    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                       THE FUTURE OF HOUSING IN AMERICA:
                         GOVERNMENT REGULATIONS AND THE
                              HIGH COST OF HOUSING

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

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                             HOUSING AND INSURANCE

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 MARCH 22, 2016

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 114-81

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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        JEB HENSARLING, Texas, Chairman

    PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking
        Vice Chairman                        Member
    PETER T. KING, New York              CAROLYN B. MALONEY, New York
    EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
    FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
    SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
    RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
    STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
    BILL POSEY, Florida                  WM. LACY CLAY, Missouri
    MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
        Pennsylvania                     DAVID SCOTT, Georgia
    LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
    BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
    BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
    SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
    ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
    STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
    STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
    MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
    MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
    RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
    DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
    ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
    ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
    ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
    KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
    LUKE MESSER, Indiana                 JUAN VARGAS, California
    DAVID SCHWEIKERT, Arizona
    FRANK GUINTA, New Hampshire
    SCOTT TIPTON, Colorado
    ROGER WILLIAMS, Texas
    BRUCE POLIQUIN, Maine
    MIA LOVE, Utah
    FRENCH HILL, Arkansas
    TOM EMMER, Minnesota

                         Shannon McGahn, Staff Director
                        James H. Clinger, Chief Counsel
                     Subcommittee on Housing and Insurance

                     BLAINE LUETKEMEYER, Missouri, Chairman

    LYNN A. WESTMORELAND, Georgia, Vice  EMANUEL CLEAVER, Missouri, Ranking
        Chairman                             Member
    EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
    SCOTT GARRETT, New Jersey            MICHAEL E. CAPUANO, Massachusetts
    STEVAN PEARCE, New Mexico            WM. LACY CLAY, Missouri
    BILL POSEY, Florida                  AL GREEN, Texas
    ROBERT HURT, Virginia                GWEN MOORE, Wisconsin
    STEVE STIVERS, Ohio                  KEITH ELLISON, Minnesota
    DENNIS A. ROSS, Florida              JOYCE BEATTY, Ohio
    ANDY BARR, Kentucky                  DANIEL T. KILDEE, Michigan
    KEITH J. ROTHFUS, Pennsylvania
    ROGER WILLIAMS, Texas

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        March 22, 2016...............................................     1
    Appendix:
        March 22, 2016...............................................    33

                                   WITNESSES
                            Tuesday, March 22, 2016

    Been, Vicki, Commissioner, New York City Department of Housing
      Preservation and Development...................................     7
    Daily, F.R. Jayar, Chief Operations Officer, American Homestar
      Corporation, on behalf of the Manufactured Housing Institute
      (MHI)..........................................................     6
    Dickerson, A. Mechele, Professor, The University of Texas at
      Austin School of Law...........................................    11
    Holland, Clyde, Chairman and Chief Executive Officer, Holland
      Partner Group, on behalf of the National Multifamily Housing
      Council (NMHC) and the National Apartment Association (NAA)....     4
    MacDonald, Granger, President, MacDonald Companies, on behalf of
      the National Association of Home Builders (NAHB)...............     9

                                    APPENDIX

    Prepared statements:
        Been, Vicki..................................................    34
        Daily, F.R. Jayar............................................    42
        Dickerson, A. Mechele........................................    55
        Holland, Clyde...............................................    68
        MacDonald, Granger...........................................    85

                  Additional Material Submitted for the Record

    Luetkemeyer, Hon. Blaine:
        Written statement of the Mortgage Bankers Association with
          attachment, ``Affordable Rental Housing and Public Policy
          Toward Greater Housing Security and Stability,'' MBA
          Affordable Rental Housing Task Force, December 2015........    96
        Written statement of Steve PonTell, President and CEO,
          National Community Renaissance (National CORE).............   118
    Cleaver, Hon. Emanuel:
        Written statement of Enterprise Community Partners...........   127
    Ellison, Hon. Keith:
        Letter to Hon. Richard Cordray, Director, CFPB, and Hon.
          Loretta Lynch, Attorney General of the United States, dated
          January 12, 2016...........................................   134
        Response letter from Hon. Richard Cordray, Director, CFPB,
          dated February 9, 2016.....................................   137
        CFPB report entitled, ``Manufactured-housing consumer finance
          in the United States,'' dated September 2014...............   140
        Representative Ellison's statement on H.R. 650, the
          Preserving Access to Manufactured Housing Act..............   195
        Various newspaper articles alleging bad behavior.............   198
    MacDonald, Granger:
        Written responses to questions for the record submitted by
          Representative Royce.......................................   241

                       THE FUTURE OF HOUSING IN AMERICA:
                         GOVERNMENT REGULATIONS AND THE
                              HIGH COST OF HOUSING

                                  ----------

                            Tuesday, March 22, 2016

                 U.S. House of Representatives,
                                Subcommittee on Housing
                                         and Insurance,
                               Committee on Financial Services,
                                                       Washington, D.C.
        The subcommittee met, pursuant to notice, at 2:02 p.m., in
    room 2128, Rayburn House Office Building, Hon. Blaine
    Luetkemeyer [chairman of the subcommittee] presiding.
        Members present: Representatives Luetkemeyer, Westmoreland,
    Garrett, Pearce, Rothfus, Williams; Cleaver, Velazquez, and
    Clay.
        Chairman Luetkemeyer. The Subcommittee on Housing and
    Insurance will come to order. Without objection, the Chair is
    authorized to declare a recess of the subcommittee at any time.
        Today's hearing is entitled, ``The Future of Housing in
    America: Government Regulations and the High Cost of Housing.''
        Before we begin, I would like to thank the witnesses for
    appearing before the subcommittee today. We look forward to
    your testimony. I now recognize myself for 5 minutes to give an
    opening statement.
        Last year, I joined several of my colleagues in New Orleans
    to examine the state of housing 10 years after Hurricane
    Katrina. While in New Orleans, we visited public housing sites
    and met with residents. My colleagues will remember meeting a
    woman who had lived in public housing her entire life.
        Like so many people across the Nation, she told us her goal
    was to escape public housing and have her own home. This
    resident told the story of her son, who had achieved that dream
    and purchased his own home. He broke the cycle his mother aimed
    to shatter as well.
        He was able to do that because he had opportunity. He had
    options. He found a house to call a home. So today we ask
    ourselves, where do people go when they reach self-sufficiency?
        Is the stock of affordable market rate housing plentiful
    enough to support the people seeking it? The unfortunate answer
    is no. According to a recent study by NYU and Capital One, the
    renter population is growing while affordable housing options,
    those that consume less than 30 percent of household income,
    are shrinking.
        The study also found that in cities across America, the
    average renter can afford fewer than 25 percent of rental
    units. Imagine that daunting landscape through the eyes of a
    single mother looking to graduate from public housing.
        Today, we will examine some of the root causes behind
    rising housing costs in the Nation, with specific focus on the
    government's contribution to the price tag. Federal, State, and
    local rules and regulations, including Davis-Bacon wage rates
    and zoning laws, are proving to be barriers to the development
    of affordable housing.
        According to the New York City Independent Budget Office,
    the requirement to pay prevailing wages translates to a per-
    unit cost increase of nearly $45,000. That is an additional
    $2.8 billion in labor cost to meet the mayor's affordable
    housing goal.
        Manufactured housing rules and regulations from the
    Department of Housing and Urban Development (HUD), the Federal
    Housing Administration (FHA), and the Consumer Financial
    Protection Bureau (CFPB) have stifled the availability of an
    affordable alternative to site-built homes.
        This subcommittee will continue to dedicate its time and
    energy to examining different methods to lift people from
    poverty and ensure that people don't have just a place to live,
    but a place to have a life.
        This is an important conversation. In the words of one of
    our witnesses, Professor Mechele Dickerson, ``For the first
    time since possibly the Great Depression, the lack of
    affordable housing is being viewed as a crisis that affects
    Americans of all ages, races, and income groups.''
        Government has inserted itself into the business of housing
    by mandating affordable housing and community reinvestment
    while simultaneously shifting creation of affordable housing
    and community reinvestment. It is time to promote the
    development and availability of housing for low- and middle-
    income Americans, not restrict it.
        I want to thank our witnesses for appearing today. We look
    forward to your testimony.
        The Chair now recognizes the ranking member of the
    subcommittee, the gentleman from Missouri, Mr. Cleaver, for 5
    minutes for an opening statement.
        Mr. Cleaver. Chairman Luetkemeyer, members of the
    subcommittee, good afternoon. Thank you again for giving us
    your time to help us focus on this important issue.
        When you consider the fact that there are approximately 12
    million Americans who spend more than 50 percent of their
    income on housing, I don't think that it is a far-fetched
    notion to say that we are in the throes of a crisis in the
    future of housing in America, government regulations, and the
    high cost of housing.
        It has been about 8 years since the economic meltdown of
    2008. And as we all know, not only did the Great Recession
    devastate individual household wealth, but it also eviscerated
    our housing market.
        Recovery has been slow, and in the time our housing trends
    have shifted with more Americans renting than purchasing new
    homes. Today's hearing gives us an opportunity to learn from
    your ideas in which we can put in place to turn this
    unfortunate turn of events around.
        According to the Joint Center for Housing Studies at
    Harvard University, the number of U.S. households that rent
    their housing rose to a 20-year high of 35.5 percent in 2014.
    And at the same time, the national rental vacancy fill as rents
    soar.
        Wages have also stagnated leaving more Americans rent-
    burdened. Simply put, many of our constituents are facing a
    housing crisis where need outweighs availability. And because
    of this, it is crucial that we provide robust funding for our
    Federal housing programs.
        For example, recently I joined with Ranking Member Waters
    and 69 other Members to request that our appropriations, or the
    appropriators, provide strong funding for Section 8 rental
    assistance as well as for housing programs that provide
    dedicated funding for the elderly and the disabled.
        I also urge our appropriators to fully fund the HOME
    Investment Partnership Program and the Community Development
    Block Grant program. Both programs effectively leverage private
    capital through Federal investment to encourage the development
    of housing, though both have been cut in recent years.
        We thank you for your participation. I look forward to
    hearing from you in your testimony.
        Chairman Luetkemeyer. The gentleman yields back.
        Today, we welcome the testimony of Mr. Clyde Holland,
    chairman and chief executive officer, Holland Partner Group, on
    behalf of the National Multifamily Housing Council and the
    National Apartment Association; Mr. F.R. Jayar Daily, chief
    operations officer, American Homestar Corporation, on behalf of
    the Manufactured Housing Institute; Ms. Vicki Been,
    commissioner, New York City Department of Housing Preservation
    and Development; Mr. Granger MacDonald, president, MacDonald
    Companies, on behalf of the National Association of Home
    Builders; and Professor Mechele Dickerson, professor at the
    University of Texas at Austin School of Law.
        Each of you will be recognized for 5 minutes to give an
    oral presentation of your testimony. And without objection,
    your written statements will be made a part of the record.
        Before we proceed, I want to seek unanimous consent to
    yield time to the gentleman from Texas, Mr. Williams, for the
    purpose of introducing not one but two of today's witnesses. So
    without objection, the gentleman is recognized.
        Mr. Williams. Thank you, Mr. Chairman. It is a great honor
    to introduce two great Texans. Of course, everybody in Texas is
    great, but we are proud of our State.
        First of all, is it is an honor and a privilege to
    introduce this morning Granger MacDonald, who is not only a
    fellow Texan but has been a dear friend of mine for many years.
    Granger is a second generation builder and developer from
    Kerrville, Texas, one of the most beautiful cities in America,
    with more than 40 years of experience in the home-building
    industry.
        He sits on the board of the National Association of Home
    Builders as first vice president and as chairman and CEO of the
    MacDonald Companies, as we have heard. As you will hear from
    him this afternoon, housing is one of the most regulated
    industries in the Nation.
        Mr. MacDonald is uniquely qualified to speak about the
    regulatory barriers to affordable housing, and we look forward
    to hearing his testimony today. And Granger, welcome. It is
    good to see you.
        Next, it is another great honor to introduce Mechele
    Dickerson. I am happy to introduce her this afternoon, another
    fellow Texan and a professor of law, who teaches at one of the
    finest universities in the country, one that I just happen to
    represent in the United States Congress.
        Ms. Dickerson is a nationally recognized bankruptcy law
    scholar in addition to being a professor at the University of
    Texas Law School. In addition to her teaching responsibilities,
    Professor Dickerson has published numerous books and articles
    that should be relevant to our hearing today.
        So I look forward to her testimony and that of Granger's.
        And Mr. Chairman, I yield back.
        Chairman Luetkemeyer. I thank the gentleman. Just a couple
    of quick notes--excuse me. I have a little allergy problem
    today, so forgive my voice here. You have a lighting systems in
    front of you: green means go; yellow means you have 1 minute
    left; and then when it hits red, you need to wrap it up.
        Also, we do have votes here shortly, and as I talked to all
    of you a while ago, we are going to try and get as far down the
    road as we can with testimony before we stop. We will take the
    time out then at that point, do our duty of going to vote on
    the different issues that are before us today, and then come
    back and complete the hearing. So let us see how far we can
    get.
        Mr. Holland, we now recognize you for the first 5 minutes.

       STATEMENT OF CLYDE HOLLAND, CHAIRMAN AND CHIEF EXECUTIVE
       OFFICER, HOLLAND PARTNER GROUP, ON BEHALF OF THE NATIONAL
     MULTIFAMILY HOUSING COUNCIL (NMHC) AND THE NATIONAL APARTMENT
                           ASSOCIATION (NAA)

        Mr. Holland. Thank you, Chairman Luetkemeyer, Ranking
    Member Cleaver, and members of the subcommittee. It is my
    privilege to appear before you today on behalf of the National
    Multifamily Housing Council and the National Apartment
    Association to discuss the challenges of meeting the increasing
    demands for multifamily homes for millions of working
    Americans.
        I am the chairman and chief executive officer of the
    Holland Partner Group based in Vancouver, Washington. We are a
    fully integrated real estate investment firm in the western
    United States with experience developing approximately $7.5
    billion in assets representing 30,000 apartment homes.
        The lack of affordable workforce housing is placing
    increased financial pressure on middle-income Americans.
    According to a 2013 report by Harvard's Joint Center for
    Housing Studies, more than one in four renter households, or
    approximately 11.2 million individuals, paid more than half of
    their income for rental housing.
        Without your leadership and effective policy enactment,
    meeting the affordability challenge will become increasingly
    difficult. Changing demographics and housing preferences drive
    more people toward renting.
        Almost 75 million young adults are entering the housing
    market as renters. At the same time, Baby Boomers and empty
    nesters are trading single family houses for rental apartments.
    This combination of factors is forecast to lead to 4 million
    new renter households over the next decade.
        There are several reasons why Americans are facing high
    rents and finding too few affordable options. First, while the
    cost to develop and operate rental housing increases annually,
    the median renter household income is virtually unchanged since
    1981. In many markets, even if developers agree to take no
    profit, the cost to build still exceeds what people can afford
    to pay.
        Second, there is an enormous mismatch between the supply
    and demand for apartments. As my first slide illustrates the
    NMHC and the NAA estimate that between 300,000 and 400,000
    apartments must be constructed annually to simply keep pace
    with demand. Yet on average, just 208,000 were delivered
    annually in the 4-year period from 2011 to 2015.
        While completions of 310,000 units in 2015 was an
    improvement, the stock of available entitled land is
    diminishing. Future development will be constrained, making it
    more difficult to fulfill the housing needs.
        Lastly, development of new apartment homes is exceptionally
    difficult. In many markets, it is simply impossible. We have
    been developing and rehabilitating apartments for over 30
    years, and the current environment is by far the most
    challenging.
        There are many hurdles and regulations that can impede the
    process. Community resistance to renters or ``NIMBYism''--not
    in my backyard--is frequent, but rarely based on legitimate
    concerns. Before a project can break ground, the entitlement
    process can take 2 to 10 years and require an up-front
    investment of $1 million or more.
        Even in communities that want and desperately need new
    multifamily developments, the numerous hurdles that must be
    overcome include entitlement expenditures, zoning rules,
    environmental site assessments, impact fees, mandates like
    inclusionary zoning or rent control, and labor expenses and
    building code requirements.
        One thing I will point out on the slide that is before you
    is in 2007 when the financial meltdown happened, there were
    many individuals and firms involved with land entitlement. They
    lost everything, and today the funding for new entitlements is
    nearly nonexistent.
        And so the raw material necessary, particularly in high-
    barrier entry markets, of zoned land that can be utilized is
    falling at a rapid clip.
        All of the costs add up. Point Loma Nazarene University
    studied the San Diego housing market and found that regulations
    increased the cost of housing by a staggering 40 percent.
        The White House Council of Economic Advisers Chairman Jason
    Furman recently noted that multifamily housing units are the
    form of housing supply that is most often a target of
    regulation. We could not agree more.
        The bottom line is that workforce housing development
    requires a partnership between the government and the private
    sector. Local governments can do this by bringing down barriers
    to development and incentivizing for-profit entities to build
    apartments at a price that is affordable for the community.
        When both the public and private sectors bring all their
    tools and assets to play, there is a greater likelihood of
    finding solutions to our housing challenges. Specific proposals
    to accomplish these objectives are included in our written
    testimony.
        Americans work hard and deserve quality housing at a price
    they can afford. As a Nation, we are falling far short of our
    goal. What is needed is a bold, fresh vision that sets aside
    historic approaches. We recommend a task force challenged with
    developing effective solutions to today's housing challenges.
    Thank you.
        [The prepared statement of Mr. Holland can be found on page
    68 of the appendix.]
        Chairman Luetkemeyer. I thank the gentleman for his
    testimony.
        Next, Mr. Daily is recognized for 5 minutes. You may begin.

       STATEMENT OF F.R. JAYAR DAILY, CHIEF OPERATIONS OFFICER,
     AMERICAN HOMESTAR CORPORATION, ON BEHALF OF THE MANUFACTURED
                        HOUSING INSTITUTE (MHI)

        Mr. Daily. Good afternoon, Chairman Luetkemeyer, Ranking
    Member Cleaver, and members of the subcommittee. My name is
    Jayar Daily. I am the chief operating officer of American
    Homestar Corporation, which designs and produces manufactured
    housing.
        Thank you for the invitation to serve as a witness at this
    important hearing about regulatory barriers to affordable
    housing. I am pleased to testify on behalf of the Manufactured
    Housing Institute, of which I serve on the board of directors,
    and I am the immediate past Chair of the Manufacturer's
    Division and the chairman of the National Modular Housing
    Council Division.
        Twenty-two million Americans call manufactured housing
    their home. It is simply the most affordable home ownership
    option for families who live in non-metropolitan and rural
    areas.
        Median income per manufactured homeowners is just over
    $26,000 each year. Last year, the industry produced over 70,000
    homes, roughly 9 percent of the new single family home starts.
        I am pleased to testify on the regulatory barriers facing
    manufactured housing, a critical source of available housing
    which in so many parts is in short supply.
        While much progress has been made in achieving economics of
    scale in delivering high-quality affordable homes under a
    robust Federal housing code, there are three strong headwinds
    that keep the industry from fully meeting the critical need for
    affordable housing in this country.
        First, we have a housing financing system that does not
    adequately meet the needs of borrowers looking to finance and
    purchase manufactured housing.
        CFPB regulations pertaining to the definition of loan
    originators as well as HOEPA provisions governing small balance
    loans have prompted a decline in smaller loans, shutting out
    many customers. We applaud this committee and the House for
    passing H.R. 650, the Preserving Access to Manufactured Housing
    Act, this past year.
        In addition, FHA's Title I program for title lending simply
    does not work as evidenced by the fact that there are only 80
    certified appraisers in the entire country, and the fact there
    was only $24 million of endorsements in 2014.
        Finally, despite the 2008 Housing and Economic Recovery
    Act's duty-to-serve requirements for manufactured housing,
    Freddie Mac and Fannie Mae have largely stayed away from
    participating in the chattel home-only market, which represents
    70 percent of the total homes that are sold. With the recently
    proposed Duty-to-Serve rule, we see the opportunity for
    development of a secondary mark for chattel loans.
        The second headwind is that manufactured housing production
    is regulated by the HUD code, a comprehensive set of guidelines
    that touches virtually everything in the assembly and site
    process.
        While the industry works well with HUD, there are several
    areas where improvements are needed: greater attention to
    economic impact concerns as HUD finances its regulations;
    exercising its pre-emption authority with States and localities
    as we are pre-empted out of zoning by some communities; and
    ensuring greater coordination among Federal agencies that
    impact housing, such as the Department of Energy's energy
    efficient standards.
        We support H.R. 3135, which would ensure that HUD remains
    as the prime regulator in the partnership with the DOE.
        Finally, the third strong headwind is the 1974 legislation
    that brought the industry into the modern era, the Manufactured
    Housing and Construction Safety Standards Act. It is
    antiquated.
        For example, the Act puts the industry under Federal lemon
    laws, even though we are not an automobile business, and if
    otherwise robust quality assurance and dispute resolution tools
    under the HUD code. And the Act requires that homes be built on
    a steel chassis, which stifles design innovation.
        We believe, in conclusion, through partnership with this
    committee and our work with HUD and other agencies, we will
    make progress in these critical areas and will continue to
    expand the supply of affordable housing. Thank you for the
    opportunity to testify.
        [The prepared statement of Mr. Daily can be found on page
    42 of the appendix.]
        Chairman Luetkemeyer. Thank you, Mr. Daily. You came in a
    minute under the bell there. Well done.
        Ms. Been, you may proceed. You are recognized for 5
    minutes.

    STATEMENT OF VICKI BEEN, COMMISSIONER, NEW YORK CITY DEPARTMENT
                OF HOUSING PRESERVATION AND DEVELOPMENT

        Ms. Been. Thank you. Chairman Luetkemeyer, Ranking Member
    Cleaver, and members of the subcommittee, thank you for the
    opportunity to testify today. I am Vicki Been, the commissioner
    of the New York City Department of Housing Preservation and
    Development (HPD).
        HPD is responsible for carrying out Mayor Bill de Blasio's
    initiative to build 80,000 new affordable homes and preserve
    the quality and affordability of another 120,000 homes over the
    next 10 years.
        Let me highlight a couple of key initiatives we have
    undertaken in the City to help address the critical need for
    affordable housing. And I will then explain why that need,
    despite the City's Herculean efforts, requires both greeter
    Federal commitment to fund the construction and preservation of
    affordable housing and more flexibility in Federal programs.
        First, the City has doubled the capital funding that the
    City is providing to create and preserve affordable housing to
    $8.2 billion over 10 years. Funding from the Federal Government
    is absolutely crucial to address the affordable housing crisis.
    But while we are asking Washington for support, we are
    committing a huge amount of our own resources to build new and
    preserve existing affordable housing.
        Second, our City Council is voting as we speak on two very
    significant changes to our local regulations to provide new
    tools to achieve affordable housing for a broad range of
    families and to remove inefficient regulations that raise the
    cost of housing.
        The first change will implement mandatory inclusionary
    housing. Our program will broaden the income levels that we
    serve so that we can provide homes to families who are at
    poverty level, far below the 50 percent to 60 percent AMI of
    tax credit properties, as well as all the way up to moderate-
    income workers earning 80 percent of AMI, for example, who
    increasingly are being priced out of the city.
        We have also made major updates to our 1961 zoning text to
    encourage more senior affordable housing and remove unnecessary
    parking requirements and other regulatory barriers to the
    production of affordable housing.
        Much has been made of the burdens that regulation imposes
    on construction, and our update to the zoning text removed many
    inefficient regulations.
        But many of the regulations that folks claim are
    unnecessary or unduly burdensome are critical to making our
    neighborhoods safe and to ensuring that growth doesn't outpace
    the supply of essential infrastructure and services.
        Sadly, we saw this illustrated in the East Village last
    year where construction and gas connections that were not in
    compliance with the building code leveled multiple buildings,
    killed two people, and displaced dozens from their homes.
        Let me turn to a few areas where I believe Congress could
    be enormously helpful in addressing the housing needs of people
    all across the country.
        First, the low-income housing tax credit could be even more
    successful if the program were amended to allow-income
    averaging. The developer could offer units affordable to
    tenants earning between 40 percent and 80 percent of AMI.
        The higher-income units could then cross-subsidize the
    lower-income units and communities would be able to serve
    lower-income households without any additional cost to
    taxpayers or to the developer, and would be able to meet the
    needs of a far broader group of families.
        Next, day in and day out we hear from local elected
    officials and community organizations about the dire need for
    senior housing. Historically, the HUD Section 202 program
    spurred the production of affordable senior housing. But it has
    been completely defunded since 2011.
        We desperately need Congress to restore funding for the
    Section 202 program. In New York City, alone we have 200,000
    seniors on wait lists for affordable housing in the City.
    Without Section 202 funding, we are unable to meet those needs.
        Finally, there are many critical HUD programs that we use
    locally, including HOME, public housing capital and operating
    funds, RAD, but I must stress the paramount importance of the
    Section 8 voucher program. I know that Congress is very
    concerned about the growth of this program as a percentage of
    the overall HUD budget, but I can't emphasize enough how
    critical it is.
        We use those vouchers to allow us to rehab dilapidated
    housing, where residents could not afford the increased rent
    that would otherwise be necessary to support the rehab. We use
    vouchers to help prevent and to end homelessness. We project-
    base Section 8 vouchers to develop new affordable housing,
    especially for seniors.
        I am hopeful that our sustained local commitment to
    preserve our existing affordable housing and build much-needed
    new affordable housing will stabilize our neighborhoods. But we
    can't do it alone. Our local efforts must be paired with a
    renewed Federal commitment to fund affordable housing and
    support local government's efforts to provide better homes and
    stronger neighborhoods for our low-income families.
        I am grateful for the subcommittee's attention to
    affordable housing and for calling today's hearing. And I am
    happy to answer any of your questions.
        [The prepared statement of Commissioner Been can be found
    on page 34 of the appendix.]
        Chairman Luetkemeyer. Thank you, Ms. Been.
        Mr. MacDonald, you are recognized for 5 minutes.

    STATEMENT OF GRANGER MACDONALD, PRESIDENT, MACDONALD COMPANIES,
     ON BEHALF OF THE NATIONAL ASSOCIATION OF HOME BUILDERS (NAHB)

        Mr. MacDonald. Chairman Luetkemeyer, Ranking Member
    Cleaver, and members of the subcommittee, thank you for the
    opportunity to testify today. My name is Granger MacDonald. I
    am the chief executive officer of the MacDonald Companies and a
    home builder and multifamily developer from Kerrville, Texas. I
    also serve as NAHB's first vice chairman.
        Mr. Chairman, we appreciate the opportunity to testify as
    the home-building business is the most regulated industry in
    America. Regulatory burdens impose costs on the development of
    land and construction of single family and multifamily homes.
    These added costs are passed along to homeowners and renters
    through higher prices and rents.
        On average, 25 percent of the price of a single family home
    is attributed to regulation. Regulation is pushing up the price
    of housing beyond the means of many middle-class working
    families.
        On a national basis, a 1,000 increase in home prices leads
    to pricing out slightly more than 206,000 individuals from home
    purchase. Over 110,000 renter households will become burdened
    by rising rates if he cost of producing rental housing units
    increases by .1000.
        The construction trade is constantly the focus of
    regulations from OSHA, EPA, DOE, FEMA, and other agencies.
    Specifically, regulations on energy codes, EPA's Waters of the
    United States, OSHA's crystalline silica, the Department of
    Labor's persuader rule and joint employer standards, and the
    ADA compliance are only a few of the myriad of regulatory
    issues that my industry faces on a daily basis.
        All of these regulations factor in the cost of housing as
    cost increases and access to capital remains tight. Home buyers
    and renters will have fewer safe, decent, affordable housing
    options.
        While regulatory reform will help us lower the development
    costs to reach lower-income households, it is financially
    infeasible to construct new, unsubsidized, affordable housing
    units without Federal assistance. It is important to remember
    that the regulatory reforms are not a substitute for programs
    like the low-income housing tax credit and housing choice
    vouchers.
        Let me expand on a number of barriers that directly affect
    housing affordability. NAHB has serious concerns regarding the
    decreased housing affordability that will result along the
    Nation's rivers and coast once HUD begins to implement the
    Administration's flood Executive Order.
        This order expands the floodplain management requirements
    far beyond the long-established 100-year floodplain. HUD has
    indicated it will apply the order to all Federal projects such
    as HOME, CDBG, and federally-insured multifamily projects, such
    as FHA-backed loans.
        The major concern is that HUD has not mapped the
    geographical limits of the expanded floodplain or analyzed the
    costs and benefits of implementing new standards.
        Additionally, the home-building industry is experiencing a
    major labor shortage, with 41 percent of the builders
    identifying this as their top concern. I have seen how labor
    shortages have delayed construction projects and made them more
    costly. Projects that should have taken 14 months and $100,000
    per unit to construct, now take 18 months and $115,000 per unit
    to construct.
        It is impossible to build rental units without reluctantly
    passing on the increased cost to the consumer. To address this
    labor shortage in our industry, we should work to encourage
    careers in construction. And the trades in the residential
    building and modeling are good, family-supporting jobs.
    Carpenters, for example, earn an average of $45,000 per year,
    while electricians and plumbers earn an average of $54,000 a
    year.
        The Davis-Bacon Act can substantially increase the cost of
    constructing affordable housing. Smaller builders and
    subcontractors are ill-equipped to deal with the compliance
    burdens and the reporting mandates that are required on a
    weekly basis.
        These burdens are disproportionately affecting small
    businesses who cannot afford to hire the compliance staff or
    consultants. This negatively impacts the goals of the
    government's housing program by unnecessarily creating
    additional layers of bureaucracy and cost.
        Lastly, the ability of the home-building industry to
    address affordable housing needs that can contribute
    significantly to the Nation's economic growth is dependent upon
    the housing finance system that provides adequate, reliable
    credit. At present, home buyers and builders continue to
    confront challenging credit conditions, weighed down with
    overzealous regulatory response to the Great Recession.
        Lingering doubts and uncertainty of the market participants
    has resulted in undue restrictions on availability of mortgage
    credit to many creditworthy homeowners. It is essential that
    all levels of government work together to remove the
    unnecessary red tape that delays and prevents development.
        I would like to thank the subcommittee for the opportunity
    to testify today. We look forward to working with you to
    achieve the necessary reforms and expand the availability of
    affordable housing.
        [The prepared statement of Mr. MacDonald can be found on
    page 85 of the appendix.]
        Chairman Luetkemeyer. Thank you, Mr. MacDonald, for your
    testimony.
        And Professor Dickerson, you are recognized for 5 minutes.

    STATEMENT OF A. MECHELE DICKERSON, PROFESSOR, THE UNIVERSITY OF
                     TEXAS AT AUSTIN SCHOOL OF LAW

        Ms. Dickerson. Good afternoon, Chairman Luetkemeyer,
    Ranking Member Cleaver, and members of the subcommittee. My
    name is Mechele Dickerson and I teach both law students and
    freshmen at the University of Texas at Austin.
        Thank you for giving me the opportunity to participate in
    this hearing on the housing unaffordability crisis and how it
    is affecting middle-class, middle-income families throughout
    our country. You have asked me to specifically address how
    overall housing trends and recent changes in the U.S. housing
    market should inform housing policies.
        Middle-class and working-class Americans who work hard,
    play by the rules, and are not leading extravagant lifestyles
    are struggling to find affordable housing to buy or to rent.
    And this has now become a national crisis.
        There are two things I will stress about the current
    housing unaffordability crisis. The first is that the crisis
    involves more than just sluggish home sales.
        It is certainly true that soaring single family home prices
    have now made it harder for middle-income Americans to become
    homeowners. The 2015 overall homeownership rate of 63.4 percent
    was the lowest rate in this country in almost 50 years.
        But the crisis is having a devastating effect on people who
    are and likely will always be renters. Since the recession, the
    number of renters in the United States increased by double
    digits and renter households are now the majority in 9 of the
    11 largest U.S. metropolitan areas.
        Unfortunately, affordable rental units are not being built
    at a rate that is keeping pace with the heightened demand for
    these units. The housing affordability crisis is not limited to
    the home buying market, so solutions to the crisis should not
    be narrowly focused on ways to make it easier for people to buy
    single family homes.
        We saw during the recent housing crash and recession that
    it is not enough to just relax regulations in lending standards
    to qualify borrowers for a mortgage loan. Homeowners won't
    remain in their homes if they don't have the financial means to
    do so.
        The second point I will make is that the housing
    unaffordability crisis involves more than just poor people,
    although certainly housing unaffordability is a problem for the
    poor. Even full-time workers are now struggling to find
    affordable housing.
        The harm to the middle-class is striking. Approximately 75
    percent of renters who earn between $30,000 and $45,000 each
    year, and almost 50 percent of rental households who earn
    between $45,000 and $75,000 each year, pay more than 30 percent
    of their income on housing. That is the core of our middle-
    class and they are paying a disproportionate amount of their
    annual income on housing.
        Young adults in particular are struggling. Our Millennials,
    between the ages of 25 and 34, the ones who should be first
    renting and then buying homes, are unable to do so. Their
    homeownership rates are the lowest they have been in more than
    20 years.
        Young workers who have good-paying jobs are finding it hard
    to buy homes or even to pay rent. Many have returned home to
    live with their parents because they can't afford to both repay
    their student loans and also to pay rent or to save enough to
    buy a home.
        Housing policies should continue to support developers who
    want to build and Americans who have the means to purchase
    large single family homes. However, if we as a Nation are
    serious about solving the housing unaffordability problem,
    everything needs to be on the table and up for re-examination.
        All current land use laws and policies should be re-
    examined to ensure that the policies reflect the new economic
    realities middle-class families are facing. Cities and states
    need to rethink their zoning laws and policies and consider
    whether things like inclusionary zoning can help ease the
    affordable housing crisis.
        As a Nation, we must reject the antiquated view that large
    single family homes are preferable to all other forms of
    housing. And finally, we need to consider whether one of the
    largest tax expenditures, the mortgage interest deduction,
    which disproportionately favors high-income taxpayers, needs to
    be reviewed or revised because there are so many middle-income
    households that are struggling to even find an affordable place
    to rent.
        Mr. Chairman, I commend you for convening this hearing, and
    I thank you. And I will be happy to answer any questions you
    might have.
        [The prepared statement of Professor Dickerson can be found
    on page 55 of the appendix.]
        Chairman Luetkemeyer. We thank the panel for their
    testimony. And I now recognize myself for 5 minutes to begin
    the questioning. Hopefully, we can get through a couple of
    groups before we have to go vote.
        Mr. Holland, you had some interesting testimony and you
    represent the multifamily housing group. What do you see as the
    biggest barrier or the most burdensome rule, the most
    burdensome regulation to being able to build affordable
    housing, multifamily housing?
        Mr. Holland. Mr. Chairman, thank you very much. That is a
    very good question. What I can say is the biggest concern for
    providing housing really differs. In the middle of America, you
    have a very different environment, if you will, than you have
    at the coasts.
        In your high-population areas, the biggest impact to
    providing affordable housing is the lack of zoned land or land
    that is entitled for high-density housing.
        The nature of the housing demand has shifted. You have
    Millennials that are about 75 million. They want to live
    downtown. They want to walk to work. They don't want to be
    involved in commuting. So the competition for urban infill
    housing is extreme in your rising Gen Y workforce markets.
        With respect to the open areas and areas essentially in the
    middle of America, you have a different set of elements. Mr.
    Granger and Mr. MacDonald talked about the regulation and
    aspects of that. And one of our studies showed that 40 percent
    of the cost of a rental apartment has to do with regulation.
        And so within the confines, if you will, of where we are
    at, that lack of entitled zoning and land and the increasing
    burdens of costs associated with that are really the center of
    that.
        Chairman Luetkemeyer. Okay. You said 40 percent of the cost
    of producing a rental unit is due to the rules and regulations?
        Mr. Holland. Yes, sir.
        Chairman Luetkemeyer. Holy smokes. Okay.
        Professor Dickerson, quick question for you. You made a
    comment a minute ago about the percentage of income people are
    able to pay. Would you give me a figure of what you think would
    be adequate for somebody to be able to pay a certain percentage
    of your income for rent and/or house payment?
        Ms. Dickerson. Historically, 20 to 25 percent was the
    number. The problem is that 30 percent is now seen as the floor
    and it goes as high as 50 percent.
        Chairman Luetkemeyer. Okay. And I assume that sometimes
    people can afford 30 percent more than they can afford 50
    percent because they have a higher income. So 30 percent of a
    high income is a lot less than 50 percent of a small income. So
    it depends on how much income you make I would assume,
    depending on what percentage you can pay. Is that right?
        Ms. Dickerson. I'm sorry. I misunderstood your question. I
    thought you were referring just to the middle-class.
        Chairman Luetkemeyer. Okay. Well, that is a good place to
    start. So I appreciate that. Very good.
        Mr. MacDonald, you had some interesting comments with
    regards to the different problems that you see with regards to
    building homes and providing adequate housing for folks. And
    you talked about floodplain problems. Can you explain that just
    a little bit?
        Mr. MacDonald. Yes, sir. The new rule, the Executive Order
    that is coming down that HUD is looking at, changes the 100-
    year floodplain to a new undefined amount of floodplain. And
    the problem that we have with it, and we are not saying that we
    are opposed to the Executive Order at this point until it--but
    we are opposed until it is better defined.
        And HUD itself has done none of the modeling to determine
    what that floodplain would be. So we don't know for every foot
    you go up, how many feet you go out laterally, and so until
    there is modeling done to prove what that is, we can't even
    determine the cost or the real effect of it.
        And we would appreciate HUD suspending any action on the
    Executive Order until they actually know the full extent of it,
    and the unintended consequences.
        Chairman Luetkemeyer. Ms. Been, on the 80,000 new
    affordable housing units that the mayor is proposing, are those
    for seniors, disabled, other folks, mixed?
        Ms. Been. They are available--
        Chairman Luetkemeyer. Or is it mixed-use of everybody or is
    it just subsidized housing or can you explain what is in the
    80,000?
        Ms. Been. So the 80,000 is subsidized housing and it is
    available for a wide variety of people at a wide variety of
    incomes. We do provide housing that is only for seniors. So for
    example, in the last 2 years we have provided about 3,000 new
    units just for seniors, but seniors can enter the lottery for
    any of our new units as well.
        Chairman Luetkemeyer. Okay. These are all subsidized units.
        Ms. Been. Yes.
        Chairman Luetkemeyer. That is not a mixed-use structure
    where you have individual private pay and/or a commercial use
    within a building and then subsidizes rent. This is only for
    subsidized folks?
        Ms. Been. This is only for the subsidized units. Often,
    they are in mixed-income building and serve a range of incomes.
        Chairman Luetkemeyer. Okay. I thank you. My time has
    expired.
        With that, I will go to the gentleman from Missouri, the
    ranking member of the subcommittee, Mr. Cleaver, for 5 minutes.
        Mr. Cleaver. Thank you, Mr. Chairman. I want to focus on
    low-income housing tax credits. And since this is the largest
    driver of private sector investment, what can we do? Only about
    10 percent of those tax credits are used. What can we do to
    attract a greater number of corporations, individuals who are
    interested in some kind of a housing development?
        Ms. Been?
        Ms. Been. I am happy to jump in there. I am happy to say
    that we use every low-income housing tax credit available to us
    in the City. And the way that we do that is by using those tax
    credits to leverage other resources, both private resources and
    other subsidies from the City.
        We also work very hard to provide greater flexibility. As
    you know, one of the critical issues with the tax credit
    program is that because it targets 50 percent and 60 percent
    AMI then you are not serving many of the poorest families and
    you are not serving a lot of the working and middle-class that
    Professor Dickerson mentioned.
        By allowing averaging you provide a lot more flexibility
    and also, you give the developers a flexibility that makes the
    risk of the property less intense. If they have a family who
    earns income that is now at 65 percent that can be averaged out
    so that they don't have to evict that family in order to stay
    compliant with the low-income housing tax credit rules. So
    greater flexibility is the key.
        Mr. Cleaver. Is the dollar for dollar sufficient as a
    magnet?
        Ms. Been. Is it sufficient? Well, it is necessary. There
    are probably other things that are required as well. A great
    deal of flexibility about both the zoning entitlements, all
    kinds of flexibility is required in order to attract people to
    those developments.
        Mr. Cleaver. Mr. MacDonald?
        Mr. MacDonald. In the State of Texas, we are about five to
    one oversubscribed for the credits. In the allocation process
    there are five projects for every one that gets funded. So we
    could use more credits. Right now it is based on 2 per capita
    for every citizen in the State.
        Mr. Cleaver. You all would expect that from Texas.
        Mr. MacDonald. Yes.
        [laughter]
        And it is hard in Texas right now to get a deal obviously
    because there are so many people fighting for them. And part of
    the scoring process and the qualified allocation process is
    deeper skewing and you get more points for deeper skewing.
        For example in Texas, if you are going to be successful in
    getting a tax credit for your project now, you have to go to 30
    percent or 40 percent median income for a percentage of your
    tenants or you are not going to score high enough to win the
    deal.
        Mr. Cleaver. So do either of you, Ms. Been or Mr.
    MacDonald, believe that we are already operating at optimum
    level in order to attract private investment?
        Mr. MacDonald. I would love to see more funds put into tax
    credits. I'm sure that would be a hard fight. It is hard every
    time we try to get anything in the tax credit program done for
    increasing the amount of credits.
        But they are one of the finest investments for private
    sector governmental sector partnership that has ever been
    designed because you have a government hand in helping
    facilitate getting something done that is run in the private
    sector. So it is the best of both worlds.
        Mr. Cleaver. Ms. Been?
        Ms. Been. I would agree with that. Not only are our tax
    credits vastly oversubscribed, but we allocate our tax credit
    properties through a lottery. We are now getting 1,000
    applications for every single unit of affordable housing that
    we are putting on that lottery.
        So the need is vast and we need even more tax credit money.
    It leverages a huge amount of private investment. So it is well
    worth the expenditure.
        Mr. Cleaver. Mr. Holland?
        Mr. Holland. Yes, sir. One of the things that is overlooked
    many times is the 4 percent tax credits with 80/20 bonds. If
    you look at the success of the 80/20 bond program, it creates
    the single largest number of units both market rate and
    affordable housing that has been available.
        However, since the meltdown, and with Fannie and Freddie
    being put into conservatorship, the cost of credit enhancement
    of those bonds for many of the last 5 or 6 years, has not been
    available. And the cost of rollover credits is now up 300
    percent.
        And so with effective credit enhancement for the 80/20 bond
    program it will unlock the use of 4 percent tax credits, which
    have largely been wasted. And they are not being utilized. And
    so with the oversubscription of the 9 percent credits, if we
    had effective credit enhancement for the low floater bond
    program we would be there.
        We also support income averaging because it is a much more
    effective outcome.
        Mr. Cleaver. Right. Thank you.
        Chairman Luetkemeyer. The gentleman's time has expired.
        Votes have been called, so I think we are going to try and
    get one more Member in, and then we will move to recess.
        And with that, we go to the the vice chairman of the
    subcommittee, the gentleman from Georgia, Mr. Westmoreland, for
    5 minutes.
        Mr. Westmoreland. Thank you. I am a recovering builder, so
    I have some interest in this.
        Mr. MacDonald, on the flood insurance, this committee is
    very concerned about flood insurance and the cost of it. Is it
    true that you still, even though just a corner of your property
    would be in a flood plain and the elevation of your house could
    be 6 feet above that, could you still have to have flood
    insurance with an FHA loan?
        Mr. MacDonald. That is correct, sir.
        Mr. Westmoreland. We are going to hopefully try to get that
    to where there is some type of elevation that you would no
    longer have to have it, but I am assuming that the reason they
    are requiring them to have flood insurance is knowing they
    would never flood and help offset somebody else's.
        The other question I have for you is on OSHA. Since OSHA,
    if I understand it correctly, has gone to a policy much like
    the IRS where if somebody turns in a safety violation they get
    a certain amount of that fine, have you seen an increase in the
    OSHA violations in the last couple of years?
        Mr. MacDonald. We have. We have seen a large increase in
    OSHA inspections in all forms of the construction industry. And
    I wouldn't want to speculate as to what caused it, but I
    certainly wouldn't tell you you were wrong.
        Mr. Westmoreland. I think that is probably a big cause of
    it.
        Mr. Holland, did you do a project in Griffin, Georgia?
        Mr. Holland. No, sir.
        Mr. Westmoreland. Okay. The preowned homes--the sales were
    down about 8 percent.
        Mr. Holland. Yes, sir.
        Mr. Westmoreland. Have you seen a rise in the rental? I
    know you talked about how many units were going to be short.
    Have you seen an increase in your rental occupancy that would
    kind of counterbalance what the preowned homes have been?
        Mr. Holland. Yes. What we have seen, particularly in our
    urban environments, is that the demand for housing is far
    outstripping our ability to build supply. And that the cost, it
    is really there are three parts of the triangle.
        One part of the triangle is the cost of the actual housing.
    The second part which families have to deal with is the cost of
    transportation of where the housing is built compared to where
    their job is. And the third part of that deal is really how you
    handle the infrastructure costs and who gets essentially tagged
    with those infrastructure costs.
        And so yes, we have seen a significant increase in the
    demand for rental housing, which is pushing prices up very
    significantly.
        Mr. Westmoreland. Is the impact cost basically sewer,
    water, police protection, or do they just kind of make up some
    stuff?
        Mr. Holland. Well, how did you say it? I wouldn't want to
    dissuade that aspect of things, but it has been noted that many
    cities which are suffering financial burdens because of the
    meltdown have looked to new development and significantly
    increased their impact fees to try and make up for lack of
    funding in other areas, which has pushed up the cost of the new
    housing.
        And because of the Basel III regulations and the banking
    regulations an appraisal has to justify those rents. So the
    entire market has to bear that increase before you can qualify
    for your financing to move forward.
        Mr. Westmoreland. Thank you.
        Ms. Been, you mentioned 80,000 new affordable homes. Are
    those single family homes or--
        Ms. Been. Some are single family. Most are multifamily. New
    York is a multifamily--
        Mr. Westmoreland. And then another 120,000? You talk about
    how HPD is leading the mayor's charge in partnership with your
    sister agencies, developers, tenants, community organizers,
    elected officials, and financial institutions.
        You don't have time to go through and tell me what each one
    of those do, but being from a rural area of the south, we don't
    see much of this. What part would the elected officials have in
    this? Would it be zoning, waiving the fees, or what would it
    be?
        Ms. Been. The elected officials in New York, if there is a
    rezoning required, actually New York is mostly an as of right
    town. We don't do rezonings for every development. But if there
    is a rezoning required, the elected officials will weigh in as
    to what that rezoning should look like.
        They will weigh in with specific concerns. You need a
    school to offset the people who are coming into this building,
    those kinds of things. So they will express the concerns about,
    is the infrastructure there to support the development?
        Mr. Westmoreland. So does this organization have to pay the
    impact fees as well?
        Ms. Been. We don't have impact fees in New York City.
        Mr. Westmoreland. Wow. Well, I am sorry I am out of time,
    but thank you all.
        Chairman Luetkemeyer. The gentleman's time has expired. We
    are going to try and squeeze in one more Member quickly so we
    can--not too many people have voted yet, so I think we have
    enough time.
        The gentlelady from New York, Ms. Velazquez, is recognized
    for 5 minutes.
        Ms. Velazquez. Thank you, Mr. Chairman.
        Ms. Been, welcome to the committee. In your experience with
    housing development, especially with high-cost cities like New
    York, is it possible to build affordable housing without
    Federal rental subsidies like project-based rental assistance
    or fair construction subsidies like the low-income housing tax
    credit? Would the mayor be able to fulfill his promise of
    building all these units of housing without a Federal
    involvement?
        Ms. Been. No. The Federal contribution is absolutely
    critical. It is critical in two ways. One is that to reach the
    very lowest-income families, the families who are at poverty
    level making 30 percent of AMI, we need a form of rental
    assistance.
        The rent that those families can pay won't even keep the
    lights on, truthfully. So we have to have a form of rental
    assistance and that is critical from the Federal Government.
        We do sometimes get cross-subsidies from the very high
    value neighborhoods, but the other place that Federal dollars
    are so critical is in the poorest neighborhoods where housing
    is not only providing affordable housing, but it is
    revitalizing the neighborhood. It is stabilizing it. It is
    providing jobs. And in those poorest neighborhoods, Federal
    dollars are absolutely essential.
        Ms. Velazquez. Thank you.
        Mr. Holland, in your testimony you stated that, ``Congress
    should play a key role in addressing housing affordability.'' I
    agree with you. Can you discuss the importance of Congress
    increasing funding for affordable housing programs like the
    Section 8 program?
        Mr. Holland. Yes, absolutely. From the National Multi-
    Housing Council and the National Apartment Association's
    standpoint, we support full funding for these programs.
        And looking at, again, you have a 9 percent tax credit
    program which has been very successful, but on the tax-exempt
    bond side the 4 percent tax credits have largely gone unused
    because of the lack of credit enhancement given Fannie and
    Freddie's situation.
        And so effective separation of the rules, if you will, that
    are being put in place were being put in place because of
    issues in the single family mortgage lending areas.
        The multi-family did not contribute to the financial
    meltdown. In fact, the losses at Fannie and Freddie from the
    apartment credit enhancements or the apartment lending were
    less than 1 percent of their portfolio.
        So almost nothing. But yet the costs to credit enhance the
    80/20 bond program under the current conservatorship are up 300
    percent, which has limited our ability to use that tax credit
    program effectively.
        Ms. Velazquez. Sure. Thank you.
        Mr. MacDonald, almost 2 million households did not form
    during the recession. As the economy improves and hiring
    returns to normal, how will this pent-up demand affect
    affordability?
        Mr. MacDonald. The problem is the pent-up demand hasn't
    been met because of many reasons. A lot of folks have wanted to
    either move up to a nicer home, buy their own home, or even
    have their own apartment, and they just haven't been able to
    for many reasons.
        The new mortgage requirements that are being required now
    are so stringent that it is the credit scores have to be so
    high to qualify for a mortgage that it is very hard for the
    first-time homebuyer and the move-up homebuyer. They can't get
    to the next level.
        So consequently they are not moving up, and then that has
    created a backlog, so that when people can't get the move up
    homebuyer then they don't go to the next level or the next
    level. And you end up with people who are fairly stagnant in
    place, whether they want to be or not.
        And then we all have people in the renter market. There are
    a lot of us who still have our children, grown children living
    in the basement because they can't figure out how to get their
    own place. And that is not something they want or we want,
    but--
        Ms. Velazquez. Thank you. I yield back.
        Chairman Luetkemeyer. The gentlelady yields back. With
    that, we are going to recess. They tell me it will be somewhere
    around 30, 35 minutes, so we appreciate everybody's patience.
        [recess]
        Chairman Luetkemeyer. Okay. We will gavel ourselves back
    into session here. I know we have a number of Members who are
    either here or on the way, so we will begin our questioning
    again.
        And I thank the panel for their indulgence.
        With that, we will recognize the gentleman from Texas, Mr.
    Williams, who was also an introducer a while ago. Mr. Williams
    is recognized for 5 minutes.
        Mr. Williams. Thank you, Mr. Chairman.
        And Mr. MacDonald, thanks again for being here. I
    appreciate it. In your testimony you say that 25 percent of the
    cost of a new single family home is attributable to government
    regulation. Why is that so important or noteworthy?
        Mr. MacDonald. That cost has to be passed on to the
    consumer. As a result it directly affects the affordability of
    the housing. And nationally, as I said earlier, 1,000 increases
    the price of 206,000 households; 1,000 increases the burden to
    110,000 renters.
        And in Texas, with the most significant price out effect,
    more than 18,000 households are pushed out of the market with a
    1,000 increase.
        Mr. Williams. I have a couple of questions here, and we
    will just go through them quickly. Do you believe that certain
    building constructions regulations at the local level are
    required?
        Mr. MacDonald. Yes, sir.
        Mr. Williams. On page seven of your written testimony, you
    state that the collective force of the actions taken by these
    agencies, i.e., CFPB, HFA, regulators implementing the Dodd-
    Frank Act, has also resulted in undue restrictions on the
    availability of mortgage credit to many creditworthy borrowers.
    That is true, isn't it?
        Mr. MacDonald. Yes, sir.
        Mr. Williams. Based on your written testimony, does the
    National Association of Home Builders believe that the Dodd-
    Frank Act was a mistake?
        Mr. MacDonald. Yes, sir. There are parts of it that the
    problem is we don't even have all the parts of it--
        Mr. Williams. Right.
        Mr. MacDonald. --written yet.
        Mr. Williams. But it would be good if we could let
    competition work. That would be the best thing, wouldn't it?
    Let the consumers decide?
        Mr. MacDonald. Fair market.
        Mr. Williams. Mr. Daily, another great Texan I might add,
    right?
        Mr. Daily. Thank you for the recognition.
        Mr. Williams. There you go. What makes manufactured housing
    an attractive option for affordable home ownership for
    consumers?
        Mr. Daily. The basic availability of manufactured housing
    is that on a cost per foot, it is about half the cost of site-
    built housing. It is built in a controlled environment. And it
    is primarily delivered to rural markets where production
    builders do not operate because they don't have scale.
        Mr. Williams. It is a good option for consumers. Describe
    today's manufactured housing. How does it compare to site-built
    housing or traditional apartments in terms of quality and
    value?
        Mr. Daily. The traditional manufactured housing is built to
    the HUD code. And that is a pre-emptive code in the country
    that has been in place since 1974. And it is primarily a
    performance code that works across the country. Modular houses
    are built basically to the same code of the site-built homes.
        Mr. Williams. You said that the CFPB regulations are
    harmful to consumers, as a lot of us believe. What evidence do
    you have of this harm?
        Mr. Daily. I think the primary piece of evidence that we
    have is that when we look at the home data, sales of homes less
    than $75,000 2014 to 2013 are down double-digits while other
    portions of the market are doing very well. So what it
    basically says is those people who are the first tranche of
    buyers really struggle to meet all the regulations.
        Mr. Williams. In other words, another case of those people
    wanting to help people, but they end up hurting those people.
        The House last year passed a bill that I believe will not
    only help the manufactured housing industry, but also
    consumers. How will the change in H.R. 650 help consumers?
        Mr. Daily. I think that if the bill ultimately passes,
    there are two components that will be very helpful. The first
    is the trigger rate being raised will allow more lenders to
    participate in the market because right now there are very few
    HOEPA loans that are being written simply because the lenders
    didn't don't want to touch them.
        And then the second is the loan origination, where a lot of
    our buyers are new buyers or older people who have not
    purchased homes in a very long period of time.
        Mr. Williams. I'm sorry?
        Mr. Daily. And by allowing our salespeople, who can operate
    under the Dodd-Frank regulations, be more helpful to these
    people I think it can help them to learn more about buying
    homes and the home-buying process.
        Mr. Williams. And finally, if H.R. 650 becomes law, will
    consumers lose protections and will they be vulnerable to
    predatory lending, do you think?
        Mr. Daily. No. I don't believe any of those things will
    happen. Basically what we are asking for is some slight
    modifications to the current law that we believe will open the
    market, especially to that first tranche of buyers.
        Mr. Williams. Thank you. And I might add too, Mr. Holland
    is also a Texan. You went to school in Texas, didn't you?
        Mr. Holland. No. I was born just outside of San Antonio.
        Mr. Williams. There you go.
        Mr. Chairman, I yield my time back.
        Chairman Luetkemeyer. The gentleman yields back.
        We now go to the gentleman from Pennsylvania, Mr. Rothfus,
    for 5 minutes.
        Mr. Rothfus. Thank you, Mr. Chairman. And again, I thank
    the panel for bearing with us during our break for the votes. I
    want to touch base, Mr. Holland, go back to what you were
    talking about earlier in response to some of the questions
    about the regulation.
        And I think you said that 40 percent of the cost of
    multifamily is attributable to rules and regulations? Do you
    recall that?
        Mr. Holland. Yes, sir.
        Mr. Rothfus. We are here looking at things from a Federal
    perspective. I am wondering if you can identify perhaps a
    Federal regulation that is responsible for driving up cost or
    alternatively what would be the single greatest Federal barrier
    to development?
        Mr. Holland. The greatest?
        Mr. Rothfus. Either a Federal regulation--again, I am
    trying to look at things that we can be addressing from a
    Federal perspective. A lot of it--you mentioned zoning as an
    issue for, I think, the coastal cities. That is pretty much a
    local.
        Mr. Holland. If you look at effective housing, there are
    three parts of the triangle. One part is actually the cost of
    the building of the housing unit. The second aspect is how far
    that housing unit is from someone's job and their activities,
    so that is transit. The third portion of that is
    infrastructure.
        And so we have to solve all three aspects in order to build
    because the local jurisdictions add the infrastructure costs in
    forms of impacts to our requirements. So we have to get active
    zoning. Then we have to pay for the infrastructure. And then we
    have to look at what the cost of transportation is for our
    consumer.
        And so one of the things we would love to have an
    opportunity to do is to have a task force to look at all three
    because the cost of building, for instance, another freeway to
    the next subdivision on the edge of town is dramatically more
    than the cost to increase the density, if you will, to build a
    high rise in an urban environment where people can walk to
    work, or around the light rail or transit node where they can
    use public transportation.
        And so we are looking for an effective voice, if you will,
    so that we can look at the whole part of the housing criteria.
        In the Federal question, one of the things that I cited
    earlier was the lack of credit enhancement for the tax exempt
    bond program and the tripling of that cost with Freddie and
    Fannie in conservatorship.
        The number of apartments that were built after the 80/20
    bond program was launched in the early 1980s, which was a very
    difficult time, took starts from 200,000 units to 600,000 units
    over 3 years.
        That is the kind of solution-based outcome that we feel
    like a task force that looked at all three of these components
    could help with and could make a very significant difference
    in.
        Mr. Rothfus. If I could go to Mr. Daily, you had talked a
    little bit about the HUD code that was enacted in 1974, last
    amended 15 years ago. It would seem that addressing these rules
    which apply to all manufactured homes nationwide would go a
    long way towards improving the affordability of manufactured
    homes.
        Which specific aspects of the HUD code are most harmful to
    your business as well as consumers?
        Mr. Daily. I think the first aspect is that we really need
    to get HUD to cooperatively work with our consensus committee
    before they issue governance because every time they issue
    governance and we really haven't had full discussion or
    conversation with them, it usually adversely impacts the cost
    of our homes. And in our business, every 100 makes a
    significant difference.
        I think that the next opportunity is to really work on the
    HUD code and modernize it and that in itself will allow us to
    change the way the elevations of our homes appear if we can
    take them off the chassis ultimately and will also help the
    perception of the homes.
        Mr. Rothfus. Mr. MacDonald, you list in your testimony some
    Federal agencies that have besieged the home-building industry,
    namely the Occupational Safety and Health Administration, the
    EPA, FEMA, and the Department of Labor.
        You also specifically mentioned the Waters of the U.S. rule
    as an especially damning regulation that could increase housing
    cost. Could you explain your concerns about the impact of the
    Waters of the U.S. on home builders and your customers?
        Mr. MacDonald. Surely. The way the Waters of the U.S. is
    described is it takes every mud puddle, creek, the soil out in
    front of your driveway, and makes it a tributary of the waters
    of the United States, which would require you every time you
    develop a lot or a single family house you will have to get a
    LOMR-CLOMR review, engineering review by the Corps of Engineers
    to build on every single individual lot. It would be simply
    devastating in both time and money.
        Mr. Rothfus. I yield back, Mr. Chairman.
        Chairman Luetkemeyer. Mr. Holland, would you like to answer
    that?
        Mr. Holland. I can speak to that. We had one project that
    was a great example of that in Hillsboro, Oregon, where we had
    water flowing out of a culvert and into a culvert across a two-
    acre parcel. And the Corps took the position that it was a
    navigable waterway. And that entire 2\1/2\ acre parcel became
    unbuildable because of that.
        We would have put 250 apartments on that parcel had that
    regulation, coming out of a culvert and into a culvert. If they
    hadn't taken the position that those were waters of the USA and
    that was a navigable waterway. And it only had water in it
    during the 3 or 4 wettest months of the winter.
        Chairman Luetkemeyer. Could you not enclose that area?
        Mr. Holland. Excuse me, sir?
        Chairman Luetkemeyer. Could you have enclosed the area? Go
    from culvert to culvert and put a pipe in there that covered
    that entire area?
        Mr. Holland. Then we would have been locked up.
        Chairman Luetkemeyer. Okay.
        Mr. Holland. Because we would have been building in a--or
    we would have unauthorized deal of wetlands and devastating
    work in the Waters of the USA. I would be wearing stripes. I
    don't look good in stripes.
        Chairman Luetkemeyer. Okay. I thought maybe you could work
    with the EPA, but evidently you couldn't, no?
        Mr. Holland. The application process takes a year-and-a-
    half.
        Chairman Luetkemeyer. Okay. Thank you.
        The gentleman from Kentucky, Mr. Barr, is recognized for 5
    minutes.
        Mr. Barr. Thank you, Mr. Chairman.
        Mr. Holland, I will start with you. I appreciated your
    testimony about Section 8 reform, and I am particularly
    interested in how we can effectively deliver Section 8 vouchers
    in a more cost-effective way based on the existing allocations
    that we have.
        And you talked about three-way leases and repetitive unit
    inspections, resident eligibility certification and other
    regulatory paperwork.
        Can you amplify with specificity on the reforms that you
    would suggest to us on how to stretch those Section 8 dollars
    so that we don't have the waiting list that we have?
        Mr. Holland. Yes, absolutely. One is clearly streamlining
    the process, but another key aspect is confidence in the
    process. From a private sector standpoint, if you are going to
    count on a revenue stream, you need to know it is funded.
        And notwithstanding the financial challenges that happened
    in 2008 to 2012 but sequestration and whether they were going
    to be extended or not extended, all of that uncertainty for
    owners who have to rely on making their payment on the first is
    really challenging.
        And so one is confidence that the program you are going to
    sign up for is going to be there so that you can allow those
    units to be rented. Because if you don't have that confidence
    and that revenue stream gets interrupted, you will lose your
    property.
        Mr. Barr. Yes, and I think that goes without saying, but I
    am particularly interested in the regulatory issues. So what
    are the--because we all know that the reliability and certainty
    is--
        Mr. Holland. Yes, sir.
        Mr. Barr. --an impediment, but what about the, for example,
    the streamlining of the inspection process, the paperwork, the
    three-way lease?
        Mr. Holland. We support all of that, but for instance one
    is if you had a HUD inspection over the last 24 months, we
    think that you should allow somebody to move in right away
    without having to wait and re-inspect every unit every time, et
    cetera.
        And so, a very thoughtful business-like approach to if it
    has been inspected, if there is a record of compliance, et
    cetera, allowing those to move forward without having very
    significant delays in those processes, which just reduces the
    income for everybody in the process.
        Mr. Barr. Again, we do have limited resources so that makes
    sense.
        And let me move now to Mr. Daily. I am a proud co-sponsor
    and supporter of H.R. 650, and I think it makes a lot of sense,
    particularly for my constituents in rural Kentucky and access
    to credit for an excellent affordable housing option for them,
    manufactured housing.
        Can you describe for those colleagues of mine who couldn't
    bring themselves to support this effort, explain to them and on
    the record why it is inappropriate to classify manufactured
    housing small loans as high cost under HOEPA?
        Mr. Daily. The fact of the matter is that a lot of the
    people who want to buy a manufactured house, number one, they
    live in a rural area. Number two, their incomes are modest.
        Their incomes can fluctuate based on what they do for a
    living. They work in agriculture. They work in a plant. So it
    is very difficult for them to check all the boxes to get a
    loan.
        Mr. Barr. So when the Bureau says that your industry is
    predatory, what is your response?
        Mr. Daily. I would say we are not predatory at all.
    Basically, what we are trying to do is match people up with
    houses that make sense for them that they can afford.
        Mr. Barr. Yes. And one of the things I have said is that
    they are going to protect people right out of their homes. This
    is an affordable housing option, and as you noted that the
    decline in manufactured home loan origination--
        Mr. Daily. Right.
        Mr. Barr. --is evident as a result of these one-size-fits-
    all regulations. So I think that the mission of consumer
    protection is being turned around on its head here.
        Mr. Daily. I think there is an opportunity to be more
    flexible and for us to follow the rules with some more
    flexibility. And I think that the consumer will ultimately
    benefit if we can do that.
        Mr. Barr. And if manufactured housing sellers are deemed
    loan originators, even though they are not receiving any
    compensation for the sale, other than just for selling the home
    and not for financing the loan, explain the appropriateness of
    that?
        Mr. Daily. The concern that we have with regards to
    origination is that the industry is committed to follow the
    law, number one. And by being committed to follow the law it is
    most appropriate that we really understand what our customers
    need in terms of size of house and what they can afford.
        And the way that the law reads today, we basically can show
    them the home and then what we have to do is give them a list
    of possible lenders. And they are not experienced homebuyers so
    what happens is we lose customers that become disenfranchised.
    The process is just too difficult for them.
        We believe that we can follow the law that will not be
    steering and it is up to the government to regulate to make
    sure that people aren't steering.
        Mr. Barr. And these are fixed-rate, fully amortized, no
    balloons? These are pretty standard--
        Mr. Daily. Yes, these are typically chattel loans, right.
        Mr. Barr. Right. Exactly. Well, I encourage you to stick
    with it and hopefully our friends in the Senate are listening
    to your testimony.
        Mr. Daily. Thank you.
        Mr. Barr. I yield back.
        Chairman Luetkemeyer. The gentleman's time has expired.
    With that, we will go to round two.
        And the ranking member, Mr. Cleaver, has some additional
    questions, so he is recognized for 5 minutes.
        Mr. Cleaver. Thank you. Mr. Barr, the Senate does not
    listen to anybody.
        [laughter]
        I move that we close the Senate and give--
        [laughter]
        Professor Dickerson, one of the concerns--this is somewhat
    personal--with children, young adults aged 24 to 35 are not
    buying homes at the same level they did when I was in that same
    age bracket. Actually, I owned a home when I was 26.
        And I know there are a lot of factors in probably the
    student loan payments and so forth. I am interested in any
    other factors that you believe are inhibiting the purchase of
    homes by the Millennials. And the second part of it, maybe for
    everyone, is what can we do to remedy this?
        Ms. Dickerson. Another thing that inhibits it are stagnant
    wages. I don't know that there is necessarily any regulation
    that you all have in place or could pass that would deal with
    the issue of stagnant wages, but this is a problem that has
    been going on for 30 years where the income for the, whether
    you want to say top 1 percent or top 5 percent has been going
    up and income for pretty much everybody else has remained
    stagnant or has declined.
        The other thing that has happened with Millennials is they
    are not forming households at the same rate that Boomers did.
    They are delaying marriage. They are delaying having children.
        And the primary trigger for a young couple to decide they
    want to become a homeowner is, well, first they move out of the
    parents' basement. They marry. They have children and then they
    want to buy a home. And in many instances it is because of the
    school, the schooling issue.
        Mr. Cleaver. How do you get them out of the basement?
        [laughter]
        I'm sorry. I won't go there. But that is troublesome. There
    probably isn't one legislative thing we could probably do and
    drop the interest rates. I think it is almost a sin that we are
    making money, the Federal Government is making money off of our
    college students after graduation.
        The rental housing that is being created, or much of it, is
    luxury units. And I am assuming that there is some kind of
    trickle-down theory that would take care of the luxury
    apartments and eventually will take care of the low to
    moderate-income.
        Mr. Daily, do you have any--
        Mr. Daily. Specifically on rental?
        Mr. Cleaver. Yes.
        Mr. Daily. There is some rental activity that takes place
    in manufactured housing communities today. And it is just
    perking along. There have been some increases that I think
    seniors feel some pressure on, but generally speaking, I think
    it is operating quite well.
        Mr. Cleaver. Is it easier to do low- to moderate-income or
    luxury?
        Mr. Daily. As an industry, we typically do not build rental
    properties, luxury rental properties. We are primarily single
    family homes.
        Mr. Cleaver. Mr. MacDonald?
        Mr. MacDonald. My company typically builds workforce
    housing in smaller communities. We utilize the low-income
    housing tax credit program for a good amount of that. And then
    we also build conventional apartments, but we just do a very
    good job of trying to keep our costs in line so that we can
    function in those markets.
        But I will tell you it is increasingly hard to do. And many
    of the problems that we encounter are the problems with Fannie
    and Freddie being basically out of the business, being slow to
    be able to react.
        So we end up having to go to getting HUD-insured mortgages
    in the Section 221(b)(4) program and try to work through that.
    Then we encounter other issues with HUD that layer on more
    expenses on top of that.
        So it is kind of a Catch-22 that we keep running into. We
    think we get one place fixed and then another one pops up. It
    is like whack-a-mole. It is just you can't quite get your arms
    around all of it at the same time.
        But I think there is probably a trend to do more workforce-
    type housing than luxury housing. I am seeing that in the
    marketplaces now. It is not happening in the big cities. I am
    talking about in the smaller communities, mid-sized cities and
    the smaller cities.
        Mr. Cleaver. Ms. Been?
        Ms. Been. Can I weigh in on that? We see actually a lot of
    the opposite. We see the trickle up that homes are built for
    really workforce, middle-income folks and then because the
    demand for housing, especially in urban areas is so great, we
    see that housing actually being rented by wealthier renters
    rather than the renters that it was intended for.
        So and the trickle-down theory, at least in New York City,
    really hasn't panned out because the homes that are built for--
    on the luxury market have all kinds of restrictions in terms of
    how much income you have to have in order even to rent that
    apartment that it becomes very difficult for it to sift down in
    any way except over decades.
        Mr. Cleaver. Yes, my time has expired. My assumption was
    just that if we are leaving low-income tax credits--if we are
    leaving money on the table, if builders are leaving money on
    the table instead of going through low-income tax credits, the
    assumption is that they would automatically try to--they are
    moving towards luxury.
        I yield back, Mr. Chairman.
        Chairman Luetkemeyer. The gentleman yields back.
        Mr. Barr from Kentucky is recognized for 5 minutes.
        Mr. Barr. Thank you, Mr. Chairman.
        And back to Mr. Holland really quickly. You spent a good
    bit of time in your testimony talking about ``not in my
    backyard'' the ``NIMBY'' issue and local zoning and land use
    laws. And Mr. Rothfus was touching on this a little bit, but if
    you could expand on what Federal role there is, if any, to
    encourage reforms to local zoning laws that would help
    facilitate the construction or rehab of affordable housing?
        Mr. Holland. Let me just touch on the NIMBY question, which
    is if you imprint--in the West Coast cities, for instance, I am
    going to--let me just take a step back.
        We have 10 gateway cities in the United States where
    particularly in the areas--Austin, Texas, would be one,
    Portland, Oregon, Southlake Union in Seattle where you have
    very significant increases in technology-related jobs.
        And what is happening is the kickback to it building more
    density is that people are using the zoning land use deal to
    tie up sites from 5 to 10 years. We are building one site in
    downtown Los Angeles where it took 5 years to get the zoning.
    They were sued because it was too dense. That took 2 years to
    resolve.
        Then they were sued because it wasn't dense enough. That
    took another 2 years to resolve. And the gentleman who was a
    30-year land developer said, ``I am done.'' And we are
    finished. We just got that project finished. So from a Federal
    standpoint this is I-73, and the question is, will 23 be
    enough?
        Now, if you took a small fraction of those transportation
    dollars and you said we are going to build a light rail or we
    are going to build transit hubs or we are going to provide
    access to the urban core, but it came with a requirement that
    said if you are going to take these transportation dollars you
    need to be able to have as of right zoning so you can put
    residential density around the transportation nodes and in the
    urban core.
        That triangle between infrastructure, transportation, and
    housing has to be all three. And many cities want to do the
    right thing, but the local politicians are concerned about
    getting kickback from their constituents.
        But in order to get transportation dollars, if you had to
    have as of right zoning around 5 percent of the land, the urban
    core and around the transit corridor, we could build
    significant amounts of housing that would then provide an
    adequate supply so you are not creating economic dislocation.
        Because in those job centers in those gateway cities, those
    new jobs pay a hundred grand or thereabouts, very top, and they
    economically dislocate everybody else within that sphere. And
    that ripple down happens because we are not building the
    density of housing and a quantity of housing in those key
    submarkets.
        Mr. Barr. Thank you.
        And Mr. MacDonald, I didn't get a chance to talk to you,
    but I always enjoy talking to Bob Weiss in Kentucky and the
    Home Builders--
        Mr. MacDonald. Good man.
        Mr. Barr. --Association in Kentucky and in Lexington, the
    largest City in my district, Todd Johnson. They do a great job
    representing our home builders. They talk about that labor
    shortage a lot.
        In fact, the Home Builders Association of Lexington had to
    start their own privately funded building institute for
    workforce development. And so we know that is a big issue. So
    if you want to amplify that testimony a little bit, and tell us
    if there is anything that Congress can do to help there?
        And secondly, talk a little bit more about Davis-Bacon and
    also Waters of the United States and any other regulations and
    the added cost to the home purchaser as a result of those
    regulations?
        Mr. MacDonald. Yes. So we have a huge problem with labor
    right now. In Texas, for example, the average age of an
    electrician is 61 years old. The average age of a plumber is 59
    years old. A framing carpenter is 57 years old. So what we are
    doing is we are aging out of all the trades.
        We have made a mistake in the country in that we have
    somehow told everybody that you are a failure if you don't go
    to college. And you are a failure if you don't end up with
    large student debt.
        Mr. Barr. And these can be really good jobs. These can be--
        Mr. MacDonald. And--
        Mr. Barr. --well-paying jobs.
        Mr. MacDonald. And what ends up--
        Mr. Barr. And the demand is there.
        Mr. MacDonald. And we are talking about $50, $60 an hour
    jobs. We are not talking about jobs that--and that is not what
    happened. And that is not accounting for the guy who may start
    his own company and even do better than that. We are talking
    about someone who just works the trades.
        And that is an extreme issue in the country that we need to
    figure out how to overcome. The Home Builders Institute, we are
    the largest trainer of people in trades. We work in prisons,
    everywhere else trying to get people to understand better about
    the trades issue.
        Back over to Davis-Bacon for just a second. The problems of
    Davis-Bacon there, for example, are like the new electronic
    reporting program that Davis-Bacon uses. It is new and it is
    very difficult.
        I have a subcontractor who has been working with me. He is
    a stone mason, Jose Guerrero. He is from Lytle, Texas. He has
    been with me for 12 years. He did the masonry work on my
    personal residence, and does all of our projects all over the
    State of Texas.
        He travels great lengths sometimes to get to these
    projects. It is him, his brothers, and some of their sons. They
    do beautiful work. They are craftsmen in the first order.
        I am building a project 30 miles away from his home in
    Seguin, Texas, and I can't use him because we are doing a
    (d)(4) Davis-Bacon property there.
        And Jose is a wonderful guy, but he doesn't understand
    computers well enough to get online and follow the Davis-Bacon
    reporting systems required by HUD. And so he has been pushed
    out of the market. It is a gigantic unintended consequence for
    a minority contractor to lose business.
        Mr. Barr. And my time has expired, but lead paint is also
    something that I hear about from my remodelers.
        Mr. MacDonald. Yes, sir.
        Mr. Barr. I yield back. Thanks for your indulgence, Mr.
    Chairman.
        Chairman Luetkemeyer. Great questions. The gentleman yields
    back.
        Let me just wrap up with a couple of questions for
    everybody. One of the questions I started out with a while ago
    was what is the most burdensome rule or regulation? Our hearing
    today is on future housing, government regulations and the high
    cost of housing.
        Can each one of you give me the one rule or regulation that
    is most burdensome to you that you think could help alleviate
    or help improve or streamline or whatever it might be, housing
    general?
        Professor Dickerson, do you want to--we were busy on the
    other end over here. That may not be your area of expertise,
    but I am sure you have a lot of background on that as well.
        Ms. Dickerson. Well, I guess I would. And it is not a
    Federal rule--
        Chairman Luetkemeyer. Yes, Federal. Yes.
        Ms. Dickerson. --or regulation but it does relate to the
    zoning issue. And I will respond to your question by mentioning
    that in 1926 the Supreme Court said that it is okay to
    segregate single family housing and apartments and keep them
    completely apart.
        In that opinion, and I think that opinion now controls a
    lot of both State and local zoning theories, apartments and
    renters were referred to as ``parasites.''
        And I think that as a country we have to get to the point
    that we recognize that if we are going to resolve the
    affordable housing crisis it is going to be a mixture of high
    end, mid-end, housing for the poor, and that we have to be
    willing to accept that in some instances people aren't going to
    be happy that certain types of affordable housing may be in
    their areas.
        Chairman Luetkemeyer. I think it is important, and I asked
    the question I think of Ms. Been a while ago when I was talking
    also, but I viewed the Hurricane Katrina rebuild, and a lot of
    their rebuilding is done in mixed-use.
        You have a lot of folks who are renting who are able to pay
    it. You have commercial users in the building. You have
    subsidized renters. So by using that sort of a model it enables
    builders to do a better job of building and you can actually
    build communities around that versus just apartment after
    apartment after apartment.
        And it seems like it works better. I don't know what your
    thought process is. You see in a little bit different spectrum
    perhaps what is going on.
        Ms. Dickerson. It not only works better but it is sort of
    consistent with the point I have been making that we have to
    think outside the box.
        So simply because it is not a form of affordable housing
    that we have always used, simply because it may require us to
    think differently about what the Millennials want for housing?
    What do we need for working families? What do we need for
    people who live in a rural community?
        One example that I will use is the City of Memphis, and I
    am only familiar with it because first, I am from Memphis, and
    second, I was there last week for a conference on urban blight.
    Most of the affordable housing units that have been created in
    the City of Memphis have been mixed-use and mixed-income.
        And so I think that is a great way for a lot of cities to
    sort of deal with the issue of affordable housing and also to
    respond to some of the needs of Millennials who want to have
    everything around them. They don't want to have to get in the
    car to drive to get everything.
        Chairman Luetkemeyer. Very good.
        Mr. MacDonald, would you like to answer the question that I
    originally posed here? We kind of got off--
        Mr. MacDonald. Certainly.
        Chairman Luetkemeyer. --but I appreciate that, Professor
    Dickerson.
        What is the one rule that--whatever the spectrum that could
    help you be able to better provide housing for especially low-
    and middle-income folks?
        Mr. MacDonald. The problem is it is a bundle of sticks. It
    is the straw that broke the camel's back.
        Chairman Luetkemeyer. Okay.
        Mr. MacDonald. And it is just one on top of another on top
    of another on top of another. And yes, we could go and we could
    pull off one. We could say we could fix the Waters of the U.S.
    issue. We could fix the 100-year floodplain issue with HUD. I
    could go through the crystal silicon sand issue with the EPA.
        All of those are wonderful things for us to be able to
    unload, but if you take one and all the rest of them stay, you
    haven't fixed the problem, sir. We have to address all of them.
        I would love to be able to give you a silver bullet and say
    get that one, and I can't do it because it is the whole bundle
    of sticks.
        Chairman Luetkemeyer. What we are looking at doing is
    trying to find that bundle of sticks. We did H.R. 3700, which
    was a good step.
        And I think it addressed--somebody had a question a while
    ago, I think Mr. Holland. You made a comment. We actually fixed
    your problem with regards to--
        Mr. Holland. Fix the dwelling re-inspections.
        Chairman Luetkemeyer. Dwelling inspections, yes, that is
    what it was. And then we actually fixed that problem with H.R.
    3700. So we are listening and that is why we are having the
    hearings here today.
        Ms. Been?
        Ms. Been. I really appreciate what you did in H.R. 3700,
    which is a huge step forward for those of us in cities. But I
    would say that, again, one of the major barriers that we have
    to provide affordable housing is the rigidity of the tax credit
    rules. Having income averaging, which would allow us--it would
    reduce costs because we go through a lot of tenants to find the
    ones in the haystack who exactly fit to the income level.
        We limit the ability of the City to use the tax credit
    program for preservation because you have existing tenants. And
    if one of them is at 65 percent of AMI, then you have problems
    in using the tax credit for preservation.
        So that alone could make a huge difference in the way in
    which we could leverage the tax credit program to really
    provide exactly the mixed-income housing that we want.
        We don't want everything at 50 to 60. We want that range
    because it is better for the neighborhood. It is better for the
    families. So having that flexibility would make a huge
    difference.
        Chairman Luetkemeyer. Great suggestion. Thank you very
    much.
        Mr. Daily?
        Mr. Daily. I mentioned to Representative Barr about Dodd-
    Frank, HOEPA and the origination. Those are two of the primary
    obstacles we have today. But I think the bigger obstacle is
    secondary funding so that more people can enter the market,
    because we are the form of housing that is not subsidized.
        And so we are truly trying to serve working Americans who
    need a new home. And if we had availability of more funds, I
    think we could do a much better job.
        And the other fact is that we primarily serve rural
    markets. And when you go through rural America today, you see
    the state of housing, and it has deteriorated significantly.
    And I happen to go across the country on a regular basis on
    rural roads and so it is real. And those people deserve better.
        Chairman Luetkemeyer. When I left home and went off to
    college, my first housing rental was a mobile home. Then after
    I got out of school, my first home was a mobile home. And once
    I got married, my first home was a mobile home.
        And my wife decided we needed to go someplace else, to do
    something else. So we moved again. But I have had interesting
    experiences with it, so thank you.
        Mr. Holland?
        Mr. Holland. Yes, sir. Thank you.
        Chairman Luetkemeyer. How would you address that question?
        Mr. Holland. Yes, sir. Thank you very much. I would address
    that much like Mr. MacDonald did. We look at Davis-Bacon wages.
    In wood frame construction, they add about 25 percent of the
    cost of the buildable cost from that standpoint.
        You look at some of the new energy regulations and the
    energy regulations don't have a payback for 30 years. It is
    hard to say that you shouldn't have an energy-efficient house.
        But if it is a 30-year payback, and it raises the effective
    cost to the consumer, is it really something that is going to
    add to from that standpoint?
        The question of Waters of the USA, et cetera, all of those,
    the regulations under Dodd-Frank for apartments, we weren't
    part of the problem. And so you didn't have the losses that
    Freddie and Fannie in the apartment sector, but because of the
    regulations of Dodd-Frank and the requirements in the risk-
    based capital, it is significantly increasing the cost of our
    construction loans. And also Freddie and Fannie spreads are
    increasing because of Dodd-Frank and Basel III from that
    standpoint.
        The one thing I would throw out to you is in the western
    United States, particularly in California, the discrimination
    of many cities against apartments is one of the things that is
    significantly increasing the cost.
        Cities want office buildings because they have the jobs and
    they get the property taxes they want; retail because they
    collect the sales tax. But they play a game of beggar thy
    neighbor where we don't want those people living in our town.
        And it is really a problem because you have to add the
    transportation and getting approvals in those cities to be able
    to build apartments and to be able to allow the workforce who
    is working in that town to be able to live in that town at all.
    Just getting permission to build would be a dramatic
    improvement.
        And so one of the things we would love to see is some type
    of guidelines where cities needed to have as of right zoning or
    zoning availability for their workforce so this game of pushing
    the apartments in some other place wouldn't be able to do that.
        Chairman Luetkemeyer. So are you advocating, say, would a
    mixed-use--
        Mr. Holland. Absolutely.
        Chairman Luetkemeyer. --structure work there? You are
    looking to try and appease the city fathers so you come in and
    say, we will build a mixed-use building where we can have some
    apartments as well as commercial use stuff in there?
        Mr. Holland. If we were to have a regime where we could
    build mixed-use around transit, because then families with
    limited means wouldn't need a second car. That would save them
    on average $9,000 a year to be able to use public
    transportation.
        We would produce the housing. We would allow them to use
    effective use of the infrastructure or the transit. And the
    only reason most people need a second car is so that the second
    spouse can get to work.
        So if you can have the density around the transit or in the
    urban core, it is going to significantly improve the choices
    and the cost from a development standpoint.
        Chairman Luetkemeyer. Very good. Well, I think we have
    exhausted all of the questions that we have for you. And I
    certainly appreciate everything that you have presented to us
    today. You have been fantastic witnesses. We certainly
    appreciate your patience with us.
        Mr. Cleaver. Mr. Chairman?
        Chairman Luetkemeyer. Do you have another one?
        Mr. Cleaver. No. I would like to enter into the record this
    document entitled, ``Enterprise Community Partners Statement
    for the Future of Housing in America.''
        Chairman Luetkemeyer. Without objection, it is so ordered.
    Anything else?
        The Chair notes that some Members may have additional
    questions for this panel, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 5 legislative days for Members to submit written questions
    to these witnesses and to place their responses in the record.
    Also, without objection, Members will have 5 legislative days
    to submit extraneous materials to the Chair for inclusion in
    the record.
        And with that, this hearing is adjourned.
        [Whereupon, at 4:27 p.m., the hearing was adjourned.]

                                 A P P E N D I X

                                 March 22, 2016

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