[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
BOOM AND BUST: THE NEED FOR BOLD
INVESTMENTS IN FAIR AND AFFORDABLE
HOUSING TO COMBAT INFLATION
=======================================================================
HYBRID HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
DECEMBER 1, 2022
__________
Printed for the use of the Committee on Financial Services
Serial No. 117-105
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
50-158 PDF WASHINGTON : 2023
HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina,
NYDIA M. VELAZQUEZ, New York Ranking Member
BRAD SHERMAN, California FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri ANN WAGNER, Missouri
ED PERLMUTTER, Colorado ANDY BARR, Kentucky
JIM A. HIMES, Connecticut ROGER WILLIAMS, Texas
BILL FOSTER, Illinois FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio TOM EMMER, Minnesota
JUAN VARGAS, California LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam TED BUDD, North Carolina
CINDY AXNE, Iowa TREY HOLLINGSWORTH, Indiana
SEAN CASTEN, Illinois ANTHONY GONZALEZ, Ohio
AYANNA PRESSLEY, Massachusetts JOHN ROSE, Tennessee
RITCHIE TORRES, New York BRYAN STEIL, Wisconsin
STEPHEN F. LYNCH, Massachusetts LANCE GOODEN, Texas
ALMA ADAMS, North Carolina WILLIAM TIMMONS, South Carolina
RASHIDA TLAIB, Michigan VAN TAYLOR, Texas
MADELEINE DEAN, Pennsylvania PETE SESSIONS, Texas
ALEXANDRIA OCASIO-CORTEZ, New York RALPH NORMAN, South Carolina
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts
Charla Ouertatani, Staff Director
C O N T E N T S
----------
Page
Hearing held on:
December 1, 2022............................................. 1
Appendix:
December 1, 2022............................................. 65
WITNESSES
Thursday, December 1, 2022
Bailey, Nikitra, Executive Vice President, National Fair Housing
Alliance....................................................... 5
Eaddy, Margaret, activist and housing seeker..................... 6
Holtz-Eakin, Douglas, President, American Action Forum........... 10
Mitchell, Michael, Director, Policy and Research, Groundwork
Collaborative.................................................. 8
Zandi, Mark, Chief Economist, Moody's Analytics.................. 11
APPENDIX
Prepared statements:
Bailey, Nikitra.............................................. 66
Eaddy, Margaret.............................................. 78
Holtz-Eakin, Douglas......................................... 80
Mitchell, Michael............................................ 86
Zandi, Mark.................................................. 94
Additional Material Submitted for the Record
Waters, Hon. Maxine:
Written statement of Liberation in a Generation.............. 101
Written statement of National NeighborWorks Association...... 105
BOOM AND BUST: THE NEED FOR BOLD
INVESTMENTS IN FAIR AND AFFORDABLE
HOUSING TO COMBAT INFLATION
----------
Thursday, December 1, 2022
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10:09 a.m., in
room 2128, Rayburn House Office Building, Hon. Maxine Waters
[chairwoman of the committee] presiding.
Members present: Representatives Waters, Scott, Green,
Cleaver, Himes, Foster, Vargas, Gottheimer, Lawson, Pressley,
Torres, Lynch, Adams, Tlaib, Dean, Garcia of Illinois, Garcia
of Texas, Auchincloss; McHenry, Lucas, Posey, Luetkemeyer,
Huizenga, Barr, Williams of Texas, Hill, Emmer, Zeldin,
Loudermilk, Mooney, Davidson, Budd, Rose, Steil, Timmons,
Sessions, and Norman.
Chairwoman Waters. The Financial Services Committee will
come to order.
I want to thank the Members for their patience this
morning. We are in the process of reorganizing the Democratic
Caucus, so I don't know how this is all going to work out, but
we are going to get started.
Without objection, the Chair is authorized to declare a
recess of the committee at any time.
Today's hearing is entitled, ``Boom and Bust: The Need for
Bold Investments in Fair and Affordable Housing to Combat
Inflation.''
I now recognize myself for 4 minutes to give an opening
statement.
Good morning, everyone. First, I would like to say that I
am incredibly proud that this committee has made it a top
priority to ensure that every family has access to fair and
affordable housing across the country.
Since I became Chair in 2019, this committee has held 55
hearings on housing, including the first-ever Full Committee
hearing on homelessness. However, the opposite side of the
aisle has repeatedly complained about our focus on housing,
while offering no solutions to safely and affordably house
families.
With Republicans holding the Majority next Congress, this
will likely be our last hearing on housing affordability for
the foreseeable future. But I know the ranking member is a good
person, so I hope he will prove me wrong.
Unfortunately, our nation's housing crisis is getting
worse. Some believe that robust Federal investments in fair and
affordable housing aren't needed, but that deregulation in the
private market alone will solve this crisis. But decades of
dismal Federal investment in housing have landed us in the
current housing crisis, and we cannot expect different outcomes
without different interventions.
Today, there is no metropolitan area in the country where
families can afford a home while making minimum wage. A chronic
undersupply of housing has led to skyrocketing costs, and
today, housing is a primary driver of core inflation.
While the Federal Reserve has leaned on interest rate hikes
in the hopes of curing inflation, including four supersized
rate hikes this year alone, those hikes do nothing to address
the fundamental shortage of affordable housing and, in fact,
make it worse. These hikes have made lending more costly,
pricing first-time and first-generation homebuyers out of the
market to record lows by adding to the already-high costs of
purchasing a home. Housing construction has also slowed due to
increased lending costs, exacerbating the existing supply
shortage.
The Fed cannot address inflation alone. That is why last
year, my committee fought to secure over $150 billion in fair
and affordable housing investments in the House, which would
reduce core inflation by addressing the root cause of our
inadequate housing supply. These investments are estimated to
create more than 1.4 million affordable homes, help 868,000
families lower their housing costs, and create jobs that will
boost local economies.
Without these target investments, we will never fully
address housing inflation. Instead, we will continue to face a
homelessness crisis and skyrocketing rents, and homeownership
will move further out of reach for everyday people, while
private equity firms and banks, like JPMorgan Chase, gobble up
more and more homes for profit.
We need bipartisan support for bold investments to make
housing affordable and finally rein in core inflation.
With that, I yield back.
And I now recognize the ranking member of the committee,
the gentleman from North Carolina, Mr. McHenry, for 4 minutes.
Mr. McHenry. Thank you, Madam Chairwoman.
And we will certainly, with the incoming Republican
Majority, prioritize housing and financial stability next
Congress, and put a great emphasis on that. And it is our hope
that we can actually achieve some bipartisan results in the
world of housing in a way that this committee hasn't done for--
well, actually, probably as long as we have both served on this
committee, unfortunately, but not for a lack of trying. But our
hope is that we can work together and get something done.
But for this hearing, I am grateful that my colleagues
across the aisle are finally ready to talk about inflation and
how to combat it. Committee Republicans have consistently taken
every opportunity to discuss the skyrocketing prices clobbering
American families.
For more than a year, Republicans have been sounding the
alarm about the Democrats' reckless fiscal agenda and its
impact on households and job creators. Democrats chose to
ignore those warnings. Republicans said that a massive $1.9-
trillion spending bill would wreak havoc on our economy, and
Democrats doubled down with even more spending.
Republicans offered simple amendments to the Democrats'
partisan bills during our June markup this year to actually
address the inflation crisis, and the Democrats rejected each
one.
So I have to say, today's hearing is simply too little, too
late.
Since Democrats took control of Washington, the cost of
everything has gone up: food, energy, healthcare, and, yes,
housing, the topic of this hearing, are all much more expensive
today than they were just 2 years ago.
Rather than focus on the rising costs of housing, Democrats
continue to turn to their tired old playbook of policies that
actually make the problem worse, not better. These are policies
such as the Down Payment Assistance Program and the numerous
other programs included in the Democrats' doomed Build Back
Better Act, which threw hundreds of billions of dollars into
ineffective housing programs. While well-intentioned, this
would do nothing to help lower the costs of housing or to
increase our housing supply. Those are the things we need to
address.
To find real solutions to bring to this housing crisis, we
need to take a step back. Consider this: The average 30-year
fixed-rate mortgage rate from June 2009 until the end of 2021
was 3.97 percent. Today, that same mortgage comes with a rate
approaching a whopping 7 percent, whopping in comparison to the
last decade, which was historically not whopping.
The speed and the magnitude of this increase is without
comparison in history. So, there is that.
Then, there are two main contributors to this housing
problem. First, Democrats' fiscal policies and regulatory
policies are discouraging the building of new homes. We know
that artificial local barriers to construction, such as
restrictive zoning ordinances and overly-burdensome
regulations, play a significant role in limiting new
construction. A limited supply of something, coupled with
increased demand, always leads to higher prices. And higher
prices require larger loans, making it less affordable for
families.
The second contributor is our current environment in which
the Fed must tighten its monetary policy and reduce its balance
sheet to fight out-of-control spending. This causes mortgage
rates to increase, making them more expensive and riskier.
Economists are rightly concerned about the effect of
quantitative tightening on the housing market. The $35-billion-
per-month in agency mortgage-backed securities that are rolling
off of the Fed's balance sheet takes money out of the housing
market, limiting the availability of credit. We know the Fed's
tools to address runaway inflation are blunt, but they are
necessary to stabilize the economy and return to normal credit
environments.
As lawmakers, we should do our part to assist in this
effort to bring down prices. That means reining in spending and
practicing fiscal discipline. A doubling down of failed housing
policies is not the answer. We need innovative solutions.
Thank you, Madam Chairwoman. I yield back.
Chairwoman Waters. Thank you, Ranking Member McHenry.
I now recognize the Chair of our Subcommittee on Housing,
Community Development, and Insurance, the gentleman from
Missouri, Mr. Cleaver, for 1 minute.
Mr. Cleaver. Thank you, Madam Chairwoman.
Gas prices fell this week to a national average of $4.67,
which is 12 cents lower than it was last week, so inflation is
coming down. Nevertheless, we do have inflation and elevated
consumer prices which are hitting our people in this country.
The impact of inflation is felt particularly hard among low-
and moderate-income Americans who have tight budgets and lack
discretionary income.
However, as much as we are concerned about prices, we must
not forget that housing is the single-largest expense for
American families. Rents are 22.8 percent higher in the 50
largest cities than 2 years ago, with some hikes far exceeding
what is reported in the Consumer Price Index, in some cases by
hundreds or thousands more. The lack of housing stock has
driven up the prices, and the Federal Reserve's rate hikes do
nothing to alleviate housing inflation.
Bringing inflation under control and addressing the impact
of inflation on American families begins and ends with the
housing crisis.
Thank you, Madam Chairwoman, for your leadership and for
holding this hearing today. And I yield back.
Chairwoman Waters. Thank you, Mr. Cleaver.
I now recognize the ranking member of our Subcommittee on
Housing, Community Development, and Insurance, the gentleman
from Arkansas, Mr. Hill, for 1 minute.
Mr. Hill. Thank you, Madam Chairwoman.
Americans continue to fall behind because of Biden
inflation, and their paychecks are worth less every month.
Working Americans in central Arkansas and across the country
are getting fleeced. So, I am glad the Majority has finally
decided to hold a hearing on combating inflation.
Wasteful spending, productivity-killing regulations, and
overly-accommodative monetary policy have led to a 40-year high
in inflation. So, it doesn't make a whole lot of sense to me
why the Majority keeps noticing bills that will make inflation
worse, and put homeownership further out of reach, like the
noticed Downpayment Toward Equity Act.
Today, we will hear from some of our witnesses advocating
for tempting ideas, like rental or down payment assistance. But
doubling down on failed housing policies won't make housing
more affordable in America.
I have said it before, and I will say it again: Federal
housing policies which only subsidize demand and don't address
barriers to supply will never make housing more affordable.
I yield back.
Chairwoman Waters. Thank you very much, Mr. Hill.
I want to welcome today's distinguished witnesses to the
committee: Nikitra Bailey, the executive vice president of the
National Fair Housing Alliance; Margaret Eaddy, an activist and
housing seeker; Michael Mitchell, the director of policy and
research at Groundwork Collaborative; Mark Zandi, the chief
economist at Moody's Analytics; and Douglas Holtz-Eakin, the
president of the American Action Forum.
You will each have 5 minutes to present your oral
testimony. You should be able to see a timer that will indicate
how much time you have left. I would ask you to be mindful of
the timer so that we can be respectful of everyone's time.
And without objection, your written statements will be made
a part of the record.
Ms. Bailey, you are now recognized for 5 minutes to present
your oral testimony.
STATEMENT OF NIKITRA BAILEY, EXECUTIVE VICE PRESIDENT, NATIONAL
FAIR HOUSING ALLIANCE (NFHA)
Ms. Bailey. Good morning, Chairwoman Waters, Ranking Member
McHenry, and distinguished members of the committee. Thank you
for the opportunity to testify in today's hearing.
I am Nikitra Bailey, the executive vice president of the
National Fair Housing Alliance (NFHA), the only national civil
rights organization dedicated to eliminating housing
discrimination and ensuring equitable housing opportunities for
everyone.
NFHA's top equity initiative creates fairness and
transparency in algorithms to stop technology from recycling
discrimination. Rising housing, gas, and food costs are the
main drivers of inflation, but housing costs are the key
driver. Home prices rose 10.4 percent in 2020, and another 18.8
percent in 2021. Rental housing prices rose 17.6 percent in
2021, far outpacing income increases. The Consumer Price Index
rose 7.9 percent in the last year, the highest increase since
1982.
Housing costs accounted for more than 40 percent of the
increase in the core inflation rate. Despite the Federal
Reserve's quantitative easing, these trends are not slowing
down. Housing continues to be the single-largest expense for
the average consumer, with shelter accounting for 33 percent of
the CPI.
While rental inflation is lessening as of October 31, 2022,
Americans paid an average of $2,040 in market rent. There
continues to be no city in our nation where someone making the
minimum wage can afford to live in a two-bedroom apartment. It
could take as long as 2023 for housing changes to be felt by
consumers, and high inflation is likely to last through 2024.
The Federal Reserve lacks the teeth to address housing
inflationary impact. Low housing inventory, record competition
from corporate cash investors, restrictive zoning ordinances,
supply-chain disruptions, rising building material costs, and
labor shortages are all driving prices higher.
While carefully weighing anti-inflationary measures, the
Fed's actions did not prevent the housing market from entering
into a recession. Mortgages rates returned to well over 7
percent. And as of September 2020, pending home sales were down
10.2 percent month over month, with the declines the most acute
in the Northeast. And that is just locking out first-time
homebuyers, including many millennials from Charlotte, North
Carolina, to Boise, Idaho.
Further, there is a shortage of 7 million affordable and
available rental homes for extremely low-income renters. There
is great irony in passing the Inflation Reduction Act without a
single penny for fair and affordable housing, when every
economic indicator has shown the direct connection between
housing and inflation.
Congress and the Biden Administration are equipped to
mitigate housing's outsized role in inflation, and voters are
demanding action. Americans support major investments to build
safe and affordable housing, even if it would grow the national
debt, mean raising taxes, or cutting spending of the areas to
pay for it. Voters want the Federal Government to address high
housing costs with bipartisan legislation that grows the supply
of homes, improves housing affordability, and provides rental
and down payment assistance.
During the recent midterm elections, voters approved
capping rate increases on rent, and ballot proposals to fund
and authorize affordable housing construction across the
country. Making key, impactful, demand-sized investments and
supply-sized subsidies that prioritize fair housing will help
to drive down housing costs while growing the economy. It is
critical to embed fair housing in every action.
As a nation, we have tried and failed to create affordable
housing opportunities by implementing Federal housing policies
in discriminatory ways that entrench residential segregation.
The roots of discrimination in housing are deep, pernicious,
and persistent. Past race-conscious housing policies, banking,
and other practices created today's structural inequalities.
By contrast, the equity-based provisions in the American
Rescue Plan Act help to stave off another foreclosure-induced
recession. The Great Recession robbed Black and Latino
communities of $1 trillion in wealth. Even before the Fed's
COVID-19 interventions exacerbated racial inequality, the
Black-White wealth gap had grown by $20 trillion, with
inequitable housing prices driving the disparity.
Why would we want to go back? The nation needs a
comprehensive housing strategy rooted in equity. Equitable
policies advance opportunity for everyone and create an economy
that works for all. Priorities for funding must include
critical support for local fair housing enforcement agencies to
fight over 4 million incidents of housing discrimination,
mostly in housing and rental, First-Generation DPA, the
Neighborhood Homes Investment Act, and increased support for
vouchers for families with children, and support for Native
communities, older Americans, and people with disabilities.
Thank you.
[The prepared statement of Ms. Bailey can be found on page
66 of the appendix.]
Chairwoman Waters. Thank you, Ms. Bailey.
Ms. Eaddy, you are now recognized for 5 minutes to present
your oral testimony.
STATEMENT OF MARGARET EADDY, ACTIVIST AND HOUSING SEEKER
Ms. Eaddy. Good morning. My name is Margaret Eaddy, and I
am from Hampton, Virginia. I am grateful to the Office of
Representative Maxine Waters for providing me an opportunity to
speak to you today.
The topic of this hearing, fair and affordable housing, is
personal for me, and that is because my husband and I currently
live in our vehicle. There are so many other things about me I
would rather be sharing with you today. I am a visual artist
who paints beautiful abstract paintings. I am a former
librarian. I am an advocate for other parents like me who have
been impacted by gun violence.
Being homeless steals your identity. People like my husband
and I need stable housing first before we can accomplish our
full potential. So today, I wanted to briefly share our housing
story with you. Our experience has also brought us into contact
with other families who are facing similar challenges, and I
hope to speak up for them as well.
When the pandemic hit in 2020, my husband saw his hours cut
in his job hauling trash to the landfill. We fell about $150
short on our rent. Instead of working with us, the landlord
evicted us. My husband and I decided to move into our vehicle
while we searched for other places, but we soon found out the
barriers to finding a home were very steep. Whenever my husband
and I would speak with rental offices, I would give them my
name, they would type my name into some sort of data system,
and then tell me, we see an eviction on your public record so
we can't help you.
My husband and I were able briefly to find a place to live
after our story received news coverage. We received support
from kind individuals on GoFundMe. But this year, after that
attention faded, our landlord chose to do what many landlords
have done recently: They failed to renew our lease after it
expired and then increased our apartment's rent beyond what we
could pay. So for the last 4 months, my husband and I have been
living in our car again.
In the parking lots where we sleep, and in homeless
agencies where we visit, I have met many other homeless
families. It hurts so bad to see moms and dads out there with
their kids. The dads look like their pride was stolen away from
them. And when they tell you their stories, they will tell you
that their world turned upside down because their rent went up
by even just 50 or 60 more dollars, and they couldn't afford
that.
Even if an apartment were to be offered to us, the deposit
and income requirements are so high. A landlord typically asks
for 3 times the rent up front, $3,000, for example, for a place
that rents for $1,000. We don't have that. The landlords can
also require you to show that you make 3 times the monthly rent
just to qualify. We can't show that.
All of this makes people in our situation more vulnerable
to any landlord who will accept you, even if they overcharge
you and provide unsafe conditions. When people have stable
housing, it allows them to do so much more in life. I know that
it is hard for a Member of Congress to imagine yourself living
in your car. It was hard for my husband and I to imagine
ourselves in this situation, but I am asking you today to
imagine yourself in our situation.
You don't know how good it is to have a knob to turn every
evening, to enter a space where you are safe and not in danger,
until that is taken away from you.
There are so many people out here who, if they had safe,
affordable houses they could stay in until the day they died,
that would be something that they really do desire. Anything
that you can do to help make this a reality will mean a lot to
people.
Thank you.
[The prepared statement of Ms. Eaddy can be found on page
78 of the appendix.]
Chairwoman Waters. Thank you so very much for your
testimony.
Ms. Eaddy. You are welcome.
Chairwoman Waters. Mr. Mitchell, you are now recognized for
5 minutes to present your oral testimony.
STATEMENT OF MICHAEL MITCHELL, DIRECTOR, POLICY AND RESEARCH,
GROUNDWORK COLLABORATIVE
Mr. Mitchell. Thank you. Thank you, Chairwoman Waters, and
Ranking Member McHenry. Thank you for inviting me to testify
today.
My name is Michael Mitchell, and I am the director of
policy and research at the Groundwork Collaborative, an
economic policy think tank based in Washington, D.C., dedicated
to broadly share prosperity and abundance for all.
My testimony today will focus on three key points.
First, the Federal Reserve's actions to combat inflation on
driving up rents as high interest rates increasingly price
people out of the home-buying market and further crowd the
rental market. They are also exacerbating the long-standing
housing crisis by dampening sorely-needed investment in new
construction.
Second, the Federal Reserve's aggressive interest rate
hikes risk undermining a strong labor market and pushing our
economy towards a recession. These actions are coming at great
costs to workers and families across the country, particularly
the most vulnerable.
And third, policymakers have the tools at their disposal to
build a more resilient and equitable housing sector.
To my first point, the Federal Reserve's actions to combat
inflation are driving up rents and dampening sorely needed
investment in new housing construction. The Federal Reserve has
raised interest rates 6 times so far in 2022, including 4
interest rate hikes of 75 basis points.
As the Federal Reserve continues to raise interest rates,
other rates, such as mortgage rates, follow suit. The average
30-year fixed-rate mortgage rate across the U.S. is above 6.5
percent, and near 15-year highs.
As the cost of buying a house becomes more expensive,
potential homebuyers are forced to remain in the rental market,
where there are already too few rental units to meet demand,
putting upward pressure on rental prices. The most recent CPI
report for October revealed that rent prices have gone up 7.5
percent year over year, the highest rate in over 40 years.
Federal Reserve action also undermines private-sector
investment in housing construction as the rising costs of
borrowing makes such construction more costly and less
profitable. In recent months, we have seen declines in permits
for single-family home construction and single-family housing
starts. The Fed-induced slowdown in the housing market will
only exacerbate the 4-million-unit deficit in housing that
predated this inflationary period.
The Federal Reserve's aggressive approach to interest rate
hikes risks undermining a strong labor market and harming
marginalized workers, while large corporate landlords use this
moment to push up rents and boost profits.
Thanks to timely actions taken by the Biden Administration
and Congress, we have experienced one of the strongest post-
recession recoveries on record. However, this recovery is in
jeopardy because of the Federal Reserve's aggressive interest
rate hikes. In recent months, job and rate growth have slowed,
and a broad range of experts, from Nobel Prize winning
economists to financial analysts, have started to sound the
alarm about how the Federal Reserve interest rate hikes could
throw us into a devastating and totally-avoidable recession.
A recession at this moment would be particularly damaging
to marginalized workers, workers of color, workers with
disabilities, and women in the labor market, as discrimination
in the labor market means these workers are the last to benefit
from a strong economy and the first to suffer in a recession.
Yet, despite the significant threats that the Federal
Reserve's interest rate hikes pose to economic security for
millions, many of which are renters, large landlords have seen
this moment as an opportunity to raise rents by as much as they
possibly can. These companies have been very explicit about the
fact that the Fed's actions have given them cover to raise rent
more than overall inflation in order to pad their own pockets
and those of their shareholders. On earnings calls, they have
been forthright with shareholders about their ability to raise
rents with zero concerns for the tenant.
So, what is to be done? While the Federal Reserve may be
exacerbating the rent affordability crisis, there are a number
of actions that Congress can take to address the growing costs
of rent while also tackling key underlining factors to ensure
adequate affordable housing into the future.
For immediate impact, Congress can protect lenders from
burdensome rent increases in homes with federally-backed
mortgages, tackle corporate profiteering in the housing sector,
and make investments in helping families afford housing.
And for the longer horizon, Congress can make public
investments geared toward boosting the housing supply, and work
with municipalities to adopt new forms of zoning regulation
that would enable an increase in the supply of affordable
housing.
The Federal Reserve's actions to combat inflation are
driving up rents and exacerbating a housing crisis that
threatens the well-being of millions of families across the
country. Congress will need to act to ensure that struggling
families have access to quality and affordable housing.
In the long run, public investment in boosting housing
supply will be critical to building a housing sector capable of
meeting our country's needs.
Thank you. And I look forward to your questions.
[The prepared statement of Mr. Mitchell can be found on
page 86 of the appendix.]
Chairwoman Waters. Thank you very much.
Dr. Holtz-Eakin, you are now recognized for 5 minutes to
present your oral testimony.
STATEMENT OF DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN ACTION
FORUM
Mr. Holtz-Eakin. Thank you, Chairwoman Waters, Ranking
Member McHenry, and members of the committee for the privilege
of being here.
I want to make just a couple of simple points, and then I
look forward to your questions.
The first is that obviously, housing is central to the
inflation that is at decade highs, and also to efforts to
control that inflation. As the committee well knows, measured
year over year, inflation--CPI inflation in the most recent
poll was 7.7 percent. But I think the more striking number is
that if you look at the bundle that is food, energy, and
shelter, that is now rising at 9.5 percent annually, down a bit
from the 10 percent earlier. But still, every family when they
fill up their car, go to the grocery store, and then go home is
reminded of the erosion in their standard of living coming from
this inflation.
Of that bundle, shelter stands out as the most important.
Shelter inflation is now 6.9 percent year over year, up from
6.6 percent the month before, and indeed has risen every month
since early 2021, and has shown no sign yet of peaking. And
that puts the Federal Reserve in a great dilemma.
If shelter inflation is at 6 percent, and it's a third of
the CPI, the only way the Fed can hit a 2-percent target is to
have everything else be zero. That is not going to happen. And
getting housing inflation under control is central to success
in returning to a price stability mandate for the Federal
Reserve. So as a direct matter, the Fed is going to have to
focus on housing.
As an indirect matter, the housing market is an important
conduit for monetary policy. If mortgage rates are higher and
people want fewer mortgages, they are going to buy fewer homes.
They are going to build fewer apartments. And in those fewer
homes and fewer apartments, we are not going to put in
furnaces, we are not going to put in refrigerators, and we are
not going to carpet them, so the Fed's actions will have a
broad cooling effect on large swaths of the economy. And so as
a conduit, the housing market is going to carry an especially-
large burden in controlling inflation.
This Fed's strategies will make that burden even larger
because, as the ranking member mentioned, the Federal Reserve
has gone from buying $30 billion a month in mortgage-backed
securities to unwinding $35 billion a month in mortgage-backed
securities. That's a $65-billion-a-month swing, roughly a fifth
to a quarter of normal mortgage finance, which puts extra
pressure on access to capital in the housing sector. So, we are
going to see a Federal Reserve that needs to control housing
inflation, and its procedures will indeed target the housing
sector disproportionately.
Sadly, this tightening cycle comes at a time when there
were record-low vacancies in the rental market, and a record-
low inventory in the owner-occupied sector. And so, we, once
again, learn the lesson that if you let inflation get embedded
into the economy, you have no good choices. You either live
with the inflation, which is untenable in most people's minds,
or you have to undertake actions which seem at odds with your
other goals. And that is the position that we find ourselves in
today.
It is unsurprising to me that in those circumstances, there
will be calls for additional assistance into both rental and
unoccupied housing. You are hearing those calls today. I would
say two things about that. The first is, they are unlikely to
succeed. The Fed's goal and its necessity is to cool the
housing market and then allow housing demand to continue.
Adding more demand subsidies will simply be counteracted by a
higher and more-aggressive Fed of necessity. So, it is not
going to be effective at this point in time.
And the historical record on demand subsidies is not
exactly a sparkling one. Housing was at the center of the 2007-
2008 financial crisis, and the Great Recession that was
attributed to the housing Government-Sponsored Enterprises
(GSEs), Fannie Mae and Freddie Mac. Long-standing subsidies to
owner-occupied housing placed the taxpayers at tremendous risk,
fed an unwise credit boom in the housing sector, and ultimately
led to enormous losses in personal wealth across the economy.
Since then, nothing has changed. The GSEs remain in
conservatorship. They are undercapitalized, and they are back
to their traditional mission creed of finding additional ways
to subsidize housing when it has been proven that that is an
unwise course and is not going to be effective.
And so, I would encourage this committee to look at the
other side of the market. Look at the supply side and find
effective ways to deal with the chronic undersupply of housing;
do not repeat failed demand stimulus.
Thank you.
[The prepared statement of Dr. Holtz-Eakin can be found on
page 80 of the appendix.]
Chairwoman Waters. Thank you very much.
And Dr. Zandi, you are now recognized for 5 minutes to
present your oral testimony.
STATEMENT OF MARK ZANDI, CHIEF ECONOMIST, MOODYS ANALYTICS
Mr. Zandi. Thank you, Chairwoman Waters, Ranking Member
McHenry, and members of the committee. Thank you for this
opportunity to participate in today's hearing.
My name is Mark Zandi, and I am the chief economist at
Moody's Analytics. I am also the lead director of the
Reinvestment Fund, a large Community Development Financial
Institution (CDFI). And I am on the board of directors of MGIC,
which is one of the nation's largest mortgage insurers. But the
views I am expressing here today are my own.
I will make four points in my remarks, and they echo many
of the remarks made by the other witnesses.
First, it is clear that American households are struggling
with the hit to their purchasing power from the very high
inflation. Prices are rising quickly for many goods and
services, gasoline and food, new vehicles and, of course,
housing, the subject of this hearing.
Just to make that point concrete, the typical American
household making the median income has to devote $433 more per
month to purchase the same goods and services that they were
buying this time last year because of the high inflation.
Clearly, for someone making $70,000 a year, that is financially
overwhelming.
Second, there is a long list of reasons for why inflation
is high. I would put at the top of the list the Russian
invasion of Ukraine and the resulting surge in oil, natural
gas, agriculture, and other commodity prices. The pandemic is
still creating havoc, as we can see in China, the global supply
chains into the labor market, and, of course, also the
affordable housing shortage, which has been building since the
great financial crisis over 10 years ago. In fact, I estimate
that the shortfall in housing at this point is about 1.6
million homes, which is about 1 year's worth of new
construction at the current pace.
This shortfall has been long in the making. It is behind
the very-high house prices and the rents that we are struggling
with, and it is key to the inflation that we are suffering
through right now.
As others have pointed out, housing accounts for one third
of the Consumer Price Index, and it has accounted for over a
percentage point of inflation, given the Federal Reserve's
target of 2 percent. That gives you a sense of how daunting
this is.
My third point is that the Federal Reserve really does not
have the policy tools needed to address this shortage, and its
effort to quell inflation by raising interest rates, while
appropriate, is adding to the cost of housing services. The
higher mortgage rates resulting from the Fed tightening are
undermining the affordability and the demand for homeownership,
and that is causing more people to have to rent, which is
causing rents to rise and adding to the cost of housing
services.
Also, and I think less appreciated, the higher costs, the
lending rates for new construction, those weigh against the
building of new multifamily units for single-family rental, and
that reduction in supply is also adding to rents and housing
costs.
And this leads to my final point. Because of the inability
of the Fed to address this issue, it is up to Congress and the
Administration to adopt policies to help alleviate the
shortage, and to improve supply to help rein in the inflation.
These policies can include a range of things, including tax
breaks, grants, access to less-expensive capital, and critical
incentives to get local decision-makers to ease zoning rules
and restrictions on development.
Now, grants tend to close the economic gap for local
governments and philanthropies to build and renovate housing,
and tax incentives tend to close the gap for private businesses
to do the same.
But most immediately, I think I would focus on the tax-
related policies. I think they can work quickly to increase
housing supply, which has to be the focus, and bringing private
capital to bear to address the affordable housing shortfall
will be needed to bring it to scale and to help over the longer
run, because even on the other side of the pandemic and its
effects, the housing shortfall is going to be significant and
add to inflationary pressures.
So, affordable housing is a serious problem. It is driving
up the cost of housing and homeownership, and putting upward
pressure on inflation that will be long with us, and it is a
pernicious problem. But fortunately, there are policy solutions
to this problem that make good economic and political sense.
I look forward to your questions.
Thank you.
[The prepared statement of Dr. Zandi can be found on page
94 of the appendix.]
Chairwoman Waters. Thank you so very much, Dr. Zandi.
I now recognize myself for 5 minutes for questions.
Mrs. Eaddy, I want to thank you so much for appearing here
today to share your very difficult story with this committee,
and I am also very saddened that your experience is one that is
shared by millions of families all across this country,
especially among low-income families and people of color. No
one should have to rely on GoFundMe to afford a roof over their
head.
We throw around large amounts of money in our
conversations. We talk about millions and billions and
trillions. So, could you just talk a little bit about what
something like $150 billion in fair funding or affordable
housing investments would do for you and your family, and for
those in similar circumstances? Would it make a difference in
your life? What would it do for you?
Ms. Eaddy. Of course, it would make a difference,
Chairwoman Waters. Just a little bit of that, like one little
drop of that money could change not only my life and my
family's, but a lot of families' lives. That money could give
us back our identity and our dignity, to feel safe again, to
feel like we are human again, because when we are out here
being homeless, it is just like everything is stripped away
from us. It is like we don't see an end to it. But if we did
have funds to help us, it would change our whole perspective.
It would give us back our identity. It would give us our place
back in society where we won't feel like we are the bottom of
the barrel. It will give us just a safety net where we can feel
as though we can accomplish things. Because if we have to
constantly worry about having a roof over our head, we don't
have time to adapt or try to even put into words, is there any
hope to get housing.
I feel as though the money would be something that could
really help us bring back not only our identity and our self-
worth, but it would be something that would definitely help us
go towards trying to make our lives better in the future.
So, having the resources to be able to get affordable
housing would be an asset to us.
Chairwoman Waters. Thank you so very much.
Dr. Zandi, can you tell us what robust Federal investments
in affordable housing like those that we had in Build Back
Better, which we passed through the House, would mean for
inflation and the economy overall?
Mr. Zandi. Chairwoman Waters, I think they would be very
positive because they were almost entirely focused on the
supply side of the housing market. And the lack of supply that
has been developing since the financial crisis over a decade
ago is the key reason for the surge in house prices and rents
that are adding to the inflationary pressures that we are
suffering through right now. Those various grants and tax
breaks that were provided in the Build Back Better Plan to
increase supply would address that question.
And those programs are already in place. Those tax breaks
are already in place. They are tried and true. They are not
perfect, but they do work, and many of them do work very, very
quickly and can help increase the supply, particularly of
affordable rental housing in the next 12, 18, 24 months when
obviously, it is going to be very critical that we get
inflation back in. And housing cost inflation, as has been
pointed out, is a very key part of overall inflation. So
getting rent growth, slowing it down, that would go a long way
toward getting inflation back into its box and allowing the Fed
to bring down interest rates, which, of course, would be
critical to making sure the economy can get through the next 12
to 18 months without going into a recession.
So, I think of all of the policies in Build Back Better,
the housing-related supply-side policies are particularly
important in addressing the high inflation that we are
suffering through at this point in time.
Chairwoman Waters. Thank you very much.
The gentleman from North Carolina, Mr. McHenry, who is the
ranking member of the committee, is now recognized for 5
minutes.
Mr. McHenry. Thank you, Madam Chairwoman.
Dr. Holtz-Eakin, with inflation that we haven't experienced
since the 1970s, like the Carter Administration, the Biden
Administration has exacerbated price instability and the cost
of consumer goods going up. And that has been exacerbated by
Federal spending. Obviously, the Fed has a certain role in
monetary policy, but the fiscal house adds a key ingredient to
the experience that we have here in the United States, pre-
Ukrainian invasion.
So, can you explain how massive spending bills impact
inflation price instability and, thereby, housing prices as
well?
Mr. Holtz-Eakin. Certainly. In 2021, we saw a 6-percentage-
point increase in consumer price inflation in the United
States. That has only happened three times. The first time was
in 1952, when the U.S. economy was growing rapidly, 10.5
percent, a pretty big number, and the Federal Government
increased its spending by 50 percent to prosecute the Korean
War. With big Federal spending and a hot economy, consumer
price inflation jumped right up. The Fed did nothing to offset
it.
That is exactly what we saw in 2021. The $1.9-trillion
American Rescue Plan was about a 50-percent increase in typical
Federal spending. The Fed did nothing to counteract it. We saw
a big jump in inflation in 2021. I think that's unquestionably
a big root of the current inflation problem.
The other episode that is illustrative as well is in 1974
with the OPEC oil embargo, when global oil prices quadrupled
overnight. That caused pressures in every business in America,
which got passed on to consumers. And we saw supply chain
issues. Those are certainly part of the inflation story, but
they are not all of it. That excessive Federal spending,
excessive stimulus produced demand across-the-board and rapid
increases in prices.
Mr. McHenry. So, the Federal Housing Finance Agency (FHFA),
in response to substantial changes in housing prices, and
because of the change in Administration, has raised the
statutory limit for the maximum-size mortgages that Fannie and
Freddie can buy. And now, you have Government-Sponsored
Enterprises enabling the financing of mortgages on homes sold
up to $1,089,300, in some places across America.
So translated, taxpayers will now be on the hook to
guarantee $1-million homes in places like California, New York,
and the D.C. suburbs. Housing experts, like former FHFA
Director Ed DeMarco, have observed that, ``Excessively high
loan limits exacerbate the affordability crisis.''
Do you agree with Director DeMarco that something is not
right here?
Mr. Holtz-Eakin. I do. We have seen the track record of
demand subsidies exacerbating higher prices because of the
inadequacy of supply. These are especially poorly-targeted
demand subsidies--$1-million homes are not exactly targeting
those subsidies toward those who are most in need. So, it is
the worst of both aspects of that policy.
Mr. McHenry. Okay. So to address inflation, what should
Congress do?
Mr. Holtz-Eakin. First, it should not exacerbate the
problem. That is the number-one thing that a future Congress
could do is not put the U.S. in this position again. As I
mentioned, now that inflation is entrenched, there are no good
choices for combating it. So, don't put the U.S. in that
position again by having fiscal policies that add up, and don't
exacerbate demand in an excessive fashion.
Mr. McHenry. And if Congress could do one or two things on
housing to increase the affordability of the housing supply, to
enhance the supply of housing, what would you say?
Mr. Holtz-Eakin. I would echo some of the things that Mark
Zandi said, which is, a carefully-thought-out long-term plan to
increase supply is the key. A rapid response, trying to sort of
solve this problem overnight, really just produces a huge
construction boom and exacerbates the inflation problem. This
is the wrong time for that. So, have a patient strategy that is
going to increase the supply of rentals, especially housing in
the United States.
Mr. McHenry. So, a long-term approach to a long-term
problem?
Mr. Holtz-Eakin. Yes.
Mr. McHenry. Mr. Zandi, do you agree?
Mr. Zandi. Yes. I would focus on the supply side here in
the immediate future. And I do think the tax incentives that I
mentioned in my remarks would be particularly effective in the
near term: the Low-Income Housing Tax Credit (LIHTC); the
Neighborhood Homes Investment Act tax credits; and the New
Market Tax Credits Program. Again, the infrastructure for
getting that capital out into the marketplace is already there.
It is well-functioning. The Administration is making tweaks to
these programs to make them more effective. Congress is passing
legislation or proposing legislation to make them more
effective.
Mr. McHenry. Thank you for your testimony. Thank you for
testifying, and thank you, Dr. Holtz-Eakin.
Chairwoman Waters. Thank you very much.
The gentleman from Georgia, Mr. Scott, who is also the
Chair of the House Agriculture Committee, is now recognized for
5 minutes.
Mr. Scott. Thank you very much, Madam Chairlady.
About 10 years ago, the U.S. Department of Housing and
Urban Development estimated that we in Congress needed to spend
$26 billion on construction projects for repairing the nation's
stock of aging housing. Unfortunately, Congress didn't do
anything about that.
After years of failing to address this problem, the current
backlog of unfunded capital projects has now ballooned to an
estimated $80 billion. These types of projects include things
like repairing damaged roofs, replacing broken heating and air-
conditioning, and reconstructing aging sewage lines, critical
repairs that also affect the health and the safety of 1.2
billion families who are living in public housing units.
And so, Ms. Bailey, I want to ask you, how do we get into a
situation where we have an $80-billion backlog of public
housing construction and projects? And specifically, how many
public housing units are lost each year to this backlog?
And, Ms. Bailey, I want to express to you that I am very
concerned about this. Public housing is how I got my start in
politics. I represented all of the basic large public housing
in Atlanta as I launched my political career, so I am very
concerned about it.
How many public housing units are lost each year to this
$80-billion backlog? This is a major national issue.
Ms. Bailey. Thank you so much for the question.
I agree with you. Even before this crisis, families were
struggling and our infrastructures were struggling. We have a
massive underload. We are not properly resourcing the
communities that have been locked out of opportunity for the
entirety of our nation. We have constantly relied on affordable
housing with our root in it in fair housing to lead the nation
forward exacerbating inequality. So we need a ton of
investment, as you outlined, to address the public housing
deficiencies all over our country.
And what is important about using those resources to affect
those deficiencies is the reality that the courage that Mrs.
Eaddy used today in being here gives us an opportunity to help
families just like hers have the God-given human dignity
restored that they desperately need.
Mr. Scott. Right, that's an excellent answer. And we have
to draw more attention to helping those people. It is public
housing. That means it is congressional housing. It is what we
in the public sector, which is the Federal Government, which is
HUD, this is our challenge to do.
My second question to you is, from what I understand,
public housing authorities are not required to submit capital
needs assessments for what projects need repair. You can't
repair projects if you don't know which ones to repair. If that
is correct, how does HUD keep track of the number of backlogged
projects?
Ms. Bailey. I would like to follow up with you--
Mr. Scott. Ms. Bailey, if you could answer that.
Ms. Bailey. I would like to follow up with you in response.
I would say we have to make sure HUD is adequately funded
because part of the challenge is that it lacks the technology
and staffing, people, that it needs to effectively operate. HUD
was massively defunded by the former Administration, and we
have to, right now, make sure HUD has every resource to
continue to do all that Secretary Fudge is doing to address our
nation's affordable housing crisis.
Mr. Scott. And do you know that there are people who
started out in the public housing, and they are out, they are
sleeping on the streets in my district in Georgia. And we have
been helping them. We have been saving them. And Chairwoman
Waters and I and this committee have put together housing
assistance, helping them with getting running water.
Thank you, Madam Chairwoman, but this is a serious issue.
Chairwoman Waters. Thank you very much.
The gentleman from Texas, Mr. Sessions, is now recognized
for 5 minutes.
Mr. Sessions. Thank you very much, Madam Chairwoman.
Mr. Mitchell, I would like to go through a quick discussion
with you.
Do you work well with HUD?
Mr. Mitchell. Our organization does not work with Housing
and Urban Development.
Mr. Sessions. I have tried. I have tried, and we have had
at least one hearing with Secretary Fudge of HUD. Today, we
have heard our young chairwoman say Republicans offered no
solutions to try and fix the housing crisis. Today, we heard a
blame game for there is not enough money, funding. But, Madam
Chairwoman, I would like to enter into the record a series of
letters--
Chairwoman Waters. Without objection, it is so ordered.
Mr. Sessions. --about discussions that people back in Texas
have had with not only Secretary Fudge, that was very
unsuccessful, but also from her organization on issues related
to north Texas having an excessive number of people who were
without housing. And the executive director of the Dallas
Housing Authority, Mr. Troy Broussard, had been working for
quite some time with local advocates, people who wished to come
in and provide affordable housing and to do these things
because they saw firsthand the problems in north Texas. As you
know, Texas is growing, and north Texas is exponentially
growing. In a series of letters and conversations, including
with the senior Member from north Texas, Chairwoman Eddie
Bernice Johnson, and myself, we were completely unsuccessful in
attempting to get HUD to even respond properly. And they came
back and, by and large, gave excuse after excuse after excuse,
saying a waiver would be too complicated for Dallas, Texas, to
deal with the problems that local people have. That is all they
asked for.
And instead of saying, let's work with you, they ignored
over a year of trying to solve the problem. And the problem,
while I am not a housing expert, should have put a person from
the Secretary of HUD, where they flew down to Dallas, Texas--
and we are going to find this out next year when our young
chairman will be--as the chairman, we are going to have the
Secretary come and tell us what did they do? Did they fly down?
Did they do calls? And then, we are going to have the Dallas
Housing Authority come and tell us about all their efforts to
try and do something.
So, I find what is happening today very regrettable,
because Republicans did try and help. The Honorable Eddie
Bernice Johnson, a senior Member of this body, and the
Honorable Greg Meeks, a senior member of this committee--we
went and personally met with them earlier in the year to try
and say, please help us in Texas and in north Texas. And we got
zero help from HUD.
I would have to beg the question, what good does it do to
have someone whose job is bigger than they are in that
position? And so, I would like to let each of you know we do
appreciate your feedback today.
I don't agree that the blame game of Republicans or the
prior Administration holds any significance to where we are.
President Biden accepted the ball where it lay, and that is
what he will be held accountable for. And each of you, I
sympathize with you. I have a Down's Syndrome son. I am in the
disability community. They are struggling mightily, people who
cannot take care of themselves. This Administration has turned
its back on them.
Thank you for the time, Chairwoman Waters.
Chairwoman Waters. You are so welcome. And let me remind
you that we passed from this committee, the Build Back Better
bill, $150 billion, and HUD and the President are providing the
leadership.
The gentleman from California, Mr. Sherman, who is also the
Chair of our Subcommittee on Investor Protection,
Entrepreneurship, and Capital Markets, is now recognized for 5
minutes.
Mr. Sherman. Thank you.
There has been a comment about inflation. I should point
out that inflation is going to be worse, or has been worse over
the 2022-2023 period in most other developed countries as
compared to the United States. So the real lesson is, don't be
a developed country on a planet with COVID-19 and a European
war. We have done our best to handle the situation. Every other
country that is similarly situated has as well.
We are told that maybe we shouldn't have a higher
conforming loan limit in California than in other States. I
take this personally. If you have a similar house, in a similar
neighborhood, in one State, in another State, the U.S.
Government should provide the same level of assistance rather
than say it is okay to do it somewhere else but not in
California.
I believe Mr. Holtz-Eakin pointed out the inadequacy of
supply, which I think is the problem. It is supply and demand.
But keep in mind we have more square footage of housing in our
country than any other major country in the world. It is just
we have giant homes for some people and others are living on
the streets. We are urged to be patient. It is hard to be
patient while you are living in your car.
There are three problems: There is the homelessness
problem, where people can't even get an apartment; there are
people who are in apartments, but the rent is too damn high;
and there are people who can't afford or cannot comfortably
afford to buy a home. We can build a few buildings with Federal
money. We as politicians can be there to cut the ribbon. But if
you are trying to provide housing for nearly 340 million people
in a capitalist society, you have to look at the homes that are
going to be built and operated in the capitalist society,
otherwise you are just cutting ribbons for a few hundred
people.
We can incentivize the building of homes, but it is nothing
compared to what local governments do to prevent the building
of workforce housing. If you require no more than 4 homes on an
acre, and a $100,000 feed to hook up to local services, you are
not going to have housing that people can afford.
We have the fiscalization of land use planning where a city
in my State loses money if they allow the construction of
housing, and in many places. The way for the city, which makes
the land use planning decisions to make money, is an auto
dealership or luxury homes. Low cost to the city. Lots of
revenue for the city. It is absolutely absurd that we provide
cities with money based upon how rich their residents are. If
every city in every State got the same amount of money per
resident, we would have a fair provision of local services and
the end of an incentive to keep out workforce housing.
We see zoning decisions made to keep out poor people,
sometimes to keep out people of color, and sometimes to
preserve the environment, which often adds up to being the same
thing. If you can't build an apartment building anywhere in the
city, you can't have workforce housing in that city. And when
you look at the zoning and the fees, which this Congress has
not prohibited, it is not surprising that we have more square
footage than any other developed country and more per person,
and we have more homeless than any other developed country.
I have to shift to another issue. Ms. Bailey, should we be
doing more to provide assistance for safe parking? Because a
good chunk of the homeless people in my area have a car; they
just don't have a place to live.
Ms. Bailey. Sir, we should be doing more. I am sorry, thank
you so much for the question. And we should be doing more to
make sure families can remain safely housed. The American
Rescue Plan Act that this Congress passed included increased
support to protect homeowners with the Emergency Rental
Assistance Program. We have done a tremendous job of holding--
Mr. Sherman. I am going to try to squeeze in one more
question.
Mr. Mitchell, is there any way that we can create enough
housing if we allow cities to charge $100,000, $150,000 per
unit to the developer and to not allow more than 4 or 5 units
of housing per acre?
Mr. Mitchell. I think it will be critical for local
governments to make sure that they are creating zoning laws
that allow for construction of the kinds of units that are
necessary to house the number of people to meet demand, and
currently we are not doing that. And as you mentioned, in most
localities it is not possible at this moment.
Mr. Sherman. Thank you.
Chairwoman Waters. Thank you very much.
The gentleman from Florida, Mr. Posey, is now recognized
for 5 minutes.
Mr. Posey. Thank you very much, Chairwoman Waters, for
holding this hearing, and for holding the many hearings that
you have held in seeking solutions to the unaffordable housing
crisis.
Mr. Holtz-Eakin, in the Inflation Reduction Act and many of
our housing proposals, we see proposals that attempt to solve
inflation or housing pricing by simply giving more money to
groups to pay higher prices. We also have proposals to give
some people money to buy gasoline. Please comment on this
approach to inflation and high prices.
Mr. Holtz-Eakin. This is subsidizing demand. One of the
problems is that demand is too high relative to supply. And so,
it just exacerbates the problem in the long run and undermines
the intent of the program.
Mr. Posey. The Build Back Better Act is being noticed in
this hearing. Can you please comment on the housing strategy in
this proposal, including the heavy emphasis the bill places on
investment and refurbishing of public housing projects?
Mr. Holtz-Eakin. I have not stayed current with the
provisions in Build Back Better since it did not become law,
but I would be happy to get back to you in writing.
Mr. Posey. Okay. Madam Chairwoman, I yield back the balance
of my time.
Chairwoman Waters. The gentlewoman from New York, Mrs.
Maloney, who is also the Chair of the House Committee on
Oversight and Reform, is now recognized for 5 minutes.
Mrs. Maloney. Thank you so much, Madam Chairwoman. And I
thank you for holding this hearing, and I thank you for
focusing on the need for more housing. It is a persistent
problem, the affordability of housing in my own district, and I
would say in my city, in my State, and clear across this
country.
And the raising of interest rates has worsened
affordability for homebuyers and homeowners and even renters.
For example, between April 2021 and April of this year,
mortgage rates increased by nearly 2 basis points, and the
median home price rose by over $50,000. And the monthly cost of
homeownership, which includes a monthly payment on a 30-year
mortgage, property taxes, property insurance, and mortgage
insurance grew by at least $500-a-month. But in some cases, in
metropolitan areas, it has grown by over $1,000 a month.
I would like to ask Dr. Zandi, an economist, whether
raising these interest rates contributes to the increased cost
of housing for homeowners, which is a goal of most families and
renters in this country.
Mr. Zandi. Thank you, Congresswoman, for the question. Yes,
clearly it does. I think your statistics strike that point
quite clearly. I will point out, though, that to a significant
degree, this is by design. The Federal Reserve is working hard
to slow the economy's growth, to quell the wage and price
pressures. And the most rate-sensitive sectors of the economy
are going to suffer the most as a result. Single-family housing
is the most rate-sensitive sector of the economy. If you are
going to buy a home, most people have to get a mortgage, and
thus the rate sensitivity.
Unfortunately, this is by design. But it does bring up the
broader point that housing affordability is going to be a long-
term issue, even when we get to the other side of this and get
inflation back in and interest rates back down. And
homeownership is going to be under significant pressure going
forward.
So it is about supply in the near term, but I do think,
longer run, we also have to think about ways to improve
affordability for lower-income disadvantaged groups. And
demand-side policies will become more important at that point
in time. But in the here and now, the reduction of
affordability is by design. The Fed is working to slow the
economy's growth, and they are doing it by hitting the single-
family housing market very hard.
Mrs. Maloney. But there would be other ways to address the
inflation that is in our economy. I would venture to say that
housing has not caused the inflation in our country, it is more
caused by the war in Ukraine--
Mr. Zandi. Absolutely.
Mrs. Maloney. --or the war in Afghanistan, and the
destruction of our supply chain. Why don't we address those
causes as opposed to attacking housing and the affordability of
housing?
I am concerned about the impact it is going to have on my
constituents and other Americans to be able to afford a home
with these interest rates going so high. We have a 30-year
mortgage. My question is, could we change our policy to have a
50-year mortgage and possibly alleviate some of the pressures
homeowners face in making their monthly payments?
And I would add that this housing inflation affects renters
too, because when the mortgage goes up, then the rent also goes
up. So, I would like your take on changing it from a 30-year
mortgage, which is really the standard that we have in America,
to a 50-year mortgage, for 50 years, so that you could lower
the rate and allow people who are confronting constrictions in
their income to afford homeownership.
Mr. Zandi. That is an interesting idea. I would say the
United States is very unusual compared to every other country,
except for the few exceptions, to having the 30-year fixed-rate
loan. Most countries have much shorter mortgages. They adjust
immediately if market interest rates are 2-year or 3-year or 5-
year. And that is because of Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac allow for the 30-year fixed-rate
mortgage to be the bread-and-butter mortgage in the United
States. And right now, that is insulating homeowners from this
run-up in interest rates.
I don't know that a 50-year mortgage would advance the
ball, Congresswoman, only because the typical American
household lives in their house for no more than 10 years. So,
very, very few people would actually live in that house over
that period of time.
I would throw out another idea: Assumability of mortgages.
Right? So, you get a mortgage at a lower mortgage rate, and
when you move, you can take that mortgage with you. FHA has
some mortgages like that. That might be an idea that would be
very helpful in helping insulate the housing market and
homeowners and improving affordability in the longer run.
Mrs. Maloney. Thank you. My time has expired.
Chairwoman Waters. Thank you very much. The gentlelady's
time has expired.
The gentleman from Missouri, Mr. Luetkemeyer, is now
recognized for 5 minutes.
Mr. Luetkemeyer. Thank you, Madam Chairwoman.
Mr. Holtz-Eakin, the Administration is considering, under
an FHA program, to have rent control put in place. According to
a survey of our nation's economists, more than 8 in 10 of them
believe that rent control ordinances would harm both the
quality and quantity of affordable housing in areas where it is
implemented.
American economist Walter Williams once said, ``Short of
aerial bombardment, the best way to destroy a city is through
rent controls.'' Would you agree with that?
Mr. Holtz-Eakin. I would. There is a track record of
failure of rent control provisions in States and localities
across the United States. It is not a theoretical issue. This
is something that has not worked on the ground.
Mr. Luetkemeyer. It is concerning. I think the discussion
this morning is quite interesting from the standpoint that Mr.
Sherman, a minute ago, was talking about trying to increase the
supply. You have been talking about supply. Mr. Zandi has been
talking about supply. And it seems as though the different
communities try to constrict the supply through the amount of
regulation they put out there.
It has been a while, so I may be wrong on this figure, but
it seems to me that I saw or heard a figure in this committee
at one time that 25 percent of the cost in some communities is
rules and regulations compliance. I don't know if it is that
great or not, but that is significant. And Mr. Sherman made the
point a minute ago about hundreds of thousands of dollars--and
I have a relative who lives in California, so I know it is
extremely high in California to try and build a house or build
any sort of commercial building, just for the permits and all
of the other things you have to go through. These are costs
that drive the cost of the construction up, which means it has
to be recouped through the rents that are charged for the
occupants of that building. There has to be a way to control
those and find a better way to do this. Don't you think so?
Mr. Holtz-Eakin. Everyone who studies this problem comes to
the conclusion that an enormous amount of it stems from
decisions made at the local level, whether they are land use
zoning restrictions or our construction codes, a variety of
regulatory costs that raise the cost of housing. That has to be
part of the solution.
This committee, unfortunately, is not in every locality in
the United States. And it always comes up, what can the Federal
Government do? And those tools are far more limited. I think
that is one of the reasons that historically, the Federal
Government has always turned to demand subsidies. It is not
that hard to do that at the Federal level. It is very hard to
control these regulatory land-use decisions at the local level.
Mr. Luetkemeyer. To take it to the extreme, one of my sons-
in-law is in the construction business, and part of it is he
builds hotels. But he is in this business and understands
building apartments and hotels and things like that. He lives
in Colorado, and he was telling me about Boulder, where you
can't even build a new apartment building in Boulder.
So, how do you solve the housing problem whenever you have
a community board there, the city council that would prohibit
any new construction? They don't want people to come. This is
crazy. And it is a college town where the demand is soaring. It
makes no sense.
I think we have to find a new way to address this from the
standpoint of thinking differently about trying to address the
problem instead of trying to constrict it and hope it goes
away. It doesn't work.
In part of the discussion this morning with regards to
inflation--you and I have had this discussion offline, and in
my Small Business Committee a couple of times, and I really
appreciate your comments on it--it looks like inflation is fed
by four different things: rules and regulations; energy; money
supply; and the supply chain employee problems that we have
talked about. And much of this can be done with the
Administration without congressional action, when you look at
rules and regulations.
I think your entity, your association came up with a figure
of $200 billion as what it cost last year for compliance. And
it is over another $100 billion this year by this
Administration just on compliance for new rules and
regulations. This is crazy that it has to all be implemented
and charged through rents and higher costs to the people who
purchase products and services.
Mr. Holtz-Eakin. That is exactly right. We do keep track of
the burden placed on the private sector of every new final
regulation in the Federal Government. And the Biden
Administration finalized $200 billion of regulatory cost in its
first year. That is the highest we have ever seen in our time
doing this. It is well over a hundred this year. And those are
costs that will have to be passed on to consumers and will show
up as higher prices.
Mr. Luetkemeyer. One more quick question. It seems like we
have a Fed in contradiction to the Administration on the
standpoint the Fed is trying to constrict your ability--the
demand, and on the other side, when you throw millions and
trillions of dollars into the economy, you are trying to
increase demand and supply.
I have never seen the Fed and the Administration at odds
like this. Would you like to make a quick comment on that?
Mr. Holtz-Eakin. There is nothing the Administration has
done that has helped the Fed. They could relieve some tariffs,
and those are bit costs, especially in the construction of
homes. We did a calculation, and I would be happy to get it to
you, that could do something with the regulatory costs. They
could not forgive the student loans, which is basically a $420-
billion spending program. There is nothing about what the
Administration has done that is aiding and abetting the Fed's
efforts to fight inflation.
Mr. Luetkemeyer. Thank you very much.
Madam Chairwoman, my time is up, so I yield back.
Chairwoman Waters. Thank you very much. You just hit upon
an issue that I think we could work together on, and that is
reducing the cost at the local levels from permitting one-stop
shops. And in the Build Back Better Act, we had appropriations
in there for those who deal with the zoning problems in
producing affordable housing.
Mr. Luetkemeyer. There is a lot of common ground, Madam
Chairwoman.
Chairwoman Waters. I think we can work together on that.
Thank you.
The gentleman from Texas, Mr. Green, who is also the Chair
of our Subcommittee on Oversight and Investigations, is now
recognized for 5 minutes.
Mr. Green. Thank you, Madam Chairwoman. And I thank the
witnesses for appearing.
Mr. Zandi, if we had not had a global pandemic which shut
down the world's economy, and disrupted supply chains, if we
hadn't had a war in Ukraine, would this be a different
conversation that we are having today?
Mr. Zandi. Oh, absolutely. Those two massive, unprecedented
shocks to the supply side of the economy are the principal
reasons for the very high inflation we are suffering through
right now. And another person made the point earlier, one
strong piece of evidence of that is this inflation that we are
suffering through now is across the globe in all parts of the
world. And it just drives home the point that these two supply
shocks are difficult for any country to navigate through, and
certainly, we are struggling as a result of it. There are other
reasons, but those are the two key reasons for this high
inflation.
Mr. Green. I raise these issues because I defend President
Biden. I think President Biden has done a pretty good job under
the circumstances that he has had to negotiate. And I think
that for us to just allow it to be said simply that these are
Biden problems is an extortion of the facts; it is not just an
exaggeration. It is unbelievable that we would try to pin all
of this on a President who has been able to manage our
situation such that we are better off than most of the
economies in the world.
Is this a true statement, Mr. Zandi? Are we better off than
most of the economies in the world?
Mr. Zandi. Yes, our economy is performing exceptionally
well compared to the rest of the world. You can see that in the
strong value of the U.S. dollar against all currencies. It is
very, very high by historical standards, and that is because
the U.S. economy is performing much, much better than other
places in the world. So, yes, I think that is very much the
case.
Mr. Green. Let me add this as well, there is talk about not
having had hearings on inflation. Well, Democrats have acted.
We have not just had hearings, we have acted on this inflation.
We have reduced the cost of pharmaceuticals for seniors.
Inflation is all about paying for things at a high price. We
have brought those prices down. We have reduced the cost of
healthcare for seniors. I happen to care about seniors. Some
people seem to think that if you only help seniors, you are not
helping the economy. Seniors are a large part of the economy,
and they need help too.
We have also engaged in the passage of legislation to boost
the manufacturing of semiconductors. This is a real problem for
us, having semiconductors made abroad. And we can bring down
the cost of cars by dealing with the cost of semiconductors.
So, we have done our share. And it is time for my
colleagues across the aisle to come up with the solutions and
present them so that they too can have the opportunity to be
perused closely and scrutinized even closer for what they are
doing.
Let's talk about people who live in the streets of life. It
is my opinion that the greatness of a nation will not be
measured by how we treat people who live in the suites of life,
but rather how we treat people who live in the streets of life.
People who have to sleep in their cars, asking us to imagine
what it is like to sleep in a car? I appreciate the question,
but I think that it is more like water on a duck. It just rolls
off.
I have never had to sleep in a car. We live in a different
world. If people who sleep in cars were making these decisions,
you would get different results. We live in a different world.
We don't have to worry about healthcare. If we get sick, we
just walk across over to the Capitol Building, where there is a
doctor waiting on us right now.
We live in a different world. We make hundreds of thousands
a year. Our salaries are different. And I just resent and
regret that you have to come begging and appealing to us with
tears in your eyes, asking us to help.
I stand with you, and I stand with poor people, regardless
of their hues. White people need help too. I stand with you.
And I yield back the balance of my time.
Chairwoman Waters. Thank you very much, Mr. Green.
The gentleman from Michigan, Mr. Huizenga, is now
recognized for 5 minutes.
Mr. Huizenga. I agree with my colleague, Mr. Green, that we
do live in a different world.
But, Ms. Eaddy, I want to address you first before I get
into some of the arguments you may have heard. Well, let's just
call them robust discussions. That is a more polite way.
We have common goals. We have different paths for getting
there. But I want to say thank you for sharing your very
personal story. I want you to know I hear you, I see you, and I
believe my colleagues see you and hear your story.
I recently had a chance to, in my hometown, visit with an
organization called Jubilee Ministries, that is working on
trying to get at that workforce housing. And they had been
running into, like all of us--my family is actually in
construction--all of us have been running into on the
development side the difficulty of maneuvering past local
governmental regulations to allow for affordable housing to
exist. It is density issues. It is various elements of sort of
overengineering in a way. In fact, the National Association of
Home Builders says that their estimate is $98,000 per house for
the average added cost because of those local requirements.
So, how have we attempted to get at that? I know my
colleague, Mr. Barr from Kentucky, who has been on this issue
for a long time as well, has a bill, the Housing PLUS Act. I
have been involved in this issue for a long time as well. And
we know that there have been burdens that have been put in
place. Mr. Holtz-Eakin has talked about this, and Mr. Zandi and
others have as well. Mr. Mitchell talked about that. We have
some agreement here that we have to get at this.
What we don't necessarily have agreement on is sort of the
sources of inflation and what are some of the causes of that. I
know, for example, in building houses, supply has gotten
tighter and it has gotten more expensive. Labor has gotten
tighter and is therefore more expensive. We know that 70
percent of a barrel of oil, for example, is used for energy.
But the other 30 percent goes into things like shingles and
siding and PVC pipes. And when we are constraining that by
choice here in the United States, by this Administration, we
are then limiting the ability to have affordable materials
there.
By the way, I ran this little formula past Fed Chairman
Powell the last time he was here, of how to explain inflation.
And I estimate in various studies that we have looked at, about
20 percent of the inflation that we are seeing today is due to
supply chain, about 20 percent is due to labor, and about 20
percent is due to energy. Now, those last two are governmental
policy-driven. But 40 percent of that is monetary policy in
spending. We have been flooding the zone, which has caused that
pressure to go upwards in so many areas, whether it is in cars,
as my colleague from Texas will tell you, or whether it is
housing, whether it is groceries, whatever it might be. So, we
know that record inflation continues to impact the lives of
hardworking Americans.
I am going to quickly move through--I know there is a
number of well-intentioned things that the other side has done,
but it does throw fuel on the fire. The University of Michigan
Consumer Sentiment Index estimated that the American sentiment
over the past 6 months is comparable to late 2008 and 2009,
when the great financial crisis plunged our country into
economic crisis.
The impact of the COVID pandemic spared no one. In Michigan
alone, some 32 percent of businesses reported government-
mandated shutdowns in 2020, and job recovery has been slow.
Reckless spending, including more government investments and
the overregulation will continue the current trajectory. But
today, we are talking about housing. So, let's do that quickly.
Michigan rental rates have increased 10.5 percent,
outpacing the national average. In the Grand Rapids
metropolitan area, the yearly change for a one-bedroom
apartment is up 5 percent, while a two-bedroom is up 17
percent. Home sales are down 17 percent Statewide. The average
monthly payment on a $350,000 home in Zeeland, Michigan, will
cost approximately $500 more than it did last year because of
those interest rates. Gas prices in my hometown of Holland
continue to be well above the national average. It is real
money for people. It is real money.
And Mr. Holtz-Eakin, I think we can agree that both
monetary and fiscal policy will be key to delivering the
elusive soft landing. I am just not sure it is possible. Do you
believe that we can even achieve a soft landing?
Mr. Holtz-Eakin. I think it is possible, but the historical
record is very poor on that front. We have never had a soft
landing when inflation has been up above 4 percent and
unemployment below 5 percent. And that is where we find
ourselves.
Mr. Huizenga. Madam Chairwoman, I appreciate the
opportunity. And I blew up my staff's direction that they
wanted to go.
But, Ms. Eaddy, I wanted you to know you are heard, we hear
you, and we appreciate you.
Chairwoman Waters. Thank you very much. And I hear you and
I see you. And the proof of the pudding is in the eating. I
will be looking forward to working with you on housing and
getting affordable housing.
With that, the gentleman from Missouri, Mr. Cleaver, who is
also the Chair of our Subcommittee on Housing, Community
Development, and Insurance, is now recognized for 5 minutes.
Mr. Cleaver. Thank you, Madam Chairwoman.
Let me first of all express my appreciation for your
emphasis on housing. I didn't grow up in a car. It was just a
little bit better. We had two rooms with no heat. But I grew up
in Texas, so it wasn't quite as bad as it would be here in D.C.
I am obsessed with housing because I don't want a single
kid to grow up like I did, not one. We have to keep working on
it, and even if we have to debate, we have to do that. You can
never really defeat a person on a cause that will never give
up, give out, or give in. And on this issue of housing, we need
to face it, we need to fight it, and we need to finish it.
Madam Chairwoman, thank you.
Let me ask Ms. Bailey and Dr. Zandi, there is in my
congressional district in Kansas City one of the nation's first
housing co-ops called Parade Park, which is now in distress. It
is a massive 510-unit housing project. It is not public
housing. It is a co-op. And this week, in fact, yesterday,
Monday, HUD took management control of the property, and they
are trying to preserve this affordable housing asset in my
congressional district.
Now, my greatest concern was and still is that if HUD had
not taken it over, it would have eventually been condemned,
foreclosed, and demolished. It is a huge tract of land. And my
fear was that some corporate investor would come in, redevelop,
raise the prices, and alter the community.
So, Ms. Bailey, Dr. Zandi, what can Congress do to prevent
the mass transfer of affordable housing from community
ownership to these large profit-seeking corporations--I guess
that may be redundant--but what can we do?
Ms. Bailey. Thank you for the question. We can do something
different. We can make sure we put the resources in the hands
of owner-occupants. We have to do something different. Supply-
side strategies alone have not produced different outcomes. We
need things like targeted first-generation down payment
assistance so first-time millennial homebuyers can get to the
table fast enough to have their offers actually considered. One
out of seven homes in communities all over the country is being
purchased by investors, pushing out millennial homebuyers of
every hue. So, we have to make sure that those communities get
the resources they need so that they can actually eat at the
table.
We know that student loan debt is one of the major barriers
for these millennials. So passing the President's student loan
debt, just allowing that to process forward could really help
lift their debt-to-income ratios to make those families ready
to actually participate and be at the table in a competitive
way against these investors.
Mr. Cleaver. Dr. Zandi?
Mr. Zandi. It is a very difficult problem. I will mention
two possible ways to address it. The first is around the cost
of financing. In many cases, investors, particularly
institutional investors in the housing space, have access to
lots of capital, cheap capital, and they are able to use that
to buy properties and win those properties when they are
competing with other potential buyers.
So, if a co-op--and I don't know the circumstances here,
but I am just kind of thinking about this more broadly--was
able to get access to capital more readily and more affordably,
that might give them a better chance of holding on and winning
out in that competition.
And we have Fannie Mae, Freddie Mac, and the Federal Home
Loan Banks. And there are other government institutions that
can be involved in this to help make that come to reality.
Second, and this is not specifically to the co-op, it is to
single-family housing. One of the problems is when single-
family housing goes into default and foreclosure, then large
investors--again, because they have access to cheap capital--
can come in and buy those properties and take ownership. I
think--and this is one of the proposals the Biden
Administration has recently made in its housing supply
proposals is to make sure that philanthropies like CDFIs and
others that are looking out for these communities have first
opportunity at these foreclosed properties, these defaulted
properties, before they actually go to institutional investors.
So, two different markets, but a similar kind of problem.
And I think we have some tools that we could use to help
address this problem.
Mr. Cleaver. Thank you very much. And thank you, Madam
Chairwoman.
Chairwoman Waters. Thank you.
The gentleman from Kentucky, Mr. Barr, is now recognized
for 5 minutes.
Mr. Barr. Thank you, Madam Chaiworman.
And let me join my colleagues in commending our witness,
Ms. Eaddy, for your courage in coming before us and sharing
your personal story. It shows a lot of fortitude to come before
Congress and testify and share your personal story. It shows a
lot of guts. And what it says about you and your character is
that we know you and your husband can make it. You can do it.
We appreciate your testimony. And we know that hope is
available to you because of your strength that we see.
My question to you is that, in addition to housing
assistance that you are asking for, would it be helpful to also
have an advocate for you, someone that you can talk to, in
addition to housing, and help you with job counseling,
financial literacy programming for you and your family? Would
it be helpful if you also had some additional services that
could connect you with other services in addition to the
housing assistance?
Ms. Eaddy. Thank you for your question, Mr. Barr. Anything
that will be an asset for us to be able to come back into the
community, to make sure that we can succeed in this, would be
good. Of course, we want an advocate to be able to help us with
our financials and job descriptions, or anything to do with
that. Of course, we need advocates to speak up for us and teach
us how to be literate with our finances and everything,
anything that will help us be an asset to the community.
Mr. Barr. And you are an asset to the community, and I can
see that. And I am not saying this applies to you, but others
who have difficulty with homelessness or living in their
vehicles and not having a home, some of them have substance
abuse challenges or mental illness issues--I'm not saying that
applies to you--so do you think it would be helpful for them,
in addition to housing, to connect them with mental health
services or substance abuse counseling?
Ms. Eaddy. Yes, it would be.
Mr. Barr. Great. Let me ask Mr. Holtz-Eakin a question
about Chairwoman Waters' Downpayment Toward Equity Act, which
would spend $100 billion on essentially, no-strings-attached
checks of $25,000 that potential homebuyers could use towards a
down payment on a home. Let's analyze the effects that this
would have on a macro level. Would legislation like this
contribute to home price inflation?
Mr. Holtz-Eakin. Yes.
Mr. Barr. Let's talk about it in combination with Fed
policy right now, the tightening program that the Fed is
engaged in. As the Fed is actively trying to tamp down soaring
home prices by increasing interest rates to reduce demand,
would legislation like the Chair's work directly against the
Fed's goal of reducing demand?
Mr. Holtz-Eakin. Yes. And most likely what would happen is
the Fed would be more aggressive. Overall home purchases would
continue to decline, because that is the necessary objective
for them. This might change the composition of who gets the
house.
Mr. Barr. So, demand-side subsidies would actually increase
the likelihood that the Fed would have to be even more
aggressive in raising interest rates and borrowing costs?
Mr. Holtz-Eakin. Yes, absolutely.
Mr. Barr. And would legislation like this result in a
greater supply of housing or simply more demand for the same
limited resource?
Mr. Holtz-Eakin. The latter. It is not a supply-targeted
policy.
Mr. Barr. So while maybe not as flashy as handing out
$25,000 taxpayer-funded checks so wealthy individuals can buy
million-dollar homes, what are some of the serious proposals
that Congress should be considering to actually increase our
housing supply and address this affordability issue?
Mr. Holtz-Eakin. As I mentioned earlier, the tax incentives
to increase construction, I think, make sense over the long
term. You want to have a predictable, reliable environment that
provides supply at a lower cost, so lightening the regulatory
burdens at the local level. If you have a way to influence
that, do it. There are tariff policies in place from the
Federal Government that are raising the cost of construction
and construction goods. That will be a sensible thing that
could be reduced. And the Low-Income Housing Tax Credit is not
perfect, but it is a thing.
Mr. Barr. Yes. And to your point, in my remaining time I
will just point out that a 2021 study by the National
Association of Home Builders found that basic regulatory costs
add $93,800 to the price of a new home. Do you support Federal
efforts to remove some of that regulatory burden to amplify the
supply?
Mr. Holtz-Eakin. I think that is a sensible idea. I don't
know how you can do it, but I would be happy to work with you
on that.
Mr. Barr. Okay. My time has expired, so I yield back.
Chairwoman Waters. Thank you.
The gentleman from Connecticut, Mr. Himes, who is also the
Chair of our Subcommittee on National Security, International
Development and Monetary Policy, is now recognized for 5
minutes.
Mr. Himes. Thank you, Madam Chairwoman. And a big thank you
to our panel, especially Ms. Eaddy.
I have been doing this for a while, and I have seen
witnesses who have lots of lawyers and days of preparation, and
you have made a real impact with your story here. I chair the
Select Committee on Economic Disparity and Fairness in Growth,
and all over the country, we found people like you who could
live their dreams and contribute to the workforce if they just
had that platform, which is not an automobile. Thank you.
I really care about this issue, because if we are going to
address economic disparity, we are going to do a bunch of
stuff, but housing may be first, second, or third in line. We
are not spending nearly enough time this morning talking about
the fundamental underlying issue, which is, by one estimate,
3.8 million missing homes.
Madam Chairwoman, I want to place into the record some work
that was done by our former colleague, Denny Heck. It is a
report called, ``Missing Millions of Homes,'' which talks about
the supply--
Chairwoman Waters. Without objection, it is so ordered.
Mr. Himes. I want to devote my time to--we said we should
look at it, we should focus on it, but what can we actually do?
Now, by way of preface here, we are talking about the Federal
Reserve. The Federal Reserve is damned if they do, and damned
if they don't, as long as there are not 4 million units that we
need out there.
The work we did on my Committee on Economic Disparity
showed two things: one, lots of interference with supply
associated with local zoning regulations and all sorts of other
issues; and also, a severe lack of supply in the workforce.
Apparently, the construction workforce used to average 36 years
of age in 1985, and today, it is 42 years of age. So, you have
an aging workforce.
I am going to start with Mr. Mitchell. But Mr. Mitchell, I
am going to ask you to be really brief because I want to hear
from our other witnesses. What specifically can the Congress of
the United States do to address the supply--and let me say
too--LIHTC, I get it. I worked with LIHTC. There is actually
bipartisan support for increasing LIHTC. Two million units.
That is good stuff.
But apart from tax subsidies, what else can the Congress do
to rapidly allow for the construction of some 4 million units
in this country?
Mr. Mitchell. Absolutely, Congressman. I think one of the
most important things that Congress can do is to continue to
make large public investments. I think things that have been
targeted in the Build Back Better, specifically billions of
dollars for the Housing Trust Fund, resources to renovate stock
that is already available and make sure that it is quality and
affordable would go a long way.
Mr. Himes. Any programs there that you see as particularly
effective?
Mr. Mitchell. I would lift up, I think, the National
Housing Trust Fund. That could be really critical.
Mr. Himes. Thank you. I appreciate that.
Let me go to Dr. Zandi on the supply question.
Mr. Zandi. Yes. I think what would really be critical is
providing financing for manufactured housing. If you really
want to get a lot of units out there fast, make it easier for
people to get loans for purchasing a manufactured home. Right
now, they are chattel loans, and that is a fragmented market,
very costly, and very difficult. This is something with which
Fannie Mae and Freddie Mac could be very helpful in developing
a more cost-efficient, homogeneous market for those loans.
And if you can do that, then you take the manufactured
housing market, which today produces 100,000 units a year, to
something that is meaningfully higher than that, very
affordable, and can be in any community across the country. So
if I was looking for something that wasn't tax-related, I would
be focused on that like a laser beam.
Mr. Himes. Thank you. I appreciate the specificity.
Let me open it up a little unfairly to Ms. Bailey and Mr.
Holtz-Eakin. Local zoning--I have lots of small towns that are
uninterested in being told by the Federal Government that they
have to lighten up their zoning. So, we have a real problem
without much of a lever.
Let me start with Mr. Holtz-Eakin. If you would, leave a
little bit of time for Ms. Bailey. But what leverage, if any,
do we have to--I don't want to use the word, ``coerce,'' but to
encourage a rethink of zoning and regulation?
Mr. Holtz-Eakin. I think you framed it exactly right. Those
regulations and zoning rules exist because they want them. And
so, you are going to have to somehow have a lever that causes
them to change their mind. Usually, that is financial and
making Federal aid contingent upon the behavior at the local
level. That is probably the lever that would be the one you
want to try. And I am happy to yield to you the rest of the
time. That is a hard question.
Mr. Himes. It is a tough question, Ms. Bailey, but I would
love to get your perspective.
Ms. Bailey. Fully enforce our nation's robust fair lending
laws and fair housing infrastructure. We actually have this
unfounded association between race and risk that is really the
root of a lot of those zoning ordinances and we are causing the
economy to underperform. So if we fully enforce our nation's
fair housing and lending laws, we would actually create
equitable opportunities that could help us actually create
jobs. Fair housing actually creates job.
Mr. Himes. Thank you. That was perfection. My time just ran
out. Thank you very much, Madam Chairwoman.
Chairwoman Waters. Thank you very much.
The gentleman from Texas, Mr. Williams, is now recognized
for 5 minutes.
Mr. Williams of Texas. Thank you, Madam Chairwoman. And I
thank everybody for being here today.
And, Ms. Eaddy, I want to join in on thanking you for your
testimony. It reminds me of a Bible passage. Luke 6:38 says,
``A good measure, pressed down, shaken together and running
over, will be poured into your lap. For with the measure you
use, it will be measured to you.'' You are giving a lot today.
And we appreciate it very much.
I also want to just touch on what we have talked about. It
has been a great hearing. I think we have a lot of common
ground here, which is good to see. But I own some apartments,
and I will tell you, everybody has touched on the fact that the
biggest problem is not in the rates, but that the rates are
based on interest, they are based on local jurisdiction, and
they are based on inflation. We would love to charge less, so
that is something we can work on. It looks like we all agree on
that.
American families and businesses have been feeling the
impacts of runaway inflation for far too long. We have heard it
today. Research of the Federal Reserve Bank of San Francisco
confirms what Republicans have been warning about for the past
2 years: Reckless government spending contributed to the price
increases that we have. We are all experiencing it; it is a
real problem. I am in the car business, so I can tell you all
about that. It was irresponsible to think we could spend
trillions of dollars and expect there to be no negative
consequences.
And rather than recognizing the ramifications of their
policy decisions, my Democratic colleagues seem to have doubled
down on their belief that inflation can be tamed with even more
government spending. Simply look at the bills attached to this
hearing. There are billions of dollars in new Federal programs
that will make prices even worse off and higher. So let's be
very clear, you can't spend your way out of this inflationary
cycle.
Mr. Holtz-Eakin, can you discuss how the policies attached
to this hearing, including the entirety of the $3 trillion
Build Back Better, which everybody has talked about, will
further contribute to the inflation all Americans are currently
facing?
Mr. Holtz-Eakin. By and large, they continue the tradition
of demand subsidies, especially in housing. There is a long
tradition of that in the Federal budget. And yet, we are here
with an enormous affordable housing crisis and large inflation.
It seems to me that we should learn the lesson and try
something else.
Mr. Williams of Texas. Right. Now, the mismatch between
housing supply and demand has been getting continually worse
each year. And it is the total problem with everything. There
is more demand than we have. I am in the car business; we don't
have any vehicles to sell but there is a lot of demand, and
that is ramping up inflation.
This has driven home prices up to their recent highs and
made homeownership unrealistic for many Americans. And when you
hear people talk about a 50-year mortgage, that is pretty
scary. As we look for solutions to this problem, we must focus
on the supply side of this equation instead of on programs that
will create more demand for housing and continue the
inflationary cycle.
If we incentivize the private sector--which is always
good--to build new housing units, that will begin to alleviate
the upward price pressure. Unfortunately, supply chain issues
and labor shortages are making the numbers more challenging for
the private sector to make these types of large investments. I
believe the Tax Code can be used to help make the economics of
these deals work.
So, Mr. Zandi, you discussed some tax credits in your
testimony that could help solve some of the problems. Could you
elaborate on these suggestions and how they would allow the
private sector, someone like me and others, to invest in new
housing units?
Mr. Zandi. Yes. At the end of the day, you want to incent
builders to go out and build more homes as fast as possible,
and we want them to build mostly affordable rental--we need
housing across the housing stock, but the most acute problem is
affordable rental property.
I mentioned three different tax credits in my written
testimony. We talked about LIHTC. That is tried and true and, I
think, very effective.
Another tax credit that I think we should do is the
Neighborhood Homes Investment Act, which helps with
rehabilitation. As you know, in many communities, both urban
and rural, you can renovate; buy old property and renovate; buy
old buildings and renovate, and the market value is too low to
cover the cost of that renovation. So, this tax credit would
help builders and others defray that cost until we get more
renovation of this old housing stock that we have in different
parts of the country.
And the third is the New Markets Tax Credit. Again, tried
and true, and there is a lot of bipartisan support for it. And
that really is incredibly effective at building underserved
communities. It helps not only with affordable housing, but it
helps with healthcare centers and community centers and healthy
food, all of the things that are critical to making housing
work for a community.
I think I focused on those three things. And, again, those
programs are in place. They are very well-understood by
everyone who is participating in them. I think we can just
juice them up a little bit. And I think we can get a lot more
housing supply here in the not-too-distant future.
Mr. Williams of Texas. Okay. Thank you very much. I yield
back.
Chairwoman Waters. The gentleman from Illinois, Mr. Foster,
who is also the Chair of our Task Force on Artificial
Intelligence, is now recognized for 5 minutes.
Mr. Foster. I guess this question is for Mr. Holtz-Eakin or
Mr. Zandi. If you look at all of the different incentives that
we tried to apply to get people in housing, both on the supply
side and the demand side, has anyone systematically looked at
what gets the most people into a house per unit of Federal
expenditure?
Mr. Holtz-Eakin. I don't know the answer to that. If
someone does, it is Mark Zandi, so you should let him answer.
Mr. Foster. Okay. Mark, you are up.
Mr. Zandi. That is my buddy.
Well, it depends on circumstance, Congressman, right? If
you are saying on average through the business cycle on trend,
and you are talking about homeownership, getting lower-income
people into homeownership, those demand-side measures are
critical. The down payment is the single-biggest barrier to
homeownership.
Now, I am not advocating that that is the appropriate
policy at this point in time, but there will come a time in the
not-too-distant future when we should be focused on that,
because homeownership hasn't gone anywhere in 40 years. It has
gone up, it has gone down, it has gone all around, but it is
back to where it was 40 years ago. And if you kind of do the
arithmetic here, it is headed south, not north, if we don't do
something about it.
I do think down payment assistance that is well-targeted
and paid for--it needs to be paid for--would be very helpful
here. And that is very, very effective. Not now. But when you
look out 2, 3, 4 years from now, I think that will be a big
bang for the buck, as they say, for that kind of policy.
Mr. Foster. Yes. But I guess my question is, is there
something--if it hasn't been done--that the Congress could
commission that, let's have someone look systemically at all of
the different things we try and try to figure out what is the
most-effective use? Ms. Bailey, do you have a--
Ms. Bailey. Thank you so much. Chairwoman Waters'
Downpayment Toward Equity Act would invest over $100 billion in
first-generation down payment assistance. It would create 5
million net new homebuyers, of whom 1.7 million would be Black,
1.32 million would be Latino, and 1.4 million would be White,
because White people in rural communities are locked out by
these same policies.
We need creative, innovative, targeted solutions like that
to bring in the very borrowers that the future system depends.
We won't have a housing system if we don't put equity at the
center. The market's future buyers, 7 out of 10 of them, will
be people of color. If people of color are not able to overcome
the barrier of down payments and get access to homeownership,
our housing system tanks, which means the gross domestic
product, of which housing accounts for nearly 20 percent, drags
down the whole economy.
Inclusive solutions are about bringing everyone along. We
commend the chairwoman for her brilliant leadership. And it is
not lost on any of us that one day her picture will hang on
these walls. And families like Ms. Eaddy and her wonderful
husband will not be in a position to have to do it on their own
because the American way has been that we have never required
families to do it on their own. Our public policies create
opportunity for people. We have not done it in an equitable
way. Now, COVID requires equity.
Mr. Foster. The thing I am struggling with is, okay, we can
also help her with housing vouchers, just a big expansion of
the housing. But how do we look at that, with housing vouchers
that will, over time, cause more people to build more units if
we really expanded the housing voucher thing? It is one of the
ways to get at the mismatch between the number of units
available and the number that are needed. And I am just trying
to understand how we most effectively use the subsidies that we
will have available.
Ms. Bailey. We can enforce our laws. Source-of-income
discrimination is one of the primary barriers for why women
with families cannot get access to those housing vouchers,
because landlords are denying them those units. So, we have the
tools. We have to have the courage.
Mr. Foster. And just following up on Representative Himes'
questions about the carrots and sticks that the Federal
Government may have available to get rid of some of the local
barriers, what would be the most cost-effective way in terms of
changing the number of units available per expenditure of
Federal dollars? And is there any, even a rough way, to
calculate how effective those might be?
Mr. Holtz-Eakin, do you want to take a swing at that? Or
how we would even go about trying to understand whether that
might be the most effective way to spend our money here.
Mr. Holtz-Eakin. This sounds like the kind of thing on
which the Congressional Budget Office (CBO) could be useful in
helping you. They have a long history of looking at both
Federal mandates on State and local governments, but also the
responses of States and localities to Federal spending
programs. And I think that is the place where you want to look
at the track record and see what worked.
Mr. Foster. Okay. And we will be following up for the
record with Mr. Zandi on that.
Thank you. I will yield back.
Chairwoman Waters. The gentleman's time has expired.
The gentleman from Arkansas, Mr. Hill, is now recognized
for 5 minutes.
Mr. Hill. Thank you, Madam Chairwoman. And let me too start
out with thanking all of you for your work for the committee
today in expressing your views on this important topic. And I
thank our chairwoman for her passion and commitment to housing
as a public policy topic.
I want to follow up too on Mr. Himes' comments, my good
friend from Connecticut, talking about this gap, the supply-
side gap. I think that is important. He raises some really good
issues.
First, I have offered amendments consistently on the House
Floor for 8 years that nonunion construction trades be approved
DOL apprenticeships. And every year that bill is voted down by
the Majority. But the DOL union-based apprenticeship program
only produces about 88,000 construction trades, when we have a
market demand of over 600,000 a year. So I think opening up and
qualifying more people to fill that gap is an important labor
component in the supply side on construction.
Local zoning is also an important issue. And I was very
pleased to see Ed Pinto's work at the American Enterprise
Institute on walkable communities and how cities could develop
best practices for increasing density, changing a lot of the
rules, and making it cheaper and more affordable to come and do
in-fill housing, which also brings with it quality grocery
stores and things of that nature. We are doing that in Little
Rock, and I have been impressed with some of the performance
there.
I agree with Mr. Zandi on New Markets Tax Credits. I was on
the CDFI advisory board when President Bush was in office. And
it is something that Congress has generally supported, but the
numbers are so high, it is almost impractical in multifamily.
And certainly impractical in low- to moderate-income affordable
housing, I think, because the program really--if you can't
spend $10 million in one location, it ends up not being
competitive. So, perhaps Congress can look at that.
And then, I support extending the Tax Cuts and Jobs Act
Opportunity Zones and making a much more aggressive approach
there on how we can have better Opportunity Zones that benefit
low- to moderate-income housing opportunities.
So those are some issues on the supply side, I think, that
are very, very important.
Chair Powell gave a speech at the Brookings Institution
yesterday where he broke down core inflation to three
components: goods; housing; and services other than housing.
And he acknowledged housing services inflation, which measures
the rise of all rents and rental equivalent costs in owner-
occupied housing. And in my view over, particularly over the
last 2 years of this intense 40-year inflation, it is way
understated, the Consumer Price Index. As many of you know, 30
percent of the CPI and 40 percent of the CPI are based on both
rental and housing.
Mr. Chairman, I would like to put in the record the core
CPI inflation index.
Mr. Green. [presiding]. Without objection, it is so
ordered.
Mr. Hill. Thank you, my friend.
Mr. Holtz-Eakin, would you agree that the method of
calculating owner-occupied housing lags the market and
understates the full picture of just how much housing prices
and rents have gone up? We heard one of our witnesses talk
about 22 percent rent increases. Is it understated?
Mr. Holtz-Eakin. Yes, it is understated. It lags the
market.
Mr. Hill. So, it is really worse. What we are facing in
rental increases and home price increases are worse than they
have appeared in the trailing statistics?
Mr. Holtz-Eakin. Yes.
Mr. Hill. Yes. And I think that is something that is,
again, frustrating that housing has taken such a big hit. But
let me say that when we spend money in this Congress like
drunken sailors, and keep accommodative monetary policy far too
long at zero, we all pay the price, all of our families pay the
price with these higher mortgage rates.
I was looking at H.R. 4495, the Downpayment Toward Equity
Act, and as I noted in my opening comments, it doesn't really
address supply. It is a more demand-driven issue. And I will
just give you some feedback that in Arkansas, we are one of, I
think about 20 States, that uses the bond program and recycles
that down payment assistance money. On top of HUD's HOME
Program, and Community Development Block Grant (CDBG) Programs,
we really have worked hard, including with the CARES Act money,
to provide down payment assistance to people who are qualified.
And we have a surplus every year, meaning we really have, I
think, a good housing market in Arkansas.
But I would like to see CBO or GAO tell us where the
weaknesses are in down payment assistance. Because in my home
State of Arkansas, I think we really have been helpful to
everyone in that emerging equity.
But I would love to hear more from you, Ms. Bailey. If you
could submit to the record some comments on where you think it
is adequate and where it is the most weak, that would help us.
Thank you. I yield back.
Mr. Green. The gentleman's time has expired.
The Chair now recognizes the gentleman from California, Mr.
Vargas, for 5 minutes.
Mr. Vargas. Thank you very much, Mr. Chairman.
First of all, I want to thank Chairwoman Waters. I agree
with Ms. Bailey that she has been a champion for housing, and I
think that she has been the lion of Los Angeles in trying to
get more affordable housing, and I appreciate her very much.
Mr. Chairman, I also appreciate you. You quoted the Bible,
and I am sure you knew what you were doing, but you modernized
it and called it the people in the street of life. But you were
really quoting Matthew 25, which is the last judgment. And I
want to read a little bit of this passage.
``For I was hungry and you gave me something to eat, I was
thirsty and you gave me something to drink, I was a stranger
and you invited me in, I was naked and you clothed me, I was
ill and you comforted me, I was in prison and you came to visit
me.''
And, of course, they asked him, ``When did we do that?''
And he answered, ``When you did it for the least of my
brothers.''
Now, I have to say that I think both sides share that. I
have many friends on the Republican side, and I have great
respect for the gentleman who was sitting next to you, Mr.
French Hill, who is a good friend of mine. I know that he wants
to do that. And trying to get there, I think is the hard part,
because we disagree on strategy, but hopefully we can come
together a little bit more to get things done.
I do want to ask about inflation because this has been
brought up a number of times. Mr. Holtz-Eakin, you addressed
inflation. What is the inflation rate in the EU?
Mr. Holtz-Eakin. I don't know the exact rate right now, but
they have very high inflation, especially since the onset of
the--
Mr. Vargas. Is it higher than ours?
Mr. Holtz-Eakin. I'm sorry?
Mr. Vargas. Is it higher than the United States?
Mr. Holtz-Eakin. In some places, yes.
Mr. Vargas. Okay. How about in the U.K.?
Mr. Holtz-Eakin. Yes.
Mr. Vargas. Have they implemented President Biden's
policies?
Mr. Holtz-Eakin. No. But I think if you look at the period
when the policies I mentioned were most important, it is 2021,
when we saw inflation get to nearly 7 percent on the Consumer
Price Index year over year. European inflation was nothing like
that. All of that preceded the invasion of Ukraine by Russia.
So the period where the policy impacts, the excessive
monetary stimulus, the excessive fiscal stimulus, was 2021.
That produced--
Mr. Vargas. Then, you don't think this is related to the
pandemic?
Mr. Holtz-Eakin. I think that European inflation went up
about a percentage point a quarter in 2021, went from zero to 4
percent. That was, by their standards, very high inflation. And
that is a good metric of the impact of the pandemic on global
supply changes. We were nearly double that. That was the
additional monetary and fiscal stimulus that the U.S.
undertook.
Mr. Vargas. Yes. But the interesting thing is this they
didn't implement our policies, and they are higher than us. It
is an 11.5 percent inflation rate in the EU, and the U.K. is 11
percent, much higher than we are.
So this whole thing was used politically and,
interestingly, didn't actually work. Americans are much smarter
than I think some of my colleagues on the other side think, and
they knew that it was political and it wasn't reality.
But, anyway, let's move on. Because I do agree with a lot
of what they have said today about regulations at the local
level. I do believe that. However, I also think--and because no
one wants poor people. That is the problem. Everyone wants
density somewhere else, not in their own community. It is a
real problem.
But, Mr. Mitchell, I wanted to ask you this: In the Build
Back Better, Chairwoman Waters and the rest of us were pushing,
and especially she was, for $150 billion. What would that have
done for affordable housing in the United States?
Mr. Mitchell. Thank you, Congressman.
I think there are two kind of horizons that we need to be
thinking about the policies here. In the immediate future right
now, given the rapid rise in rental prices, that is being able
to make sure that renters in this moment have the support that
they need to be able to afford rent or other folks being able
to find housing, and there are significant investments in Build
Back Better that would have allowed for that to happen.
At the same time, there were also resources available to
make sure that we have the housing supply in the long term that
is either being upkept or renovated or putting more housing
supply online. So, there are resources in Build Back Better to
accomplish both of those goals.
Mr. Vargas. And I agree with my colleagues, again, on the
other side of the aisle. It is a big-time supply issue. We have
to build more, and we have to figure out how to do that,
hopefully together.
I have 10 seconds left. So, again, I want to thank
everyone, all of the witnesses here. And I yield back.
Thank you.
Mr. Green. The gentleman's time has expired.
The gentleman from West Virginia, Mr. Mooney, is now
recognized for 5 minutes.
Mr. Mooney. Thank you, Mr. Chairman. Thank you for this
hearing. I think it is important that we talk about these
issues.
My question is directed at Mr. Holtz-Eakin. Earlier this
year, the Government-Sponsored Enterprises (GSEs) announced
their plans for equitable housing finance at the direction of
the Federal Housing Finance Agency (FHFA). The plans call for
lower down payment requirements and reduced mortgage insurance
costs for prospective minority homeowners, among many other
things, many other changes disregarding considerations of risk
and ability to pay. And increasing homeownership by encouraging
riskier mortgages is exactly what led to the 2008 financial
collapse, which actually disproportionately hurt the minority
homeowners it was intended to help, yet it seems we learned
nothing.
Moreover, FHFA Director Sandra Thompson has refused to
finalize a proposed rule that would have subjected these
concerning changes to review in public comment. This
Administration, frankly, has a habit of circumventing the
traditional rulemaking process, from the Consumer Financial
Protection Bureau (CFPB) making substantial changes to its
examination manual, to the Department of Veterans Affairs
issuing an interim final rule allowing for taxpayer-funded
abortions in violation of Federal law.
So, Mr. Holtz-Eakin, can you explain the dangers of the
GSEs' equitable housing finance plans and why changes of this
significance should be subject to public scrutiny?
Mr. Holtz-Eakin. I mentioned the rule that you brought up
in my written testimony. It is important that if the GSEs are
going to roll out new products, they be subject to review, and
I think it would be good to finalize that rule. Historically,
this is the kind of slippery slope that got the GSEs in trouble
and ultimately put them in the conservatorship and put the
taxpayers at such risk.
These are highly-risky loans. They are riskier than they
otherwise would be because they couldn't get the conventional
treatment, so they need special treatment to get them a loan,
and they are more likely, as a result, to have financial
problems down the line and for the taxpayer to be on the hook
for the cost.
And tragically, we have, in fact, seen the disproportional
impact on minority communities that these efforts had. I was in
the Bush Administration in the early 2000s when there was an
enormous push for minority homeownership. And with the benefit
of hindsight, all we did was wipe out the net worth of millions
of families, and that was not a wise thing to do.
So I am concerned about this initiative, not because it is,
in and of itself, so large, but because it is indicative of the
kinds of things that might be pursued going forward.
Mr. Mooney. Thank you.
And, again, I really worry this will harm the minority
homeowners that it is intended to help. And I know my friends
on the other side of the aisle are trying to help. I am trying
to help. We all have good intentions, but it is not the
intentions; it is the policies and the effects that we need to
look at. And you don't want to do something, however well-
intended it may be, that has the opposite effect, which is what
seems to be happening with a lot of these policies.
What we should do is encourage savings and living within
your means, both as a country, the United States of America,
and as individuals and families. We already know how reckless
spending policies were a leading cause of this inflation crisis
we are in now.
I can tell you as a Cuban American myself, I believe that
increasing minority homeownership is a worthwhile goal. My
mother fled Communist Cuba, where the government offers no
freedoms and dictates every aspect of people's lives. The
United States, a free market economy, welcomed her with open
arms, as they do other immigrants.
The solution to America's housing affordability challenges
is to reduce government spending and regulation in the housing
market. We should, instead, advance free market policies that
increase opportunities for all Americans, regardless of race,
ethnicity, or religion.
I thank you, Mr. Chairman, and I yield back the balance of
my time.
Mr. Green. The gentleman yields back.
The gentleman from Florida, Mr. Lawson, is now recognized
for 5 minutes.
Mr. Lawson. Thank you, Mr. Chairman, and a special thanks
to Chairwoman Waters and Ranking Member McHenry for having this
hearing today.
Before I get started on my questions, I would just like to
say I really appreciate Ms. Eaddy's testimony, which
exemplifies the problem that we have in America. And if I had a
magic wand, I would wave it and see if we could solve some of
the problems. I would hope that all of us can come together,
Democrats and Republicans, and do something to solve this
housing issue.
I was homeless, once. We lost everything in a fire, and had
to move from time to time, and I know how difficult that is
while raising a family. And I really applaud my father. I don't
know how he got out of it over the years, but we made it every
time some relatives would put us out. So, I know what that is
like, and I know that we are fortunate today to have the
opportunities that we have.
But to Ms. Bailey, my home State of Florida has the largest
homeless population in the United States, and we know
homelessness has an adverse impact on people of color and
lower-income communities. In your testimony, you discuss how
the COVID-19 pandemic exacerbated the housing discrimination
and the wealth gap. What are some considerations Congress
should keep in mind to ensure that there is an equitable
solution to address these issues?
Ms. Bailey. Thank you so much for the question.
As the descendent of formerly enslaved Africans, I have to
say our nation's mortgage market was built on the bodies of
enslaved Africans. The fact that we are here today talking
about the housing system means we are talking about our
ancestors. So, let me start there.
We have to make sure we have equitable policies because for
the entirety of our nation's history, our housing policies,
Federal, State, and local, have been implemented in a way that
cements and perpetuates residential segregation. There is an
unfounded association between race and risk because of
enslavement in these United States. It is not that we don't
want Black people, Latino people, Asian American and Pacific
Islander people, and Native communities from whom the land was
forcefully dispossessed to have opportunity. We don't want the
people--and we have to talk about this--in our communities. In
our zoning ordinances, we are saying we don't want integration,
when in fact, today in America we actually are seeing
integrated communities. We have actually seen the Black
homeownership rate go up, the Latino homeownership rate go up,
and the Asian American homeownership rate go up because of
inclusive policies.
This committee's work on the American Rescue Plan Act to
preserve homeownership with the Homeowner Assistance Fund and
the Emergency Rental Assistance meant that we kept families
housed during the time of a great COVID pandemic which
disproportionately impacted the very same people that the Great
Recession decimated.
You want to talk about responsibility and personal
opportunity? Let's talk about it. The Homestead Act created 20
percent of the wealth that White Americans and families who got
that benefit can point to. People of color were intentionally
locked out of opportunity. We know inclusive policies work. Why
in the world would we want to go back?
Mr. Lawson. Thank you.
Quickly, Dr. Zandi, you mentioned during Congressman
Williams' testimony, I think, that one way to help the housing
market is to increase the rental assistance program other than
affordable housing.
Can you comment on that, please?
Mr. Zandi. Yes. Clearly, many households are unable to
afford the current high rent, and so, we are seeing, obviously,
higher homelessness and very fragile housing tenure.
So I think, particularly at this point in time when rents
are so high and are unlikely to come down in a meaningful way
anytime soon until we can get more supply into the market, it
is important to provide assistance for rent. So rental
assistance is, I think, at this point particularly important
for people who are really under a lot of stress.
Mr. Lawson. Okay. Thank you.
With that, Mr. Chairman, I yield back.
Mr. Green. The gentleman yields back.
The gentleman from Ohio, Mr. Davidson, is now recognized
for 5 minutes.
Mr. Davidson. Thank you, Mr. Chairman.
And thank you to our witnesses. I appreciate you being
here, and I appreciate the committee's emphasis on affordable
housing.
Frankly, compared to Washington, D.C., or California, or
New York, pretty much everything in Ohio is affordable. But for
people who live there, their income is based on Ohio, not on
D.C., so, we all have our different challenges around the
country, and we have a lot of Federal policies.
Mr. Holtz-Eakin, I kind of want to explore some of the
conversation that you have had about how the Federal Reserve
has engaged in activities that have distorted the market.
First and foremost, in 2020, it did provide essential
stability in March and April when our markets were in freefall.
We can only have a functioning market if there is eventually a
buy side. There was no buy side. So, they intervened. They
created some stability. They did some heroic stuff. But then
almost right after that, they started doing truly market-
distorting stuff.
One of the worst things related to this hearing is they
were buying, for months and months and months, $40-billion
worth of mortgage-backed securities and holding rates really
low. That created an asset bubble, potentially. And you have
emphasized that they needed to cool off demand.
But people are going to need to live somewhere. So when you
talk about demand, is that somehow that people start demanding
a house? How does that play out for the average family in
western Ohio when you have a Federal Reserve setting a price,
now rates start going up, and you said cooling demand. How does
that play out?
Mr. Holtz-Eakin. First of all, I think it is a very good
point that the Fed did a tremendous job in 2020 of stepping in
and providing enormous amounts of liquidity and having
financial markets stabilize fast. We don't think of 2020 as a
year of a banking crisis or financial crisis. We had the
pandemic.
So they did a great job, but as part of that, they made a
decision to buy the $30-billion worth of MBS, which is a clear
subsidy to the mortgage market, without great discussion. And
now that they are taking it back at an even greater amount, it
is having an enormous impact on housing markets.
So, their very blunt tools, raising rates across the
economy on every class of credit, every maturity, and pulling
back on this liquidity, are having a disproportionate impact on
housing at a time when people need housing.
And that, to me, says, number one, the Fed doesn't have
fine tools that can target different sectors. It doesn't. And,
number two, don't get yourself in the position where you have
to fight inflation like this. Once you do, you have nothing but
bad choices. You need to slow down the labor market, which
means fewer jobs. You need to slow down retail sales, which
means fewer sales. None of that is good news. And that is the
position we now find ourselves in.
Mr. Davidson. Yes. People sometimes say, don't fight the
Fed, right? The Fed is moving things one way or the other. When
you think about households, they have to find a place to live.
Rates are going up. So fundamentally, that means what? They are
not going to buy? That means somehow rents aren't going to go
up? The people who own the property are going to have to have
rents move where rates move, or where inflation moves.
Can you highlight the dangers of this overzealous activity
that the Federal Reserve has gotten themselves in? Because it
really does limit their options without affecting the average
American, doesn't it?
Mr. Holtz-Eakin. I think the activities, again, are
attributed to the earlier policy errors. There is no question
they were excessively loose, and now they are trying to take it
back as fast as possible. It is having, as I said, a really bad
impact on the housing market, much stronger than, for example,
the labor market, which continues to produce 100,000 jobs a
month. It will show up in building, so home builders are
clearly looking at a poor outlook. As a result, we will have
fewer single-family homes, and the rental market will become
much more heavily-contested, and rents are going to go up. I
think that's where the rubber hits the road. And it is going to
be a tough housing market for the foreseeable future.
Mr. Davidson. Right. I just think there are a lot of
consequences for the Fed's actions, and they can't take it
back. They might feel bad--they don't really express it very
well if they do--but there are big consequences for this.
And I think the last thing I would say is, the reaction is
to say, let's subsidize all of it. Well, what does that do? It
increases government spending, and it pushes the Fed to print
more money, which drives more inflation, which is why we have
the problem that we have today.
So, we should be careful about our own policy tools here in
Congress.
My time has expired, and I yield back.
Mr. Green. The gentleman yields back.
The gentlewoman from Massachusetts, Ms. Pressley, who is
also the Vice Chair of our Subcommittee on Consumer Protection
and Financial Institutions, is now recognized for 5 minutes.
Ms. Pressley. Thank you, Mr. Chairman. And I thank our
chairwoman for holding this critical hearing and consistently
highlighting the urgent need in our country for fair and
affordable housing.
In my district, the Massachusetts 7th, housing is in
devastatingly-short supply. My constituents, particularly those
who are Black, Brown, and low income, are being priced out of
their homes due to skyrocketing rent.
And I want to highlight today just how urgent the need is
for investments and policy solutions that meet the moment to
address this housing crisis, especially for renters in
districts like my own.
Across Massachusetts, a quarter of all residents spend half
their income or more on housing. Boston is now the second-most
expensive city in the country to rent in, where the median rent
for a one-bedroom apartment is just over $3,000.
This is a crisis, and we must act swiftly. Housing is at
the intersection of everything. We will never actualize
economic justice, close the racial wealth gap, improve public
health outcomes, recognizing that housing is a critical
determinant of health, or meet our climate goals without
addressing this affordable housing crisis.
So, Congress must act simultaneously by investing in
affordable housing supply as a long-term solution while also
enacting policies in the immediate term to reduce costs in the
here and now.
Mr. Mitchell, experts agree the limited supply of
affordable housing is the root cause of housing inflation. Can
you explain why we must address it?
Mr. Mitchell. Absolutely, Congresswoman.
To your point, exactly what you said, many folks in the
housing advocacy space say, ``The rent eats first.'' And what
this means is that housing is the single-largest budget item
for households, and for low-income families, it accounts for
almost half of their budgets, which means that they have that
much harder of a time when rents increase of making ends meet,
and become that much closer to eviction and homelessness. And
this is especially true for Black and Brown renters; last
month, roughly one in five Black renters reported that their
household was behind on rent payments.
So, it is absolutely imperative that we address the housing
affordability crisis.
Ms. Pressley. Thank you. I certainly agree.
And this committee, under Democratic leadership, has long
supported bold investments in our housing supply, but even so,
working families across our nation are struggling right now,
and they cannot afford to wait years for housing supply to be
built.
There are 7 days in a week, and not one of them is called,
``someday.'' We have to act now. We need to pair these longer-
term investments with short-term solutions that alleviate the
financial pain that families are facing today.
In past moments of crisis, when prices previously spiraled
out of control, our country enacted price controls in housing
to maintain stability.
Mr. Mitchell, how would rent stabilization be effective in
ensuring that folks are housed in the short term, helping
working families across the country, while also avoiding
homelessness?
Mr. Mitchell. Again, given the immediate needs of renters
and the outsized power of the landlords to significantly raise
rents in this moment, rent stabilization policies offer a near-
term pathway of providing relief to renters and addressing the
fundamental power imbalance that we are seeing right now.
And we should note that rent control policies have evolved
tremendously over time. Most modern rent stabilization efforts
target specific property types within a city or locality, and
they allow for more-controlled rent increases, which mitigates
a lot of the negative concerns that people often associate with
rent control policies.
The research here is very clear: Rent control policies
reduce rents for the tenants at whom they are targeted. They
increase residential stability. They protect tenants from
eviction. And more recent research suggests that these modest
rent stabilization policies also do not deter new construction.
So in some ways, you can see that pairing these rent
stabilization policies then with the investments in putting new
supply online can work well and work hand-in-hand together.
Ms. Pressley. Thank you, Mr. Mitchell. I certainly agree.
Housing is a human right. We have to be responsive to the
pain that families are currently experiencing with a two-prong
solution that pairs long-term investments in housing supply
with immediate policy changes that ensure access to affordable
housing. Everyone deserves more than shelter; they deserve to
have a home.
Thank you. And I yield back.
Mr. Green. The gentlelady yields back.
The gentleman from North Carolina, Mr. Budd, is now
recognized for 5 minutes.
Mr. Budd. Thank you, Mr. Chairman.
I just want to begin with a couple of facts, a bit of a
review.
In 2021, we saw the average home price rise almost 20
percent, which was the largest increase in the 34-year history
of the Case-Shiller Index, which tracks average home prices.
And when you couple that with historically-high inflation, you
can see that we really have a recipe for economic pain.
The average rate for a 30-year fixed-rate mortgage has
doubled over the last year alone. It was at about the 3-percent
range in March, and was over 7 percent in October.
So, let's break that down. We take the average homebuyer
looking for a basic FHFA-backed loan for a median-priced
$430,000 home, and then you factor in national averages for
property tax, home insurance, and a 20 percent down payment, at
a 7 percent interest rate, that homebuyer's average monthly
payment is going to be about $2,900.
Now, compare that to a year ago when the rates were closer
to 3 percent. That is about an $850 increase every single
month. I don't think that working families have an extra 10,000
bucks laying around.
So, instead of addressing the root causes of high
inflation, things like reckless runaway spending, we have seen
the Democrats focus on the same old failed progressive
policies. According to the National Association of Home
Builders, 25 percent of all costs associated with a single-
family home and developments are directly attributed to
regulations. That is a 25 percent tax that gets passed onto
these homebuyers.
So tell me, how is more spending and more regulation going
to fix that problem? It is not.
I think we would be a lot better off to find a better
solution to address domestic supply-chain issues, and ease
regulations, especially on the local level, not here in
Washington, D.C. And we need to encourage reducing regulations
here in Washington as well, but especially on the local level
where most of those costs are incurred. We also need to
encourage work. We need to cut runaway government spending. We
need to support innovative free-market solutions to increase
the housing supply in this country, which right now just can't
keep up with demand.
The hard truth is that the liberal ideology of the Biden
Administration and Congressional Democrats and what they are
doing just prevents them from solving this issue. They talk a
good game, but in reality, their failed policies have made it
worse for working families.
So until we change course away from failed progressivism,
which is really regressive, working families will find it
harder and harder to afford their daily lives and it will keep
them from becoming homeowners.
I yield back.
Mr. Green. The gentleman yields back.
The gentleman from New York, Mr. Torres, is now recognized
for 5 minutes.
Mr. Torres. Thank you, Mr. Chairman.
We are increasingly phasing out single-family-only zoning,
which, to me, is a policy shift in the right direction, but as
we reform zoning codes across America, we have to grapple with
the following quandary: How do we reap the benefit of housing
development without the cost of housing displacement? Land use
reform is a necessary but insufficient condition for
affordability.
Ms. Bailey, what else can be done to ensure deep
affordability in the new housing supply that land use reform
would unlock?
Ms. Bailey. Thank you for the question.
We can create programs that are equitable for the frontline
workers who actually risked their very lives to save the
economy during COVID-19, families who, through no fault of
their own, have been the hardest hit by COVID. So, things like
first-generation down payment assistance that has already been
discussed; support for voucher holders; support for people with
disabilities; but also the Neighborhood Homes Investment Act.
We could actually build 100,000 new units to help these
homeowners who have been hardest hit by the Great Recession
that robbed $1 trillion from Black and Latino communities.
This is a tax credit subsidy. But what we have to do is
make sure fair housing is embedded in it. For the entirety of
these United States, what we have done is try to create
affordable housing without censoring it in fairness. When we
censor it in fairness, like we did with the American Rescue
Plan Act's resources, we actually help the families who need
the help the most, and who have been the most harmfully
impacted by this crisis.
Going into this crisis, our families were already
struggling because of the devastating impact from the Great
Recession. They are not equitably sharing in the recovery, and
the Fed's efforts have exacerbated inequality to the point that
the Black-White wealth gap right now is by $20 trillion added.
Mr. Torres. To your point, homeownership is the foundation
for wealth in our society. And contrary to popular opinion, the
largest housing program is not LIHTC. It is not Section 8. It
is not Section 9 public housing. It is the mortgage interest
deduction by far, which disproportionately benefits wealthier,
Whiter households.
I have a question about homelessness. The size of the
homeless population depends on the definition of homelessness
that one adopts. Take New York City as an example. If you
define the homeless population as those living on the streets
or in a shelter, there are more than 60,000 homeless people in
New York City. But if I define it more broadly to those
doubling up and tripling up, there are more than 100,000
homeless students in the New York City public school system,
not to mention hundreds of thousands more who belong to the
rest of the household.
How should we define homelessness federally? And do you
have a sense of how much larger the homeless population would
be if we were to factor in those who are temporarily and
unstably-housed?
Anyone can answer that question.
Ms. Bailey. I think we have to absolutely expand the
definition, and we actually have to think about some of the
solutions that worked and the policies that we created for
homeless veterans, because we made a tremendous advancement in
helping homeless veterans. And if we provided some of those
same innovative approaches for families with children, we could
actually increase resources and support to help those children
and those families have more sustainability.
Mr. Torres. And again, Mr. Zandi, I have colleagues who
romanticize the free market. And the market has its place. The
market is a powerful tool. But there are market failures. In
your opinion, do you think that the free market is sufficient
to create the affordable housing we need, at the level of
affordability that we need, on the scale that we need?
Mr. Zandi. No, I don't. I think that the market was
significantly impaired in the wake of the housing bust and
great financial crisis, and it struggled to get it back
together to produce the kind of housing that we need as quickly
as we need it.
I do think it is important for lawmakers to focus on ways
to try to help address the shortfalls and, thus, these ideas
around tax credits and also on grants and other forms of
subsidy to try to make it less expensive and cheaper for
builders to put up more affordable--particularly affordable
rental housing units.
So, no, I don't think we should rely on the market by
itself to be able to get us to where we need to go as quickly
as we need to get there. This is a problem that has been in the
making for over a decade. If we do nothing, it is going to be a
problem that we are going to be grappling with for at least
another decade, or perhaps a generation.
So, I do think it is really important that lawmakers focus
on this and try and address these market failures.
Mr. Torres. And I will quickly note, anyone who is saying
we can resolve the affordability crisis without Federal
investment is living on a different planet.
And I will leave it at that.
Mr. Green. The gentleman yields back.
The gentleman from Tennessee, Mr. Rose, is now recognized
for 5 minutes.
Mr. Rose. Thank you, Chairman Green. And thanks to
Chairwoman Waters and Ranking Member McHenry for holding the
hearing today. Thank you to all of our witnesses for being here
and taking time to share your expertise with us.
I was glad to see that the Majority has invited CFPB
Director Chopra to testify later this month, and I would hope
that the chairwoman would also invite SEC Chair Gensler to
testify, perhaps in support of the upcoming FTX hearing.
In the last 133 days, we have had only one hearing that
included witnesses from the Biden Administration, which I
believe is a dereliction of our duty as Members of Congress to
conduct oversight. I hope that changes in a few weeks, and I am
confident that it will and that we will be seeing a lot more
government officials as witnesses before this committee.
Since my time is limited, I want to dive straight into my
questions.
Dr. Holtz-Eakin, earlier this year we held a hearing on the
Biden Administration's PAVE Task Force which was created based
on anecdotal evidence to address discrimination in home
appraisals. The task force did not conduct any new research. It
also failed to include dissenting opinions on the subject about
the contested and limited body of work on appraisal bias.
Setting aside whether or not it is wise to make policy
decisions based on anecdotal evidence, I am curious about your
thoughts on one of the task force's recommendations, which is
to require FHA lenders to track usage and outcomes of
reconsiderations of value, and report it to the FHA so that HUD
can evaluate the impact that reconsiderations of value might
have on possible discrimination.
Dr. Holtz-Eakin, would the costs of increased reporting
requirements like this impact the cost of buying a new home?
Mr. Holtz-Eakin. Certainly, those costs will get passed
along. There is no question about that.
Mr. Rose. Dr. Holtz-Eakin, the task force also wants to
increase requirements for anti-bias fair housing and fair
lending training for all appraisers. The industry itself has
been exploring ways to improve diversity among the profession,
but one of the barriers to entry as an appraiser that is
commonly cited is the strict training requirements and long
hours that it takes to become an appraiser.
So, Dr. Holtz-Eakin, does increased training requirements
make the profession more attractive to prospective appraisers?
Mr. Holtz-Eakin. I will have to get back to you on that
with a better answer. I don't really know that industry very
well.
Mr. Rose. Thank you. If you would, I would appreciate it
and I would welcome your insights there.
Dr. Holtz-Eakin, earlier this year, every single Democrat
on this committee voted for a bill entitled, the Downpayment
Toward Equity Act, which would allow even people who make more
than $200,000 per year to receive government grants of nearly
$100,000 to purchase a home.
Setting aside the absurdity of giving individuals who make
more than $200,000 in income, a six-figure government
assistance check, and setting aside the $100-billion price tag
of this legislation, Dr. Holtz-Eakin, does increasing the
demand for something such as housing, leaving supply constant,
reduce costs?
Mr. Holtz-Eakin. No. It will just exacerbate the pricing
problem we see already.
Mr. Rose. I think so.
Earlier, Representative Barr mentioned the conundrum of
lowering the cost of regulatory assistance. And you said that
is a pretty big task, and you weren't necessarily sure how we
go about that. But if you might expand on that a little, I
would appreciate it.
Mr. Holtz-Eakin. I think this has come up a number of
times, and localities have these land use restrictions and
construction requirements for a reason. They value them for
reasons both noble and not noble. And you are now going to have
to have some appropriate Federal intervention into local
decision-making in order to change that. How do you do that?
You can try to do it by fiat, but it is awfully hard to tailor
that to the circumstances across the country. You can make it a
condition of financial assistance and have it as a carrot that
they do that. But they could ignore that carrot and continue.
I think it is a really difficult policy problem to have,
the Federal Government trying to influence the decisions being
made at local levels across the country.
Mr. Rose. And is it futile, or do you think it is essential
that we try to figure out how to influence those local
decisions?
Mr. Holtz-Eakin. All of the numbers that you have heard
today are that this is one of the most-significant reasons to
have an affordable housing problem in America. So, yes, it
ought to be looked at.
Mr. Rose. Thank you. I appreciate it.
And I see my time has expired, so I yield back.
Mr. Green. The gentleman yields back.
The gentleman from Massachusetts, Mr. Lynch, who is also
the Chair of our Task Force on Financial Technology, is now
recognized for 5 minutes.
Mr. Lynch. Thank you, Mr. Chairman. And I want to thank all
of the witnesses who are here today. Thank you very much, and
the ones joining us online as well.
I share the representation of the City of Boston, so my
situation is quite similar--the same actually as Ms. Pressley
outlined, where the median rent now is around $3,000 a month
for a one-bedroom. I think the average housing cost right now
for a single-family home is somewhere around $770,000, far
above the national average.
My own background is, I grew up in the Old Colony Housing
Project in South Boston. At the time, it was among the poorest,
predominantly-White Census tracts in the United States. So, we
struggled. And my views on housing policy necessarily are
shaped by that experience. I saw how my mom and dad struggled.
I saw how they had a really hard time raising me and my five
sisters, just trying to provide a safe place for all of us and
a stable environment.
And it seems like things have gotten worse. We were at the
very bottom of the economic ladder, and we struggled for
housing. But now, I see people who are working who would, I
think, commonly be referred to as middle class, yet, because of
the exorbitant prices of housing, they are being forced out.
I think we had a good start with HOPE VI, and I know that
Jack Kemp, a Republican, was one of the early architects of
that program. Now, we have one program that was started by the
Obama Administration called the Choice Neighborhoods Program
that actually tries to build mixed-income housing. One of the
problems that I have--and I represent a lot of people in public
housing, including that same housing projects; it has been
renamed The Anne M. Lynch Homes at Old Colony in memory of my
mom. But we still have the same problem. People are struggling.
And the new model tries to bring in private money to partner
this Choice Neighborhood Program to build mixed income, so
middle income or so-called workforce housing.
And I am just wondering, Mr. Holtz-Eakin, we are struggling
with this idea of rent control again. The mayor of Boston is
looking at it because she doesn't have many options, and I
understand that. But I am old enough to remember the previous
iteration of rent control that was a disaster. It caused
disinvestment and the lack of development of housing.
I just wonder, Mr. Holtz-Eakin and Mr. Zandi, from an
economic standpoint, is that the type of model that will
succeed? If we can sort of get buy-in from middle-income people
as well as those who want to help people at the bottom of the
ladder, is that the model that will succeed in generating the 4
million units of housing that we need to create?
Mr. Holtz-Eakin. I feel pretty confident that a rent
control approach won't solve the problem. I say that respectful
of the testimony of Mr. Mitchell. You can probably write down
on a blackboard a price stabilization approach that works, but
I would be skeptical that we could make it work in every
community in America.
So, I would prefer to find ways to get private capital in
to increase the access of that cheap capital. I will let Mark
speak for himself, but he has talked about that on a number of
occasions. And whether it is tax-based incentives that draw
that capital in or others, I don't have an attachment to any of
them. We need to get greater capital in to provide affordable
housing. That is the key, yes.
Mr. Lynch. Mr. Zandi?
Mr. Zandi. Yes. In the long list of things that we can and
should do to help these low-income households be able to afford
a home, rent stabilization, rent control would be all the way
at the bottom of the list. I would be very, very cautious about
going down that path. It is very, very difficult to implement
in a way that will end up resulting in more supply. And we need
to be focused very carefully on increasing the supply of
housing as fast as possible. And rent control, rent
stabilization is pretty difficult to implement to make that
effective.
The other thing I would say is, there are a lot of
landlords out there. There are the institutional landlords. But
in many cases, the landlords we are talking about here for
these kinds of kind of lower-income households in these
communities we are trying to help are mom-and-pop landlords.
They are middle-class households as well. You need to keep that
in mind.
So, I don't know that I would go down that path. I would go
down these other paths before I went down the rent
stabilization or rent control path.
Mr. Green. The gentleman's time has expired.
The gentleman from South Carolina, Mr. Timmons, is now
recognized for 5 minutes.
Mr. Timmons. Thank you, Mr. Chairman. I appreciate you
having this hearing.
I live in Greenville, South Carolina. I represent
Greenville and Spartanburg. We have a major challenge with
affordable housing. The city has grown so much. There have been
so many people moving into the district, and rents have gone
through the roof. The same problem is happening all over the
country, but we have it twice as bad because we also have very
poor public transportation.
So, it really has become a major issue in my district. And
I, like all of you, agree that market forces are not going to
solve this problem. The government has to do something. The
question then becomes, what? Is it to somehow incentivize the
developers to invest in affordable units, or is it requiring
them, as some cities have done? Is it creating a fund that will
subsidize across-the-board using General Fund tax dollars? Is
it de-restricting land to force developers to do it? There are
all of these different tools in our toolbox, and the question
is, how?
And I think my view on this is that it is a problem when in
one building, different units are subsidizing others. So if
this is important to us--and it is important to us--it should
be General Fund dollars. It should be money that the entire
citizenry pays to facilitate affordable options in urban areas.
But then, the other thing is public transportation. There
are certain parts of our country that have grown so expensive
that it is just not economical to even make the attempt. The
question is, how do you allow people to move in and out, to
have access to areas to work and enjoy that community?
Those are the two kinds of variables that I see: government
intervention to facilitate affordable housing; but also, public
transportation.
Mr. Holtz-Eakin, do you agree that those are two of the
biggest kind of levers in this conversation?
Mr. Holtz-Eakin. Yes. Those are central to this.
I would really put the relentless focus on supply of
affordable housing that Mark Zandi just mentioned at the
forefront, because that will dictate the residential patterns
that will be viable over the long term and, thus, dictate the
transportation networks that you need to have to support those
residential patterns.
So, I think you have to get the housing piece right first
before you start thinking about getting the transportation
piece.
Mr. Timmons. Do you think it is reasonable that the
government should create incentives as opposed to requirements
to essentially tell developers that we will make it easier for
you to develop, whether it is putting your permit in the front
of the line--right now, permitting is incredibly backed up in
South Carolina, because we have so much development. That is
going to slow with interest rates increasing. But there are all
of these different tools. It is not a one-size-fits-all model,
and every city is different.
We can all agree that we need to have affordable housing. I
guess the question becomes, what tool in the toolbox is the
right tool to use to achieve that objective? And I guess it is
very situation-specific. What works in Greenville, South
Carolina, does not work in New York City.
Mr. Holtz-Eakin. I think that is the right bottom line,
that we shouldn't presume, sitting here in Washington, D.C., to
understand the local conditions all around, and we should
permit the flexible use of local tools to get to the
objectives. But you do have, at the Federal level, the power to
set the objectives and set the targets and try to make sure
that we get the outcomes we want.
Mr. Timmons. And I think there is a bigger question of rent
versus own. D.C. has a very complicated system through which
you get into the lottery, and then you purchase something, and
you live there, and then you only get the benefit of the--I
have looked at it extensively, and I promise you, I have no
idea how it works, but it theoretically works.
I think the other challenge is that everybody does it
differently, and there is no best practice. Is that fair?
Mr. Holtz-Eakin. In my opinion, I have never been able to
get excited about rent versus own, and that somehow, we should
get everybody into an owner-occupied home and--
Mr. Timmons. We know how that went last time.
Mr. Holtz-Eakin. We need more affordable housing, rental
housing, owner-occupied housing, and people are going to decide
whether they want to rent or own.
I have both rented and owned in my life. I didn't think I
was a worse citizen when I was a renter. I actually thought I
continued to uphold my civic duties. I have never understood
the magic whereby we want to pick one over the other, so I
would like to just focus on the supply of affordable housing.
Mr. Timmons. Sure. In the area that I live, we are having a
challenge because the city is growing into an area that was low
income, and they were all renters. And so the challenge
becomes, is it reasonable to ask them to move? And I would say
it is not. If they have been living somewhere for 20, 30 years,
they have a right to continue to live there. It is a very
complicated situation.
I don't want to go over my time. Thank you so much.
I yield back, Mr. Chairman.
Mr. Green. The gentleman's time has expired.
The gentlewoman from North Carolina, Ms. Adams, is now
recognized for 5 minutes.
Ms. Adams. Thank you, Mr. Chairman. And I want to thank you
for hosting today's hearing, and Chairwoman Waters. And to our
witnesses, thank you as well.
Ms. Bailey, this question is for you. In your testimony,
one of the key points you make is that GSEs aren't meeting the
expectations of their mandate to support affordable housing
initiatives.
First, can you specifically tell us more about how the GSEs
could be doing better? And second, can you discuss what
Congress can do to leverage the GSEs and the Federal Home Loan
Banks to close the racial homeownership gap and the affordable
housing crisis?
Ms. Bailey. Thank you for the question.
Absolutely, the GSEs continue to underserve all
communities, despite a public interest mission to making sure
that there is broad credit liquidity in every community at the
same time.
We support and are pleased with the Federal Housing Finance
Agency's recent release of the GSEs' equitable housing finance
codes. We have needed things like this for a very long time,
because of our nation's history of housing discrimination,
where we have created equitable opportunities, and in the first
35 years of the FHA-insured program, $120 billion of that
program mostly went to White Americans. Less than 2 percent of
those FHA-insured mortgage loans went to families of color. So,
White families had a head start.
We need equitable programs because families of color don't
have the resources built up from long-term homeownership that
can be passed forward to successive generations. The equitable
housing finance plans actually implement part of the Equal
Credit Opportunity Act's--which has been in place for over 40
years--special purpose credit programs. These are simply
programs that allow for lenders to look at their own individual
borrowing, and to see whom is it that they are underserving and
then to just create a targeted plan to bring in those
consumers, to make sure they have a fair chance because of the
history of discrimination that those communities have faced.
We also want to make sure that they affirmatively further
fair housing, because we have never fully enforced our fair
lending laws, and they have an explicit responsibility to
affirmatively further fair housing.
Ms. Adams. Okay. Great. Thank you so much.
Ms. Bailey, can you briefly discuss how corporate ownership
of housing units at this scale prevents first-time homebuyers
from finding housing, and what Congress can do about this? In
my community, the UNC Charlotte Urban Institute found that
corporate landlords own over 11,000 housing units.
Can you speak to this?
Ms. Bailey. Sure. One out of seven homes is actually being
purchased by investors in the communities hardest hit by the
recession in the South and in the Midwest. So, we need things
like targeted first-generation down payment assistance, which
is so different from first-time down payment assistance. This
down payment assistance actually targets the families that our
former housing policies have kept out. Current first-time
homebuyer programs are open and available to everyone, so even
wealthier people in high-resource communities could have access
to them.
By targeting down payment assistance by first generation,
we go to those communities that we have left behind,
communities all across our country: 1.7 million of those
borrowers would be Black; 1.32 million, Latino; and 1.4 million
would be White, because, again, these are the very communities
and rural communities that have been locked out of opportunity
for some of the same reasons. And many of these borrowers, up
to 88,000, would also be Asian American and from Pacific
Islander and Native communities.
So, equitable policies are good for our economy because
they help us to bring in the very communities we left out, but
they also help to create jobs. A targeted down payment
assistance by first generation would help us to generate
billions of dollars in both local revenues and thousands of
jobs.
Ms. Adams. Yes, ma'am. Thank you.
Mr. Zandi, can you discuss why the investment in LIHTC is
needed now more than ever before, because the funding in Build
Back Better would have provided a lot of relief?
Mr. Zandi. Yes, it would. And I know you have also worked
very diligently on this in trying to make some changes in the
funding related to the American Rescue Plan money to allow more
LIHTC development. And I think that is the kind of thing we
should be doing.
The Federal Government is the single-largest funding source
for affordable rental housing. That is the largest program that
the Federal Government operates. It is very efficient. It is
well-understood, and tried and true. And I think that is what
we should be focused on.
Ms. Adams. Thank you so much. I am out of time.
Mr. Chairman, I yield back.
Mr. Green. The gentlewoman's time has expired.
The gentleman from Wisconsin, Mr. Steil, is now recognized
for 5 minutes.
Mr. Steil. Thank you very much, Mr. Chairman. And thank you
all for being here for another hearing on housing.
Mr. Holtz-Eakin, the Federal Housing Finance Authority
(FHFA) announced this week that it is going to increase the
maximum conforming loan limit to more than $1 million in high-
cost areas, and $726,000 in other parts of the country. In
other words, the Federal Government is going to subsidize high-
cost, million-dollar home purchases.
Can you kind of walk us through what impact expanding
Federal support for jumbo mortgages might have, in particular
on inflation?
Mr. Holtz-Eakin. Certainly at this point, as we have
discussed extensively, housing is a big part of the inflation
story. And it will increase the demand for housing and
especially expensive housing, jumbo mortgage-financed housing.
And other things being the same, those increases in demand can
exacerbate the inflation problem.
My deep belief is that the Federal Reserve will simply undo
it. And so, this will be an incredibly ineffective subsidy
which will probably allow these fairly affluent borrowers to
get financing, and someone else will get crowded out, because
the Fed really can't allow the aggregate to increase.
Mr. Steil. Let's follow up there. Somebody else is going to
get crowded out.
Mr. Holtz-Eakin. Yes.
Mr. Steil. Who gets crowded out? Other rich people or
lower-income people who are trying to buy a home?
Mr. Holtz-Eakin. Probably the lower income. It will just
move down the ladder, and they'll get credit out at the bottom.
Mr. Steil. So, the policies put forward where the
government comes in and intervenes actually hurt the lower-
income homebuyers buying homes, not at a $1-million price
point, but the lower price point. That gives me a lot of pause.
Let me ask you a follow-up question to that. Do you view
that this move could increase the risk to the Federal
Government, ultimately being the taxpayers?
Mr. Holtz-Eakin. Oh, yes. I am deeply concerned that the
GSEs, which were fundamentally involved in the last housing
bubble and the financial crisis, remain unaltered to this day.
They have been in conservatorship ever since the crisis. They
are undercapitalized by their own assessments. And now, on a
regular basis, they are expanding the credit box to allow
riskier and riskier mortgages, which is simply a recipe for
those mortgages to eventually fail, and for the taxpayer to
have to step in on a large scale.
Mr. Steil. Let's dig in on that deeper, because what we
have seen over the past 2 years in the one-party Democratic
control is aggressive new government spending, $6.8 trillion in
new government spending on top of the current operations of the
Federal Government. This reckless spending is, I think, one of
the key drivers of the inflation we see. We also have a war on
energy. We have labor policies that need to be reformed.
But all of that piling in together is, at the same time,
the Federal Reserve with blunt instruments of raising interest
rates is trying to hit the brakes, while the fiscal policy
coming out of Congress is exacerbating a problem that we are
facing right now. On top of that, the Federal Reserve is
engaged in quantitative tightening, pulling liquidity out of
the market.
How do you think that the quantitative tightening policies
that the Fed has indicated they are planning to continue are
going to have in particular as it relates to the housing
market?
Mr. Holtz-Eakin. I don't think we know the magnitude. We
have never done quantitative tightening, so this is
unprecedented, and I can't give you an interest rate
equivalent.
Mr. Steil. Right.
Mr. Holtz-Eakin. But directionally, it is pretty clear that
there will be other things the same, not as much mortgage
capital available. To get that capital to have to offer higher
returns means higher mortgages rights for everyone else. So,
this will disproportionately hit the housing sector compared to
the overall rate increases.
Mr. Steil. At what point do you think we will have
additional clarity as to the impact that these quantitative
tightening policies are going to have? I agree with you, we saw
quantitative easing one time in history. Now, we are unwinding
this. The Ph.D. economists will say, ``Is it the reverse of
quantitative easing?'' It seems like that is a rational
analysis. We are seeing some directional indications here.
What should policymakers be looking at as it relates to the
interest rates, as it relates to housing as this quantitative
tightening process continues down the road?
Mr. Holtz-Eakin. Roughly speaking, you do rate increases,
and you try to look at the impact on real economic activity,
particularly business spending, Capital Expenditure (CapEx),
things that would be indicators of a potential for a downturn.
That is a general phenomenon. Compare that to the impact on the
real economic activity, the home building and apartment
building that goes on in the housing sector, and how quickly
the ladder goes down and how much more deeply it goes down
tells you the QT impact.
Mr. Steil. Thank you very much. I appreciate your testimony
here today.
I look forward to 1 month and 2 days from today when we are
going to be able to put a check on some of the reckless
spending.
Mr. Chairman, I yield back.
Mr. Green. The gentleman yields back.
The gentlewoman from Pennsylvania, Ms. Dean, is now
recognized for 5 minutes.
Ms. Dean. Thank you, Mr. Chairman. And I thank all of our
witnesses for being here today. I hope you will excuse my
absence. I think you know that we are involved in a
reorganizational set of meetings as well, but I wanted to be
sure to get here.
I especially want to thank you, Mrs. Eaddy, for sharing
your personal story with us today. I am sorry for what you and
your husband have been through, but that is kind of hollow
words. It is up to us to do better and to do more. And that is
why I am so glad that our chairwoman focuses on affordable
housing and homelessness as much as she does.
It matters in my district. I have a district--from suburban
Philadelphia out into rural Pennsylvania--where we struggle
with homelessness and affordable housing. And so, I am very sad
but pleased to have read your testimony.
I want to follow up on something that Mr. Barr asked you
earlier, and that it is the benefit of supportive services for
people suffering from homelessness. You indicated that
supportive services would be helpful for many, and I agree. But
I want to follow up on a point that you alluded to in your
testimony.
Can you explain the importance of having stable, safe
housing first as the foundation for your life, in order to make
other improvements in your life? That is, can you talk about
how harmful it can be to couple a demand for supportive
services at the same time as trying to simply get safe housing?
Why is it for you that it is foundational that first, you have
to get in a safe place?
Ms. Eaddy. Thank you for the question. To me, it brings
stability for us. Just having a safe place to go to every
single day without being worried about being harmed while we
are homeless is something that I really just--it bothers me
every single second of the day. The stability to me in having
safe affordable housing, being able to be inside and know that
we are safe, and that will give us more time.
Because in the midst of all of this, my husband had a
mental breakdown. To me, right there, him worrying that he has
to progressively all the time go to work, go to work, but it is
not enough money. Go to work, go to work, and maybe we will
make enough to be able to afford the rent. So just being his
back to try to make--not push him to, work harder, husband, you
know what I am saying? But maybe we can do a little bit more.
Maybe you can work a couple more hours, and then we can put the
money towards this, to make us be more stable to get a place.
To me, that is stability. Just having somewhere to live
will make us be more stable, to make us be able to wake up
every day and feel safe, and not have to worry about being
outside. Now, we can get back into the life of things because
we have a little bit of stability.
Ms. Dean. Thank you for that real clarity. And you are
absolutely right, it is not just a tax on your physical health,
but what a challenge to mental health for any one of us. As you
said, you don't know how good it is to have a knob to turn
every evening to enter a space where you are safe and not in
danger until it is taken away from you. You are absolutely
right.
You also said being homeless steals your identity. Well, it
hasn't stolen yours, nor your husband's. So, I thank you for
being here today.
I wanted to use that point to pivot to monetary policy. I
just have a quick question for two of our economists, and it is
really about the Fed and overcorrection for inflation.
I wonder, Dr. Zandi and Mr. Mitchell, could you just
comment on where you think the Fed should go this month and
moving forward in terms of interest rates as it impacts people
who are struggling to find housing?
Mr. Mitchell. Absolutely. I would actually say that the Fed
should put a pause to interest rate hikes immediately. And I
would say that in part because, as we talk about the underlying
factors of inflation right now, none of those things are the
things that the Fed can address by raising interest rates. As
other people have mentioned, it is a blunt tool. And at this
moment, it does more harm than good.
Ms. Dean. I agree with you there, Mr. Mitchell.
And quickly, Dr. Zandi?
Mr. Zandi. I think the Federal Reserve has to lay out a
path for another percentage point of rate increases. We are
close to 4 percent on the funds rate, and we will be close to 5
by the spring. That is what is embedded in stock prices. That
is what is embedded in the current mortgage rate. That is what
is embedded in the value of the dollar. They need to execute on
that, and then they need to stop and take a look around and
make sure that inflation is coming in and that everything is
sticking to the script. But I think they need to follow through
on the rate increases that they articulated they will do. If
they don't, then we do run the risk of seeing inflation become
more entrenched, embedded, and more of a problem.
Ms. Dean. Thank you. And I know my time has expired.
Mr. Green. The gentlelady's time has expired.
The gentleman from Illinois, Mr. Garcia, is now recognized
for 5 minutes.
Mr. Garcia of Illinois. Thank you, Mr. Chairman. And, of
course, I thank all of the witnesses for joining us today to
discuss this crucial and timely topic.
I represent a working-class district, a majority Latino
community in Chicagoland. Most of my constituents are renters
who have been suffering from rising rent costs over the last 5
years. Rents have increased by almost 40 percent nationally,
outpacing wage increases. Nearly half of renters, and over 80
percent of extremely low-income renters pay more than 30
percent of their income toward rent. And this crisis will only
get worse if Congress does not act to address it.
There are many reasons for the housing affordability
crisis. I want to zoom in on one big one that doesn't get
enough attention: Corporate greed. I recently led a letter
asking the FTC and the DOJ to investigate RealPage for
anticompetitive practices. RealPage is a multinational company
that provides landlords with rent-setting software. It
advertises that its customers, ``outperform the market by 3 to
7 percent.'' And in some cases, recommends its clients accept
lower occupancy rates in order to raise rents and make more
money.
Mr. Mitchell, can you tell us a bit about RealPage and its
rent-setting software, YieldStar?
Mr. Mitchell. Absolutely. As you mentioned, this is a real
estate tech company that created a proprietary software called
YieldStar. It takes rental market data from various firms,
inputs it into this model, and then it spits out pricing
strategies.
I think what is most alarming here, and what is the reason
that RealPage is now under a DOJ investigation, is that the
software is possibly facilitating collusion in the rental
market amongst landlords who, in theory, are supposed to be
competitors. And this only exacerbates what is already a gross
imbalance of power between landlords and renters.
And I think the other important thing here to know about
RealPage is that it acquired its own major competitor back in
2017 in the space, giving it a lot of market concentration and
further exacerbating the range of landlords that are using this
software in any given locality.
Mr. Garcia of Illinois. Yes. Thank you. And what impact do
you think RealPage is having on the rental market, and what do
you believe that lawmakers should do in response, if anything?
Mr. Mitchell. I think you have lifted up some of the
important things here. It eliminates the interaction between
landlord and tenant. It takes, so to speak, the pricing
decision offsite. It encourages landlords to prioritize high
rents and profits over, say, reduced turnover or renter
stability. And in certain instances, as you mentioned, it is
taking unit stock offline to achieve higher profits. And in
these instances, I think it is absolutely imperative that the
relevant regulatory bodies are investigating to make sure that
antitrust laws, profiteering laws are being adhered to, and
that renters aren't at the mercy of colluding landlords.
Mr. Garcia of Illinois. RealPage, I want to add, is owned
by a private equity firm. And many of RealPage's clients are
backed by private equity firms.
What impact is private equity having on housing
affordability, and what could Congress do about it?
Mr. Mitchell. I think there are a few directions we can go
here. First and foremost, when we talk about who owns rental
property in this country, we oftentimes think of mom-and-pop
landlords. And while that is true--and when we think of the
actual properties, we think about units, we are seeing that
institutional investors own a growing and now a majority share.
In 2015, it was about 50/50 in terms of units between
individual investors and institutional investors. In 2021, the
latest data that we have, it is actually about two-thirds now
institutional investors. And as that becomes the case, I think
the super-charges trends that we have seen over the last few
years in terms of the continued shift and the heightened
prioritization of profits and shareholder return, and we can
see this dynamic the earnings calls where large corporate
landlords, many of them backed by private equity, are laser-
focused on taking every penny possible from renters and driving
returns with no regard for the broader health or the stability
in the broader rental market. So, I think that is really
important to focus and understand.
Mr. Garcia of Illinois. Thank you so much.
I wanted to just acknowledge the presence of Ms. Eaddy.
Thank you for your powerful testimony and for being with us
today. Homeless service providers are on the front lines of
ensuring that people receive support when they need it. These
providers are often overworked, underpaid, and understaffed,
which means that sometimes people don't get the help that they
need. And your testimony here compels us to really think about
what kind of services should be provided and funded. Thank you.
Mr. Chairman, I yield back.
Mr. Green. The gentleman's time has expired.
The gentlewoman from Michigan, Ms. Tlaib, is now recognized
for 5 minutes.
Ms. Tlaib. Thank you so much, Mr. Chairman. And thank you
to Ms. Margaret Eaddy for telling us what needs to be said,
which is we need to move with the urgency that is needed for
this crisis.
I am also incredibly grateful--and Mr. Chairman knows
this--that Chairwoman Waters from day one, from the first day I
entered into Congress, has said that housing is infrastructure.
And she reminds us of that every single day. So, I am really
grateful for this hearing.
I represent Michigan's 13th Congressional District. More
than half of the owner-occupied single-family homes in my
community are valued at less than $100,000. Our State lost more
Black homeownership than any other State in the country over
the last 2 decades.
I know the Urban Institute has found that it is actually
more difficult for borrowers to get an FHA mortgage for a home
valued at less than $100,000 than for a loan larger than
$100,000.
Meanwhile, the Urban Institute has also found that 3 in 4
homes priced at or below $100,000 are purchased by all-cash
buyers and investors. So countless homebuyers, particularly
first-time homebuyers, are being locked out of homeownership in
the middle class. And this is hardly a problem exclusive to
urban communities like the City of Detroit; the southeast,
Texas, and the Great Plains are also seeing a huge impact.
I worked with Chairwoman Waters and, of course, my amazing
colleague, Representative Kaptur, on creating the Community
Restoration and Revitalization Fund and the Build Back Better
Act that directed Federal funds towards reinvestment in old or
abandoned housing stock across the country and rehabbing them
into affordable rental units.
Ms. Bailey, can you talk a little bit about how the Federal
down payment assistance or the creation of a Community
Restoration and Revitalization Fund helps bridge the
homeownership gap and reverse these trends?
Ms. Bailey. Thank you for the question. Indeed, the program
would establish a competitive grant program at HUD to support
the creation of affordable housing and community redevelopment
in neighborhoods that are experiencing blight.
We talked earlier about how our communities, including
communities like yours in Detroit, have not recovered from the
Great Recession. This is why the GSE's Equitable Housing
Finance Plans are critically important, because what they are
doing is providing liquidity for small-dollar mortgage
programs, those pilots that would allow people in your
communities to get access to mortgage loans that are less than
$100,000, the loans that our large-scale lenders are refusing
to make despite getting deposits for reinsurance.
We need these Equitable Housing Finance programs because
whole regions of the country are credit-starved. We need to do
everything that we can to make sure those Equitable Housing
Finance Plans pass. But we also need the Build Back Better Act.
It is a compromise; $150 billion of targeted assistance,
including the Community Restoration and Revitalization Fund,
would bring much-needed resources into communities all over the
country that want to have a stake in an equitable recovery and
for whom housing continues to be a challenge. It would generate
thousands of jobs. So, marrying supply and demand together is
the solution.
Ms. Tlaib. Ms. Bailey, Mr. Mitchell, Mr. Zandi, do you have
any other recommendations in regards to how I can help so many
of my families--we are talking about particularly, homes valued
less than $100,000. What are some policy recommendations that
you may have for me, my colleagues, and the Administration?
Ms. Bailey. First, continuing to make sure the Equitable
Housing and Finance programs are implemented. The GSEs have to
do them every 3 years. There needs to be accountability for
those plans. We need to know how they are actually delivering.
They have broad public interest mandates for the protections
that they get to make sure credit availability is available in
every market, not only Fannie Mae and Freddie Mac, but also the
Federal Home Loan Banks.
Ms. Tlaib. Yes, great. Mr. Zandi, really quickly, are you
concerned about the possibility that the Fed's monetary policy
will lead to an even larger homebuilding gap, increasing our
shortage of housing and worsening some of the issues and crises
that my families are going through in the 13th District?
Mr. Zandi. Yes, it will. The higher rates obviously push
people into--they can't buy a home because they can't afford
it. So, they go into a rental property, which jacks up rents,
all else being equal. It also affects lending rates for
construction and development. And that affects the ability of
multifamily developers to put up property. You have more
demand, and you have less supply, so that pushes up rents, and,
of course, that hurts everybody. It hurts the renters. They
can't--
Ms. Tlaib. Absolutely. I really think the Fed is taking,
literally, a sledgehammer to the demand with so many sectors
working on this issue, sectors of our economy, but especially
housing.
I really appreciate this hearing, and I yield back.
Chairwoman Waters. Thank you very much.
The gentlewoman from Texas, Ms. Garcia, who is also the
Vice Chair of our Subcommittee on Diversity and Inclusion, is
now recognized for 5 minutes.
Ms. Garcia of Texas. Thank you, Madam Chairwoman. And to
all of the witnesses, I apologize that I was not here to hear
your testimony. But like Ms. Dean mentioned earlier, we were
all involved in some organizational leadership elections this
morning and were called away.
But I am just so glad we are doing this hearing because I,
frankly, think that we can't really talk enough about the need
for affordable housing, not just in the cities that you have
mentioned, but really across America.
And I want to first start by thanking you, Ms. Eaddy, for
being here today, for having the courage, having the activism,
and for having the voice that you have to speak up and work on
these issues for so many people across America.
I can tell you that I have been working on this issue since
I was a young legal aid lawyer. I represented the Houston
Welfare Rights Organization. And one of the planks we had then,
and it continues today, is getting more affordable public
housing. We focused a lot on that. And it was always helpful
when we had clients like you who were active and engaged and
could speak for others. So, thank you for being that voice. And
please know that there are many of us in this room and others
who support you and hear you and will continue our fight. And,
of course, you can't find a better champion for all of that
than our chairwoman, who has pushed and pushed on this issue
for years. And the fight will continue, I am sure.
I want to start with you, Ms. Bailey. I am from a Latino
district, 77-percent Latino. And Latinos were probably the only
ethnic sector that had an increased homeownership rate this
last year, but it doesn't mean we are there yet either. And I
think some of the issues for us are compounded when you include
the unauthorized immigrant in the mix of Latino, which adds a
different subset of issues, with some providers and landlords
not wanting to lease or rent to people who are unauthorized in
this country.
Given that Latinos are positioned to be the largest group
of homebuyers in the nation, I am concerned about a lot of the
barriers to housing affordability that will block their
process. Because we will continue to grow, we are here to stay.
Please share your perspective on the potential that interest
hikes that will hinder the progress for homebuyers of color,
and particularly the Latino community, and how can
affordability challenges widen the racial gap?
Ms. Bailey. Thank you much so much for the question. As you
said, Latinos are going to play a major role in the mortgage
market. Seven out of ten future buyers are going to be people
of color, with Latinos accounting for a large majority of those
buyers, along with African Americans and Asian Americans and
Native communities.
One of the things that we need to do is to make sure the
very buyers that the future system depends on have access to
targeted first-generation down payment assistance as provided
in the Downpayment Toward Equity Act that has been a part of
the House-passed Build Back Better Act.
That targeting of down payment assistance helps to overcome
one of the biggest barriers, which is the lack of down payment
because families have not had equitable opportunities to build
homeownership over intergenerational times.
I like to say that today's renters are tomorrow's
homeowners. So, we have to do everything for homeowners to make
sure they have equitable housing opportunities, including
making sure there is real support for an increase in vouchers,
and that HUD gets the resources that it needs to effectively
implement its programs, because HUD has been gutted and doesn't
have proper staffing to do the fair housing--
Ms. Garcia of Texas. Right. Particularly the last
Administration.
Ms. Bailey. Yes.
Ms. Garcia of Texas. Recently, our only newspaper in
Houston, the Houston Chronicle, published an article in
September highlighting the impacts of inflation on rent prices,
demonstrating that prices in Houston are becoming troublingly-
unaffordable. The average apartment rents in the City have
increased by 12 percent since 2019, to an average of $1,300 per
month.
Can you speak about the ways that high rent cost can hinder
homeownership, and what is an important tool for building
wealth, especially for low-income renters?
Ms. Bailey. They actually stop families from being able to
save. But another thing that happens is that, in credit
scoring, which is typically one of the underwriting criterias,
our current credit score models don't even factor in positive
rental payment history.
What we need to do is to make sure those credit score
models actually become more inclusive and factor in that
positive history. Because when we look at things like positive
rental payment history, we actually see that we can expand the
credit box for the more than 8 million mortgage-ready Latino
and African-American consumers who are ready to enter into the
homeownership space.
Ms. Garcia of Texas. Thank you. Madam Chairwoman, I yield
back.
Chairwoman Waters. Thank you.
The gentleman from Massachusetts, Mr. Auchincloss, who is
also the Vice Chair of the committee, is now recognized for 5
minutes.
Mr. Auchincloss. Thank you, Madam Chairwoman, for this
hearing, and also for your commitment to affordable housing.
Mrs. Eaddy, let me begin by applauding your testimony and
thanking you for humanizing this issue. In your words, I hear
echoes of the thousands of constituents in the Massachusetts
Fourth District, southeastern Massachusetts and Greater Boston
who are in panic mode on a daily basis. Our office is inundated
with phone calls--from senior citizens, young families, and
everyone in between--because we are in a crisis right now in
Massachusetts. The cost of housing is our biggest problem. And
safe and affordable and dignified housing is a human right.
Ms. Bailey and Mr. Mitchell, I want to ask you both a
question, a deliberately-challenging question. We have two
different threads in our housing policy debate in this country.
One thread is housing as investment, and a means of building
wealth, and transferring wealth across generations. The other
is housing as affordability. We want housing to be cheaper. The
challenge is a good investment goes up in price over time, and
an affordable product goes down in price over time.
Can we have both of these conversations at the same time?
Can we talk about housing as an investment, and can we talk
about affordable housing and be talking about the same thing,
or are they inherently intentioned?
Ms. Bailey. Thank you for the question. We can walk and
chew gum at the exact same time. We need to do both here. This
is an opportunity to use housing as a fundamental right to
really stimulate economic growth and grow the economy for
everyone.
Targeted investments like the Neighborhood Homes Investment
Act, with inclusion of fair housing protections and oversight,
will help us to build those 100,000 affordable units in the
communities that we have left behind.
Mr. Auchincloss. But let me challenge you on that. And, Mr.
Mitchell, you can jump in here too. If we add a lot more supply
to the market, which I think everybody on this panel agrees
that we need to do, wouldn't you expect that the aggregate
price of the product is going to go down, or at the very least
not go up as much as it has previously and, hence, make it a
worse investment for wealth-building and intergenerational
wealth transfer?
Ms. Bailey. If I may just say one thing, homeownership is
important because it allows families to lock in their monthly
housing expenses. That is something that we are not talking
about.
Mr. Auchincloss. Okay.
Ms. Bailey. It means that your landlord can't, in the next
year, cause your rent to increase. So, that is one of the
things that we have to factor in and pull people in for.
Mr. Mitchell. I think more broadly, when we talk about
these sorts of investments, what it allows for is for broader
economic growth. So, if we look at the kind of investments that
were made over the course of the pandemic and the ensuing
recovery, we have seen as a result one of the strongest
economic recoveries at post-recession in modern history.
Because of those investments, we are seeing jobs growing
back, and wage growth for the first time for a lot of folks in
many decades. And that enables us to then focus on increasing
capacity and productive capacity moving into the future.
Mr. Auchincloss. I want to add another dimension here.
Maybe, it is not so much clearly about return on investment
(ROI), it is about the inclusivity of economic growth, and the
stability, to your point, Ms. Bailey, as well. I appreciate
those answers. Thank you.
Mr. Holtz-Eakin, let me close with you. I have here a
quotation from one of my favorite publications, Strong Towns.
And it says, ``What we need to do is to improve affordability
as something dramatically different. We need to allow the next
increment of housing as a right, everywhere. We need to remove
barriers to doing small-scale in-fills that we can get a
thousand small projects from incremental neighborhood-based
developers that proceed with very little fuss and with no
organized, mobilized opposition. We need to invite a different
kind of developer into the game.''
That sounds like organic, bottoms-up community-driven
development with the next increment, not these mega, mixed-use
projects but ones that are more entrepreneurial and more
incremental.
You had mentioned carrots and sticks that the Federal
Government might be able to use to incent this kind of
development. Say more about those in our final minute, and if
you could, add a little bit about parking regulations too,
which to me are the antithesis of housing affordability,
because we subsidize places for cars while making places for
humans more expensive?
Mr. Holtz-Eakin. That is broadly another strategy on
increasing supply. And it is a dramatically different strategy.
And I don't see any reason why we should limit the strategies
we contemplate. The question is, how do you get there? And
there is no reason why any city or locality couldn't just do
that.
Mr. Auchincloss. Yes, there is. Because people like talking
about more housing in abstract, and don't like talking about
more housing next to them. I was a city councilor for 5 years.
I have seen it.
Mr. Holtz-Eakin. I am going to agree with you. I am just
saying that either the community is going to agree somehow that
we are going to take this different strategy, our reservations
notwithstanding, and then pursue it. Or when we have the
conversation on this, the Federal Government is somehow going
to provide a carrot or a stick and say, you have to do it.
Mr. Auchincloss. We are out of time here. I want to invite
you but also everybody else on the panel who may be interested
in responding in writing to what specific carrots and sticks
the Federal Government might be able to use to incent the kind
of development I described.
And I yield back, Madam Chairwoman.
Chairwoman Waters. Thank you very much.
Without objection, I ask unanimous consent to introduce the
following letters for the record: A coalition letter from 12
real estate industry organizations, including the National
Association of Home Builders, and the National Association of
REALTORS; a letter from the National Low-Income Housing
Coalition; and a letter from the National Community
Reinvestment Coalition, all in support of today's hearing and
the need for robust, affordable housing investments.
I would like to thank our distinguished witnesses for their
testimony here today. And let me just include in this closing
that I am so thankful that all of you are here today, and for
the time that you have spent with us helping this Congress to
understand the need for housing.
And, Ms. Eaddy, I want to thank you for sharing with us
what has been happening to you and your family. And even though
we will not be in charge of this committee--I will be the
ranking member, I do believe--we will not forget that you came
here today. And we are going to have a budget. And we are going
to be traveling, and I hope that we will get to see you, maybe
in your hometown. I don't know. But I thank you so very much.
And I thank all of our expert witnesses who are here today.
This has been very important. This is the last housing hearing
that I will be holding. And, the Members on the opposite side
of the aisle have indicated interest. One said, ``I see you, I
hear you.'' Well, we are going to see if that is really what
was meant.
And so again, I can't tell you how much I appreciate
everyone who was here today.
The Chair notes that some Members may have additional
questions for these witnesses, 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.
With that, this hearing is adjourned.
[Whereupon, at 1:41 p.m., the hearing was adjourned.]
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