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




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

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 11, 2008

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 110-119



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

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

        Jeanne M. Roslanowick, Staff Director and Chief Counsel


                            C O N T E N T S

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

                               WITNESSES
                        Wednesday, June 11, 2008

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

                                APPENDIX

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

              Additional Material Submitted for the Record

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


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

                              ----------                              


                        Wednesday, June 11, 2008

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      STATEMENT OF SCOTT BERNSTEIN, PRESIDENT, CENTER FOR 
                    NEIGHBORHOOD TECHNOLOGY

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


                            A P P E N D I X



                             June 11, 2008


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