[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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