[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
H.R. 6078, THE GREEN RESOURCES
FOR ENERGY EFFICIENT
NEIGHBORHOODS ACT OF 2008
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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
U.S. GOVERNMENT PRINTING OFFICE
44-184 PDF WASHINGTON DC: 2008
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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
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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
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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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