 a.m., in room
    2128, Rayburn House Office Building, Hon. Barney Frank
    [chairman of the committee] presiding.
        Members present: Representatives Frank, Waters, Sherman,
    Hinojosa, Baca, Scott, Green, Cleaver, Hodes, Klein, Wilson,
    Perlmutter, Carson, Speier, Cazayoux, Childers; Bachus,
    Biggert, Shays, Capito, Brown-Waite, Barrett, Campbell, Roskam,
    and Heller.
        The Chairman. The hearing will come to order.
        This is a very important initiative. Obviously, there is a
    great deal of concern in the country about energy efficiency.
    Much of the discussion has focused on the prospects of
    conservation. Obviously, we're talking about energy both from
    the standpoint of additional sources and also efficiency.
        Much of the discussion about conservation increased
    efficiency has focused on transportation where there currently
    is a great deal to be done. But the way in which we live
    physically also has a great deal to do with energy consumption.
    Earlier last year when we were debating the regulation changes
    and the Government Sponsored Enterprises, specifically Fannie
    Mae and Freddie Mac, some members came up with the notion of
    incentivizing them further to incentivize people in turn to do
    more energy efficiency.
        We also heard from our colleague who is the chair of the
    Appropriations Subcommittee that covers HUD, Mr. Oliver, my
    Massachusetts colleague, about his concern about energy
    efficiency and HOPE VI. We then, among ourselves, decided that
    it really made sense to do this in a comprehensive way. I am
    particularly pleased that some of the freshmen members of this
    committee took the initiative in putting this together, and we
    will hear from them later.
        Our colleague from Colorado, Mr. Perlmutter, has been a
    lead in this, and other freshmen have joined in, as well. What
    we want to do is to go forward with legislation that maximizes
    our ability to improve energy efficiency. Now, this divides.
    There are programs which are federally funded. I believe we
    have the right in those as the landlord, as the entity that
    will be charged with costs going forward in running those
    properties, to do some mandating.
        There are mandates in this bill, but they are mandates that
    relate to what we, the Federal Government, as the builder and
    as the entity that has ongoing financial responsibilities does.
    With regard to the private sector, mandates become less clearly
    justified. Some argue for them, and some argue against them.
    But incentivizing clearly makes a great deal of sense. So this
    is a bill that differentiates to some extent its treatment
    based on the level of Federal involvement, but it is a
    comprehensive and very thoughtful approach.
        And I can say that without an ego, because I was not
    involved in the drafting. The task force, Mr. Perlmutter, Mr.
    Hodes, and others were, and they have done an excellent job. It
    is late in the year, so there appears to be little likelihood
    that this will become law before the end of the year, but I
    would hope that we could go forward.
        We're still going to be around for a couple of months, so
    this could pass the House to put us in a position where come
    next year, we would be ready to move fairly quickly on it.
    Because from the standpoint of energy efficiency, a great deal
    can be accomplished with regard to the way in which people
    live. And, so, I regard this as a very important initiative
    from this committee.
        I should say that some areas in the housing field become
    somewhat partisan, which to me is not a bad thing. I think
    partisanship is an essential part of democracy in fact as well.
    This is one where I think we have a chance for a great deal of
    bipartisan cooperation. I think this is a goal and a deficiency
    that's broadly shared.
        That doesn't mean everybody will agree with all of the
    specifics, but I think this is a very hopeful initiative by
    this committee to make a contribution to resolving a great
    national problem.
        And with that, I will now recognize for 5 minutes the
    ranking member.
        Mr. Bachus. I thank the chairman for holding this hearing
    and I think energy efficiency is very important, something we
    should be talking about in our Federal housing programs.
        I commend the gentleman from Colorado, Mr. Perlmutter, for
    his participation, but as we examine this legislation, we have
    to remember that energy efficient buildings and houses are just
    part of the challenge that we are facing of very high energy
    costs and what those challenges do to the American consumer and
    businesses.
        Gasoline prices are soaring past $4 a gallon and the burden
    of these unprecedented costs is falling hardest on the low- and
    moderate-income families who have no alternative to escape the
    economic impact of policies over which they have no control.
        For example, in Bibb County, in my district, the average
    per capita income is $16,217; that is $312 a week. Some 59
    percent, 58.8 percent of my constituents in that county commute
    to another county for their work. They drive to their job in
    another county.
        Here is a recent gas receipt from my district: $89 to fill
    up their tank. Now, this is a citizen. The average citizen in
    this county makes $312 a week. That's what they are facing.
    They are spending $89 every few days just to get to work. That
    doesn't leave much to take care of other needs of the family.
        People are struggling to put food on the table, and this is
    the problem with getting fuel efficiency and our homes. People
    struggling to put food on the table and gas in their tank
    aren't going to be able to afford to make sure that their
    houses meet new green standards, which are going to be
    expensive. So this is the problem we have to face first. People
    demand and expect answers from Congress.
        I haven't had any of my constituents tell me to make their
    houses green, but I have had plenty of them tell me to do
    anything I can to bring gas prices down. The United States
    imports 60 percent of its oil. That's a dangerous level, but
    solutions are available. Broader exploration of domestic
    resources is one.
        We import 20 million barrels of oil a day. We take 9
    million of those and refine it into gasoline. We could increase
    that by a million, which is over 10 percent, a million a day,
    just by drilling in a small portion of ANWR, developing
    alternative fuels, and increasing use of nuclear power, and
    that is a slam dunk.
        I remember being on the Floor 12 years ago debating the
    need to build nuclear power plants and people responded by
    saying it will take 10 years. We could have had them 2 years
    ago. Today they're saying that it will take 10 years. We have
    to start now. China--it was in the paper today--has 32 nuclear
    power plants under contract, large ones, in China.
        I was just in Abu Dhabi last week. Now, they're one of the
    richest countries in the United Arab Emirates and export all
    kind of oil to us. They're building two nuclear power plants so
    they can sell us more oil, but we, who have an energy shortage,
    aren't building nuclear power plants.
        We have to address this problem, and let me stop by saying
    this, Mr. Chairman. I'll end with this. Rising fuel costs,
    gasoline costs, are going to sink our economy and they're doing
    it as we speak. That is the reason why I have signed a
    discharge petition this week to bring the ``No More Excuses
    Energy Act'' to the Floor for an immediate vote.
        If not this bill, it needs to be another one authorizing us
    to drill immediately, to develop nuclear power plants, to put
    them on the fast track, and to develop alternative fuels such
    as solar, wind, and coal. That's why I'm urging this committee,
    let's focus on fuel efficiency in this meeting. Let's go out of
    this thing. Let's sign a discharge petition, and do something
    about the rising cost of high energy prices, particularly
    before this winter.
        In closing, let me welcome today's witnesses. We appreciate
    you taking the time to discuss energy efficiency and
    conservation measures as we try to develop a thoughtful
    approach to the issues raised by Mr. Perlmutter's legislation.
        Thank you.
        The Chairman. I want to recognize Mr. Perlmutter for 6
    minutes, and I ask him to yield me 1 minute, if he would,
    because I just want to apologize.
        When I'm wrong, I do admit it. I had said that I thought
    this could be a bipartisan subject. Apparently, I was wrong.
    I'm sorry that the ranking member finds himself on a committee
    with no jurisdiction over anything he just talked about, and
    I'm sorry that this apparently is going to lead to no serious
    discussion from some people about the important subject under
    consideration today.
        I guess we have an immediate problem, but we have an
    immediate problem in part because we haven't been thoughtful in
    the past. And the notion that you don't pay a lot of attention
    to longer range thinking seems to me to be a mistake. So,
    obviously, members have the right to use this hearing for
    whatever purpose they want.
        Mr. Bachus. Mr. Chairman?
        The Chairman. No. I will not yield to the gentleman.
        Mr. Bachus. I want to associate myself with your remarks.
        We do need a bipartisan solution; energy efficiency is
    important.
        The Chairman. I will take back my time. I'm sorry. The
    gentleman had his time, and he chose not to talk about that.
    Well, things are what they are.
        If members want to make this a partisan debate about issues
    not before this committee's jurisdiction, they are fully
    entitled to do so.
        I was hoping we could have a focused discussion on the
    merits of this bill with its long-range advantages. If we have
    to have that only on one side, that's what we'll have.
        I thank the gentleman from Colorado, and I recognize him
    for the remainder of his 6 minutes.
        Mr. Perlmutter. Thank you, Mr. Chairman, and I want to
    thank you for the opportunity to talk about energy efficiency
    in housing and in commercial buildings.
        I think what we're going to find today, and in response to
    the ranking member's comments really, you know, by
    jurisdiction, we're limited to certain things we can do within
    this committee. And one of the things that we're trying to do
    through this bill is to reduce housing costs using efficient
    measures with respect to housing and other kinds of
    construction as well as develop renewable sources that might be
    used with respect to buildings.
        I think you're going to hear testimony from HUD and a
    number of the other witnesses today that are going to talk
    about the fact that 40 percent of our energy consumption in
    this country comes from buildings; and, a lot of that from
    homes. And, for instance, with HUD they have about three
    million homes that they either own or subsidize in some fashion
    or another.
        The largest single housing cost for HUD is its utility cost
    at about $4.6 billion. And so to the degree we can get HUD and
    others to make their units or homes more efficient, we are
    going to save dramatically on energy costs. I think the
    testimony today will be that between 2000 and 2007, energy
    costs across the country have gone up about 30 percent, so I
    appreciate the ranking member's comments about gasoline prices.
        We are not on the Energy and Commerce Committee. We are not
    on the Science Committee, but we are on the Financial Services
    Committee where we do have jurisdiction over homes, buildings,
    real estate and banking, and mortgages, where we can do our
    part to try to reduce energy costs for the people who live in
    this country.
        So I really do appreciate the opportunity, Mr. Chairman, to
    bring this bill before you. You asked a number of us, from both
    sides of the aisle, to serve on an energy efficiency task
    force. We did all serve on this bipartisan committee and we did
    all get along. And Representatives had comments pro and con
    about this particular legislation.
        Now, the first thing I would like to do, Mr. Chairman, is
    submit for the record a letter from a number of organizations
    that participated in our energy efficiency task force
    supporting this kind of legislation. Among those signing this
    letter are the Alliance for Community Trees, the American
    Institute of Architects, the Bank of America, the Center for
    American Progress, the Center for Neighborhood Technology, the
    Energy Programs Consortium, Enterprise Community Partners, the
    Federation of American Scientists, the Green Building
    Institute, the Local Initiative Support Corporation, the
    Louisiana Pacific Corporation, the National American Indian
    Housing Council, and Stewards of Affordable Housing for the
    Future.
        The Chairman. Without objection, that will be made a part
    of the record.
        Mr. Perlmutter. Thank you, sir.
        This bipartisan task force that you asked us to participate
    in involved a number of meetings with all of these
    organizations. And we also dealt with the Department of Energy,
    the EPA, HUD, Fannie Mae, and Freddie Mac to come up with what
    we believe is a bill that provides many incentives to the
    private sector to move our housing and our building stock to
    energy efficient standards.
        I think we also have, as you said, mandates to the Federal
    Government to upgrade 50,000 of those three million units to
    use as a control group to show that utility costs really do go
    down. I think it is common sense that we're going to see that
    they go down, but I think HUD will say that they have had good
    experience in the past in driving down energy costs for low-
    income tenants and people who live in these houses. That's
    where we want to go with this. This is a very broad bill when
    it comes to real estate.
        I think it is something that was started back in the
    1970's, but then sort of petered out. We have for the ranking
    members concerned incentives for location efficient mortgages
    so that if somebody were to live near a transit line, near a
    bus line, near their work, they will have benefits from that,
    that when somebody makes a loan, a location efficient mortgage,
    we think we will show that it's a less risky loan; and, as a
    consequence, that person should get a lower mortgage rate.
        It would be the same thing with respect to energy efficient
    mortgages. It's less risky, because it doesn't cost as much.
    The house doesn't cost as much. So we're trying to provide
    incentives through the mortgage industry, through green
    mortgages, to encourage people to buy or build, or retrofit,
    their homes to energy efficient standards.
        And with that, Mr. Chairman, I yield back, and I look
    forward to the testimony.
        The Chairman. The gentlewoman from Illinois is recognized
    for 3 minutes.
        No. I'm sorry. The gentlewoman from West Virginia is first
    on the list I was given; I guess it's her subcommittee. So the
    gentlewoman from West Virginia is recognized first for 3
    minutes.
        Mrs. Capito. Thank you, Mr. Chairman, and I would like to
    thank the witnesses for coming before us today and I would like
    to thank my colleague, Mr. Perlmutter, for putting forth this
    piece of legislation. He and I have had numerous discussions in
    an attempt to be a bipartisan situation. And so, as this moves
    along, I hope we can continue those discussions.
        I do have a couple of concerns, initially, and I'm sure
    we'll get into this as we have the witnesses moving forth. I
    think we all have the goal of efficiency, and green building is
    something that we know we want to achieve and we want to have
    in our future.
        I do have concerns about some flexibility issues in this
    bill. I think that innovation is occurring as we speak on this
    topic. What we thought was energy efficient or green building
    15 years ago, or maybe even 5 years ago, has been far surpassed
    by what we see now in front of us. And I have a concern that we
    may be losing some of the efficiency by putting in stringent
    mandates and stringent requirements and losing some of the
    flexibility that comes about with innovation and creativity in
    terms of the legislation.
        The other area of concern I have is the Freddie Mac and
    Fannie Mae portion of it with the energy efficient mortgages,
    and I'm glad he explained the location efficient mortgages,
    because I wasn't really exactly sure what that meant. But I
    think in this day and age when we now we have some uncertainty
    with our mortgage financing in the direction that we want to
    go.
        We are still trying to work through a consensus bill on FHA
    and all those things, so I think this is an area where I would
    tread lightly, and I would like to see, before we put mandatory
    requirements onto Fannie and Freddie, that we make sure that
    they are in the safest and soundest position to take on another
    mandate.
        Again, we're talking about energy efficiency. And I do
    think, even though we are talking about energy efficiency in
    our own homes, we are talking about affordability. I think it
    is right and proper to bring up that we are in an area here
    with energy efficiency, whether it's driving your car or
    feeding your tractor or trying to fill up your tractor on the
    farm. The high price of gas is something that we can think
    about every day. And I think we should think about this because
    the cost of heating oil and heating a home, whether it's energy
    efficient or green built, is something that I think is going to
    impact particularly those in the lower- and mid-lower-income
    areas as it will impact all of us.
        So, again, I would like to thank Mr. Perlmutter. I would
    like to thank the chairman for this hearing, and I look forward
    to the testimony of the witnesses.
        Thank you.
        The Chairman. The gentleman from New Hampshire, Mr. Hodes,
    a very active member of the task force, is recognized for 3
    minutes.
        Mr. Hodes. Thank you, Mr. Chairman.
        Thank you for empaneling the energy task force and having
    me serve on it. And I want to thank my colleague, Ed
    Perlmutter, whose leadership I admire. It has been a terrific
    experience to work with Mr. Perlmutter on this bill, which has
    really been the product of a true collaboration between
    Congress and numerous interested parties, many of whom are here
    today.
        Green is the new ``red, white, and blue,'' and I can think
    of no more important issue for the 21st Century and the future
    of this country and of the world than America's leadership in
    dealing with energy efficiency, renewable and alternative
    energy, and sustainable building.
        The Green Act is a comprehensive approach to energy
    efficiency that will encourage American businesses and American
    families to be part of the 21st Century energy solution by
    using incentives and market mechanisms to inspire the financial
    community to go green. This bill is short on mandates and long
    on market incentives and goals.
        We recognized early on that there would be a lot of
    pushback if we were long on mandates, and we sought to follow
    the philosophical bent of this committee, which the chairman
    exemplifies so well in making sure that our mandates were
    tailored, careful, and narrow.
        I found that while many people express intense interest in
    a new direction on energy, most folks don't appreciate how
    significantly our built environment is to the issues of our
    energy consumption and carbon emissions. This legislation is a
    step in a new direction for our Nation. It is essential for the
    financial services community to help lead the way on this vital
    challenge for our Nation's future.
        The time for obsolete thinking about our energy past is
    over. We need to move aggressively towards our new energy
    future. We will need time to transition from fossil fuels.
    Energy efficiency and conservation in buildings is a critical
    component available now. It's the low-hanging fruit, especially
    as energy costs soar.
        I look forward to hearing the witnesses' testimony, because
    Mr. Perlmutter and I are resolutely not doctrinaire in our
    approach to this bill. We want to make sure that we produce
    legislation that is practical and effective.
        Thank you very much.
        The Chairman. The gentlewoman from Illinois, Ms. Biggert,
    is recognized for 3 minutes.
        Mrs. Biggert. I'm sorry. Did you say 2 minutes?
        The Chairman. Three minutes.
        Mrs. Biggert. Three minutes. I would like to thank the
    chairman for holding today's hearing on the bill to promote
    greener, energy efficient buildings. I'm especially pleased
    that our committee is beginning a dialogue about this issue,
    because another committee on which I serve, the Science and
    Technology Committee, has been working diligently in recent
    years to support the development and deployment of green
    building technology.
        So to further advance this cause, I have partnered with my
    colleague from Missouri, Congressman Carnahan, to establish a
    high-performance buildings caucus. And many of the outside
    groups that are testifying today, and were involved in crafting
    H.R. 6078, are members of the coalition that supports our
    caucus.
        At the start of this Congress, I introduced H.R. 84, the
    Energy Efficient Buildings Act of 2007, legislation designed to
    offset the cost of designing green buildings. So I certainly
    understand and appreciate the importance of promoting green
    construction and energy efficient buildings, but when Americans
    are facing a crisis in the mortgage market and a crisis at the
    pump, it's critical that we address those issues by crafting
    policies that promote both affordable energy and affordable
    housing.
        Certainly high performance or green buildings are critical
    to addressing climate change and should save their owners money
    over the long run, but green buildings cost more up-front,
    sometimes considerably more, which means our Federal dollars
    may not go as far. I think that this is a good starting point
    to discuss the best ways to promote energy efficient buildings.
    So I look forward to working with my colleagues to strike the
    right balance in this bill between its goal to promote green
    buildings and the first and over-arching goal of Federal
    housing programs, which is to facilitate affordable housing for
    American families.
        I have a couple of questions about the bill that I hope our
    witnesses will address. First, I would like to better
    understand the rating system prescribed for Federal housing
    programs in the bill and how it measures up against other green
    building standards.
        Second, I am concerned about the limited number of green
    building raters around the country. There may not be enough of
    them to meet the demand created by the bill; I believe that one
    State that mandated green assessments had to repeal this
    requirement because of a lack of qualified energy efficient
    raters.
        And, third, I would like to better understand how a green
    building would reduce the risk of a mortgage borrower and
    therefore justify reducing the mortgage insurance premiums,
    which the bill does.
        Incentives to encourage green buildings are good as long as
    they factor in the risk of the mortgage borrower and don't
    jeopardize the financial stability of Federal housing programs.
        Finally, it's such a time of volatility in the housing
    market, it may be inappropriate to require FHA programs and
    GSEs, Fannie Mae and Freddie Mac, to focus significant
    resources on green mortgages ahead of all other mortgages. So I
    look forward to today's testimony on these issues and I yield
    back the balance of my time.
        The Chairman. I want to thank the gentlewoman, in
    particular, not just for the comments in raising precisely the
    kind of questions that we have to address, but for mentioning
    the work of the Science Committee.
        I think one of the besetting sins of this institution has
    been excessive concern over turf and jurisdiction. We have
    tried very hard to work cooperatively with other committees,
    and I am glad that she is on both committees and will help us
    promote that.
        We will look forward to working with the Science Committee,
    so we can have a joint effort here. That is the appropriate
    response. So I appreciate that, and we will draw on the
    gentlewoman's joint membership as one of the things that will
    help us facilitate a cooperative result.
        I neglected to do something earlier, so let me just take a
    minute now. This committee has benefitted on our side from a
    number of new members joining the House and coming to this
    committee. I have not taken the chance yet to formally
    introduce them, so I will do that now. Actually, we have
    freshman Members of this committee with five members junior to
    them. There are people climbing up the aisles here.
        Our colleague from California, Jackie Speier; our colleague
    from Louisiana, Don Cazayoux; and our colleague from
    Mississippi, Travis Childers, have all joined us. I want to
    welcome them to the committee.
        I also just want to ask unanimous consent to put some
    statements into the record. First, the gentlewoman from
    California, the chair of the Housing Subcommittee, had another
    meeting to go to, and she has a statement for the record. We
    also have statements from: Fannie Mae; Freddie Mac; the
    Stewards of Affordable Housing for the Future; the Manufactured
    Housing Institute; the National American Indian Housing
    Council; and the Green Building Initiative, all of which I ask
    to be submitted for the record, and without objection, they
    will be.
        The gentleman from California, Mr. Sherman, is now
    recognized for 3 minutes.
        Mr. Sherman. Thank you.
        For a rare time in history, energy is the number one
    economic issue, the number one national security issue, and the
    number one environmental issue, all simultaneously. What we do
    today will not only help individual homeowners or apartment
    owners, but will also have in effect on the economy, especially
    because energy is highly elastic as to price. That is to say if
    we can reduce demand nationwide by 5 or 10 percent, we can
    reduce price by far more than that.
        Now, our ability to reduce world price for oil may not
    achieve that goal, but there is a domestic market for natural
    gas, and if we can act today to reduce demand for natural gas
    by only a few percentage points, we can help bring the price
    down.
        Finally, there is the issue of which shade of green these
    homes should be. There are national standards. There are
    voluntary standards that the home builders subscribe to, etc.,
    and I haven't picked my favorite shade of green. Those on the
    task force may have a better palate, but I do know one thing,
    and that is, whatever we do here should provide electric
    outlets that will allow for the recharging of plug-in vehicles.
    And whether that has to be 220-volt or regular voltage, I leave
    to the experts. But what we do on housing should relate to
    what's being done on vehicles. I don't know whether plug-in
    electrics are our future, but I do know that it's a lot cheaper
    to put the plug in when you build the house than it is to go
    try to put it in later.
        And, finally, Mr. Hodes, I look forward to appropriating
    and using without your permission your colorful line about
    green being the new ``red, white, and blue.''
        I yield back.
        The Chairman. I now recognize the gentlewoman from Florida
    for 2 minutes, from the list given to me by the leadership.
        Ms. Brown-Waite. I thank the chairman and also the
    witnesses for being here today.
        I appreciate what the sponsor is trying to do on this bill,
    but I must say that we need to have concerns about the
    unintended consequences. We also need to look at the timing. We
    all know that the housing market has been rocky, unpredictable,
    and unreliable, and is still sitting in a virtual quicksand.
        Congress has forced homeowners to absorb sky-rocket gas and
    food prices, mortgage ARM recess, and in Florida significant
    property insurance and tax increases. Now, I'm not blaming
    those tax increases on Congress, but, you know, individual
    States have individual problems. And all of this is happening
    while homes actually are losing value.
        We have demanded that Fannie Mae and Freddie Mac come to
    the aid of our housing market by taking on more risk with
    higher conforming loan limits in expanding their affordable
    housing goals. And Congress is passing bills that dramatically
    expand FHA's role in stabilizing the housing market. Now we're
    going to demand that homes be built to lofty, somewhat
    unproven, and perhaps overly ambitious environmental standards.
        You know, it's almost like we are putting passengers back
    on the sinking Titanic. So why would we put these additional
    regulatory weights on a housing market that is still teetering
    on a very tight rope? This bill requires Fannie and Freddie to
    purchase 5 percent of energy efficient mortgages and location
    efficient mortgages with the intent to go as high as 25
    percent.
        By requiring this, we may be diverting very important
    resources from Fannie's and Freddie's primary goal of
    purchasing affordable housing loans. As anyone can see, this
    could have a drastic and negative affect on our current housing
    woes.
        Additionally, the Green Act requires appraisers to consider
    renewable energy sources, energy efficiency or energy
    improvements in homes. This would be all at the same time that
    we're paying over $4 a gallon for gas, and it is anticipated to
    go to $5 a gallon. And this has all been, quite honestly, since
    my colleagues on the other side of the aisle have taken control
    of the House and the Senate.
        Americans are taking more money from their savings, their
    discretionary spending, their children's education, and their
    healthcare plans. They're taking it wherever they can find it
    to make ends meet today. As home values continue to fall into a
    black hole, we're asking Americans to spend more on them. This
    is not the time to pass the bill, Mr. Chairman, but I do urge
    the committee members to listen to the witnesses that we have
    today; and, we need to focus on the eroding dollar and what it
    is doing to oil prices worldwide.
        Thank you, Mr. Chairman, and I yield back the balance of my
    time.
        The Chairman. The gentleman from Georgia is recognized for
    3 minutes.
        Mr. Scott. Thank you very much, Mr. Chairman.
        I, too, want to join with you in welcoming our new members
    to this committee. This is in my opinion the most influential
    key committee dealing with the infrastructure of our economy,
    so this is very timely. I do have a few concerns about the
    bill.
        First, let me commend my distinguished colleague from
    Colorado, Mr. Perlmutter, because I believe there are some
    very, very important reasons why we need to move forward with
    the bill; however, I do have some concerns. My first concern is
    the impact on low- and moderate-income individuals. We have to
    move with caution as we put forward these new energy
    requirements, because energy bills fall disproportionately on
    the poor and those with moderate income.
        We have to make sure that in this energy bill, the policies
    will not fall disproportionately and impose additional costs on
    low-income people as we put these requirements in place. So we
    need to examine that. I also have some concerns about
    manufactured housing. As we move into this very difficult time
    in our economy, manufactured housing plays a bigger role,
    especially targeted towards low- and moderate-income
    individuals.
        My key concern is that in the bill apparently, and I could
    stand to be corrected, but it requires that manufactured homes
    have to comply with two separate building codes. That could
    prove overly burdensome and expensive and could very well drive
    manufacturers from the marketplace, the result being hurting
    the very people that we're trying to help, which are low- and
    moderate-income families.
        So in our rush to do what is right, we have to go look out
    and make sure that we are not hurting the low- and moderate-
    income people in terms of the energy policies in the bill and
    in terms of the stresses being placed with this double standard
    on manufactured housing.
        Let me just be specific. Manufactured housing in this bill
    would have to comply with these two, separate building codes,
    the HUD code, and NFPA 501 for additional credit. Now, this
    lighter standard is not even used to construct manufactured
    homes and does not provide green building guidance.
        Finally, I think we have to look very carefully at these
    requirements on Fannie and Freddie, simply because my concern
    is that it may distract Fannie and Freddie from their primary
    responsibility of providing liquidity into the market, which is
    in line and is needed for more affordable housing.
        So, as you know, I certainly commend my good colleague, but
    those are three very important concerns that we want to make
    sure we address and make sure we're not putting that burden on
    the lower-income people; that we're not driving manufactured
    housing out of the marketplace with this bill, and that we're
    sensitive to putting additional stresses on Fannie Mae and
    Freddie Mac that would take their mind and their attention away
    from their primary goal of putting liquidity into the market.
        I yield back.
        The Chairman. We have only three more speakers, working on
    the list given by both sides.
        The gentleman from California, Mr. Campbell, is now
    recognized for 2 minutes.
        Mr. Campbell. Thank you, Mr. Chairman.
        I am going to add to the chorus of concerns about this bill
    and I will just try to discuss 5 of them in the 2 minutes here.
    First is the effect on the market, which has been described
    that the housing market is in a virtual depression. We don't
    need to increase their costs. And we have government facilities
    that are intended to help low-income people get housing and
    provide stable mortgages. We don't want to take our eye off the
    ball on those primary missions.
        Second, we don't want the bill to be overly prescriptive.
    We have all seen the situation where someone comes into our
    office and says, ``Oh, I have the greatest energy efficiency
    product. There it is. Please mandate it.'' Because there is
    nothing better for businesses' margins than to have the
    government mandate the purchase of their product. So we don't
    want to be doing that.
        Third, it was talked about mandates versus incentives, and
    I agree. We want to go more towards incentives and mandates,
    but as I count this, about half of the provisions in here start
    with either required or mandatory, and that is too much.
        Fourth, we all in this committee are sometimes for Federal
    preemption and sometimes against Federal preemption. I don't
    think any of us is totally clean on that, but one thing we do
    have to remember, when it comes to housing, housing don't move;
    and, so, if there's one thing for which we have to be careful
    not to set Federal standards to try and apply in Newport Beach,
    California, in Florida, in Seattle, in Montana, and in Palm
    Springs, where the housing is very different and it doesn't
    move. I have a concern about that.
        And them my fifth concern, and the chairman is correct, my
    fifth concern is not in the jurisdiction of this committee, but
    there is a point here that we can do all this that we want, but
    what we really need to be doing is producing more green,
    cheaper energy like nuclear, like Japan, Sweden, Italy, France,
    and all these other countries that are now producing a lot of
    very clean, very cheap nuclear power.
        I yield back.
        The Chairman. The final speaker on that side is the
    gentleman from Texas for 2 minutes.
        Mr. Green. Thank you, Mr. Chairman.
        I greatly appreciate you holding this hearing and I will
    yield to Mr. Perlmutter.
        Mr. Perlmutter. Thank you, Mr. Green.
        Just a couple of things. One, I want to stop this mandate
    talk because there are no mandates except those that Mr. Scott
    mentioned with respect to manufactured housing. We can talk
    about that with respect to home builders. Basically, what
    happens is if somebody builds a house to certain green
    standards, and the HUD Secretary will choose those green
    standards--we have set two in the bill, but it is very flexible
    as to what they could be.
        One is a consensus standard from the heating and air
    conditioning people, and the other is the International Energy
    Conservation Code of 2006. So if those are met, it triggered
    and Fannie Mae buys a mortgage from a house that meets those
    standards, Fannie Mae gets a credit towards its affordable
    housing goal.
        So let's say Fannie Mae buys $800 billion worth of
    mortgages in the secondary market each year. Their affordable
    housing goal is 50 percent of that, so $400 billion of Fannie
    Mae's mortgages should be in affordable housing, zero to
    $420,000.
        If every one of those were green and affordable, Fannie Mae
    will have met its goal at $300 billion. Now, I think the
    testimony is going to be that people are better off and their
    costs are lower in energy efficient homes, so it helps people
    of low- to moderate-income levels, number one.
        Number two, with respect to, pardon me, the manufactured
    housing, you're right. One is they must meet Energy Star levels
    as well as National Fire Protection Act levels. I'm happy to
    talk about that, and certainly as Paul Hodes said, available
    and amenable to working this out, so that it works to move this
    country towards energy efficiency in an affordable and
    healthful way.
        And I think the testimony today is going to tell you that
    this bill generally does it. It's not perfect, and we will fix
    it.
        The Chairman. The gentleman from Illinois for 2 minutes,
    Mr. Roskam.
        Mr. Roskam. Thank you, Mr. Chairman.
        I found these opening statements actually to be really
    insightful and helpful. I want to affiliate myself with the
    gentleman from Georgia, Mr. Scott, who I think articulated well
    some of the increased pressures, as did Ms. Brown-Waite, about
    increasing mandates at a time of uncertainty.
        Mrs. Biggert mentioned the seeming disconnect between the
    mortgage insurance provision of the bill that is unrelated to
    stability in the financial element of it. And I also sensed Mr.
    Perlmutter is open and has really sensed a willingness to
    listen, and so forth. You know, I am always nervous when I hear
    someone say there are no mandates ``except,'' and that is what
    the sponsor said a minute ago. I know that that we will be
    given more of an opportunity to hear about that.
        But whenever there's qualifying language, simply the
    declaration of no mandates of course doesn't mean that there
    are no mandates, and I think we need to be very careful in how
    we characterize things.
        I come from the Midwest, and I wasn't here for the original
    drama of the opening statements between the chairman and the
    ranking member, but I sense a little bit of aggravation on the
    part of the chairman of other jurisdictional issues coming into
    this committee, but they're sincere in the fact that my
    district, Mrs. Biggert's district, and other districts in the
    Chicago area have some of the highest energy prices in the
    country.
        Energy and its supply is clearly a part of this debate, and
    I think what the gentleman from Colorado was trying to do is to
    cast a longer vision. We will have the conversation about
    whether the solution is a good one or not. I appreciate the
    fact that he's casting a longer vision, but in the short run
    there also has to be an answer to the supply question that I
    have not heard from the majority so far.
        I yield back.
        The Chairman. The gentleman from Texas has asked unanimous
    consent to speak for 30 seconds, Mr. Hinojosa, without
    objection.
        Mr. Hinojosa. Thank you very much, Mr. Chairman.
        I have 44 students in the Rayburn cafeteria from my
    congressional district, and I told them to please wait.
        The Chairman. Are you buying?
        [Laughter]
        Mr. Hinojosa. I wish they could all vote!
        The Chairman. Then you better not buy.
        [Laughter]
        Mr. Hinojosa. But I wanted to simply commend Congressman
    Perlmutter for introducing H.R. 6078, and know that I strongly
    support your effort.
        I also want to say that I thank the chairman for calling
    this hearing. I like all the people on Panel One, and I look
    forward to their presentation, but I especially wanted to
    recognize Marshall Purnell of the American Institute of
    Architects, because I want to hear what he has to say about
    environmental design of homes. And I also look forward to Jerry
    Howard, president of the National Association of Home Builders,
    to tell us if it is feasible to do what the architects are
    recommending.
        With that, Mr. Chairman, I yield back.
        The Chairman. I thank the gentleman and we will now proceed
    to the witnesses.
        Our first witness is Mr. Michael Freedberg, the Co-Chair of
    the HUD Energy Task Force and the Director of the Division of
    Affordable Housing Research and Technology at the Department of
    Housing and Urban Development.
        All witnesses' written statements and any other material
    will be made a part of the record.
        Mr. Freedberg.

       STATEMENT OF MICHAEL FREEDBERG, CO-CHAIR, HUD ENERGY TASK
     FORCE, AND DIRECTOR, DIVISION OF AFFORDABLE HOUSING RESEARCH
    AND TECHNOLOGY, OFFICE OF POLICY DEVELOPMENT AND RESEARCH, U.S.
              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

        Mr. Freedberg. Thank you, Mr. Chairman, Congressman
    Perlmutter, and other members of the committee.
        I do appreciate this opportunity to appear before you today
    on behalf of our new Secretary. This is an important hearing on
    an important issue. In my capacity as Co-Chair of HUD's Energy
    Task Force, I have had the opportunity to work with every
    program office at HUD on this topic. And before coming to HUD,
    I had extensive experience with energy efficient housing
    rehabilitation and that experience demonstrated conclusively
    that relatively low investments in energy efficiency can yield
    substantial energy savings in older housing stock. Simple
    paybacks and returns on investments can be very rapid.
        Over the past few years, HUD has initiated a comprehensive,
    Department-wide effort to address the key role that energy
    plays in housing affordability. We also have begin an active
    partnership with the Department of Transportation to expand
    affordable housing opportunities near transit, which will in
    part address the rising cost of gasoline that some of the
    members have already addressed.
        We have made some modest progress in this area and are
    beginning to build a broader, affordable, green agenda as well.
    And there are some exciting green initiatives that we have
    started that I have described in my written testimony. Our
    commitment to energy efficiency has been driven by five key
    factors: rising energy costs; the age of the existing inventory
    in public and assisted housing; the disproportionate burden of
    rising energy costs on low- and moderate-income families, as
    Mr. Scott alluded to; the impact of energy costs on HUD's own
    budget; and new opportunities for increasing energy efficiency
    in public housing through asset management.
        Let me touch on those briefly. As has already been alluded
    to, according to the Energy Information Administration, from
    2001 to 2007, the cost of home heating nearly doubled or more
    than doubled in many parts of the country. With oil at more
    than $130 a barrel, these costs have obviously continued to
    rise, especially for home heating oil uses in the northeast.
    Combined with the $4 gasoline cost on average across the
    country, both housing and transportation energy costs are
    becoming a critical household expenditure.
        With regard to the age of the housing stock, about 65
    percent of public housing units were built prior to 1970, and
    the majority of those are in climate zones two and five, which
    are some of the colder and hottest areas of the country. The
    assisted housing stock is also older, built at a time with less
    attention on energy efficiency.
        We are especially concerned about the impact of high energy
    bills on low- and moderate-income families. As noted in the
    President's national energy policy, the energy burden on low-
    income households is a proportion of income 4 times grater than
    for other American households. And, of course, it has already
    been alluded to that HUD's own budget is directly impacted by
    utility costs.
        HUD spends more than $4 billion on energy-related utilities
    and direct operating grants to PHAs and through Section 8, both
    project and tenant-based utility allowances. Housing
    authorities report utility expenditures of $1.7 billion, fully
    22 percent of operating costs. And we also spend an additional
    $3.2 billion in utility allowances for Section 8, tenant-based
    vouchers and project-based Section 8 assistance. These are
    significantly high numbers and they are on the increase,
    unfortunately.
        In the policy and regulatory environment, the Energy
    Independence Act of 2007 requires us to raise the standard for
    certain public-assisted or insured properties to meet or exceed
    the 2000 IECC, and we will be initiating rulemaking on that
    front very shortly.
        In August 2006, Mr. Chairman, we submitted a 25-point
    energy action plan to Congress. The Act requires us to provide
    Congress with a 2-year update on our progress, and we will be
    submitting that report to Congress in August of this year, and
    we will provide you a lot more detail on how much progress we
    are making.
        Our goal is to provide information incentives and technical
    assistance to HUD's customers and partners to make informed
    decisions to reduce energy costs in their buildings, either in
    the development or design of new housing, or in the management,
    maintenance, or operation of the existing stock. The benchmark
    that we have adopted is the Energy Star label for new homes and
    products. This is a well-recognized standard in the market
    place and there is an excellent infrastructure to support
    through the EPA and DOE.
        Our written testimony goes into some details on some of
    these issues and some of the actions.
        Mr. Chairman, we would be happy to provide you more
    detailed comments on the bill itself once we have had a chance
    to review it, but in the meantime, I am happy to answer any
    questions on technical issues or related subjects, and we stand
    willing to work with the committee on any or all issues related
    to the bill.
        [The prepared statement of Mr. Freedberg can be found on
    page 113 of the appendix.]
        The Chairman. Our next witness is Patrick Lawler, the Chief
    Economist and Associate Director of the Office of Policy
    Analysis and Research at the Office of Federal Housing
    Enterprise Oversight.
        Mr. Lawler?

     STATEMENT OF PATRICK J. LAWLER, ASSOCIATE DIRECTOR AND CHIEF
       ECONOMIST, OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT
                                (OFHEO)

        Mr. Lawler. Chairman Frank, Ranking Member Bachus,
    Congressman Perlmutter, and other members of the committee,
    thank you for the opportunity to testify on the Green Act of
    2008.
        I am the Chief Economist to the Office of Federal Housing
    Enterprise Oversight, the Safety and Soundness Supervisor for
    Fannie Mae and Freddie Mac. OFHEO supports the broad goal of
    enhancing energy efficiency in American homes, but we have some
    reservations about diverting the Enterprises' focus from their
    current responsibilities.
        The legislation would, among other things, broaden the
    mission of Fannie Mae and Freddie Mac to encompass the
    promotion of energy efficiency and conservation. Improved
    energy efficiency has long been a national priority and many
    opportunities for energy savings in housing exist. Recent
    increases in the price of oil are strong reminders of the
    desirability of conserving energy and reducing dependence on
    fossil fuels.
        Both Fannie Mae and Freddie Mac have had energy efficient
    mortgage programs for a number of years. These programs expand
    their underwriting standards in two ways. First, energy
    improvements being made to a property when a loan was
    originated can be added to the appraised value or purchase
    price of the house. This allows for the financing of the
    improvements with the funds held in escrow until the
    improvements are complete.
        Second, the reduced energy cost associated with documented
    energy-saving features of a house may be taken into account in
    assessing a borrower's ability to pay by adding the anticipated
    monthly savings to the borrower's income for the purpose of
    determining debt to income ratios.
        These programs have met with little success. The
    underwriting modifications do not often have a significant
    effect on whether a loan is approved, and the cost of obtaining
    documentation of energy savings may often offset the benefits.
        This legislation seeks to dramatically increase the
    Enterprises' efforts by using both incentives and requirements
    associated with the housing goals currently administered by
    HUD. Section 4 of the Green Act would provide extra credit
    toward any goal for which a loan was otherwise qualified if the
    property of the loan finances meets energy efficiency
    standards. Because the legislation specifies that the
    availability of this credit cannot be used by the regulator to
    increase the goal, the purchase of additional energy efficient
    loans would mean easier to meet standards for affordable
    housing loans.
        Section 6 of the bill would create new goals for energy
    efficient and location efficient mortgages. For this purpose,
    energy efficient means loans underwritten to take into account
    energy savings of alterations or new construction when
    considering the adequacy of a borrower's income. And location
    efficient means loans underwritten by augmenting borrower
    income to account for decreased transportation costs associated
    with a property. In both cases, a broad range of loans could be
    included. Designing definitions that provide attractive
    incentives to qualify, while also providing meaningful energy
    savings, could prove difficult.
        A third section directly affecting the enterprise is
    Section 5. It would expand the enterprises' purchase and
    guarantee authorities to include energy efficient and location
    efficient mortgages. As drafted, it would appear that the new
    authority would include loans in excess of the conforming loan
    limits and loans in excess of 80 percent of property value that
    are not covered by mortgage insurance or other credit
    enhancements. Such authority would create considerable safety
    and soundness concern. If energy and location efficient loans
    are broadly defined, this could constitute a significant
    expansion of Enterprise charter authorities into areas with
    much more risk than is currently permitted.
        The size of the loss the Enterprises have absorbed over the
    past year and their current importance to the successful
    function of our residential mortgage market recommend against
    substantial expansion of the risk-taking authority at this
    time. However, as Director Lockhart has said many times, these
    turbulent mortgage markets highlight the critical need for GSE
    reform legislation, such as that passed by the House and the
    Senate Banking Committee, with strong bipartisan support. Both
    bills would combine OFHEO with the Federal Housing Finance
    Board to create a new, stronger regulator to oversee Fannie
    Mae, Freddie Mac, and the 12 Federal Home Loan Banks. This new
    regulator would be funded entirely by these entities, separate
    from the annual appropriations process, be given the
    authorities that new capital standards for the entities it
    regulates, and otherwise have important powers of bank
    regulators including independent litigating authority and the
    power to establish a receiver. The bill would also combine in
    one agency the safety and soundness and mission oversight that
    are now divided between OFHEO and HUD.
        OFHEO greatly appreciates the strong, sustained support for
    this legislation shown by Chairman Frank and the members of
    this committee.
        Thank you.
        [The prepared statement of Mr. Lawler can be found on page
    243 of the appendix.]
        The Chairman. Thank you.
        I'm going to begin the questioning with the main author of
    the bill, the gentleman from Colorado.
        Mr. Perlmutter. Thank you, Mr. Chairman.
        I would like to first direct my questions to Mr. Freedberg.
    One of the things that we have been talking about is standards,
    and there are certain standards for new homes that would be
    considered green, which would trigger the incentive to Fannie
    Mae. And within the bill, the HUD Secretary has a right to
    establish the standards every 6 months or so. But we have set
    forth two of them: One is an IECC standard, International
    Energy Conservation Code; and the other is ASHEAE, which is the
    American Society of Heating Engineers, Air Conditioning, and
    something else; I apologize to the ASHEAE people.
        What is your opinion of including those standards in this
    bill?
        Mr. Freedberg. Congressman, I'm not going to take a
    position on the specifics of the bill, but I can give you some
    idea of what we're doing now and how--
        The Chairman. In fairness to HUD, I appreciate their coming
    to testify. You know, we did get this and the other thing, so I
    think it's entirely appropriate to get these general comments.
    As we go forward, we'll be looking for HUD to be more specific,
    but at this point I just want to be clear; we're perfectly
    happy with that level of comment. And so go ahead.
        Mr. Freedberg. Well, thank you, Mr. Chairman.
        We are following the direction of Congress under the Energy
    Act of 2007 to develop a rule that would set the standard at
    the IECC 2006 level, either meet or exceed that. And there is a
    rulemaking process that we're undergoing.
        I should say that I mentioned that we have adopted a
    voluntary standard through our various programs and through our
    competitive grant awards, and so forth, that has set the
    standard at Energy Star for new homes, which is 15 percent over
    the 2004 IECC. I believe that is also higher than the energy
    code of 2006. And I don't want to take a position as to whether
    that would be an appropriate mandatory standard or not; but all
    of our experience with Energy Star shows that the added cost of
    meeting the Energy Star standard, which is 15 percent over the
    2004 IECC standard, is typically about maybe $1,000 over and
    above standard construction, if that--it can be lower; and that
    those are very cost-effective from the point of view of energy
    savings. They're very fast paybacks.
        So we have been comfortable, at least as a voluntary
    standard setting the Energy Star label, which is probably above
    the IECC label. And we have not taken a position on whether
    that would be a mandatory standard.
        Mr. Perlmutter. Right. Well, given your experience at HUD
    and in your prior experience, you heard Mr. Scott's questions
    about not wanting to harm low- to moderate-income families with
    respect to making homes or HUD units, or whatever, energy
    efficient. In your experience, do the people who own these
    homes or reside in these apartments, does it benefit them if
    the homes are energy efficient, or not? And I'm sure my
    question sort of answers it, but please expand on that.
        Mr. Freedberg. Well, I think you--and as my comments
    indicated in my opening remarks, we're dealing with older
    housing stock that is generally quite inefficient relative to
    the new stock that is coming on line. And there's no question
    that we need to do more to upgrade those units from an energy
    efficiency point of view.
        All of their reports that we're getting--I have an example
    of just a retrofit that was done in a 34-unit multi-family
    building in California, for example. The cost of the rehab was
    $643,000, according to this project; the green premium was
    about $100,000, which would be typically higher. But the annual
    savings were about $11,375 in that case, so a very good
    payback.
        But I do think that if HUD were to be looking at green
    standards, we would obviously pay attention to the
    affordability aspects. That is the bottom line; we want to be
    sure that whatever goes in at the front end at the very least
    pays for itself over time. And that would certainly be one of
    the considerations that we would apply.
        Mr. Perlmutter. In your statement, you say, ``strengthen
    rewards and incentives for energy efficiency. Although
    requirements vary from program to program, in general HUD's
    incentives for encouraging energy efficiency are relatively
    modest.'' What do you mean by that?
        Mr. Freedberg. What I meant by that is that we do have some
    incentives in some of our programs. I think public housing in
    particular provides what we call the frozen rolling base
    subsidy, which allows housing authorities to capture some of
    the savings in the short term and through energy performance
    contracts to retain a full 100 percent of the savings for the
    duration of an energy performance contract. There are also
    other subsidies, such as the add-on subsidy, which would allow
    you pay for the added improvement.
        Mr. Perlmutter. My question is the ``relatively modest,''
    and then I think my time is up, and we'll have to switch.
        Mr. Freedberg. Yes.
        Mr. Perlmutter. But it was the relatively modest component.
        Mr. Freedberg. I would say that if you looked at the
    programs across-the-board, the incentives are relatively modest
    in terms of the number of points, for example, that we provide
    for competitive grant programs. On the other hand, we have
    found that even providing a small incentive in terms of just a
    couple of points for some of those grants, we have seen a
    pretty big impact.
        But there are some programs, such as the assisted and
    insured stock, where there are no real obvious incentives for
    energy efficiency in that stock.
        Mr. Perlmutter. Thank you.
        The Chairman. The gentleman from Alabama?
        Mr. Bachus. Thank you.
        Mr. Lawler, I think your testimony is that Fannie and
    Freddie are buying these energy efficient or green mortgages
    today? They're--
        Mr. Lawler. They have programs, but they are not greatly
    used.
        Mr. Bachus. Okay. If you add--you know, these credits as
    one of the incentives for taking these mortgages, does that
    create--obviously it creates some incentive to take these
    mortgages over another mortgage. Does that create any safety
    and soundness problems? Does it also maybe have any effect on
    the green mortgages you're taking? And I say all that under the
    backdrop of, you know, our lending industry is stressed right
    now; we're asking Fannie and Freddie to do more and more. The
    financial stability of our GSEs is something that we're all
    very concerned about.
        How does this affect that?
        Mr. Lawler. Well, their primary missions are the stability
    and affordability of the mortgage markets. The more additional
    responsibilities you give them, there is some potential for
    dilution of their efforts. As far as safety and soundness,
    we're concerned that this not be a mechanism for allowing them
    to buy very large mortgages that otherwise would not meet their
    conforming loan limits, or--
        Mr. Bachus. And the new authority does include authority
    for them to take these loans above the conforming loan limits?
        Mr. Lawler. It would appear to. That would be, I think, a
    fair reading of it.
        Mr. Bachus. Which--
        Mr. Lawler. And also--
        Mr. Bachus. Loans in excess of 80 percent of the--
        Mr. Lawler. --would appear to allow the high LTV loans that
    are not backed by mortgage insurance or other credit
    enhancements.
        Mr. Bachus. Which would be obviously risky. Those are both
    risky.
        Mr. Lawler. Especially the latter would be quite risky
    loans, compared to loans they're allowed to buy. So we would be
    concerned about that. The energy efficient loans within those
    limits, there's no particular reason to believe that they would
    be riskier than other loans.
        I think a fair argument could be made that taking account
    of energy savings in underwriting could be appropriate, and
    could be beneficial. It's not always that straightforward
    exactly how to do that. I think in particular with location
    efficient loans, trying to ensure that what you're measuring
    actually contributes to borrower savings in a particular
    mortgage may be somewhat difficult. So there are some
    challenges in defining some of these things.
        Mr. Bachus. Thank you.
        Mr. Freedberg, you have testified that presently HUD is
    offering some programs, energy efficient mortgage products. So
    does this legislation have any impact on your current efforts
    to reduce energy costs and offer those products?
        Mr. Freedberg. We have had an energy efficient mortgage
    product on the books. I think Congress actually created that
    product back in 1992, so we have had quite a bit of an
    experience with that. And again, I'm not going to talk to the
    specifics of the bill. Most of the references to the energy
    efficient and location efficient mortgages are referring to the
    Fannie and Freddie products, which are separate from the FHA
    product that we administer.
        I will say, though, that our requirement is that any
    additional investment in energy must pay for itself, so that
    you can underwrite the added cost of the investment through the
    savings, and we do require that there be an expert report, and
    I believe the bill does address that as well.
        So we're very comfortable that the product that we have
    offered has actually provided a benefit to the consumer,
    without added cost.
        Mr. Bachus. Well now, as I read the bill, and what I think
    I have just heard you say is that this would actual require FHA
    to insure another $1 billion worth of these new energy
    efficient loans?
        Mr. Freedberg. I believe there is a section of the bill
    that does address that, yes.
        Mr. Bachus. Fine.
        Mr. Freedberg. There is.
        Mr. Bachus. Are those available? Is the lending market
    producing that number of loans today?
        Mr. Freedberg. The number in the bill is actually quite
    low, frankly, given the volume. But even at that level, we have
    found that the energy efficient mortgage product has been a
    somewhat under-utilized product, in part because I think
    lenders have found it difficult--certainly when it comes to an
    existing homes product--to get the work done and set up the
    escrow fund, and so forth. And I think those issues would need
    to be addressed in order to make the energy efficient mortgage
    a valuable product--
        Mr. Bachus. Any suggestions you have for us on how we would
    do that in this legislation, I think would be appreciated.
        Mr. Freedberg. We would be happy to get you some
    suggestions.
        Mr. Bachus. Thank you.
        But I think you are saying the potential for saving money
    on more energy efficient homes is there and ought to be
    utilized, particularly as energy prices escalate.
        Mr. Freedberg. Absolutely. As long as you ensure that the
    investment up front is done well and done correctly, and that
    you have some reasonable assurance that you're going to get the
    savings.
        Mr. Bachus. Thank you.
        The Chairman. The gentleman from Georgia?
        Mr. Scott. Thank you very much, Mr. Chairman.
        First, Mr. Freedberg, let's see if we can't get our arms
    around this whole issue of the impact of rising energy costs on
    low- and moderate-income people. The disproportionate--you made
    a very startling observation that it is 4 times as great among
    low- and moderate-income people as the rest of the levels.
        Now if you could answer or give us an assessment of that in
    specific relationship to your understanding of this bill, and
    where in the bill and how in the bill would complying with the
    energy efficient policies within this bill, as well, would have
    an impact on the energy costs for this group of people. Can we
    talk about that first?
        The second part of the question still does relate to the
    low- and moderate-income people. And that is this issue, which
    hopefully we will get to a little bit later, and as Mr.
    Perlmutter said, we will address, this double whammy that is
    being placed on manufactured housing, which targets basically
    low- and moderate-income persons. We are putting two building
    codes on them--what impact does that have in driving
    manufactured home builders out of the marketplace and then
    adding that cost to low- and moderate-income people?
        So we could examine that--as well as you, Mr. Lawler--so
    going forward, as we move forward this bill, that we have done
    diligence on this specific issue, that we have a clear
    understanding of what this impact, the impact on low- and
    moderate-income people will be. And are there areas in which we
    can move to fix it so that it doesn't disproportionately fall
    on people of low and moderate income?
        Mr. Freedberg. Those are two big questions, Congressman.
    And I think you have certainly zeroed in on the essential issue
    here, which is to the extent that we're talking about
    affordable green or affordable energy efficiency, what
    distinguishes affordable green from other kinds of green
    building? The obvious factor is the affordability. I will tell
    you that HUD has always been concerned about defining green in
    a way that is affordable to the constituency that we serve,
    low- and moderate-income families. And my expectation would be
    that to the extent that the Secretary is given the authority to
    establish green guidelines or other standards, if that were the
    case, then that would certainly be the first screen that we
    would be looking at.
        There is no question that--
        Mr. Scott. Excuse me. You said the first screen? I didn't
    really understand.
        Mr. Freedberg. Would be the first criteria for determining
    any appropriate green guidelines or standard would be its
    affordability, by definition. Now I do think that we need to be
    moving towards perhaps a different view of housing, which is
    life cycle cost of the housing, which is both the front end and
    the operating cost over time, particularly when HUD is footing
    the bill for the utilities in the housing through one or more
    of our subsidy programs. It is important that we look at both
    the front end and the long-term operating cost over time.
        But I do understand the concern that there may be front-end
    costs that don't pay back sufficiently or in a fast enough time
    period--and indeed where you have a limited amount of money for
    a particularly subsidized affordable housing that somebody's
    going to pay some additional cost at the front end.
        But I guess the point I'm making is that if HUD were given
    the authority, I'm absolutely confident that we would be
    looking at what parts of green are affordable, both at the
    front end and over time through the operating costs. And then
    it would absolutely be the judgment of the Secretary as to how
    to balance front-end costs versus the operating costs over
    time. I'm not speaking to the specifics of the bill, but I
    would think that would be the operating procedure.
        We have a program now, speaking of green, through the Mark-
    to-Market program. It's a pilot project or a model program. We
    have about 50 buildings that are going through what we call a
    green remodeling initiative. And we're giving owners the option
    of doing some add-on green measures and providing them an
    incentive with a reduced owner contribution at the front end
    from 20 percent to 3 percent. And--
        Mr. Scott. Mr. Freedberg, my time is--I want to get to the
    other part of that, that double, the two separate different
    building codes, what impact that will have on the manufactured
    housing market. Would it in fact drive--could it drive some of
    those people, manufactured home builders, out of the
    marketplace, thereby denying that option to lower-income
    people?
        Mr. Freedberg. I'm actually going to defer on responding to
    that question. I'll be happy to get our manufactured housing
    office to give you a response on that, because they deal with
    this issue all the time, with regard to implementing the HUD
    code. And this, I know, is a concern of the manufactured
    housing industry that any additions to the code would be an
    add-on front-end cost.
        The Chairman. Thank you, Mr. Freedberg. If they could
    submit that for the record, we would appreciate that.
        The gentlewoman from Illinois is recognized.
        Mrs. Biggert. Thank you, Mr. Chairman.
        You talked a little bit about the requirement of the bill
    for FHA to insure the $1 billion worth of energy efficient
    homes. Yesterday in the New York Times there was an article
    where Commissioner Montgomery said, ``Let me repeat, FHA is
    solvent.'' But he did say that the projected loss to the home
    program since 2004 has required FHA to withdraw $4.6 billion
    from its $21 billion capital reserve fund, made to cover the
    cost.
        My concern is that--and one of the issues that I had in my
    opening statement about the green building to reduce the risk
    of a mortgage borrower and lower the mortgage insurance
    premiums. And my concern is, are we putting too much pressure
    on FHA? We don't know really where the bottom of this mortgage
    crisis is. And then to come along where we're going to reduce
    the premiums, which I think, you know, where we need the risk,
    is this something that is important, or not?
        Mr. Freedberg. As I say, I think we have had experience
    with the FHA product, obviously the energy efficient mortgage
    product. It has been a very modestly used product; less than
    1,000 mortgages a year are being reported at this point. And we
    do have a provision to ensure that the add-on cost is paid for
    with the energy savings.
        But I would be happy to again get back to you with a more
    extensive response from our FHA people.
        Mrs. Biggert. Right.
        Mr. Freedberg. Clearly, risk is something that we do all
    the time, and we would have to look at that.
        Mrs. Biggert. The problem is that there are so few of these
    type of mortgages. We don't really have the data to determine
    whether there will be additional foreclosures based on this, do
    we?
        Mr. Freedberg. I don't think we have seen any evidence that
    the energy efficient mortgages that we have insured have higher
    default rates, at least historically. But I would be happy to
    get you some details on that, as well.
        Mrs. Biggert. Okay. Thank you.
        Mr. Lawler, if the bill seeks to increase Fannie Mae's and
    Freddie Mac's efforts by using both incentives and requirements
    associated with its housing goals, what is the effect that this
    provision would have on the current affordable housing goals
    structured and administered by HUD?
        Mr. Lawler. Well, it would diminish the focus on affordable
    housing somewhat, because it specifically says that the
    regulator, the HUD Secretary, can't change the goals to account
    for additional credit in the incentive portion. So energy
    efficient loans that meet some of the energy efficiency
    standards we have been talking about would get at least 25
    percent more credit. That additional credit would be goal space
    that wouldn't need to be met by affordable housing loans. So,
    it would mean some reduction in the requirements for affordable
    housing.
        Mrs. Biggert. Okay. Thank you. I yield back.
        The Chairman. The gentleman from Texas, Mr. Green.
        Mr. Green. Thank you, Mr. Chairman, and I thank Mr.
    Perlmutter for associating the color green or the name Green
    with the title of his legislation. As you know, Mr. Perlmutter,
    I am quite fond of green.
        [Laughter]
        Mr. Green. And I thank the witnesses for appearing today.
        I would like to visit briefly with Mr. Freedberg on the
    question of affordability. Mr. Freedberg, this question of
    affordability can sometimes be relative, because persons who
    purchased these fuel-efficient cars many years are reaping
    great benefits today. They at the time they made the purchase
    probably had an outlay of capital that was questionable. So the
    question becomes: Not only is it affordable in the current
    market, but you have to look through the vista of time, to some
    extent, and ascertain whether affordability is something that
    is foreseeable, given that oil is a finite resource, given that
    we're having the price of oil continually escalate--cartel
    controls the price more so than the marketplace.
        So given this, could you kindly factor that into the
    equation, what I have just called to your attention. If the
    price of oil, let's say it doubles in the next 5 years, if we
    have done this, won't we be all the better for having done
    these things, with this kind of affordability in mind?
        Mr. Freedberg. Well, there's absolutely no question,
    Congressman, that if oil prices continue to rise, that initial
    investment in a more fuel-efficient car would increasingly be a
    better deal.
        Mr. Green. Hence, an investment now in a fuel-efficient
    home will become a better deal, as oil prices escalate?
        Mr. Freedberg. Indeed. And frankly, you know, the practice
    when the experts do energy audits and do the front-end energy
    assessments, they tend to be rather conservative in projecting
    future oil or energy cost increases, so that to the extent that
    there are increases that would certainly to the benefits to the
    consumer.
        I should say that I think you'll be hearing in your second
    panel some of the experience that the Enterprise Communities
    Program has had with about 250 buildings and many thousands of
    units, and I think they're coming up with some very perhaps
    helpful data as to the costs and benefits of investing in
    green. And my office, the Policy Office, is certainly going to
    be taking a look and hopefully working with groups like the
    Enterprise Community partners and the NHB to actually take our
    time to really look at, you know, what makes sense and what
    doesn't make sense, and then learn from the experience of
    people like Enterprise.
        Mr. Green. Thank you. Continuing with this, but in a
    different light, it seems that we agree that this is an
    appropriate thing to do, what Mr. Perlmutter has suggested,
    that we start to look at this, for obvious reasons. This is
    Genesis that he has introduced us to, and you can't get to
    Revelations if you don't have Genesis. So it just kind of makes
    sense that we would start now, so that we can get there.
        Many times we seem to want the crops, but we don't want the
    rain and thunder and the lightning. To get the crops, sometimes
    you have to go through this process.
        So I want to commend Mr. Perlmutter for what he has done to
    get us started with this process. There may be some changes.
    Legislation always evolves. But you don't have evolution if you
    don't start at some point.
        With that in mind, why would we not develop some small
    portion of the stock that we have? I think he used the number
    50,000 of 3 million units. Is that number too large, 50,000, of
    3 million units?
        Mr. Freedberg. Again, I'm not going to answer as to the
    specifics of the bill.
        Mr. Scott. Well, let's not assume that we have a bill.
    Let's just talk about 50,000 of 3 million units.
        Mr. Freedberg. Fifty thousand is certainly a very, you
    know, small share of the total portfolio that you would be
    talking about, yes.
        Mr. Scott. With that said, Mr. Chairman--and I must say the
    chair looks good on you--I will yield back the balance of my
    time.
        Mr. Perlmutter. [presiding] The Chair now recognizes Ms.
    Brown-Waite.
        Ms. Brown-Waite. Thank you very much, Mr. Chairman.
        Coming from Florida, but also traveling to where my
    daughter lives, I see that there's a tremendous amount of
    stagnant building. I mean it is just not happening. Many people
    are going into other enterprises. Do either of you know exactly
    how much green building is going on? I know when I spoke to a
    builder, and this happened to be a builder in Florida, he said,
    ``Green, shmeen. I can't sell.'' Do either of you have any
    comments?
        Mr. Freedberg. I think that would be a good question for
    the second panel, and I don't--
        Ms. Brown-Waite. And I can't be here for the second panel.
    I will--
        Mr. Freedberg. I don't have numbers for you on that.
    Clearly the housing market is in a downturn at this point. But,
    you know, all the anecdotal evidence seems to point to a rising
    demand for green building. Now one marker of that is what I was
    referring to earlier, which is Energy Star, which is energy
    efficient homes. And after an initial slow start-up we have
    seen an exponential increase in the penetration of Energy Star
    in many markets. I'm not sure it's a big deal in Florida,
    though, but certainly in Arizona and some other places, we have
    seen a big escalation. I think that is a reflection of growing
    interest in this topic.
        Ms. Brown-Waite. My next question is, if the GSEs are going
    to be required to purchase the green loans, should banks be
    required to originate them?, possibly through a new CRA
    requirement?
        Mr. Lawler. That would be one possibility. Certainly there
    are a variety of originators from whom Fannie Mae and Freddie
    Mac buy, not just commercial banks, but also mortgage banks, so
    that there are a variety of venues. Clearly they can't
    originate loans. They have to buy loans that are made by other
    people. I think the thrust of the bill is to get them to
    encourage others to make these loans by saying that they will
    pay a premium for them in order to meet their goals.
        The same kind of issue arises with respect to affordable
    housing loans, and that's essentially how that has worked.
    Fannie and Freddie have occasionally paid additional amounts to
    acquire loans that meet goals.
        But beyond paying more, there are other ways that they can
    stimulate demand. They can make more information available;
    they can help lenders make more information available about
    different types of loans that they're interested in buying.
    Different types of cost savings. It would give them an
    incentive to participate in expanding education about
    possibilities. So there are a variety of ways that they could
    work to meet such a goal.
        Ms. Brown-Waite. And my last question is, to meet these new
    goals, the GSEs will need to collect data from the lenders who
    sell them the loans. Will the lenders actually have this data
    on how many loans would qualify? And do you anticipate any new
    costs these regulatory requirements will have on the mortgage
    industry?
        Mr. Lawler. Well, there are costs in acquiring information
    about energy efficiency for any particular property, and
    someone would pay them. Normally that would be paid by the
    borrower, except that the goals would incent Fannie Mae and
    Freddie Mac to pay up for these loans, and ultimately it might
    mean that Fannie Mae and Freddie Mac implicitly were paying for
    some of these costs. Certainly somebody would have to pay for
    it. And if the volumes got larger, there might be efficiencies.
    So far those costs have deterred borrowers from wishing to
    participate. But the incentives of higher goals haven't been
    there either.
        Ms. Brown-Waite. Thank you. And Mr. Chairman, I would like
    to submit the question about the green buildings to the next
    panel. I can't stay; I have another meeting, but I will be
    submitting it to them, and also submitting the questions for
    the record.
        Mr. Perlmutter. Certainly. And without objection, it will
    be made a part of the record--
        Ms. Brown-Waite. I yield back.
        Mr. Perlmutter. And if you would like any of us to ask your
    question for you, we are happy to do that too.
        Ms. Brown-Waite. Thank you. I yield back the balance of my
    time.
        Mr. Perlmutter. Mr. Cleaver from Missouri?
        Mr. Cleaver. Thank you, Mr. Chairman. Let me also express
    appreciation to you and the other freshmen members on the
    committee who put forth this legislation. I apologize. I'm
    running, ironically, back and forth between this committee and
    the Select Committee on Energy Independence and Global Warming,
    which is holding a hearing at this very same time on the future
    of oil. I don't want to violate what Chairman Frank said
    earlier about jurisdictions, and I think we did have some
    comments that by being on that committee, I would naturally
    have a propensity to react, but I will suppress that and get
    into a couple of issues.
        First of all, for Mr. Freedberg, HUD deals with poor
    people. Do you have any idea of what the number one issue is
    that negatively impacts poor people? I used to be one of your
    tenants. I lived in public housing. So I'm just--
        Mr. Freedberg. Well, in terms of housing, fundamentally
    it's the cost of housing or other household expenses.
        Mr. Cleaver. Yes. Utilities. I'll ask and then answer it.
    Utilities. That's the utility cost. And if you talk to pastors,
    like Reverend Green, who just left--he's coming back in from
    Genesis to Revelation--but if you ask pastors who are in
    churches, particularly here on the eastern seaboard, what is
    the number one request they receive? And it is help on
    utilities.
        And so in piggy-backing on what my colleague, Mr. Green,
    said, it just seems practical for us to make some dramatic
    changes now so that we won't have to pay a heavier cost for
    them in the future. And so I may not have been here--is HUD's
    official position that this legislation is too costly? Is
    that--
        Mr. Freedberg. We do not have an official position on this
    bill. We will be working with the committee to, you know,
    provide any responses. But we do not have an official position
    on the bill yet, Mr. Cleaver. I'm here to say that this issue
    has been and is extremely important to the Department, both
    from the point of view of the impact of rising energy costs on
    our residents, and on homeowners who use our mortgage insurance
    programs. I think I indicated that we are already doing quite a
    bit--probably not enough in some people's view to address the
    issue--and we're also concerned about the impact that has on
    our own operating costs, which are now in the billions in terms
    of expenditures for utilities through utility allowances and
    other programs.
        So this is a critical issue and I think it's clear that
    while we have made some modest steps in the right direction, we
    have more to do. The Department's leadership has been quite
    supportive of our efforts to increase energy efficiency and to
    assist our customers and our tenants to address energy costs.
        Mr. Cleaver. Okay.
        Mr. Freedberg. So it's a critical issue, and in general we
    commend the committee for, you know, putting together--
        Mr. Cleaver. So HUD is almost for this legislation?
        Mr. Freedberg. We're not taking an official position on the
    bill.
        Mr. Cleaver. Okay. All right.
        Mr. Freedberg. But we are saying that this--
        Mr. Perlmutter. I did hear ``commend.'' I'm going to use
    that ``commend'' for a long time now.
        [Laughter]
        Mr. Cleaver. Mr. Lawler, this is something that comes up in
    this committee on every piece of legislation that we even
    almost consider, and it is the desire by many to say that we
    don't need any new regulations. I mean no matter what the issue
    is, we don't need any. Why? Would you suggest that we do not
    need to--that Congress should not become involved in this
    issue? Because approving Mr. Perlmutter's bill is putting
    regulations where they are not needed?
        Mr. Lawler. I didn't say that--
        Mr. Cleaver. I'm not begging the question. I'm asking a
    question.
        Mr. Lawler. I certainly didn't say that.
        Mr. Cleaver. Yes. I'm not begging the question. I'm asking
    a question.
        Mr. Lawler. We support the broad goals of increasing energy
    efficiency and energy conservation in homes. Using Fannie Mae
    and Freddie Mac involves some trade-offs. They have some really
    critical missions right now. And mortgage markets have been
    somewhat disturbed over the past year. So we have some
    reservations about using them for that purpose at the present
    time. At the same time, we recognize that this is an important
    national priority.
        So we have some specific safety and soundness concerns that
    we raised. And more broadly we have some reservations, but we
    recognize that this is an important priority too.
        Mr. Perlmutter. The gentleman yields back.
        The gentleman from New Hampshire, Mr. Hodes.
        Mr. Hodes. Thank you, Mr. Chairman.
        Gentlemen, thank you for your presentations, which I found
    helpful and constructive. Up in New Hampshire, things get
    pretty cold. Traveling around my district, people I represent
    are afraid that they're going to freeze to death next winter
    because they're not going to be able to afford oil or gas or
    whatever it is that most of them heat their homes with. And
    they are eager to see a national policy that reflects the
    reality that for the past 30 years, we have had our heads in
    the sand about where we ought to be moving on energy
    efficiency, which is a large contributor to where we are today.
        So I'm coming at this by telling you that my sense is: We
    can't afford to wait any more on moving aggressively towards
    these directions.
        First, Mr. Lawler, are there benefits in this bill to
    Fannie Mae and Freddie Mac?
        Mr. Lawler. I don't think there are benefits to Fannie Mae
    --well, yes, there is a benefit in that it could help them meet
    their affordable housing goals.
        Mr. Hodes. And isn't that a significant benefit?
        Mr. Lawler. That could be a significant benefit. It has
    been very difficult to meet those goals in the past few years.
        Mr. Hodes. So this is a help to Fannie Mae and Freddie Mac
    in meeting their affordable housing goals?
        Mr. Lawler. Yes.
        Mr. Hodes. Okay.
        Mr. Lawler. It would also, however, have some other effects
    on them that they might consider not beneficial. It would set
    up some other goals that they would have to meet as well.
        Mr. Hodes. I understand. It's a balance. You have to live
    with what Congress tells you to do, and that's always tough.
    It's a tough job.
        You said in your testimony--I forget whether it was written
    or oral--that your existing energy efficiency mortgage programs
    have met with little success over the years.
        Mr. Lawler. They're not our programs. We regulate Fannie
    Mae and Freddie Mac. So--
        Mr. Hodes. So the programs for energy efficient mortgages
    over the years have met with little success, according to your
    testimony?
        Mr. Lawler. Yes.
        Mr. Hodes. Why?
        Mr. Lawler. They haven't been heavily publicized and they
    haven't met with a great response. Borrowers find it relatively
    expensive to go through the process of establishing savings,
    and it hasn't been worth it to them; it hasn't made enough of a
    difference in getting loan approval, or in providing the kinds
    of savings that borrowers have been interested in acquiring at
    the same time they get the loan. The process, if it's an
    existing home, is that you have to be promising to make some
    improvements. Typically you can't make them until you have
    actually taken possession of the home, and so there's a delay
    involved there in establishing after the fact that you have in
    fact achieved a certain level of savings, and so forth.
        Mr. Hodes. So it has been a cumbersome process for
    borrowers?
        Mr. Lawler. I think so.
        Mr. Hodes. Does the bill go far enough in its present form
    in addressing those issues? Or do you think it could do more?
        Mr. Lawler. I think it needs to do more. Either the bill or
    the regulator in implementing this would have to try and design
    something that worked a little bit more efficiently.
        Mr. Hodes. Okay.
        Mr. Lawler. And I think it would be a difficult thing to
    do, and I'm not sure exactly what the right solution would be;
    I think it would need some help there.
        Mr. Hodes. And isn't one of the other reasons that you
    haven't seen great success in energy efficient mortgages
    because the cost-benefit ratio has simply not been there?
        Mr. Lawler. Yes. I think that has been the case. The idea
    behind them is to try and prevent the lack of immediate cash
    from being a bar to being able to make some effective energy
    investments. But still you would have to convince the borrower
    that these are effective investments, that it will save them
    money--
        Mr. Hodes. And as fuel prices rise as dramatically as they
    have, and as they will continue, that cost benefit analysis
    gets different.
        Mr. Lawler. Should change.
        Mr. Hodes. Okay.
        Do Fannie Mae and Freddie Mac currently buy second
    mortgages?
        Mr. Lawler. Yes, they do.
        Mr. Hodes. And let me just throw out: What impact do you
    see if we were able to help provide an incentive for Fannie Mae
    and Freddie Mac to buy second mortgages specifically addressing
    retrofit projects for existing stock, where homeowners come in,
    want to take a second mortgage in order to make the kind of
    changes that would be beneficial to their energy efficiency.
        Mr. Lawler. That's an interesting question. The recent
    experience, of course, with second mortgages has been very
    unfortunate, as a general proposition.
        Mr. Hodes. Understood.
        Mr. Lawler. These might be a little bit different. They
    might have somewhat different risk characteristics, especially
    if they were really saving money for the borrower in doing
    them.
        And so it is something that I think requires some more
    study to try and evaluate what the safety and soundness
    characteristics of it would be.
        Mr. Hodes. Well, we look forward to working with you on
    that issue. Thank you.
        I'm out of time, Mr. Chairman.
        Mr. Perlmutter. Thank you. The gentleman yields back. And
    we would just like to thank you, Mr. Freedberg, and you, Mr.
    Lawler, for taking your time--when not having specifics about
    the bill, but having taken the time to try to understand what
    we're doing and for your comments today.
        And so thank you very much, and we will now call up our
    second panel: Ms. Koo; Mr. Purnell; Mr. Howard; Mr. Hicks; Mr.
    George; and Mr. Bernstein.
        Any members of the committee may submit additional
    questions for the record, or any of their statements for the
    record.
        Good morning, everyone. Thank you for being here, and I
    would like to start with the testimony of Ms. Koo. Without
    objection, your written statements will be made a part of the
    record, and you will each be recognized for a 5-minute summary
    of your testimony.
        Ms. Koo?

       STATEMENT OF DORIS W. KOO, PRESIDENT AND CHIEF EXECUTIVE
                 OFFICER, ENTERPRISE COMMUNITY PARTNERS

        Ms. Koo. Thank you, Mr. Chairman, and members of the
    committee. I am Doris Koo, president and chief executive
    officer of Enterprise Community Partners. We thank you for the
    opportunity to testify today.
        Enterprise is a national nonprofit organization that has
    invested more than $9 billion to create more than 240,000 units
    of affordable homes throughout this country, most of them in
    lower- and moderate-income communities. We are bringing the
    benefits of green building to low-income people, to build and
    rehabilitate for-sale homes and rental apartments that are
    healthier, more energy efficient, and better for the
    environment. We call that the triple bottom line.
        Green Communities is a 3-year experiment, where homes are
    built according to a national criteria and it's the only
    framework for green affordable homes that exists today. The
    criteria were developed in collaboration with and endorsed by
    leading environmental energy, green building, affordable
    housing, and public health organizations. In the last 3 years,
    Enterprise has invested more than $570 million to create more
    than 11,000 green communities homes in more than 250
    developments in 28 States. And since we launched the
    initiative, we can count with pride 20 States having embraced
    similar criteria, either adding bonus points or making it a
    requirement for affordable housing developers to seek local and
    State funding.
        We share this initial progress because it's our practice to
    advocate for public policy changes, based on real experience.
    So my comments today are not based on theory or ideology, but
    on practical experience in housing development and a growing
    body of research.
        We know housing, energy, and transportation needs for low-
    income families are interconnected, and they are getting worse.
    We can make progress on all these fronts and lock in long-term
    environmental benefits by making green affordable homes a
    national priority. We want to believe that green and affordable
    can be one and the same.
        Community organizations, home builders, financial
    institutions, mayors, and governors across the country have
    increasingly recognized this and are taking action. Now it is
    time for Federal leadership. We need a national commitment to
    bring home the benefits of green building to the residents of
    affordable housing.
        The Green Act is a major step toward that commitment. We
    really commend Congressman Perlmutter for your vision and your
    boldness in taking this leadership.
        The impacts of a national commitment to green, affordable
    homes would be profound. So to address Congressman Scott's
    question, green community developments generate substantial
    cost savings from low energy and water usage, and hundreds of
    dollars per unit on an annual basis in many cases can accrue to
    both low-income tenants and the operators of low-income
    housing.
        We are also starting to demonstrate significant health
    benefits from green affordable homes, especially for people
    with asthma; most of them are predominantly low income.
        Green affordable homes at scale can also significantly
    reduce carbon emissions. And the construction and
    rehabilitation of green affordable homes can be the basis for
    creating large numbers of green jobs, especially in home
    building and renovation. This will be particularly effective in
    communities that might be hardest hit by the foreclosure
    crisis, where rehabilitation of some of those vacant homes can
    generate both environmental benefits and economic benefits.
        Our data show that highly sustainable homes for low-income
    families can be created for only marginally high development
    costs. So contrary to the notion that it would cost you and pit
    affordable and green against one another, we're showing that
    costs might be only 2 to 4 percent higher on the average, and
    appear to come down with experience.
        This holds true for virtually every form of housing in
    every type of climate in every kind of community we have tested
    around the country. And based on this experience and in light
    of the major benefits that would follow, Enterprise strongly
    supports raising the bar on environmental performance and
    affordable housing. It's not about picking a program, but it's
    about establishing clear minimum benchmarks for better building
    performance that are widely understood and easily measured.
        In closing, we must act with urgency, because the important
    thing is not to debate the nuances, but to move forward with a
    commitment and the national leadership. We pledge our
    knowledge, our expertise, and our track record to work with you
    to really move this bill forward. And we will submit with our
    testimony the publication called, ``Bringing Home the Benefits
    of Energy Efficiency to Low Income Households,'' as part of our
    testimony.
        Thank you.
        [The prepared statement of Ms. Koo can be found on page 230
    of the appendix.]
        Mr. Perlmutter. Without objection ``Bringing Home the
    Green'' will be made a part of the record. Thank you, Ms. Koo.
        Ms. Koo. Thank you.
        Mr. Perlmutter. Mr. Purnell?

      STATEMENT OF MARSHALL E. PURNELL, FAIA, PRESIDENT, AMERICAN
                        INSTITUTE OF ARCHITECTS

        Mr. Purnell. Chairman Perlmutter, and members of the
    committee, good morning. I am Marshall E. Purnell, FAIA,
    president of the American Institute of Architects.
        On behalf of our 84,000 members, and the 281,000 Americans
    who work for architectural firms nationwide, I would like to
    thank you for the opportunity to appear today, to share some of
    our Nation's architects' thoughts on the Green Resources for
    Energy Efficient Neighborhoods Act.
        This landmark legislation will promote energy efficiency in
    our Nation's residential building sector, providing direct
    benefits to the environment, our economy, and especially to the
    millions of Americans who are struggling to cope with rising
    energy prices.
        I, therefore, offer my and the AIA's sincere support for
    this vital legislation.
        As an architect, I work every day to design spaces that
    maximize energy efficiency. Buildings are one of the largest
    consumers of energy in this Nation. The Department of Energy
    reports that the building sector accounts for 39 percent of the
    total energy consumption, more than both the transportation and
    industry sectors.
        Buildings and their construction are responsible for nearly
    half, about 46 percent, of all greenhouse gas and carbon
    emissions produced in the United States every year, and 71
    percent of the U.S. electricity consumption.
        In order to make significant reductions in the energy used
    by our Nation's buildings, the Federal Government, architects,
    builders, and financial institutions must work together to
    promote energy efficiency across the country.
        The GREEN Act will encourage this collaboration. This bill
    includes a carefully balanced mix of incentives and
    requirements to achieve energy efficiency in the residential
    sector, providing direct benefits to the environment, the
    economy, and homeowners and renters across the country.
        The bill will also help create jobs in the struggling
    design and construction and real estate markets.
        The legislation under consideration by this committee is
    the most comprehensive attempt to promote energy efficiency at
    the residential level to emerge from Congress.
        The AIA strongly supports this legislation as it applies
    energy efficiency standards for new residences and existing
    houses under the jurisdiction of the Department of Housing and
    Urban Development.
        This legislation requires new or renovated structures to
    comply with the most widely accepted energy standards currently
    in existence. The legislation rightfully prescribes energy
    efficiency standards that were developed under an open
    consensus based process, and by offering additional credit to
    projects that achieve even greater energy efficiency, the
    legislation truly incentivizes green design and construction in
    the most practical applicable manner.
        Energy costs are soaring across the country, and many
    citizens are being pushed to their financial limit. Designing
    and constructing energy efficient homes will provide an
    immediate financial benefit to homeowners and renters through
    reduced utility costs.
        While establishing new energy standards for some residences
    will make great strides toward promoting residential energy
    efficiency, it is only one part of the overall strategy to
    achieve an economy-wide energy savings.
        To truly encourage energy efficiency, a multi-faceted
    approach is necessary. The GREEN Act rightfully acknowledges
    this and includes important policy ideas that will promote
    energy efficiency by providing incentives to lenders and
    financial institutions to provide lower-interest loans and
    other benefits to consumers who build, buy, or remodel their
    homes and to businesses to improve their energy efficiency.
        Specifically, the bill will promote the use of energy
    efficient and location efficient mortgages, EEMs and LEMs. EEMs
    and LEMs are effective financial tools that provide incentives
    to homeowners to purchase energy efficient homes or renovate
    existing homes to make them more energy efficient.
        The AIA is especially pleased by provisions in this bill
    that will result in more energy efficient mortgages and
    location efficient mortgages in the marketplace and educate
    borrowers and lenders of their benefits.
        As this bill moves forward, we would like to work with the
    committee and the bill supporters to ensure that homeowners
    have access to the best design information and expertise as
    they embark on energy efficient upgrades.
        That means working with licensed design professionals like
    architects and landscape architects to maximize sustainable
    design opportunities like orientation, natural day lighting,
    and surrounding landscaping.
        It means ensuring that renovations and retrofits are
    overseen by qualified licensed professionals specially trained
    to address all aspects of building and performance and safety.
    It means ensuring that the public knows where to turn for the
    best and most reliable information about who is properly
    qualified to design green residences.
        We strongly support the members of this committee in their
    efforts to make the Nation's housing stock more energy
    efficient. This legislation will reduce energy costs for
    Americans, reduce our demand on foreign sources of oil, and
    preserve our natural environment.
        Thank you, Mr. Chairman, and members of the committee. I
    welcome any questions that you may have.
        [The prepared statement of Mr. Purnell can be found on page
    248 of the appendix.]
        Mr. Perlmutter. Thank you, Mr. Purnell.
        Now, Mr. Howard, you are recognized for 5 minutes.

     STATEMENT OF JERRY HOWARD, EXECUTIVE VICE PRESIDENT AND CHIEF
        EXECUTIVE OFFICER, NATIONAL ASSOCIATION OF HOME BUILDERS

        Mr. Howard. Mr. Chairman, and members of the committee, my
    name is Jerry Howard. I am the CEO and executive vice president
    of the National Association of Home Builders.
        Thank you for the opportunity to testify today on H.R.
    6078, the GREEN Act, and the efforts our industry is making in
    building energy efficiency and supporting affordable housing.
        We appreciate the opportunity to continue in good faith to
    provide comments and input on H.R. 6078. There are some very
    ambitious and well-intentioned proposals in the bill and there
    are some very, very solid points in the bill that we support.
        NAHB currently has no position on this legislation.
    However, as I mentioned, we do support many of the provisions.
        First, we support incentives for green building and energy
    efficiency, including efforts to provide grants for builders to
    offset some of the up-front costs associated with incorporating
    more green features into the homes they build.
        We are pleased to see that the legislation offers grants to
    State and local governments to help improve residential energy
    efficiency via the energy efficiency block grants. We also
    support provisions that allow for reductions in the amounts
    that owners are required to contribute for energy efficient
    mortgages.
        However, we remain concerned that the bill does not provide
    enough resources to achieve these goals it envisions, and in
    some instances, it appears to conflict with the overall housing
    mission of HUD and the GSEs.
        The legislation creates many new programs but it does not
    provide adequate staffing or additional appropriations to
    ensure that these programs are implemented successfully.
        Because of the establishment of these new programs, and the
    goals for the GSEs related to energy efficient mortgages and
    location efficient mortgages, we are worried that the primary
    goals of providing safe, decent, and affordable housing may be
    subjugated to the goals of this new energy efficiency policy.
        Also, we are similarly concerned with the aggressive new
    energy efficiency requirements in the bill, which although
    well-intentioned, may not achieve true energy savings. Proving
    energy savings from the building envelope with mandatory energy
    ratings for FHA insurance, for example, could have the
    unintended consequences of limiting FHA because of the
    infrastructure to support energy ratings is limited itself.
        We believe that these hurdles must be overcome before the
    goals of H.R. 6078 can be realized.
        NAHB is in an unique position to comment on this
    legislation because we are true pioneers in green building as
    much as we are champions of affordable housing.
        As you may know, NAHB is currently in the process of a
    groundbreaking effort to produce the first and only national
    green building standard that will be approved by the American
    National Standards Institute.
        My written statement details the efforts our members have
    taken on building green homes for nearly 3 decades, long before
    many green organizations existed, let alone embraced green
    building.
        Our industry is fully committed to promoting green building
    across the broad spectrum of residential construction, single
    family, multi-family, remodeling, and land development.
        I also want to take a moment to highlight one of the most
    important aspects of green building efforts in this
    legislation, energy efficiency. I want to reiterate our support
    for improving energy efficiency in homes in all markets,
    including affordable housing.
        However, while energy efficient features can be built into
    a structure from the initial construction, it is possible that
    no meaningful energy savings will be achieved if the home is
    operated inefficiently.
        The majority of the energy consumed in a home is the result
    of the independent resident behavior, that is lighting,
    electronics, appliance use, laundry, and cooking habits. Lack
    of energy conservation by the resident has the potential to
    subvert the efficiency or green features built into the home.
        That is why NAHB is committed to greater consumer education
    within the context of our green building program and standard,
    and we hope that Congress can match this commitment with
    support for better consumer education on green building in lieu
    of simply endorsing potentially costly construction mandates
    that may not achieve the savings envisioned.
        I appreciate the ongoing dialogue on this very important
    issue, I appreciate the opportunity that we have been afforded
    to comment on H.R. 6078, and I am prepared to answer any
    questions.
        [The prepared statement of Mr. Howard can be found on page
    212 of the appendix.]
        Mr. Perlmutter. Thank you, Mr. Howard.
        Mr. Hicks, you are now recognized for 5 minutes.

    STATEMENT OF TOM HICKS, VICE PRESIDENT, INTERNATIONAL PROGRAMS
         AND LEADERSHIP IN ENERGY AND ENVIRONMENTAL DESIGN FOR
         NEIGHBORHOOD DEVELOPMENT, U.S. GREEN BUILDING COUNCIL

        Mr. Hicks. Thank you, Chairman Frank, Ranking Member
    Bachus, Congressman Perlmutter, and members of the committee
    for the opportunity to discuss the GREEN Act.
        My name is Tom Hicks. I am a vice president with the U.S.
    Green Building Council, a nonprofit 501(c)(3) organization
    comprised of more than 1,500 private, nonprofit, and government
    organizations. Our vision is to deliver a sustainably built
    environment and our mission is quite simply market
    transformation toward this vision.
        I would like to thank Congressman Perlmutter and the other
    members for their leadership in drafting and introducing this
    important bill and for providing us the opportunity to speak
    with you today.
        As we work to transform the built environment in which we
    live and work, we are mindful that true market transformation
    requires that the advantages of green building be made
    available to all individuals.
        The residential sector represents an unique opportunity to
    make this vision a reality. Representing 21 percent of the
    nation's total energy, the residential sector presents a
    tremendous opportunity to address climate change, create jobs,
    and make our homes healthier and more environmentally
    responsible.
        In a time of rising energy prices, green homes also offer
    the promise of greater energy savings, putting money back into
    the pockets of American families.
        Green homes, both affordable and market rate, are now
    entering the marketplace. As an example, Morrisania Homes,
    which you will see on the easel to my right, is an affordable
    housing project in the South Bronx. It is a project that earned
    the lead silver rating, makes use of recyclable carpeting, 100
    percent Energy Star appliances, low flow water fixtures, and
    low Voc paints and finishes.
        In addition to these benefits, the residents of the
    Morrisania homes in the Bronx expect to save over 30 percent of
    their annual utility bills.
        The result is a community of homes that people can afford,
    which allow the city to grow in an environmentally responsible
    way.
        Bringing the benefits achieved by Morrisania into the
    mainstream requires a two pronged approach, involving both new
    and existing homes. While the greening of the new homes is
    essential to advancing professional capacity for green building
    and ensuring that the green building practices are integrated
    into new housing projects, existing homes provide an unique
    opportunity to achieve great energy savings on a wide scale.
        Provisions of the bill that provide a minimum threshold for
    energy reduction to rehabilitate existing housing as well as
    residential energy efficiency block grant programs will make
    energy efficient green home renovations more available to all
    homeowners.
        The GREEN Act also takes important strides toward
    increasing awareness of the benefits of energy efficiency and
    green building.
        As an earlier adopter of green building and a provider of
    affordable housing, the Federal Government is well-positioned
    to assist in the transformation of the housing sector. The
    GREEN Act harnesses this potential by marshalling public funds
    to bring the financial benefits of green building to the people
    who can most benefit from the operational savings they
    generate.
        In addition, through government-backed financial
    institutions, this bill provides numerous financial incentives
    for energy efficient buildings.
        When our green building rating system was first introduced
    into the commercial marketplace, it was the first national
    green building certification program. The majority of the early
    projects using LEED certification were going green not because
    of evidence based business case, but because of values oriented
    commitment.
        Since then, the market for green buildings has grown to a
    projected $20 billion annually and first cost premiums for
    green buildings have gone down to as low as zero to 2 percent.
        The business case has been well-articulated from cost
    savings to increased property values, and market demand
    continues to grow.
        Leaders in both the private and public sectors are critical
    in getting green building to where it is today. Federal
    agencies were some of the USGBC's first members and many
    continue to lead by example by requiring LEED for their own
    facilities.
        Finally, I would like to state our commitment to making
    green building affordable, accessible, and available to
    everyone. USGBC is dedicated to making the case for affordable
    green housing.
        We are now working with partners in the affordable housing
    sector to ensure that individuals of all income levels can
    experience the benefits of healthier, more environmentally
    responsible, and energy efficient living spaces.
        The extraordinary work of Enterprise Community Partners,
    the commitment of the Home Depot Foundation, the work of
    Habitat for Humanity, and many others all demonstrate that
    green building is possible without big cost premiums, and
    equally important, that the benefits to families with the
    greatest financial needs are tremendous.
        While LEED for Homes was just released in December of 2007,
    case results indicate low or no first cost premiums with strong
    operational cost savings. To date, more than 1,800 affordable
    units have registered with LEED, and nearly 300 have already
    completed the certification process.
        Through a generous grant through the Home Depot Foundation,
    USGBC is able to offset the certification costs for their
    affordable housing projects seeking LEED certification.
        In conclusion, I would like to thank the Financial Services
    Committee for the opportunity to discuss this important
    measure. I look forward to working with the committee as it
    deliberates on this important legislation, and I look forward
    to answering any questions.
        Thank you.
        [The prepared statement of Mr. Hicks can be found on page
    185 of the appendix.]
        Mr. Perlmutter. Thank you, Mr. Hicks.
        Mr. George, you are now recognized for 5 minutes.

    STATEMENT OF ALAN W. GEORGE, EXECUTIVE VICE PRESIDENT AND CHIEF
       INVESTMENT OFFICER, EQUITY RESIDENTIAL, ON BEHALF OF THE
        NATIONAL MULTI HOUSING COUNCIL (NMHC) AND THE NATIONAL
                      APARTMENT ASSOCIATION (NAA)

        Mr. George. Thank you. Chairman Frank, Ranking Member
    Bachus, and distinguished members of the committee, I am Alan
    George, executive vice president and chief investment officer
    of Equity Residential, an S&P 500 company focused on the
    acquisition, development, and management of high-quality
    apartment properties throughout the United States.
        Equity Residential has investments in or owns 564
    properties totaling nearly 150,000 units in 23 States and the
    District of Columbia. We are the largest publicly traded
    apartment company in the country and employ more than 4,000
    people.
        I am here today on behalf of the National Multi Housing
    Council and the National Apartment Association representing the
    Nation's professional multi-family housing industry.
        The multi-family housing sector is committed to increasing
    energy efficiency and overall sustainability of our buildings
    in a way that does not jeopardize the availability and
    affordability of housing.
        For more than 10 years, Equity Residential has actively
    sought out opportunities to improve the efficiency of our
    apartment properties which are both meaningful and cost
    effective.
        Equity's investments in energy and efficiency include
    improved lighting efficiency using high-performance fluorescent
    bulbs and LED fixtures, white roofs, improving the performance
    of mechanical systems through HVAC systems, upgrading
    equipment, and the installation of programmable thermostats
    throughout our properties.
        Upgrading building envelopes by installing high-performance
    windows, upgrading installation, and conserving water through
    the efficient use of plumbing fixtures, weather based
    irrigation systems, and xeriscaping.
        The incentive-based approach embodied in the bill can
    assist developers and owners in improving the sustainability of
    their properties. However, we do have some specific suggestions
    for improving the bill which fall into four broad categories.
        First, we believe the incentives will continue to provide
    our firm and others with the tools necessary to make meaningful
    improvements to the performance of America's housing stock.
    However, our experience suggests that certain proscriptive
    mandatory building requirements, like some of those in the HOPE
    VI section of the bill, may negatively impact the supply of
    affordable housing.
        We are committed to increasing the sustainability of low-
    income housing as well as keeping housing affordable in all
    markets. We believe the mandatory green requirements in the
    HOPE VI program may have unintended consequences and costs that
    may far outweigh possible gains.
        Second, we believe that it is important that any minimum
    efficiency standards with sustainability benchmarks be tied to
    the nationally recognized codes and standards like those of the
    International Code Council or ASHRAE. These organizations
    follow time-tested protocols that ensure openness and fairness
    in the development process.
        While the minimum energy standards identified in Section
    Two of this bill flow from recognized standard setting and code
    making bodies, the standards, and for additional credit, as
    well as the mandatory requirements in Section 19 do not.
        Forced compliance with non-consensus based documents can
    lead to implementation problems, incompatibility with local
    business codes and standards, uncertainty in enforcement, and
    unnecessary costs in tabulation.
        To that end, NMHC has participated in the development of
    the national green building standard, along with a diverse
    group of stakeholders that include building code officials, the
    U.S. Green Building Council, the real estate industry, product
    manufacturers, and other experts in green building and energy
    efficiency.
        The national green building standard is the first standard
    to address all green residential buildings, including multi-
    family, single family, and mixed-use development.
        Unlike other green building programs, it is written to be
    seamlessly incorporated into existing building codes and has
    followed the strict standard setting procedures established by
    the American National Standards Institute.
        Third, we support the Federal programs that help property
    owners understand which technologies, products, and practices
    will be most practical and cost effective in improving energy
    efficiency in federally assisted housing.
        Recognizing there was a lack of industry specific data,
    NMHC and other real estate groups recently commissioned a study
    examining the feasibility and cost implications of making large
    increases in energy efficiency in a typical apartment building.
        The bill's energy efficiency demonstration project is
    absolutely a step in the right direction, but should be
    expanded to include all sorts of federally assisted housing, we
    believe.
        Finally, we support the provisions of the bill that would
    include incentives for borrowers to receive more favorable
    terms on FHA mortgage insurance for multi-family properties.
    However, we are concerned about the potential impact this may
    have on the integrity of the program when implementing
    regulations are developed.
        The FHA program plays an important role in the continued
    provision of affordable housing in the country. Any changes to
    the program, however well-intended, could create an imbalance
    that will negatively affect the strained supply of affordable
    housing.
        The bills directs the HUD Secretary to establish incentives
    through a discount on the mortgage insurance premium, but it
    does not provide guidance as to the formula for calculating
    this discount, nor does it specify the discount amount.
        We would suggest that the HUD Secretary convene a blue
    ribbon task force that would include representatives from
    Federal agencies, the real estate industry, the GSEs, and
    affordable housing advocates. The task force would develop
    policy recommendations regarding the most effective way for the
    FHA to incentivize uses of this program.
        In conclusion, multi-family housing supports the goals of
    this bill through dense development practices, inherent
    efficiencies in energy and water use, and the effective use of
    infrastructure and building materials.
        Apartment homes are an essential element for meeting our
    Nation's affordable housing needs. The cost to develop these
    properties within practical mandates will spiral, which would
    add further stress to our housing affordable stock.
        Thank you.
        [The prepared statement of Mr. George can be found on page
    131 of the appendix.]
        Mr. Perlmutter. Thank you, Mr. George.
        Mr. Bernstein, you are recognized for 5 minutes.

          STATEMENT OF SCOTT BERNSTEIN, PRESIDENT, CENTER FOR
                        NEIGHBORHOOD TECHNOLOGY

        Mr. Bernstein. Thank you very much. My name is Scott
    Bernstein, and I am president of the Center for Neighborhood
    Technology in Chicago, which is a 30-year-old group that
    actually works to bring home the benefits of sustainable
    development inclusively, and I am also chairman of the Surface
    Transportation Policy Partnership, a coalition of organizations
    in 42 States.
        I thank the chairman, the ranking member, and the members
    of the committee for the privilege to testify today.
        We endorse this bill. My written testimony says why. I
    would like to quickly show some slides that illustrates why we
    support it and highlight some things that have not been spoken
    to by the previous speakers.
        First of all, I would like to talk about the cost of
    transportation in light of not only $4 gasoline costs, but how
    it compares to the cost of energy.
        The average American household uses 100 million British
    thermo units of energy per year, which is the amount used by a
    household driving 17,000 miles in a year at 25 miles to the
    gallon, or more realistically 15,000 miles a year at 20 miles
    to the gallon. American households are using as much or more
    energy at the household level for transportation as they are
    for heating, cooling, and lighting.
        Therefore, this is extremely important. They are also
    paying more for that. They are paying about $3,000 a year right
    now on average for transportation costs, and $2,000 for the
    other items, and therefore, this is of critical importance.
        We spent time at the request of the Brookings Institution,
    the Center for Housing Policy, and the National Academy of
    Sciences to derive this impenetrably dense formula that
    describes the relationship. It is a little easier to understand
    if you look at the graph.
        As density and accessibility goes up, vehicle miles
    traveled for household goes down. That is six million data
    points for Chicago, San Francisco, and Los Angeles on there. It
    was peer reviewed by over 100 academics, and it has been shown
    now to work in 52 regions, 37 Japanese cities, and London and
    Paris.
        Same view. If you convert that to carbon, we find that as
    density and accessibility goes up, carbon emitted per household
    goes down as well.
        If you look at the map on the left, this is Chicago, and
    the light color areas are the ones where households are driving
    less than 15,000 miles in a year. The red ones are the ones
    where they are driving more.
        The map on the right shows that households in those yellow
    areas are spending less than $1,900 a year for gasoline. By the
    way, this is real time data, calculated this week. In the red
    areas, it is between $4,000 and $6,000 a year right now and
    rising.
        There is a big savings to be had by promoting what we call
    location efficiency.
        If we convert that to dollars and cents, in the green
    areas, those households are spending $5,000 to $6,000 a year
    less than in the tan areas because they have the location
    efficiency. That is money in the bank, it is the equivalent for
    low- and moderate-income households of a 10 to 15 percent
    increase in income tax free to address Congressman Scott's
    question. You can have it both ways.
        If we calculate a standard affordability index, the housing
    units in Chicago that are 30 percent of income or less, it is
    the map on the left, but if you say where can households live
    where they spend less than 48 percent on housing and
    transportation, it is the map on the right.
        We have done this now for 52 regions in the United States
    comprising half of the population and we always get this
    pattern. Therefore, if we do not take these costs into account,
    we are burdening these households.
        Again, when you put this story together, we find that in
    the red areas, households earning less than $50,000 a year
    across the United States, working families, they are now
    spending almost two-thirds of their income on housing and
    transportation.
        Transportation and energy costs double the cost of housing,
    therefore, that is why this bill is compelling.
        If you ask the same question about carbon emissions, which
    I was asked to address, the map on the right is color coded.
    Blue is good. Red is bad. The dark blue area, that is the
    lowest carbon emissions. The light blue, the next lowest, etc.
        Again, where there is high density, good transportation
    choices and good accessibility, carbon emissions are much, much
    lower. You can also make that work for the architects and
    urbanists in the room using a transect as you get out to the
    ex-urban areas. You have very high emissions, between 9 and 15
    tons for household, for transportation. As you get to the more
    urbanized areas, whether they are in the city or the suburbs,
    down in the two to four ton range and so forth.
        Location efficient mortgages, I'm proud to be a co-inventor
    of this. It is a product that was introduced to the marketplace
    as a joint product with Fannie Mae by our organizations in the
    1990's based on research supported by foundations and the
    Federal Government.
        It is a mortgage that counts the savings from
    transportation, which I have just demonstrated, as an offset to
    the assumed fixed cost of housing, usually principal, interest,
    taxes, and insurance.
        It was tried in over 40 regions of the United States with
    these colorful brochures illustrating things like ``Take the T
    Home'' in Boston. I am sorry Chairman Frank is not here to hear
    that. Location efficient mortgages in four areas and smart
    commute mortgages in several others.
        To summarize, what we found when we pulled in the last week
    the loan officers who conducted the original demonstrations,
    and these are very low volumes, there are only a few thousand
    mortgages put out deliberately, but no foreclosures in Seattle.
    No foreclosures in Chicago. One out of 53 in Boston and none
    out of 100 in San Antonio, Texas.
        These clearly out perform the market. I like what the
    Tribune had to say, ``Skip the car, buy a house.''
        Mr. Perlmutter. You are going to have to wrap up.
        Mr. Bernstein. I recommend that the definition of ``energy
    efficiency'' in this bill that is adopted include location
    efficiency for the reasons stated. I think that location
    efficient mortgages should take this into account. I think in
    defining geographically underserved markets, these costs can be
    taken into account quite simply, and I think in all of the
    federally assisted housing programs, whether vouchers, tax
    credits, or direct project subsidies, if we do not take these
    costs into account, we are going to burden American households,
    and frankly, we are going to increase the foreclosure rate.
        The last map here simply shows that foreclosures have risen
    the fastest in the least efficient parts of the region. Costs
    keep going up. This is likely to get worse. Therefore, I think
    this actually meets both the mission and the safety and
    soundness goals of the GSEs, and that is why I strongly urge
    you to move forward with this legislation.
        Thank you very much.
        [The prepared statement of Mr. Bernstein can be found on
    page 62 of the appendix.]
        Mr. Perlmutter. Thank you, Mr. Bernstein. I will recognize
    myself for 5 minutes to ask a few questions. I will start with
    you, sir.
        We heard from Mr. Freedberg that HUD and the Federal
    Government have had some programs on the books since the
    1970's. Location efficient mortgages or energy efficient
    mortgages, in your opinion, why have they not been more widely
    utilized?
        Mr. Bernstein. There has been a lack of clarity in the
    statutory declaration of purpose. The legislation that HUD
    operated some of these earlier programs under has lapsed,
    notably, after the Carter Administration.
        They have been treated as experiments instead of as
    essential features of the market. In Fannie's and Freddie's
    case, look, they are doing 10 mortgages a minute, we calculate,
    between the two of them. Location and energy efficient
    mortgages are not features. You cannot push the button on the
    automated underwriting software and get these up for all of
    them. If they are not offered to people, how will they know
    there is a choice?
        You have to commit to taking them to scale. You have to
    commit to doing what the banks wanted to do. Our experience was
    that lenders came out of the woodwork to offer these, but it
    was hard to get a commitment to take it to scale from the GSEs,
    and I think you can correct that by direction.
        Mr. Perlmutter. That is by stimulating a secondary mortgage
    market in these particular mortgages?
        Mr. Bernstein. That is correct. I think there has been a
    misunderstanding, and it was reflected in earlier testimony,
    that we are asking people to take extra risk here. We are
    asking people to not borrow as much for cars, and to spend a
    little more on their homes in order to come out way ahead.
        Mr. Perlmutter. Mr. George, I would like to ask you a
    question. With respect to the upgrade that is within the bill,
    the 50,000 units, you said that was an appropriate approach. Do
    you think that should be expanded? Do you think that is a good
    pilot program? How would you look at that?
        Mr. George. Yes, sir. I do think that is a program that
    should be expanded. I think there are a tremendous number of
    alternatives out there today with respect to energy efficiency.
    Clearly, as oil and other energy costs have risen, there are
    new alternatives that then become cost efficient and actually
    give you a good return on investment for those kinds of
    investments.
        Mr. Perlmutter. This question is for you and Mr. Howard. In
    your comments, both of you have talked a little bit about the
    International Code Council green building standard. Can the two
    of you tell me where we are in that process, whether it has
    been approved by the consensus group yet or whatever?
        Within the bill, the HUD Secretary can certainly make that
    one of the standards that would trigger a green mortgage which
    would allow Fannie Mae a credit, so if you two could comment.
        Mr. Howard. As I understand it, Mr. Chairman, that bill is
    in the final approval process at the ANSI organization, and it
    should be done in a relatively short timeframe.
        Mr. Perlmutter. For the whole panel, with the current
    housing stock that we have, both multi-family as well as single
    family residential, in your opinion, what would be the best way
    to get those homeowners or those building owners to reduce
    energy consumption? It is just an open-ended question.
        Mr. Hicks. I think that some of the measures that are in
    this bill by providing opportunities for second mortgages, for
    energy retrofits, I think would go a long way. I also think
    along with that, we need to focus in on education and
    awareness, making sure these opportunities are very well known
    to the homeowners.
        Mr. Perlmutter. Ms. Koo?
        Ms. Koo. Mr. Chairman, there is a major starting point
    where we have to look at how the Federal Government allows
    taxpayer funds to support subsidized housing, and 25 million
    Americans live in low-income and subsidized housing.
        We heard the HUD gentleman talk about 1.2 million PHAs,
    public housing units, that were built before 1970.
        We are absolutely supportive of creating incentives, but we
    also urge the Federal Government to take national leadership to
    create a minimum benchmark in terms of requiring better
    performance on energy.
        It is a leadership role that the Federal Government should
    play.
        Outside of that, of course, you need incentives. Of course,
    you need education. Modeling that we have done in the last 3
    years really shows that the benefits will pay for the initial
    investment of 2 to 4 percent.
        The Federal Government, as one of the biggest supporters of
    affordable housing, can alter the market by bringing/buying
    power into the market, in retrofitting and incentivizing both
    on the homeowner side and the rental side.
        This is about taking a commitment through practice to scale
    and transforming the market through a variation of incentives
    and also expectations, so that the taxpayers' investment would
    bring back taxpayer benefits in the long run.
        Mr. Perlmutter. Thank you. Mr. Purnell, if you had a
    comment, and then my time has expired, and I will have to
    recognize Mr. Campbell.
        Mr. Purnell. I would just like to echo the remarks from the
    last two panelists. Education, awareness, and the incentives
    that are there for a secondary mortgage market, you could even
    go as far as tax credits at some point to make sure that people
    are aware of this.
        The slides we just saw basically demonstrate that if you
    were to cut the energy usage in an average home by 50 percent,
    something that architects today know is quite doable, it is
    almost like getting 50 percent more gas mileage on that vehicle
    in that household. If you cut the energy usage 50 percent in
    all buildings in the country, it is like doubling the gas
    mileage on every vehicle in the United States.
        It is not a function of should we do this. We are about
    where we were when we were talking about reducing gas mileage
    on automobiles back in the early 1970's. It was not a function
    of should we do it. It was how do we do it and how quickly
    should we start it and how broadly can we apply this.
        Today, the people who have taken advantage of that are
    really reaping the benefits. It is not a function today of
    should we do something like this as far as the architects are
    concerned. We know we should be doing this. We know there is no
    reason why people should not be able to move into a home that
    has a 30 to 40 percent energy advantage over a home that was
    built 2, 4, or 5 years ago.
        Mr. Perlmutter. Thank you, sir. Now I will recognize Mr.
    Campbell for 5 minutes.
        Mr. Campbell. Thank you, Mr. Acting Chairman.
        First question for Mr. Purnell. Mr. Purnell, in your
    statement, you said, ``Designing and constructing energy
    efficient homes complete with energy efficient appliances as
    well as heating, air conditioning, and lighting systems, will
    provide an immediate financial benefit to homeowners and
    renters through reduced utility costs.''
        If that is the case, why do we need this bill at all? Why
    will people just not do it because there is a financial
    incentive to do so?
        Mr. Purnell. I think incentivizing people, and you have to
    incentivize the builders. This bill also addresses new
    construction and it also addresses the homeowner who is
    investing.
        There are people who are taking out second mortgages to
    make their homes more energy efficient.
        I think the education and letting low- and moderate-income
    people know this is something that should be done as well and
    then providing the opportunity for them to do it by the
    incentives at the lending financial markets and Freddie and
    Fannie with regard to second mortgages might help as well.
        Mr. Campbell. Thank you. One caution I will make for the
    author and others. In California in 2001, we had a big energy
    crisis. People may remember. There were some of these incentive
    things put in, which allowed people to game the system and
    allowed people to get the incentive without actually doing what
    they were supposed to do. A lot of that went on and it ended up
    not being good for anybody.
        If I can move to Mr. Howard, Mr. Hicks, and Mr. George, and
    basically the same question. Taking aside some concerns that I
    have about the whole thing we are doing here, and about whether
    we are taking our eye off the ball on producing more clean and
    cheap nuclear energy which will solve a lot of these problems
    over time, Mr. Howard, if you look at a national set of
    standards which I think is difficult, the plains, the coasts,
    the desert, etc., but is there a group of national standards or
    something that your organization supports?
        Mr. Howard. There are the ones that we have referred to in
    this testimony, Congressman, with respect to the ANSI process,
    and those standards when they come out will be supported by the
    National Association of Home Builders.
        Mr. Campbell. Mr. Hicks, same question.
        Mr. Hicks. In addition to those, we promote the LEED for
    Homes rating system as a way to further drive leadership.
        Mr. Campbell. Which? I am sorry.
        Mr. Hicks. LEED for Homes. Leadership, energy and
    environmental design, to further drive leadership and benefits
    that you can gain from the green building sector.
        Mr. Campbell. Mr. George?
        Mr. George. There are several standards that NMHC, NAA, and
    a number of other building organizations have supported,
    referenced in my testimony, which is specifically designed for
    apartment housing, high-density apartment housing, which has
    many of the components of LEED and several other of the
    standards referenced.
        Mr. Campbell. Is it fair to say the three of you have three
    different standards that you support?
        Mr. Howard. It sounds like it.
        Mr. Campbell. Mr. Bernstein, a question for you. I found
    your charts and everything interesting. I live in an urban
    area. I am from the Newport Beach area in California. There is
    not much--this is not about my district necessarily.
        It looked to be pretty clear that this efficiency occurs in
    urban areas and does not in rural areas where my neighbors are
    across the street and other people's neighbors are a mile down
    the road or in a different town 25 miles down the road.
        How do you do something like you are talking about and make
    it equitable for people who are not living in high-density
    areas?
        Mr. Bernstein. If I am not mistaken, right now
    approximately 82 percent of the population does live in
    metropolitan location efficient areas and another 6.7 percent
    of rural Americans do as well. Rural America is a lot more
    dense actually than most people realize.
        The other half of that question has to do with the local
    amenities. What the chart shows is that you get the location
    efficiency one of two ways: Either because there is good mass
    transit or transportation choices; or because the stuff you do
    is close to you, like a grocery store.
        It is when you have very low density and no amenities at
    all that your travel demand is going to be very high, and too
    much of suburban America is like that. I think we need to start
    retrofitting it to provide better choices.
        On balance, this would be extremely equitable. It would
    count the savings that people are getting from making smarter
    choices and when they go to Realtor.com, sir, or Google.com,
    they do not get the transportation cost in with the housing
    cost, so they make a bad choice. Now, they would know how to do
    it.
        Mr. Campbell. Thanks. Perhaps Mr. Howard and Mr. George,
    just kind of about what people are thinking out there. Before I
    lost my mind and went into politics, I was in the retail car
    business for 25 years, and there were times when people were
    really interested in energy and fuel economy, like now. There
    were also times when people did not even look and did not care.
        What is the buyer, what is the renter, what is their
    concern and interest in this area, in green houses or green
    energy efficiency?
        Mr. George. I would say for the renting public, there is a
    tremendous and increasing interest in green technology, and
    that buildings that have green attributes to them are very
    attractive to people. They feel as though they are doing good.
        Mr. Campbell. Mr. Howard?
        Mr. Howard. There is definitely an increase in the
    marketplace, increased demand for green energy efficient
    housing. Right now the marketplace is not as active as we would
    like it to be, but prior to the downturn, it was a
    significantly growing element in the industry.
        Mr. Campbell. Thank you very much.
        Mr. Perlmutter. Thank you. The gentleman yields back. Mr.
    Scott was going to be recognized for 5 minutes but it will now
    be--you are next. Mr. Scott is recognized for 5 minutes.
        Mr. Scott. I wanted to kind of continue my line of
    discussion on the impact on how we make sure that we are not
    doing an over impact on the impact of energy costs on low- and
    moderate-income people. As we mentioned before, it is a very
    serious issue.
        Are you all fairly confident that in this particular piece
    of legislation--are you familiar with it pretty well? Do you
    have any concerns about that issue vis-a-vis this bill? Do you
    see anything within what we are doing here that might have a
    negative effect on low- and moderate-income people?
        Ms. Koo. If I may, Representative Scott, we have studied
    for 3 years by using a variety of incentives and capacity
    building, sharing knowledge, with affordable housing developers
    around the country, in all housing types, in rentals, for sale,
    and we have found an unconditional conclusion that the payback,
    both in terms of the utility savings for either the residence
    and for the operators of low-income housing, as well as an
    increase in health benefits, outweigh definitively the initial
    investment that needs to go in, which could be between 2 and 3
    percent.
        You asked a question about manufactured homes earlier. We
    have limited experience with that. It was built into modular
    homes in Pass Christian, Mississippi, after the storm. What we
    learned was that the technique of making the homes green is
    more about how to put the modular pieces together, so that it
    is the caulking and the sealing and the fresh air intake and
    the exhaust and the ventilation that would make the house
    green.
        It is not the manufacturing or altering the panels to make
    them green even though the use of nontoxic paint and cabinets
    and stuff all add to the health quality.
        We are not seeing a tremendous increase of costs that would
    be prohibitive to the manufacturers of this type of housing,
    but it is the skill set and the knowledge with which you put
    them together.
        In return, the homeowners who live in those homes are
    realizing tremendous utility savings and a much more healthier
    home.
        Mr. Scott. How do you address the issue of the two separate
    codes that the manufactured homes' industry is concerned about
    in terms of feeling that this would be overly burdensome,
    expensive, and would drive many of these manufacturers out of
    the marketplace?
        That is their concern. Do you see that?
        Ms. Koo. I am not an expert in the codes. I would defer to
    Mr. Purnell to address that. I can assure you that the initial
    concerns existed when Congress was going to introduce ADA Code
    compliance for the Americans With Disabilities Act to retrofit.
    It was the right thing to do. In time, the industry learned to
    work with it. Over time, the best practice becomes the common
    practice.
        Mr. Purnell may know about the specific codes that you are
    talking about.
        Mr. Scott. Mr. Purnell, if you could address that. We need
    to find out if this is a serious concern. What I hear from
    those in the industry is that the actual complying with these
    two codes, they feel it would mean less competition, higher
    home prices for the moderate- and low-income persons, and a
    feeling that it could drive them out of the market.
        Is that true, in your opinion?
        Mr. Purnell. In my opinion, no, it is not true. Would there
    be some additional costs? I would have to know what aspects of
    the codes is giving the modular manufacturers some concern.
        Typically, a local building code in a State or a city is
    more restrictive than these national codes that you are
    speaking of. Most manufacturers are sometimes kept out of
    marketplaces because of the local codes.
        For instance, here in the District of Columbia, they have a
    very strict local code that in addition or I should say
    amendments to national codes that are quite restrictive on
    manufacturers in many respects.
        I would have to know what the specifics are. Congressman
    Scott, I lived in a manufactured home as an architect; I lived
    in one I designed for about 18 years. Some of them are not
    necessarily for just low- and moderate-income people.
        The manufacturers really have the best opportunity to
    address this issue of green home and green design. I do not
    think we are that far away from having hybrid homes like we
    have hybrid cars, and the manufacturing industry is probably
    the best way to address it.
        Mr. Howard. Congressman, you asked about the impact on
    affordable housing and housing affordability. I would suggest
    to you, sir, that absent appropriations, increased
    appropriations, there could be a concern about the number of
    units that the Federal Government could subsidize if there are
    increased costs per unit. That only makes sense.
        Likewise, with respect to Fannie and Freddie, if they are
    given credit for achieving their affordable housing goals, and
    it is fewer units because they get extra credit for doing green
    housing, then there is less incentive for them to do more
    affordable housing.
        It is sort of like you can accomplish what you want to
    accomplish but it could end up costing more in appropriations,
    and I think with the scarcity of Federal resources right now,
    the committee needs to make decisions about balancing that.
        Mr. Scott. Do you think amending the charters of Freddie
    Mac and Fannie Mae to promote green building would distract
    them from their primary function of enhancing liquidity, which
    in effect helps with affordable housing?
        Mr. Perlmutter. The gentleman's time has expired, but I
    will let you answer this question.
        Mr. Howard. I believe, sir, it could distract them. As I
    say, the way the bill is written right now, it gives them extra
    credit, as I understand it, in achieving their affordable
    housing goals for doing green housing, which would mean they
    would do potentially less, a smaller number of units of
    affordable housing.
        The answer is that depending upon how it is done, it could
    very easily and very well distract them; yes, sir.
        Mr. Scott. Thank you, Mr. Chairman.
        Mr. Bernstein. Congressman, I want to say that if that
    charter amendment was defined to very clearly delineate a focus
    on making the housing that they are ultimately purchasing the
    mortgages for more affordable for the borrower, it would not
    only not be a distraction, it would certainly be less of a
    distraction than having to deal with the foreclosure crisis
    right now. The two are directly linked.
        This is about performance, safety, and soundness, not just
    mission. What the bill does is bring the two together quite
    nicely. I am unaware of any cap on the amount of affordable
    housing that Fannie and Freddie can be credited for. There are
    minimum's. What they can sell in the market determines how much
    they can do in total. If, in fact, you give them a focus that
    allows them to do more, they are going to do more of it.
        Mr. Perlmutter. Mr. Green from Texas is now recognized for
    5 minutes.
        Mr. Green. Thank you. After hearing the testimony of the
    witnesses, it seems to me that if we fail to act now, at some
    point in the not too distant future when oil prices have
    escalated greatly, some folks are going to say, why did they,
    knowing what they knew then, fail to act when they could have?
        It is fairly clear to me that we are in a position where we
    must act. We are in a position where we may fail to act. We
    really must act. This is bigger than just simply thinking of
    reducing the amount that people are paying for energy today. It
    may very well mean that people will be able to afford to live
    in a home tomorrow.
        We already have energy costs that exceed the cost of a
    mortgage payment in some places with some homes. We absolutely
    have to reduce the cost that persons are paying to cool and
    heat their homes. We really do.
        I greatly appreciate the testimony from the witnesses
    today. Let me ask this: With reference to appraisals, will the
    values of homes increase once these energy conservation efforts
    have been perfected within the homes?
        Mr. Purnell, how would this impact the appraisal process,
    sir?
        Mr. Purnell. They should increase. It probably will make
    the home more desirable to the average buyer, if it follows
    what has happened in the commercial building market, commercial
    office building owners have built in green and environmentally
    sensitive efficiencies in office buildings, and as a result,
    have been able to command higher rents.
        There are some corporations and commercial enterprises that
    will insist on going into a building that is sustainable, and I
    would imagine that you would have home buyers with that same
    mindset.
        Mr. Green. Would this not cause other builders, builders in
    the marketplace, understanding that these homes are desirable,
    to start to make the adjustments such that they will be able to
    market their products to the extent that they can compete with
    these products that we have introduced into the marketplace?
        Mr. Purnell. I think you see it now in just about
    everything. You see it in the foods and the way advertising for
    food, food that is organic. Clothing, we have organic fibers
    and fabrics. You see there is a premium that people are willing
    to pay in some cases and the manufacturers of these are taking
    advantage of it. It is the same with home buyers.
        I think once you decide that energy efficiency is something
    that people want, it is something that is going to be
    desirable. It is going to drive demand. It is sort of an ironic
    thing, but as you move and demand to have more energy efficient
    homes and cars and just the lifestyle, you drive demand for oil
    down. When you drive demand down, prices will go down. It has a
    snowballing effect on where prices will go in the future.
        Mr. Green. Let's talk for a moment about Fannie Mae,
    Freddie Mac, and FHA. Is there anyone who is of the opinion
    that these institutions will have to enforce some sort of
    building code or building standard because it is my belief that
    the legislation will not require them to enforce, but what they
    will do is accord loans to homes or purchasers who have homes
    that come up to a certain standard.
        They do not get out into the marketplace and start the
    business of deciding that some homes must be brought up to
    standard. Those that are will benefit from what they do, which
    is lend money. In the case of FHA, it is a guarantee.
        Let's talk for just a moment about FHA more appropriately.
    How would this harm FHA in terms of its safety and soundness if
    you think it will. Does anybody think it will, FHA guaranteeing
    a home that is energy efficient?
        Mr. Bernstein. It should reduce the risk. If you are making
    loans on a basis of cost effectiveness to reduce the net outlay
    of the borrower, the borrower has an increased ability to pay,
    the risk should drop, the delinquencies and the defaults should
    drop, both for the energy efficient and for the location
    efficient mortgages.
        Mr. Green. My time is up, Mr. Chairman. You have been most
    generous. I do want to thank the witnesses again.
        It seems to me that we have a choice of leading, following,
    getting out of the way, or being over run. My hope is that we
    will lead on this issue.
        Thank you, Mr. Chairman.
        Mr. Perlmutter. Thank you, Mr. Green. The gentleman from
    Texas yields back. The gentleman from New Hampshire, Mr. Hodes,
    is recognized for 5 minutes.
        Mr. Hodes. Thank you, Mr. Chairman. I want to thank the
    panel. I appreciate the effort that you have made in your
    remarks and the work you have done all on the development of
    sustainable buildings.
        As I see it, we are at a watershed moment. There is no
    going back. I know change is not easy. As humans, we have a
    chemical in our brain that wants to hang onto the status quo,
    and you need to make a decision when new information comes in
    to move forward.
        Anybody who has lived through the past 3 days, and the past
    couple of summers, knows we are now at 100 degrees up and down
    the Eastern Seaboard. Gas is skyrocketing past $4 a gallon.
    Change is upon us. We must accept it, adapt, and innovate.
        I want to explore the ways in which this bill will help
    unleash the entrepreneurial spirit of this great country, to do
    what we need to do to give us real security, a thriving economy
    and jobs, and a sustainable planet.
        Mr. Purnell, I have heard a lot from the other side, and
    this bill does not, of course, address the production of
    energy. It talks about energy conservation.
        Why is energy conservation in buildings the low-hanging
    fruit in terms of what we can do for our energy use in this
    country?
        Mr. Purnell. It is something that the everyday citizen can
    basically control to a large measure. We cannot change the gas
    mileage in our cars as we drive them except that we can ease
    down on the accelerator and not travel at posted speeds and
    maybe save 5 to 10 percent of the gas mileage.
        We can go into our homes. We can make our homes more energy
    efficient in appliances that we use and in the types of ways we
    heat and cool our homes. We can save 40 to 50 percent of energy
    in our homes, without really going to active systems, such as
    wind and solar, which could take it down even further.
        Most Americans realize that they do not know how they can
    contribute and they do not know how they will get a payback and
    they do not know exactly what that payback is because they are
    not quite educated. They do not know if they can get a second
    mortgage just to do these kinds of things.
        I think this is a way that if the education is there, and
    the awareness of this bill is made to the general public, I
    think it has a tremendous potential for energy savings across-
    the-board in the United States because most people want to do
    something, want to do their fair share.
        You see people now basically looking to buy a hybrid
    automobile. You look at people now, they want to take their
    trash and they want to separate the bottles and the cans and
    they want to recycle. You do not have to be told to do this.
    This is something that people want to do. I think this would
    allow them a way to do it.
        Mr. Hodes. Mr. Howard, I appreciate the comments from the
    home builders and I appreciate the constructive way that we
    have worked with the home builders on this legislation. I look
    forward to further discussion about some of your ideas.
        I just wanted to clarify one thing. As of today, the
    national green building standard that you have been working
    hard on is not yet approved; is that correct?
        Mr. Howard. That is correct, sir.
        Mr. Hodes. You understand that we are putting in this bill
    the ability of the Secretary to include new standards as they
    come along?
        Mr. Howard. Yes, sir.
        Mr. Hodes. Talk to me about the benefits to the jobs that
    your members are so concerned with, and the jobs in the economy
    that are going to flow from the benefits of this GREEN Act.
        Mr. Howard. Where we see enhanced job growth mostly, sir,
    would be in retrofitting existing housing in the remodeling
    sector, which is a very important component, particularly at a
    time when the new home construction sector is in a downward
    cycle, the remodeling sector tends to go up. It could be a very
    countercyclical opportunity for builders in that regard.
        Mr. Hodes. I would just generally like to ask the panel, do
    you think the bill goes far enough in its current form in
    dealing with the issues of retrofitting existing homes or do
    you see areas where we could do more to make sure that market
    is addressed?
        Mr. Purnell. I think it probably takes you out of the
    responsibility of this particular committee, but tax incentives
    would go a long way to ensure that people took advantage of
    this bill.
        Mr. Hodes. We cannot do that here.
        Mr. Purnell. But you can work with the folks who can.
        Mr. Hodes. Yes, we can. Mr. Howard?
        Mr. Howard. I agree with Mr. Purnell. Right now, the bill
    goes fairly far in terms of the jurisdiction of this committee.
        Mr. Hodes. Mr. Bernstein?
        Mr. Bernstein. There are 126 million homes in America, and
    we are adding 1.8 million a year. Clearly, the more we can do
    to strengthen the excellent point that was just made, the
    better we will be.
        Most people's homes or most of the homes that we are going
    to see in 30 years from now are here already. If we do not make
    those as energy efficient as possible, we will lose twice.
    First, on the energy efficiency of those homes, and secondly,
    we are going to induce more sprawl. You saw from my slides the
    effect of that.
        We have an opportunity here by focusing on existing homes
    to strengthen at least two major cost saving centers and get
    the innovation out of both.
        Mr. Howard. Sir, if we were building 1.8 million homes this
    year, I would sleep a lot better at night.
        [Laughter]
        Mr. Howard. It is closer to half that number.
        Mr. Hodes. Ms. Koo?
        Ms. Koo. Mr. Hodes, we remember the HUD number, $4 billion
    in energy utility subsidies a year. Mr. Howard was mentioning
    about appropriations. If you can save 25 to 40 percent of that
    utility allowance, and put back just 2 to 4 percent in
    increased costs to retrofit and build things more energy
    efficient, not only will you balance the appropriations
    question, but you would also create a much healthier living
    environment, especially for low-income people.
        Mr. Hodes. Thank you. I know I am out of time. Mr.
    Chairman. I just want to commend the panel, and we look forward
    to working with you as we go forward to make this a better Act.
        I would just remind you that some time ago, a noted world
    leader said the only thing we have to fear is fear itself. We
    cannot look backward. We have to look forward on where we are
    going.
        I thank you. I thank you, Mr. Chairman.
        Mr. Perlmutter. I know I speak for the committee and for
    Chairman Frank, thank you for all of the time you all put into
    your statements and for your comments today.
        The Chair notes that some members may have additional
    questions for these witnesses that they wish to submit in
    writing. Without objection, the hearing record will remain open
    for 30 days for members to submit written questions to these
    witnesses and to place their responses in the record.
        With that, this hearing is adjourned.
        [Whereupon, at 12:56 p.m., the hearing was adjourned.]

                                A P P E N D I X

                                 June 11, 2008

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