[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]






 
                       THE COST OF REGULATION ON

                   AFFORDABLE MULTIFAMILY DEVELOPMENT

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         HOUSING AND INSURANCE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 5, 2018

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 115-114
                           
                           
                           
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
 
 
 
 
                                  _________ 
 
                       U.S. GOVERNMENT PUBLISHING OFFICE
                    
 31-574 PDF                    WASHINGTON : 2018      
 
 
                           

                 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
STEVAN PEARCE, New Mexico            GREGORY W. MEEKS, New York
BILL POSEY, Florida                  MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri         WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan              STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin             DAVID SCOTT, Georgia
STEVE STIVERS, Ohio                  AL GREEN, Texas
RANDY HULTGREN, Illinois             EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida              GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina     KEITH ELLISON, Minnesota
ANN WAGNER, Missouri                 ED PERLMUTTER, Colorado
ANDY BARR, Kentucky                  JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania       BILL FOSTER, Illinois
LUKE MESSER, Indiana                 DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado               JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas                KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine                JOYCE BEATTY, Ohio
MIA LOVE, Utah                       DENNY HECK, Washington
FRENCH HILL, Arkansas                JUAN VARGAS, California
TOM EMMER, Minnesota                 JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York              VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan             CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia            RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana

                     Shannon McGahn, Staff Director
                 Subcommittee on Housing and Insurance

                   SEAN P. DUFFY, Wisconsin, Chairman

DENNIS A. ROSS, Florida, Vice        EMANUEL CLEAVER, Missouri, Ranking 
    Chairman                             Member
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
STEVAN PEARCE, New Mexico            MICHAEL E. CAPUANO, Massachusetts
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
STEVE STIVERS, Ohio                  STEPHEN F. LYNCH, Massachusetts
RANDY HULTGREN, Illinois             JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DANIEL T. KILDEE, Michigan
LEE M. ZELDIN, New York              JOHN K. DELANEY, Maryland
DAVID A. TROTT, Michigan             RUBEN KIHUEN, Nevada
THOMAS MacARTHUR, New Jersey
TED BUDD, North Carolina


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 5, 2018............................................     1
Appendix:
    September 5, 2018............................................    33

                               WITNESSES
                      Wednesday, September 5, 2018

Ansel, Sue, President and Chief Executive Officer, Gables 
  Residential, on behalf of the National Multifamily Housing 
  Council and the National Apartment Association.................     5
Lawson, Steven E., Chairman, The Lawson Companies, on behalf of 
  the National Association of Home Builders......................    10
Poethig, Erika, Vice President and Chief Innovation Officer, The 
  Urban Institute................................................     6
Schloemer, James H., Chief Executive Officer, Continental 
  Properties Company, Inc........................................     8

                                APPENDIX

Prepared statements:
    Ansel, Sue...................................................    34
    Lawson, Steven E.............................................    73
    Poethig, Erika...............................................   107
    Schloemer, James H...........................................   118


                       THE COST OF REGULATION ON
                   AFFORDABLE MULTIFAMILY DEVELOPMENT

                              ----------                              


                      Wednesday, September 5, 2018

                     U.S. House of Representatives,
                                    Subcommittee on Housing
                                             and Insurance,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:04 p.m., in 
room 2128, Rayburn House Office Building, Hon. Sean Duffy 
[chairman of the subcommittee] presiding.
    Present: Representatives Duffy, Ross, Posey, Luetkemeyer, 
Hultgren, Rothfus, Zeldin, Trott, Cleaver, Velazquez, Sherman, 
Beatty, Kildee, Kihuen, and Waters.
    Also present: Representative Green.
    Chairman Duffy. The Subcommittee on Housing and Insurance 
will come to order. Today's hearing is entitled, ``The Cost of 
Regulation on Affordable Multifamily Development.'' Without 
objection, the Chair is authorized to declare a recess of the 
subcommittee at any time. Without objection, all Members will 
have 5 legislative days within which to submit extraneous 
materials to the Chair for inclusion in the record.
    Without objection, Members of the full committee who are 
not Members of this subcommittee may participate in today's 
hearing for the purpose of making an opening statement and 
questioning our witnesses.
    The Chair now recognizes himself 4 or 5 minutes for an 
opening statement. I first want to welcome our witnesses and 
thank them for participating in today's hearing, looking at the 
cost of regulation and barriers preventing affordable 
multifamily housing development.
    I have read your written statements and appreciate the time 
and effort you put in providing your insight to this 
subcommittee and to the committee as a whole. The lack of 
development is especially concerning because, while we continue 
to enjoy some of the lowest unemployment rates in our history, 
people are having trouble finding affordable housing in areas 
where jobs are being offered.
    The Wall Street Journal ran an article on May 30th of this 
year entitled, ``Rural America Has Jobs. Now It Just Needs 
Housing.'' The story starts with a man who was offered a job in 
Nebraska but had to turn it down because he couldn't find 
affordable housing to rent.
    That man ended up staying in Iowa at his current job. He 
was making $2.00 less an hour without benefits. So he had 
housing. He could have gotten a pay raise and benefits, but 
because there was inadequate housing, he wasn't able to take 
advantage of that opportunity.
    Another compelling fact from the article highlighted some 
housing and job numbers. So get this. There were over 990 job 
openings in Platte County, but only 65 homes available for sale 
in the median listing price. On the tails of The Wall Street 
Journal article, two of the organizations testifying today 
issued a study about the cost of multifamily development.
    That study reported that regulation from all levels of 
government--Federal, State, local--ccount for an average of 
32.1 percent of multifamily development costs, 32.1 percent of 
the cost. Today, I expect to hear our witnesses dive deeper 
into what those costs really are.
    It seems a majority of the costs highlighted in the study 
are at the local level where building codes and zoning laws are 
handled, all other costs are the result of requirements from 
HUD (U.S. Department of Housing and Urban Development) relating 
to fair housing or ADA (Americans with Disabilities Act) 
compliance. While we want to be sure that we are protecting our 
most important financial investments from catastrophic 
disasters, we also must recognize that building codes add to 
construction costs, which, in turn, increases the cost of 
housing.
    Testimony from both the National Multifamily Housing 
Council and the National Association of Homebuilders states 
that on average, 7 percent of regulatory costs come from 
building codes changed over the past 10 years. Mitigation is 
something I am a strong supporter of.
    We, on this committee, have worked on a comprehensive flood 
insurance bill this past Congress. Like many things, it passed 
the House and has not passed the Senate yet--we are ever 
hopeful. But doing that work, we saw that for every dollar 
spent on pre-disaster mitigation, it saves $4 on recovery 
costs. There are clear benefits to building codes. No one is 
disputing that here, building codes are important.
    But making sure we strike the right balance is critical. 
And when the pendulum swings too far over and costs increase 
too much, what should be affordable all of a sudden becomes 
unaffordable for so many of our constituents and American 
families. While some people make protecting their homes a top 
priority and spend more than others on construction costs, we 
must ensure that homes already being built to code are not 
being impacted by local authorities with additional regulations 
or red tape.
    Now, Mr. Schloemer highlights several specific examples in 
which building codes, zoning issues, or permitting approvals 
have impacted multifamily development projects. I point him out 
because he is from the great State of Wisconsin and I 
appreciate him being here.
    Some of those examples include instances in which cities 
have required you to pay for the entire cost of a traffic 
signal as opposed to the community living in that neighborhood 
paying for the traffic signal as well, or upsizing a water main 
for an unknown future development unrelated to the project that 
you are building at that point in time.
    You said another example in which a municipality in Texas 
revised three of its zoning districts to specifically exclude 
multifamily as a permitted use. It is these specifics that help 
paint a picture of what you mean by regulatory barriers to 
building. Before we get to your oral statements, I want to 
thank you all for coming and testifying today. Again, this is a 
time for us to hear from you on what the right balance is for 
us and what role do we have at the Federal level and how this 
policy trickles down to the State and municipal levels.
    What we want to do again is have smart codes, but not too 
many codes that increase the cost of building, which again 
affect our families and the most vulnerable among us. So with 
that, I yield to the Ranking Member, the gentleman from 
Missouri, Mr. Cleaver, for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman, and I appreciate as 
well your willingness to come and help us as we go through this 
very difficult issue. The Nation is facing a steady and 
dramatic decline in available and affordable housing, period, 
certainly multifamily housing is included.
    And it is hard to imagine that it has been a decade since 
the housing crisis of 2008. As I said in here with maybe a few 
people who are here now, Mr. Green, all of us on this side were 
here and it doesn't appear as if it was that long ago.
    But the economy has greatly improved since that time and 
many families particularly in minority communities were never 
fully able to recover from that crisis. The demand for rental 
units vastly increased in the years following the Great 
Recession and the availability of affordable unit, rental units 
has not kept pace.
    In addition, millennial adults burdened as my children will 
often say with high student loans and limited job 
opportunities, they have put off homeownership and they have 
made conscious decisions to stay in the rental market. And so, 
that has contributed to the growing rental affordability 
crisis. According to the National Low Income Housing Coalition, 
there is no State, metropolitan area in our Country, where a 
worker earning Federal minimum wage can afford a two-bedroom 
rental home at fair market rent by working a standard 40-hour 
week.
    I was the mayor of Kansas City for 8 years and I became 
very familiar with the challenges associated with developing 
affordable housing options. This is a challenge that is not 
only in existence in the urban core, but I represent a large 
rural area of Missouri. And there are some towns in my district 
where they have not been able to have a single new unit 
constructed in a decade.
    And so it is an issue that I am concerned with. But it also 
brings into play some other issues, like what are we going to 
do with the programs like HOME, CDBG (Community Development 
Block Grant), the National Housing Trust Fund, and the low-
income tax credit. These all must be preserved and, in fact, 
enhanced if we are going to deal with this crisis.
    And so, Mr. Chairman, at this point I would yield to Mr. 
Sherman for the remainder of the time.
    Mr. Sherman. The rent is too damn high, the paycheck is too 
damn low. Nothing we do is going to make housing affordable 
unless we increase supply. We cannot repeal the law of supply 
and demand. By first world standards, Europe, Japan, the United 
States, we have more square footage of housing per person by 
far than any of them. But we live in larger units and we need 
the number of units that we have for the family units.
    This hearing is somewhat mistitled in that it talks up--in 
that it says the cost of regulation, there is also the benefits 
of government involvement including especially FHA (Federal 
Housing Administration) Fannie and Freddie loans and Section 8. 
And if we took those away, housing would be less affordable.
    And in addition to the costs where you actually write a 
check to pay for regulation, you also have the density limits 
and the zoning and the prohibition. And I am not sure that that 
is even included in the 32 percent, I believe, that was cited 
by the Chairman, because it doesn't cost you more to build a 
three-story building than a five-story building. But if you 
can't build a five-story building, you can't pay for the land.
    In my State, we are going to require that all new housing 
have solar panels on it. Now, if lenders will factor that in 
and say we will lend more to build those units because the 
landlord or the tenant will not have the electric bill and if 
in fact those solar panels create enough kilowattage to pay for 
themselves, that may be a good thing.
    But assuming not, assuming that you just look at how much 
rent is provided and how much it costs to build the unit, this 
will mean fewer apartment buildings will be built in the State 
that has the greatest housing crisis. So I look forward to 
hearing from our witnesses how we are going to have enough 
housing units and how we are going to prevent NIMBYs (not in my 
backyard) from prevailing except in my district.
    I yield back.
    Chairman Duffy. The gentleman yields back. We now welcome 
our witnesses. Our first witness today is Ms. Sue Ansel, 
President and CEO of Gables Residential, on behalf of the 
National Multifamily Housing Council and the National Apartment 
Association, welcome.
    Ms. Ansel. Thank you very much.
    Chairman Duffy. Next witness is Ms. Erika Poethig. I hope I 
am saying your name correctly. Vice President and Chief 
Financial Officer at the Urban Institute. Next witness from the 
great State of Wisconsin, Mr. James Schloemer is the Chief 
Executive Officer at Continental Properties Company. Welcome. 
And our final witness is Mr. Stephen Lawson, Chair of the 
Lawson Companies on behalf of the National Association of 
Homebuilders (NAHB).
    The witnesses will, in a moment, be recognized for 5 
minutes to give an oral presentation of their written 
testimony. Without objection, the witnesses' written statements 
will be made part of the record following their oral remarks. 
Once the witnesses have finished presenting their testimony, 
each Member of the subcommittee will have 5 minutes within 
which to ask all of you questions.
    You will note that on your table, there are three lights. 
The green light means go. The yellow light means you have 1 
minute left. And obviously, when the red light turns on, that 
means your time is up. The microphones are sensitive, so make 
sure you are speaking directly into them and make sure that 
they are actually on.
    Now with that, Ms. Ansel, you are recognized for 5 minutes.

                     STATEMENT OF SUE ANSEL

    Ms. Ansel. Chairman Duffy, 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 (NMHC) and the National Apartment Association (NAA) to 
discuss regulatory barriers to developing multifamily housing 
and their impact on reaching our shared goal of addressing our 
Nation's rental affordability challenges.
    I am the Chairwoman of NMHC and Chief Executive Officer of 
Gables Residential, a vertically integrated real estate company 
specializing in development, construction, ownership, 
acquisition, financing, and management of multifamily and 
mixed-use communities. Gables manages over 30,000 apartment 
units and over 430,000 square feet of retail space.
    I see the harmful impact of our Nation's antiquated, 
duplicative, and costly regulatory systems on a daily basis. As 
outlined in a recent study by NMHC and the National Association 
of Homebuilders, 32 percent of multifamily development costs 
are attributable to local, State, and Federal regulations. And, 
in a quarter of the cases, that number can reach as high as 
42.6 percent.
    It is not easy to build apartments. It can take up to a 
decade just to break ground. Outdated zoning laws, unnecessary 
land use restrictions, arbitrary permitting requirements, 
inflated parking requirements, environmental site assessments, 
and more discourage housing construction and raise the cost of 
those properties that do get built. Localities impose a variety 
of fees on new housing, including impact fees, inspection fees, 
property taxes, inclusionary zoning mandates, and rent control 
rules further discourage housing investment.
    These time and cost burdens lead to fewer apartment homes 
being built, and the apartments that do get built require 
higher rents to cover the high cost of development. Make no 
mistake, smart regulation plays a critical role in ensuring the 
health and well-being of the American public. But well-
intentioned local, State, and Federal regulations are too often 
onerous and cumbersome and increase development and operational 
costs, sometimes forestalling development altogether.
    My written testimony outlines in detail a host of barriers 
to development and examples from across the country where red 
tape has driven up project costs for both apartment 
construction and renovation. For example, in Texas, Gables was 
required to replace and increase the capacity of a storm line 
by 75 percent in conjunction with the development of a site and 
to help address community flooding unrelated to the project.
    This resulted in 2 months of additional permit time, 30 
days of additional build time, and $250,000 in additional 
costs. While the example I cite is a local requirement, Federal 
regulations also result in additional costs. The aforementioned 
cost of regulation study found that complying with Federal 
requirements added significant development costs.
    For example, OSHA (Occupational Safety and Health 
Administration) requirements account on average for 2 percent 
of total project costs, while costs associated with the changes 
to building codes, which are developed in conjunction with the 
Federal Government, accounted on average for 7 percent of total 
development cost. My written testimony includes a variety of 
solutions that would reduce regulatory red tape impacting the 
development and operations of multifamily properties.
    It should be noted that what works in one jurisdiction 
might not work in another. But utilizing outside-the-box 
thinking and innovative solution-oriented approaches can lead 
to progress. Some local solutions include establishing by right 
zoning, reducing parking requirements, or providing fast-track 
permitting approval for affordable housing developments.
    Federal policy solutions range from incentivizing local and 
State governments to partner with the private sector to boost 
housing production at all price points to making commonsense, 
modest changes to the Community Reinvestment Act to remove 
impediments to obtaining credit for workforce and affordable 
multi-housing.
    Additionally, Congress could further improve and streamline 
the Section 8 Housing Choice Voucher Program to make it easier 
for property owners to participate and provide increased and 
adequate funding for subsidized housing programs. The National 
Multifamily Housing Council and the National Apartment 
Association estimate that we need to build 4.6 million new 
apartments by 2030 to meet demand.
    Meeting that demand will require both revamping how we 
build apartments and the courage of policymakers at the 
Federal, State, and local levels to implement inventive policy 
ideas, provide incentives, and reduce impediments.
    On behalf of the apartment industry and our 39 million 
residents, we stand ready to work with Congress to ensure that 
every American has a safe and decent place to call home at a 
price that enables individuals to afford life's necessities. 
Thank you.
    [The prepared statement of Ms. Ansel can be found on page 
34 of the Appendix.]
    Chairman Duffy. Thank you. Ms. Poethig, you are recognized 
for 5 minutes.

                   STATEMENT OF ERIKA POETHIG

    Ms. Poethig. Thank you, Mr. Chairman, Ranking Member 
Cleaver, and Members of the Housing and Insurance Subcommittee 
for the opportunity to be on this expert panel. My name is 
Erika Poethig and I am Vice President and Chief Innovation 
Officer at the Urban Institute, which is based here in D.C.
    We are a non-profit research organization dedicated to the 
power of evidence to improve lives and strengthen communities. 
The views expressed before you today are my own and should not 
be attributed to the Urban Institute, its trustees, or its 
funders.
    Nearly every county in the United States lacks enough 
affordable rental housing to meet residents' needs. With 
expanded rental demand since the Great Recession, this crisis 
is particularly urgent for extremely low-income households and 
those living in rural, suburban, and urban counties in the 
heartland and on the coasts.
    Because of the widespread nature of this problem, 
increasing the supply of affordable rental housing deserves 
national attention. And I am so glad that you are holding this 
hearing today, because I believe this issue deserves that kind 
of attention. While regulatory reforms can play an important 
role, they are not sufficient to fully address America's 
affordability challenge.
    When considering regulatory reforms, I want to make three 
points. First, the multifamily housing supply challenges we 
face are the result of a market failure. It simply costs more 
to build and operate rental housing than many low-income 
Americans can afford to pay in rent. In fact, 11 million 
households pay more than 50 percent of their income in rent. 
That is a quarter of all renters. Public investment and 
subsidies are necessary to bridge the cost gap and meet the 
needs of extremely low-income renters, which account for 70 
percent of these households.
    Second, exclusionary zoning and exclusionary practices 
increase the cost of development, drive economic and racial 
segregation, and are grounded in the legacy of racial 
discrimination. Promoting more inclusive housing development 
will help lower development costs, integrate neighborhoods, and 
begin to repair a long history of racial discriminatory 
practices that still play out today.
    Third, not all regulations are the same. Many housing 
regulations are grounded in efforts to protect public health 
and well-being, and a growing body of research links housing to 
health outcomes with ample evidence that healthy housing 
regulations protect children and older adults. Policy changes 
to reform regulation should retain and expand measures to 
protect health and well-being.
    Between 2010 and 2030, there will be five new renter 
households for every three new homeowners. This increase in 
demand coupled with regulatory limits on housing supply puts 
pressure on rents. These costs the lowest-income Americans like 
older adults on fixed incomes can least afford. While removing 
barriers to multifamily development, such as exclusionary 
zoning, would increase supply and lower development costs, our 
research shows that these reforms would not be sufficient to 
close the gap for millions of American families.
    We need to expand rental assistance to all eligible 
households to increase housing stability. Exclusionary zoning 
and discriminatory practices come at a real cost to people. 
Economic and racial segregation results in unequal distribution 
of access to opportunity and exposure to harm.
    As my colleagues found in studying 20 years of data in 
Chicago, higher levels of economic segregation and black/white 
segregation were associated with lower per capita income for 
blacks. And additionally, higher levels of black/white 
segregation was associated with lower levels of educational 
attainment for both blacks and whites as well as higher 
homicide rates.
    This is exactly why the requirement for communities to 
affirmatively further fair housing is so important. Without a 
requirement to facilitate inclusive communities and housing, 
homeowners of all political stripes oppose change at the 
expense of low-income renters and people of color. And research 
shows us that allowing and encouraging builders to create 
housing that expands choice for all households is a win-win 
scenario.
    We need a more balanced housing policy in this country that 
combines reducing local regulatory barriers to multifamily 
development, expands Federal rental subsidies to all those that 
qualify, promotes healthy housing, and fully implements the 
obligations to affirmatively further fair housing. I hope this 
testimony shows that rationalizing local zoning and supporting 
the housing needs of our lowest-income neighbors will benefit 
every community across the Nation.
    Thank you for this opportunity to testify before the 
committee. I am happy to answer any questions that you have.
    [The prepared statement of Ms. Poethig can be found on page 
107 of the Appendix.]
    Chairman Duffy. Thank You. Mr. Schloemer, you are 
recognized for 5 minutes.

                  STATEMENT OF JAMES SCHLOEMER

    Mr. Schloemer. Chairman Duffy, Ranking Member Cleaver, and 
Members of the subcommittee, thank you for this opportunity to 
discuss regulatory barriers to affordable housing development.
    These barriers pose significant challenges for developers 
of apartment housing nationwide. I am Jim Schloemer, Chief 
Executive Officer of Continental Properties Company. We develop 
apartment communities across 24 States and are recognized as 
one of the largest apartment developers in the country.
    Continental Properties has a unique business model in the 
industry. We are a production builder of reasonably priced 
workforce-attainable apartment homes, delivering over 3,000 new 
apartments each year. In contrast to recent urban core 
development trends, we build only in suburban and second-tier 
markets, some of the Nation's most underserved.
    Employing prototypical designs for all locations, we gain 
efficiencies in construction and operation that allow us to 
reduce costs, resulting in 51 percent of the apartments in our 
portfolio offered at rents affordable to households earning 
just 80 percent of area median income.
    This is a rare price point for new home construction and we 
believe that a 5 percent reduction in our development costs 
would allow us to offer 62 percent of our apartments at rents 
affordable to households earning 80 percent of AMI (area median 
income). Our apartments are not subsidized, but nearly all of 
our apartment communities are financed with mortgages issued 
through a GSE (government-sponsored enterprise).
    The mortgages issued by the GSEs for multifamily financing 
have proven to be safe and effective in encouraging the 
creation of new multifamily housing. In Continental Properties' 
experience, the GSE-sponsored mortgages have supported our 
ability to provide new apartments at workforce attainable 
rents.
    Over the past 5 years, the cost to develop apartment homes 
has increased drastically, dramatically faster than rent 
increases in all 24 States in which we do business. This trend 
cannot be sustained. Unnecessary, overly burdensome policies 
create significant barriers to the development of apartment 
homes. Their impacts increase the cost of development, restrict 
supply, and ultimately raise monthly rents.
    Our industry and our company are constantly seeking ways to 
control development costs. Easing regulatory burden is a 
critical consideration as we explore solutions to close the 
affordability gap in America's housing. We regularly face 
hurdles intended to deter apartment development at the local 
level, and even well-intentioned policies promulgated by State 
and Federal authorities can inhibit apartment development.
    My written testimony includes detailed examples of these 
challenges. Significant barriers exist in zoning rules, 
permitting systems, gratuitous infrastructure demands, onerous 
building codes, and land use requirements. The entitlement 
process is often structured against multifamily housing, rarely 
permitting by right development.
    Municipalities employ arbitrary code interpretation and 
impose open-ended community demands. It is not uncommon for 
jurisdictions to deny rezoning requests for multifamily 
development despite documented substantial housing needs in 
those very communities. In one case, contradictory 
decisionmaking added 8 months to our approval process and 
increased our total project costs by over 3-1/2 percent.
    Municipalities are also increasingly looking to pass along 
future infrastructure costs to developers, while some 
infrastructure enhancements around a development site may be 
mutually beneficial, jurisdictions often exploit developer 
resources and, by extension, burden renter households. 
Frequently, arbitrary mandates on dwelling size, project 
density, or site features like enclosed parking unnecessarily 
increase development costs.
    Federal regulation can significantly increase the cost of 
affordable apartment development. For example, while apartment 
providers strongly support the goals of Federal accessibility 
laws, provisions that exceed practical needs for accessibility 
and impractical enforcement policies drive up costs. Compliance 
is so complex that developers often employ consultants to guide 
conformance.
    Regulations fail to consider conditions that impact sincere 
compliance intentions such as topography, limitations of 
construction materials, and construction tolerances. By better 
aligning requirements with consumer needs for accessible homes, 
development costs could be significantly reduced while 
continuing to protect the needs of disabled residents and 
guests.
    Housing affordability is a critical issue. I applaud your 
efforts to address this problem. Policymakers at every level of 
government have a role to play in removing obstacles to housing 
production and providing a supportive environment for the 
creation of affordable homes. Thank you.
    [The prepared statement of Mr. Schloemer can be found on 
page 118 of the Appendix.]
    Chairman Duffy. Thank you. Mr. Lawson, you are recognized 
for 5 minutes.

                   STATEMENT OF STEVEN LAWSON

    Mr. Lawson. Thank you, Chairman Duffy, Ranking Member 
Cleaver, and Members of the subcommittee. I appreciate this 
opportunity to testify today. My name is Steve Lawson. I am 
Chairman of the Lawson Companies and also a third-generation 
homebuilder and multifamily developer from Virginia. I also 
serve as the Chairman of NAHB's Multifamily Council.
    Homebuilding is one of the most regulated industries in 
America. And while there is a very necessary role for sensible 
regulation, the cost of excessive regulation creates a 
tremendous burden to the production of affordable housing. NAHB 
and NMHC produced a joint study to raise awareness of how much 
regulation currently exists, how much it costs, and also to 
encourage governments to thoroughly consider the implications 
for housing affordability when proposing new directives. The 
study found that, on average, nearly one-third of the cost of 
multifamily development is attributable to local, State, and 
Federal regulations.
    The top regulatory barrier determined by the joint study 
was the compliance with increased building code requirements. 
These account for 7 percent of total development costs. 
Agencies such as the DOE (Department of Energy), EPA (U.S. 
Environmental Protection Agency), FEMA (Federal Emergency 
Management Agency), and HUD have used the codes' development 
process to advance their policy goals. In the recent energy 
code hearings, DOE testified and gave public support for code 
changes that would have removed flexibility and increased costs 
without improving energy efficiency.
    Inclusionary zoning policies are another costly barrier 
that require developers to subsidize a specific percentage of 
total units within market-rate developments and set income-
based rent controls for the subsidized units. IZ, as it is 
called, has become the preferred or only method, it seems, of 
achieving fair housing goals.
    However, IZ acts like a tax on housing. And when it is 
used, it adds 5.7 percent to the cost of development. In fact, 
the burden of the subsidized unit actually raises the market, 
the cost of the market rate units, which results in pricing out 
the middle class.
    Trade issues such as the imposition of a softwood lumber 
tariff on imports of lumber from Canada, a shortage of skilled 
labor, local land use challenges, and NIMBY opposition often 
kill the development of affordable housing before it even has 
begun. For example, the joint study found that 85 percent of 
developers experienced added costs or delays due to 
neighborhood opposition.
    Additionally, the homebuilding industry is experiencing a 
major labor shortage. In a recent NAHB survey, 84 percent of 
builders identified the labor shortage as a problem which makes 
it the industry's top concern for 2018. What we see on the 
ground is that the skilled labor force is aging and new workers 
are not entering the trades. We need to encourage careers in 
construction. These are good family supporting jobs and NAHB 
has pledged to educate and train over 50,000 new workers over 
the next 5 years through our workforce development arm, the 
Home Builders Institute.
    The ability of the homebuilding industry to address 
affordable housing needs is dependent on a housing finance 
system that provides adequate and reliable credit. NAHB urges 
lawmakers to consider the critical roles that the GSEs, FHA, 
USDA, and other entities play in the housing finance system and 
take into consideration multifamily developments' access to 
credit while examining legislation for housing finance reform.
    Last, while regulatory reform will help us lower 
development costs to reach lower income households, it is 
financially infeasible to build new affordable rental units 
without Federal assistance. Regulatory reforms are not a 
substitute for programs like the low-income housing tax credit, 
project-based Section 8, HOME, or CDBG.
    I would also be remiss to have this opportunity and go 
without applauding the New Democrat Coalition for releasing a 
white paper earlier this year, which seeks solutions to the 
chronic problems facing the housing industry. NAHB looks 
forward to working with them as they continue to help grow and 
support affordable housing.
    Thank you again, Mr. Chairman, for the opportunity to 
testify today, we appreciate your efforts to examine regulatory 
burdens and we look forward to working with you to expand the 
availability of affordable housing.
    [The prepared statement of Mr. Lawson can be found on page 
73 of the Appendix.]
    Chairman Duffy. Thank you, Mr. Lawson, and I thank our 
whole panel for their oral testimony.
    The Chair now recognizes himself for 5 minutes. And, Mr. 
Lawson, I think you bring up a good point in regard to the need 
for more young people to get into the trades. I think the Home 
Builders Institute were at the White House about a month ago on 
that very issue, committing to train more young people to make 
sure that as folks retire, they are being replenished with 
really good paying jobs. I suppose that is a different hearing 
though, so I am not going to get into that, but I want to 
commend the homebuilders, for that is a problem we are having 
across the country.
    So, to the panel, we are saying, I think, the study that 
you cited, 32 percent of the cost of multifamily projects is 
from regulation, correct? Is this 32 percent or a third of the 
cost, is that from stupid regulation, smart regulation, or a 
combination of both? I am asking this question because if we 
were in Florida, I want certain regulation in regard to 
flooding, I want certain regulation in regard to hurricanes and 
wind, right? It is going to obviously increase the cost of a 
home in Florida.
    If you had to break that 32 percent down, what percent of 
that is over-regulation versus appropriate regulation?
    Ms. Ansel, can you answer that question?
    Ms. Ansel. Sure, I am happy to. Thank you for the question. 
I think it is a combination of both smart regulation and over-
burdensome, antiquated, duplicative regulation.
    Chairman Duffy. You are going--
    Ms. Ansel. So, it is hard to put a specific percentage to 
that but often it is a combination of local, State, and Federal 
regulation that is often in conflict with each other, is 
duplicative, and creates additional time and burden. So, over-
broad regulation would be what I would declare is the biggest 
problem.
    We need to very carefully look at the unintended 
consequences of the regulation. Smart regulation is important; 
it is important. We have always been supportive of that but it 
is time to take a look at specific regulation and assess their 
true unintended consequences.
    Chairman Duffy. Mr. Schloemer or Mr. Lawson, either one of 
you.
    Mr. Schloemer. I would share Ms. Ansel's response that it 
is a combination of appropriate and unnecessary regulation. The 
examples you cited for hurricane protection, for example, in 
Florida is entirely appropriate. But as I cited in one of my 
examples, if we just reduced our cost by 5 percent, we think we 
could increase the amount of housing available to families 
earning less than the area median income by a factor of 20 
percent, from 51 percent to 62 percent or an additional 11 
percent of all apartments in our portfolio.
    And that isn't an unreasonable target to be shooting for. 
One-sixth of that regulatory cost to be reduced, to be 
reconsidered I think is an appropriate target and it certainly 
represents a number that is realistically within the 
unnecessary or over-burdensome regulation.
    Chairman Duffy. Mr. Lawson?
    Mr. Lawson. I would agree with previous speakers and also 
point out that I think we need to consider the cumulative 
effect of regulation. I am certainly not, I probably didn't 
coin the phrase but I have heard people say regulatory creep 
and that is we add one more regulation one year which is a good 
idea. The next year, it is another good idea. The year after, 
it is another good idea and so on and so on.
    And I think what has happened is we have now found our 
place--found ourselves in a place where the cumulative effect 
is detrimental.
    Chairman Duffy. So, Mr. Lawson, are you in the business of 
doing projects to lose money?
    Mr. Lawson. No, I am not.
    Chairman Duffy. Ms. Ansel? Mr. Schloemer?
    Ms. Ansel. We are not.
    Chairman Duffy. I didn't think so. So, obviously, you are 
going to pass these increased costs onto your renters right?
    Ms. Ansel. We are required to.
    Chairman Duffy. Right. And so, when we have increased 
unnecessary costs of projects due to regulation, in the end the 
people that we are trying to help, those who need affordable 
housing, are the ones that are hurt the most. Is that not fair?
    And Mrs. Poethig, I appreciate your testimony and you hit a 
wide range of things. Mr. Cleaver, as you were testifying, we 
were talking about your testimony and I think he is going to 
hit on some of the issues as well. But you would agree with 
this that we want to strike the right balance in regard to 
regulation, right?
    Ms. Poethig. Yes. And I think it would be important to 
study the cost and benefits of different regulations because I 
do think they provide some societal benefits, some health 
benefits, some other kinds of benefits to well-being, and we 
want to take those into account, because I think the tradeoffs 
you are raising are really important in terms of both 
affordability. But also let us think about some of the other 
benefits that regulations might be providing as we think about 
ways to rationalize them.
    Chairman Duffy. And I think that is important for us to 
look at, and every regulation probably has a do-gooder and pure 
heart behind it, but if we have so many regulations that do so 
many great things but they cause the cost to rise so much that 
people can't afford to get into the residence, that also is a 
problem. I think we have to look at what is a good policy but 
what is affordable policy as well.
    Sometimes we don't all need to have BMWs. Sometimes we just 
may want a Yugo. I don't think they make Yugo's anymore but, 
sometimes you just need a simple car to get you to work or a 
motorbike, and especially if you can't afford a high-end car.
    My time has expired but one question you guys can respond 
to in writing is obviously, we are very cognizant of the lanes 
of the Federal Government, the lane of the State government, 
and the lane of municipalities, and where a lot of us don't 
like to cross that lane. But if you have advice to us on what 
we can do at the Federal level through the whole spectrum, from 
us on down, how we can streamline this approach, I would 
welcome your insight on that, on how we can lead the way to 
have an impact up and down the food chain if you will.
    With that, my time has long expired, I now recognize 
Ranking Member from Missouri, Mr. Cleaver for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman.
    I am going to be beating up on myself on this a little. I 
may be the only former mayor here. But as we are talking about 
the regulations, the truth of the matter is most of the 
regulations actually have nothing to do with the Federal 
Government. Most of the regulations are municipally handled 
and, to some degree a few, the State government, but most of 
them are municipal.
    I was in San Francisco over the weekend, a city that is I 
think 7-1/2 half square miles, and they have less than 10,000 
people moving in in 10 years because they can't afford to move 
in there. So, the price of housing has just gone, and my 
analysis of that is that the city made some horrible zoning 
decisions that made it possible for or reduced the chances of 
people with low incomes to move in.
    So, I connect that in many ways with the need for fair 
housing, and I think that the Brookings Institute study is 
rather clear. If you have poor fair housing decisions, you are 
going to end up with also the municipalities making decisions 
that would also eliminate--if they also eliminate really 
serious fair housing issues, you are going to wipe out any 
opportunities for people to come in and build new housing and 
buy new housing, and that is just the way it is.
    Am I putting too much on the fair housing issue and should 
we be, as a Federal Government, in any way sending signals back 
to municipalities and State governments about what they need to 
do? We have some issues. I think we need to have low-income tax 
credits. I think we need more money in CDBG because it offers 
municipalities opportunities to use flexible dollars from the 
Federal Government, we need 202 loans for senior housing, all 
of this.
    But can you focus a little on the fair housing issues and a 
little if you would on what the Federal Government could do to 
impact local government, and are we trespassing? Yes?
    Ms. Poethig. Thank you, Ranking Member Cleaver. I see these 
two issues as absolutely connected and my written testimony 
goes into greater detail. Because of the history of racist and 
discriminatory policies at the local level that are tied to the 
zoning practices and to redlining, the limits that we see on 
multifamily development are entwined with fair housing issues.
    So, the Affirmatively Furthering Fair Housing rule was 
absolutely intentioned to enable local communities to really 
evaluate and assess those policies, to look for ways in which 
they could improve the environment for multifamily rental 
housing, but also to increase access to opportunity for all 
residents in the city. And I think we have to understand the 
history that led us to where we are today and the connection 
between fair housing and the limitations on multifamily 
development to see the benefits of the Affirmatively Furthering 
Fair Housing rule to stimulate more rental housing.
    Mr. Cleaver. San Francisco is the second largest or the 
largest city in California, which one it is I am not sure, but 
the weird thing about it is that it is a city that is only 6 
percent African-American and dropping, by the way. And every 
decision made by the City Council, unless it is with a great 
intentionality to create opportunities using fair housing as 
the motivation, we are going to see one of our largest cities 
in the country with virtually no minorities or at least no 
African-Americans.
    I think there is a large population of Asians. And I am 
hoping that from this discussion, and if we had time I would 
really like to know are we trespassing or should this hearing 
be done in city halls around the country instead of here in 
Washington?
    Ms. Ansel. Ranking Member Cleaver if I might add, National 
Multifamily Housing Council and NAA have always been strong 
supporters of fair housing, we believe in it completely. The 
issue we have is there is not enough supply in our communities, 
in our apartment homes. And so, we need to find ways to reduce 
the costs. The additional and over-burdensome regulation 
reduces the amount of new multifamily homes that are built.
    Mr. Cleaver. In cities, these are in cities.
    Ms. Ansel. In cities. Well, throughout--in cities and in 
rural areas as well. And so, I think there is a piece that the 
State, the local, and the Federal Government can play in this. 
I don't believe that we are overstepping our bounds. I think 
the Federal Government can look for ways to incentivize local 
and State governments to partner with private organizations to 
create the opportunities to build more apartment homes.
    The additional supply will solve many of the problems that 
we have discussed here today and there are a number of steps 
that we can take to do that.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the Vice Chairman of the 
subcommittee the gentleman from Florida, Mr. Ross, for 5 
minutes.
    Mr. Ross. Thank you, Chairman. I thank the panel for being 
here. We are here today not to talk so much about regulation in 
and of itself of the housing industry especially the 
multifamily industry, but also the overburden caused by certain 
regulations. And I think that the title is correct, it is the 
cost of regulation on affordable housing, the cost should have 
a return and that return should be quantified objectively by 
assessing the health, safety, and welfare of those that we are 
trying to protect.
    For example, in Florida in 1992, we had Hurricane Andrew, 
we realized our housing stock was flimsy as could be. We 
imposed the Nation's strongest building code, but as a result 
we have had a great return, lower insurance premiums, but most 
importantly we have kept people from being displaced from 
having to lose their home including in a multifamily housing.
    Look at Louisiana, for example, that lost a congressional 
seat as a result of Hurricane Katrina because so many people 
were displaced.
    But what I want to talk about here is I think it is 
important that we consider regulations that increase the cost 
of capital used for multifamily housing development. In what 
ways do regulations that increase the cost of financing for 
these projects, costs that are no doubt passed along in some 
form to the end-users, complicate efforts for affordable 
housing?
    For instance, Mr. Schloemer, would you agree that various 
regulatory rules relating to financing such as the 
classification of High Volatility Commercial Real Estate or 
HVCRE loans impose hidden fees on the potential housing process 
and lead to the impediment of better housing projects?
    Mr. Schloemer. I think the short answer to that question is 
yes, I would agree. With the introduction of that particular 
policy, one of the things that we saw was a reduction in 
availability of bank-originated construction funds.
    Mr. Ross. Yes. Increased capital requirements with a loan-
to-value of greater than 80 percent and you are impeding the 
ability to meet a demand that the market has stressed on your 
industry.
    Mr. Schloemer. The cost of the equity component of the 
financial stack, the capital stack is much higher than the debt 
portion. And so, therefore, by increasing the amount of equity 
capital that was put in, it increased the overall capital cost.
    Mr. Ross. And then to piggyback on the Ranking Member Mr. 
Cleaver, I think the Federal Government may be, in its own 
subtle way, increasing its regulatory influence on the 
multifamily housing just through the finance regulatory scheme. 
Would you agree?
    Mr. Schloemer. Yes, I would.
    Mr. Ross. Mr. Lawson, although local governments generally 
have the authority for building codes, your testimony states 
that Federal and State governments are becoming increasingly 
involved in the process. Do you have some examples of the 
Federal Government becoming more involved in the local building 
code process?
    Mr. Lawson. This is something that our staff has worked on 
in great detail. So, I can't say I am the most knowledgeable, 
but I do know that the energy codes department has had or the 
DOE through the energy codes process has taken a--
    Mr. Ross. It imposed a higher burden.
    Mr. Lawson. Higher burden but taken a very prescriptive 
approach instead of a more performance-based approach, meaning 
advocating for certain ways to achieve energy gains, energy 
efficiency gains when what we advocate as the industry is give 
us a performance measure--
    Mr. Ross. And let us meet that.
    Mr. Lawson. To achieve and let us figure out the best way 
to do that instead of picking winners and losers within the 
building supply category.
    Mr. Ross. I appreciate that. Let me follow up on something 
in your earlier testimony, too, that I really want to hit on. 
And you talked about labor shortage. And I have been very 
concerned about this because I have talked with my road 
builders, I have talked with construction, I have talked with 
many of the service industries out there, and the lack of 
skilled labor is adversely impacting our ability to sustain the 
GDP growth we are now experiencing.
    You have talked about increasing careers in the 
construction arena and skilled labor. Let me ask you this 
specifically. That is a long-term program. And I think it is a 
very valid program that I support strongly in vocational 
training in skilled areas, but what about the use through an H-
2B program, increasing the H-2B program so that we can meet our 
immediate labor shortage with foreign nationals coming here for 
temporary purposes? Is that something that you think would be 
supportive for your industry?
    Mr. Lawson. Absolutely.
    Mr. Ross. I appreciate that.
    Ms. Ansel, in your testimony you note that the issue of 
rent control can be counterproductive and can serve as a 
disincentive to investing and developing the diversity of 
housing units that a community requires.
    Are there policy alternatives that you would suggest to 
rent control or ideas that local governments can consider 
instead of rent control? And I have got 2 seconds.
    Ms. Ansel. I think there are a number of policy options 
that are available. We talked a little bit about different 
ways. Again, I go back to the issue, why rent control is a 
problem is because it is against economic forces of supply and 
demand. And it will serve to reduce the amount of supply of new 
apartment homes.
    The thing that we need to do is to find ways to increase 
the ability for apartment developers to create more supply, 
that will have the biggest impact on our ability to reduce 
rents and create more affordable and workforce housing.
    Mr. Ross. Thank you. I yield back.
    Chairman Duffy. The gentleman yields back. The Chair now 
recognizes the Ranking Member of the full committee, the 
gentlelady from California, Ms. Waters, for 5 minutes.
    Ms. Waters. Thank you very much, and I appreciate the 
opportunity to share some of my thoughts. Having listened to 
some of the presentations that have been made and particularly 
reading Mr. Schloemer's testimony, I am absolutely moved to 
first say that most of the Members of this committee are 
committed to the proposition that we have to have more 
multifamily housing. I believe that this could be and should be 
a bipartisan issue because I think all of our communities all 
over this country are impacted by a combination of things that 
all of you are identifying.
    And I am wondering if we could ask you to join with us in 
helping to eliminate some of these barriers, because I think 
that you have the knowledge. You have the background. And you 
understand how all of this works.
    And while I have not had an opportunity to talk with my 
Ranking Member of this subcommittee or any other Members about 
this, just looking at these presentations, let me just say 
this. We are focused particularly on this side of the aisle for 
support for infrastructure development and the funding by the 
Federal Government to improve the infrastructure of this 
country.
    And while a lot of people think about that in terms of 
issues like repairing bridges, developing new water systems, as 
I look at the testimony, I think there are a lot of things that 
can be done with infrastructure development and repair that 
would ease some of the burdens for the development of 
multifamily housing.
    In looking at some of this testimony where you are required 
to pay for fire hydrants and even though it wasn't said here, I 
talked with a developer that had to move a big pole that had to 
do with the electricity distribution and all.
    I think that should be part of what we pay for with 
infrastructure. Infrastructure helps to reduce the costs and 
makes it easier for our developers if they did not have to be 
involved with other areas other than getting that housing 
developed.
    And so I would like you to think about that and think 
about, as we move toward support for infrastructure development 
in the Federal Government, what can you identify that could be 
included in infrastructure development that would reduce the 
cost of multifamily development in ways that make good sense?
    The other thing I would like you to think about is this, a 
lot of this has to do with the locals. And whether we are 
talking about zoning laws or other kinds of laws that basically 
discriminate or whether we are talking about systems that don't 
work, when someone can have something sitting on their desk for 
a month and not move it, and permitting, et cetera.
    I would like us to think about incentives, real incentives 
for locals to get rid of these impediments to development. You 
know what many of them are. And you have experienced many of 
them. Now, I have heard a lot of talk about one-stop shops that 
could expedite permitting and all of that. But I don't know if 
they really work as well as they should.
    I think some of the ideas are good, that they want to have 
one-stop shops but in some of my cities, they have one-stop 
shops but they don't do any better than when they were not one-
stop shops. And so, what can be included in this permitting and 
other kinds of things that you have to go through that would 
help to expedite the process?
    I believe that we can come together around these issues. 
And I believe that all of us must be committed to the 
proposition that we can develop low-income housing. I, at the 
Federal level, support, of course, Section 8 and subsidies and 
the Housing Trust Fund and all of that because we need money. 
We can't do it without the dollars.
    And if we can get together and support the dollars that are 
needed then I think these other kinds of ideas may go a long 
way to reduce that cost.
    I think Mr. Schloemer, you said you--under certain 
conditions you could reduce by 5 percent development of 
multifamily housing. Let us see, we believe that a 5 percent 
reduction in our development costs would allow us to offer 62 
percent of our apartments at rents affordable to households and 
but 80 percent of AMI income level, which I think is 
significant, significant. And if in fact we could concentrate 
on multiple ways by which to reduce by 5 percent or more or 
some percentage, we could get some of this done.
    So, I would like you not to think purely about the 
development of low-income multifamily housing and not think 
about these other kinds of issues such as get right in the 
middle of support for infrastructure development with the 
Federal Government and identify specifically, I think you can 
do that, ways by which you have had to pay for costs that you 
never anticipated or costs that you should not have to bear 
because they want you to do something that perhaps the city 
could have done or the Federal Government could have helped 
with.
    With that, I yield back the balance of my time. Thank you, 
Mr. Chairman.
    Chairman Duffy. There is no time left, Ranking Member.
    The Chair now recognizes the gentleman from Missouri, the 
Chairman of the Subcommittee on Financial Institutions, Mr. 
Luetkemeyer for 5 minutes.
    Mr. Luetkemeyer. Thank you Mr. Chairman and just to follow 
up on the remarks of the Ranking Member. Infrastructure is 
necessary for any sort of development that you do, so how you 
structure that infrastructure it pays for is really important. 
And I agree with her to a certain extent, however, I know in my 
area a lot of development is done with tax increment financing, 
so that the cost is not borne by the individuals who do 
business with the commercial site or the people who rent 
apartments or homes already from whatever that area.
    So they use a tax that whatever commercial development is 
in the area, the increased tax activity pays for the bonds to 
be able to build new roads, new water lines, sewer lines, or 
whatever, so that it is not borne by the people who have to do 
business with or rent apartments from.
    So, to me that is the way that this can be done. I don't 
know if every State does this in the country, but Mr. Lawson 
and Mr. Schloemer, are you familiar with that? You guys are in 
the business.
    Mr. Schloemer. I am familiar with that. It has different 
acronyms in different parts of the country. For the most part, 
in suburban and second-tier markets it is not used for housing 
development.
    It is often used for commercial development as you 
characterize it, that shopping centers, office buildings, 
industrial facilities, and not geared toward housing 
development. So we have not utilized it. And it has not been an 
available avenue for us in any of our housing development.
    Mr. Luetkemeyer. Mr. Lawson?
    Mr. Lawson. I would echo those comments. I would also say 
that to get a tax increment financing district established is a 
very political process and one that takes a long time and a lot 
of money.
    Mr. Luetkemeyer. I don't disagree with you there. A couple 
years ago I went to New Orleans and saw how they rebuilt their 
housing structure down there. And they have a lot of housing 
now that is the second and third stories, the buildings that 
they have the ground floor for commercial use.
    So I think that is an opportunity if you have mixed use of 
your structures that you could utilize this tax increment 
financing situation for the building and constructing in these 
certain areas but just as a thought.
    I know the Chairman made a great point a while ago when he 
said good policy is not necessarily affordable policy. And I 
think that is what we are talking about today. Nobody denies 
that some of the rules and regulations are not well-
intentioned. It is, can we afford this? And does it put more 
burden on people, businesses, whoever, than we can afford to be 
able to do?
    And one of the things--I Chair the Financial Institutions 
Subcommittee. And we had a roundtable yesterday with regards to 
a new rule that is being promulgated. It is not yet 
implemented, although it is going to be done pretty shortly. 
This deals with how banks structure their loan loss reserve for 
anticipated losses. It is called CECL (current expected credit 
loss). And what it does is it causes them to look forward 
rather than backward as to whether they make a house loan on a 
rural area, a multifamily housing loan, whether they are going 
to have any loss on that, and then they have to reserve for 
that, which you have to reserve an account before.
    Now, in discussion yesterday while the tax accountant guys 
with their thick rimmed glasses and Coke bottle jobs really 
thought this was a great idea, all the rest of the folks around 
the table who deal with this in the real world said, Look, this 
is going to really increase costs. We may actually reduce the 
ability of us to provide services on certain products. If you 
have seen at the banks, already they have gotten rid of a lot 
of small-dollar lending. Some banks no longer do home mortgages 
at all. So, we have another rule that is while it is well-
intended here and this is by a separate entity, this is not 
even the government. This is separate entity out here, the FASB 
folks who are looking at this.
    And it is actually going to impact on, we have a discussion 
going about to CRA, which is Community Reinvestment Act, 
whether the banks can comply with some of the requirements of 
that, if you go to CECL, are you going to restrict the ability 
to loan to certain folks because they increased costs. Have you 
all talked about this or are you aware of CECL at all? Ever 
heard of it?
    Mr. Schloemer. I have not in my role in development, but as 
a bank director--
    Mr. Luetkemeyer. OK. Are you concerned about it at all as 
your role as a bank director, knowing what it could do to the 
folks that you do business with?
    Mr. Schloemer. Absolutely. The particular bank that I serve 
on the board of is a very financially sound bank but it is the 
CECL requirements and the proposals have had concern over our 
ability to make as many loans and to the extent that the bank 
would like to make loans, further restriction.
    Mr. Luetkemeyer. So that raises costs, again, that is a 
cost that has to be borne by the developer because you are 
going to the banks, it is going to raise the costs to do the 
loan to the developer, is it not?
    Mr. Schloemer. Unfortunately, it is not even just borne by 
the developer. It ultimately is borne by the renter household 
in the case of multifamily.
    Mr. Luetkemeyer. OK. Yes. Are the purchasers of the home, 
if you are doing a homebuilding loan, this is very concerning 
to me and we had a long discussion on it and hopefully we will 
get some consensus.
    Mr. Chairman, my time is over. I thank you very much and I 
yield back.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentlelady from New York, Ms. 
Velazquez, for 5 minutes.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Miss Poethig, while I agree that streamlining regulations 
can be important, the other side of the aisle often fails to 
look at the whole equation when it comes to affordable housing. 
Do you agree that the drastic cuts that have been made to 
programs like HOME, CDBG, Section 202 Program, Project-Based 
Section 8, many of which successfully combined Federal funding 
with private sector dollars have exacerbated the lack of 
affordable housing in this country?
    Ms. Poethig. Yes, I do, Congresswoman.
    Ms. Velazquez. And Mr. Lawson and Miss--I am sorry I just 
can't see from here, Miss Ansel?
    Ms. Ansel. Ansel.
    Ms. Velazquez. I just would like to specifically bring the 
issue of the CDBG and HOME cuts. How have those cuts inhibited 
your ability to produce and preserve additional units of 
affordable housing?
    Ms. Ansel. So NMHC and the National Apartment Association 
have been strong supporters for a number of years of not only 
reducing regulation, but increasing the funding for these 
programs, CDBG, the HOME, Section 8. There are a number of 
programs that can really help increase affordable housing and 
help those residents of the United States who need the most 
help.
    So, we would agree completely that it needs to be a two-
pronged approach to solve this problem.
    Ms. Velazquez. So it is not enough to try to say here that 
regulations are the main factor for the lack of production of 
affordable housing in our in our country.
    Ms. Ansel. We think regulations are important but we think 
there are more steps that can be done to increase affordable 
and workforce housing.
    Ms. Velazquez. So Miss Poethig, the Federal Financing Bank 
Risk Sharing program has proven to be a successful partnership 
between HUD, the Treasury Department, State, and local housing 
finance agencies.
    And since its formation in 2014, the program has created 
more than 3,000 affordable homes in New York City alone and 
more than 20,000 homes around the country. Yet, the Trump 
Administration is considering letting this program expire.
    Do you know of any argument that can be presented to us 
that will support the elimination of this program at this time?
    Ms. Poethig. Given the drastic gaps we have in affordable 
housing, I can think of no argument for canceling that program.
    Mr. Lawson. And I can say that we have used that program.
    Ms. Velazquez. Yes.
    Mr. Lawson. And it has been extraordinarily helpful. Its 
implementation has been slowed by the uncertainty of future 
funding.
    Ms. Velazquez. Yes, right, and that coming from an 
Administration that is headed by a businessman, so in business, 
we need certainty, because without that people will not make 
decisions whether or not to go ahead with a project in our 
districts.
    So, I sent a letter to the Secretary of HUD, asking them 
not to let this program expire. And I hope that since we are so 
much interested, in this committee and subcommittee, about the 
affordability of housing in our Nation, that we invite our 
Chairman and the Members of the Subcommittee on Housing to send 
a letter to the Administration to not let this program expire.
    With that I yield back, Mr. Chairman.
    Chairman Duffy. The gentlelady yields back.
    The Chair now recognizes the gentleman from Pennsylvania, 
Mr. Rothfus, for 5 minutes.
    Mr. Rothfus. Thank you, Mr. Chairman.
    Mr. Schloemer, the Ranking Member talked about some of the 
data that you had in your testimony. I want to go back to it. 
You talked about a 5 percent reduction in your development 
costs would allow you to offer 62 percent of your apartments 
that are at rents affordable to households that earn 80 percent 
or less of AMI. This would be a significant increase from your 
current 51 percent rate.
    And Miss Velazquez raised the issue of regulations, I want 
to get a feel for the scope of regulations and the extent to 
which they are a factor. What would be the main regulatory cost 
drivers that are impacting your developments?
    Mr. Schloemer. Well, as my written testimony indicated, it 
occurs at both the Federal and the local levels. And so, I 
think you have to break those down. I think on the Federal 
level, again, as has been stated by everyone here, I think 
there is unanimity in our industry for support of fair housing 
and accessibility regulations and laws, however the 
implementation may not meet the objectives that Congress has 
set forth.
    And one of my favorite examples, I came down a ramp here 
into this auditorium today that I expect meets the ADA 
accessibility of an 8 percent slope on that ramp, and yet when 
we build apartment communities as opposed to a single-family 
subdivision that isn't subject to that ruling, we have to 
maintain a 2 percent slope throughout the development.
    I can cite specific examples where the cost for maintaining 
that 2 percent slope has probably added 2 percent to 2.5 
percent to our overall development costs on a project, so just 
an application of maintaining accessibility standards according 
to the ADA as opposed to the Fair Housing would be one specific 
example.
    At the local level there has been a lot of discussion by 
the committee as well as by the people testifying about the 
importance of consistency and reliability of regulations or 
programs. We find often at the municipal level that even after 
permits have been issued, new requirements are imposed upon us. 
And those are examples where we can't anticipate and it slows, 
retards, or even eliminates development because of the 
uncertainty of implementation of rules even after a permit has 
been issued.
    Mr. Rothfus. I am wondering if you or anybody on the panel 
might be able to cite some examples of local or State 
governments that have successfully facilitated more affordable 
housing construction through some type of regulatory reform. 
Anybody aware of any examples that we can point to?
    Mr. Schloemer. There was an earlier mention of the 
development that occurred in New Orleans after the hurricane 
and I think what was important about that circumstance was the 
exodus of residents, the destruction of housing, and the clear 
shared recognition that new housing needed to be created, 
whereas at the local level there is often not that recognition 
of the need for housing as people have used the NIMBY-ism term. 
They would rather see the jobs created in their communities and 
the housing created in another community.
    Mr. Rothfus. Ms. Ansel, in your testimony you discussed 
possible modifications to the CRA to facilitate more lending to 
affordable multifamily developments. As you noted, the CRA 
currently allows banks to obtain credit for multifamily units 
serving occupants with incomes of up to 80 percent of area 
median income, but you also noted that income information is 
not typically captured.
    How would you propose that the CRA be modified to address 
this issue and encourage more lending to affordable housing 
developers?
    Ms. Ansel. If you don't mind, I am going to answer your 
last question first.
    Mr. Rothfus. OK.
    Ms. Ansel. So, I think it is important to note that many 
municipalities around the Nation are attempting different 
solutions. And while we applaud those different solutions, it 
is hard today to point to one that has been really successful, 
but we would be more than happy to get back to you in written 
testimony as to the things that have been successful.
    With respect to CRA, I would like to do the same thing. I 
would like to provide a written response to you. It is a 
detailed answer and I would like to give you that full answer 
if I might.
    Mr. Rothfus. Appreciate that. Thank you and I yield back.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from California, Mr. 
Sherman, for 5 minutes.
    Mr. Sherman. Ms. Ansel, the National Multifamily Housing 
Council and the homebuilders have put out the study saying 32 
percent of the costs of building multifamily housing is 
attributable to costs of complying with the local, State, and 
Federal regulation. How much of that is Federal regulation?
    Ms. Ansel. Well, we have identified in the study, sir, two 
Federal pieces that create the most burden are OSHA regulations 
that account for up to 2.6 percent of total project costs and 
building code compliance was 7 percent.
    Mr. Sherman. I don't think anybody is calling for just 
eliminating OSHA.
    Ms. Ansel. No, sir, absolutely not. Yes.
    Mr. Sherman. OK. Go ahead. Yes.
    Ms. Ansel. As we stated earlier, we strongly believe that--
    Mr. Sherman. Go ahead. What is the second?
    Ms. Ansel. The second piece is the change in building 
codes, over the last 10 years changes in building codes that 
have been directed in conjunction with the Federal Government 
have increased costs by 7 percent--
    Mr. Sherman. You are saying these are requirements imposed 
by the Federal Government for subsidized flood insurance or 
financing? I am not aware of a Federal building code that 
applies to everybody.
    Ms. Ansel. No, examples of those, sir, would be, as you 
know, there are a flood of regulations that impact apartments.
    Mr. Sherman. Right, right.
    Ms. Ansel. So there are diverse Federal agencies, including 
the Department of Housing and Urban Development, Environmental 
Protection Agency.
    Mr. Sherman. If the Federal Government is going to insure, 
guarantee its insurance, pay for it, we would have 
requirements.
    Ms. Poethig, I know a couple dozen ways where the Federal 
Government can spend money and make sure people have housing. 
Do you know of any way in which the Federal Government cannot 
spend money but still get housing for people, and which would 
you suggest?
    Ms. Poethig. I can't think of any.
    Mr. Sherman. OK. I know, I think it was Mr. Lawson, might 
have been Mr. Schloemer suggested changing ADA to provide a 2 
percent slope instead of an 8 percent slope.
    Mr. Schloemer. Actually no, if I could just correct that.
    Mr. Sherman. Yes.
    Mr. Schloemer. ADA requires an 8 percent slope and FHA, the 
Fair Housing imposes a policy of a 2 percent accessible slope 
throughout a development and that may have not even been in 
code but originated in policy regarding--
    Mr. Sherman. So you are saying this is a case where the ADA 
allows for an 8 percent slope but another Federal law requires 
you to just have the 2 percent slope and the 2 percent slope, I 
assume is more expensive for you.
    Mr. Schloemer. That is correct.
    Mr. Sherman. OK. So we have at least identified one thing 
the Federal Government ought to take a look at.
    Ms. Poethig, we want to encourage more landlords to 
participate in Section 8. Are there regulations or HUD rules 
that burden landlords and make them unwilling to participate?
    Ms. Poethig. I think you have asked a really important 
question, and the Urban Institute most recently released a 
report on the ways in which landlords are in fact 
discriminating against Section 8 voucher holders.
    There are certain jurisdictions that have source of income 
protection for voucher holders, and what we found in our 
research is that in fact, those local laws and regulations are 
enabling voucher holders to access more units, so those--
    Mr. Sherman. Wait, wait. I think my question was more are 
there rules that burden landlords and make them unwilling to 
participate? And you have identified a situation where 
landlords may be unwilling to participate. And we could have 
some regulations that force them to participate, which is an 
interesting answer but not to my particular question.
    Ms. Poethig. Certainly.
    Ms. Ansel. If I might--
    Mr. Sherman. Ms. Ansel.
    Ms. Ansel. If I might answer that. The cost of the 
regulations that are required by the Section 8 Voucher Program 
create significant additional operational costs for example.
    There is paperwork that is cumbersome just to get the 
verification for voucher amounts, that is not--and it is 
dependent on the different localities but that varies by 
market, so that takes time and additional effort to understand 
what the verification amount is.
    Members who participate in the Section 8 Voucher Program 
are required to use HAP the contracts which, in many cases, is 
different than what the other lease agreements that a property 
operation company would use.
    The inspection process for that Section 8 housing can be 
slow, which requires the owners to maintain vacancy which is 
lost income. There are additional communications required with 
multiple third parties--
    Mr. Sherman. And then that being said, Ms. Poethig, it 
brings up a good example. I think you were saying that in 
effect, some cities require you to view Section 8 as a source 
of income to pay for the housing instead of excluding that and 
then excluding the resident as not being, quote, qualified, 
because they don't have enough income.
    Ms. Poethig. That is correct and it is intended to address 
discrimination that the Urban Institute has, in fact, 
documented happens against voucher holders.
    Mr. Sherman. OK, thank you. I yield back.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from Illinois, Mr. 
Hultgren, for 5 minutes.
    Mr. Hultgren. Thank you, Chairman Duffy.
    Thank you all for being here. I am grateful for your work 
and your testimony today.
    The first question I want to address to Ms. Ansel, if I 
may. There has been a lot of discussion around the shift from 
home ownership to rental, both those in their 20's entering the 
house market and Baby Boomers looking to downsize and shed the 
responsibility of homeownership.
    I wondered if you could talk a little bit about, do you 
believe that this growing preference to rent instead of own 
will continue, and if so, what reforms do you view as the most 
pressing for policymakers to consider when looking at ways to 
address this shortage of affordable multifamily housing?
    Ms. Ansel. Yes, sir, the demographics, a study by the 
National Apartment Association, the National Multifamily 
Housing Council shows that there is going to be increasing 
demand for rental property homes because of the shift in 
demographics.
    There are, as pointed out earlier in the testimony, young 
adults who are coming out of school and are burdened with 
school debt. Young adults are getting married later in life and 
having children later in life, both of those issues are 
increasing demand for multifamily on the front end, and a 
number of older demographics, older than 45 are moving back 
into apartment residency.
    Primarily this is because of lifestyle choices. A number of 
folks are recognizing that having a mortgage-free life is 
something that they would prefer. They are able to move for a 
job if the job moves to a different city. A lot of this has 
happened since 2008, so we believe that there will be continued 
demand for apartment housing.
    And I think that we have talked about a number of different 
things that we can do at the Federal level to reduce 
regulations, but other things that I would suggest we consider 
is that we should retain and expand pro-development tax 
policies, think we should support housing finance reform that 
preserves multifamily mortgage liquidity provided by the 
government-sponsored entities.
    We should increase funding and support for housing subsidy 
programs as we have talked about, and we should support funding 
for the FHA multifamily programs. We think all of those will 
help increase the number of apartment homes.
    Mr. Hultgren. All right, thank you.
    Mr. Lawson, if I could follow up and I think you have 
touched on a little bit of this, but I know the National 
Association of Homebuilders Survey referenced in your testimony 
estimated that regulations account for as much as 30 percent of 
development and construction costs. And in some cases can 
exceed 40 percent.
    How do we as a Congress make strides in reducing regulatory 
costs while allowing for independence and flexibility at the 
local level to be able to tailor regulation to the needs of the 
community?
    Mr. Lawson. That is an excellent question. And we certainly 
don't have all the answers. Land use is a local decision. 
However, I do think what we need to do is look at each 
regulatory regime and take an honest look at what the costs of 
that regime are. We need to strike that balance.
    As all the panelists said, there is most certainly a place 
for regulation. But we need to judge those, the impact those 
regulations have on an economic basis very fairly.
    I think energy efficient initiatives are a great, great 
example. We could demand that every home install a certain type 
of energy efficiency appliance. If the payback is greater than 
10 years, I would suggest that that be a tipping point. If the 
payback is 30 years, 40 years and I have even heard some people 
in the industry talk about a 100-year payback, that is not 
something that strikes a balance in my humble opinion.
    Mr. Hultgren. In my last minute here, Mr. Schloemer, if I 
could address to you, in your testimony you discuss how your 
business focuses on suburban and secondary tier markets. These 
are not always the first to come to mind when you think of 
underserved markets.
    According to the map included in your testimony, your 
company owns six of these properties in Illinois. We talked 
about that a little bit, with three in my district. When you 
discuss barriers to multifamily development you had actually 
used two instances in Illinois where infrastructure 
requirements increased the cost of two projects, one totaling 
more than $60,000.
    I understand that you may not be able to identify specific 
regulations at your Illinois properties off of the top of your 
head. But I wondered and would be curious to learn more about 
these Illinois examples. And if any other State-specific 
burdens that your company sees as inhibiting further 
development in the State?
    Mr. Schloemer. Thank you. As my written testimony 
indicated, there are certain infrastructure improvements that 
are mutually beneficial, whereas others are done to satisfy 
infrastructure demands that a community has identified and they 
recognize that they can use that, an approval of a project as a 
lever.
    One of the properties either in your district or adjacent 
to your district required us to put in a new public street that 
was not necessary to service the property, but in fact, 
alleviated existing traffic burdens that were in the market.
    It is entirely possible with the discussion that was made 
earlier about Federal infrastructure programs that I know are a 
topic here, that the incentive may be tied to those 
infrastructure support dollars that come from the Federal 
Government entirely related to the availability and the speed, 
as well as the availability of approvals for multifamily 
improvements or developments within any particular community 
that utilizes those infrastructure dollars.
    Mr. Hultgren. Great. My time has expired. I yield back.
    Thanks, Chairman.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from Michigan, the 
holder of the new position of Vice-Ranking Member, Mr. Kildee 
for 5 minutes.
    Mr. Kildee. Thank you very much and I appreciate the 
recognition of the title of assistant to the regional manager.
    Well, first of all I apologize for not having been present 
for your initial testimony. So some of what I may ask may 
already have been covered, and I know it's covered in part in 
some of the written testimony.
    But if I could start with Ms. Poethig who, we worked 
together in the past, and you are familiar with some of my past 
work on housing development. I wonder if you might comment and 
maybe the others would have some thoughts on this as well.
    On the particular challenges in weak and very weak housing 
markets, one of the advantages of stronger markets when it 
comes to development of affordable units in housing, is the 
ability to leverage higher market rate rents to help subsidize 
or support the development of affordable units. In really weak 
markets it is really tough to do that.
    And I wonder, that is just one example, I wonder if you 
might comment on a particular Federal involvement in supporting 
very weak markets in trying to address this challenge, where 
often there actually is an oversupply of very low quality 
housing and the question is really quality and affordability. I 
wonder if you might just comment generally on that subject.
    Ms. Poethig. Certainly and thank you for the question. I 
think you raised a really important issue, which is perhaps, in 
some markets that are weaker, there may be existing supply of 
affordable rental housing. And the goal is to preserve and 
improve that housing so that it meets quality standards, but 
it's also about preserving existing subsidy, which is why 
preserving Section 8 properties in some of those markets is 
important, because of the point I made earlier and that we make 
in our written testimony is that for every place around the 
country, whether you are a weak or a hot market, extremely low-
income households face affordability gaps.
    And so, that is the reason why I stress in my testimony the 
importance of expanding rental assistance to all eligible 
households, and I think that would address both weak market and 
hot market affordability challenges.
    And those can be coupled with other affordable existing 
rental housing or they can be a stimulus also to the creation 
of new housing, because they provide a reliable supply of 
income over a period of time. And I think that expansion of 
rental assistance could be a really good solution in weak 
marketplaces as well.
    We go into greater detail on this about a new tool that we 
created called Penciling Out, that I invite the committee to 
look at that allows you to really understand the role that 
these different regulations play, but the role that subsidy 
plays in closing that gap.
    Mr. Kildee. Thank you. If I could just zero in on another 
particular point because I am running out of time, as Erika, a 
lot of my background previous to being here was in the 
development of public land-bank authorities.
    One of the advantage that land-bank partners bring to 
affordable housing development is that because it is a public 
entity it has to measure all the externalities associated with 
development, and because public entities end up paying the high 
cost, the very high price associated with a lack of affordable 
housing, the concentration of poverty, all the associated 
social and economic impacts that local communities face, it 
makes sense, it made sense to me to have that local entity 
serve as a very patient partner with capital that is available 
to help underwrite the cost and essentially be a partner in the 
development of affordable rental and for-sale housing.
    The problem as I see it and I am running out of time, the 
work that I have done is very narrow and it is very focused and 
it has really never, at least recently we have seen some 
example, but we have never actually seen it come to scale.
    And I know, Erika, you are somewhat familiar with the model 
that I helped to develop. Is there any thought about how to 
create local partnerships that can bring capital into this 
space on the basis that that investment actually saves so much 
more in terms of the negative externalities that come with the 
lack of affordable housing? And we just all pay such a high 
price, somebody is paying.
    And I wonder, and I am not sure I am making myself 
particularly clear, but I wonder if you may just comment on how 
we might figure out a way to internalize those externalities 
and realize that we all pay such a heavy price. We hear so much 
about the cost of development and I get that, but what we don't 
hear very much about--hear so much about is the cost of all the 
ills, the social ills and the economic ills that come from the 
lack of affordable housing. That is a very high price. And we 
haven't figured out yet how to bring that capital to bear to 
prevent those costs. Any thoughts?
    Ms. Poethig. Just quickly. I think you are absolutely right 
and there is very good evidence about the costs and 
consequences of particularly a vacant land, vacant properties 
that are causing those externalities. So I think there are some 
interesting ways to think about using Pay For Success as a tool 
to bring capital to really address the rehabilitation of those 
properties as a way to internally do that, because I think 
there is evidence that points to the health benefits and safety 
benefits.
    I also think that there is a good opportunity to align with 
the opportunity zones in some interesting ways. And so, I would 
put that on the table as something also to consider as we think 
about those policy options.
    Ms. Ansel. Might I add on that answer quickly and we are 
close to out of time. The cost, the land cost for development 
is up to 25 percent of the total project cost, so if there is a 
way for the Federal Government to incent localities to 
participate in a public-private partnership, to create those 
land banks and put that under-utilized land to work for 
creating affordable housing, it would create a win-win 
situation.
    Mr. Kildee. Thank you and I appreciate the Chairman's 
indulgence, it was probably because of the title that you gave, 
the additional--
    Chairman Duffy. The gentleman yields back. And I was going 
to note that only the Vice-Ranking Member gets the latitude to 
take 5 minutes and 20 seconds to actually ask his question, 20 
seconds over before we hear the response.
    Mr. Kildee. I have learned from the best, Mr. Chairman.
    Chairman Duffy. The Chair now recognizes the gentlelady 
from Ohio, Mrs. Beatty, for 5 minutes?
    Mrs. Beatty. Thank you, Mr. Chairman. And to our Ranking 
Member and to all of our witnesses here, thank you.
    I want to start by echoing the remarks of our Ranking 
Member on the full committee that today is very bipartisan or 
should be with this issue, and it's certainly been very 
educational.
    I represent the Third Congressional District in the great 
State of Ohio, and then Franklin County within the Columbus 
Metropolitan area. Central Ohio is expected to grow up to 1 
million residents by 2050, mostly in and around Columbus, which 
is the fastest growing metropolitan area in the Midwest.
    And according to Zillow, the medium-income value in my 
district is up nearly 30 percent and the median rent is up 22 
percent in just about the last 6 years. A vast majority of 
Americans around the country haven't had a wage increase in 
decades, while housing costs as you know continue to skyrocket.
    I have repeatedly said in this committee, and in other 
forums, and I will say it again that according to the National 
Low-Income Housing Coalition, there is no State, metropolitan 
area, or county where a worker earning the Federal minimum wage 
can afford a two-bedroom rental home at fair market rent by 
working a 40-hour a week job. And in Columbus an individual 
would need to make $17.50 or more an hour to afford a two-
bedroom apartment.
    So I am open to any ideas of how to fix this problem. But 
certainly, cutting taxes and cutting regulations is not the 
silver bullet that maybe some people might think.
    You have been very informative here, but a lot of the 
responses to me have appeared to be more things at the local or 
the State level for a fix. So I guess I am going to ask each of 
you briefly to tell me what is the one change you believe that 
Congress at the Federal level that falls within the purview of 
our jurisdiction, that Congress can do to lower the cost of 
building multifamily housing in the United States?
    Ms. Poethig. I think one interesting idea to consider that 
would be in the purview and has been done within education 
reform is to think about a Race to the Top. To think about some 
pot of money that localities really want, maybe it is 
transportation money but maybe it is in the housing space, and 
make it available to those States that do draft some regulatory 
reforms that are impeding multifamily development. I think that 
is one idea that would be in the purview of the Federal 
Government.
    Ms. Ansel. Thank you, Congresswoman. I think that you have 
hit the nail on the head in that we have two issues. One is an 
income issue and the second is the supply issue.
    And so, I think the Federal Government needs to look for 
ways to create partnerships with the localities and private 
developers to create more supply. I think there are a number of 
ways to do that, some of those that we have identified. I know 
you have asked for one but development is a capital-intensive 
business, and so, I would tell you supporting housing finance 
reform that preserves the availability of capital for 
multifamily development is one of the most critical issues that 
we can address.
    Mrs. Beatty. Thank you.
    Gentlemen?
    Mr. Lawson. I agree that you have absolutely hit the nail 
on the head and this is a three-decades-old problem where 
housing costs have risen faster than incomes.
    I would say that the thing that we could do most easily and 
there is some legislation that has been introduced that would 
expand the housing tax credit. I would say we need to expand 
and enhance the housing tax credit, expand it from a volume 
perspective and enhance it to reach a much broader array of 
incomes, and specifically not have it face and fall off the 
cliff at 60 percent or in the case now, 80 percent with income 
averaging. I think we need to address affordability on the 
entire spectrum.
    Mrs. Beatty. Thank you and I like that. I don't know if you 
know, I co-sponsored that bill that was a piece of legislation 
that Congressman Pat Tiberi introduced. So thank you for that. 
I am not sure if it went anywhere, so maybe I can get my 
Chairman over here to take a look at that.
    If my colleague could ask for a letter, I don't want a 
letter, I want legislation, so thank you for that. Last, I have 
8, 9 seconds, left.
    Mr. Schloemer. One of the benefits of spurring more 
multifamily housing development is also the jobs that it 
creates. At our apartment communities for example, there isn't 
an entry-level maintenance person that makes less than double 
the Federal minimum wage as an entry-level wage and receives 
benefits on top of that.
    So by creating more housing we are also creating more 
family supporting wages. So I would like to point that out.
    And then second I made mention of gaining some consistency 
between ADA and FHA. I think that is a single item, that you 
asked for us to name a single item that the Federal Government 
could do, that would be it.
    Chairman Duffy. The gentlelady yields back. We will take a 
look at that.
    The Chair now recognizes the gentleman from the great State 
of Texas, Mr. Green for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. And I thank the Ranking 
Member and the witnesses for appearing as well.
    I think that Mrs. Beatty has made some salient points with 
reference to wages, wage stagnation. Unfortunately the benefits 
of the economy seem to be inuring to those who are at the top, 
and those who are at the middle and at the bottom don't seem to 
be making nearly the gains.
    But let us move to another topic. Federal funding for new 
construction of affordable housing, what impact has the lack of 
that funding had on the market itself? We are not constructing 
more with Federal dollars. You have fewer houses available.
    Obviously when you have a great demand and the supply is 
limited, you have an impact. What about Federal spending? That 
is something that we can regulate. How does that impact the 
housing market?
    Mr. Lawson. I will take a stab at that. I think it simply 
exacerbates the problem. We know that there is great demand for 
affordable housing. The statistics have long shown that many, 
many families are spending far more than they should on housing 
costs. The rent burden, very well documented. All of those 
things are I think a result of our market being out of balance. 
Simply not enough supply of affordable housing and a high 
demand.
    Mr. Green. Would someone else care to respond?
    Ms. Ansel. I think as identified in our testimony, NMHC and 
NAA are strong supporters of increasing the funding of the low-
income tax housing credit program and also recommend creating a 
middle-income tax housing credit program. The fact that those 
programs have been receiving less funding has certainly 
resulted in the fact that there are less affordable apartments 
that have been built.
    We have talked today about the ever-increasing cost of 
building apartment homes due to labor and commodity prices, and 
so, to build more supply, the Federal Government has a very 
real opportunity to help create incentives that allow us to 
create those additional homes.
    Mr. Green. Yes?
    Ms. Poethig. And I would just add, there is not a county in 
the country where there is a balance of supply for extremely 
low-income renters. So even tax-credit housing will need some 
source of subsidy to ensure that those households that make 
less than 30 percent of area median income which is about an 
average of $22,000 for a family of four across the country but 
differs, can't find a place to live.
    And so, it is both, it is a package of the CBDG HOME 
dollars that provide the source of subsidy for the development 
to make it affordable but, more often than that, we are seeing 
that folks holding vouchers are also utilizing low-income 
housing tax credit properties. So it is a whole bundle of 
important Federal assistance that is enabling the supply to be 
built, when it goes down, so too does the supply go down.
    Mr. Green. And just briefly, assuming that we do construct 
and that Federal Government plays its role, that goes beyond 
simply providing a place for someone to live. It impacts the 
economy in the area.
    When someone gets a job, that person then spends additional 
dollars, someone has to buy the carpet, that person will be 
paid, there's a washing machine that is purchased, drapes, 
there is a benefit beyond the living quarters that we will 
receive when we invest in these kinds of projects. And I think 
too often we see this as simply a handout to someone so that 
that person will have a place to stay, if you will. But it is 
really more about economic development for a community.
    Anyone care to say just a word in the last 8 seconds I 
have?
    Ms. Poethig. I think you are absolutely right. And we have 
a web portal called How Housing Matters where we look at all 
the relationships between how housing is a platform to achieve 
better outcomes for individuals and families and communities 
that really assembles all of the research that underscores all 
the points that you just made.
    Mr. Green. Thank you very much.
    Mr. Chairman, you were very generous with the time. I owe 
you 22 seconds.
    Chairman Duffy. I will find some time to take it from you, 
Mr. Green. Thank you for yielding back.
    This concludes our questioning portion. If I could just 
take a moment of personal privilege, I want to thank Chase 
Burgess who has served on this committee for a number of years. 
He came here as an intern with John Boehner while studying at 
Miami of Ohio. And then he joined the Financial Services 
Committee as an intern after graduation and has worked his way 
up to legislative assistant and now a professional staff 
member.
    I don't know why anyone would choose to leave this great 
committee and go to the outside and do other work, but Chase is 
doing that, but we thank him for his service and dedication to 
this committee, its cause and to our country.
    So, Chase, thank you. We will definitely miss you. I 
appreciate it.
    And with that, I want to thank our witnesses for their 
testimony today. I would just note that you might think that we 
never get along, that there are no ideas that we can agree to 
but if you listen to both sides of the aisle there is an 
understanding that we have a problem, and there is a pathway 
forward in a bipartisan fashion that we could craft a solution.
    We will look to you and others in this space to help us as 
we move forward to work on a bipartisan piece of legislation. 
So hopefully this is not the end, this is the beginning of a 
conversation that can have a real impact on affordable housing 
in America.
    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.
    Again, thank you for your testimony and your time. And with 
that, this hearing is now adjourned.
    [Whereupon, at 3:50 p.m., the subcommittee was adjourned.]

                            A P P E N D I X



                        September 5, 2018
                        
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