[Senate Hearing 117-213]
[From the U.S. Government Publishing Office]


                                                      S. Hrg. 117-213

               HOME=LIFE: THE STATE OF HOUSING IN AMERICA
=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                                   ON

    EXAMINING HOW LOCATION AND QUALITY OF HOUSING CAN DETERMINE HOW 
          RESILIENT OR VULNERABLE WE ARE TO NATURAL DISASTERS

                               __________

                             MARCH 16, 2021

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                Available at: https: //www.govinfo.gov /

                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
47-081 PDF                 WASHINGTON : 2022                     
          
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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                     SHERROD BROWN, Ohio, Chairman

JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
JON TESTER, Montana                  MIKE CRAPO, Idaho
MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia                  JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                     STEVE DAINES, Montana

                     Laura Swanson, Staff Director

                 Brad Grantz, Republican Staff Director

                       Elisha Tuku, Chief Counsel

                 Beth Cooper, Professional Staff Member

                Megan Cheney, Professional Staff Member

                 Dan Sullivan, Republican Chief Counsel

                  Jonathan McKernan, Republican Detail

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                    Charles J. Moffat, Hearing Clerk

                                  (ii)

                            C O N T E N T S

                              ----------                              

                        TUESDAY, MARCH 16, 2021

                                                                   Page

Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    41

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     3

                               WITNESSES

Christopher Herbert, Managing Director, Harvard Joint Center for 
  Housing Studies................................................     6
    Prepared statement...........................................    42
    Responses to written questions of:
        Chairman Brown...........................................   149
        Senator Cortez Masto.....................................   151
        Senator Warnock..........................................   154
Diane Yentel, President and Chief Executive Officer, National Low 
  Income Housing Coalition.......................................     8
    Prepared statement...........................................    57
    Responses to written questions of:
        Chairman Brown...........................................   157
        Senator Cortez Masto.....................................   159
        Senator Warnock..........................................   161
Nikitra Bailey, Executive Vice President, Center for Responsible 
  Lending........................................................     9
    Prepared statement...........................................    78
    Responses to written questions of:
        Senator Cortez Masto.....................................   162
        Senator Warnock..........................................   168
Edward J. Pinto, Director, Housing Center, Resident Fellow, 
  American Enterprise Institute..................................    11
    Prepared statement...........................................   122
Edward J. DeMarco, President, Housing Policy Council.............    12
    Prepared statement...........................................   142
    Responses to written questions of:
        Senator Cortez Masto.....................................   175
        Senator Sinema...........................................   181

              Additional Material Supplied for the Record

Letter from Center for Urban Renewal and Education...............   183

                                 (iii)

 
               HOME=LIFE: THE STATE OF HOUSING IN AMERICA

                              ----------                              


                        TUESDAY, MARCH 16, 2021

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 1:58 p.m., via Webex, Hon. Sherrod 
Brown, Chairman of the Committee, presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. The Committee on Banking, Housing, and 
Urban Affairs will come to order. This hearing, as we see, is 
in the virtual format. A few reminders as we begin.
    Once you start speaking, there will be a slight delay 
before you are displayed on the screen. To minimize background 
noise, please click the mute button until it is your turn to 
speak or to ask a question.
    You should all have one box on your screens labeled 
``Clock'' that will show how much time is remaining. For 
witnesses, you have 5 minutes for your opening statement. And 
for Senators, the 5-minute clock still applies to your 
questions.
    At 30 seconds remaining for both statements and questions, 
you will hear a bell ring to remind you your time has almost 
expired. It will ring again when your time has expired.
    If there is a technology issue, we will move to the next 
witness or Senator until it is resolved. To simplify the 
speaking order process, Senator Toomey, the Ranking Member, and 
I have agreed to go by seniority for this hearing.
    Thank you to the witnesses. Mr. DeMarco, I have not greeted 
you yet. How are you? Nice to see you. Thank you to all the 
witnesses for joining us today.
    The title of today's hearing--Home = Life--comes from 
Matthew Desmond, the author of the book ``Evicted''. He 
scribbled that in the front cover of my copy of the book, which 
I bought. It tells you really all you need to know about 
housing. Where you live determines where your kids go to 
school, how far you have to go to get to work, and what kinds 
of jobs you can get.
    It determines where you do your grocery shopping and 
determines whether your children are exposed to mold or 
hazardous lead. We saw over the past year that our housing 
certainly affects our health. That is only going to be even 
more true in an era of a changing climate.
    The location and quality of our housing can determine how 
resilient or vulnerable we are to natural disasters. That is 
why this hearing is long overdue.
    For the past 6 years, we have had numerous hearings on GSEs 
and the effects of housing on Wall Street, but we have ignored 
how our entire housing system is working for homeowners looking 
to buy a lower-cost home, seniors on a fixed income, and 
renters working a minimum wage job. We will have lots of 
discussions about the GSEs and their role in our housing 
finance system for sure.
    I have put forward a set of principles on the role the GSEs 
should play in our housing market. But that is not what today's 
hearing is all about.
    It has been some 9 years since this Committee held a 
hearing on the state of all housing in America. That is what we 
are here to discuss today. When we held that hearing in 2012, 
we were still trying to clean up the mess that Wall Street and 
predatory lenders had made. We might expect things to get 
better as we moved out of that recession.
    As Wall Street reminds us daily, the stock market is up; 
interest rates have been near record lows. And for many 
Americans, things have gotten better.
    Home prices have increased, giving some homeowners a 
valuable asset and the ability to finance home repairs and send 
their children to college. But that surely does not tell the 
whole story. People's paychecks have not kept up with the cost 
of living--we know that--particularly the cost of rent. The 
typical nursing assistant or janitor or retail worker--the very 
people we have called ``essential workers'' during this 
pandemic, the people that go to work every day exposing 
themselves to all of us and come home, anxious at night, hoping 
they did not spread this virus to their children. The essential 
workers--the nursing assistant, the janitor, the retail 
worker--they are not paid enough to afford a two-bedroom 
apartment anywhere in the country.
    Even before the pandemic, 11 million renters--that is one 
in four renters--were paying more than half their income for 
housing before the pandemic. For more than half of Black and 
Latino renters, there is little left over each month for food 
and medication, let alone saving for a rainy day.
    When a hard day's work does not even pay your bills, saving 
for a downpayment to buy a house, of course, is not a reality. 
It is not just renters. Today more than one in five homeowners 
still pay more than one-third of their income for housing.
    The number of lower-income homeowners continues to shrink. 
Most concerning of all, perhaps, the Black home ownership rate 
is as low as it was--think about this--is as low as it was when 
housing discrimination was still legal.
    Former HUD Secretary Romney--the father of our colleague 
Senator Mitt Romney--tried to fully implement the Fair Housing 
Act when it first passed, just days after Dr. King's 
assassination, to combat systemic discrimination in our housing 
markets. He was sidelined by the Nixon administration and its 
new-found Southern strategy, and the law has never been fully 
enforced, making it harder to ensure equal access to housing.
    And while we are the wealthiest country in the world, we 
have more than half a million people--including more than 
100,000 children--without a place to stay on a given night. 
Behind every one of these numbers is a family with a story. 
Last year, before the pandemic began, I asked Ohioans to tell 
me about their housing stories. Stories flooded in.
    I heard from seniors who just were not sure how they could 
stay in their home on a fixed income.
    I heard from people in their 40s and 50s who, in their 
entire adult life, had never been paid enough to make rent 
without more than one job. I heard from parents who would love 
to own a home for their children, but knew they would never be 
able to beat out an investor looking to buy the same property 
for cash. This is what families were facing a year ago.
    This pandemic, of course, made it worse. Ten million 
renters were behind on rent at the beginning of January.
    If they were paying more than half their income on rent 
before the pandemic, it is tough to see how they could ever 
hope to catch up. As some homeowners are bombarded with ads to 
refinance at the lowest cost on record, the homeowners who need 
help the most do not have the same opportunities. Meanwhile, 
millions of homeowners are behind on their payments or facing 
foreclosure.
    Homeowners of color are more likely to have fallen behind 
because of the pandemic. The American Rescue Plan will help. It 
will get shots in arms to get the virus under control. It will 
speed additional help to renters, homeowners, and people 
experiencing homelessness.
    But the Rescue Plan was just that--a rescue, to mobilize 
our resources to get through an emergency. Returning to the 
same broken system, where hard work simply was not paying off 
for so many workers, and still is not, is not good enough.
    We have an opportunity on this Committee to make people's 
lives better through better housing policy--to expand access to 
affordable rentals, to make it easier to purchase a home, to 
put trades people to work building housing. and making it safer 
and more resilient.
    Fundamentally, we pretty much want the same thing: a place 
that is safe, in a community we care about, where we can get to 
work and our children can have a good school, with room for our 
family -whether that is three kids, or an aging parent, or a 
beloved dog. You should get to define what home looks like for 
you. You should be able to find it and afford it without 
crippling stress every single month.
    That is our charge on this Committee, to make it so for 
everyone. Thank you.
    Ranking Member Toomey.

         OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you, Mr. Chairman. Thanks for calling 
this hearing, and thank you to our witnesses for testifying 
today.
    Last week, we took another step toward socializing housing. 
Last week, Congress nearly doubled the $40 billion in housing 
support it had already appropriated since the pandemic. Calls 
for additional assistance were being made before almost any of 
the December spending was ever distributed to households.
    Billions in stimulus checks, unemployment insurance, often 
exceeding work income, and other welfare meant most households 
at risk of homelessness had already received more money from 
Government than they had lost in income. We have likely 
exceeded the point where someone who has worked hard, made 
sacrifices, paid their bills, cared for their families, but 
received little of this Government largesse is asking 
themselves: How is any of this fair?
    And last week's bill added to an already vast Government 
role in housing. The number and cost of the many housing 
subsidy programs just boggles the mind. The mortgage interest 
deduction, capital gains exclusion on home sales, tax deduction 
on property taxes, FHA, VA, USDA, mortgage insurance, and 
Ginnie MBS guarantees, Government- induced downpayment 
assistance programs, LITHC, an overlapping array of HUD 
programs. There is project-based rental assistance, tenant-
based rental assistance, public housing funding; Section 2002, 
housing for the elderly; Section 811, housing for persons with 
disabilities; Section 521, rural rental housing; CDBG, home 
block grants, homelessness. It is unbelievable. And then, of 
course, we have the GSEs which have historically subsidized 
mortgages.
    Folks, Government is the problem here, not the solution. 
Fifty years and countless hundreds of billions of dollars in 
Federal housing support have had no meaningful impact on home 
ownership rates. In 1970, the home ownership rate in America 
was 64 percent; in 2020, 65.28. And as one of our witnesses 
will testify, Black home ownership levels are similar to when 
the Fair Housing Act was passed in 1968. In 1960, Black home 
ownership was about 38 percent; in 2019, just 42 percent.
    Why is this? It is because Government policies mostly are 
making housing more expensive. Local zoning laws restrict the 
supply of housing, which drives up home prices and rents. The 
GSEs, FHA, and VA subsidize the debt financing component of 
home purchases, and those subsidies are passed on into the form 
of higher home prices.
    Subsidized debt also encourages people to take on more debt 
than they can handle. We saw how badly that turned out in 2008.
    The state of housing in America affirms the urgency of 
financing reform. As we will heard today, the housing market is 
cyclical. It is a question really of when, not if, there will 
eventually be a housing downturn, and the GSEs and the housing 
finance system are just not prepared. FHFA Director Calabria in 
the last administration made significant progress in reforming 
the system. Thanks to their good work, the net worth sweep has 
been suspended. The GSEs finally have begun to build capital 
under a constructive new capital rule.
    For more than 12 years after the financial crisis, Congress 
has still not addressed the fundamental flaws in the system 
that led to the crisis. The system is still dominated by the 
GSE duopoly, and these $6 trillion behemoths actually have an 
even larger market share than they had before the crisis. They 
certainly remain too big to fail.
    The GSEs and the system also remain gravely 
undercapitalized. Just as before the financial crisis, these 
flaws in the system continue to encourage excessive risk 
taking. They risk future taxpayer bailouts, and they threaten 
financial stability. And just as before the financial crisis, 
these flaws also continue to undermine the availability and 
affordability of housing in America.
    The solution is not to double down on the old ways by 
simply easing underwriting standards, lowering FHA premiums, or 
further subsidizing mortgage debt. We need to try something 
new. We need to scale back the role of Government and leverage 
the power of free enterprise to promote housing for all 
Americans.
    For more than 30 years, Chairmen and Ranking Members from 
both sides of the aisle on this Committee have worked together 
on an ongoing basis to improve our housing market. I am 
committing to working with you, Mr. Chairman, and other members 
of this Committee to continue that tradition in this Congress. 
And in that spirit, yesterday I released principles for 
reforming the housing finance system. Now, these principles 
build on the bipartisan efforts of current members of this 
Committee from both sides of the aisle.
    And, Mr. Chairman, I think these principles also share 
considerable overlap with the principles you laid out in 
September of 2019. I think we need to end the ``too big to 
fail'' GSE model of privatizing gains and socializing the 
losses by permitting the chartering of competitors to the GSEs. 
We need to recapitalize the GSEs and end the conservatorship. 
And these reforms need to be done in an incremental and 
realistic manner that continues to foster a liquid secondary 
market for mortgages and the continued availability of the 30-
year mortgage, while promoting equitable access for mortgage 
lenders of all types. These reforms should represent the rule 
of law and rights of the GSE shareholders that were infringed 
by the Third Amendment.
    I know we have significant differences about the role of 
Government in the housing market, but I do believe that a 
compromise is possible. There is a lot of work that can be 
productively done on a bipartisan basis this Congress, and as 
part of that work, I look forward to hearing from Treasury 
Secretary Yellen soon, since that is required by the latest 
changes to the PSPAs, and then I hope we will act together.
    Thank you.
    Chairman Brown. Thank you, Ranking Member Toomey.
    I will introduce today's five witnesses.
    Dr. Chris Herbert is the managing director, Harvard Joint 
Center for Housing Studies, which publishes an annual report 
examining the state of the rental and home ownership markets. 
He is also a lecturer at the Department of Urban Planning and 
Design at the Harvard Graduate School of Design. He serves on 
the Board of Director of Freddie Mac and is a member of the 
Milken Institute Center for the Future of Aging. Welcome, Dr. 
Herbert.
    Ms. Diane Yentel is the president and CEO of the National 
Low Income Housing Coalition. She served as vice presidents of 
public policy and government affairs at Enterprise Community 
Partners and Director of the Public Housing Management and 
Occupancy Division at U.S. Department of Housing and Urban 
Development. Welcome, Ms. Yentel. She is having some technical 
problems. She may end up doing this by phone. It is not clear.
    Ms. Nikitra Bailey is an executive vice president at the 
Center for Responsible Lending. She leads mortgage policy 
advocacy. Ms. Bailey currently serves on the Consumer Financial 
Protection Bureau's Consumer Advisory Board, is vice chair of 
the North Carolina Housing Coalition, and a board member of the 
North Carolina Institute for Minority Economic Development. 
Welcome, Ms. Bailey.
    Mr. Ed DeMarco has been in front of this Committee before, 
is president of the Housing Policy Council. Prior to joining 
them, he was a senior fellow and resident at the Milken 
Institute Center for Financial Markets and for 5 years served 
as Acting Director of the Federal Housing Finance Agency. He 
also served as Chief Operating Officer and Senior Deputy 
Director of FHFA and its predecessor agencies, held positions 
at Social Security, the Treasury Department, and the GAO. Mr. 
DeMarco, welcome.
    And is that everybody? I am sorry. Mr. Pinto I skipped 
over. Sorry about that. Mr. Pinto is resident fellow and 
director of AEI Housing Center at the American Enterprise 
Institute. He oversees the publication of AEI housing market 
indicators. Mr. Pinto formerly served as Executive Vice 
President and Chief Credit Officer for Fannie Mae and as senior 
legal counsel and capital markets program manager for the 
mortgage insurer MGIC.
    Dr. Herbert, please begin.

 STATEMENT OF CHRISTOPHER HERBERT, MANAGING DIRECTOR, HARVARD 
                JOINT CENTER FOR HOUSING STUDIES

    Mr. Herbert. Thank you, Senator Brown. Chairman Brown, 
Ranking Member Toomey, Members of the Committee, thank you for 
inviting me to testify at this hearing.
    I am Chris Herbert, the managing director of Harvard Joint 
Center for Housing Studies. For more than three decades, the 
center has published the annual State of the Nation's Housing 
report, so I am pleased to share our views on the Nation's 
principal housing challenges today.
    In addition, I serve on the Board of Director of Freddie 
Mac. Although I am here in my capacity with the Joint Center, I 
just want to note that, as with my responsibilities on the 
board, there will be some limit on things I might be able to 
comment on about the GSE operations.
    This past year's tumultuous events have illuminated and 
exacerbated our Nation's many housing challenges. The pandemic 
has put further stress on millions of Americans who were 
already struggling to pay for their housing. The national 
reckoning with racial justice has put a spotlight on glaring 
racial disparities in access to decent and affordable housing. 
And the devastating series of earthquakes, hurricanes, 
wildfires, and extreme cold have done extensive damage to homes 
across the country.
    But the past year has also highlighted the importance of 
the housing sector to the broader economy, having been a bright 
spot in an otherwise troubled year.
    In my testimony today, I will highlight five key housing 
challenges we face across all areas of our country-- urban, 
rural, suburban--that call for action by the public, private, 
and nonprofit sectors to address.
    First is the need to expand rental assistance programs to 
help the 10.6 million renters spending over half their incomes, 
many of whom have extremely low incomes, making even the lowest 
market rents unaffordable. This heavy burden increases housing 
instability, undermining the ability of people to work and 
study, and forces them to cut back on food, health care, and 
savings. Expanding support for these renters would greatly 
enhance their well-being and help the economy.
    Second is the need to address barriers to housing 
construction, and particular of modest-cost homes. Many things 
contribute to our current shortfall in housing supply: labor 
shortages, the rising cost of materials, and restrictive 
regulations that constrain efficient land use by limiting 
density, creating costly and complex approval delays and adding 
excessive fees. The Federal Government should leverage the 
tools it has to encourage State and local regulatory reform and 
to support more efficient means of building homes.
    Third, given the significant financial and social benefits 
of owning a home, there is a compelling need to expand access 
to sustainable home ownership, particularly for people of color 
that historically have been shut out. The shortfall in home 
ownership among Black and Hispanic households, 31 and 26 
percentage points, respectively, is simply shameful. We need to 
expand homeowner education and counseling to help people 
navigate this complex process, increase critically important 
financial supports for downpayments and closing costs, provide 
access to safe and affordable credit, and expand supports post-
purchase to help sustain home ownership.
    Fourth, we need to address the stubbornly high levels of 
segregation across America, which are perhaps most evident in 
the concentrations of people of color in high- poverty 
neighborhoods. Research provides compelling evidence that 
childhood exposure to high levels of poverty reduces lifetime 
earnings, lowers college attendance, and increases 
incarceration rates. In response, we need to expand affordable 
housing options in a broader range of communities to 
affirmatively further fair housing and to coordinate 
investments in housing with improvements in schools, public 
safety, and economic development in historically marginalized 
communities.
    Finally, we need to invest in existing homes to make them 
more resilient, healthy, and age-friendly. Not only is climate 
change increasingly causing damage to our homes, it also calls 
for improved energy efficiency as weather becomes more extreme. 
Older, poorly maintained homes expose residents, particularly 
people of color and those with low incomes, to carbon monoxide, 
radon, lead, asbestos, and allergens, with significant health 
consequences. And with the population over age 75 poised to 
double over the next two decades, we need to modify millions of 
homes to allow older adults to age safely in their homes and 
their communities.
    Let me conclude by saying that as the title of this hearing 
indicates, having a good-quality, affordable, and secure home 
in a thriving community is foundational for a healthy and 
productive life for every person in America. Addressing our 
country's housing challenges will take concerted action for the 
public, private, and nonprofit sectors, but this investment 
would pay substantial dividends to these individuals and to 
society at large.
    Thank you for turning your attention to these critical 
issues and for your invitation to share this information with 
you today. I look forward to your questions. Thank you.
    Chairman Brown. Thank you, Dr. Herbert.
    Ms. Yentel, you are recognized for 5 minutes. Welcome.

         STATEMENT OF DIANE YENTEL, PRESIDENT AND CHIEF
    EXECUTIVE OFFICER, NATIONAL LOW INCOME HOUSING COALITION

    Ms. Yentel. Thank you. Chairman Brown, Ranking Member 
Toomey, and Members of the Committee, thank you for the 
opportunity to testify on the state of housing in America.
    The COVID-19 pandemic and economic collapse of 2020 
devastated millions of families, and people with low incomes 
and people of color have been disproportionately impacted 
through greater financial hardship or increased illness and 
death.
    Racial disparities in housing contribute to the inequitable 
health outcomes during the pandemic. Decades of structural 
racism in multiple systems, including housing, leave Black 
people, Native Americans, and Latinos much more likely to be 
renters, to be rent-burdened, and to experience homelessness 
than white people. And people of color in homes are more likely 
to live in overcrowded housing, all risk factors for increased 
likelihood of contracting or spreading COVID-19.
    The pandemic made clear that affordable homes are necessary 
for individual and public health, but renters and unhoused 
people have struggled to remain safely and stably housed 
throughout the pandemic due to the underlying affordable 
housing crisis that existed pre-pandemic. Pre- pandemic, there 
was a shortage of nearly 7 million affordable and available 
rental homes for America's lowest- income renters. For every 
ten of the lowest-income renter households, there are fewer 
than four homes that are affordable and available to them. 
Without affordable options, 10 million very-low-income 
households were severely housing cost-burdened, spending more 
than half of their incomes on rent and utilities, leaving them 
one financial shock away from missing rent and facing evictions 
or, in worst cases, becoming homeless.
    So for many of these same renters, the coronavirus and its 
financial fallout was that financial shock. They lost jobs and 
wages. They have increased Internet, child care, health care, 
food expenses, and they struggled more than ever to pay the 
rent.
    A patchwork of Federal, State, and local resources and 
protections, including a broad Federal eviction moratorium 
implemented in September 2020 by the CDC, kept many people 
stably housed during the pandemic, but renters struggled to 
keep up with the rent. The latest estimates are that about 10 
million renter households owe over $50 billion in rent and 
utility arrears, and they remain at high risk of losing their 
homes.
    In response, in December Congress extended [no audio] large 
part due to Chairman Brown's leadership, Congress provided a 
total of $47 billion for emergency rental assistance to assist 
low-income renters and landlord address these rent and utility 
arrears.
    These are other resources in the American Rescue Plan are 
critically needed and will go a long way to helping renters 
remain in their homes and to keep people experiencing 
homelessness safe, healthy, and housed during COVID-19. 
Policymakers must now ensure that emergency rental assistance 
funds are quickly and equitably distributed to households 
facing the greatest needs. And President Biden must defend, 
extend, strengthen, and enforce the Federal eviction moratorium 
to keep renters in their homes while this historic allocation 
of rental assistance is distributed.
    As the Nation recovers from the pandemic, Congress must 
turn its attention to advancing long-term solutions to resolve 
the Nation's housing crisis. These solutions include:
    One, expanding rental assistance to make it universally 
available to all eligible households in need and improving the 
program to ensure that it meets the needs of the people with 
the lowest incomes and people of color.
    Two, we must increase the supply of homes that are 
affordable to people with the lowest incomes through the 
preservation and construction of public housing, a major 
expansion of the National Housing Trust Fund, and incentives or 
requirements to reduce restrictive local zoning.
    Three, we should create a permanent emergency rental 
assistance program to keep families stabilized during a crisis, 
[no audio] everyday financial shocks and crises that low-income 
people face.
    And, four, we must lessen ongoing evictions and their long-
term harm with robust renter protections like right to counsel 
and expunging eviction records.
    This Committee and Congress have a historic opportunity to 
ensure both that unprecedented emergency resources are used for 
their intended purpose and to advance and enact solutions to 
address and end the affordable housing crisis in our country. 
And I look forward to working with you on this important work. 
I look forward to your questions, and thank you again for the 
opportunity to testify today.
    Chairman Brown. Thank you, Ms. Yentel.
    Ms. Bailey is recognized for 5 minutes.

 STATEMENT OF NIKITRA BAILEY, EXECUTIVE VICE PRESIDENT, CENTER 
                    FOR RESPONSIBLE LENDING

    Ms. Bailey. Good afternoon, Chairman Brown, Ranking Member 
Toomey, and Committee Members. Thank you for the opportunity to 
testify in today's hearing.
    I am an executive vice president at the Center for 
Responsible Lending, an affiliate of Self-Help, one of the 
Nation's largest community economic development lenders.
    Home ownership is the bedrock of the American middle class. 
It is the way that most Americans build wealth. It is the 
economic engine that fuels the greater economy. But we have to 
be honest about our country's inequitable investments in home 
ownership. We have left entire taxpaying communities behind. 
COVID-19 has brought these injustices into full view.
    On the one hand, some people can shelter in place, benefit 
from a roaring stock market, and watch their homes increase in 
value. On the other, essential workers face economic 
uncertainty and service positions that make them more likely to 
contract the virus. Many families suffer reduced wages, 
unemployment, and needing to wait at food pantry lines that 
circle entire city blocks and stretch down rural roads.
    Our Nation's housing policies are a core cause of these 
interconnected inequities. We all know that a home is much more 
than just its four walls.
    Federal policies, especially the Homestead Act and the New 
Deal, subsidized land and home ownership, literally the 
foundation of the American middle class. But redlining admit 
these benefits were primarily available for white Americans and 
explicitly excluded most Black Americans and other people of 
color. These laws created wealth that could be passed forward 
to successive generations and cemented a white middle class 
that could use their wealth to provide for a child's education, 
seed money for a business, a secure retirement, and a buffer 
against economic setbacks.
    The opportunities for many white Americans contrasts 
sharply with those for Black and brown families who have been 
systemically denied the ability to buildup the capital needed 
to obtain a mortgage and build equity.
    Yes, today's Black home ownership rate is at levels similar 
to 1968 when the Federal Fair Housing Act was passed and even 
the 1890s. The law's formal outlawing of discrimination belies 
the fact that housing discrimination remains widespread to this 
day. There is a direct connection between this legacy and the 
inhumane events over the summer that led to the people-led 
protests demanding justice. We must act to eliminate racist 
structures and create inclusive communities.
    In the run-up to the Great Recession, predatory lenders 
targeted communities of color with toxic and risky mortgage 
loans. Black and Hispanic families unnecessarily lost more than 
$1 trillion in wealth as a result. Since then, Fannie Mae and 
Freddie Mac have woefully underserved Black and Hispanic, 
Native and Pacific Islander communities. There could have been 
770,000 more Black homebuyers if mortgage credit was not 
unnecessarily tight and lenders were willing to make small-
dollar mortgage credit available.
    Like the last economic recovery, today's is K-shaped and 
uneven. Once again the relief is failing to reach the hardest-
hit families. While it seems the mortgage market is booming, a 
closer look at the data reveals a market dominated by 
refinances that mostly benefit the wealthiest.
    Typically, refinancing accounts for only a third of the 
market, but in 2020 they were over half. Historically low 
interest rates and the Federal Reserve's monthly purchases of 
$40 billion in agency mortgage-backed securities are keeping 
the market strong, yet many hardworking families are unable to 
secure a simple rate refinance that would save them a couple 
hundred of dollars per month that would help them to stay out 
of foreclosure and remain housed as the health pandemic 
continues.
    Given our national crisis and inequitable housing finance 
system, a new substantial public investment in home ownership 
is needed to bring in first-generation homebuyers. The future 
of the market is now, and its success depends on its ability to 
serve the 3 million Black and more than 5 million Hispanic 
mortgage-ready potential homebuyers.
    Addressing inequities can create shared prosperity by 
adding potentially $1 trillion per year to the economy, 
generate billions in local revenues, and create thousands of 
jobs. It would bring us closer to an America as good as her 
ideals where the promise of America can reach all of our 
children.
    Thank you for the opportunity. I look forward to answering 
questions.
    Chairman Brown. Thank you, Ms. Bailey.
    Mr. Pinto is recognized for 5 minutes.

        STATEMENT OF EDWARD J. PINTO, DIRECTOR, HOUSING
     CENTER, RESIDENT FELLOW, AMERICAN ENTERPRISE INSTITUTE

    Mr. Pinto. Thank you, Chairman Brown, Ranking Member 
Toomey, and other Members of the Committee, for the opportunity 
to testify today.
    Notwithstanding 70 years of Federal efforts, neither the 
goal of making homes affordable for lower-income households nor 
the goal of achieving generational wealth for lower-income 
homeowners has been met. Yet this year is the 100th anniversary 
of an even more troubling event: In 1921, the Federal 
Government began implementing zoning and land use policies 
designed to make it too expensive for racial and ethnic groups 
to be able to live in newly built homes and neighborhoods. I 
have estimated that since 1940 this has prohibited the 
construction of some 8 million homes. Therefore, it comes as no 
surprise that we have a broken housing ladder, with home prices 
rising much faster than incomes, pricing many out of the first 
rungs. We have an overheated housing market today with rapid 
home price appreciation, the result of extremely low interest 
rates, combined with the tightest supply in history. Last 
month, inventory was down 47 percent from 2 years before.
    We also have a market that is far, far from equilibrium. 
The Federal Housing Finance Agency's metric shows that we 
currently have prices 14 percent above the long-term trend, and 
this trend is rising rapidly.
    When we compare home prices to the fundamentals such as 
construction costs, wages, and rents, we find that since 2012 
home prices have gone up two to three times faster than those 
fundamentals. We know from history the bigger the gap, the more 
painful the correction, with lower-income and minority 
homeowners being slammed the most.
    Consider this thought experiment. Let us say rates go up to 
5 percent by the end of next year. This last happened just 2-1/
2 years ago, and home prices go up the expected 35 percent from 
the beginning of 1920 to the end of next year. We are already 
well on our way to that 35 percent. And the monthly payment 
would increase by 85 percent. This would sharply reduce demand, 
turning an overheated market into a buyer's market. The 
resultant price declines would inflict the most harm on low-
income and minority homeowners, who are ill equipped to handle 
such price volatility.
    The distortions that we have had due to zoning and other 
land use regulations have driven up home construction costs and 
land prices unevenly across the entire United States. For 
example, a home in Phoenix today sells for about a third as 
much per square foot as one in San Jose. Supply constraints and 
the inflationary effects of the Federal Government's 1921 
zoning and land use regime that I described earlier continues 
in force today. It is embodied in thousands of State and local 
land use codes.
    Since 1994 low-tier home prices have risen 39 percent 
faster than high-tier ones and have had much greater price 
volatility. This has had a detrimental effect on entry- level 
buyers. Further, high leverage, when combined with a 
constrained supply, is the key driver of higher home prices. It 
merely permits one borrower to bid against another would- be 
buyer for scarce goods.
    The 1994 to 2020 period has seen extreme home price 
volatility in the low-price tier. Let us take Phoenix. There 
was an increase starting in 1994 of 225 percent in nominal 
prices. Then, in 2007, prices collapsed in the following years 
by 70 percent followed by a climb in 2012 to today of 225 
percent. All of this in 27 years.
    One of the most pernicious effects of rapidly increasing 
house price appreciations on lower-income households is that it 
creates the illusion of wealth. Earlier when I mentioned prices 
rising 225 percent followed by the decline of 70 percent, it 
was the land price, not the structures, that exploded and then 
collapsed. So we put low-income homeowners who purchased in 
2004 and 2007 into the unknowing speculation in land.
    How might we sustainably build generational wealth for 
lower-income households and minority households through home 
ownership? Financial assistance might be provided to buy down 
the rate on a wealth-building 20-year loan. This would provide 
potential equal buying power for the 20-year loan versus the 
30-year loan. The 20-year loan reliably builds generational 
wealth, reduces defaults, and limits capitalization into higher 
prices. It could be narrowly targeted to lower-income, first-
generation homebuyers. It would sustainably expand the credit 
box and growing home ownership opportunities, especially for 
minorities.
    There are many other suggestions in my written testimony, 
but I will leave it here, and thank you for the opportunity for 
testifying today.
    Chairman Brown. Thank you, Mr. Pinto.
    Mr. DeMarco is recognized for 5 minutes.

   STATEMENT OF EDWARD J. DEMARCO, PRESIDENT, HOUSING POLICY 
                            COUNCIL

    Mr. DeMarco. Very good. Thank you, Chairman Brown, Ranking 
Member Toomey, Members of the Committee. Thank you for inviting 
me here today.
    My written statement covers four broad topics: the 
pandemic, the racial ownership gap, housing supply, and housing 
finance reform.
    The housing finance system generally, and mortgage services 
in particular, responded effectively to the needs of homeowners 
who saw their income disrupted by business shutdowns. Servicers 
quickly established processes to offer homeowners mortgage 
payment forbearance, even as their own employees were 
converting to work from home. By mid-April, more than 2 million 
families had received forbearance, and by late May, that number 
was up to 5 million.
    Over the past year, nearly 7 million families have been on 
forbearance. More than half of these households, though, have 
resumed making their payments or paid off their mortgages. 
Today about 2.6 million households remain in forbearance, and 
most of them are approaching 1 year in forbearance.
    Recently, FHFA and the Government-insured loan programs 
indicated that forbearance could be extended up to 6 more 
months. Despite this tremendous response by homeowners and 
mortgage servicers, a lot of work remains. By this fall, 
homeowners will need to resume payments. For those whose 
incomes have been permanently lost or reduced due to the 
pandemic, servicers will use all the tools available to them to 
find an appropriate solution.
    Beyond the pandemic, we face a pressing challenge 
addressing the racial gap in home ownership, and I would like 
to thank my fellow panelists for all their thoughtful comments 
on this already.
    While this is a challenging priority, it is also an 
opportunity. It is an opportunity to think differently about 
the most effective ways to promote sustainable home ownership 
for individuals and families who have the means to own a home 
but have been unable to realize that dream. HPC encourages more 
focus on downpayment assistance to give homebuyers some amount 
of equity in the property or that create rainy-day reserves to 
address future needs. Homebuyer counseling and education before 
starting the home purchase process would also be a big assist 
to many families. Since the long-term public policy goal is 
wealth building, we should focus on building and preserving 
homeowner equity.
    My written statement also touched on the following points:
    First, any discussion of broadening home ownership 
opportunities should include FHA.
    Second, a critical factor to consider when pondering new 
approaches to expand home ownership opportunities is the 
changing characteristics of household income. It is becoming 
more volatile.
    Third, we should not measure success simply by observing 
positive changes in home ownership rates. Any such gains must 
be sustainable through the economic cycle.
    One key element in meeting both the racial ownership gap 
and the more general challenges of affordable housing is this: 
We need to build more housing. The lack of supply is both a 
rental and an ownership challenges. The barriers are well 
known, if difficult to surmount. Land use restrictions, zoning 
laws, building codes, and other requirements often slow or 
preclude home construction, particularly of more affordable 
dwellings. Beyond all these concerns, we cannot lose sight of a 
huge challenge that has been with us now for more than a dozen 
years: housing finance reform.
    The good news is that there is broad agreement on the 
principles of reform, and HPC welcomes the latest contribution 
yesterday from Senator Toomey. In 2013, Senators Corker and 
Warner identified the basic policy compromise that remains the 
foundation for bipartisan reform: restore reliance on 
meaningful private capital to bear mortgage credit risk, 
backstop the system with a Federal guarantee to ensure deep 
liquidity in all markets, and charge fees both for that 
Government backstop and to fund affordable housing needs.
    The 10 basis points affordable housing fee they proposed 
became part of virtually every reform bill since. Over the past 
10 years, such a fee could have raised over $30 billion for 
affordable housing. Think of the opportunity cost of our 
failure to act. We still have significant taxpayer exposure and 
systemic risk, and we missed the opportunity to expand funding 
to support affordable housing and housing supply.
    Thank you for inviting me today.
    Chairman Brown. Thank you, Mr. DeMarco.
    The questioning will begin with Senator Ossoff from 
Georgia. He will be recognized for 5 minutes.
    Senator Ossoff. Thank you, Mr. Chairman, for convening this 
hearing and for your flexibility with my schedule. Thank you to 
our panel.
    I would note, Mr. Chairman, that when the Chair of the 
Federal Reserve recently testified before this Committee, he 
noted that well-targeted fiscal policy is a more effective way 
of relieving economic distress and relieving poverty than loose 
monetary policy, and, accordingly, the American Rescue Plan 
includes not just very significant cash relief for working- and 
middle-class families, more than $12,000 between tax credits 
and stimulus checks for a typical working-class family of four, 
but, also, mortgage assistance, housing vouchers, rental 
assistance that people need during this crisis. And I think 
these and other provisions help explain why there is 
overwhelming bipartisan support for this stimulus bill. And I 
suggests that, moving forward, we should think about 
bipartisanship as a measure of the breadth of public support, 
whatever politicians in Washington may view, and three-quarters 
of Americans support this bill.
    I want to ask you, Ms. Bailey, about the housing vouchers 
included in the American Rescue Plan. In my discussions with 
local housing authorities, I have heard that these are highly 
effective at helping lower-income households afford housing 
near good schools and good jobs.
    In your view, during this pandemic, during this crisis, 
should HUD allocate those new vouchers that Congress just 
authorized to the housing authorities that are serving 
communities with the most acute housing crises rather than just 
distributing them according to population?
    Ms. Bailey. Thank you so much. One of the lessons of the 
Great Recession is that we need to have targeted relief, and 
that that relief must reach the hardest-hit communities. So 
anything that we do must really get to those socially and 
economically disadvantaged communities to make sure we do not 
miss them this time.
    I would pause and turn it over to Ms. Yentel so that she 
can chime in on this answer, but I also want to thank you and I 
want to thank this entire Committee for the great work that 
Congress just did in passing the additional $10 billion to help 
struggling homeowners. Without that support in the home 
ownership Assistance Fund, we would not have an ability to 
really help consumers who are nearing a wave of foreclosures.
    So I will stop there and turn it over to Ms. Yentel.
    Senator Ossoff. And thank you so much. And, Ms. Yentel, I 
may come to you in just a moment. Ms. Bailey, I appreciate that 
answer as we consider how to advocate that HUD proceed. But I 
have a question for you, Mr. Herbert, if I might, and 
considering the affordable housing crisis we have had in 
Georgia, cities like Atlanta, for example, predated this 
pandemic, the dynamic of gentrification whereby Black 
communities deeply rooted in the urban core of Atlanta, 
Georgia, and cities like them have been displaced as rapid 
economic growth has driven up rent and property taxes.
    Just going back to Econ. 101, Mr. Herbert, housing is 
unaffordable in part because demand is outstripped supply. So 
how can Congress reduce impediments to density and support a 
sustainable expansion of housing supply, especially in those 
urban environments where gentrification is displacing Black 
residents?
    Mr. Herbert. Thank you, Senator Ossoff, for the question. 
It is absolutely the case that land use controls are a State 
and local purview, so it does put the Federal Government in a 
bit of a bind in how it can control that. But the Federal 
Government does have the power of the purse, so one method I 
would suggest is, looking at investments in housing and 
investments in infrastructure, that the availability of that 
funding be tied to evidence that localities and States are 
allowing for density of housing and communities where it is 
needed, communities of opportunity, areas near transit.
    Certainly there are other ways in which the regulatory 
authority of the Federal Government could also be used to 
incentivize States to reduce these barriers to make it possible 
to build more affordable housing where it is needed.
    Senator Ossoff. Thank you, Mr. Herbert, and a follow- up 
there. I mentioned that Chairman Powell had noted in a recent 
discussion before this Committee that fiscal measures are a 
superior way of relieving poverty than monetary expansion. On 
the subject of monetary policy, I noted with interest that New 
Zealand's Prime Minister, Jacinda Ardern, recently announced 
she would instruct New Zealand's central bank to target home 
price stability as part of the central bank's mandate. 
Interestingly, New Zealand was the first country in the world 
to order its central bank to target consumer prices in 1989.
    Since this Committee has jurisdiction over the Federal 
Reserve System, I would be curious for your reaction, Mr. 
Herbert, to that New Zealand policy initiative?
    Mr. Herbert. Well, certainly runaway house prices are a 
challenge for affordability and do damage both in the near term 
in terms of people being priced out of homes and in the long 
term. I think it is challenging given that the interest rate is 
also being used to support the economy, to know how you can 
thread the needle between providing the interest rate boost 
that will provide that needed boost to the economy, at the same 
time also providing a boost to home prices.
    So I think while it is a worthy goal, I am not sure how to 
square that circle myself.
    Senator Ossoff. Thank you, Mr. Herbert. Well, perhaps it is 
by utilizing fiscal policy more on the expansion side. To be 
continued.
    And, Mr. Chairman, thank you for your indulgence and 
recognition.
    Chairman Brown. Thank you, Senator Ossoff.
    Ranking Member Senator Toomey is recognized for 5 minutes.
    Senator Toomey. Thank you, Mr. Chairman. You know, when we 
think about the state of housing, I do think it is important to 
think about housing prices compared to other economic 
fundamentals.
    Mr. Pinto, you addressed this. I just want to make sure we 
have got this distilled down to its essence here.
    First, let me say, isn't it true that in recent years 
housing prices have increased faster than income in many 
markets? Mr. Pinto, are you there?
    Mr. Pinto. Yes.
    Senator Toomey. Can you hear me?
    Mr. Pinto. Yes, that is true, Senator.
    Senator Toomey. OK. And is it also true that home prices 
just cannot rise faster than personal income indefinitely? That 
is not sustainable. Is that right?
    Mr. Pinto. That is also correct. It is not sustainable.
    Senator Toomey. Right. So since that is what has been going 
on for some time, does it follow that at some point in the 
foreseeable future housing prices are going to have to converge 
back toward income and other fundamentals? There is going to 
have to be a return to a convergence there, right?
    Mr. Pinto. That is my opinion, yes.
    Senator Toomey. OK. Dr. DeMarco, Mr. Pinto has confirmed 
that, to put it briefly, the housing market, at least in some 
places, is overheated. That is my term, but I think that is 
true. My question for you: Does this current state of the 
housing market reinforce the case for GSE reform, or does it 
weaken the case? What is your sense?
    Mr. DeMarco. I think the case is there today. It was there 
yesterday, and I believe it really needs to be dealt with now. 
There are a number of things affecting market conditions now 
that would be improved with housing finance reform.
    Senator Toomey. So yesterday I released principles for 
housing finance reform, and you alluded to them. I do want to 
reiterate that I look forward to working with the Chairman, my 
colleagues on this Committee, and the administration to try to 
move the ball forward on that.
    Let me ask you this, Dr. DeMarco, because I know you have 
done a lot of work in this space. The principles that I 
released yesterday include reforms that are meant to preserve 
access to the 30-year mortgage, increase the role of private 
capital, protect taxpayers against future bailouts. Are all of 
these possible in combination, or are they mutually exclusive?
    Mr. DeMarco. I believe they are quite possible, Senator, 
and I believe there have been a number of reform proposals that 
have aligned with the sort of principles that you put out, that 
Chairman Brown put out, and I believe that housing finance 
reform can do those things.
    Senator Toomey. And despite the fact that the economy has 
not fully recovered from last year's shutdowns, you believe 
that now is as good a time as any to begin this process. Is 
that a fair statement?
    Mr. DeMarco. It is, Senator. It is going to take a number 
of years to do this, and there is no reason to be delaying. We 
have been delaying for 12 years.
    Senator Toomey. And my last question, then, and I think I 
am going to run out of time, but if we were to go down this 
road in a bipartisan fashion, we could achieve something very 
close to the problems that, as you point out, have been 
discussed for some period of time. Could you discuss some of 
the advantages that people would find, some of the advantages 
for taxpayers, for homeowners, for future homeowners? What is 
your sense of some of the advantages of these reforms?
    Mr. DeMarco. I think reform can bring greater competition 
to the housing market, and that competition would spur greater 
innovation. All of the witnesses today have talked about some 
of the challenges for the racial ownership gap and so forth, 
and I believe that more innovation would really help. It would 
also lead to a reduction in systemic risk. Today we have got a 
lot of systemic risk by concentrating risk, you know, on the 
backs of the taxpayer through these Government-backed entities, 
and I believe housing finance reform can disseminate that risk 
through the system, which would lower risk to the whole 
financial system.
    Senator Toomey. Thank you, Dr. DeMarco.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you. Senator Reed is back, but I 
promised Senator Smith, because I did not know if Senator Reed 
was going to get back in time. Senator Smith is recognized for 
5 minutes and then back to you, Jack, if that is OK.
    Senator Smith. OK.
    Chairman Brown. Sorry about this.
    Senator Smith. Thank you, Chair Brown, and thank you, 
Senator Reed. I appreciate that.
    Chair Brown and Ranking Member Toomey, I really, really 
appreciate this conversation and the vital importance of 
addressing the underlying fundamental challenges that we have 
in the housing system in this country. And while I certainly 
agree that there is a need for us to look at what we do with 
GSE reform, I would just like to point out that the challenges 
that we have are really systemic and have existed for a long, 
long time.
    This is what it looks like in Minnesota. In rural areas, 
small-town areas, big cities, the housing market is not 
working, and it especially is not working for working people. I 
hear this from mayors. I hear this from business owners who 
cannot find people to work in their companies because there is 
no affordable place for them to live. I hear about this from 
college presidents and students. It was a challenge before 
COVID, and now, of course, the systemic inequities in our 
system have just been made so much worse.
    So I would like to start with the question of home 
ownership, and, Ms. Bailey, I am going to come to you on this. 
One of the issues that I am very interested in addressing on 
this Committee is the persistent gap in home ownership between 
white households and households of color. In my home State of 
Minnesota, we have one of the largest home ownership gaps in 
the whole country; 77 percent of white households in Minnesota 
own their own home, but only 24 percent of Black households own 
their own home.
    So the question is: How do we fix this? I think we know a 
lot of this has happened. It is a combination of federally 
sanctioned redlining and unequal access to investments in 
infrastructure and discrimination in the housing service, the 
financial service industry. But what do we do to fix this?
    I want to ask you about this. So Minnesota Housing Agency, 
our housing finance agency, has run an enhanced downpayment 
assistance program that has reduced barriers to home ownership 
for people of color. In the first few years, 68 percent of the 
borrowers who received this assistance were households of 
color, highly effective.
    Ms. Bailey, can you just talk a little bit about how 
strategies like this can help to reduce disparities in home 
ownership and what else we ought to be considering as we think 
about this systemic challenge?
    Ms. Bailey. Thank you for the question. Those are exactly 
the type of strategies that we should consider. We know that 
targeting downpayment assistance can go a long way in bringing 
in underserved communities into home ownership. We also know 
that if we target this resource to first-generation homebuyers, 
we really are going to get those communities of color that have 
that history of underservice.
    Another thing that we should really consider doing is using 
the Equal Credit Opportunity Act's special purpose credit 
programs. We often think about our fair lending laws as things 
that are penalties, but here we have a tool that we are not 
using that could really help us target individual solutions for 
specific financial institutions to really reach the consumers 
that they are underserving, that really create them in such a 
way that we could actually grow home ownership by millions of 
people and really generate the overall economic economy in 
localities all across the country.
    Senator Smith. So powerful, and it also allows us to really 
do something systemic to address the wealth gap that we have in 
this country.
    Mr. Herbert, I would like to follow up on some of your 
comments. One of the challenges that we have in Minnesota and I 
know we have in other parts of the country is a real shortage 
of affordable housing, workforce housing, as well as, really, 
the whole gamut of housing in rural communities. I am excited 
to be the new Chair of the Housing Subcommittee, and Senator 
Rounds is my Ranking Member. We will be working together. We 
are both quite interested in addressing some of these rural 
housing needs.
    So could you talk a little bit about what the barriers are 
to building new workforce housing in rural communities and what 
we should do to be addressing this challenge?
    Mr. Herbert. Thank you, Senator. You know, I think the 
challenges facing rural communities are quite similar to urban 
areas in the sense that housing costs have outpaced incomes. 
And so certainly if we are going to build workforce housing for 
some of our poorest residents, we are going to need to think 
about subsidy systems.
    One of the challenges our rural communities face is that 
our current delivery mechanisms, primarily the low- income 
housing tax credit, end up requiring a certain scale of 
investment in order to make those deals work because of the 
huge complexity of them. So we need to think about other 
channels, I think, that are more effective at reaching rural 
communities. We have a number of programs through the USDA and 
have the Rural Housing Service that have been effective. I 
think it is more of a question of putting more resources 
through some of those channels to reach these communities than 
we have been doing in recent years.
    Senator Smith. Thank you so much for that. I could not 
agree more. I think about communities like Thief River Falls in 
northwestern Minnesota where Digi-Key, a very important 
employer, is literally struggling to fill the jobs that they 
have because they cannot find places for people to live. It 
strikes me that if we really want a housing system that works 
for working families, there are some specific problems that we 
can solve, and I think that you all have done a good job of 
laying out what some of those challenges are.
    So thank you very much, Mr. Chair. I will yield back.
    Senator Reed. [presiding]. Thank you very much.
    Normally I would recognize a Republican member to go back 
and forth, but I am not aware of who is on camera or ready to 
go on camera, so I will go ahead and take my questions, and 
then hopefully be given a response as to who is on camera.
    So let me start with Ms. Yentel, if I may. Ms. Yentel, last 
Congress we appropriated more than $46 billion in emergency 
rental assistance. States are working hard to spend it. Can you 
please tell us what the resources will mean for the families 
that you represent for the National Low Income Housing 
Coalition? Who will be helped and how?
    Ms. Yentel. Yes, thank you for the question, Senator Reed. 
So there is an estimated about 10 million renter households who 
during the pandemic have accrued about $50 billion in rent and 
utility arrears. So these emergency rental assistance dollars 
will be a tremendous relief to them and to the landlords, some 
of whom have also struggled to pay the bills.
    Throughout the pandemic many renters have had to make 
difficult tradeoffs to keep up with their bills, often having 
to forgo health care, school supplies, or food in order to keep 
their home. As a result, we have seen food pantry requests 
increase by 2,000 percent in some communities, and we have had 
as many as 30 million households say that they do not have 
enough to eat.
    So at the National Low Income Housing Coalition, we hear 
from dozens of people every day who are in this situation. They 
are struggling. They are hungry. They are homeless. Or they 
cannot sleep because they are so worried that they are going to 
be evicted and lose their homes.
    I included some of these stories in my written testimony 
that I hope you have an opportunity to review, stories from 
people like Stephanie in New Orleans who lives with her 
daughter and her infant granddaughter, and they owe about 
$7,000 in back rent and late fees from when she lost her job 
during the pandemic. She is terrified of having to go to a 
homeless shelter with her baby granddaughter if she loses her 
home. Her landlord is threatening to evict her, and she is on 
the waiting list, waiting for that emergency rental assistance 
to come through.
    Or Stacy, who is a 46-year-old woman with chronic health 
issues. She lives in Nevada. She is homeless with her adult son 
after he lost his job during the pandemic and was not able to 
access unemployment benefits. And before they were evicted, 
they had to pay a couple months' rent on their credit card. So 
now in addition to being homeless, they are also in debt, and 
they are desperate for help to get back into housing.
    So these families and millions more like them will get 
relief from this emergency rental assistance and from the funds 
that are going to local communities to help address the needs 
of people experiencing homelessness.
    Senator Reed. Thank you very much. And, Ms. Bailey and Dr. 
Herbert, as you know, the American Rescue Plan includes 
legislation that I initially introduced with a funding of $10 
billion, a homeowner assistance fund, to help keep families in 
their homes. Can you please discuss how homeowners have been 
impacted by COVID-19 and why these resources are necessary 
investments? Ms. Bailey, why don't you start?
    Ms. Bailey. Yes, thank you so much for the question. I 
would also like to point out another really great thing that 
your legislation did was provide support for housing counseling 
and also for fair housing initiatives, which is so critical as 
we see so many Asian American families increasingly 
experiencing discrimination during this time of COVID-19. So 
thank you so much for your leadership.
    So it is critically important because, even before COVID-
19, we knew that 40 percent of Americans did not have $400 to 
cover an unexpected expenses. Families were already on the 
verge. So we needed these resources so that we can do 
everything that we can to really keep hardest-hit families in 
their homes. Sadly, the hardest-hit funds from the last crisis 
actually came to communities of color well too late. We 
actually started to see our foreclosures happen in 2006. The 
market did not crash until 2008. So having these funds and 
explicitly the resources for the equitable targeting for 
communities that have been socially disadvantaged is going to 
be critical in making sure all communities have a chance at 
recovery.
    Senator Reed. Thank you.
    Dr. Herbert, please.
    Mr. Herbert. So I would just add to what Ms. Bailey said, 
which is, you know, right now the forbearance of support that 
has been provided through the Federal Government has been 
incredibly helpful. As Mr. DeMarco noted in his comments, 2.6 
million homeowners are still in those forbearance plans. So in 
many ways, you have been insulated, I think, from the impacts 
of this pandemic on homeowners because of that protection. But 
as we look forward to September, when the 18-month forbearance 
period will end, we have to worry about the fact that many of 
those homeowners will now have accumulated substantial deficit 
in payments. Black Knight estimates that about one in five 
homeowners will owe more on their homes with their mortgage 
debt and the accumulated arrears than their homes are worth. 
One out of three FHA homeowners are in that situation. And all 
of this presumes that homeowners will go back to the income 
they had before the pandemic, and we know that loss of jobs 
will persist. We know that many loved ones who supported the 
homes have also been lost to the pandemic.
    So as we look forward, dealing with these arrears and 
dealing with this permanent loss of income that will result is 
going to be important if we are going to sustain home 
ownership. I think one thing we learned from the last crisis is 
that if we do not sustain home ownership, the gap between 
whites and people of color in home ownership will only grow. 
And so this investment in making sure those homeowners are able 
to keep their homes and benefit from today's rising prices is 
critical.
    Senator Reed. Well, thank you very much, Dr. Herbert.
    Now, on behalf of Chairman Brown, let me recognize Senator 
Rounds.
    Senator Rounds. Thank you, Mr. Chairman.
    First of all, I would just like to say thank--I appreciate 
the fact that we are actually having this discussion today on 
housing. I have a real interest in rural housing, as Senator 
Smith has indicated, and one area that I want to at least look 
at with some particular focus is that with regard to affordable 
housing on Native American reservations. Tribal communities 
have many unique challenges from economic and housing 
standpoints that make them distinct from other rural areas.
    Ms. Yentel, where do you think Congress should focus its 
efforts when it comes to housing on tribal lands with all of 
its concerns, the fact that we have got low economic income to 
begin with, we have got real challenges with regard to the 
poverty that is there, and at the same time we have tribal 
trust lands which makes it even more difficult for someone to 
actually have land to build a house or put housing on?
    Ms. Yentel. Absolutely. Thank you, Senator Rounds, for the 
question. As you know very well, Native Americans in tribal 
areas face some of the worst and most acute housing needs in 
the country. They have such high poverty rates, low incomes, 
overcrowding, in some cases--in many cases there is a lack of 
plumbing, lack of heat, and very unique development issues. And 
despite this growing need for safe and decent homes on tribal 
lands, Federal investments in housing for Native Americans on 
reservations and off reservations has been underfunded for 
decades. And certainly centuries of structural racism that 
stripped land and wealth from Native Americans combined with 
ongoing discrimination today also result in Native Americans 
being dramatically overrepresented in the homeless population.
    Prepandemic, I had the privilege of visiting your State and 
going to Pine Ridge reservation with a member of the Oglala 
Sioux Tribe who is also a member of the National Low Income 
Housing Coalition, Pinky Clifford, and I saw firsthand just the 
tremendous overcrowding and poor housing conditions.
    So to meet the needs, Congress should expand the National 
Housing Trust Fund. Much of that fund can be used to develop 
and preserve affordable housing on tribal lands and for Native 
Americans in urban areas. And also in recent years, Congress, 
as you know, passed a Competitive Tribal Housing Program that 
went especially to tribes that have the greatest need and 
capacity to use those funds. This was a really important 
improvement and development, and we think that program should 
be continued and expanded.
    Senator Rounds. I know that some of the reservations in 
South Dakota have some of the greatest degrees of poverty any 
place in the Nation. One of the challenges that we find there 
is that their land is held in trust, and since it is held in 
trust, it is very difficult for them to be able to actually 
have the asset to begin with and to allow people to actually 
make a mortgage to them.
    We found the same problem when it came to VA loans where 
you have veterans coming back onto reservations, but they 
literally have a very difficult time getting set up to bust 
through that issue of the land that they are going to be using 
is tribal trust land. I look forward to working with different 
organizations to work our way through that.
    Mr. DeMarco, I would like to start with you on a question 
that I have, and then I would like a follow-up with Ms. Bailey 
and Mr. Pinto in terms of their quick thoughts on it.
    Late last year, FHFA finalized its capital rule, which 
seeks to increase the amount of capital that GSEs hold. I 
applaud steps that FHFA is taking to reduce the GSEs' leverage, 
but I am concerned about the capital rule's punitive treatment 
of credit risk transfer, or CRT. CRT can be an important tool 
used to offload and competitively price risk. And given that 
the capital rule demands that Fannie and Freddie raise capital 
that is several times greater than the largest IPO ever, it is 
important for the GSEs to have every tool in the toolbox 
available to manage that risk.
    My question for you, Mr. DeMarco, is: How much more 
difficult will it be for the GSEs to raise capital given the 
capital rule's treatment of CRT? And does the rule need to be 
revised? And then just as a quick follow-up for Ms. Bailey and 
Mr. Pinto, I understand that both you and your organizations 
have filed comment letters expressing concern about the 
treatment of CRT, and I would like any thoughts that you may 
have in my remaining time.
    Mr. DeMarco, would you begin, please?
    Mr. DeMarco. Certainly. Thank you, Senator. Look, I think 
FHFA did a nice job putting out a comprehensive capital 
framework and worked hard to align it with other regulated 
financial institutions. But a real weakness is exactly what you 
identified, and that is the treatment of credit risk transfer 
is such that it means that GSEs will have to build more capital 
in order to meet the capital requirements. It also means that 
we are going to be concentrating more risk on the GSEs because 
we are reducing the incentive to do CRT. CRT is an opportunity 
to really disperse risk across the market, and not giving it 
fair capital treatment reduces the probability that that 
happens.
    Senator Rounds. Thank you.
    Ms. Bailey.
    Ms. Bailey. Thank you for the question. Our concern is that 
the rule does not do enough to really distribute systemic risk 
broadly, which is the foundation of the housing finance system. 
So I would be happy to talk with you when we have a few more 
minutes in detail about all our details.
    Senator Rounds. Thank you.
    Mr. Pinto.
    Mr. Pinto. The concern that I have had with the credit risk 
transfers is that if there is a market meltdown at some point--
and we experienced that with the GSEs back in 2008-- the credit 
risk transfer market is going to disappear. And so just when--
while I would have put some [audio disruption] earlier, they 
would have the ability [no audio] future, and that is going to 
limit their ability at that point.
    Senator Rounds. Thank you.
    Thank you, Mr. Chairman. I believe my time has probably 
expired.
    Senator Reed. Thank you, Senator Rounds.
    And on behalf of the Chairman, Chairman Brown, let me 
recognize Senator Warren.
    Senator Warren. Thank you, Mr. Chairman, or Acting 
Chairman.
    So today millions of families are behind on their rent, 
millions of families who lost jobs during the pandemic, who had 
their pay reduced, or who lost a loved one.
    Now, we fought hard to make sure those families will have 
access to emergency rental assistance and protection from 
eviction. But the fear of not being able to make rent has been 
a daily reality for too many families since well before the 
COVID-19 pandemic. Rents are high because supply is low.
    Ms. Yentel, right now is there rental housing available for 
every family who needs it at a cost that they can afford?
    Ms. Yentel. No, Senator Warren, there is absolutely not. 
There is a pervasive and longstanding shortage of homes, 
affordable and available to the lowest-income renters, such 
that for every ten of the lowest-income renter households, 
there are fewer than four apartments that are affordable and 
available to them.
    Senator Warren. So, in other words, this is just Econ. 101. 
Finding adequate affordable housing is a challenge because we 
have a nationwide housing shortage. One problem with the supply 
has been Federal law.
    Ms. Yentel, why hasn't our country built more affordable 
places for people to live?
    Ms. Yentel. I would say that there are a few reasons. In 
the private market, certainly the local restrictive zoning 
inhibits the supply of apartments, and especially affordable 
apartments, and that drives up costs for everyone.
    For the lowest-income renters, there has been an ongoing 
underfunding of Federal investment in programs like the 
National Housing Trust Fund that could develop and preserve 
affordable apartments for the lowest-income renters. And for 
public housing, specifically the Faircloth amendment limits the 
total number of public housing units that can be built to 
levels that existed back in 1999. So it prohibits any increase 
of public housing above units that existed back then.
    Senator Warren. So every time we talk about putting a unit 
of new Federal housing on the market, we have to take a unit 
off, which means we have needlessly restricted the creation of 
affordable housing.
    So we are in a housing crisis. Is there any reason that we 
shouldn't repeal the Faircloth amendment?
    Ms. Yentel. No, there is no reason. And just to be clear, 
that prohibition is on public housing units alone.
    Senator Warren. Yes.
    Ms. Yentel. There is no reason, and repealing the Faircloth 
amendment is part of a comprehensive solution to the housing 
crisis, yes.
    Senator Warren. OK, good. So that is at least a part of 
addressing that shortage. We can repeal the cap on the number 
of federally funded housing units. In addition, we can build 
more housing.
    Now, President Biden has called for increasing the Housing 
Trust Fund, a fund dedicated to building, rehabilitating, 
preserving, and operating rental housing, and I have a bill on 
this ready to go. By adding nearly $45 billion every year for 
the next decade in the Housing Trust Fund and making other 
necessary investments, my bill would create more than 3 million 
new housing units.
    Ms. Yentel, let me ask you--that is how we build new 
housing, but let me ask one more quick question before we quit 
here, and that is about the condition of our existing stock of 
public housing. Is it in good shape?
    Ms. Yentel. So first to say we strongly support your bill 
to provide $45 billion from the Housing Trust Fund. That is 
just what we need. And for public housing, you know, some 
developments that have acquired resources to redevelop in 
recent years, they are in OK shape. Some are in good shape. But 
most of the public housing stock is not in good condition, and 
some of the public housing stock is really in deep disrepair. 
The housing stock is old, and decades of Federal investment by 
the Federal Government has resulted in today where we have an 
estimated $70 billion of capital repairs that are needed to 
stop the loss of units to obsolescence and decay and also to 
restore it to livable conditions for the people who live there 
today and to preserve it for future generations.
    Senator Warren. Yes, make an investment. You have got to 
take care of what we own.
    I just reintroduced a bill with Representative Nydia 
Velazquez to do exactly that, to invest $70 billion in 
addressing the repair backlog. It is not a mystery why we have 
an affordable housing crisis. Through decades of 
underinvestment and unnecessary restrictions, Congress has 
helped create this crisis. That means that Congress can help 
fix it by making serious investments in increasing the supply 
of affordable housing and expanding public housing for the 
first time in decades. We need to do this as soon as possible. 
Thank you very much for being here today.
    Thank you, Mr. Chairman.
    Senator Reed. Thank you, Senator Warren.
    We are in a complicated situation, so let me do this: If 
there are Republican members who are on, I would ask you to 
turn your camera on so that you can be recognized. And if we do 
not see that materialize very quickly, then I will just go down 
the roster of Republican members and see if we can get our next 
speaker.
    So I do not a Republican member on the screen, so Senator 
Shelby? Senator Crapo? Senator Scott of South Carolina? Senator 
Tillis? Senator Kennedy? Senator Hagerty? Senator Lummis? 
Senator Moran? Senator Cramer? Senator Daines?
    Having exhausted the Republican list, I shall now go to--
ah, Senator Menendez, you are recognized.
    Senator Menendez. Well, thank you. Thank you all.
    Ms. Bailey, New Jersey has some of the toughest housing 
challenges of any State in the country. A new report by Adams 
Solutions shows that of the 50 U.S. counties who housing 
markets are most vulnerable to the impact of the COVID 
pandemic, eight of them are in New Jersey. One of those is 
Essex County, home to the city of Newark, where nearly two-
thirds of renters are paying more than 30 percent of their 
income toward rent, according to a recent Rutgers University 
report.
    These and other statistics suggest that after the current 
moratorium ends, we might be facing an eviction and foreclosure 
wave even worse than what we saw in the Great Recession.
    The American Rescue Plan that Congress just passed includes 
one of my major priorities, $100 million in housing counseling 
funding that can help renters and homeowners avoid a worst-case 
scenario. What impact will this new housing counseling funding 
have on preventing evictions and foreclosures?
    Ms. Bailey. It will do a great deal, and thank you for the 
question. We have to be honest. Servicers are not housing 
counselors. We know that people who get pre- and post-housing 
counseling actually perform much better in home ownership. So 
the $100 million that you pushed for in the last bill will go a 
great way in really helping those communities get the kind of 
information that they need to really weather this economic 
calamity and be able to hold onto their homes. It is money that 
is definitely needed and money that will help us avoid that 
cliff of foreclosures that you talked about. It will just keep 
them far, far away.
    Senator Menendez. I appreciate that. The plan also requires 
at least 40 percent of housing counseling funding go to 
minority or low-income households. Do you believe this targeted 
funding can help ensure that the COVID economic recovery is a 
more equitable one than the 2008 crisis?
    Ms. Bailey. Indeed. As I stated earlier, foreclosures 
happened in Black and Latino communities in 2006, far sooner 
than any of the relief showed up. We also know that Black and 
Latino families were disproportionately steered into risky and 
toxic mortgage loans even when the data showed that they 
qualified for loans that were cheaper and more affordable. In 
fact, I believe there was a piece, a research piece that was 
published by the Wall Street Journal that showed that up to 80 
percent of those families actually qualified for mortgage loans 
that were much cheaper than the ones that they actually ended 
up receiving.
    As a result of people in our communities receiving these 
disproportionate levels of toxic and risky mortgages, we have 
seen a disproportionate amount of foreclosures, and we have 
seen communities really suffer from losing a whole trillion 
dollars of wealth as a result of those foreclosures being 
disproportionately in communities. So having these resources in 
the hands of housing counselors who actually are closest to the 
members of the communities, the people who are going to 
naturally get the first phone call for help, will go a long way 
in giving our community members access to people who can really 
help them weather this economic challenge and get the answers 
and solutions that they need.
    Senator Menendez. Thank you for that.
    As we consider ways to work out of the current crisis and 
ensure a sustainable and equitable recovery, we need to start 
thinking about how we coordinate housing and transit 
development so that our communities can improve economic 
resiliency, expand transportation and housing options, and 
promote job creation for all segments of our society.
    We had a great example of this after the last recession 
when--in my home State, we have something called the ``Hudson-
Bergen Light Rail System'' that came online to connect the 
North Jersey communities of Bayonne, Jersey City, Hoboken, 
Weehawken, Union City, North Bergen. That project revitalized 
the region and spurred new development and helped local 
businesses. It was a catalyst for economic growth and brought 
new jobs to the neighborhoods along the line.
    So I would like to ask Dr. Herbert, do you think this type 
of coordinated development is important when considering the 
various challenges and preferences, for example, seniors who 
may rely on transit for their independence, low-income [no 
audio] with transit that helps them get to work, and 
millennials, many of whom want to drive less and live in more 
walkable communities?
    Mr. Herbert. Absolutely, Senator, and thank you for the 
question. In particular, you mentioned seniors. The need to 
have accessible housing so that people who cannot drive can get 
access to services, amenities, and family and friends is 
critical. And certainly given the issues around climate change 
and the need to reduce our carbon footprint, having housing 
that is accessible to transit and tying development of our 
transit system to housing development is critically important.
    Earlier I mentioned the idea that, to the extent that we do 
invest in transit, if we can tie that to localities, having 
requirements about making density allowable in those 
communities in order to get access to the funding will go a 
long way to make sure housing is tied to transit.
    Senator Menendez. Well, thank you. I have legislation 
called ``Livable Communities,'' and that is exactly the concept 
behind it, and I look forward to exploring it with the Chairman 
and my colleagues on the Committee.
    Thank you, Mr. Chairman.
    Chairman Brown [presiding]. Thank you, Senator Menendez. I 
wanted to say thank you to Senator Reed for taking time during 
this.
    I have not asked my questions yet. I am going to go last. 
Senator Tillis is next and then Senator Tester. Senator Tillis, 
you are recognized for 5 minutes. The microphone is not on.
    [Pause.]
    Chairman Brown. Senator Tillis, your microphone is not 
working or you have been muted the whole time.
    Want to try again? Still cannot hear you.
    Cameron, do you want to work on this? And I will go on to 
Senator Tester. Senator Tester from Montana is recognized for 5 
minutes.
    Senator Tester. Thank you, Mr. Chairman. And thank you, Tom 
Tillis.
    So this is a question for the whole panel, and I just want 
to know what your view of housing is in rural America and if it 
is any different in rural America than it is in urban America. 
And you can just start in the order that you testified.
    Mr. Herbert. Senator Tester, I will go first as the first 
person to speak. You know, I would say that the issues in rural 
America are very similar in many respects to urban America. 
There are rural communities that are impoverished. There are 
rural communities that are thriving. There are rural 
communities that are gentrifying. And so as we think about 
rural areas, I think we do not think about separate housing 
problems but very similar housing problems.
    We need to expand access to rental housing. As we talked 
earlier with the Senator from Minnesota, there is a need for 
workforce rental housing in rural areas, and many of our 
Federal delivery systems do not work well on a smaller scale.
    There is also a need for affordable home ownership. There 
is a need for investment in housing that is of low quality, 
that we need to increase the quality of housing in rural areas.
    So as much as I think there are some unique aspects of 
rural areas, in many respects the challenges and issues are 
similar, given the diversity of rural areas.
    Senator Tester. Does anybody have anything to add to that 
or disagree with what he said?
    Mr. Pinto. Senator Tester----
    Ms. Bailey. The thing that I would add--and thank you for 
the question--is that we have got to make sure when we are 
reaching out to rural communities we are doing so in a way that 
they can actually get the information that they need. 
Oftentimes when we think about them, we do not understand that 
they have all been limited to access, so we propose these 
solutions and we put the information out and we use the 
Internet, but we might be missing people who do not have that 
access. So anything that we do needs to make sure we can 
communicate with those communities.
    And then, finally, there are many families of color that 
are in rural communities all over our Nation, and oftentimes we 
do not talk about that increased diversity there, and that is a 
really critical component of all the solutions that we have to 
have across rural communities.
    Senator Tester. Thank you.
    Mr. Pinto, you were going to say something?
    Mr. Pinto. Yes, I agree with Chris that the challenges are 
very similar in rural communities and urban communities. I 
would say that some sensible steps at the local level and at 
the State level would be to increase supply. There has been a 
lot of discussion about the limitations of zoning and the 
history of that, to increase supply, reduce income 
stratification by legalizing two-, three-, and four-unit 
structures in single-family areas, single-family attached 
housing in single-family neighborhoods; increased density for 
single-family and multi-family zoning. A lot of that is not 
applicable in true rural areas, but the small towns have plenty 
of areas where there is more density that that can be taken 
advantage of, and by right zoning, just allow the marketplace--
mobile homes to be used, manufactured housing. These are all 
things that could add tremendously to the supply.
    I would add that what is going on with the work-from-home 
phenomenon is rural communities, we are seeing demand has 
increased quite a bit in rural communities. So rural 
communities are going to need more supply than they have in the 
past 10 or 15 years.
    Senator Tester. So anybody want to add to the supply issue 
very quickly? Because that is an important issue also. Anybody 
want to add to that?
    Ms. Yentel. Yes, I would add quickly that, in addition to 
what was said, just to recognize that the shortage of homes for 
the lowest-income people is pervasive, whether it is rural, 
suburban, or urban areas. There is no community that has a 
sufficient number of homes affordable to its lowest-income 
renters. So, again, expanding the National Housing Trust Fund 
to meet that need, and also to point out how essential 
preservation is everywhere and in rural areas. Preserving the 
Section 515 loan program homes where, you know, the people who 
live within them earn maybe $13,000 a year, and there is very 
little housing stock in their communities where they could go 
if their homes expire, the affordability expires. So the 
preservation of those homes is critical as well.
    Senator Tester. I am just going to--Mr. DeMarco, go ahead.
    Mr. DeMarco. Just very briefly, Senator. To add to 
everything my colleagues said, there are two things that have 
not really come up. One is rural areas really have a 
predominance of low-balance loans, and there are some different 
challenges with low-balance lending. I think if we could 
encourage the CFPB, other Government agencies, to develop loan 
products or accommodations to help lenders with low-balance 
loans be able to sell them. There are also certain appraisal 
challenges, as you well know, that need some attention.
    Senator Tester. I am going to leave it at that because 
there are only 20 seconds left. But I will say I want to thank 
all the witnesses for being here today. I can tell you that the 
housing challenges in a State like Montana--I do not think they 
are any different than anywhere else--have really created some 
economic problems where there is no workforce housing, there is 
no affordable housing, businesses cannot expand. That is a real 
challenge.
    Thank you all for being here.
    Chairman Brown. Thank you, Senator Tester.
    Senator Tillis is recognized for 5 minutes. He will be 
followed by Senator Warner.
    Senator Tillis. Mr. Chairman, can you hear me?
    Chairman Brown. Yes, perfectly now. Thank you.
    Senator Tillis. I think Senator Tester has perfected some 
way of muting me at a perfect time so he can skip ahead of me, 
but I am glad I am back.
    Just a real quick question for all the witnesses. I am 
trying to get my head around disparity in estimates on back 
rent and utilities. I know Moody's had the report out at $57 
billion. The National Multi-Family Housing Council rental 
tracker has an estimate, and the National Council of State 
Housing Agencies is about half of Moody's. And then the 
Philadelphia Reserve put the number at a fraction of either of 
those two estimates.
    So, in your opinion, what sort of metrics should we be 
using to accurately depict the back rent, back expenses 
situation? And I would also be curious in your answer if you 
can tell me with respect to the COVID response, separate from 
the housing issue, if you think Congress' actions up to this 
point have been adequate? We can start with Mr. Pinto and go 
down the line.
    Mr. Pinto. Well, thank you for that question, Senator 
Tillis. Let me respond to your second question in particular. 
The initial actions that Congress took in the CARES Act would 
then be picked up by the Federal agencies-- FHA, VA, Rural 
Housing, Ginnie Mae, and eventually Fannie and Freddie--put in 
place the forbearance program that was authorized by Congress, 
put in a program that focused on how to provide relief to the 
homeowners, and provided an exit plan for many of those 
homeowners by allowing those amounts that were forborne to be 
added at the end of forbearance to their balances without 
interest.
    And so all those steps that were taken very rapidly in 
March and April really saved us from a crisis, and we have been 
able to take advantage of that forward thinking since that 
time.
    Ms. Bailey. Thank you for the question. One of the things 
that I would add is the point that we have to make sure that 
for privately backed mortgages, that those protections extend 
there. And what would be great would be to see the direction 
that private lenders actually follow those same protections. 
Doing so will help us keep the kind of uniformity that 
consumers need who are struggling under the weight of potential 
foreclosure.
    Senator Tillis. And to go through the responses, I am 
trying to get my head around how we could have vastly different 
estimates. Are they measuring the same challenge? In any of 
your opinions, does one of the studies--is there a metric that 
we should follow? Or is there something else we can to balance 
out what are disparate estimates and what the real need is?
    Ms. Yentel. So I think it is very difficult to have a 
concrete estimate of rent arrears. There is no way to measure 
that with certainty. All of the estimates that you named I 
think have different pros and cons. I believe the $57 billion 
estimate of rent and utility arrears that accrued during the 
pandemic is likely the most accurate. One measure of that is 
seeing programs for emergency rental assistance that opened 
with their initial allocation from December's $25 billion of 
emergency rental assistance, that very quickly after opening, 
they had to close their programs and no longer accept 
applications because they were overwhelmed with need.
    What we do know right now is that Congress has appropriated 
$46.5 billion for emergency rental assistance, and our work now 
I think is to ensure that those funds get out as quickly as 
possible and to the people who have the greatest needs, the 
lowest-income and most marginalized people. And certainly we 
and the Federal Government and others will be tracking very 
carefully as we go whether and how those rental assistance 
dollars are meeting the need or whether continued need exists. 
Certainly it will exist for the longer-term stability of these 
low-income renters who struggled to pay the rent even before 
the pandemic.
    Mr. Herbert. And if I just might add, Senator, I think the 
challenge is that we have good information about different 
pieces of the market; we do not have information about the 
whole market. So when we look at professionally managed 
apartment associations who have good access to data, they are 
also getting information on the most well-to-do renters.
    The other thing I think we have to bear in mind is that 
when we are looking at missed rent payments and how far the 
renters are is that renters have been doing all they can to tap 
every resource possible. So if they look at how much maybe rent 
has been collected, that does not take into account that they 
have borrowed that from friends, they took it from retirement 
savings, they got it from other resources that ultimately have 
to be paid back.
    And so it is a complicated measure in many respects, but I 
think the estimate that puts this at the upper end is really 
reflecting the financial hardship that has been imposed on 
renters from their loss of income.
    Mr. DeMarco. If I may just add with regard to the other 
part of your question, I do, I think Congress has done a great 
job with the CARES Act, and I think that servicers, Government 
agencies, and so forth have also done their part to see that it 
has been implemented well. And with regard to loans not covered 
by the CARES Act, private lenders are actually providing that 
same kind of forbearance, the same assistance to borrowers that 
are not in Government-backed loans, and I think that is a 
credit as well.
    Senator Tillis. Thank you, Mr. Chairman.
    Chairman Brown. I just lost you. Thank you, Senator Tillis.
    Senator Warner from Virginia is recognized for 5 minutes.
    Senator Warner. Thank you, Mr. Chairman.
    I think we all agree with need to expand the housing market 
without increasing credit risk or, frankly, inflating home 
prices. I also think we realize--and other experts on this 
panel are very well aware of this--that in many ways when we 
look at the wealth gap in this country, 10:1 white families 
over Black families, a lot of that is due to the failure of 
families of color to be able to afford home ownership.
    So working with a group of experts, is have been working on 
a proposal that would help first-generation homeowners by 
offering shorter-term mortgages, literally 20- year mortgages 
rather than 30-year mortgages, but by decreasing and a little 
bit of subsidy on these already low interest rates, you would 
still be making payments approximately the same as you would on 
a 30-year loan. But the benefit here is because of the equity 
accumulation, these families would be accumulating equity in 
these homes at a 2:1 rate over a 30-year loan. This really does 
subsidize wealth building without driving up home prices, and 
in the current low interest rate environment, I think it is a 
proposal, Mr. Chairman, that really warrants some review.
    Mr. Pinto, would you agree that investing in equity rather 
than debt to help close the ownership gap might be a proposal 
worth looking at?
    Mr. Pinto. Absolutely, Senator. I mentioned that in my 
remarks. I believe that we do, as you indicated, need to 
subsidize wealth building and stop subsidizing debt, more and 
more debt. This would go a long way to building generational 
wealth. It would go a long way toward providing the cushions 
that homeowners need. I mentioned that they do not have the 
ability to withstand the ups and downs of the market. This will 
be a very large equity cushion. At the end of 5 years--and it 
happens just about every year along the way--you end up with 
twice as much equity at the end of 5 years with a 20-year loan 
as a 30- year loan. So I endorse it.
    Senator Warner. Mr. DeMarco, do you agree with Mr. Pinto?
    Mr. DeMarco. I do, Senator, and I agree with what you are 
proposing. The other thing I would add that is really well 
constructed about what you are doing is it is structured in a 
way not to bring a new subsidy into the market at a time in 
which house prices are already inflated, and that is a very 
thoughtful feature, as well as the focus on supporting equity 
building as opposed to supporting families becoming highly 
levered.
    Senator Warner. And, Dr. Herbert, if we do this, there 
would be some Government involvement in subsidizing the 
interest rate on these loans to bring it down so that the 
equivalent--that you would be making the same payment you would 
make on a 30-year basis, but it would be on a 20-year loan. And 
the truth is if we--I think the idea of limiting this to first-
generation homebuyers really gets at some of the racial equity 
issues that exist in our country.
    Dr. Herbert, isn't this issue in terms of home ownership 
one of the big drivers of the racial wealth gap? And I would 
love to have Ms. Bailey and Ms. Yentel in the last minute and 
45 weigh in on that subject as well.
    Mr. Herbert. Senator, absolutely. The disparity in wealth 
you mentioned tend to run between whites and Black households 
is largely due to differences in home ownership, and the 
targeting of a program to first-generation homeowners would be 
an effective way of ensuring that people of color who have been 
left out of the opportunity to own a home for generations have 
that opportunity.
    One of the things that is often overlooked is that people 
like myself, when they buy a home, often turn to our parents 
who benefited from home ownership as a way to pay for that 
downpayment and get over the hump. People of color do not have 
that opportunity, and so targeting first-generation homeowners 
in particular would be a great way to target those benefits and 
also to make sure that the program is at a scale that is 
benefiting people who most want to help and not inflating the 
market. So I think it is a well-designed program.
    Senator Warner. Ms. Bailey and Ms. Yentel, would you like 
to make comments?
    Ms. Bailey. Thank you. I actually agree with the targeting 
of first-generation homebuyers as a specific way to really get 
at those socially and economically underserved communities 
that, as has been explained already, struggle with 
intergenerational transfers of wealth, which has allowed people 
to really save for a downpayment, along with broader societal 
discrimination where we see inequity in pay. So I am looking 
forward to seeing your bill and just working with it and 
working through it with you.
    Senator Warner. Thank you so much.
    Ms. Yentel, please. I have had a good streak going. You get 
the last 20 seconds.
    Ms. Yentel. Yeah, I would echo and reinforce that certainly 
it was decades of [audio interruption] in housing and 
transportation policies that created this yawning wealth gap 
that exists today, and in large part it is intentional housing 
policies that can help bridge that gap, and policies like yours 
sound like the kind of creative approach that we need to move 
forward.
    Senator Warner. Thank you, Mr. Chairman. I look forward to 
sharing this with the whole Committee. Thank you so much.
    Chairman Brown. Thanks, as do we.
    The Senator from Montana, Senator Daines, is recognized for 
5 minutes.
    Senator Daines. Thank you, Chairman.
    I want to jump in on concerns I am hearing across our State 
in Montana, and that is conversations with realtors, home 
builders, developers, they agree there is simply not enough 
inventory to keep pace with demand, and we are seeing some 
significant, in fact, historical increases in property values 
and homes.
    I grew up the son of a contractor. My dad founded the 
Southwest Home Builder Association in Montana, in fact, and so 
my summers were spent on construction crews. So I have been 
watching this for many, many years, since the early 1970s, in 
fact. But we all remember our economics classes in high school. 
When demand outpaces supply, prices rise, and right now housing 
in many parts around our State frankly is not even affordable 
for most.
    As you look at COVID-19 forbearance programs, they have 
been a lifeline for millions of families. House price 
appreciation has helped homeowners build equity in their homes 
these past years. The problem is when somebody decides to sell 
their house and move somewhere else, the question is: What do 
you move next to in terms of replacing it, even though you get 
a big value for what you might sell your current home for.
    I am pleased to see the number of people in forbearance 
totally decrease, but I am worrying about some of these trends 
we are seeing in the housing market. According, in fact, to the 
Federal House Finance Agency, home prices rose nearly 11 
percent between the fourth quarter of 2019 and 2020 nationwide. 
So if we look at our price appreciation in Montana, it was 15.5 
percent, the second-fastest in the Nation, by the way. And it 
comes back to, again, this fundamental issue of supply not 
keeping pace with demand.
    Mr. Pinto, are you concerned about this rapid rate of house 
price appreciation we are seeing in our country?
    Mr. Pinto. Absolutely, Senator, and thank you for that 
question. I have been tracking this for many years. The boon 
started in the beginning of 2012, and it has continued 
unabated. But it accelerated tremendously last year starting in 
May, and now prices are going up, as you indicated, 11 percent 
year over year. We think when the April data come out for the 
transactions that end up closing in April, we will be seeing 
house prices up nationwide about 13 or 14 percent year over 
year.
    This is going to create a tremendous problem in the future. 
As was mentioned earlier, real estate cycles are cyclical, and 
we will get back to some level of--return to some sustainable 
level, and that is going to require some adjustment in prices. 
It will not be anything, in my opinion, close to what happened 
in 2007 and 2008 and 2009 and 2010. However, it will hurt when 
it occurs, and it will hurt low-income and minority buyers the 
most because, as I mentioned earlier, they have the least 
ability to withstand these fluctuations in home prices.
    Senator Daines. So, you know, the age-old question-- and I 
want to get your opinion on this--is: How do we best address 
the issue of housing supply while continuing to responsibly 
increase home ownership?
    Mr. Pinto. I think it comes down to reversing what the 
Federal Government put in place back in 1921, which is this 
zoning structure that was specifically designed, believe it or 
not, to raise house prices, to make them too expensive for 
minorities and ethnic groups. And that system is still in place 
in the United States, and what is suggested is if you start 
building two-unit, three-unit, four-unit structures, some 
attached structures--I call it ``light-touch density''--if you 
allow some higher density in marketplaces, I personally tried 
to build a workforce housing development without subsidies in 
the Southeast, and I ended up with a $100,000 cost all in, but 
the restrictions that applied in terms of fees and other things 
per unit is what made it uneconomical, and, therefore, I had to 
abandon it even though I invested a substantial amount of my 
own money. I have tried to do this. It is possible to do, but 
you cannot do it with the local communities putting roadblock 
after roadblock in the way.
    Senator Daines. Thank you. I have got a question for Mr. 
DeMarco, and this is really looking more at the rental market, 
because as we are starting to see home appreciation and the 
costs going up, of course, it is taking a lot of folks out of 
the ability to buy a home and look at renting if they might 
otherwise want to be renting--or buying, I should say. In fact, 
one of the jokes in my hometown of Bozeman, where I went to 
kindergarten to college, Bozeman, Montana, it is being called 
``Boz-Angeles,'' ``Boze-Man Cisco.'' I mean, we are seeing this 
huge influx. We are one of the fastest-growing micropolitans in 
America, the No. 1, in fact, the last few years. And so it is 
putting a lot of pressure on the market, and it is raising 
rents as well. In fact, there are places, looking at the rental 
market there, that it looks more like a D.C. market than a 
Montana market.
    So my question, Mr. DeMarco, is: What market-conscious test 
might be taken to ease pressure on renters? And how does the 
limited supply of homes factor in this equation?
    Mr. DeMarco. Well, the first basic is to bring more supply, 
and Ed Pinto, what he just went through with regard to some of 
the barriers in building, you know, housing for home ownership 
also applies with rental. It takes a long time to bring things 
into market. The market is slow to respond, and all the costs 
that are involved in trying to do that are really quite 
something.
    So, really, if you want the market to work, we have got to 
reduce these sort of regulatory barriers that keep new housing 
supply from coming online.
    Senator Daines. Thank you. I am out of time. Mr. Chairman, 
thanks for your grace. I will turn it back to you.
    Chairman Brown. Thank you, Senator Daines.
    Senator Cortez Masto from Nevada is recognized for 5 
minutes.
    Senator Cortez Masto. Thank you, Mr. Chairman. Thank you to 
the Ranking Member. I so appreciate the panelists in this 
conversation today.
    Like everyone else, Nevada has not only an affordable 
housing crisis, but we have high, high prices in housing 
happening right now because of the lack of supply.
    Let me start with a conversation that I think, Dr. Herbert, 
you were having with Senator Warner. I know a recent report 
that I saw from the National Association of Realtors found that 
Black households are more than twice as likely as white ones to 
be rejected for mortgage loans.
    I also know, Dr. Herbert, in your research you found that, 
on average, Black homebuyers pay a higher interest rate than 
that of white homebuyers. In fact, I believe your research 
finds that high-income Black homeowners pay a higher interest 
rate than low-income white homeowners.
    My first question to you is: As you did your research to 
gather this data and to make this conclusion, did you rely on 
the Home Mortgage Disclosure Act data to determine, help you 
determine these disparities?
    Mr. Herbert. The analysis of interest rates, I believe, was 
using the American Housing Survey, which provides information 
on the interest rates that homeowners have. So we did not use 
HMDA for that, I do not believe, although, Senator, I have to 
admit that was done by one of my researchers, not myself 
directly.
    If it were done using HMDA, that certainly is a 
comprehensive data set covering the entire country, and it 
represents the vast majority of borrowers in the country. So I 
may have to correct the record, and I will get back to you on 
that.
    Senator Cortez Masto. I appreciate that. So let me ask for 
the panelists that do their research how many of you rely on 
HMDA data to make your determinations and your research on the 
impact to homeowners, particularly homeowners of color. I am 
curious. Does anybody else rely on HMDA data?
    Mr. Pinto. Yes, Senator. This is Edward Pinto. We really, 
at the Housing Center, tremendously on HMDA data along with 
much other data that we assemble in conjunction with HMDA data. 
We created a data base that allows us to analyze housing 
markets at very fine levels, including using HMDA data.
    Senator Cortez Masto. Thank you. That is helpful. So I 
guess my next question is, you know, we recently passed 
legislation that actually limited the HMDA data for the vast 
majority of small banks and credit unions that make between 25 
and 100 mortgage loans, limited your ability to conduct 
research and gather that information. Does that recent change 
that we made in limiting the data from these institutions, has 
it impacted your ability to conduct research and make a 
determination whether there is redlining or discrimination 
happening?
    Mr. Pinto. We just downloaded the preliminary 2020 data, 
and until we get the final data for 2020, we will not know the 
exact impact. But the fact of the matter is the housing markets 
in the United States are highly concentrated among larger 
lenders, and I think it is a question of paperwork burden 
versus the data.
    There were always some lenders that were not required to 
submit HMDA data. It adds up to a very small percentage, and I 
would have to look and get back to you on how the change would 
affect specifically our research.
    Senator Cortez Masto. And that will be helpful. That will 
inform legislation for me, and so I really look to the 
practical experience, so whatever you can respond to that, that 
would be wonderful.
    Was somebody else going to respond?
    Mr. Herbert. Senator, yes. This is Chris Herbert. I was 
just going to add, while it is the case that large lenders 
cover the vast majority of the country, we have had several 
Senators representing rural States asking about conditions in 
their States, and I think it is really important to have 
information from small lenders in particular which will be 
located in smaller communities. And so if we want to have a 
complete picture of lending in this country, which I think we 
do, then having data that covers all lenders is important. As 
Mr. Pinto mentioned, there is an issue around reporting burden, 
but I think we need to balance that against the fact that HMDA 
has been enormously consequential in understanding lending 
patterns, and to lose that insight is a real loss.
    Ms. Bailey. And if I may add, we cannot watch for 
discrimination that we cannot see. Or fair lending laws are 
critical for letting us understand what is going on in the 
marketplace, so it is critical that we have all of the data so 
we can understand what is going on.
    We also need the CFPB to really connect the dots for us. 
They can actually, in issuing their reports on HMDA, really 
tell us what is going on with FICO scores and other credit 
scores, so we need them to act proactively so that we can have 
that information, so that we can really determine if our fair 
lending laws are being fully enforced.
    Senator Cortez Masto. Thank you. Thank you. That is very 
helpful.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Cortez Masto.
    Senator Van Hollen from Maryland is recognized for 5 
minutes.
    Senator Van Hollen. Thank you, Mr. Chairman and Ranking 
Member Toomey, and thank you for holding this hearing on these 
fundamental housing questions.
    We have been bouncing around between votes, but I want to 
thank all the members of the panel for your testimony. Lots of 
good ideas to a challenging issue, but one where there are some 
clear ideas for moving forward.
    We know that from 1979 to 2018 real hourly wages grew at 
6.1 percent for median-wage workers while the median gross rent 
increased by approximately 37 percent. So, obviously, a big gap 
in people's capacity to afford rent. There is a big supply 
piece, and there is also a shortage of affordable housing 
vouchers.
    Ms. Yentel, I want to thank you and the Low Income Housing 
Coalition for your good work, and I know that Senator Young and 
I have been working with you on the legislation that we 
introduced, the Family Stability and Opportunity Vouchers Act, 
which would create another 500,000 housing vouchers and 
focusing on families with young children and moving to areas of 
opportunity with wrap-around services. Can you just speak to 
how you think this could help meet the challenge?
    Ms. Yentel. Yes, thank you, Senator Van Hollen, for the 
question, and thank you for your work and your leadership on 
this bipartisan legislation, which is so important and we 
strongly support.
    Housing choice vouchers are a proven solution to ending 
homelessness and ending housing poverty and must be expanded? 
We need to work toward universal housing vouchers for all those 
in need, and creating 500,000 new mobility vouchers would be a 
tremendous step forward. These vouchers are targeted to 
pregnant women and moms of kids that are younger than 6 years 
old for whom the long-term consequences of living in deep 
segregated poverty and in unaffordable housing are very clear 
in the research.
    So it is very important. This legislation, if it were 
enacted, could largely eliminate homelessness among families 
with young kids, and it could sustainably reduce the number of 
children that are growing up in concentrated poverty. So we 
strongly support it and believe Congress should enact it soon.
    Senator Van Hollen. Well, I appreciate that. I hope we can 
work with the Committee to get that done.
    You also in your testimony mentioned the emergency rental 
assistance that we provided during this COVID pandemic with the 
hopes of making something permanent. And I want to thank the 
Chairman, Senator Brown, for all his efforts. Our Committee 
worked to provide that $25 billion rental assistance fund, 
first in the December bill and then in the more recent American 
Rescue Plan. But we know--and Matthew Desmond and others have 
written on this--that sometimes just a one-time missing payment 
of $300 or $500 on the rent can make the difference between 
whether a family stays in their home or is put out on the 
street through eviction.
    So if we are working hard to prevent evictions now, doesn't 
it make sense to try to identify a way to create a sort of 
permanent rental assistance insurance fund so families are not 
tossed out on the street simply because they cannot make a 
payment on a one-time basis? I do not know if it is a revolving 
fund. Can you just elaborate on that idea?
    Ms. Yentel. Yeah, one, I would underscore and agree with 
the importance of having some type of emergency rental 
assistance permanently available for low-income families who 
generally can make ends meet but have a financial shock or a 
financial crisis that threatens to drive them deeper into 
poverty, which is what results from a single eviction filing. 
So, yeah, and it is much more cost-effective in the long term 
to pay a small amount relatively always to keep people housed 
than to pay for the long-term effects that come from eviction 
for those families, for communities, and for our country.
    So a rental insurance program is an innovative, interesting 
way to move forward. Another way is through the bipartisan 
legislation that you are an original cosponsor of, the Eviction 
Crisis Act, and to take that national emergency assistance fund 
that was envisioned pre-pandemic as a pilot--I would say the 
last year has been our pilot of learning how emergency rental 
assistance programs work. And we should move forward with 
making that program permanent.
    Senator Van Hollen. Well, thank you. With the Chairman's 
indulgence, if I could just get a short answer from the other 
panelists as to whether or not this is an idea worth exploring 
in your view.
    Mr. Herbert. I will voice my support. I think we could 
spend a little money up front and keep people housed, avoid the 
cost to them and for society in terms of trying to get them re-
housed. HUD had the Family Options Study a few years ago to 
look at the cost of, you know, people who had to go into the 
system, the shelters and the like, and it is much more 
expensive. So money that would keep people housed is both good 
for them and good for society.
    Ms. Bailey. I would agree. We know that about a million and 
a half people have really transitioned into rental from home 
ownership, so I would totally agree.
    Mr. DeMarco. It is certainly an idea worth a lot of 
exploration because it could really help.
    Senator Van Hollen. I appreciate it. Thanks.
    Chairman Brown. Anybody else?
    Mr. Pinto. Just to say that, as with any program, the devil 
is in the details. I listed some things, acts that Congress 
passed on multi-family and community development, all of which 
were going to do great things, and here we are with these 
discussions.
    I would point you, Senator, to the State of Massachusetts, 
which has a data program on home ownership where they have an 
unemployment component built in by the Massachusetts Housing 
Finance Agency, built into the mortgage insurance that the 
State provides. But it has a lot of provisions in it to make 
sure it does not get abused and it actually does what it is 
supposed to do. But that is something on the mortgage side that 
might be a good example on the rental side.
    Senator Van Hollen. I appreciate that. I thank all of you 
for your testimony.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Van Hollen.
    I will yield myself 5 minutes. I have not yet asked 
questions. I put myself last today, so I will start with Ms. 
Yentel. Thank you. This has been a fascinating hearing, and I 
really appreciate the patience of all five of you and other 
committees members, all the back and forth.
    Ms. Yentel, it is clear we do not have nearly enough homes 
that people can afford, particularly people that corporations 
pay small wages to. We need to create more homes people can 
afford. We also need to ensure that we do not fall further 
behind by failing to maintain the homes we have.
    Ms. Yentel, what do we need to do to preserve our existing 
affordable housing so that it can still provide a safe home for 
the lowest-income families?
    Ms. Yentel. Thank you for the question, Chairman Brown. 
Yes, there is a tremendous need not only to build more housing 
and expand Section 8 vouchers, but to preserve the affordable 
housing that we have in our country now. Public housing in 
particular needs an infusion of funds to repair and preserve 
these units that are home to over 2.5 million low-income people 
and predominantly people of color. Because of decades of 
disinvestment by the Federal Government, many of these 
affordable homes are in severe disrepair. There is an estimated 
need for $70 billion in public housing capital repairs, and 
project-based rental assistance, too, needs to be adequately 
funded for affordable housing preservation.
    Without adequate and timely appropriations to renew 
project-based rental assistance contracts, some of these rental 
homes could be lost to the affordable housing stock. And as I 
mentioned earlier, we need sufficient funds to preserve the 
affordable housing that is supported through USDA's Section 515 
loan program. These are rural tenants with extremely low 
incomes, and they live in communities where there is very 
little, if any, replacement housing stock. So preservation is 
really critical there.
    Chairman Brown. Thank you, Ms. Yentel.
    Ms. Bailey, my hometown of Cleveland, there were a lot of 
homes, and older cities like that, a lot of homes that look 
affordable. They are listed for $50,000, $60,000, $70,000, yet 
low-income families cannot seem to find lenders to make the 
loans. Sometimes we see these lower-cost properties snapped up 
by investors paying cash.
    What do we do to help more families get affordable, smaller 
mortgages in neighborhoods like that?
    Ms. Bailey. Absolutely. Thank you for the question. One of 
the ways to really encourage some of our larger lenders to 
actually make these loans--many of them are not making the 
loans on the front end, but their investment arms are actually 
benefiting from supporting the lenders who are. And then the 
next thing that we need to do is really make sure that there is 
just this affordable credit. When we look at cities like 
Detroit, we know that the only option that many of those people 
there have is kind of this exploitative notion around what 
credit access is. So we need to make sure we are funding these 
mortgages because they are critical for home ownership for low-
wealth families all across the country, including your home 
State.
    Chairman Brown. Thanks, Ms. Bailey.
    Dr. Herbert, I voted to confirm Secretary Carson 4 years 
ago because of his interest in and knowledge of the impact that 
lead-based paint has on children's brain development. What do 
we do? What do we do about that?
    Mr. Herbert. Thank you, Senator, for the question. You 
know, I think we often overlook the quality of the current 
housing stock as an important determinant of health. We often 
focus on affordability as the No. 1 problem we face in this 
country, but particularly in low-income communities and 
communities of people of color, older homes offer a number of 
hazards. Lead is one; asbestos, radon, allergens. And so we 
really do need to take a concerted effort to invest in these 
homes to be able to make them healthy and make them good places 
to live.
    In your question to Ms. Bailey, the homes in Cleveland that 
cost so little are opportunities for home ownership, but they 
do need to also be coupled with support for financing to 
upgrade those homes and make sure they are healthy, safe, and 
sanitary.
    Chairman Brown. Thank you. My last question, and just a 
comment first. This is the first hearing this Committee has 
held, as I said in my opening statement, in nearly a decade on 
the full picture of the housing market. It seemed like leaders 
in Washington do not want to talk about housing when it affects 
people's lives. They only want to talk about it in sort of 
grand terms of how it affects Wall Street. So this discussion 
is long overdue because housing is about people's lives.
    We know if people do not have affordable homes, it is 
almost impossible for them to join the middle class, to build 
wealth across generations, and pass some of that wealth on to 
their children. And we know when a family is thrown out of a 
home they love, it just upends their whole lives, and it is 
hard for them to recover.
    So my last question for both Ms. Bailey and Ms. Yentel. 
Just paint a picture for us. When somebody gets evicted or 
foreclosed on, what happens to them?
    Ms. Bailey. Thank you. One of the things that we know is 
that people get pushed out of communities. We have had many 
Hurricane Katrinas all over the United States as a result of 
the last foreclosure crisis. We have seen family members get 
displaced from the very communities that they have had long 
foundations in. And if I could just revert back really quickly 
to your last question, I think small-dollar-balance mortgages 
are really a way for lenders to use the Equal Credit 
Opportunity Act's special purpose credit programs. They 
actually allow lenders to tailor solutions for the communities 
that they are underserving. So in those various communities 
across the country, lenders can proactively seek out solutions 
to really provide mortgages to the consumers that they are 
underserving, and it is really critical that we do so, because 
at this time we have many lenders talking about the social 
unrest that happened all over the Nation, and so much of that 
social unrest is rooted in housing. And many of them have made 
really bold pledges around solutions that they want to really 
invest, so these tools that the special purpose credit 
provisions provide really give them the ability to get at those 
solutions that they have talked about.
    Chairman Brown. Thank you.
    Ms. Yentel.
    Ms. Yentel. So evictions risk lives. They drive families 
deeper into poverty. During a pandemic evictions further burden 
overstretched hospital systems. They make it much more 
difficult for the country to contain the virus. Evictions have 
been shown to increase the spread of and potentially deaths 
from COVID-19. And at any time, evictions are profoundly 
traumatizing and destabilizing. They lead to poor health, 
especially for children and moms who can report depressive 
episodes related to their eviction many years later. Evictions 
harm mental health with documented increases of depression and 
anxiety and suicide. And they harm physical health, from high 
blood pressure to other poor health outcomes. And evictions, 
even a single eviction filing, create a spiraling down into 
poverty that can be very difficult for a family to climb back 
out of. Evictions are expensive. Families have to pay to 
reclaim their belongings, another bill that they cannot afford. 
And having that eviction filing on their record makes it harder 
for them to find landlords who will rent to them, which leads 
them to live in housing that is in poorer condition or is in 
neighborhoods with lower-performing schools and less access to 
jobs or transportation.
    So evictions truly can harm all aspects of a person's and a 
family's lives, and they certainly harm communities and the 
long-term financial health of the country, because evictions 
are expensive to the Federal Government as well.
    Chairman Brown. Thank you, Ms. Yentel. I never thought of 
that, about having to pay to get your belongings back, out of 
storage or wherever they are.
    Thank you all. All five of you gave us good insight. Thank 
you for that. I know that Ranking Member Toomey appreciates the 
questions offered by members on both sides. As the hearing's 
title states, ``Home = Life.'' It is fundamental to the work of 
the Banking, Housing, and Urban Affairs Committee. This hearing 
is the start of a long overdue conversation about our Nation's 
housing supply, and I appreciate Ranking Member Toomey's 
cooperation, and everybody on this Committee.
    For Senators who wish to submit questions, those questions 
are due 1 week from today, Tuesday, March 23rd. To the 
witnesses, you have 45 days to respond to any questions. Thank 
you for that.
    With that, the hearing is adjourned. Thank you all.
    [Whereupon, at 4:03 p.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
              PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
    The title of today's hearing--Home=Life--comes from Matthew 
Desmond, the author of the book ``Evicted''.
    He scribbled that in the front cover of my copy of the book. And it 
tells you really all you need to know about housing.
    Where you live determines where your kids go to school, how far you 
have to go to get to work, and what kinds of jobs you can get. It 
determines where you do your grocery shopping, and whether your kids 
are exposed to hazardous lead or mold.
    And we saw over the past year that our housing certainly affects 
our health.
    That's only going to be even more true in an era of a changing 
climate. The location and quality of our housing can determine how 
resilient or vulnerable we are to natural disasters.
    And that is why this hearing is long overdue. For the past 6 years, 
we've had hearings on the GSEs and the effects of housing on Wall 
Street, but ignored how our entire housing system is working for 
homeowners looking to buy a lower cost home, seniors on a fixed income, 
and renters working a minimum wage job.
    We'll have lots of discussions about the GSEs and their role in our 
housing finance system. I've put forward a set of principles on the 
role the GSEs should plan in our housing market. But that's not what 
today's hearing is about.
    It's been nearly nine years since this Committee held a hearing on 
the state of all housing in America--and that's what we're here to 
discuss today.
    When we held that hearing in 2012, we were still trying to clean up 
the mess Wall Street and predatory lenders had made.
    We might expect things to get better as we moved out of that 
recession. As Wall Street reminds us daily, the stock market is up, and 
interest rates have been near record lows.
    And for many Americans, things have gotten better. Home prices have 
increased, giving many homeowners a valuable asset and the ability to 
finance home repairs and send their kids to college.
    But this doesn't tell the whole story.
    People's paychecks have not kept up with the cost of living--
particularly the cost of rent.
    The typical nursing assistant or janitor or retail worker--the very 
people we've called essential during this pandemic--isn't paid enough 
to afford a two-bedroom apartment anywhere in the country.
    Even before the pandemic, nearly 11 million renters--that's one-in-
four renters--were paying more than half their income for housing.
    For more than half of Black and Latino renters, there is little 
left over each month for food and medication, let alone saving for a 
rainy day.
    When a hard day's work doesn't even pay your bills, saving for a 
down payment just isn't a reality.
    And it's not just renters.
    Today, more than one-in-five homeowners are still paying more than 
one-third of their income for housing. The number of lower income 
homeowners has continued to shrink. And most concerning of all, 
perhaps--the Black home ownership rate is as low as it was when housing 
discrimination was legal.
    Former HUD Secretary Romney--the father of our colleague, Senator 
Mitt Romney--tried to fully implement the Fair Housing Act when it 
first passed to combat systemic discrimination in our housing markets.
    But he was sidelined by the Nixon Administration and its Southern 
strategy, and the law has never been fully enforced, making it harder 
to ensure equal access to housing.
    And while we're the wealthiest country in the world, we have more 
than half a million people--including more than 100,000 children--
without a place to stay on a given night.
    And behind every one of these numbers is a family with a story.
    Last year, before the pandemic began, I asked Ohioans to tell me 
their housing stories.
    Stories flooded in. I heard from seniors who just weren't sure how 
they could stay in their home on a fixed income.
    I heard from people in their 40s and 50s who, in their entire adult 
life, had never been paid enough to make rent without working multiple 
jobs.
    I heard from parents who would love to own a home for their 
children, but knew they would never be able to beat out an investor 
looking to buy the same property for cash.
    This is what families were facing a year ago. The pandemic only 
made it worse.
    An estimated 10 million renters were behind on rent at the 
beginning of January. If they were paying more than half their income 
on rent before the pandemic started, it's tough to see how they could 
ever hope to catch up.
    As some homeowners are bombarded with ads to refinance at the 
lowest rates on record, the homeowners who need help the most don't 
have those same opportunities.
    Meanwhile, millions of homeowners are behind on their payments or 
facing foreclosure. Homeowners of color are more likely to have fallen 
behind because of the pandemic.
    The American Rescue Plan will help. It will get shots in arms to 
get the virus under control and speed additional help to renters, 
homeowners, and people experiencing homelessness
    But the Rescue Plan was just that--a rescue, to mobilize all our 
resources to get us through an emergency. Returning to the same broken 
system, where hard work wasn't paying off for too many workers, isn't 
good enough.
    We have an opportunity on this Committee to make people's lives 
better through better housing policy--to expand access to affordable 
rentals, to make it easier to purchase a home, and to put trades people 
to work building housing and making it safer and more resilient.
    Fundamentally, we all pretty much want the same thing--a place 
that's safe, in a community we care about, where we can get to work and 
our kids have a good school, with room for our family--whether that's 
three kids, or an aging parent, or a beloved pet.
    You should get to define what home looks like for you. And you 
should be able to find it and afford it without crippling stress every 
single month. That is our charge on this committee--to make it so for 
everyone.
    Thank you.
                                 ______
                                 
               PREPARED STATEMENT OF CHRISTOPHER HERBERT
      Managing Director, Harvard Joint Center for Housing Studies
                             March 16, 2021
    Chairman Brown, Ranking Member Toomey, Members of the Committee: 
Thank you for inviting me to testify at this hearing.
    I am the Managing Director of the Joint Center for Housing Studies 
of Harvard University and a Lecturer in the Department of Urban 
Planning and Design at Harvard's Graduate School of Design. I am also a 
member of the Board of Directors of Freddie Mac. Through its research, 
education, and public outreach programs, the Joint Center for Housing 
Studies' mission is to advance understanding of housing issues and to 
help leaders in government, business, and the civic sectors make 
decisions that effectively address the needs of cities and communities. 
For more than three decades we have published the annual report The 
State of the Nation's Housing and I am very pleased to have the 
opportunity to share the work of our Center with the Committee today.
Introduction
    The tumultuous events of the past year have both illuminated and 
exacerbated our Nation's many housing challenges. The economic and 
health impacts of the COVID pandemic have put tens of millions of 
Americans who were already struggling to pay for their housing at risk 
of eviction and foreclosure. The national reckoning with our long 
history of racial injustice has rightly put a spotlight on glaring 
racial disparities in access to decent, affordable housing in thriving 
communities. And the devastating impact of climate change on housing 
security has been evident in a series of damaging hurricanes in the 
Gulf Coast, in wildfires in the West, and in the recent frigid weather 
in the South that left thousands without electricity, heat, or water 
for many days.
    At the same time, the pandemic has also highlighted the important 
role that housing plays as a key driver of the overall economy. Housing 
expenditures typically account for nearly a sixth of economic activity. 
But over the last few months, strong activity in the housing market, 
including strong existing home sales, high levels of new construction, 
and a thriving remodeling market, have been a bright spot in an 
otherwise very troubled economy. Thus, public support for the housing 
sector is not only critical to improving the well-being of families and 
individuals but also has important benefits for the broader economy.
    In my testimony today I'll highlight five key housing challenges we 
face as a country that in my view call for more concerted public, 
private and nonprofit efforts to address.
Millions of Renters Face Severely Housing Cost Burdens
    As a rule of thumb, housing is considered unaffordable when a 
family spends more than 30 percent of its income for shelter. By this 
metric, the share of renters paying an excessive amount of income on 
housing, which has been rising steadily for decades, has greatly 
increased since the start of this century (Figure 1). In 1960 only 24 
percent of renters exceeded this affordability standard. But at last 
count in 2019, the share was almost twice as high at 46 percent. 
Indeed, this metric is so commonly exceeded that we now also track the 
share of households with severe housing cost burdens-spending more than 
50 percent of income on housing--and this share alone is now 24 
percent. Overall, more than 20.4 million renters are housing cost 
burdened, including nearly 10.5 million who are severely burdened, a 
number that has remained stubbornly high since peaking in 2014.
    While the incidence of renter cost burdens does vary across 
markets, there are no areas of the country that are immune to this 
challenge. The issue is most severe in Florida, Hawaii, California, and 
Nevada where more than half of renters spend over 30 percent of their 
income for housing. But even in the states with the lowest rates-states 
in the Upper Midwest and Appalachia-nearly four out of ten renters are 
cost burdened. \1\ Cost burdens are somewhat lower in non-metropolitan 
areas as housing costs tend to be lower, but again even in these areas 
38 percent of renters are cost burdened.
---------------------------------------------------------------------------
     \1\ Joint Center for Housing Studies. ``The State of the Nation's 
Housing 2020''. Harvard University, 2020. Available at: https://
www.jchs.harvard.edu/state-nations-housing-2020.
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    Notably, since the start of the 2000s renter affordability 
challenges have been moving up the income spectrum. The largest 
increases in the share cost burdened since 2001 has been among those 
earning $25,000-$49,999, up 13 percentage points over this period 
(Figure 2). Still, the problem is most concentrated and severe among 
lowest-income renters with more than 80 percent of those earning under 
$25,000 cost burdened, including 62 percent who are severely cost 
burdened. Indeed, roughly two-thirds of all severely burdened renters 
are in this lowest-income group.


    The consequences of these severe cost burdens are many and 
significant. Perhaps most importantly, the burdens lead to housing 
instability as renters are one hardship away from being unable to pay 
their rent. And since, as Princeton University Sociology Professor 
Matthew Desmond has noted, ``the rent eats first'' each month these 
families and individuals are forced to make difficult tradeoffs, 
spending far less on food, healthcare, and savings than those who are 
able to find affordable housing. \2\ Desmond's work also highlights the 
profound impact that a lack of stable, affordable housing has on 
families, disrupting schooling and undermining the ability to maintain 
employment.
---------------------------------------------------------------------------
     \2\ Desmond, Matthew. Evicted: Poverty and Profit in the American 
City. Crown, 2016.
---------------------------------------------------------------------------
    Conditions for low-income families with children and those headed 
by older adults are especially troubling. Among households with 
children under age 18 in the bottom expenditure quartile in the 2018 
Consumer Expenditure Survey, those with severe cost burdens spent 93 
percent less on healthcare (including insurance premiums and out-of-
pocket expenses) and 37 percent less on food than unburdened 
households. Differences among households in the bottom expenditure 
quartile headed by those age 65 and over are similarly large. Older 
adults with severe cost burdens spent 50 percent less on healthcare and 
food than same-age households without burdens. \3\
---------------------------------------------------------------------------
     \3\ Joint Center for Housing Studies of Harvard University. The 
State of the Nation's Housing 2020. Harvard University, 2020. Available 
at: https://www.jchs.harvard.edu/state-nations-housing-2020.
---------------------------------------------------------------------------
    The COVID pandemic has greatly exacerbated these existing 
challenges, as the loss of income during the pandemic has fallen most 
severely on low-income renters and people of color who were already 
struggling to pay rent each month. Phase 3 of the Census Bureau's 
Household Pulse Survey, conducted since November, finds that while 17 
percent of all renter households report being behind on their rent, 
these shares are much higher for those earning under $25,000 (24 
percent) and for Black (27 percent) and Hispanic (21 percent) renters 
(Figure 3).
    For these lowest-income households, the private market is simply 
unable to supply housing that is within their financial reach. Consider 
that at an annual income of $15,000--what someone earns working full-
time at the Federal minimum wage-rents would have to be $375 a month to 
be affordable under the 30 percent standard. Even at $25,000, rents 
would have to be $625 a month to be affordable. These levels are well 
below what a typical home rents for even in the lowest-cost areas of 
the country. Rental subsidies are needed to fill the gap between what 
these families can afford and these market rents, but, because such aid 
is limited, only 29 percent of those earning less than 50 percent of 
area median income, and therefore eligible for most federal assistance 
programs, are able to secure this assistance. \4\ Given the profound 
impact that stable, affordable housing has for those able to secure it, 
there is a compelling need for expanded efforts to provide the rental 
assistance that millions of households direly need.
---------------------------------------------------------------------------
     \4\ Watson, Nicole Elsasser, Barry L. Steffen, Marge Martin, and 
David A. Vandenbroucke. Worst Case Housing Needs: 2019 Report to 
Congress. U.S. Department of Housing and Urban Development, June 2019. 
Available at https://www.huduser.gov/portal/sites/default/files/pdf/
worst-case-housing-needs-2020.pdf.
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Constrictions on the Supply of New Housing Contribute to Affordability 
        Challenges
    One important factor behind the deterioration in affordability is 
that the supply of new housing has barely kept pace with household 
growth, putting upward pressure on rents and home prices. Since the 
1970s the addition of new homes through construction has typically 
exceeded household growth by about 20 percent, enough to accommodate 
not only new households but also to replace of older homes and meet the 
demand for second homes (Figure 4). But for much of the last decade, 
new construction has barely kept pace with household growth, a streak 
that is unprecedented. Research from Freddie Mac examining new housing 
supply relative to growth in demand at the state level finds that 29 
states have a housing deficit relative to what would be needed based on 
historic vacancy levels, totaling 3.3 million units. \5\
---------------------------------------------------------------------------
     \5\ Freddie Mac, Economics and Research Group. ``The Housing 
Supply Shortage: State of the States''. Economic and Housing Research 
Insight, February 2020. Available at: http://www.freddiemac.com/fmac-
resources/research/pdf/202002-Insight-12.pdf.


    Furthermore, much of the shortfall in supply has been among homes 
of modest size, which, over the last two decades, have declined sharply 
as a share of all new units. For example, the share of new single-
family homes under 1,800 square feet has fallen sharply since the start 
of the 2000s, down from 37 percent in 1999 to just 21 percent by 2015 
(although it has since inched up to 24 percent). Similarly, over the 
same period, multifamily housing has been increasingly concentrated in 
large structures, which have higher development costs, while so-called 
`middle' housing types have dwindled. \6\ In 1999 just over half of new 
multifamily housing consisted of small buildings with between 2 and 19 
units while just 12 percent had 50 or more. By 2019 these shares had 
been reversed with a majority of new units in high-rise buildings. \7\
---------------------------------------------------------------------------
     \6\ Parolek, Daniel G. ``Missing Middle Housing: Thinking Big and 
Building Small To Respond to Today's Housing Crisis''. Island Press, 
2020.
     \7\ U.S. Census Bureau, Survey of Construction, available at: 
https://www.census.gov/construction/chars/.
---------------------------------------------------------------------------
    A number of factors are behind this trend, but regulatory barriers 
in the form of restrictive zoning and other land-use regulations that 
limit opportunities to produce housing at greater density, difficult 
approval processes, and high impact fees have been important 
contributors. \8\ Of course, regulations also generate benefits in 
promoting the health and safety of individuals and communities and in 
promoting more efficient forms of urban development that must be 
balanced against any costs imposed. In a comprehensive review of the 
academic literature, Gyourko and Malloy (2014) conclude that 
regulations are found to reduce construction, raise prices, and promote 
sprawl, although they note it is difficult to gauge the benefits 
produced to estimate the net impact of regulation. \9\ While specific 
estimates on prices vary widely, one in-depth review by Glaeser, 
Gyourko, and Saks (2006) estimates that the magnitude of the regulatory 
tax in the single-family market ranges from 0 percent in such 
unrestricted markets as Cincinnati and Houston, to as high as 20 
percent in Boston, and 30 percent or more in California. \10\
---------------------------------------------------------------------------
     \8\ Schuetz, Jenny. ``Who's To Blame for High Housing Costs? It's 
More Complicated Than You Think''. The Brookings Institution, January 
17, 2020. Available at: https://www.brookings.edu/research/whos-to-
blame-for-high-housing-costs-its-more-complicated-than-you-think/.
     \9\ Gyourko, Joseph, and Raven Molloy. ``Regulation and Housing 
Supply''. In Handbook of Regional and Urban Economics, vol. 5, pp. 
1289-1337. Elsevier, 2015.
     \10\ Glaeser, Edward L., Joseph Gyourko, and Raven E. Saks. 
``Urban growth and housing supply.'' Journal of economic geography 6, 
no. 1 (2006): 71-89.
---------------------------------------------------------------------------
    Given the important contribution of supply-side constraints in 
producing our affordability challenge, there is a clear need for 
concerted efforts by the public, private and non-profit sectors to 
pursue both regulatory reform and more efficient means of production 
that will increase the supply of modest housing at lower cost. While 
land use regulation is a responsibility of state and local governments, 
the Federal Government has the ability to influence these policies 
through its own policies and funding requirements.
The Challenge of Attaining and Sustaining Home Ownership
    While the housing boom and bust dramatically demonstrated the risk 
entailed in owning a home, there is nonetheless strong evidence that 
home ownership can provide substantial financial benefits while 
providing greater stability and control over one's home. \11\ The 
financial benefits of home ownership by itself are quite significant. 
According to data from the 2019 Survey of Consumer Finance, housing 
equity continues to wealth, account for a large majority of total 
wealth for people of color and low-income households, while renters are 
found to have accumulated only a few thousand dollars (Figure 5). 
Perhaps not surprisingly given the many benefits of home ownership 
survey research also finds that young people of all races and 
ethnicities have a strong desire to eventually own a home, with more 
than 80 percent indicating they would like to own a home someday. \12\
---------------------------------------------------------------------------
     \11\ See: Herbert, Christopher E., Daniel T. McCue, and Rocio 
Sanchez-Moyano. ``Is Home Ownership Still an Eeffective Means of 
Building Wealth for Low-Income and Minority Households? (Was it 
ever?)'' and Rohe, William M., and Mark Lindblad. ``Reexamining the 
Social Benefits of Home Ownership After the Housing Crisis'' both in in 
Belsky, Eric S., Christopher E. Herbert, and Jennifer H. Molinsky, eds. 
``Home Ownership Built to Last: Balancing Access, Affordability, and 
Risk After the Housing Crisis''. Brookings Institution Press, 2014.
     \12\ Drew, Rachel Bogardus, and Christopher E. Herbert. ``Post-
Recession Drivers of Preferences for Home Ownership''. Housing Policy 
Debate 23, no. 4 (2013): 666-687.
---------------------------------------------------------------------------
    But home ownership rates today remain well below historical 
benchmarks. Indeed, rates of homeowning among adults from their late 
20s through their early 40s remain 3-5 percentage points below levels 
from the early 1990s, before the housing boom began. \13\
---------------------------------------------------------------------------
     \13\ Joint Center for Housing Studies. ``The State of the Nation's 
Housing 2018''. Harvard University, 2018. Available at: https://
www.jchs.harvard.edu/state-nations-housing-2018.
---------------------------------------------------------------------------
    But even more concerning than the shortfall in homeowning among 
younger adults are enormous disparities in home ownership opportunities 
for people of color. As of 2019 home ownership rates for Black 
households trailed that of non-Hispanic white households by 31 
percentage points, while the shortfall among Hispanic households was 
nearly as large at 26 percentage points (Figure 6). Indeed, the 
shortfall among Black households is larger today than it was in 1960, 
before the passage of the Fair Housing Act. \14\
---------------------------------------------------------------------------
     \14\ See https://www.urban.org/policy-centers/housing-finance-
policy-center/projects/reducing-racial-home ownership-gap.


    There are a range of factors that contribute to these lower home 
ownership rates. \15\ These differences in part reflect racial 
disparities in economic opportunity that result in lower incomes and 
weaker credit profiles. But even accounting for these disparities, an 
analysis by the Urban Institute finds that substantial numbers of young 
people of color have sufficient income and credit to be ``mortgage 
ready'' and could afford a median priced home in their market if they 
had the ability to make a 10 percent downpayment. \16\
---------------------------------------------------------------------------
     \15\ Goodman, Laurie, Alanna McCargo, Edward Golding, Bing Bai, 
Bhargavi Ganesh, and Sarah Strochak. ``Barriers To Accessing Home 
Ownership: Down Payment, Credit, and Affordability''. Urban Institute, 
November,2017. Available at https://www.urban.org/research/publication/
barriers-accessing-home-ownership.
     \16\ Goodman, Laurie, Alanna McCargo, Edward Golding, Bing Bai, 
Bhargavi Ganesh, and Sarah Strochak. ``Barriers To Accessing Home 
Ownership: Down Payment, Credit, and Affordability''. Urban Institute, 
November, https://www.urban.org/research/publication/barriers-
accessing-home-ownership (2017).
---------------------------------------------------------------------------
    One barrier facing these young would-be owners is a lack of 
accurate information about the homebuying process, particularly what is 
required to qualify for a mortgage. Research by Fannie Mae has found 
that renters overestimate how much savings is needed and how high 
credit scores need to be, and that people of color are more likely to 
lack accurate knowledge of the process. \17\ Perhaps more important, 
however, is a lack of savings needed for downpayment and closing costs. 
Research has consistently found that cash grants have much greater 
potential for expanding access to home ownership than simply lowering 
downpayment requirements or interest rates. \18\
---------------------------------------------------------------------------
     \17\ Fannie Mae. ``What Do Consumers Know About the Mortgage 
Qualification Criteria?'' Washington, D.C.: Fannie Mae (2015). 
Available at: https://www.fanniemae.com/sites/g/files/koqyhd191/files/
migrated-files/resources/file/research/housingsurvey/pdf/consumer-
study-121015.pdf.
     \18\ Wilson, Ellen, and Robert R. Callis. ``Who Could Afford To 
Buy a Home in 2009? Affordability of Buying a Home in the United 
States''. Current Housing Reports. Washington, D.C.: U.S. Census 
Bureau. May (2013). Available at: https://www.census.gov/content/dam/
Census/library/publications/2013/demo/h121-13-02.pdf. See also Herbert, 
Christopher E., Donald R. Haurin, Stuart S. Rosenthal, and Mark Duda. 
``Home Ownership Gaps Among Low-Income and Minority Households. U.S. 
Department of Housing and Urban Development, Office of Policy 
Development and Research, 2005. Available at: https://www.huduser.gov/
portal/publications/HOMEOWN/HGapsAmongLInMBnN.html.
---------------------------------------------------------------------------
    Expanding access to home ownership and closing these sizeable 
disparities by race and ethnicity will require a range of policy 
supports, including homebuyer education and counseling, access to safe, 
affordable credit, and financial supports to address the shortfall in 
needed savings. But as important as these approaches would be, it is 
equally important to ensure there are also supports to help sustain 
homeowners through inevitable challenges that arise in life. These 
supports include both counseling for distressed homeowners as well as 
financial supports to address changes in life circumstances. Approaches 
to financing homes that help build equity quickly would also expand the 
benefits of home ownership and expand the financial cushion available 
to weather future downturns.
    Indeed, the COVID pandemic illustrates the importance of such 
efforts. As with renters, homeowners of color and low-income households 
are disproportionately likely to report being behind on their mortgage 
payments (Figure 7). While 7 percent of non-Hispanic white homeowners 
currently report being behind on their mortgage, the rates are more 
than twice as high among Black (17 percent) and Hispanic (16 percent) 
owners and three times higher among those earning under $25,000. While 
forbearance offered to government-backed loans is currently in place 
for 2.7 million homeowners, these mortgage payments are still going to 
be due eventually. Once forbearance ends, it remains to be seen whether 
these owners will be in a position not only to make up what they owe 
but also to resume making payments as large as those made before the 
pandemic hit. \19\ With house prices rising sharply in many areas of 
the country, failing to retain ownership would represent a significant 
lost opportunity to both maintain their homes and accrue future wealth.
---------------------------------------------------------------------------
     \19\ Blackknight, Mortgage Monitoring Report January 2021. 
Available at https://www.blackknightinc.com/black-knights-january-2021-
mortgage-monitor/.
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High Levels of Racial and Economic Segregation
    The high degree of residential segregation that exists today is 
another area of important concern for housing policymakers. Among the 
many factors contributing to this pattern are discriminatory housing 
practices, the lack of affordable rental and home ownership options in 
many communities, and missed opportunities to affirmatively further 
racial integration. These patterns of segregation by race and ethnicity 
and by income segregation have critically important implications for 
who gets access to good quality public services, healthy environments 
and economic opportunities.
    Segregation of the Black population is particularly high, although 
it has declined from extremely high levels in the years following the 
passage of the Fair Housing Act in 1968. \20\ At last count (in the 
2010 Census), the average level of segregation across U.S. metropolitan 
areas indicated that 59 percent of the Black population would have to 
move to have an even distribution across neighborhoods. However, in 
large metro areas in the Northeast and Midwest this metric remained 
near 80 percent, almost as high as levels prevailing decades earlier. 
People who are Hispanic or Asian are also highly segregated, with 
average measures indicating that 48 percent of Hispanics and 41 percent 
of Asians would have to move to achieve an even distribution of these 
populations across neighborhoods. The level of segregation for these 
both groups has also not improved over time, with levels close to what 
they were in 1980.
---------------------------------------------------------------------------
     \20\ Logan, John R., and Brian J. Stults. ``The Persistence of 
Segregation in the Metropolis: New Findings From the 2010 Census''. 
Census brief prepared for Project US2010 24 (2011). Available at: 
https://s4.ad.brown.edu/Projects/Diversity/Data/Report/report2.pdf.
---------------------------------------------------------------------------
    Meanwhile, segregation by income has actually increased over time. 
One clear metric of this trend is the share of families living in 
neighborhoods with median incomes above or below 80 percent or 125 
percent of the area median income. In 1970 about two-thirds of families 
lived in middle-income neighborhoods with the remaining third split 
between lower-income and higher-income areas (Figure 8). By 2009, the 
share of households in middle-income neighborhoods had fallen to less 
than half, with nearly a third each living in lower- and higher-income 
areas. Clearly, American families have come to reside in areas that 
include concentrations of either low- or high-income households with a 
shrinking set of mixed-income communities.


    Racial and income segregation intersect for people of color, 
resulting in very high exposure to concentrated poverty (Figure 9). 
Nearly two-thirds of the Black, Hispanic, and Native American 
populations living in poverty reside in communities with poverty rates 
above 20 percent, about twice the share of the non-Hispanic white 
population living in poverty. Large shares of relatively affluent 
households of color also live in these neighborhoods, including 39 
percent of both Black and Native American households and 30 percent of 
Hispanic households.
    Racial disparities in housing that result from this segregation are 
both a cause and a consequence of other social inequalities. 
Discriminatory practices have limited the opportunities for people of 
color to live in neighborhoods that offer good-quality schools and 
public services, while also increasing their exposure to crime and 
other environmental hazards. The nation's long history of housing and 
mortgage market discrimination has also prevented generations of Black 
and Hispanic households from buying homes and accruing wealth. The 
impact of this systemic inequality is evident in the lower incomes and 
wealth of today's households of color, a legacy that perpetuates their 
struggle to obtain decent, affordable housing in safe neighborhoods.
    The significant consequences for life chances of growing up in 
areas of high poverty has been well documented in a series of research 
projects by Raj Chetty, Nathanial Hendren, and John Friedman. \21\ 
Among the key conclusions of this work are that every year spent during 
childhood in highly impoverished neighborhoods lowers lifetime 
earnings. In addition, growing up in these areas also has deleterious 
effects on incarceration rates, college attendance rates, fertility 
rates, and marriage patterns. Given these profound impacts, efforts to 
ameliorate the degree of segregation and the stark differences in 
neighborhood conditions for people of color needs to be a high priority 
of US housing policy.
---------------------------------------------------------------------------
     \21\ For a listing of related research see https://
opportunityinsights.org/neighborhoods/.
---------------------------------------------------------------------------
    To promote greater opportunities for racial and economic 
integration, housing policy needs to be crafted to expand the supply of 
affordable housing options in a broader range of communities, to 
support efforts to affirmatively further fair housing, and to 
coordinate investments in housing with improvements in schools, public 
safety, and economic development to help revitalize disadvantaged 
communities.
The Need To Adapt Homes To Be More Resilient, Healthy, and Age Friendly
    A final significant housing challenge for the country is to adapt 
the existing housing stock to be more resilient in the face of climate 
change, to provide healthier living environments, and to meet the needs 
of a rapidly aging society.
    The impact of climate change on the housing stock is most evident 
in the growing number and severity of natural disasters (Figure 10). 
According to the National Oceanic and Atmospheric Administration, in 
2020 the U.S. experienced 22 distinct billion-dollar disasters, with 
the cost of damages from these events totaling $95 billion, both of 
which are record highs for a single year.


    Disasters of this scale require massive recovery efforts, but such 
efforts often overlook the Nation's most vulnerable households, 
particularly renters. For example, a National Low Income Housing 
Coalition analysis of Superstorm Sandy's impact in three New Jersey 
counties found that there were large losses of low-cost rental units in 
two of the three counties and that many renters received no disaster 
assistance at all. \22\ A 2010 Government Accountability Office report 
also showed that only 18 percent of damaged rental units received 
federal assistance after Hurricanes Katrina and Rita, compared with 62 
percent of damaged homeowner units. \23\
---------------------------------------------------------------------------
     \22\ National Low-Income Housing Coalition. 2019. ``Long-Term 
Recovery of Rental Housing: A Case Study of Highly Impacted Communities 
in New Jersey After Superstorm Sandy''. National Low-Income Housing 
Coalition. December 2019. https://nlihc.org/sites/default/files/Sandy-
Rental-Recovery-Report.pdf.
     \23\ Government Accountability Office. 2010. ``Federal Assistance 
for Permanent Housing Primarily Benefited Homeowners; Opportunities 
Exist To Better Target Rental Housing Needs''. GAO-10-17. https://
www.gao.gov/assets/310/300098.pdf.
---------------------------------------------------------------------------
    Climate change has also added to the number of low-income 
households facing energy insecurity. When the pandemic forced families 
to spend more time at home, residential utility use went up-sometimes 
significantly. This was especially true during the record summer heat 
last year, when the need for air-conditioning was extreme. For lower-
income households, this forced a tradeoff between paying higher utility 
bills or suffering the health risks of excessive heat.
    Even before the pandemic, communities of color were especially at 
risk of energy insecurity. According to the most recent Residential 
Energy Consumption Survey, 54 percent of American Indian or Alaska 
Native, 52 percent of Black, and 45 percent of Hispanic households 
experienced some form of energy insecurity in 2015-about twice the 25 
percent share of non-Hispanic white households. \24\ More recent 
studies have also found that formerly-redlined neighborhoods in US 
cities experienced more extreme heat events than surrounding areas.
---------------------------------------------------------------------------
     \24\ Joint Center for Housing Studies. The State of the Nation's 
Housing 2020. Harvard University, 2020. Available at: https://
www.jchs.harvard.edu/state-nations-housing-2020.
---------------------------------------------------------------------------
    Low-income households and people of color are also much more likely 
to be exposed to unhealthy environments in the home due to living in 
older, poorly-maintained buildings that expose residents to hazards 
such as carbon monoxide, radon, lead, asbestos, and allergens. \25\ 
Indeed, estimates by the American Public Health Association and the 
National Center for Healthy Housing find that in 2014 about a quarter 
of asthma cases were linked to the home environment, 21,000 lung cancer 
deaths were linked to radon in homes, and 24 million homes had lead-
based paint hazards. \26\
---------------------------------------------------------------------------
     \25\ For a review of literature on these hazards and risks faced 
by low-income households see https://www.healthypeople.gov/2020/topics-
objectives/topic/social-determinants-health/interventions-resources/
quality-of-housing.
     \26\ As reported in Bailey, Peggy. Housing and Health Partners Can 
Work Together to Close the Housing Affordability Gap. Center on Budget 
and Policy Priorities, 2020. Available at https://www.cbpp.org/
research/housing/housing-and-health-partners-can-work-together-to-
close-the-housing-affordability.
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    Lastly, over the next two decades the number of adults in the US 
age 75 and older is expected to double from 14 to 28 million, which 
means older adults will account for one out of every five households. 
\27\ At this stage of life the incidence of physical limitations on 
mobility begin to rise sharply, requiring accommodations in the home to 
allow individuals to age safely in their homes and communities. These 
accommodations include no-step entries, single-floor living, extra-wide 
doorways and halls, accessible electrical controls and switches, and 
lever-style door and faucet handles. However, the 2011 American Housing 
Survey reports that just 1 percent of US housing units have all five of 
these universal design features. And while nearly 90 percent of 
existing homes have at least one of these five features, only 57 
percent have more than one. \28\
---------------------------------------------------------------------------
     \27\ Joint Center for Housing Studies. Housing America's Older 
Adults 2019. Harvard University, 2019. Available at https://
www.jchs.harvard.edu/sites/default/files/reports/files/Harvard-JCHS-
Housing-Americas-Older-Adults-2019.pdf.
     \28\ Joint Center for Housing Studies. Housing America's Older 
Adults 2014. Harvard University, 2014. Available at https://
www.jchs.harvard.edu/sites/jchs.harvard.edu/files/jchs-housing-
americas-older-adults-2014.pdf.
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    This multitude of deficiencies in the millions of units comprising 
the existing stock of housing point to the need for policies to support 
investments to make homes more resilient, healthy, and age-friendly, 
particular for renters and homeowners of modest means.
Concluding Remarks
    I realize that I have outlined a broad set of housing challenges 
that are perhaps daunting in their scope and scale. But as the title of 
this hearing indicates, having a good quality, affordable and secure 
home in aa thriving community is foundational for a healthy and 
productive life for every person in America. Addressing our country's 
housing challenges will take a substantial commitment from the public, 
private and nonprofit sectors. But this investment would pay dividends 
in improved quality of life for those who are unaffordably and 
inadequately housed. And it would pay dividends to society as well, in 
a more productive workforce, lower public spending for healthcare and 
other supports, and would enhance economic activity in the important 
housing sector.
    Thank you for turning your attention to these critical issues and 
for your invitation to share this information with you today. I look 
forward to answering any questions you may have.
                                 ______
                                 
                   PREPARED STATEMENT OF DIANE YENTEL
  President and Chief Executive Officer, National Low Income Housing 
                               Coalition
                             March 16, 2021
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                  PREPARED STATEMENT OF NIKITRA BAILEY
        Executive Vice President, Center for Responsible Lending
                             March 16, 2021
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
                 PREPARED STATEMENT OF EDWARD J. PINTO
    Director, Housing Center, Resident Fellow, American Enterprise 
                               Institute
                             March 16, 2021
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                PREPARED STATEMENT OF EDWARD J. DEMARCO
                   President, Housing Policy Council
                             March 16, 2021
    Chairman Brown, Ranking Member Toomey, and Members of the 
Committee: Thank you for inviting me to testify today. My name is 
Edward DeMarco, and I am the President of the Housing Policy Council 
(HPC), a trade association comprised of the nation's leading firms in 
housing finance and dedicated to advancing responsible and sustainable 
home ownership opportunities.
    The past 12 months have placed extraordinary stress on families, 
our economy, and our society. Despite these stresses, the housing 
finance system generally, and mortgage servicers in particular, 
responded effectively to the needs of homeowners. Millions of 
homeowners whose income was disrupted by the pandemic received 
immediate payment relief through mortgage forbearance plans. Still, 
there are challenges and risks ahead.
    One of the most pressing challenges is addressing the racial gap in 
home ownership, which we must do if we are to expand wealth-building 
opportunities for individuals and families of color. While this is a 
challenge and priority, it also is an opportunity. It is an opportunity 
for this Committee, the administration, consumer advocates, and the 
housing finance industry to think differently about the most effective 
ways to meet this challenge and promote sustainable home ownership for 
individuals and families who have the means to own a home but have been 
unable to realize that dream.
    One key element in meeting this challenge extends beyond the scope 
of most federal programs designed to support home ownership: there 
simply is not enough housing to meet the needs of new homeowners. 
Fundamentally, we need to build more housing.
    Beyond these new challenges that are top of mind today, we cannot 
lose sight of a huge challenge that has been with us for more than a 
dozen years now, one that I have testified on before this Committee 
numerous times, in multiple capacities: housing finance reform.
    The rest of my written statement will elaborate on these points.
COVID-19 and the Single-Family Mortgage Market
    A year ago, the mortgage servicing industry was working furiously 
to comprehend and respond to the unknown magnitude of economic 
disruption facing us due to the sudden business shutdowns. The whole 
country was trying to grasp what we might be facing. The uncertainty 
was enormous, and in some sectors of the economy, the job losses were 
massive and immediate.
    More than half a million Americans have died from the virus and 
millions continue to face extraordinary hardship. Yet we can take heart 
in the efforts of so many Americans who responded admirably in the face 
of such adversity. We have seen medical advances at amazing speed, 
producing vaccines that point us to a brighter future. Many businesses 
have shifted to remote work and, as a result, many parts of the economy 
have rebounded remarkably, while other businesses and parts of the 
economy remain shuttered or operate at less than full capacity.
    The industry that I represent, mortgage lenders and servicers, has 
worked diligently to meet this moment. Servicers quickly established 
processes to offer homeowners mortgage payment forbearance plans, while 
simultaneously converting their operations to accommodate their 
employees working from home. By mid-April, more than 2 million families 
had requested and received forbearance. By late May, that number peaked 
at nearly 5 million. \1\ Homeowners have been able to request and 
receive mortgage payment forbearance simply by contacting their 
mortgage servicer and declaring a financial hardship due to the 
pandemic.
---------------------------------------------------------------------------
     \1\ Andy Walden, Economist and Director of Market Research at 
Black Knight, Inc. March, 12, 2021 ``Forbearances See Largest Weekly 
Decline Since Beginning of 2021''. Washington, D.C.
---------------------------------------------------------------------------
    While forbearance plans were mandated by the CARES Act, mortgage 
forbearance was already part of the servicing toolkit and had been used 
previously by servicers in response to natural disasters. Having this 
toolkit in place allowed servicers to deploy forbearance assistance 
across the country at a previously unseen scale in a matter of days. 
Servicers also voluntarily provided the same support for mortgages held 
in bank portfolios and private label securities, not just on the 
government-backed loans required by the CARES Act. Mortgage insurers 
have worked with servicers to align operations and support forbearance 
and post-forbearance solutions.
    The rapid roll-out of these plans is not just a success story for 
mortgage servicers, it reflects the incredible effort of many others as 
well. While not a comprehensive list, I particularly want to 
acknowledge the leadership and staff at the Federal Housing 
Administration (FHA), the Department of Veterans Affairs (VA), the US. 
Department of Agriculture's Rural Housing Service, Ginnie Mae, the 
Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac (the 
GSEs), \2\ and the Consumer Financial Protection Bureau (CFPB) for 
responding quickly and appropriately to the challenges faced by 
consumers and mortgage servicers. Each of these government agencies and 
programs worked diligently with industry representatives and with each 
other to tailor responses to the needs of homeowners.
---------------------------------------------------------------------------
     \2\ For purposes of this testimony, the ``GSEs'' (Government-
Sponsored Enterprises) or ``Enterprises'' refer to the Federal National 
Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage 
Corporation (Freddie Mac).
---------------------------------------------------------------------------
    Homeowners have also been engaged and are working with their 
servicers. Since the peak in forbearance requests, more than half of 
homeowners have resumed making their payments or have paid off their 
mortgages. Today, about 2.6 million homeowners are still in 
forbearance, and most of those are coming up on the 1-year anniversary 
of being in forbearance. \3\ Recently, FHFA and the Government-insured 
loan programs indicated that forbearance could be extended up to 6 more 
months, for a total of 18 months. HPC supports this action.
---------------------------------------------------------------------------
     \3\ Walden, Forbearances See ``Largest Weekly Decline''.
---------------------------------------------------------------------------
    Despite this tremendous response by mortgage servicers and 
homeowners, much work remains. By this fall, as forbearance begins to 
wind down, homeowners will face choices to resume payments. The silver 
lining is that the situation is not as dire as the one we faced in the 
Great Recession. In most markets, house prices have increased and most 
homeowners in forbearance have at least 10 percent equity in their 
home. Mortgage servicers remain ready to use all of their resources to 
help each homeowner find the best available outcome for their 
circumstances.
    I also hope the constructive engagement between industry and 
government agencies that developed in response to this crisis will 
continue. For example, many industry participants, including the 
Housing Policy Council, partnered last summer with housing and consumer 
advocates and the CFPB to launch an outreach campaign targeted at 
homeowners who had missed mortgage payments but were not in forbearance 
or were nearing the end of their forbearance period. This type of 
public/private partnership improves our collective ability to assist 
homeowners in need.
    For the remainder of 2021, I expect COVID-related challenges to be 
the industry's number one priority. While some of the 2.6 million 
households in forbearance today are likely to return to work as public 
health and economic conditions improve, others may face a permanent job 
loss. Working with those borrowers will be job one.
Racial Ownership Gaps and Demographic Challenges
    In 2020, the deaths of George Floyd, Breonna Taylor, Ahmaud Arbery 
and others opened a wider and more urgent demand to address racial 
disparities, including the racial home ownership gap. Unlike the 
pandemic, this gap did not appear overnight nor will it go away 
quickly. But there is broad consensus that we must grapple with it. We 
face other important challenges ahead as well; significant demographic 
changes require housing policy attention in the years ahead, such as 
senior housing, multi-generational housing, and the emergence of the 
enormous millennial generation into the housing market. \4\
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     \4\ The Urban Institute's Housing Finance Policy Center has 
produced multiple research articles and blogs on these topics. For 
example, see ``Future of Headship and home ownership'', January 2021, 
which addresses all these issues: senior households, multi-generational 
living, changing demographics, and rising millennials. Other relevant 
work includes ``By 2040, the U.S. Will Experience Modest home ownership 
Declines. But for Black Households, the Impact Will Be Dramatic, What 
Will It Take to Support 5.5 Million More Senior Renters by 2040'', and 
``The Number of Hispanic Households Will Skyrocket by 2040. How Can the 
Housing Industry Support Their Needs?''
---------------------------------------------------------------------------
    Two years ago, I testified before this Committee \5\ and set forth 
the Housing Policy Council's views on expanding opportunities for home 
ownership. Because I believe those views are still relevant today, I 
will repeat that testimony:
---------------------------------------------------------------------------
     \5\ Edward J. DeMarco, President, Housing Policy Council. March 
26, 2019. Testimony before the Senate Committee on Banking, Housing, 
and Urban Affairs on Chairman's Housing Reform Outline. Washington, DC.

        The various housing finance reform proposals put forward over 
        the last several years have all included a mechanism to 
        generate funds to stimulate the production and preservation of 
        affordable rental housing and to bolster targeted home 
        ownership assistance programs. HPC supports this approach. Our 
        members recognize that appropriations for housing programs are 
        not keeping pace with housing need in this country. Therefore, 
        given the benefits derived from the government guarantee 
        envisioned in housing finance reform, it is reasonable for 
        legislation to establish an obligatory contribution of dollars 
        through transaction fees to expand the supply of desperately-
---------------------------------------------------------------------------
        needed affordable housing.

        HPC also supports funding for specialized home ownership 
        programs. However, it is the preference of HPC members to 
        direct new funds for home ownership assistance to programs that 
        contribute directly to the households in need, reducing the 
        barriers to entry and financial challenges that these 
        individuals and families face. HPC would prefer that new funds 
        not be used to simply subsidize higher-risk loans or to 
        compensate the industry to make loans that may not perform 
        using more lenient underwriting criteria.

        We believe that funds used to address the areas of risk that 
        drive the increased pricing, rather than subsidizing that 
        pricing, would better serve the households in need. Examples of 
        these types of programs are down payment assistance grants that 
        enable households to enter home ownership with some amount of 
        equity in the property; savings programs that offer matching 
        funds to increase the down payment amount or, equally 
        importantly, that create ``rainy-day'' reserves to address 
        future needs; and dedicated accounts that could be tapped by 
        homeowners in financial distress, to avoid missed payments and 
        / or foreclosure. The application of dollars to these types of 
        programs, as well as critical home ownership counseling and 
        education services, would help families prepare for and sustain 
        home ownership, improve access, address the real barriers, and 
        create a true financial benefit and performance boost for low- 
        and moderate-income (LMI) households.

        Along these same lines, HPC recognizes that there may be 
        interest by some in preserving the GSE Affordable Housing Goals 
        and Duty-to-Serve activities. The intent of these programs is 
        to ensure the secondary mortgage market makes credit available 
        for more low- and moderate-income households, and targeted 
        market segments (affordable housing preservation, rural 
        markets, and manufactured housing) than the private sector may 
        serve on its own without government support. However, HPC 
        believes that it is worthwhile to assess and revisit the impact 
        and outcomes of these programs and consider alternatives that 
        better achieve the intended objectives. Rather than repeat the 
        use of methods that have had, at best, mixed results, we should 
        seek new types of measurable targets and financing goals to 
        ensure that traditionally underserved segments are targeted for 
        guarantor support. For example, there may be high-impact ways 
        to use additional funding, modeled on the Federal Home Loan 
        Bank System's Affordable Housing Program, which has effectively 
        served communities nationwide for decades now.

    More recently, HPC addressed the matter of affordable housing for 
low-and moderate-income families and families of color in a comment 
letter to the FHFA on the GSEs' affordable housing goals. In our 
comment letter, \6\ HPC noted that there is limited evidence that the 
housing goals have expanded low-income home ownership.
---------------------------------------------------------------------------
     \6\ Edward J. DeMarco, President, Housing Policy Council. February 
25, 2021, ``Comments on Enterprise Housing Goals Advance Notice of 
Proposed Rulemaking.''
---------------------------------------------------------------------------
    The driving factor for why the GSE housing goals have been unable 
to move the needle on addressing these structural challenges is that 
the program subsidizes demand primarily through the cross-subsidization 
of mortgage rates rather than directly addressing the barriers many 
families face in attaining home ownership. To achieve the goals, the 
GSEs offer relaxed underwriting criteria and pricing benefits to some 
consumers who might not otherwise qualify for a mortgage. This subsidy 
is based on a borrower's credit risk, not race or income or wealth or 
financial readiness. It is poorly targeted, and it fails to address the 
barriers many Black, Latino, and low income/low-wealth families face in 
trying to attain home ownership, such as a lack of downpayment, 
financial education, or a rainy-day reserve.
    Moreover, with an inelastic housing supply, continued subsidization 
of the mortgage rate has the counter-productive effect of boosting home 
prices. Simply put, making it less expensive to borrow money to 
purchase a commodity in short supply (houses) results in added demand, 
increasing the sales price. In effect, the subsidy built in to the GSE 
housing goals ends up going to the home seller, not the home buyer. 
This has the perverse effect of making housing less affordable, not 
more affordable.
    In summary, before doubling down on past programs, we should 
consider whether such programs have actually helped close the racial 
gap in home ownership or otherwise enhanced the home ownership outcomes 
for lower- and moderate-income households. We also should be mindful 
that, with house prices soaring in the face of limited supply, subsidy 
programs that are not properly designed risk enriching current 
homeowners, not creating new homeowners.
    Let me conclude this section with four final thoughts.
    First, any discussion of broadening home ownership opportunities 
should include consideration of the FHA. FHA is the country's flagship 
program to support home ownership, but it is sorely in need of repair. 
While important improvements have been made in recent years, FHA 
servicing rules and practices remain a challenge and aligning FHA 
requirements with current market practices would be helpful. We look 
forward to working with Secretary Fudge on modernization and alignment 
initiatives to see them completed. We also hope to work with this 
Committee on how FHA can be a meaningful component of efforts to build 
wealth through home ownership. Likewise, Ginnie Mae needs to continue 
its modernization efforts.
    Second, a critical factor to consider when pondering new approaches 
to expand home ownership opportunities is the changing characteristics 
of household income. In today's economy, household income has become 
more unpredictable and volatile. \7\ We underwrite mortgage loans 
considering traditional wage income and assets to determine a 
borrower's ability to repay. However, income increasingly is subject to 
variability, in part due to more households relying on multiple part-
time or seasonal jobs as the so-called gig economy expands. These 
changes may need to be considered in underwriting mortgages, especially 
for lower-income workers and certain minority communities. 
Consideration of these factors may help to create new pathways to home 
ownership.
---------------------------------------------------------------------------
     \7\ Seidman, Ellen, and Ratcliffe, Caroline. 2017 ``Everyone 
Benefits When the Financial Sector Serves People With Volatile 
Income''. Washington, DC: Urban Institute.
---------------------------------------------------------------------------
    Third, and related to the previous point, we should not measure 
success simply by observing positive changes in home ownership rates. 
Any such gains must be sustainable through the economic cycle. We 
currently are experiencing enormous house price growth, fueled largely 
by historically low interest rates and pandemic-related changes in 
demand for housing. We need to ensure we do not encourage marginal 
borrowers into highly leveraged mortgages on houses reflecting 
temporary house price gains. Otherwise, we may cause serious harm and 
set back the long-term efforts to close the racial gap in home 
ownership.
    Lastly, we need a regulatory environment that accounts for these 
considerations. On that score, the CFPB's multi-year process to 
evaluate and update the Qualified Mortgage rule was a welcome 
development that should help to close the racial gap in home ownership 
by responsibly expanding access to credit. Thus, it was troubling to 
see the CFPB last month start to backtrack on the new rule just weeks 
after finalizing it.
Housing Supply: We Need To Build More Housing
    The Chairman's letter of invitation asked me to report on 
conditions in the housing market affecting affordability and 
availability, and the challenges facing various households. The single 
biggest challenge is clear. We do not have enough houses.
    Housing construction ground to a trickle with the Great Recession 
and its long aftermath. Meanwhile, a demographic wave was building that 
would increase demand for housing. Today, the greatest imbalance, and 
the greatest challenge, in housing is this supply-demand imbalance. A 
relatively fixed supply and growing demand, fueled by historically low 
interest rates, and a pandemic-driven change in the demand for housing, 
has made it even harder for individuals and families to break into the 
ranks of home ownership.
    This lack of supply is both a rental and an ownership challenge. 
The Housing Policy Council's focus is home ownership, but to assess the 
state of housing, it is important to understand the needs of both 
renters and homeowners. home ownership remains the most common avenue 
to wealth-building, particularly for low and moderate-income families, 
and most future homeowners will come from the ranks of renters, so both 
matter. \8\ Other witnesses today will expand on the critical housing 
issues in the rental market.
---------------------------------------------------------------------------
     \8\ A recent report published by the Harvard Joint Center for 
Housing Studies describes many of the supply issues in the apartment 
market and offers strategies that developers and builders could deploy. 
See Hannah Hoyt. 2020 ``More for Less? An Inquiry Into Design and 
Construction Strategies for Addressing Multifamily Housing Costs''. 
Cambridge, MA: Joint Center for Housing Studies of Harvard University.
---------------------------------------------------------------------------
    As an economic principle, unmet demand should lead to higher prices 
and higher prices should induce more supply. However, building housing 
in most communities requires navigating a labyrinth of approvals, 
restrictions, and building requirements. The combined effect of these 
requirements is that fewer houses are built and the ones that are built 
are higher cost properties.
    The solution to this problem is simple, but politically complex. It 
primarily requires thousands of local jurisdictions to evaluate land 
use restrictions, zoning laws, building codes, and other requirements 
to ensure that home construction is encouraged, not discouraged. It 
also requires programs to address labor shortages, particularly in 
skilled positions such as carpenters, electricians, and plumbers.
    Finally, the supply problem is not just an issue of new 
construction but also an issue of rehabilitating existing supply to 
extend its useful life. In many parts of the country, we have an aging 
housing stock, and some of those properties may not be up to modern 
health, safety, and energy efficiency standards. One way to increase 
housing supply is to think about preserving and modernizing existing 
housing stock as well as identifying other existing structures that 
could be repurposed for housing.
The GSE Conservatorships: Still a Story That Needs an Ending
    More than 9 years ago, as Acting Director of the Federal Housing 
Finance Agency, I submitted a report to this Committee titled ``A 
Strategic Plan for Enterprise Conservatorships: The Next Chapter in a 
Story That Needs an Ending''. \9\ Here we are, 9 years later and more 
than a dozen years since the GSEs failed and were placed in 
conservatorships, and that story still needs an ending. On behalf of 
the members of the Housing Policy Council, I make the same plea today I 
made all those years ago: the end of the story needs to be written by 
Congress.
---------------------------------------------------------------------------
     \9\ Edward J. DeMarco, Acting Director, Federal Housing Finance 
Agency. February 21, 2012. ``A Strategic Plan for Enterprise 
Conservatorships: The Next Chapter in a Story That Needs an Ending''. 
Washington, DC.
---------------------------------------------------------------------------
    My last testimony before this Committee focused almost entirely on 
this issue. \10\ At that time, I testified on a thoughtful reform 
outline put forth by then-Chairman Crapo.
---------------------------------------------------------------------------
     \10\ Edward J. DeMarco, President, Housing Policy Council. March 
26, 2019. ``Testimony before the Senate Committee on Banking, Housing, 
and Urban Affairs on Chairman's Housing Reform Outline''. Washington, 
DC.
---------------------------------------------------------------------------
    Today, I will reiterate a few key points: Ending the 
conservatorships requires permanent change to the inherently flawed 
structures that led to the conservatorships in the first place. While 
administrative progress is welcome and can help to set a prudential 
framework for the GSEs post-conservatorship, we will not achieve true 
reform without Congress. Only Congress can revise the statutory 
charters of the GSEs, address the need for an explicit federal 
guarantee on the mortgage securities issued by the GSEs, and address 
other problems embedded in the GSEs' charters. \11\
---------------------------------------------------------------------------
     \11\ For example, as HPC noted in a recent letter to FHFA, the 
current statutory construct for resolving a failure of a GSE would 
seriously disrupt the housing finance system. See, Edward J. DeMarco, 
President, Housing Policy Council. March 8, 2021 ``Comments on 
Enterprise Resolution Planning.''
---------------------------------------------------------------------------
Principles for Housing Finance Reform
    An appropriate starting point for discussing major legislation that 
will affect so many citizens and a large segment of the economy is to 
agree to a set of principles that can guide reform. The Housing Policy 
Council centers its reform views on the following principles:

  1.  Fix what is broken and preserve what works in support of 
        consumers and the market.

  2.  The transition from the old system to the new one should avoid 
        disrupting consumers and markets.

  3.  Private capital should bear all but catastrophic mortgage credit 
        risk so that market discipline contains risk. The government 
        should provide an explicit, full faith and credit guarantee on 
        mortgage-backed securities but with a pre-set mechanism to 
        ensure any catastrophic losses that call upon taxpayer support 
        will be repaid fully.

  4.  The Government regulatory framework must be consistent and 
        equitable across all participating companies and ensure that 
        participants in the housing finance system operate in a safe 
        and sound manner.

    The Government-protected GSE duopoly should be replaced with a 
structure that serves consumers by promoting competition, 
affordability, transparency, innovation, market efficiency, and broad 
consumer access to a range of mortgage products. \12\
---------------------------------------------------------------------------
     \12\ For a more in-depth discussions of these principles and of 
the key policy issues involved in housing finance reform, see Edward J. 
DeMarco, President, Housing Policy Council. June 29, 2017, ``Testimony 
before Senate Committee on Banking, Housing, and Urban Affairs on 
Principles of Housing Finance Reform.'' Washington, DC. and Edward J. 
DeMarco, President, Housing Policy Council. September 6, 2018. 
Testimony before the Housing Financial Services Committee on ``A 
Failure to Act: How a Decade without GSE Reform Has Once Again Put 
Taxpayers at Risk.'' Washington, DC.
---------------------------------------------------------------------------
    The good news is that these principles align well with those that 
underpin virtually all of the major reform proposals that Congress has 
debated over the past ten years. They also align with the reform 
principles introduced by Sen. Toomey yesterday. Much work has been done 
on this issue, including by members of this Committee, so there is much 
to build upon.
Consumers Would Benefit From Enhanced Market Competition
    Key benefits of housing finance reform include greater market 
competition and greater reliance on private capital to manage mortgage 
credit risk. What do we lose when we lack competition in the secondary 
mortgage market? I believe we lose a lot--and our failure to appreciate 
what is lost keeps our housing finance system from realizing its 
potential to fully meet the needs of potential home buyers. \13\
---------------------------------------------------------------------------
     \13\ For a more in-depth discussion of these issues, see Edward J. 
DeMarco, November 2019. Remarks to the Exchequer Club, ``Remember Where 
They Were so You'll Understand Where We Are: The State of Housing 
Finance Reform'', Washington, DC; November 20, 2019
---------------------------------------------------------------------------
    Any list of the consequences of inhibiting a competitive housing 
finance system should start with these:

  1.  Systemic Risk: The absence of market competition concentrates 
        risk among the few market participants, in this case, Fannie 
        Mae and Freddie Mac. Systemic risk is exacerbated because this 
        limited competition reduces attention to risk management.

  2.  Monopoly pricing: The absence of market competition means we get 
        monopoly or oligopoly pricing, not a competitive market price. 
        That means consumers may pay more than they need to and that at 
        least some lenders may realize lower returns than if they had 
        competitive bids for their loans.

  3.  Limited innovation: Absent the need to maintain an edge to stay 
        ahead of the competition, the secondary market lacks incentive 
        to continuously improve and the results include lack of 
        innovation to serve emerging borrower needs and slow adoption 
        of new technology to improve efficiency and customer experience 
        and lower origination and servicing costs. Note that lower 
        costs and more innovation will lead to more qualified 
        borrowers.

  4.  Misallocation of capital: By regulating Fannie and Freddie to 
        materially lower capital standards relative to the rest of the 
        market, we misallocate capital both within the housing finance 
        system and between housing finance and competing capital uses, 
        including those that could lead to greater economic growth or 
        more housing construction.

  5.  Decreased access for small lenders: It is common sense that if a 
        market has only one or two buyers, rather than dozens of 
        buyers, it will be harder for small producers to access those 
        buyers. In the mortgage world, the largest loan originators are 
        going to be able to sell their loans into the secondary market 
        because the secondary market thrives on scale. With only two 
        buyers, not even mandates on guarantee-fee equivalency can mask 
        the inherent challenge smaller production shops have selling 
        their mortgages. Yet, if the market were more competitive, with 
        numerous outlets to sell mortgages, there would be greater 
        demand for the loan production of smaller lenders.

  6.  Decreased demand for affordable products: Congress imposed 
        housing goals on Fannie and Freddie to ensure that they paid 
        enough attention to loans in those markets. This is the same 
        phenomenon that affects smaller lenders. Increased competition 
        in the secondary market would mean increased competition for 
        affordable loans as well. Think about this: Would we have 
        greater access to credit and lower credit prices if we had just 
        two banks operating nationwide and no community or regional 
        banks to compete with them?

  7.  Policy distortions: It would be hard to overstate the political 
        influence over housing policy wielded by Fannie Mae and Freddie 
        Mac before conservatorship and the challenge that created to 
        achieving sound public policy and regulation. These GSEs 
        distorted our politics as well as our markets and we must 
        factor that into our calculus of their systemic risk.
Systemic Risk in Housing Finance is Growing not Shrinking
    In 2008, FHFA, assisted by Congressionally authorized emergency 
funding, placed Fannie Mae and Freddie Mac into conservatorships 
because of the immediate and profound systemic risk they posed to the 
financial system and to the U.S. housing market. \14\
---------------------------------------------------------------------------
     \14\ Secretary Henry M. Paulson, Jr. September 7, 2008. 
``Statement on Treasury and Federal Housing Finance Agency Action to 
Protect Financial Markets and Taxpayers.'' Washington, DC. and FHFA 
Director James B. Lockhart. September 7, 2008. ``Remarks on Housing GSE 
Actions.'' Washington, DC.
---------------------------------------------------------------------------
    In conservatorships, these companies have drawn more than $190 
billion from the U.S. Treasury Department to cover losses. More than 
that, their very ability to operate is due to the direct and ongoing 
commitment of taxpayer support that Congress authorized Treasury to put 
in place at the start of the conservatorships. While in recent years 
FHFA and Treasury have allowed the two companies to begin retaining 
earnings to rebuild capital, the taxpayer has ceased receiving 
compensation for that support and instead has been receiving an 
increasing stack of IOUs in the form of an increased liquidation 
preference, to be satisfied whenever the conservatorships are finally 
resolved.
    At the same time, the two companies loom over the housing finance 
system to an even greater degree than they did when they failed in 
2008. FHFA has taken steps to establish a set of prudential standards 
for the Enterprises post-conservatorship, including a meaningful 
capital framework. It has also overseen the restructuring of the 
capital framework for mortgage insurance companies and the development 
of credit risk transfer structures, each of which has brought new and 
strengthened private capital support to this market.
    Generally, these are positive and welcome steps. However, it is 
puzzling to HPC that the new FHFA capital rule gives limited benefit to 
the one reform in conservatorship that has reduced both taxpayer and 
systemic risk: credit risk transfer. In addition, while the pandemic's 
market disruptions last spring included a temporary shutdown of new 
credit risk transfer deals, Freddie Mac has returned to transferring 
risk into private markets, but Fannie Mae has not. The result is that 
Fannie Mae is reconcentrating mortgage credit risk on its own books, 
risk that is supported only by taxpayer-provided capital.
    Members of the Committee, you can provide a permanent and reliable 
structure for the secondary mortgage market that reduces the systemic 
risk posed by the GSEs. Until then, consumers have fewer choices, 
racial ownership gaps are the same as they were decades ago, the 
mortgage market has less innovation than other markets, and taxpayers 
and the financial system are again put at risk of another housing 
collapse.
    And lastly, in 2013, two Members of this Committee--Senators Corker 
and Warner--identified the basic policy compromise that remains the 
foundation for bipartisan reform. Restore reliance on meaningful 
private capital to bear mortgage credit risk, backstop the system with 
a federal guarantee to ensure deep liquidity in all markets, and assess 
the system both for that government backstop and to fund affordable 
housing needs, including actions that would address our supply 
problems. The 10 basis points affordable housing fee the Senators 
proposed almost a decade ago became part of virtually every housing 
finance reform bill that followed, Democrat and Republican. Over the 
past ten years, such a fee could have raised over $30 billion for 
affordable housing. Think of the opportunity cost of our failure to 
act. We still have significant taxpayer exposure and systemic risk, and 
we missed the opportunity to expand funding to support affordable 
housing and housing supply.
    Thank you for inviting me today. As always, the members of the 
Housing Policy Council look forward to working with the members of this 
Committee to tackle the challenging issues I have just described. We 
can only get this done by working together.
        RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                    FROM CHRISTOPHER HERBERT

Q.1. Addressing Neighborhood Segregation--In your testimony, 
you highlight the ongoing segregation of housing by race and 
income in our neighborhoods and connnunities. What are your 
recommendations for how policymakers and communities can 
address this issue?

A.1. Broadly speaking, segregation by both race and income is 
the result of two factors: (1) a lack of housing options in 
many communities across a spectrum of price and type; and (2) 
barriers to occupying this housing by people of color due to 
discrimination in housing markets and a lack of efforts to 
affirmatively further integration.
    The principal action needed to address the first barrier is 
for local communities to relax existing zoning, building codes 
and other regulations limiting residential construction to 
allow housing development as of right that includes more 
affordable types of housing including multifamily structures, 
townhomes, and single-family homes on small lots. Since land 
use is largely controlled by local governments, much of the 
onus is at this level of government to ensure that their 
regulations allow for a broad range of housing types in 
suitable locations. State governments have an important role to 
play, however, to provide mandates and incentives for local 
governments to adopt regulations that are more accommodative of 
affordable housing development. Similarly, the Federal 
Government can also introduce incentives to adopt regulations 
that promote housing development by making funding for housing, 
transportation or other related purpose contingent on meeting 
key metrics for development types that are allowed as of right. 
A simple example of the use of this type of incentive is how 
the National Minimum Age Drinking Act of 1984 reduced federal 
transportation funding by 10 percent unless states had a 
drinking age of 21, which proved quite effective at changing 
state law throughout the country.
    Beyond changes to land use regulations, the Federal 
Government can also help spur greater racial and integration by 
including incentives in rental housing subsidy programs (most 
notably including the Housing Choice Voucher and Low Income 
Housing Tax Credit programs) to encourage the use of these 
subsidies in communities with relatively low availability of 
these subsidies at present, such as financial support for 
mobility programs for housing voucher holders and financial 
incentives for siting LIHTC developments in high opportunity 
communities.
    Finally, policies that expand subsidies for first-
generation homeowners would also expand access to communities 
where housing is predominantly owner occupied. Upfront 
assistance with downpayment and closing costs afford the 
greatest potential for expanding home ownership for 
historically disadvantage populations, which should be coupled 
with access to home ownership education and counseling and 
safe, affordable mortgage products.
    To address the second barrier of discrimination and a lack 
of efforts to affirmatively further fair housing, the Federal 
Government should fully and aggressively ensure that the 
provisions of the Fair Housing Act are complied with and 
violators held accountable to root out discrimination in 
housing markets. There is also a compelling need to take steps 
to affirmatively further fair housing to ensure that all racial 
and ethnic groups are welcome in a broad range of communities. 
The steps taken to ensure a broad range of housing as of right 
in local communities and to incentivize the use of housing 
subsidies in these communities are key elements of such a 
strategy. But in addition, communities also need to adopt 
strategies to ensure that people of color are welcome and that 
affordable housing opportunities are made known and available 
to all racial and ethnic groups in the market area. HUD's 
recently reinstated affirmatively furthering fair housing 
requirements are an important tool in support of the analysis 
and planning needed to develop such strategies and so it is 
important that this regulation be fully supported and enforced.

Q.2. Addressing Climate Change and Resilience through Housing--
How can housing investments in single-family and multifamily 
housing help address factors contributing to climate change and 
make housing and communities more resilient to natural and man-
made disasters?

A.2. According to the U.S. Energy Information Administration, 
residential energy use accounts for 20 percent of greenhouse 
gas emissions in the U.S., with half of home energy consumption 
related just to heating and air conditioning. \1\ \2\ While 
stricter building codes are helping to improve energy 
efficiency in new housing, much of the opportunity to reduce 
residential emissions lies in greening the current stock.
---------------------------------------------------------------------------
     \1\ 1 Goldstein, B., Gounaridis, D., and Newell, J.P., 2020. ``The 
Carbon Footprint of Household Energy Use in the United States''. 
Proceedings of the National Academy of Sciences, 117(32), pp.19122-
19130. https://www.pnas.org/content/117/32/19122#xref-ref-1-1
     \2\ U.S. Energy Information Administration, ``Use of Energy 
Explained: Energy Use in Homes''. Updated August 4, 2002. https://
www.eia.gov/energyexplained/use-of-energy/homes.php
---------------------------------------------------------------------------
    Home improvements that reduce energy usage and decrease 
reliance on fossil fuels include adding insultation, improving 
air sealing with high-efficiency doors and windows, upgrading 
HVAC systems or replacing conventional systems with high-
efficiency heat pumps, and replacing older appliances and 
lighting fixtures. In part because of energy-efficiency 
retrofits, homes built before 1960 used 14 percent less energy 
per square foot in 2015 than they did in 2009, and 1960s-
vintage homes saw a 20 percent reduction in energy use over the 
same period. \3\ Yet there is significant need for additional 
investments, with many older homes lacking adequate insulation 
or relying on inefficient heating and cooling systems. For 
example, as of 2015, 17 percent of single-family homes built 
before 1980 were reported to have `poor insulation,' compared 
to just 1 percent built after 2009.
---------------------------------------------------------------------------
     \3\ La Jeunesse, E. ``U.S. Households Are Using Less Energy''. 
Harvard Joint Center for Housing Studies, Housing Perspectives, July 
11, 2018. https://www.jchs.harvard.edu/blog/us-households-are-using-
less-energy
---------------------------------------------------------------------------
    Moreover, changing technology is creating opportunities for 
greater improvements in energy efficiency, even in newer homes. 
Smart thermostats and other energy monitoring systems can 
reduce energy waste and lower utility bills. As of 2015 only 5 
percent of new homes had smart thermostats or energy-saving 
tankless water heaters, highlighting the potential for 
retrofits in homes of all ages. \4\ There are also growing 
opportunities to reduce reliance on fossil fuels to power the 
home, such as through the use of solar panels. The Consolidated 
Appropriates Act of 2016 allows taxpayers to claim a credit of 
up to 30 percent of costs for photovoltaic and solar thermal 
technologies, while states and municipalities also provide 
incentives for renewable and energy efficient systems.
---------------------------------------------------------------------------
     \4\ https://www.jchs.harvard.edu/blog/significant-improvements-in-
energy-efficiency-characteristics-of-the-us-housing-stock
---------------------------------------------------------------------------
    In addition to reducing housing's contribution to 
greenhouse gas emissions, investments are also needed to ensure 
that current housing is more resilient to extreme weather 
events including severe storms, floods, wildfires, and extreme 
heat. According to the National Oceanic and Atmospheric 
Administration, in 2020 the US experienced 22 distinct billion-
dollar disasters, a record for a single year. \5\ Retrofits to 
mitigate potential losses depend on the specific threat: 
increasing a home's resilience to flooding might require 
raising heating and cooling systems above potential flood 
levels, while those in fire-prone areas might install fire-
resistant roofing and siding. These investments can also 
protect against climate-related threats to human health as 
well, particularly for lower-income people living in older and 
poorly-maintained homes.
---------------------------------------------------------------------------
     \5\ https://www.ncdc.noaa.gov/billions/

Q.3. Can climate-friendly investments in housing construction 
---------------------------------------------------------------------------
and renovation open up new jobs and job training opportunities?

A.3. Climate-friendly home investments--for example those 
promoting greater energy efficiency--have proven to be an 
important source of job growth in the residential markets. 
Improved insulation, upgraded heating and cooling equipment, 
double or triple glazed windows, tankless hot water heaters, 
smart thermostats, and solar panels have all increased in 
popularity over the past decade. However, several of these 
efficiency enhancements still have significant growth 
potential. Fewer than 10 percent of all existing homes 
nationally have tankless on-demand water heaters, or smart 
thermostats, or solar panels. Saturation of these products is 
disappointingly low even for newly built homes. The specialized 
skills required to install many of these energy efficiency 
products could provide new employment opportunities in the home 
building and remodeling workforce that build the 1.5 million or 
so new homes each year and improve and repair the tens of 
millions of owner-occupied homes and rental units annually. At 
last count there were some 7.4 million workers in the 
construction trades, with only 9 percent having a college 
degree. Since 2018 there has been an average of nearly 300,000 
job openings monthly for these jobs. Training for workers with 
less than a college education for these skilled trades, with a 
focus on energy efficient retrofits, would open up well-paying 
jobs for 100s of thousands of workers.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
         SENATOR CORTEZ MASTO FROM CHRISTOPHER HERBERT

Q.1. A recent report from the National Association of Realtors 
found that Black households are more than twice as likely as 
white ones to be rejected for mo1tgage loans. I am deeply 
concerned we continue to see discrimination in mortgage lending 
against Black and Latino people.
    What policies do you recommend we prioritize to ensure fair 
housing?

A.1. As I noted in my response to Senator Brown's question 
above, the starting point for ensuring fair housing is to fully 
enforce existing laws from the Fair Housing Act (FHA), 
including regulations requiring efforts to Affirmatively 
Further Fair Housing, as well as the Equal Credit Opportunity 
Act (ECOA) to ensure that mortgage lending is not 
discriminatory. With regard to the specific concern you note 
about high denial rates for Black mortgage applicants, in 
addition to enforcing both FHA and ECOA, there are also a 
variety of policies that could help ensure that Black mortgage 
applicants are more likely to be approved for loans, First, 
housing counseling can be of enormous value in helping 
prospective buyers to understand lending requirements and to 
take steps to build savings and repair credit that might 
otherwise be impediments for loan qualification. Public support 
for counseling efforts could be expanded to ensure that this 
assistance is widely available to historically disadvantaged 
borrowers, including Black, Hispanic and other people of color. 
Second, given that Black consumers have much lower traditional 
credit scores, the development and use of alternative means of 
evaluating credit that incorporate non-traditional information 
such as rent and utility payments, should be supported by 
public policy to expand access to credit.

Q.2. Home value appraisals are critical to ensuring that 
homeowners receive fair value for their property. Home 
appraisals also ensure homebuyers do not overpay.
    How should we address the documented problem of bias in the 
appraisals?

A.2. To the extent that racial bias in the appraisal process 
arises from the bias on the part of appraisers, necessary 
responses should include efforts to increase the racial and 
ethnic diversity of appraisers and to provide training to 
address implicit biases. Steps should also be taken to 
eliminate overt sources of bias, such as the use of 
neighborhood race as a proxy for other measures of housing 
quality, which already would violate appraisal standards. \1\ 
The use of automated valuation models have the potential to 
reduce bias due to human judgement, but themselves may suffer 
from inaccuracy due to heterogeneity of housing stock in 
majority Black neighborhoods, rapidly changing house prices, 
and a higher share of distressed property sales. \2\ To realize 
the potential of these models to provide unbiased estimates of 
home values research is needed to evaluate the sources of bias 
in these models and to improve the inputs used to provide the 
estimates.
---------------------------------------------------------------------------
     \1\ Howell, Junia, and Elizabeth Korver-Glenn. ``Neighborhoods, 
Race, and the Twenty-First-Century Housing Appraisal Industry''. 
Sociology of Race and Ethnicity 4, no. 4 (2018): 473-490.
     \2\ Neal, Michael, Sarah Strochak, Linna Zhu, and Caitlin Young. 
``How Automated Valuation Models Can Disproportionately Affect 
Majority-Black Neighborhoods''. Washington, D.C.: The Urban Institute 
(December 2020). https://www.urban.org/sites/default/files/publication/
103429/how-automated-valuation-models-can-disproportionately-affect-
majority-black-neighborhoods-1.pdf

Q.3. Your research has found that on average, Black homebuyers 
pay a higher interest rate than that of white homebuyers. In 
fact, your research finds that high-income Black homeowners pay 
a higher interest rate than low-income white homeowners.
    In my questions to you, you noted that your research on 
interest rates from homeowners relied primarily on data from 
the American Housing Survey. Does any of your research rely on 
data from the CFPB's HMDA database?

A.3. In the years since loan-level HMDA data was made available 
in the 1990s the Joint Center historically has employed the 
HMDA data for a wide variety of significant studies and have 
found these data to be of enormous value in understanding the 
state of mortgage lending in the US. We have not, however, had 
an opportunity to employ the HMDA database since responsibility 
for these data was transferred to the CFPB as our research 
agenda has focused more on other policy areas.

Q.4. If so, has the limitation of HMDA data for the vast 
majority of small banks and credit unions that make between 25-
100 mortgage loans limited your ability to conduct research?

A.4. Since we have not undertaken research using these data in 
the last few years and so we have not confronted this issue.

Q.5. You also noted that HMDA data is critical for rural 
states, where homebuyers are primarily served by smaller 
lenders. Can you elaborate on the importance of HMDA data for 
more rural localities?

A.5. HMDA data are of enormous importance in understanding 
access to mortgage credit at both the individual borrower and 
neighborhood level. The fact that these data are readily 
available to researchers--unlike industry databases that are 
only available at high cost--supports analysis by a broad range 
of researchers. Over time the data has been of great importance 
in shedding light on issue of significant policy concern, 
including the differences in mortgage denials, the incidence of 
high cost lending, patterns of homebuying by race, ethnicity 
and income of both homebuyers and the communities where they 
are buying. However, a challenge in conducting research in 
rural areas is that common sources of credit are small local 
lenders who may not reach the minimum loan threshold that 
triggers a requirement of reporting loan activity (which was 
set at 25 closed-end loans until raised last July to 100). This 
higher reporting floor is estimated to have reduced the number 
of reporting lenders by 40 percent, drastically curtailing 
information available on lending in rural areas. This is on top 
of loss of 1200 lenders required to report when the threshold 
was set at 25 closed-end loans. \3\ The loss of this 
information will mean there is little information about the 
extent or nature of lending in rural areas, providing little 
ability for policy makers, researchers or community advocates 
to assess whether a community's lending needs are being met or 
whether potentially harmful lending practices are 
proliferating.
---------------------------------------------------------------------------
     \3\ Home Mortgage Disclosure (Regulation C); Final Rule; Consumer 
Financial Protection Bureau, 85 FR 92,28364 (May 12, 2020).

Q.6. Could you explain the importance of the additional HMDA 
data that was instituted under Section 1094 of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act and how this 
---------------------------------------------------------------------------
data would assist regulators and outside observers?

A.6. The additional data required under Section 1094 provide 
much greater opportunity for regulators and researchers to 
assess a fuller range of factors that relate to both credit 
risk of borrowers and the characteristics of the loans applied 
for and originated. While HMDA data through the years has been 
of enormous value is analyzing mortgage market outcomes, the 
lack of these additional data elements made it impossible to 
fully assess market conditions and outcomes. These additional 
data elements are of foundational importance for regulators and 
researchers to more accurately assess market conditions and 
lender actions.

Q.7. Home prices in Las Vegas increased more than 11 percent in 
the past year. Nationwide, they have risen by nearly 11 
percent.
    What should we do to increase the supply of homes, 
especially those affordable to Millennials and Generation Z?

A.7. As I noted in my written testimony, the Joint Center and 
other researchers have documented a shortage of new 
construction relative to demand in the years following the 
Great Recession. The constraints contributing to this shortfall 
in supply include regulatory barriers that add to the time and 
complexity of approval processes (thus increasing costs), 
reduce the density of development (thus increasing land costs), 
and may add excessive fees that further add to costs. As 
described in my response to Senator Brown's question, the 
Federal Government should consider adopting financial 
incentives for local governments that reduce these regulatory 
barriers. A lack of construction labor has also impeded the 
expansion of the residential construction market and so support 
for development of this workforce would also help expand new 
housing supply. The cost of lumber and other inputs into the 
construction process have also risen sharply over the past 
year, and so efforts to expand these supply chains would also 
help to lower costs of new development.
    Given the racial and ethnic diversity of both Millennials 
and Gen Z there is also a need to expand the supply of housing 
in communities of color where housing market conditions have 
been weak and current home values do not support either new 
construction or rehabilitation of existing homes. Subsidies 
targeted at both the rehabilitation of existing homes and new 
homes in these communities would both expand home ownership 
opportunities and serve to help revitalize communities that 
have suffered from a lack of public and private investment over 
many years.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                    FROM CHRISTOPHER HERBERT

Q.1. Renters and Borrowers Permanently Impacted Due to the 
Pandemic--I want to highlight an important issue that's on the 
horizon, and that is borrowers and renters who have experienced 
permanent job displacement due to the pandemic and will remain 
in forbearance or unable to pay their rent for the foreseeable 
future. As many employment repm1s and economic data suggests, 
this labor market development has dispropm1ionately impacted 
minorities and people of color.
    Can you talk about the importance of helping those who have 
lost their jobs permanently and how it has and will continue to 
impact their housing needs as a result of the pandemic? What 
additional relief or policy considerations should we be 
considering to help this segment of renters and borrowers?

A.1. As of April 2021, there were some 8 million fewer jobs 
than a year ago. While the economy is rebounding strongly from 
the worst effects of the pandemic, it is still likely that this 
jobs deficit will last for several years as the sectors of the 
economy hardest hit by the pandemic take time to recover. In 
addition to lingering job loss, the earnings power of many 
households will also be permanently disrupted by the pandemic, 
due to the loss of family members to COVID and to lingering 
disability associated with long-haul COVID symptoms. \1\ The 
American Rescue Plan passed in March, in addition to the CARES 
Act and the COVID-19 Relief Act passed last year, have provided 
a robust and much needed safety net for those experiencing 
economic loss due to the pandemic. But for those experiencing 
long-term loss of income, longer-term supports will be needed. 
For renters, expanding funding the availability of rental 
assistance through the Housing Choice Voucher and Low-Income 
Housing Tax Credit programs are called for to meet this 
expanded need for these supports--not to mention that even 
before the pandemic only roughly one if four income eligible 
households received assistance. \2\
---------------------------------------------------------------------------
     \1\ ``Researchers Are Closing in on Long COVID'', The Economist, 
May 1, 2020.
     \2\ Watson, Nicole Elsasser, Barry Steffen, Marge L.Martin, David 
A.Vandenbroucke. ``Worst Case Housing Needs: 2019 Report to Congress''. 
U.S. Department of Housing and Urban Development, June 2020. https://
www.huduser.gov/portal/publications/worst-case-housing-needs-2020.html
---------------------------------------------------------------------------
    Many homeowners have been protected from foreclosure during 
the pandemic by forbearance extended to borrowers with 
federally backed loans, which accounts for roughly 70 percent 
of all outstanding loans. To date, the vast majority of 
borrowers exiting forbearance have been able to reinstate their 
loans with very few in extended periods of delinquency. \3\ 
However, borrowers remaining in forbearance are those most 
likely to face extended loss of income and therefore the 
greatest difficulty in resuming mortgage payments. While 
today's widespread high rates of home price appreciation will 
provide many of these borrowers with home equity that would 
allow for home sales, such sales would mean forgoing any future 
benefits from home ownership. And many recent homebuyers who 
have experienced up to 18 months of missed mortgage, property 
tax and insurance payments will have accumulated substantial 
deficits that may not be covered by home equity. Meanwhile, 
there is nearly another third of borrowers who are not covered 
by forbearance mandates, importantly including manufactured 
homeowners financed through chattel loans. \4\ The American 
Rescue Plan (ARP) appropriated $10 billion in funding to assist 
homeowners with financial hardship due to the pandemic to help 
them maintain home ownership and avoid foreclosure. These funds 
can be used to cover a wide range of costs to make up mortgage 
delinquency, utility or property tax payments, fees, counseling 
costs, etc. Importantly, these funds can also be used to reduce 
principal and reduce interest rates for those who cannot resume 
their former mortgage obligations. This portion of the ARP 
holds promise to help support homeowners facing long term 
financial losses from the pandemic, but it is not clear where 
the magnitude of funding will be sufficient for the need. With 
forbearance ending for millions of homeowners this summer and 
fall it will be important to monitor the demand for this 
support to see if additional funding will be needed to maintain 
home ownership for those impacted by the pandemic.
---------------------------------------------------------------------------
     \3\ ``Mortgage Monitor Report: January 2021'' Black Knight, 
January 2021. https://cdn.blackknightinc.com/wp-content/uploads/2021/
03/BKI-MM-Jan2021-Report.pdf
     \4\ Choi, Jung Hyun and Laurie Goodman. ``22 Million Renters and 
Owners of Manufactured Homes Are Mostly Left Out of Pandemic 
Assistance''. Washington, D.C.: The Urban Institute, August 21, 2020. 
https://www.urban.org/urban-wire/22-million-renters-and-owners-
manufactured-homes-are-mostly-left-out-pandemic-assistance

Q.2. Promoting Minority home ownership--As we recover from the 
pandemic, I also want to ensure that everyone, especially in 
our rural and minority communities, have fair and equal access 
to credit to help increase home ownership.
    Ms. Nikitra Bailey, in response to the ongoing lack of 
participation among black and latino borrowers in the mortgage 
market, stated,

        Recent people-led protest[s] to address today's social 
        injustices are rooted in our nation's discriminatory 
        federal housing policies. These practices caused 
        families of color to accumulate less wealth and be more 
        susceptible to abusive subprime lending that cost Black 
        and Latino families $1 trillion in wealth. Sadly, the 
        current COVID-19 health crisis is devastating families 
        of color at a disproportionately higher rate than 
        whites. By not creating cost-efficient home ownership 
        opportunities for creditworthy borrowers of color, we 
        are denying millions of Americans the opportunity to 
        accumulate wealth, suppressing economic growth, and 
        widening the racial wealth gap. \5\
---------------------------------------------------------------------------
     \5\ CRL press release, Jun. 26, 2020, online: https://
www.responsiblelending.org/media/new-hmda-data-shows-mortgage-market-
continues-exclude-black-and-latino-borrowers.

    Can you discuss how critical it is to promote and increase 
---------------------------------------------------------------------------
minority home ownership as we recover from this pandemic?

A.2. As I described in my written testimony, there is very 
strong evidence that home ownership provides substantial 
financial benefits while providing greater stability and 
control over one's home. The financial benefits most obviously 
include the opportunity to create wealth over time and, as my 
testimony notes, home equity accounts for a large share of net 
worth among people of color. Research has also consistently 
found that racial disparities in home ownership account for a 
large share of racial disparities in household wealth. \6\ In 
addition to wealth accumulation, home ownership also fixes the 
largest portion of the monthly housing costs and provides an 
important shield against rising house prices. Once the home is 
paid for, living free and clear of mortgage debt provides an 
important dividend for households. home ownership also provides 
much greater security of tenure, allowing owners to stay in 
their homes and communities over time. The benefits of 
residential stability and the ability to be shielded from 
rising housing costs (while also benefiting from rising values) 
is of particular importance for people of color living in the 
many communities across the country experiencing gentrification 
over the past decades, putting many renters at risk of 
displacement from their homes and communities. For all of these 
reasons, expanding opportunities for people of color to own 
homes should be an important policy goal, particularly in light 
of the long history of discrimination in housing markets that 
have limited opportunities to own over time and produced the 
stark disparities in home ownership evident today more than 50 
years after passage of the Fair Housing Act. \7\
---------------------------------------------------------------------------
     \6\ Shapiro, Thomas, Tatjana Meschede, and Sam Osoro. ``The Roots 
of the Widening Racial Wealth Gap: Explaining the Black-White Economic 
Divide''. Brandeis University, Institute on Assets and Social Policy, 
Research and Policy Brief, February 2013. https://heller.brandeis.edu/
iere/pdfs/racial-wealth-equity/racial-wealth-gap/roots-widening-racial-
wealth-gap.pdf
     \7\ Rothstein, Richard. ``The Color of Law: A Forgotten History of 
How Our Government Segregated America''. Liveright Publishing, 2017.
---------------------------------------------------------------------------
    The pandemic has also highlighted other benefits of home 
ownership. One is the much greater ability of the Federal 
Government to extend protections to individual homebuyers by 
virtue of the fact that some 70 percent of all mortgages are 
backed by the Government. The forbearance protections afforded 
homeowners have provided robust supports that have kept 
millions of homeowners stably housed and shielded from both the 
threat of foreclosure and in position to negotiate resolution 
of accrued deficits with loan servicers. In contrast, the 
government has struggled to develop effective means of 
extending support to renters without such direct connections. 
In addition, the additional indoor and outdoor space associated 
with home ownership has proven to be of enormous benefit during 
the pandemic as home has become the locus for work and study 
and the need to social distance has placed a premium on private 
space. Increasing access to home ownership for people of color 
would be another important extension of these benefits that has 
been denied for generations.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                       FROM DIANE YENTEL

Q.1. Eviction Crisis Act and Protections for Renters--In your 
testimony, you mentioned the Eviction Crisis Act, which I 
introduced last Congress with Senators Bennet, Portman, and 
Young and NLIHC endorsed. In addition to providing an emergency 
housing assistance fund for rental aid and stability services, 
which you are recommending Congress expand into a permanent 
program, the bill contains a number of protections for renters 
and better tracking of eviction data.
    Are there any other renter protections or policies that 
Congress should consider in order to reduce evictions?

A.1. The power imbalance between renters and landlords put 
renters at greater risk of housing instability and, in worst 
cases, homelessness. Despite the broad and lasting consequences 
of evictions, only 10 percent of renters in eviction court 
receive legal representation, compared to 90 percent of 
landlords. In many states, landlords can evict renters for no 
reason, and there are no federal protections against arbitrary, 
retaliatory, or discriminatory evictions or other abusive 
practices by some landlords.
    Congress should enact legislation to establish a national 
right to counsel, which would help ensure more renters stay in 
their homes and mitigate harm when eviction is unavoidable. 
Banning credit reporting agencies from including eviction-
related information after three years would stop evictions from 
following families for years, and make it easier for them to 
find safe, quality housing in the future.
    Creating ``just cause'' eviction protections would ensure 
greater housing stability, particularly for survivors of 
domestic violence, dating violence, sexual assault, or 
stalking, who in many states can be evicted for the behavior of 
their abusive partners. Additionally, banning the use of ``one 
strike'' or ``no fault'' eviction policies in federally 
assisted housing would help more people remain stably housed. 
Currently, providers of federally assisted housing may evict 
tenants for minor, one-time criminal activity or the criminal 
activity of a guest, even if the tenant was unaware of the 
activity taking place. Enacting these policies would help level 
the playing field between renters and landlords, reduce 
evictions and mitigate the long-term impact of evictions on 
families.
    Other needed renter protections include:

    Prohibiting source of income discrimination to help 
        ensure that landlords do not discriminate against 
        renters with rental assistance or other sources of 
        income.

    Expanding the Fair Housing Act to ban 
        discrimination based on sexual orientation, gender 
        identity, marital status, and source of income.

    Increasing unrestricted resources for legal 
        services.

    Barring federally assisted landlords from screening 
        out applicants or evicting tenants because of the 
        actions of an abuser and from retaliating against a 
        tenant for calling emergency assistance for help, and 
        ensure survivors of domestic violence, dating violence, 
        sexual assault, or stalking have access to safe, 
        accessible homes and the ability to leave unsafe 
        housing situations without risking possible 
        homelessness.

    Providing housing resources to all income-eligible 
        households, regardless of immigration status.

    Establishing anti-rent gouging protections for 
        renters and require landlords to disclose any and all 
        fees in advance of lease signing.

    Discouraging speculators from driving up housing 
        costs.

    Regulating tenant and credit reporting agencies and 
        banning them from including eviction-related 
        information that did not result in a judgement against 
        the renter, or that occurred during the pandemic, and 
        all other eviction-related information after 3 years.

    Supporting tenant organizing.

    Establishing the right of tenants to renew leases 
        and for first right of purchase.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
             SENATOR CORTEZ MASTO FROM DIANE YENTEL

Q.1. The American Rescue Plan included more than $60 billion to 
subsidize the rent for families who became ill or were laid off 
during the pandemic.
    Some property owners will not accept vouchers--what needs 
to happen to make sure that those families are able to use 
their vouchers?

A.1. In order to ensure families are able to utilize housing 
choice vouchers and other forms of rental assistance, Congress 
must enact source of income discrimination protections. 
Currently, landlords in the private market can deny residence 
to potential tenants attempting to use a voucher to obtain 
housing. As a result, even after waiting months or years to 
obtain a voucher, families sometimes can't ``lease up'' within 
the required timeframe or can only find a landlord willing to 
rent to them in high-poverty neighborhoods with less access to 
higher performing schools and economic opportunities. Source of 
income discrimination protections would ensure tenants are able 
to use vouchers in the neighborhoods of their choice.
    One option that may help avoid the problem of landlord 
participation is to provide rental assistance through a 
renters' tax credit. A tax credit could provide the similar 
assistance as a voucher, but it would be provided directly to 
the renter as a ``hidden'' subsidy. Congress recently enacted a 
major expansion of the child tax credit and allowed these 
resources to be provided on a monthly basis. This development 
could serve as a model for providing a monthly renters' tax 
credit.
    Other reforms are also needed to ensure that families are 
better able to make use of their rental assistance, including 
using Small Area Fair Market Rents (SAFMRs) and recruiting 
landlord participation.

Q.2. Rents have risen quite high in parts of Nevada. What 
options does a tenant have when they find a home or apartment 
to rent but the rent is higher than the voucher provides?

A.2. Public Housing Agencies have the flexibility to set 
voucher payment standards, which establish the maximum amount 
of subsidy that the PHA will provide to cover the costs of 
rental housing. Typically, PHAs can fluctuate the payment 
standard from 90 to 110 percent of the Fair Market Rent (FMR), 
though PHAs can seek approval by HUD to increase the payment 
standard above that amount (between 110 and 120 percent). PHAs 
can establish a single set of payment standards for the entire 
jurisdiction or can use different sets of payment standards, 
reflecting cost differences in various communities.

Q.3. Can we provide more subsidy to families with children 
moving to amenity rich communities?

A.3. NLIHC supports the Family Stability and Opportunity 
Voucher Act, introduced by Senators Chris Van Hollen (D-MD) and 
Todd Young (R-IN) to provide 500,000 housing vouchers to 
families with young children. These resources would be paired 
with housing mobility counseling to give families greater 
choice about where they want to live.
    Public Housing Agencies (PHAs) in metropolitan areas have 
the option of setting voucher payment standards based on Small 
Area Fair Market Rents (SAFMRs) in higher-rent zip codes within 
their jurisdiction. Rather than basing payment standards on 
Fair Market Rents, which often encompass large areas with 
variable rent costs, SAFMRs are based on rents in particular 
zip codes and more accurately reflect the cost of housing in 
high-cost areas. Using SAFMRs can expand access for low-income 
households to higher-opportunity areas and make the program 
more cost-effective.
    Currently, PHAs in only 22 metropolitan areas are required 
to use SAFMRs. While other PHAs may also use SAFMRs, in order 
to improve voucher utilization, required use of SAFMRs should 
be expanded, but with certain protections. For example, areas 
with low vacancy rates should be excluded from required SAFMR 
participation. Another protection would require voucher 
households in low-rent neighborhoods whose voucher payment 
standard decreases due to SAFMR implementation to be held 
harmless so that their rent burden does not increase. This 
would also help prevent owners from leaving the voucher 
program.
    Using SAFMRs and enacting source of income discrimination 
protections would help ensure families are able to use vouchers 
in more neighborhoods. Additionally, investing in the 
construction of deeply affordable, accessible housing in an 
equitable manner, and providing desperately needed resources to 
repair and expand the stock of public housing, would provide 
families with greater options when it comes to finding a safe, 
affordable place to live.
    Making the expansion of the Child Tax Credit (CTC) and 
Earned Income Tax Credit (EITC) included in the American Rescue 
Plan permanent would help provide extra assistance to families 
with children, regardless of where they live.

Q.4. Do local governments or foundations have the resources to 
provide additional assistance?

A.4. While addressing the affordable housing crisis will 
require resources from multiple avenues, including local and 
state governments, the Federal Government is the only entity 
that can provide the resources at the scale necessary to ensure 
safe, accessible homes for people with the lowest incomes. 
Federal intervention to equitably increase the supply of deeply 
affordable, accessible housing, to bridge the gap between 
renters' incomes and the cost of rent, and to strengthen renter 
protections are needed to end homelessness and housing poverty.

Q.5. What options do the housing authorities have to work with 
HUD to ensure that Fair Market Rents are accurate?

A.5. Public Housing Agencies have the flexibility to set 
voucher payment standards, which establish the maximum amount 
of subsidy that the PHA will provide to cover the costs of 
rental housing. Typically, PHAs can fluctuate the payment 
standard from 90 to 110 percent of the Fair Market Rent (FMR), 
though PHAs can seek approval by HUD to increase the payment 
standard above that amount (between 110 and 120 percent). PHAs 
can establish a single set of payment standards for the entire 
jurisdiction or can use different sets of payment standards, 
reflecting cost differences in various communities.
    Public Housing Agencies have the option of setting voucher 
payment standards based on Small Area Fair Market Rents 
(SAFMRs) in higher-rent zip codes under their jurisdiction. 
Rather than basing payment standards on Fair Market Rents, 
which often encompass large areas with variable rent costs, 
SAFMRs are based on rents in particular zip codes and more 
accurately reflect the cost of housing in high-cost areas. 
Using SAFMRs can expand access for low-income households to 
higher-opportunity areas and make the program more cost-
effective.
    Currently, PHAs in only 22 metropolitan areas are required 
to use SAFMRs. While other PHAs may also use SAFMRs, in order 
to improve voucher utilization, required use of SAFMRs should 
be expanded, but with certain protections. For example, areas 
with low vacancy rates should be excluded from required SAFMR 
participation. Another protection would require voucher 
households whose voucher payment standard decreases due to 
SAFMR implementation to be held harmless so that their rent 
burden does not increase as well as to prevent owners from 
leaving the voucher program.
    PHAs can challenge FMRs if they think they are too low, but 
the PHA must cover the cost to produce statistically valid 
local rent surveys covering their entire FMR-area. HUD's FMR is 
based on the American Community Survey, which may not 
accurately reflect rental costs in certain rapidly changing 
housing markets. Congress should consider providing federal 
resources for HUD to conduct or support local rent to help 
ensure accurate FMRs.

Q.6. Prior to the pandemic, only 1 in 4 eligible households 
could receive rental housing assistance. With these new 
investments, how many more do you think will be able to receive 
help paying the rent?

A.6. Most of the resources in the American Rescue Plan are 
intended to address the immediate, urgent needs of renters who 
are at risk of losing their homes during the pandemic. We 
continue to need investments to ensure long-term housing 
stability. Congress should include in any infrastructure plan 
its top priorities: an expansion of rental assistance to every 
eligible household, $70 billion to repair public housing, and 
$40 billion for the national Housing Trust Fund to build and 
preserve rental homes affordable to people with the greatest 
needs.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                       FROM DIANE YENTEL

Q.1. Renters and Borrowers Permanently Impacted Due to the 
Pandemic--I want to highlight an important issue that's on the 
horizon, and that is borrowers and renters who have experienced 
permanent job displacement due to the pandemic and will remain 
in forbearance or unable to pay their rent for the foreseeable 
future. As many employment reports and economic data suggests, 
this labor market development has disproportionately impacted 
minorities and people of color.
    Can you talk about the importance of helping those who have 
lost their jobs permanently and how it has and will continue to 
impact their housing needs as a result of the pandemic? What 
additional relief or policy considerations should we be 
considering to help this segment of renters and borrowers?

A.1. Renters with long-term job loss may need longer-term 
assistance to help cover the cost of rent. Rental assistance is 
a critical tool for helping people with low incomes afford 
decent, stable homes, and avoid homelessness, but 3 out of 4 
households who qualify for rental assistance do not receive it 
because of chronic underfunding. Expanding rental assistance to 
meet the needs of all housing cost-burdened households with low 
incomes is key to any successful strategy to solve the 
affordable housing crisis and end housing instability. 
Moreover, we must invest in the national Housing Trust Fund to 
increase the supply of housing affordable to people with the 
lowest incomes.

Q.2. Promoting Minority Home Ownership--As we recover from the 
pandemic, I also want to ensure that everyone, especially in 
our rural and minority communities, have fair and equal access 
to credit to help increase home ownership.
    Ms. Nikitra Bailey, in response to the ongoing lack of 
participation among black and latino borrowers in the mortgage 
market, stated,

        Recent people-led protest[s] to address today's social 
        injustices are rooted in our nation's discriminatory 
        federal housing policies. These practices caused 
        families of color to accumulate less wealth and be more 
        susceptible to abusive subprime lending that cost Black 
        and Latino families $1 trillion in wealth. Sadly, the 
        current COVID-19 health crisis is devastating families 
        of color at a disproportionately higher rate than 
        whites. By not creating cost-efficient home ownership 
        opportunities for creditworthy borrowers of color, we 
        are denying millions of Americans the opportunity to 
        accumulate wealth, suppressing economic growth, and 
        widening the racial wealth gap. \1\
---------------------------------------------------------------------------
     \1\ CRL press release, Jun. 26, 2020 online: https://
www.responsiblelending.org/media/new-hmda-data-shows-mortgage-market-
continues-exclude-black-and-latino-borrowers.

    Can you discuss how critical it is to promote and increase 
---------------------------------------------------------------------------
minority home ownership as we recover from this pandemic?

A.2. Home ownership can be an important wealth-building tool, 
one that the Federal Government purposefully excluded many 
Black families from for generations. As a result of this 
intentional and systemic racism, there is a tremendous 
generational wealth gap between white and Black households that 
have resulted in clear racial disparities in housing and 
homelessness today.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
            SENATOR CORTEZ MASTO FROM NIKITRA BAILEY

Q.1. A recent report from the National Association of Realtors 
found that Black households are more than twice as likely as 
white ones to be rejected for mortgage loans. I am deeply 
concerned we continue to see discrimination in mortgage lending 
against Black and Latino people.
    What policies do you recommend we prioritize to ensure fair 
housing?

A.1. Thank you for your question, Senator Cortez Masto. Sadly, 
our nation's fair housing laws have yet to be fully enforced. 
We are a long way from realizing the promise of the Fair 
Housing Act. The nation's first fair housing law, The Civil 
Rights Act of 1866, was passed during the Reconstruction period 
following the Civil War and outlawed discrimination in housing. 
The 1866 law went unenforced for 102 years before the passage 
of the Fair Housing Act of 1968 because it only provided a 
private right of action. The fact that only private plaintiffs 
could bring suit for discrimination limited the effectiveness 
of the legislation as the newly freed formerly enslaved 
Africans lacked the financial resources to hire an attorney. 
History teaches us that as the formerly enslaved Africans 
became citizens, most Black Americans never received the 40 
acres of land promised by General Sherman's Special Field Order 
No. 15.
    The climate in which the 1968 act became law must be noted. 
The Fair Housing Act (FHA) was swiftly passed by the Congress 
only after Dr. Martin Luther King, Jr. was assassinated in 
Memphis, TN.
    Between 1866 and 1968, the Federal Government did not 
enforce the 1866 law's prohibition against housing 
discrimination. Therefore, Black Americans and other people of 
color were locked out of the Federal Government's New Deal 
subsidies that made home ownership more affordable and expanded 
the middle class. Due to federally sanctioned redlining at the 
time, most of the Federal Government's home ownership support 
was provided to white families. The Federal Government 
subsidized homes in predominately white suburbia-where builders 
included requirements that no homes be sold to Black Americans. 
In fact, only 2 percent of FHA insured mortgage loans went to 
Black and brown families in the program's first 35 years. \1\ 
In the state of Mississippi alone, just 2 out of 3,229 VA 
insured mortgages went to Black servicemembers seeking to 
finance a home, business, or farm in the first 3 years of the 
program. \2\
---------------------------------------------------------------------------
     \1\ Dedrick Asante-Muhammad, et. al, The Road to Zero Wealth: How 
the Racial Wealth Divide is Hallowing Out America's Middle Class, at 15 
(September 2017), https://prosperitynow.org/files/PDFs/road-to-zero-
wealth.pdf.
     \2\ Id.
---------------------------------------------------------------------------
    These policies bestowed upon white families a crucial 
measure of financial stability and a cushion against economic 
setbacks that were denied to families of color. Policies and 
practices underlying these federal programs included denial of 
credit for qualified borrowers buying in predominantly Black 
neighborhoods, thereby depressing the value of homes in those 
neighborhoods. \3\
---------------------------------------------------------------------------
     \3\ Terry Gross, ``A `Forgotten History' of How the U.S. 
Government Segregated America'', NPR Fresh Air, May 3, 2017, 
www.npr.org/2017/05/03/526655831/a-forgotten-history-of-how-the-u-s-
government-segregated-america.
---------------------------------------------------------------------------
    These policies are a significant contributor to today's 
racial wealth gaps where the median white family has ten times 
the wealth of the median Black family and eight times the 
wealth of the median Latino family. \4\ In fact, the racial 
wealth gap between Black and white families grew from about 
$100,000 in 1992 to $154,000 in 2016. \5\ The median white 
family gained significantly more wealth, with the median 
increasing by $54,000, while median wealth for Black families 
did not grow in real terms over the same time period. \6\ The 
racial wealth gap contributes to the fact that in the 46 
largest housing markets in the country, a median income Black 
household could only afford 25 percent of homes on the market 
last year in comparison to the 57 percent that a median income 
white household could afford. \7\ It will require focused and 
bold action to reverse these inequities. If current trends 
continue, it could take as long as 228 years for the average 
Black family to reach the level of wealth white families own 
today. \8\ For the average Latino family, matching the wealth 
of white families could take 84 years. \9\ (Pages 3-8 of my 
written testimony offers greater details on these harms).
---------------------------------------------------------------------------
     \4\ Asset Building Policy Network, ``The Hispanic-White Wealth Gap 
Infographic'' (September 2019), https://prosperitynow.org/sites/
default/files/resources/ABPN-Hispanic-White-
Racial%20Wealth%20Gap%20Infographic-Final.pdf; Nick Noel, Duwain 
Pinder, Shelley Stewart III, and Jason Wright, ``The Economic Impact of 
Closing the Racial Wealth Gap'', McKinsey & Company (August 2019), at 
5, Exhibit 1, https://www.mckinsey.com/industries/public-and-social-
sector/our-insights/the-economic-impact-of-closing-theracial-wealth-
gap.
     \5\ Nick Noel, Duwain Pinder, Shelley Stewart III, and Jason 
Wright, ``The Economic Impact of Closing the Racial Wealth Gap'', 
McKinsey & Company, August 2019, at 5, Exhibit 1, https://
www.mckinsey.com/industries/publicand-social-sector/our-insights/the-
economic-impact-of-closing-the-racial-wealth-gap.
     \6\ Id.
     \7\ Paul Davidson, ``Black Households Can Afford Just 25% of Homes 
For Sale'', USA Today, October 15, 2019, https://www.usatoday.com/
story/money/2019/10/15/homes-sale-black-households-can-afford-just-25-
percent-houses-market/3976383002.
     \8\ See Dedrick Asante-Muhammad, et al., ``The Road to Zero 
Wealth'', at 15 (Sept. 2017), https://prosperitynow.org/files/PDFs/
road--to--zero--wealth.pdf.
     \9\ Id.
---------------------------------------------------------------------------
    The genius of the Fair Housing Act is that it outlawed 
discrimination in housing and requires the Federal Government 
to affirmatively further fair housing, which means take steps 
to proactively create thriving inclusive communities.
    Therefore, HUD's disparate impact and Affirmatively 
Furthering Fair Housing (AFFH) rules must be restored by the 
Biden Administration. Additionally, more must be done to 
promote the use of the Equal Credit Opportunity Act's (ECOA) 
special purpose credit programs provisions. These provisions 
allow lenders to create and design programs to reach borrowers 
that they currently underserve. Congress can inquire to see if 
lenders are creating these programs. Lenders should not push 
for safe harbors to create these programs as they are fully 
permissible under ECOA and Regulation B. Moreover, CFPB, HUD, 
and DOJ should encourage the use of special purpose credit 
programs.
    Also, the Community Reinvestment Act (CRA) must be enforced 
with a focus on racial justice. We urge the Congress to require 
the Office of the Comptroller of the Currency, Federal Reserve 
Board, and
    Federal Deposit Insurance Corporation to collect data 
comparing residential, small business, and commercial lending 
by banks in low-income, minority, and distressed neighborhoods 
to such lending in other neighborhoods.
    Congress should also require the CFPB, HUD, FHFA, and DOJ 
to report on their efforts to ensure that algorithms are not 
discriminating, are being supervised for fair lending 
compliance, and proper enforcement is taken against entities 
using artificial intelligence/machine learning model decisions 
that violate the FHA and ECOA.
    Finally, Congress should require the FHFA to ensure that 
the GSEs' broad public interest duties are met by requesting 
quarterly reports on their affordable housing goals. Both 
Fannie Mae and Freddie Mac are currently woefully under 
performing in ensuring adequate support for Black, Latino, and 
other communities of color in conventional lending since the 
Great Recession. The FHFA itself is making it more difficult 
for low-to-moderate income families to secure a loan backed by 
the enterprises, including loan refinances for families that 
are hardest-hit by COVID-19. Also, Congress must require FHFA 
to report on steps it is taking to ensure that redlining is 
factored into any climate risk assessments and that the 
assessments comply with existing fair lending laws.

Q.2. Home value appraisals are critical to ensuring that 
homeowners receive fair value for their prope1ty. Home 
appraisals also ensure homebuyers do not overpay.
    How should we address the documented problem of bias in the 
appraisals?

A.2. Our Nation's fair housing/lending laws apply to 
appraisals, and Congress must urge regulators to ensure that 
they are being fully enforced.
    While numerous news stories have highlighted examples of 
racial bias in the appraisal process, \10\ there is a growing 
body of research that demonstrates appraisal discrimination is 
a systemic issue. \11\ Recent research has found that even 
after accounting for structural and neighborhood 
characteristics of homes, homes in Black neighbors were valued 
on average 23 percent less than they would have been if the 
residents of the neighborhood were mostly white. \12\ This 
translates to owner-occupied homes in Black neighborhoods being 
undervalued by $48,000 per home on average, amounting to $156 
billion in cumulative losses. \13\ Moreover, a 2020 study found 
that neighborhood racial composition was an even stronger 
determinant of a home's appraised values in 2015 than it was in 
1980. \14\ In fact, the race appraisal gap has doubled since 
1980. \15\ Another 2020 study found that Automated Valuation 
Models (AVMs) in majority Black neighborhoods produced a larger 
percentage magnitude of inaccuracies, relative to the 
underlying sales price, than AVMs in majority-white 
neighborhoods. \16\
---------------------------------------------------------------------------
     \10\ Julian Glover, ``Black California Couple Lowballed by $500K 
in Home Appraisal, Believe Race Was a Factor'', ABC 7 News, Feb. 12, 
2021; Debra Kamin, ``Black Homeowners Face Discrimination in 
Appraisals'', New York Times, Aug. 25, 2020; Troy McMullen, ``For Black 
Homeowners, a Common Conundrum With Appraisals'', Washington Post, Jan. 
21, 2021; Russell Haythorn, ``An Unconscious Bias? Biracial Denver 
Couple Says They Faced Discrimination on Home Appraisal'', The Denver 
Channel, Nov. 18, 2020.
     \11\ Brentin Mock, ``What It Will Take To Close the Race Gap in 
Home Appraisals'', Bloomberg CityLab, March 3, 2021; Andre Perry, 
Jonathan Rothwell, and David Harshbarger, ``The Devaluation of Assets 
in Black Neighborhoods'', The Brookings Institution Metropolitan Policy 
Program (Nov. 2018); Junia Howell and Elizabeth Korver-Glen, 
``Neighborhoods, Race, and the Twenty-first Century Housing Appraisal 
Industry'', 4 Sociology of Race and Ethnicity 473 (2018), (finding 
substantial differences in home values in communities of color even 
after controlling for home features, neighborhood amenities, 
socioeconomic status and consumer demand).
     \12\ Andre Perry, Jonathan Rothwell, and David Harshbarger, ``The 
Devaluation of Assets in Black Neighborhoods'', The Brookings 
Institution Metropolitan Policy Program (Nov. 2018), https://
www.brookings.edu/research/devaluation-of-assets-in-black-
neighborhoods/.
     \13\ Id.
     \14\ Junia Howell and Elizabeth Korver-Glen, ``The Increasing 
Effect of Neighborhood Racial Composition on Housing Values'', 1980-
2015, Social Problems (2020), https://academic.oup.com/socpro/advance-
article/doi/10.1093/socpro/spaa033/5900507.
     \15\ Brentin Mock, ``A Neighborhood's Race Affects Home Values 
More Now Than in 1980'', Bloomberg CityLab (Sept. 21, 2020), https://
www.bloomberg.com/news/articles/2020-09-21/race-gap-in-home-appraisals-
has-doubled-since-1980.
     \16\ Michael Neal, Sara Strochak, Linna Zhu, and Caitlin Young, 
``How Automated Valuation Models Can Disproportionately Affect 
Majority-Black Neighborhoods'', Urban Institute (Dec. 2020), https://
www.urban.org/sites/default/files/publication/103429/how-automated-
valuation-models-can-disproportionately-affect-majority-black-
neighborhoods-1.pdf.
---------------------------------------------------------------------------
    We must address discrimination in the valuation of homes in 
communities of color and owned by people of color. It is 
critical to consider all changes in the appraisal business 
model, including increased use of AVMs, with an equity lens. 
All processes must be judiciously examined for fair lending 
risk and should test outcomes for their effect and impact on 
people and communities of color. Additionally, there should be 
robust review of Federal appraisal standards, including ethics 
standards, increased training on unconscious bias for 
appraisers, and expanded initiatives to bring more appraisers 
of color into the field. Moreover, the use of sales comparisons 
in a neighborhood carries the legacy of redlining into the 
present. It allows historically undervalued appraisals to 
influence current values. As the 2020 study stated, ``Since no 
steps were taken to rectify the historic inequities, this 
approach has enabled such inequalities to persist.'' \17\ The 
appraisal industry should continue to explore more equitable 
alternative methods. We concur with the recommendations of the 
National Fair Housing Alliance as outlined in their response to 
FHFA's recent RFI on appraisals. \18\
---------------------------------------------------------------------------
     \17\ Junia Howell and Elizabeth Korver-Glen, ``The Increasing 
Effect of Neighborhood Racial Composition on Housing Values, 1980-
2015'', Social Problems (2020), https://academic.oup.com/socpro/
advance-article/doi/10.1093/socpro/spaa033/5900507.
     \18\ Comment letter from National Fair Housing Alliance to FHFA on 
Request for Information on Appraisal-Related Policies, Practices, and 
Processes (Feb. 26, 2021), https://www.fhfa.gov//AboutUs/Contact/Pages/
input-submission-detail.aspx?RFIId=1320.

Q.3. Can you elaborate on the importance of HMDA data to 
---------------------------------------------------------------------------
rooting out discrimination?

A.3. Yes, we cannot watch for discrimination that we cannot 
see. Enacted by Congress in 1975 to provide transparency in the 
mortgage market, the Home Mortgage Disclosure Act (HMDA) 
requires an annual public accounting of the nation's mortgage 
lending. Its data provides critical information for both the 
public and financial sectors by alerting the nation to trends 
on the groups of Americans that are receiving mortgage loans 
from financial institutions. One of the critical data points 
that HMDA requires is for lenders to report on the race and 
ethnicity of mortgage loan applicants. In recent years, 
however, Congress and CFPB have made legislative and regulatory 
changes to weaken HMDA reporting, resulting in decreased 
transparency. CFPB finalized a rule that would increase the 
HMDA reporting threshold for mortgages, which means that some 
smaller lenders may not have to report at all. CFPB also 
announced an advance notice of proposed rulemaking that would 
solicit feedback on the costs and benefits of collecting and 
reporting the additional data points in the 2015 HMDA rule. 
Additionally, in 2019, CFPB announced it would no longer host 
or maintain the HMDA Explorer, a vital and user-friendly tool 
to provide a clear view of the mortgage market and who it 
serves. It is essential that CFPB replace the data access tool 
and address the gap in accessibility that will have occurred 
between the release of the 2018 HMDA data and the launch of a 
replacement to HMDA Explorer.
    Thus, in its annual report to the Congress, CFPB should 
answer how it is proceeding with the above actions.

Q.4. You noted in your answers to my questions regarding the 
Home Mortgage Disclosure Act (HMDA) that the Consumer Financial 
Protection Bureau's HMDA rep01ts were critical to uncovering 
discrimination--What steps should the CFPB take to ensure HMDA 
data is accessible and available for outside observers to 
analyze the data and root out discrimination in mo1tgage 
lending?

A.4. The CFPB must also conduct research into the racial 
disparities in mortgage approvals and mortgage pricing, 
including controlling for FICO, which the CFPB's initial 2019 
HMDA report failed to do. Only the Bureau can do this as FICO 
is not publicly released. We also urge CFPB to immediately 
cease work on the HMDA rules listed in the Unified Agenda which 
would narrow data collected under HMDA and codify the privacy 
policy into Regulation B; create a ``trusted researcher'' 
program to allow others to access the full set of HMDA data; 
and reinstate the requirement for lenders to submit quarterly 
data so CFPB can observe and report on trends in closer to real 
time.

Q.5. Could you explain the impo1tance of the additional HMDA 
data that was required under Section 1094 of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act and how this 
data would assist regulators and outside observers?

A.5. The amendments made by the Dodd-Frank Act expanded the 
scope of information relating to mortgage loans that must be 
collected and maintained under HMDA. This includes information 
about credit score, the points and fees payable at origination, 
the difference between the annual percentage rate associated 
with the loan and the benchmark rate(s) for all loans, the term 
of any prepayment penalty, the value of any real property 
pledged or proposed to be pledged as collateral, the actual or 
proposed term in months of the mortgage loan, and the age of 
applicant(s).
    The Bureau also has the authority to add other data 
requirements pursuant to the Bureau's discretionary authority 
to carry out the purposes of HMDA. These new data points shed 
additional light on mortgage lending patterns. The data help 
researchers, regulators, and advocates spot possible 
discrimination, including patterns of redlining and 
discriminatory loan denials.

Q.6. Can you elaborate on the importance of HMDA data for more 
rural localities?

A.6. Yes, HMDA's data collection informs us about which lenders 
are making loans in underserved rural localities. Further, 
rural communities also reflect the diversity of the nation and 
count families of color among residents. It is critically 
important that we understand if the mortgage credit needs of 
rural communities are being met. Many large lenders fail to 
provide access to small dollar mortgage loans while their 
investment arms benefit substantially from their vanishing 
presence in the single-family market. In 2019, nearly 475,000 
homes priced below $80,000 were sold, according to U.S. Census 
Bureau data with only 43 percent of those financed with a 
mortgage loan. COVID-19 has worsened this reality as the focus 
of mortgage originations have shifted to the wealthiest 
borrowers leaving many credit worthy families with limited 
mortgage access, which has fallen disproportionately on 
families of color who typically rely on small balance mortgage 
loans to purchase a home.
    Furthermore, FHA and the GSEs' bulk sales of distressed 
loan sales coupled with the lack of small balance mortgage 
lending is pulling modest and affordable homes off the market. 
These public interest entities accrued large numbers of loans 
facing foreclosure. Rather than selling them individually as a 
local bank would do, they auctioned them off in large pools. 
While this helped FHA and the GSEs increase their reserves and 
capital more quickly, hedge funds--the largest buyers of these 
pools--converted many of the ultimately foreclosed loans into 
rental properties. This reduced the supply of modest homes for 
purchase by individuals and altered the character of 
neighborhoods where the percentage of homeowners declined. The 
sale of these distressed pools has continued, and hedge funds 
have announced plans to expand their conversion programs. \19\ 
This, along with other factors limiting new starter home 
construction, including labor and materials shortages and 
increased costs of both, created a shortage of these starter 
homes and a substantial barrier to families trying to enter 
home ownership. \20\ Instead of bulk sales to investors, more 
needs to be done with these properties to ensure that families 
can purchase them to help preserve access to home ownership in 
low-to-moderate income communities and communities of color as 
opposed to only providing rental as an option for hardworking 
families.
---------------------------------------------------------------------------
     \19\ Julia Gordon, ``The Dark Side of Single-Family Rental'', 
ShelterForce (July 30, 2018). Others have argued that these sales are 
beneficial in that the buyers have fewer restrictions on the loan 
modifications they can offer. Laurie Goodman and Dan Magder, ``Selling 
HUD's Nonperforming Loans: A Win-Win for Borrowers'', Investors and 
HUD, Urban Institute (January 2016). A better approach is reform of the 
HUD foreclosure process; substantial improvements have been implemented 
in the GSE process.
     \20\ Michael Neal, ``Residential Construction Down in June, Eye on 
Housing'', National Association of Homebuilders (July 18, 2018), http:/
/eyeonhousing.org/2018/07/residential-construction-down-injune/?utm-
campaign=EOE2018&-ga=2.126940237.1759872631.1535413976-
631253769.1535413976.
---------------------------------------------------------------------------
    Small dollar mortgages are essential in rural communities 
and Congress must require the banking regulators to ensure the 
availability of mortgage credit in these communities.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                      FROM NIKITRA BAILEY

Q.1. Renters and Borrowers Permanently Impacted Due to the 
Pandemic--I want to highlight an important issue that's on the 
horizon, and that is bonowers and renters who have experienced 
pe1manentjob displacement due to the pandemic and will remain 
in forbearance or unable to pay their rent for the foreseeable 
future. As many employment rep01ts and economic data suggests, 
this labor market development has dispropo1tionately impacted 
minorities and people of color.
    Can you talk about the importance of helping those who have 
lost their jobs permanently and how it has and will continue to 
impact their housing needs as a result of the pandemic? What 
additional relief or policy considerations should we be 
considering to help this segment of renters and borrowers?

A.1. Thank you for the question, Senator Warnock.
    The COVID-19 crisis is having a disproportionate impact on 
families of color, by nearly every metric. Data has shown that 
the virus is infecting and killing people of color at a much 
higher rate. \1\ People of color are overrepresented among 
essential workers who are generally not able to work from home 
and are more likely to encounter the virus. \2\ From February 
to April 2020, the number of Black business owners dropped by 
440,000 or 41 percent, compared to a 17 percent decline in 
white small business owners. \3\ Families of color who are 
hardest hit by COVID-19 are the same families long denied 
equity in home ownership opportunities. \4\ Indeed, there are 
statistically significant correlations between redlining and 
susceptibility to COVID-19. \5\ The same low-income 
neighborhoods of color that were intentionally cut off from 
lending and investment today suffer from reduced wealth, 
greater poverty, lower life expectancy, and higher incidence of 
chronic disease that are risk factors for poor outcomes from 
the coronavirus. \6\
---------------------------------------------------------------------------
     \1\ Centers for Disease Control and Prevention, ``COVID-19 Racial 
and Ethnic Health Disparities'', https://www.cdc.gov/coronavirus/2019-
ncov/community/health-equity/racial-ethnic-disparities/index.html.
     \2\ Tiana N. Rogers, Charles R. Rogers, Elizabeth VanSant-Webb, 
Lily Y. Gu, Bin Yan, Fares Qeadan, ``Racial Disparities in COVID-19 
Mortality Among Essential Workers in the United States'', World Medical 
& Health Policy, 2020; DOI, 10.1002/wmh3.358.
     \3\ Robert W. Fairle, ``The Impact of COVID-19 on Small Business 
Owners: Evidence of Early-Stage Losses From the April 2020 Current 
Population Survey'', National Bureau of Economic Research, Working 
Paper 27309 (June 2020), https://www.nber.org/papers/w27309.
     \4\ See Alan Gomez, et al.,`` `An Unbelievable Chain of 
Oppression': America's History of Racism Was a Preexisting Condition 
for COVID-19'', USA Today, Oct. 12, 2020, https://www.usatoday.com/in-
depth/news/nation/2020/10/12/coronavirus-deaths-reveal-systemic-racism-
united-states/5770952002/; Andre M. Perry, ``Black Americans Were 
Forced Into `Social Distancing' Long Before the Coronavirus'', The 
Brookings Institution (March 20, 2020), https://www.brookings.edu/blog/
the-avenue/2020/03/20/black-americans-were-forced-into-social-
distancing-long-before-the-coronavirus/.
     \5\ Jason Richardson, Bruce C. Mitchell, Helen C.S. Meier, Emily 
Lynch, Jad Edlebi, ``Redlining and Neighborhood Health'', NCRC, 
September 2020, https://ncrc.org/holc-health/.
     \6\ Id.
---------------------------------------------------------------------------
    According to the Bureau of Labor Statistics, while the 
unemployment rate of whites, which peaked at 14 percent in 
April, has dropped to 5.6 percent, the reported unemployment 
rate of Blacks stands at 9.9 percent and actually increased in 
February, even while the economy added over 350,000 new jobs. 
And a recent report from the Center for Economic and Policy 
Research demonstrates that BLS' surveys systematically 
understate the unemployment rate for Blacks relative to whites. 
\7\
---------------------------------------------------------------------------
     \7\ Yixia Cai and Dean Baker, ``Masking Real Unemployment: The 
Overall and Racial Impact of Survey Non-Response on Measured Labor 
Market Outcomes'', Center for Economic and Policy Research (March 
2021), https://www.ineteconomics.org/research/research-papers/masking-
real-unemployment-the-overall-and-racial-impact-of-survey-non-response-
on-measured-labor-market-outcomes.
---------------------------------------------------------------------------
    Further, the unemployment rate captures only those who are 
still deemed to be within the labor force and thus misses the 
decline in workforce participation. That has been especially 
pronounced for Black women and Latinas: there are 9.9 percent 
fewer Black women and 8.6 percent fewer Latinas in the 
workforce today than at the start of the pandemic.
    Not surprisingly given their employment situation, Black 
and brown families are struggling to make ends meet. The most 
recent Household Pulse Survey from the Bureau of the Census 
found that 44 percent of Blacks and 43 percent of Hispanics 
reported that they were finding it difficult to pay their usual 
household expenses, a rate more than 60 percent higher than for 
whites. Moreover, according to a CFPB report, as of December, 
almost one in five Black homeowners and one in seven Hispanic 
homeowners reported being behind on their mortgage compared to 
only one in twenty white homeowners. \8\
---------------------------------------------------------------------------
     \8\ CFPB, ``Housing Insecurity and the COVID-19 Pandemic'' (March 
2021), https://files.consumerfinance.gov/f/documents/cfpb-Housing-
insecurity-and-the-COVID-19-pandemic.pdf.
---------------------------------------------------------------------------
    As the uneven recovery to the pandemic continues, it is 
essential that Black and brown families hardest-hit are able to 
maintain their homes, which are the primary source of wealth in 
our communities. Thank you to the Committee for your leadership 
in passing the Homeowners Assistance Fund (HAF) in the American 
Rescue Plan. The HAF provides $10 billion in relief for COVID-
19's hardest-hit families who are struggling with mortgages, 
utilities, broadband, and taxes due to being negatively 
impacted by the pandemic. A key highlight of the legislation is 
the explicit direction for states to ensure that the relief is 
targeted to socially disadvantaged communities. Taking this 
action can help build toward a more equitable recovery. It is 
critical that racial equity remain at the core of all COVID 
relief efforts, including Treasury's implementation of the 
Homeowner Assistance Fund.

Q.2. Promoting Minority Home Ownership--As we recover from the 
pandemic, I also want to ensure that everyone, especially in 
our rural and minority communities, have fair and equal access 
to credit to help increase home ownership.
    Ms. Nikitra Bailey, in response to the ongoing lack of 
paiticipation among black and latino borrowers in the mortgage 
market, you stated,

        Recent people-led protest[s] to address today's social 
        injustices are rooted in our nation's discriminatory 
        federal housing policies. These practices caused 
        families of color to accumulate less wealth and be more 
        susceptible to abusive subprime lending that cost Black 
        and Latino families $1 trillion in wealth. Sadly, the 
        cunent COVID-19 health crisis is devastating families 
        of color at a disproportionately higher rate than 
        whites. By not creating cost-efficient home ownership 
        opportunities for creditworthy borrowers of color, we 
        are denying millions of Americans the opportunity to 
        accumulate wealth, suppressing economic growth, and 
        widening the racial wealth gap. \9\
---------------------------------------------------------------------------
     \9\ CRL press release, Jun. 26, 2020, online: https://
www.responsiblelending.org/media/new-hmda-data-shows-mortgage-market-
continues-exclude-black-and-latino-borrowers.

    Can each of you discuss how critical it is to promote and 
increase minority home ownership as we recover from this 
---------------------------------------------------------------------------
pandemic?

A.2. As the foundation of the American Dream, home ownership is 
the primary way that most middle-class families build wealth 
and economic stability. Home equity accounts for 69 percent of 
American family wealth. \10\ However, it accounts for only 30 
percent of the net worth for wealthier households but 
constitutes 67 percent for middle-to-low-income households. 
\11\ Home equity accounts for 53 percent of African American 
wealth as compared to 39 percent for whites. \12\ For many low-
to-moderate income (LMI) families and people of color in 
particular, a home represents the only asset that a family may 
ever own and the equity in their homes constitutes a larger 
share of personal wealth.
---------------------------------------------------------------------------
     \10\ James H. Carr, Michela Zonta, and Steven P. Hornburg, ``2017 
State of Housing in Black America'', National Association of Real 
Estate Brokers, September 18, 2017, http://www.nareb.com/site-files/
uploads/2017/09/SHIBA2017-final-for-web-0918.pdf.
     \11\ Brendan Greely, ``U.S. Homeowners Are Repeating Their 
Mistakes'', Bloomberg, February 14, 2013, https://www.bloomberg.com/
news/articles/2013-02-14/u-dot-s-dot-homeowners-are-repeating-their-
mistakes.
     \12\ Thomas Shapiro, Tatjana Meschede, and Sam Osoro, ``The Roots 
of the Widening Racial Wealth Gap: Explaining the Black-White Economic 
Divide'', Institute on Assets and Social Policy, at 3 (February 2013), 
http://iasp.brandeis.edu/pdfs/Author/shapiro-thomas-m/
racialwealthgapbrief.pdf.
---------------------------------------------------------------------------
    Widespread access to low-cost, fairly structured credit is 
critical for building family wealth, closing the racial wealth 
gap, and for sustaining the housing market overall. This in 
turn contributes significantly to our overall economy. Yet the 
opportunity to purchase, maintain and refinance a home still 
has not reached significant portions of low-to-moderate income 
families and people of color.
    As the cornerstone of opportunity in our nation, wide-
spread home ownership was largely created by federal economic 
subsidies that primarily benefitted whites, while excluding 
Black, Hispanic, Asian American Pacific Islander, and Native 
communities. This has given many white Americans a crucial 
lever for amassing wealth that cushions families against 
economic setbacks and creates a nest egg for the next 
generation. This crucial lever has been unjustly and 
disproportionately denied to many Black and brown families, for 
whom a lack of intergenerational wealth forces each successive 
generation to start anew, without a firm foundation to build 
upon.
    Although housing discrimination, including the ability to 
purchase a home, was made unlawful by the Civil Rights Act of 
1866, these long-standing discriminatory policies produced 
segregated housing patterns across the nation and disinvestment 
from Black communities for over 102 years until the Fair 
Housing Act of 1968 provided meaningful enforcement and an 
affirmative obligation for the Federal Government to create 
inclusive communities. This legacy has limited access to 
traditional low-cost credit for Black families and other 
families of color, and unduly exposed them to exploitative 
predatory lending, such as land installment contracts or 
contracts for deeds that robbed families of the wealth building 
benefits of home ownership. For instance, in Chicago, Illinois, 
85 percent of Black homebuyers purchased their homes ``on 
contract'' from white sellers in the mid-20th century. \13\ 
Estimates show that these Black homebuyers had more than $500 
million legally extorted from them from 1940-1970. \14\ 
Hispanic families also have a history of being victimized by 
these practices. \15\
---------------------------------------------------------------------------
     \13\ Megan Wright, ``Installment Housing Contracts: Presumptively 
Unconscionable'', 18 Berkeley J. Afr.-Am. L. & Pol'y, at 5 (2016).
     \14\ Rebecca Burns, ``The Infamous Practice of Contract Selling Is 
Back in Chicago'', Reader News and Politics, March 2017, .https://
www.chicagoreader.com/chicago/contract-selling-redlining-
housingdiscrimination/Content?oid=25705647.
     \15\ Ann Carpenter, Taz George, And Lisa Nelson, ``The American 
Dream or Just an Illusion? Understanding Land Contract Trends in the 
Midwest Pre- and Post-Crisis'', Harvard Joint Center for Housing 
Studies, March 2019, https://www.jchs.harvard.edu/sites/default/files/
harvard-jchs-housing-tenure-symposium-carpenter-george-nelson-0.pdf.
---------------------------------------------------------------------------
    As a result of this troubled history of inequity and 
continuing discrimination, Black home ownership levels, the 
primary asset of Black families, is at levels similar to when 
the Fair Housing Act was passed in 1968. \16\ In fact, the gap 
between white and Black home ownership rates today is the 
largest it has been since 1890. \17\ The home ownership rate 
for Black Americans is 42 percent, compared to white home 
ownership of 72.1 percent, and 48.1 percent for Latinos. \18\ 
In large part because families of color were not afforded the 
opportunity to build wealth through federally supported 
investment in home ownership and were later devastated by the 
financial crisis, the median white family has 10 times the 
wealth of the median Black family and eight times the wealth of 
the median Latino family. \19\ In fact, the racial wealth gap 
between Black and white families grew from about $100,000 in 
1992 to $154,000 in 2016. \20\ The median white family gained 
significantly more wealth, with the median increasing by 
$54,000, while median wealth for Black families did not grow in 
real terms over the same time period. \21\ The racial wealth 
gap contributes to the fact that in the 46 largest housing 
markets in the country, a median income Black household could 
only afford 25 percent of homes on the market last year in 
comparison to the 57 percent that a median income white 
household could afford. \22\ It will require focused and bold 
action to reverse these inequities. If current trends continue, 
it could take as long as 228 years for the average Black family 
to reach the level of wealth white families own today. \23\ For 
the average Latino family, matching the wealth of white 
families could take 84 years. \24\
---------------------------------------------------------------------------
     \16\ Alanna McCargo and Jung Hyun Choi, ``Closing the Gaps: 
Building Black Wealth Through Home Ownership'', Figure 3, Urban 
Institute (November 2020), https://www.urban.org/sites/default/files/
publication/103267/closing-the-gaps-building-black-wealth-through-home-
ownership-0.pdf; see also Laurie Goodman, Jun Zhu, and Rolf Pendall, 
``Are Gains in Black Home Ownership History?'', Urban Institute 
(February 14, 2017), https://www.urban.org/urban-wire/are-gains-black-
home ownership-history.
     \17\ Adam Levitin, ``How To Start Closing the Racial Wealth Gap'', 
``The American Prospect'' (June 17, 2020), https://prospect.org/
economy/how-to-start-closing-the-racial-wealth-gap/.
     \18\ Alanna McCargo and Jung Hyun Choi, ``Closing the Gaps: 
Building Black Wealth Through Home Ownership'', Figure 3, Urban 
Institute (November 2020), https://www.urban.org/sites/default/files/
publication/103267/closing-the-gaps-building-black-wealth-through-home-
ownership-0.pdf.
     \19\ Asset Building Policy Network, ``The Hispanic-White Wealth 
Gap Infographic'' (September 2019), https://prosperitynow.org/sites/
default/files/resources/ABPN--Hispanic--White--
Racial%20Wealth%20Gap%20Infographic--Final.pdf; Nick Noel, Duwain 
Pinder, Shelley Stewart III, and Jason Wright, ``The Economic Impact of 
Closing the Racial Wealth Gap'', McKinsey & Company (August 2019), at 
5, Exhibit 1, https://www.mckinsey.com/industries/public-and-social-
sector/our-insights/the-economic-impact-of-closing-theracial-wealth-
gap.
     \20\ Nick Noel, Duwain Pinder, Shelley Stewart III, and Jason 
Wright, ``The Economic Impact of Closing the Racial Wealth Gap'', 
McKinsey & Company, August 2019, at 5, Exhibit 1, https://
www.mckinsey.com/industries/publicand-social-sector/our-insights/the-
economic-impact-of-closing-the-racial-wealth-gap.
     \21\ Id.
     \22\ Paul Davidson, ``Black Households Can Afford Just 25% of 
Homes For Sale'', USA Today, October 15, 2019, https://
www.usatoday.com/story/money/2019/10/15/homes-sale-black-households-
can-afford-just-25-percent-houses-market/3976383002.
     \23\ See Dedrick Asante-Muhammad, et al., ``The Road to Zero 
Wealth'', at 15 (Sept. 2017), https://prosperitynow.org/files/PDFs/
road-to-zero-wealth.pdf.
     \24\ Id.
---------------------------------------------------------------------------
    Historic and ongoing systemic racism has left families of 
color more vulnerable going into the 2008 housing crisis, and 
that crisis, and the inadequate response to it, left them even 
worse off. Black and Hispanic communities lost over $1 trillion 
during the Great Recession that was never regained because the 
help came too late and well after foreclosures unnecessarily 
devastated neighborhoods--needlessly pushing families from 
their communities, pulling children from their schools, and 
wiping out the lifetime of savings they needed to move on. The 
COVID-19 pandemic is likewise hitting these families the 
hardest again, and the response so far is not equitable or 
sufficient. But beyond the pandemic response, we must address 
the long-term structural flaws that produce and perpetuate this 
inequity.
    COVID-19 has exacerbated economic inequality, leaving in 
its wake a ``Tale of Two Americas'': One where the haves, 
mostly wealthy and white, are equipped with the means to 
shelter in place throughout the global health pandemic, working 
from home, and actually growing their wealth due to roaring 
stock market surges, historically low mortgage rates, and 
increasing valuation of home properties. The have-nots, mostly 
low wage workers and people of color, could not shelter in 
place because of being relegated to jobs in the service sector 
as they became America's new essential workers. Nor could they 
afford to shelter in place because, while ``essential,'' they 
have for too long been treated as expendable, paid wages 
inadequate to cover life's essentials, let alone allow 
sufficient savings. Facing heightened COVID-19 risk by going to 
work, many of these essential workers fell ill themselves or 
brought COVID-19 home to their loved ones. And still, these 
hardworking families faced massive reductions in working hours, 
wage cuts, unemployment, food pantry lines that cover entire 
city blocks and country roads, a growing bill for back rent 
with no idea how it will be repaid, and threats of eviction. In 
many of their formerly redlined neighborhoods, quality medical 
care is in too-short supply and toxins in the physical 
environment increase the risk of chronic disease, including 
COVID-19. Moreover, many of these families struggle more due to 
insufficient access to the cost-reducing mortgage refinances at 
historically low rates that would ease their financial burdens.
    Over the course of one year, over 29 million people have 
been infected and more than 520,000 people have died in the 
United States, with Black and Hispanic communities being 
overwhelmingly devastated. Moreover, increasingly, as 
misperceptions about COVID continue to circulate and breed 
anti-Asian sentiments, too many Asian Americans live in 
constant terror as the result of an increase of hate crimes in 
their communities.
    We can choose to stay the course and embark on a prolonged 
K-shaped recovery, or we can pivot toward a more inclusive 
America where all families have an opportunity to thrive. If we 
choose the latter, home ownership can be the fuel that ignites 
future economic growth and leads our nation to shared 
prosperity. This time though, we must ensure full access as 
discrimination, especially in housing, is a drag on the economy 
that hurts families and limits economic opportunity for all 
Americans. Recent reports show that addressing discrimination 
targeted at Black Americans alone can generate $1 trillion a 
year, billions for local jurisdictions, and thousands of jobs. 
\25\
---------------------------------------------------------------------------
     \25\ Dana M. Peterson and Catherine L. Mann, ``Closing the Racial 
Inequality Gaps: The Economic Cost of Black Inequality in the U.S.'', 
Citi Global Perspectives & Solutions (Sept. 2020); Nick Noel, Duwain 
Pinder, Shelley Stewart III, and Jason Wright, ``The Economic Impact of 
Closing the Racial Wealth Gap'', McKinsey & Company, at 6, Exhibit 2 
(Aug. 2019); Jeff Cox, ``Morgan Stanley says Housing Discrimination Has 
Taken a Huge Toll on the Economy'', CNBC, November 13, 2020.
---------------------------------------------------------------------------
    These issues require a comprehensive and dedicated 
government response. One solution is more targeted aid to help 
overcome discrimination in home ownership opportunity. Saving 
for a down payment is a significant barrier to home ownership 
that particularly hits communities of color. \26\ As research 
from Freddie Mac and Urban Institute demonstrates, there are 
millions of mortgage-ready borrowers of color, based on 
borrowers' current credit scores and debt-to-income ratios, 
though not funds available for a down payment. In fact, there 
are 6.3 million mortgage ready Black and Latino millennials in 
the 31 largest metropolitan statistical areas. \27\ Given that 
many of these borrowers do not have family wealth for a down 
payment because of the lack of intergenerational wealth, 
targeted down payment assistance will be critical to enable 
mortgage-ready borrowers of color to become homeowners.
---------------------------------------------------------------------------
     \26\ See Christelle Bamona, ``Data Point: Hardship for Renters: 
Too Many Years To Save for Mortgage Down Payment and Closing Costs'', 
Center for Responsible Lending (April 2021), https://
www.responsiblelending.org/sites/default/files/nodes/files/research-
publication/crl-mortgage-downpayment-7apr2021.pdf.
     \27\ Alanna McCargo, ``America's Persistent Racial Home Ownership 
Gaps'', Urban Institute. See also National Association of Hispanic Real 
Estate Professionals, 2019 State of Hispanic Home Ownership Report; 
Alanna McCargo, Jung Hyun Choi, and Edward Golding, ``Building Black 
Home Ownership Bridges: A Five Point Framework for Reducing the Racial 
Home Ownership Gap'', Urban Institute, at 8 (May 2019).
---------------------------------------------------------------------------
    Accordingly, drawing on the approach in the educational 
arena in which there are special programs targeting first-
generation college students, we recommend that the core down 
payment assistance program be limited to first-generation, 
first-time homebuyers whose income is within 120 percent of the 
Area Median Income (AMI). We would add to this a house price 
limit as an additional safeguard to assure the money is well 
targeted.
    Half of the funds should be set aside for state Housing 
Finance Agencies that have adopted Affirmatively Furthering 
Fair Housing (AFFH) Plans, awarded based on the size of the 
renter population in each state. The other 50 percent should be 
awarded through a competitive bidding process run by the CDFI 
Fund to select Administrators committed to and capable of 
delivering funds to socially and economically disadvantaged 
individuals. The DPA should be a minimum of $20,000 per 
applicant (could be increased for high-cost markets) to provide 
sufficient funds to make home ownership affordable. In 
addition, strong reporting and evaluation requirements should 
be included to ensure transparency and efficacy.
    Finally, the Departments of Justice and Housing and Urban 
Development should be directed to conduct a study to determine 
whether this program, in conjunction with any other extant 
efforts, will succeed in remedying the effects of past and 
present discrimination and closing the racial home ownership 
gap. If the study finds that more is needed, the Administrators 
shall be authorized to use race-conscious remedies to overcome 
discriminatory barriers to serving socially and economically 
disadvantaged people, using a rebuttable presumption that 
people of color are socially and economically disadvantaged.
    Additional details on the proposal may be found in Appendix 
1 of our written testimony.
    The challenges presented by student loan debt must also be 
addressed. Student debt in this country has reached crisis 
levels and has negatively impacted the prospects of home 
ownership for an entire generation, particularly people of 
color. \28\ To help address this, FHA should modify its policy 
on how it factors in student loan debt when calculating DTI. 
Currently, FHA presumes a monthly payment of 1 percent of the 
outstanding student loan balance if borrowers are actively 
participating in a repayment plan resulting in a monthly 
obligation that does not fully amortize the debt. Black and 
Latino borrowers are more likely to be enrolled in income-based 
repayment and more likely to have loans that are negatively 
amortizing. While Fannie Mae, Freddie Mac, the Department of 
Veterans Affairs (VA) and the Department of Agriculture (USDA) 
qualify borrowers using the actual monthly obligation or an 
alternative that is more closely aligned with a fully amortized 
payment calculation, FHA continues to assume a monthly payment 
of 1 percent of the outstanding balance--which is almost always 
larger than the actual payment being made by potential 
borrowers in both covered plans and fully amortized plans. This 
policy may be disqualifying creditworthy borrowers because of 
the inflated DTI ratios that it produces. As a result, many 
potential borrowers may have more limited financing options or 
may be unable to obtain mortgage credit entirely. While this 
fix is necessary, addressing the student debt crisis and 
increasing access to home ownership will require bold 
solutions, including broad-based debt cancellation.
---------------------------------------------------------------------------
     \28\ See discussion on pp. 9-14 in Testimony of Nikitra Bailey, 
House Financial Services Committee, ``Justice for All: Achieving Racial 
Equity Through Fair Access to Housing and Financial Services'' (March 
10, 2021), https://www.responsiblelending.org/sites/default/files/
nodes/files/research-publication/crl-testimony-nikitra-bailey-hfsc-
hearing-10mar2021.pdf.
---------------------------------------------------------------------------
    Thanks to each of you for your participation in last week's 
hearing. I look forward to reviewing your responses.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
          SENATOR CORTEZ MASTO FROM EDWARD J. DEMARCO

Q.1. On page 5 of your prepared remarks you stated that ``there 
is limited evidence that the housing goals [for Fannie Mae and 
Freddie Mac] have expanded low-income home ownership.'' One 
study on this topic found that ``the goals increased the supply 
of mortgage credit available to low- and moderate-income 
households, after controlling for other mortgage market 
factors.'' \1\
---------------------------------------------------------------------------
     \1\ Brent W. Ambrose and Thomas G. Thibodeau, ``Have the GSE 
affordable housing goals increased the supply of mortgage credit?'' 
Regional Science and Urban Economics, Volume 34, Issue 3, May 2004.
---------------------------------------------------------------------------
    What studies have you reviewed to support your statement?

A.1. My statement is based on data that is reflective of the 
market as it is today and is less influenced by studies 
conducted prior to the great financial crisis. Changes in 
market dynamics, including for example, the growth of 
government-backed mortgage programs, the increasing quality of 
mortgage products, as well as the rise of non-bank lenders 
create a housing finance environment that is not entirely 
analogous to the pre-financial crisis era. Examples of studies 
that support my statement include:

    Fannie Mae and Freddie Mac Annual Housing 
        Activities Report and Annual Mortgage Report.

    Parrott, Stegman, Swagel, and Zandi, ``Access and 
        Affordability in the New Housing Finance System, Urban 
        Institute,'' February 2018

    Levitin and Ratcliffe, ``Rethinking Duty to Serve 
        in Housing Finance,'' Joint Center for Housing Studies 
        at Harvard University, October 2013

    Korman, ``Furthering Fair Housing, The Housing 
        Finance System, and the Government Sponsored 
        Enterprises,'' Kirwan Institute for the Study of Race 
        and Ethnicity, September 2010.

    A common observation in these studies is the difficulty in 
measuring with certainty the impact of the housing goals in 
isolation. HPC's recent comment letter to FHFA details in 
greater depth our rationale and conclusion and we offer that 
letter here for the record (attached below).
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

Q.2. You further state on page 5 that the goals ( or 
``subsidy'' to use your term) are ``based on a borrower's 
credit risk, not race or income (emphasis added) or wealth or 
financial readiness.'' There are eight goals for Fannie Mae and 
Freddie Mac, of which (1) three are for home purchase or 
refinance mmtgages for low-income or very low-income families, 
(2) three are for multifamily rental units affordable to these 
same families, and (3) two are for home purchase mortgages for 
families in low-income and high-minority census tracts. Thus 
six goals are based on borrower or renter income, and two are 
based on tract income and minority share of tract population. 
None of the goals are based on the creditworthiness of the 
borrower or renter.
    In light of these considerations, what is the basis for 
your statement that the goals are not based on income or race?

A.2. I appreciate the opportunity to correct any 
misunderstanding regarding my comments on the effectiveness of 
the goals in reaching the traditionally underserved population.
    The existing affordable housing goals are based on 
borrower/tenant income and serving minority communities but the 
method of achieving those goals is cross-subsidization, where 
borrowers with higher credit profiles subsidize lending to 
borrowers with lower credit profiles. That portion of my 
statement was not a comment on the definitions of GSE's goals 
themselves but rather an explanation for why the GSEs' goals 
have not been effective. As we all know, the racial home 
ownership gap today is higher than it was more than 50 years 
ago--an outcome that suggests that the current methods of 
narrowing that gap are flawed.
    As an attempt to explain why the existing methods for 
addressing the racial home ownership gap may not be effective, 
I noted that the affordable housing goals are currently 
achieved by relaxing underwriting criteria and providing 
pricing benefits to borrowers who would not otherwise qualify 
for a mortgage. The goals are not achieved by directly 
addressing the barriers that stand in the way of home ownership 
for borrowers of particular income levels or racial/ethnic 
groups. That may be why the goals have not been effective; the 
ways of achieving the goals, cross-subsidization based on 
credit scores, is poorly targeted and fails to address the 
barriers many Black, Hispanic, and low income/low-wealth 
families face in trying to attain and maintain home ownership, 
such as a lack of downpayment, financial education, or a rainy-
day fund.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                     FROM EDWARD J. DEMARCO

Q.1. Home prices continue to rise at an alarming rate in 
certain markets. In Phoenix, for example, home prices rose by 
14.4 percent last year. Is this type of increase sustainable, 
and does this phenomenon have the makings of an asset bubble? 
What are the consequences if such a bubble were to burst?

A.1. House prices have risen sharply in many communities across 
the country the past year as a result of supply/demand 
imbalance. One recent paper cites the primary causes of this 
imbalance, from least to most important, as being materials and 
labor, lending, and demographic changes. \1\ In general terms, 
this is due to the combination of:
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     \1\ Jim Parrott and Mark Zandi, ``Overcoming the Nation's Daunting 
Housing Supply Shortage'' Urban Institute, March 2021.

    the increase in building costs due to the 
        disruption of global supply chains during the pandemic, 
        along with greater trade restrictions on major U.S. 
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        trading partners.

    the struggle of the building industry to develop 
        and maintain a consistent labor force, in part 
        reflecting the difficulty that many of the trades face 
        in attracting high school graduates into careers 
        requiring specialized skills.

    historically low mortgage interest rates resulting 
        from Federal Reserve policies,

    a change in demand for single-family housing 
        resulting from both changes in housing preferences 
        brought on by the pandemic and the millennial 
        generation reaching prime homebuying age, and

    a 10-plus year slowdown in new home construction 
        that has resulted in new supply not keeping pace with 
        demographic changes.


    While it may be premature to say this has created a housing 
bubble--lending standards have remained strong and demand still 
far outpaces supply--these sort of growth rates in house prices 
are not sustainable for a long period. For the housing market 
to remain healthy in the long-run, home price appreciation must 
be tied to increases in borrower income.
              Additional Material Supplied for the Record
           LETTER FROM CENTER FOR URBAN RENEWAL AND EDUCATION
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