[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
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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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