    [Senate Hearing 117-273]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 117-273

                      SEPARATE AND UNEQUAL: THE LEGACY OF
                        RACIAL DISCRIMINATION IN HOUSING

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

                                    HEARING

                                   BEFORE THE

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

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

                 EXAMINING THE LEGACY OF HOUSING DISCRIMINATION

                                   __________

                                 APRIL 13, 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
    47-751 PDF                 WASHINGTON : 2022

    -----------------------------------------------------------------------------------

                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

                       Elie Greenbaum, Republican 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, APRIL 13, 2021

                                                                       Page

    Opening statement of Chairman Brown..............................     1
            Prepared statement.......................................    39

    Opening statements, comments, or prepared statements of:
        Senator Toomey...............................................     4
            Prepared statement.......................................    40

                                   WITNESSES

    Richard Rothstein, Senior Fellow, Emeritus, NAACP Legal Defense
      and Educational Fund, Inc......................................     6
        Prepared statement...........................................    42
        Responses to written questions of:
            Senator Sinema...........................................   198
    Lisa Rice, President and Chief Executive Officer, National Fair
      Housing Alliance...............................................     8
        Prepared statement...........................................    61
    Jason Reece, Assistant Professor, City and Regional Planning
      Section, Knowlton School of Architecture, The Ohio State
      University.....................................................    10
        Prepared statement...........................................    75
    Howard Husock, Executive Senior Fellow, Philanthropy Roundtable,
      and Adjunct Fellow, American Enterprise Institute..............    11
        Prepared statement...........................................    95
    Tobias J. Peter, Director of Research, Housing Center, and
      Research Fellow, American Enterprise Institute.................    13
        Prepared statement...........................................   102

                                     (iii)

      SEPARATE AND UNEQUAL: THE LEGACY OF RACIAL DISCRIMINATION IN HOUSING

                                  ----------

                            TUESDAY, APRIL 13, 2021

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met at 10 a.m., via Webex, Hon. Sherrod
    Brown, Chairman of the Committee, presiding.

              OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

        Chairman Brown. The hearing of the Senate Banking, Housing,
    and Urban Affairs Committee will come to order. This hearing 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 ask questions.
        You should have one box on your screens labeled ``Clock''
    that will show you how much time is remaining. For witnesses,
    you will have 5 minutes for opening statements. For all
    Senators, the 5-minute clock still applies to questions.
        At 30 seconds remaining for your statements and questions,
    you will hear a bell ring to remind you that 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, Ranking Member Toomey and I have agreed
    to go by seniority for this hearing.
        On Sunday, we marked the 53rd anniversary of the passage of
    the Fair Housing Act. Fifty-three years ago, jarred by the
    assassination of the Reverend Dr. Martin Luther King, our
    country finally made it illegal to refuse to sell a home or
    rent an apartment to someone based on the color of their skin.
    It was a historic moment. It was a hard-fought victory for
    civil rights advocates. And it was not so long ago when you
    look at the long arc of history.
        Black Americans had endured centuries--that is generation
    after generation after generation--of slavery, only to be
    locked into second-class citizenship by the Black Codes and Jim
    Crow laws that made it nearly impossible to get a good-paying
    job, to keep a reliable bank account, and, as we all know, even
    to vote. As my friend Joyce Beatty said recently, we cannot
    change our history. But we can learn from it, and we can build
    a far better future--one that brings us closer to making our
    founding ideals real for everyone.
        Fair housing took longer to pass through Congress than did
    voting rights or desegregation of public spaces, even equal
    opportunities for employment. As important as these
    advancements were, they did not come in time to help
    communities of color benefit from the historic investments that
    our Government made, that we as a society made, in American
    families and communities in the last century. Beginning with
    the New Deal and continuing through the 1960s, we tried a new,
    grand experiment in this country. We invested in workers and in
    the infrastructure that they needed to succeed. In the process,
    we built the largest, broadest middle class the world had ever
    seen.
        But that deal remains unfinished because too many were
    purposefully left out.
        We created the Federal Housing Administration to make the
    dream of home ownership, and the wealth that comes with it,
    available to millions more families. But FHA limited its loans
    to neighborhoods that were deemed ``good'' investments--
    neighborhoods with White, non-immigrant residents.
    Neighborhoods with Black and Brown immigrant residents and near
    industrial sites were ``redlined'' and called ``hazardous.''
        From 1934 to 1968, FHA helped finance more than $120
    billion worth of loans; 98 percent--think of that--98 percent
    of that $120 billion, 98 percent of that went to White
    borrowers. We put Americans to work building the interstate
    highway system, the infrastructure that would unleash new
    levels of American prosperity.
        But Federal highways cut right through Black and minority
    neighborhoods in cities like Cleveland and Baltimore and New
    York, severing tight-knit communities, destroying homes and
    small businesses, replacing them with traffic and pollution.
    Following these decades of exclusion and destruction, the Fair
    Housing Act offered enormous promise. It did not just ban
    racial discrimination; it also required that new Federal funds
    be used in ways that would affirmatively further fair housing.
    In other words, we recognized it was not possible to start from
    scratch. Our housing system had our history woven into it, and
    we would need to take active steps to include Black Americans
    and all those left out.
        George Romney, the father of our colleague Mitt, became HUD
    Secretary the year after the Fair Housing Act was passed. He
    set out to fulfill that mission: to require communities to use
    their Federal grants to build better housing and take active
    steps to include everyone, as required by the new law.
        But Secretary Romney did not get very far. President Nixon
    and his Southern Strategy blocked Secretary Romney's
    implementation of the Fair Housing Act, and it stayed that way
    for decades. Housing discrimination was illegal beginning in
    1968, but communities of color lived in the cities we had
    already built and then abandoned, and lived with the wealth
    inequality we had already grown.
        Minority communities continued to lose out on investment.
    FHA no longer used redlining maps--they were illegal--but
    communities of color still saw banks take their deposits and
    still refused to make them mortgage loans. Congress passed the
    Community Reinvestment Act, requiring banks to serve the
    communities whose money they relied in part on to make profits.
    But the same neighborhoods--the ones that had red lines drawn
    around them a few decades earlier--never got the same
    investment that others did. And after nearly three decades
    later, lenders seemed to finally discover the minority
    communities they had been neglecting for decades. But that
    discovery did not lead to positive investments to help
    communities build wealth and grow new businesses. Instead,
    predatory lenders wiped out the hard-won gains Black and Brown
    families had made in the years since 1968. They targeted people
    in lower-income and minority communities for predatory subprime
    loans and refinances. In 2003, President Bush's HUD Secretary,
    Mel Martinez, told this Committee that predatory lending posed
    ``a significant danger to minority and women homeowners
    targeted for equity-stripping loans,'' and he went on to say
    that some loans had ``abusive terms and conditions'' that may
    violate the Fair Housing Act.
        Of course, we know what happened. We remember the
    foreclosures that swept through neighborhoods in waves. We
    remember the signs that went up on home after home. Black and
    Latino homeowners were 70 percent more likely to face
    foreclosure. Today Black, Latino, and Asian families are far
    less likely to own a home than White families. The Black home
    ownership rate is as low as it was 53--think about that. The
    Black home ownership rate is as low as it was 53 years ago,
    when housing discrimination was still legal. The wounds of
    redlining remain as fresh as ever. We know where you live
    determines so much about your life--what schools you go to, the
    kinds of jobs available, how far you have to travel to get to
    work, the air you breathe, the water you drink, even how long
    you live.
        Residents in those neighborhoods that were systematically
    excluded from investment--many of them people of color--have
    lower life expectancies and are more likely to have preexisting
    conditions. Take a walk around the city where Mr. Husock and I,
    where he grew up, where I live now, look and you can still see
    the scars of the foreclosure crisis in the same neighborhoods
    that were colored in red in the maps of the 1930s. Come to my
    Zip code, 44105, in the city of Cleveland; we had more
    foreclosures in that Zip code in the first half of 2007 of any
    place in the country.
        In these neighborhoods, you will find higher rates of lead
    exposure, toxic pollution, and infant mortality. Take a look at
    maps of COVID-19 deaths; they just happen to match up with
    those redlining maps pretty well.
        Our past is still determining people's lives today. That is
    the reason for this hearing. That is why the work of this
    Committee matters. We cannot change our history, but it does
    not mean we throw up our hands and tell millions of Americans,
    ``Sorry, this is the best we can do.'' Because we know it is
    not. Remember all those infrastructure investments we made in
    the 1930s and in the years after World War II? Remember how we
    created millions of new homeowners and created the middle class
    in this country? Something the world had never seen.
        There is no reason we cannot do the same thing again, but
    this time we bring along everyone.
        On this Committee, we have an opportunity to address the
    legacy of housing discrimination. We have an obligation, under
    the law that this body passed more than five decades ago, in
    the wake of Dr. King's assassination. I look forward to hearing
    from today's witnesses about how we can begin to do just that.
        Ranking Member Toomey, you are recognized. Thank you.

             OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

        Senator Toomey. Thank you, Mr. Chairman. And let me say
    from the outset that a history of racial discrimination in
    housing is a real and sad part of our Nation's history. We
    cannot ignore that. It is a fact. It is also a fact that
    Government policies contributed to this discrimination very
    significantly.
        Some Federal Government policies were, in fact, designed to
    increase segregation. We all know and the Chairman alluded to
    fact that the FHA engaged in redlining practices, where for
    decades, FHA insurance was often limited to newer developments
    outside of inner-city neighborhoods, exacerbating segregation.
        We also know that Davis-Bacon wage requirements were
    designed to protect White union labor and to prevent Blacks
    from competing for federally funded construction jobs. Even
    today, Davis-Bacon continues to impede lower-income and
    minority workers from opportunities, and it drives up the
    construction costs for Government-assisted housing.
        We also know that some State and local government policies
    have contributed to exacerbating segregation. Some zoning
    practices--such as prohibitions on multifamily housing and
    minimum lots sizes--can have legitimate purposes for many
    communities. However, they sometimes do great harm. They can
    price low-income and minority families out of neighborhoods,
    and they reduce the supply of affordable housing for these
    families. Many of the markets with the most severe shortages in
    affordable housing have the most restrictive regulatory
    barriers to housing development.
        In San Francisco, for example, zoning regulations may have
    been responsible for more than 50 percent of total housing
    costs, according to one National Bureau of Economic Research
    study. In my view, this history shows us that when it comes to
    housing in America, including housing discrimination,
    Government has often been the problem, not the solution. And,
    unfortunately, the Biden administration does not seem to have
    learned this lesson. Its new multitrillion-dollar welfare plan,
    with a bit of infrastructure sprinkled in, seems designed to
    repeat many of the great mistakes of the New Deal and Great
    Society. After Congress has just finished spending more than
    $80 billion for housing in response to COVID--on top of the $50
    billion we spend annually on HUD programs alone, not to mention
    the many billions we spend on other housing programs, then
    there is the tens of billions at least that we forgo in tax
    revenues to subsidize housing--now, in addition to all of that,
    the Biden administration is calling for $213 billion in new
    spending for housing in its so-called infrastructure plan.
        Amazingly, the Administration wants Congress to spend $40
    billion to restore public housing projects--places where people
    generally do not want to live. Housing projects are notorious
    concentrations of poverty, crime, and other social ills. And
    research shows that moving families out of housing projects and
    integrating them into broader communities decreases violent
    crime. But rather than focusing on sensible alternatives, the
    Biden administration wants to keep families in housing
    projects. More public housing will only commit more Americans
    to a substandard living arrangement and increase Government
    dependency.
        We also should not rush to put families in homes they
    cannot afford. Relaxing underwriting requirements or expanding
    downpayment assistance programs for low-income families,
    especially in an overheated housing market, is a recipe for
    disaster. If home values drop--and eventually they very well
    may--these borrowers run the very real risk of losing their
    homes and any wealth they thought they had accumulated. And we
    have seen this happen before, most recently during the 2008
    housing crisis when Government monetary and housing policy
    created a housing bubble, the bursting of which caused the
    financial crisis and then the Great Recession.
        The Administration's infrastructure plan also calls for $20
    billion in tax credits for building and rehabilitating homes
    and making them more energy efficient. These tax credits will
    inevitably predominantly benefit developers and investors
    largely because they are not targeted to low-income families.
    In fact, homes built with tax credits can be sold to purchasers
    with incomes up to 140 percent of the area median income, not
    the poverty level.
        The Administration's plan also prioritizes using union
    labor to upgrade homes, and this unfairly excludes lower-
    income, non-unionized laborers, and it increases construction
    costs that will inevitably be passed on to homeowners.
        Today we are going to hear from two witnesses who will
    discuss how Government intervention, even when well-meaning,
    has contributed to inequality. Howard Husock is a housing
    researcher and scholar. As Mr. Husock will note, many ``race-
    conscious'' policies have not actually increased home ownership
    opportunities or wealth in underserved communities. Public
    housing has deprived many minority communities of the
    opportunity to build wealth. The Community Reinvestment Act is
    out of date and poorly designed to encourage lending in
    minority neighborhoods, and it does not track whether
    investments actually help or hurt families. And overly
    prescriptive Affirmatively Furthering Fair Housing requirements
    that put only a handful of low-income families in subsidized
    rental homes in affluent areas does little to support minority
    families or help them build wealth through home ownership.
        We will also hear from Tobias Peter, an expert in housing
    finance. He notes that policies aggressively encouraging low-
    income or minority people to buy homes--especially during a
    boom when houses are very expensive--expose borrowers to
    greater default risk during dips in the market. He argues that
    risky lending harms low-income borrowers who purchase homes
    when home prices are inflated. And he believes that local
    governments need to remove zoning restrictions and other
    regulatory barriers to housing that artificially constrain the
    supply of housing and drive up costs.
        It is important to remember that the legacy of
    discrimination is often a direct result of Government-supported
    policies. As we consider how to address the housing challenges
    we face, we should not repeat the mistakes of the past. Now is
    not the time to double down on failed efforts, and that means
    we should not keep American families in dilapidated and
    segregated housing projects; we should not let bureaucrats in
    Washington make local housing decisions that undermine
    communities; and we should not inappropriately push families to
    purchase homes they cannot afford in the long run.
        The lesson we need to learn and apply is: When it comes to
    housing in America, Government has often been the problem, not
    the solution.
        Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Toomey, for your
    comments. I will now introduce the five witnesses.
        Richard Rothstein, who is testifying for Sherrilyn Ifill,
    who could not be with us today, is a senior fellow, emeritus,
    with the NAACP Legal Defense and Educational Fund. He is also a
    distinguished fellow of the Economic Policy Institute, a senior
    fellow at the Haas Institute at the University of California,
    Berkeley, and author of the book ``The Color of Law''. Those of
    you who know this Committee know I have recommended this book
    many, many times, as well as the book ``Evicted''.
        Lisa Rice is the president and CEO of the National Fair
    Housing Alliance. I count her as an Ohioan. Prior to her work
    at NFHA, Ms. Rice spent 21 years at the Toledo Fair Housing
    Center where she had become president and CEO.
        Jason Reece is an assistant professor of city and regional
    planning at the Knowlton School of The Ohio State University.
    He previously served in multiple research positions at Ohio
    State's Kirwan Institute for the Study of Race and Ethnicity
    and worked with communities as a capacity builder as part of
    the HUD's Sustainable Communities Initiative.
        Howard Husock, from Cleveland, as I said, is an adjunct
    scholar at the American Enterprise Institute. Prior to joining
    AEI, Mr. Husock held multiple positions at the Manhattan
    Institute and served as director, author, and executive
    education program instructor at Harvard's Kennedy School of
    Government.
        Tobias Peter is a research fellow and director of research
    at the American Enterprise Institute Housing Center. He
    previously served as a senior research analyst with the Housing
    Center.
        We will begin with Mr. Rothstein. Thank you for joining us.

    STATEMENT OF RICHARD ROTHSTEIN, SENIOR FELLOW, EMERITUS, NAACP
                LEGAL DEFENSE AND EDUCATIONAL FUND, INC.

        Mr. Rothstein. Good morning, Chairman Brown, Ranking Member
    Toomey, and Members of the Committee. Thank you for this
    opportunity. I am, as the Chairman said, Richard Rothstein, a
    distinguished fellow of the Economic Policy Institute and a
    senior fellow, emeritus, of the NAACP Legal Defense and
    Educational Fund, Inc. I am here on behalf of myself and of
    Sherrilyn Ifill, the president and director-counsel of LDF that
    was founded in 1940 by Thurgood Marshall and separated from the
    NAACP in 1957.
        The LDF has long worked to promote racial integration and
    opportunity in housing. Ms. Ifill and I have submitted written
    testimony that expands on my brief remarks.
        I am also, as you heard, the author of a book, ``The Color
    of Law'', that disproves the myth of de facto segregation. In
    truth, we are residentially segregated not naturally or for
    private bigotry, but primarily by racially explicit Federal
    policies, State and local as well, designed to prevent African-
    Americans and Whites from living as neighbors. These 20th
    century policies were so powerful that they determine much of
    today's residential, social, and economic mobility.
        Because powerful Government policies segregated us, racial
    boundaries violate the Fifth, Thirteenth, and Fourteenth
    Amendments. Our Nation thus has a positive constitutional
    obligation to redress segregation with policies as intentional
    as those that segregated us.
        The Federal Government made housing and home ownership
    critical to families' economic stability and upward mobility,
    but we routinely excluded Blacks from Government benefits that
    propelled Whites into the middle class. Perhaps Government's
    most powerful unconstitutional policy was the Federal Housing
    Administration's guarantee of developers' bank loans to
    suburbanize the city-dwelling White working class and returning
    World War II veterans into single-family homes in all-White
    communities, creating a White noose around Black city
    neighborhoods. The homes were affordable, about $100,000 in
    today's dollars, to both Black and White veterans and urban
    residents who had jobs in the post-war boom. But African-
    Americans were prohibited by explicit policy from
    participating. This was not done by rogue bureaucrats at the
    FHA or Veterans Administration, an agency that followed FHA
    policy. It was spelled out in the FHA's underwriting manual,
    distributed to appraisers who evaluated builders' applications.
    The manual said a proposal could not benefit from Federal
    subsidy if it included African-Americans in a White project.
    The manual even required denial of loans for all White projects
    located near where Black families lived because that would
    ``risk infiltration by inharmonious racial groups.'' This
    notion of de facto segregation is utter nonsense.
        These inexpensive federally subsidized Whites-only homes
    now sell for $300,000, $400,000, in some areas $1 million or
    more. Whites gained wealth from equity appreciation and used it
    to send children to college, to finance short-term layoffs or
    medical treatment, to enhance retirement, and to bequeath
    wealth to children and grandchildren who then had downpayments
    for their own homes.
        African-Americans were prohibited by explicit Federal
    policy from doing the same. Today Black family incomes are
    about 60 percent of White incomes. You would think Black wealth
    would also be about 60 percent of White wealth. Households can
    save the same amounts from the same incomes. But, in reality,
    Black wealth is only about 5 percent of White wealth. That
    enormous disparity between a 60-percent income ratio and a 5-
    percent wealth ratio largely results from unconstitutional
    Federal policy that we have an obligation to remedy, one we
    have never embraced.
        Another Federal policy that segregated us was public
    housing, something we now think is for the poor, but it began
    in the New Deal for families who remained employed and could
    pay full rent. Government built it to meet a housing shortage,
    but did not subsidize it. Yet Government segregated it,
    creating separate projects for Whites and Blacks, frequently
    segregating previously integrated neighborhoods. The great
    African-American poet, novelist, and playwright Langston Hughes
    wrote in his autobiography that he lived in an integrated
    downtown Cleveland neighborhood. In high school, his best
    friend was Polish, and he dated a Jewish girl. It was an
    integrated school in an integrated neighborhood. But the Public
    Works Administration cleared part of it to build separate
    projects--one for Whites, one for Blacks--creating segregation
    where it had not existed. This policy was followed nationwide,
    creating segregated patterns that persist today.
        It was only after Whites were subsidized to leave public
    housing for all-White suburbs that public housing became almost
    all black. When industrial jobs disappeared from cities,
    residents no longer had access to good jobs and required
    subsidies.
        Contemporary land use has been layered atop an
    infrastructure created by decades of racially discriminatory
    policies. Failure to remedy these injustices has created
    multiple crises. Home ownership is out of reach for many.
    Renters are overburdened by costs. Wages are inadequate for
    housing costs in many cities. Affordable public housing is
    scarce, and housing infrastructure is neglected. These issues
    remain at the core of our Nation's inequality.
        Bold Federal action to ensure equal opportunity in home
    ownership and affordable housing is long overdue. This body can
    ensure that our housing infrastructure finally reflects the
    nondiscriminatory and inclusive vision of the Fair Housing Act.
        Thank you very much.
        Chairman Brown. Thank you, Mr. Rothstein.
        Ms. Rice, welcome.

    STATEMENT OF LISA RICE, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
                     NATIONAL FAIR HOUSING ALLIANCE

        Ms. Rice. Chairman Brown, Ranking Member Toomey, and other
    Members of the Senate Committee on Banking, Housing, and Urban
    Affairs, on behalf of the National Fair Housing Alliance, thank
    you for inviting me to speak today about the history and
    current state of housing discrimination. Our mission is to
    eliminate all forms of housing discrimination and ensure
    equitable housing opportunities for all. NFHA is also the trade
    association for over 200 fair housing organizations throughout
    the United States.
        Many of the economic challenges facing our Nation--the
    racial wealth, income, and home ownership gaps, the racial
    health disparities that preexisted and are exacerbated by the
    COVID-19 pandemic, educational and employment gap, and equities
    in credit access and other disparities--have their origins in
    discriminatory housing and economic policies implemented from
    the colonial period through present times.
        Throughout U.S. history, people of color have been
    restricted from owning land or homes. Federal laws and policies
    as well as private market practices created residential
    segregation. The dual credit market institutionalized
    redlining, exclusionary zoning policies, and other structural
    barriers that block people from opportunities to advance in
    life. These systemic barriers have never been eliminated. They
    are still with us. U.S. neighborhoods are more segregated today
    than they were 100 years ago. Consumers of color are still
    denied for mortgage loans at twice or more the rate of White
    borrowers. The Black-White home ownership gap is as wide today
    as it was when redlining was legal. And without interventions,
    people of color will never reach economic parity with White
    residents.
        Because of these structural inequities, where a person
    lives can make all the difference in their lives. Your address
    impacts everything about you. In fact, your Zip code is a
    better determinant of your health than your genetic code.
    Neighborhoods of color are more likely to have poorly resourced
    schools, fewer amenities like health care facilities, grocery
    stores, green spaces, and bank branches. But these communities
    of color are more likely to have hazardous toxic waste plants
    as well as polluted land, air, and water.
        There are over 4 million instances of housing
    discrimination that occur each year, and, unfortunately, most
    of these go unreported. But I want to give you a sense of the
    cases that do come through our doors.
        In New York, a young Asian American woman taking her trash
    out had acid thrown in her face, causing serious injuries.
        In Alabama, we are working with our members to assist
    victims of sexual assault, including a woman who was raped by
    her landlord and who got no assistance at all from law
    enforcement when she reported the incident.
        In Tennessee, we recently settled a redlining cases in
    which a local lender failed to serve Black residents in
    Memphis.
        In Maryland, we are currently investigating an appraisal
    bias case in which an appraiser stated that an affluent Black
    community in Prince George's County could not sustain a high-
    income housing development, stymieing a multimillion-dollar
    project.
        NFHA recently filed a major lawsuit against Redfin alleging
    systemic real estate sales discrimination in Philadelphia,
    Kansas City, Baltimore, Chicago, Milwaukee, Louisville,
    Memphis, Long Island, and Essex County, New Jersey.
        NFHA and its members are addressing discrimination manifest
    in algorithmic-based technologies used in the housing and
    financial services space, including the use of tenant
    screening, risk-based pricing, credit scoring, digital
    marketing, and automated underwriting systems.
        When thinking about solutions to overcome housing and
    lending discrimination, we must consider the extensive
    resources this Nation has invested in creating a deeply
    inequitable society. Thousands of laws, ordinances, and
    policies have been passed that either explicitly were race-
    based, such as the Indian Removal Act, the Chinese Exclusion
    Act, and Jim Crow laws, or laws that were implemented with
    racialized policies, such as the Federal Highway Administration
    Act and the Home Owners Loan Corporation Act.
        This Nation has spent hundreds of trillions of dollars
    implementing unfair policies which created deep-seated racial
    inequality that we see today. It is, therefore, imperative that
    the Federal Government now support equitable investments for
    marginalized groups. Discrimination is crippling this Nation.
    Research shows that if we eliminated racial inequality, the
    U.S. GDP would increase by $5 trillion over a 5-year period. So
    it is in our collective interest to expand opportunities for
    marginalized groups, and I thank you for allowing me to share
    with the Committee.
        Chairman Brown. Thank you, Ms. Rice.
        Mr. Reece, welcome, and you are recognized for 5 minutes.

        STATEMENT OF JASON REECE, ASSISTANT PROFESSOR, CITY AND
    REGIONAL PLANNING SECTION, KNOWLTON SCHOOL OF ARCHITECTURE, THE
                         OHIO STATE UNIVERSITY

        Mr. Reece. Chairman Brown, Ranking Member Toomey, and
    Members of the Committee, thank you for the opportunity to
    testify today on the legacy of racial discrimination in
    housing. I commend you for hosting a hearing on this important
    topic and elevating the issue of housing equality as a top
    priority of this Committee. I am an assistant professor of city
    and regional planning in the Knowlton School at The Ohio State
    University. My two decades of teaching, research, and
    scholarship have focused on city planning history, land use
    policy, and their implications for racial and social equity.
        Contemporary housing segregation often correlates with
    isolation into neighborhoods that lack critical opportunity
    structures, such as strong schools, healthy environments, and
    economic resources. Research by the Diversity Data Kids
    initiative at Brandeis University has found that nearly one in
    two African-American children and one in three Latinx children
    are disproportionately isolated into the most unhealthy and
    underresourced neighborhoods in our Nation's largest
    metropolitan areas. These disparities are even more pronounced
    for low-income African-American and Latinx youth.
        Segregation in our housing market was not a natural
    occurrence but enforced by a systemic arrangement of policies
    and practices throughout the 20th century by both the private
    and public sector. Local practices such as racial zoning,
    racially restrictive covenants, exclusionary zoning, and
    expulsive zoning all played a role in enforcing segregation
    into the early 20th century city. These existing patterns of
    segregation created by local practices would be reinforced by
    redlining practices and housing policies emerging from the New
    Deal. Redlining of urban neighborhoods would produce decades of
    disinvestment, while FHA guidelines mandated racial separation
    in the rapidly growing post-World War suburbs.
        Post-war policies such as urban renewal and the Federal
    Highway Act would further damage redlined urban neighborhoods,
    causing widespread disruption and displacement. Landmark civil
    rights legislation, such as the 1968 Fair Housing Act, have
    helped open housing markets, but segregation persists. For
    example, the Federal Fair Housing Act has been effective at
    reducing private discrimination in the market but has been
    unable to counter ongoing exclusionary land use policies.
        The legacy of discrimination has a direct impact on the
    challenges facing the housing sector, cities, and our society.
    Research has linked these historic policies to depressed
    wealth, health, and housing outcomes for marginalized
    communities today. Three-quarters of the formerly redlined
    neighborhoods from the 1930s low- to moderate-income today.
    Historic patterns of redlining have been associated with
    increased risk for predatory lending and foreclosure during the
    2008 housing crisis. Studies have documented the relationship
    between historic redlining, contemporary social vulnerability,
    income, and also gun violence. New studies emerging from public
    health indicate historic redlining can be linked to a number of
    contemporary health challenges. Redlining has been empirically
    linked to disparities in preterm birth, cancer, infant
    mortality, and life expectancy.
        Many policy innovations and reforms could proactively
    counter the legacy of segregation on the housing market.
    Federal leadership and investment are needed to support
    communities and local governments who are attempting to grapple
    with these challenges. Leadership is needed in building
    capacity, fostering collaboration, fostering local innovation,
    while assuring protection of civil rights.
        Federal leadership could be beneficial in aligning critical
    infrastructure investments, supporting the implementation of
    fair housing programs, and fostering regional planning
    activities. Many of the policy tools needed to counter the
    legacy of discrimination exist, but need to be brought to
    scale. For example, recent programs such as the U.S. Department
    of Housing and Urban Development's housing choice voucher
    mobility demonstration could be expanded to assist local
    housing authorities in providing better access to safe and
    healthy neighborhoods for voucher holders.
        In addition to housing mobility, direct investment is
    needed in formerly redlined communities. Proposed Federal
    programs, such as the formerly introduced Livable Communities
    initiative, could be transformative in sparking the synergistic
    investment in infrastructure and affordable housing needed for
    neighborhood transformation.
        Metropolitan housing markets are most effectively planned
    for through regional planning strategies. Regional housing
    approaches can align local government land use regulations and
    help reform local exclusionary housing policies. Regional
    planning is critical to build consensus, build capacity, and
    develop strategy among multiple local governments. Programs
    such as the Regional Planning Competitive Grant Program from
    the HUD Sustainable Communities Initiative could be
    reintroduced to support the capacity for regional planning.
        In conclusion, housing is a critical form of infrastructure
    serving families, neighborhoods, and regions. Stable housing
    and healthy neighborhood environments are critical to family
    well-being and child development. Efforts to reduce
    contemporary discrimination in the housing market and directing
    investment into historically disinvested neighborhoods provides
    an investment into the next generation of American society,
    supporting equity but also improving the Nation's health,
    wealth, and economic competitiveness.
        Thank you for the opportunity to testify today. I look
    forward to your questions.
        Chairman Brown. Thank you, Mr. Reece.
        Mr. Husock, welcome.

         STATEMENT OF HOWARD HUSOCK, EXECUTIVE SENIOR FELLOW,
         PHILANTHROPY ROUNDTABLE, AND ADJUNCT FELLOW, AMERICAN
                          ENTERPRISE INSTITUTE

        Mr. Husock. Thank you, Chairman Brown, Ranking Member
    Toomey, and distinguished Members of the Committee. It is a
    special honor to testify before the Senator from Ohio, the
    State where I was born and raised.
        That the United States has been marked by an ugly history
    of race-related housing discrimination is beyond dispute.
    Private deed restrictions barred African-Americans from buying
    or renting in neighborhoods of their choice, including such
    iconic American places as Levittown. Government policies
    reinforced and encouraged such bias, as with the redlining
    policies we have discussed. A new direction was set by the
    landmark Fair Housing Act of 1968 and its key guiding
    assumption: that race discrimination should not preclude any
    American household from buying or renting a home it can afford.
        We reversed course from what might be called ``negative
    discrimination,'' but the history of Government efforts to
    combat the effects of racism on housing policy have also
    included what can be called ``positive discrimination''
    policies, Government interventions in the marketplace conceived
    to help racial and ethnic minorities. I will discuss the
    historical evidence as to how and whether such policies have
    worked and how they might be modified today.
        The first such broad intervention was public housing,
    initiated as part of the New Deal. What was meant as Government
    benevolence did not turn out that way. In Detroit, as well as
    Chicago, St. Louis, Pittsburgh, Cleveland, and elsewhere,
    historical African-American neighborhoods were bulldozed to
    make way for explicitly racially segregated public housing.
    That meant the clearance of hundreds of Black-owned businesses
    and owner-occupied homes.
        In Detroit, the New Bethel AME Church, where Aretha
    Franklin first sang and her father preached, was torn down. So
    too was Pittsburgh's Hill neighborhood, immortalized in the
    plays of August Wilson. These neighborhoods were repositories
    of African-American wealth, small but growing. Perhaps more
    importantly, they were also communities in which wealth
    accumulation was possible.
        In contrast, ownership in public housing is a contradiction
    in terms. That has unfortunately played a role in the tragic
    lag in wealth descried earlier, and, of course, much of the
    original public housing stock has rapidly deteriorated and was
    itself bulldozed--with no compensation for residents.
        The well-intended but misguided policy to set public and
    subsidized housing rents at 30 percent of income today means
    that as one's income increases, so does one's rent. What a
    punishment. That has set a trap to hold back tenants, and that
    disproportionately affects African-American tenants who
    comprise 47 percent of all public and subsidized households
    today. Median tenure in New York City public housing, 19.7
    years.
        Consider, too, the Community Reinvestment Act, passed in
    1978 at a time when competition in the financial sector was
    sharply limited by unwise regulation. Redlining was plausible.
    In the years since then, however, lending has been
    revolutionized by technology and competition, including by
    nonbank lenders. It has become fierce. It is no longer clear
    that, absent regulation, bank redlining would persist. But
    there is reason to believe that such positive discrimination as
    the CRA can harm the prospects of those it sets out to help.
        A 2013 National Bureau of Economic Research paper found
    that loans made in the run-up to CRA exams defaulted by about
    15 percent more often than those in other periods. My concern
    is not for the profits of the big banks but, rather, about the
    minority homeowners who find themselves living on a block where
    homes have gone into default and foreclosure.
        Consider as well the Affirmatively Furthering Fair Housing
    Initiative, an understandable response to the fact that too
    many of our municipalities have adopted draconian zoning laws.
    But the emphasis of AFFH on using Federal HUD funding as a
    stick to force the construction of more subsidized rental
    housing aimed at increasing residential racial diversity
    precludes the household wealth appreciation gained through
    property ownership, and it can benefit developers more than
    low-income housing households.
        A University of California at Berkeley study has found that
    low-income housing tax credit-financed construction in that
    State costs $480,000 per unit. That is a lot of infrastructure.
        In conclusion, there are three policy changes I will leave
    you with. Let us consider more imaginative approaches to
    improve public housing than simply spending more. For instance,
    buying out public housing tenants, financed through the sale of
    those properties that are on valuable sites. Let us permit
    fixed-rent leases for public and other subsidized housing
    tenants so they can accumulate wealth.
        Second, include regular loan performance reviews
    specifically for CRA-qualified lending and make clear to
    lenders that performance, not just the extension of credit,
    matters. And let us use HUD to provide models, not mandates,
    for local communities to reform zoning in ways that will
    accommodate a wider range of missing middle-income groups
    without subsidies. These approaches will effectively provide
    vehicles of opportunity for those of all races, especially
    minorities who have been harmed by a history of ill-conceived
    Government assistance policies.
        It is an honor to testify in front of you, and I look
    forward to your questions. Thank you very much.
        Chairman Brown. Thank you, Mr. Husock.
        Mr. Peter, welcome. You are recognized for 5 minutes.
        Thank you.

      STATEMENT OF TOBIAS J. PETER, DIRECTOR OF RESEARCH, HOUSING
       CENTER, AND RESEARCH FELLOW, AMERICAN ENTERPRISE INSTITUTE

        Mr. Peter. Chairman Brown and Ranking Member Toomey, thank
    you for the opportunity to testify today.
        Many of the housing problems we face today as a Nation have
    occurred not in spite of Federal policies, but because of them.
    Two policies in particular have been major contributors to the
    separate and unequal housing legacy we find ourselves in today.
    Racial discrimination in residential zoning policies espoused
    by the Federal Government may be traced back to 1921 and
    foreclosure-prone affordable housing policies back to 1954.
    These two policies continue to contribute to disparate outcomes
    and put low-income and minority borrowers needlessly in harm's
    way and severely limit their opportunities to build
    generational wealth.
        Zoning policies espoused by the Federal Government and
    widely adopted around the country have constrained the private
    sector's ability to build adequate housing, thus fueling
    housing unaffordability.
        Starting in 1921, one-unit detached zoning policies became
    widespread through the actions of the Federal Government.
    Justified as actions ``promoting health, safety, morals, or the
    general welfare,'' they were, in fact, thinly veiled efforts to
    promote racial segregation of residential development.
        These policies have created an artificial supply shortage.
    We estimate without these policies an additional 8 million
    homes would have and can still be built without subsidy by
    private enterprise.
        This supply shortage has resulted in higher home prices,
    higher rents, and greater levels of debt in order to become a
    homeowner.
        Worsening affordability has severely affected low-income
    households, especially Black ones, by severely restricting the
    opportunity to sustainably purchase a home.
        Foreclosure-prone affordable housing policies began in
    1954, when Congress authorized FHA to use the 30-year loan.
    These policies have been primarily targeted at low-income and
    minority borrowers and have subsidized debt by providing
    excessive leverage and have not built wealth.
        Coupled with the supply shortage, the increased demand from
    additional leverage has fueled unsustainable lending and higher
    home prices. This is the paradox of affordable lending: When
    supply is constrained, credit easing will make entry-level
    homes less not more affordable.
        During the financial crisis, these policies contributed to
    8.7 million of foreclosures and other forced dispositions,
    which were one and a half times higher in lower-income and two
    times higher in minority neighborhoods than in high-income or
    more White neighborhoods.
        Today the Nation finds itself in the midst of the second
    home price boom in less than a generation. The national
    seller's market is now in its 101st month, and levels of supply
    are at record lows. Home prices are rising in the 10 to 15
    percent range compared to a year ago.
        Home price appreciation is being propelled by the Fed's low
    interest rate policies and quantitative easing, the desire for
    more space as more people work from home, and a wide credit
    box, particularly at FHA.
        Across the States you represent, affordability has
    worsened, especially for low-income and minority households.
    You can trace just how bad affordability has become from key
    housing market indicators for your State that you can find in
    the appendix.
        The COVID-19 pandemic has revealed the same fault lines
    that were present before the financial crisis, thus maintaining
    separate and unequal outcomes in the housing market.
        Delinquencies are still largely geographically concentrated
    in low-income and minority neighborhoods, where Federal
    policies provide widespread access to default-prone leverage.
        Most importantly, these Federal policies have impeded the
    creation of generational wealth for lower-income and minority
    households and have served to perpetuate the legacy of racial
    discrimination and socioeconomic stratification in housing. Due
    to their ongoing impact, there is a growing danger that housing
    is going to become even more separate and unequal. This is not
    a viable path forward. While there are, unfortunately, no quick
    fixes to correct the zoning and affordable housing policies
    that have over decades helped to create a separate and unequal
    housing market, the following represent sensible policy
    solutions.
        First, as you are now considering new affordable housing
    proposals providing hundreds of billions of new funding, you
    must be wary of Government programs that promise an easy fix.
    Many poorly designed housing assistance programs have had many
    unintended consequences which have helped to make housing
    separate and unequal.
        Second, a sounder approach for the Federal Government's
    involvement in single-family financing would be to focus on
    wealth building, not debt. Specifically, shorter loan terms
    would sustainably build generational wealth for low-income and
    minority households through home ownership. To make these loans
    attractive, Government assurance could be narrowly targeted to
    lower-income first-generation homebuyers so that they can build
    wealth.
        Third, State and local governments can greatly expand
    supply by unleashing the private sector by restoring property
    owners' rights taken away by Federal policies dating back to
    the 1920s.
        Fourth, identify and prosecute bad actors that propagate
    racial discrimination using sound data analysis by the AEI
    Housing Center while allowing others to defend themselves using
    the same approach. This test requires no new data collection,
    and we stand ready to help HUD or the CFPB to implement it.
        And, finally, fifth, provide and support economically sound
    opportunities for income and wealth growth for lower-income
    people.
        Thank you very much.
        Chairman Brown. Thank you so much, Mr. Peter.
        Let me begin the questions with Ms. Rice. Infrastructure
    investments in the past, Ms. Rice, like FHA and construction of
    the Federal highway system created jobs and helped drive
    economic growth. They only benefited some communities, however.
    They explicitly, as we know, excluded or directly harmed lower-
    wealth communities and communities of color.
        Ms. Rice, how do we ensure that new investments in
    infrastructure help promote broad-based economic growth while
    addressing economic and racial inequalities and inequities
    both?
        Ms. Rice. Thank you for the question, Senator Brown. The
    first thing that we have to do is first understand that
    infrastructure is housing. When you think of all of the
    infrastructure bills that the Nation has passed in the past,
    those infrastructure bills had a grave impact on people's
    ability to sustain their housing. It disrupted home ownership
    opportunities for many communities of color, and it created--it
    actually helped create residential segregation. So we have to
    keep that in mind when we are implementing this particular
    infrastructure bill, and one of the things that we are pushing
    for at the National Fair Housing Alliance is to sort of cloak
    the entire infrastructure bill, if you will, in a patina of
    equity. So we're arguing that the Affirmatively Furthering Fair
    Housing mandate should be applied to the entire infrastructure
    bill so that we are implementing all of these programs and
    investments in a very equitable fashion.
        The other thing is the infrastructure bill has to include
    both supply side and demand side provisions. So you cannot just
    buildup housing opportunities without ensuring that people are
    going to be able to adequately access them. And if we negate
    the reality, if we excuse the reality that families of color
    are not in the same position because of historical and current
    discriminatory practices to access affordable housing options,
    then we are going to be exacerbating inequality, much like the
    CARES Act that was implemented at the beginning of the COVID
    pandemic has worked to exacerbate inequality because it was not
    implemented through an understanding of the inequalities that
    currently exist in our Nation.
        So if we do not want to repeat that kind of exacerbation of
    inequality in our Nation, we have to make sure that the
    infrastructure bill is taking into consideration that we have a
    very uneven landscape and not everyone has access to
    opportunity. So we need to pay attention to both the supply
    side and the demand side issues.
        Chairman Brown. Thank you, Ms. Rice.
        Dr. Reece, you have helped communities engage in
    comprehensive planning efforts involving housing and
    transportation. Who needs to be at the table? If you would
    briefly tell us, who needs to be at the table to make sure that
    these plans work for the neighborhoods? Your sound is not on.
    We still cannot hear you.
        Let me come back to you. Apparently that is on our end. It
    is on his end? OK. It is on his end. Sorry about that, Dr.
    Reece.
        Let me move to Mr. Rothstein. You wrote an entire history,
    as we have cited on the Government's role in creating and
    perpetuating segregation in our housing markets and the Federal
    Government's obligation to provide redress. For those who might
    be skeptical, explain why the Government has an obligation to
    remedy the harmful discrimination that it perpetuated. And we
    cannot hear you either. Is there a problem, Mr. Rothstein? Now
    we can hear you, Mr. Rothstein.
        Mr. Rothstein. I forgot to unmute myself. Sorry.
        In the first place, we have a constitutional obligation to
    do it, no matter how difficult it is, because as we have
    discussed, the policies that created segregation were heavily
    dominated by Federal, State, and local government policies, a
    violation of the Constitution, and we have an obligation as
    Americans, difficult though it may be to remedy that, not just
    to let it take care of itself. That is the first reason.
        The second reason is so much is being made of unintended
    consequences. Of course, there are unintended consequences of
    everything we do, and we have to be careful to avoid them. But
    that cannot be a reason to paralyze us from doing anything.
        One of the things we should do is impose a disparate impact
    standard on everything that we do under this infrastructure
    bill so that we make sure that the policies that we enact do
    not have a disparate impact on African-Americans and on other
    minorities in an unintended way.
        For example, just a few years ago, the present Governor of
    Maryland took office and canceled a light-rail project that was
    going to bring African-Americans in a low-income neighborhood
    of Baltimore, give them access to good jobs, to good shopping
    opportunities, residential opportunities, and redirected that
    money to highways that would help speed the travel of commuters
    from suburban areas into the center of the city. That had a
    disparate impact on African-Americans, that policy choice. It
    was not intended as a racially explicit policy, but we need to
    impose a disparate impact standard on it and on all the
    policies that we enact.
        I think that we should legislate the disparate impact
    standard into the Fair Housing Act because leaving it to
    rulemaking, we have seen over the last decade, is subject to
    politicization and to repeal and not be effective.
        So we have to implement policies that we are obligated to
    do under the Constitution. We cannot use the fact that there
    may be occasional unintended consequences as an excuse to do
    nothing. The Federal Government was very powerful in
    implementing segregation. The fact that it was so powerful in
    doing it suggests that if it is intended in the right way, it
    can be equally powerful in desegregating.
        Chairman Brown. Thank you, Mr. Rothstein.
        Professor Reece, we will come back to you later since my
    time has expired, and if we cannot get back to you later, we
    will talk directly about your answer.
        Senator Toomey is recognized.
        Senator Toomey. Thank you, Mr. Chairman.
        Let me start with Mr. Husock. Actually, several people have
    observed that African-American home ownership rates have not
    improved since, I do not know, the late 1960s or thereabouts.
    So we have had 50 years of programs, and you went through some
    of the failings we have had with the public housing system and
    how that has failed and how rent regulations have failed, and
    the CRA has certainly at least become obsolete--oh, and
    literally, truly trillions of taxpayer dollars spent to
    subsidize housing in various ways over recent decades, and yet
    zero progress on a very important metric like home ownership
    rates.
        Is this pretty damning evidence that these programs have
    not worked, in your view, Mr. Husock?
        Mr. Husock. It is really suggestive, certainly, Senator
    Toomey, and I think we have to not look for the big quick fix.
    We have to accept the idea that the best progress is
    sustainable progress, and that can be incremental. Here is what
    I am talking about. The FHA, still today a very powerful force
    in the American Government, requires a 3-percent downpayment.
    Well, low downpayments seem like you are doing a favor to the
    homeowner, but they actually may, as you said in your opening
    remarks, qualify people for homes they cannot afford.
    Foreclosure and delinquency rates in FHA-financed homes remain
    extremely high today compared to those in the private market,
    the straight private market. That is not something that we
    should accept. It is a worry. And that resounds through the CRA
    and other efforts to shoehorn people into home ownership. Let
    us make sure home ownership is sustainable, and that way it
    will improve in the long term.
        Senator Toomey. There is no question we see a correlation
    between home ownership and favorable socioeconomic outcomes.
    But does that mean that there is a causal direction, starts
    with home ownership, and if we put people in homes they cannot
    afford, we are going to still get the favorable socioeconomic
    outcomes that we would like to see?
        Mr. Husock. No, I actually compare it to the discussion
    about moving to a better Zip code. We have to make the right
    life decisions in order to move up in the world. That is a fact
    of American life. And one of the big life decisions we make is
    to save money for a downpayment for a home so that we do not
    have a large overhanging principal, so that when home values go
    down, as they inevitably do, as you pointed out in your opening
    remarks, we are not caught in the down draft. So the good life
    decisions that allow people to accumulate wealth, whether by
    moving to a higher-value neighborhood or just having the
    downpayment to move where they can buy, those are what we need
    to encourage.
        Senator Toomey. I want to develop that, but I just want to
    close out on this. Spending a whole lot more money on the
    programs that have given us zero progress does not sound like a
    great recipe to me.
        Mr. Peter, you made a point that is very related to what
    Mr. Husock just said, which is the idea to focus on wealth
    building instead of debt building. Isn't it true that a lot of
    well-intended programs have really been designed to encourage
    people to take on more debt than they can afford, which has
    ended very badly for those very people that were meant to
    benefit? If we had programs designed to help people encourage
    the accumulation of savings and wealth, wouldn't they be a lot
    better off?
        Mr. Peter. Thank you, Senator, for the question. And, yes,
    basically since 1954, Federal affordable housing policies have
    been to subsidize debt by providing excessive leverage, and my
    colleague Howard Husock just mentioned a couple examples. At
    FHA we have--today the median debt-to-income ratio is 45
    percent. FHA goes as high as 57 percent. At FHA many of the
    loans get risks laid on top of each other with risky features.
    So there certainly--this has been the policy since 1954, and
    the outcomes do not show for it. A much better, a much sounder
    approach would be to add to wealth building, and the way to do
    that is because--the way to achieve that is to focus on shorter
    loan terms, do not get absorbed into--do not end up driving
    home prices higher and higher, but they end up providing
    sustainable wealth building, which is what we want.
        Senator Toomey. And then I have got very little time left,
    but, Mr. Husock, I wonder if you could elaborate a little bit
    on an interesting idea that you alluded to, which is the idea
    of maybe selling off public housing that is on very valuable
    land and using the proceeds from that sale to do a lot more to
    help the folks who would be displaced than keeping them there.
        Mr. Husock. Yeah, in New York City there are housing
    developments on some of the most--I mean billion-dollar lots on
    the Brooklyn waterfront and lower Manhattan. They used to be
    worth billions before the pandemic. We think they will come
    back. And they will, in fact. And rather than giving people a
    housing voucher and saying try to use it somewhere, let us pay
    them for exactly the kind of wealth accumulation they missed
    out on for 40 years--10 percent of New York City public housing
    tenants have lived there for 40 years or more, not accumulating
    wealth. Let us buy them out with the proceeds from these
    extremely valuable real estate sites and let them go use that
    where they would.
        Senator Toomey. Thanks very much.
        Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Toomey.
        Senator Reed from Rhode Island is recognized for 5 minutes.
        Senator Reed. Thank you very much, Mr. Chairman.
        Let me direct a question to Ms. Rice and Professor Reece,
    and it is a very basic one. When it comes to addressing housing
    discrimination, would the private sector on its own produce the
    most efficient and fairest outcome in your estimate?
        Ms. Rice. Sure, I am happy to go first, and thank you,
    Senator Reed, for the question. The answer is no,
    unfortunately, and we have seen this throughout history. There
    is this sort of argument that we have been hearing that
    Government should sort of stay out of the way because the
    private market can handle things on their own. I would like to
    lift up two examples of why that is not the case.
        First, the argument essentially says that it was all right
    for the Federal Government to invest trillions of dollars
    implementing policies that were equitable for and supported
    White communities in a very racialized manner. That was just
    fine. Supporting White families to make it into the middle
    class was just the thing to do, but investing dollars in
    equitable policies to support communities of color is somehow
    wrong.
        I think it is a very racist construct to argue that the
    policies and programs that benefited White residents would not,
    in fact, benefit people of color and should continue to be
    disclosed for them. The argument, I think, Senator Reed,
    ignores that the White community is where it is now on the
    economic ladder because our Government supported--from the
    colonial period to today supported their ability to secure
    land, housing, and businesses. The argument suggests that
    supporting communities of color in this way is somehow wrong,
    and I think that is clearly separate and unequal.
        The second example I would like to lift up is the
    importance of the Government's role in supporting
    antidiscrimination action. The first Fair Housing Act was
    actually passed during Reconstruction in 1866. That law was
    almost never used, Senator Reed, and that law was never used
    because people feared violence and retribution if they were to
    exact this civil rights protection. But when the Fair Housing
    Act was passed in 1968, bringing with it the full weight of the
    Department of Justice and the Department of HUD, we saw
    thousands of victims of discrimination come forward because
    they had the support and backing of the Federal Government. So
    policies implemented in a way to advance justice and fairness
    are necessary.
        Senator Reed. Well, thank you very much.
        Dr. Reece, do you have a comment?
        Mr. Reece. Yes, I wanted to come back to Senator Brown's
    question about moving forward in terms of the benefits of
    comprehensive planning to address these issues. I wanted to
    state that the planning profession still has its place in
    regards to aligning our infrastructure in an efficient way,
    avoiding land use conflict, and building the capacity and the
    consensus needed to guide the development of cities moving
    forward with the macroeconomic changes that we know are coming.
        We have learned from the painful history of the past in
    terms of these past practices that we have talked about, and
    our profession has evolved considerably since then, placing
    great emphasis on engaging marginalized communities and
    centering their voices in the context of how we plan for the
    future. This is why I believe planning still has a very
    profound role in terms of thinking about how we guide our
    infrastructure investments forward, as well as how we address
    these ongoing housing challenges facing many communities of
    color.
        Thank you.
        Senator Reed. Well, thank you very much, and my time is
    dwindling down to a few seconds. So, Chairman, I will yield
    back to you. Thank you.
        Chairman Brown. Thank you, Senator Reed.
        Senator Scott from South Carolina, who may or may not be
    on? If not, Senator Rounds of South Dakota, you are recognized
    for 5 minutes.
        Senator Rounds. Thank you, Mr. Chairman.
        Ms. Rice, I would like to begin with a question for you.
    One of the areas where housing needs are most acute are on
    tribal lands in South Dakota and across the country. Native
    American reservations have a housing stock that has suffered a
    severe underinvestment that stretches over decades.
        Now, one of the reasons for that is because we have what we
    call ``tribal trust land'' in which the Government holds in
    trust the land which belongs to the Native Americans. But when
    it comes time to build a home, showing that you actually have
    ownership or the ability to own the land and, thus, the
    location where the home is becomes rather challenging, and
    there are limited numbers of financial institutions that have
    expertise in working through that particular issue. But this is
    an item that has literally been there for decades.
        Where do you think Congress should start when it comes to
    improving housing conditions for Native Americans? And I am
    going to ask you a follow-up when we are done, but just to
    start things off, can you give me your thoughts about--these
    are rural areas, so they are different from a lot of the rest
    of the country, but to me this is critical for a population
    that really does have a very high level of poverty.
        Ms. Rice. Senator Rounds, thank you for that question, and
    it is a very important one. As you noted, there are a handful
    of lending institutions that have mastered the process for
    providing mortgage credit on tribal lands, and, unfortunately,
    we have not had a regulatory framework in which our financial
    regulators have used the carrots that they have in order to
    incentivize lenders to do more in this space. So there are a
    couple of things that we are actually championing.
        One is the use of a program called ``special purpose credit
    programs.'' This is a program that has been on the books for
    decades. It is a construct of the Equal Credit Opportunity Act,
    but it has really never been used. It is similar to
    Affirmatively Furthering Fair Housing, right? We have never had
    implementation of the Affirmatively Furthering Fair Housing
    provision of the Fair Housing Act, and so we have not realized
    the benefits that the law really holds. It is the same thing
    with the Equal Credit Opportunity Act. Because we have not hand
    really usage of the special purpose credit program provision,
    we have not seen the full scale of its benefits.
        So we are really encouraging the Department of Housing and
    Urban Development to work jointly with the CFPB and the
    prudential regulators to issue more guidance to give lenders a
    higher degree of confidence to create and implement special
    purpose credit programs which can be designed specifically for
    serving Native American populations.
        Senator Rounds. I would like to follow up a little bit on
    that because I would like to know whether or not you think
    there are items specifically with regard to the HUD Section 184
    loan guarantee program that might be improved upon for this in
    particular, because that is really a Native-focused housing
    program. Are you familiar with it? And are there some things
    that we could do specifically with that particular program?
        Ms. Rice. Senator Rounds, unfortunately I am not very
    familiar with that particular program, but I do know that
    special purpose credit programs can be used with any Federal
    mortgage programs, so they can be used with VA, they can be VA
    loans, USDA loans, FHA loans. And I am sure that they can be
    used for this loan product that you just mentioned. Again,
    there is severe underutilization of the special purpose credit
    program, but it is specifically designed--it was put in place
    to meet the special credit needs of marginalized and
    underserved communities, and Native American populations are
    ripe for that opportunity.
        Senator Rounds. Thank you for that, and I noticed that you
    mentioned the VA program. I have to recall that in either 2016
    or 2017 the Minneapolis-based office, which is responsible for
    several States for VA loans on Native American reservations,
    the Minneapolis office was given an award for having the
    highest number of VA-awarded mortgages in the Nation. They had
    five. Now, think about that in terms of the failure of our
    country to provide those types of loans to Native American
    veterans. And so I do think that there are some things that we
    can work on in that, but I thank you very much for your
    thoughts with regard to that.
        Mr. Chairman, I think I have got a little bit of time left.
        Chairman Brown. You really do not, but go ahead anyway.
        [Laughter.]
        Senator Rounds. Well, then let me just say this: Thank you
    for doing this particular item, and I think that this is an
    area that we can find some bipartisan agreement on with regard
    to improving housing programs that were well intended but that
    may very well need just kind of a review to make sure that they
    are actually doing what they were supposed to do in the first
    place.
        Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Rounds. And as a member
    of the Veterans' Affairs Committee, I will be in touch with you
    and your office on the issue you just talked about with Native
    American veterans, so we would love to work with that on
    housing.
        Senator Menendez from New Jersey is recognized for 5
    minutes.
        Senator Menendez. Thank you, Mr. Chairman.
        You know, Black and Latino households are more likely than
    White households to live in poorer and disadvantaged
    neighborhoods. As Congress considers an infrastructure package,
    we have an opportunity, I believe, to help address racial
    disparities in access to affordable housing and economic
    opportunity by targeting aid to low-income communities. And I
    believe the best way to do that is with a package that spurs
    development and investment in underserved communities by
    coordinating housing and transit development so our communities
    can improve economic resiliency.
        Dr. Reece, would an infrastructure package that provides
    specific investments to low-income communities help address
    some of the racial disparities present in affordable housing
    and economic opportunity?
        Mr. Reece. Thank you for the question, Senator. Absolutely.
    We know that the alignment of transportation infrastructure and
    housing is critical primarily in the context of allowing
    greater workforce mobility. But in addition to that, it helps
    us think proactively in terms of understanding that with these
    transportation investments we may see particularly in our urban
    neighborhoods, property value are going to go up, and we can
    potentially stabilize housing to make sure that those
    neighborhoods stay affordable and accessible.
        I am here in central Ohio where our regional planning
    agency right now is trying to think about how to prioritize
    higher-density transportation development along our arterial
    corridors and also preserve affordable housing. A program like
    this would be actually transformational in moving ideas like
    this off of the books in terms of planning and into
    implementation.
        Senator Menendez. Well, thank you. So it would be fair to
    say that you think including coordinating fair housing and
    transit development, that expands housing opportunities and
    transit access to good-paying jobs as part of an infrastructure
    package would help these racial disparities?
        Mr. Reece. Absolutely.
        Senator Menendez. And that is exactly what my Livable
    Communities Act does, which would authorize new programs at HUD
    to promote smart development and regional planning for
    transportation and affordable housing, especially to better
    integrate affordable housing availability and access to transit
    and access to job opportunities. So I look forward to hopefully
    working with the Chairman on that. Thank you.
        Let me ask you, Ms. Rice, home ownership we know is one of
    the most effective ways for low- and middle-income families to
    build intergenerational wealth. The Federal Reserve tells us
    that the median homeowner has about 40 times the household
    wealth of a renter. The Census Bureau data tells us that, as of
    the fourth quarter of 2020, only 44 percent of Black families
    and 49 percent of Hispanic families owned their homes compared
    to 74 percent of White families.
        So, Ms. Rice, Federal data shows that the median White
    family has eight times the wealth of the median Black families.
    Does the home ownership gap contribute to this wealth gap?
        Ms. Rice. Yes, Senator Menendez, absolutely it does. In
    fact, the home ownership gap is the major driver of wealth
    inequality in the United States, and so that is why it is
    imperative that we adopt programs that help expand home
    ownership opportunities for people of color. And I do want to
    make a point here, because in the lead-up to the Great
    Recession and the foreclosure debacle, the kinds of loans that
    we saw that were hyper-targeted for communities of color were
    toxic mortgages that were not designed to be sustainable, and
    that is critically important. In fact, over 50 percent of
    African-Americans and 50 percent of Latino Americans got loans
    in the subprime market. They got these really horribly crafted
    subprime loans in order to purchase their housing.
        The point I want to make is that that has always been the
    case in the United States. There has never been a time in the
    United States when the primary mainstream financial market has
    been the primary provider of credit to communities of color
    because of this legacy of discrimination and these systemic
    inequalities that we have been talking about, the dual credit
    market and so forth and so on. It is important to keep that in
    mind.
        Senator Menendez. Yes, and we certainly want responsible
    borrowing, but we also want the ability to create that
    responsible borrowing to take place at the end of the day. We
    see that the wealth gap is not static. It widens over time.
        One final question to Mr. Rothstein and Ms. Rice. You know,
    if owning your home is part of wealth building, but also if
    homes are properly appraised and valued, a Brookings
    Institution report from 2018 shows that home values in majority
    Black neighborhoods are 55 percent lower than homes in less
    than 1 percent Black neighborhoods. So how does this systemic
    undervaluation happen? And what are the consequences to
    African-American households?
        Mr. Rothstein. Well, thank you, Senator. Let me begin by
    saying that the--shall I go on?
        Senator Menendez. Yes, please.
        Chairman Brown. Yes, please proceed.
        Mr. Rothstein. Thank you. First, let me say that home
    ownership is a critically important thing to maximize. People
    who own their own homes have more pride in their communities.
    They take better care of their neighborhoods. They are more
    invested in their local schools. So nobody should minimize the
    importance of increasing ownership that is presently denied to
    African-American families.
        But we should also be careful not to overexaggerate the
    effect that home ownership has on wealth creation.
    Historically, African-Americans who have owned their homes have
    gained less wealth from them than Whites who have owned their
    own homes because African-American neighborhoods appreciate in
    value less than White neighborhoods do. An important--it is
    certainly true--and I said this in my comments earlier. The
    wealth gap that we have today is largely created by
    discriminatory Federal home ownership policies. But that is not
    the only thing that sustains it. We should not forget that if
    we want to increase wealth of African-American families and
    other minority families, we should enable them to save from
    decent incomes. Income policy is critically a contributor to
    home ownership--to wealth, rather, is as important a
    contributor to wealth creation as housing policies are. And we
    should not silo our attention to the housing and income
    policies when we are talking about wealth creation. We can
    narrow the wealth gap if we give families enough income to save
    from, the way White families do as well.
        So far as the appraisal issue goes, you are absolutely
    right. This is one of the things that a disparate impact well-
    enforced rule could address. But many people confuse appraisal
    and assessment, and one of the critical problems that we now
    face--and I am sure you have seen all the attention given to it
    in just the last few weeks as a result of a very important
    report that was issued by a political scientist at the
    University of Chicago, Christopher Berry, showing that
    systematically across this country African-Americans, because
    of discriminatory, in effect, assessment policies pay far more
    in property taxes than Whites with homes of similar value. The
    causes of this are obvious, for one thing, because as I said,
    African-American neighborhoods appreciate less rapidly than
    White neighborhoods in value. If you do not do a regular
    assessment--and many, many communities do not do it; they delay
    their assessments--over time White homes' market values are
    going to be much higher than their assessed values while Black
    home market values are not going to be so much higher. The
    result is that African-Americans pay much, much higher property
    taxes to support schools and fire departments and other public
    services than Whites pay. These are not racially explicit
    policies. They are policies that across the country--the Berry
    report documents 1,800 counties and cities in which African-
    American neighborhoods, low-income neighborhoods, pay higher
    property taxes relative to market value than White property
    taxes. Unless we begin to impose a disparate impact standard on
    the assessment practices that are imposed across the country,
    we are not going to solve this problem. And when African-
    Americans pay higher property taxes than they should, that
    depletes their wealth as well, because they are dipping into
    their savings to pay property taxes that are unaffordable. It
    causes then sometimes their homes to be foreclosed. Cities and
    counties condemn their homes and resell them to speculators for
    only the defaulted property taxes.
        This is a critical problem nationwide that is depressing
    the wealth of African-Americans, and it should be addressed.
        Senator Menendez. Thank you, Mr. Chairman.
        Chairman Brown. Thank you, Senator Menendez.
        Senator Scott from South Carolina is recognized for 5
    minutes.
        Senator Scott. Thank you, Chairman Brown, for my 10
    minutes. I appreciate that very much, noting that Senator
    Menendez used so much time. I appreciate the new standard, and
    I will take advantage of that. Thank you so much, Chairman, for
    allowing that and Senator Menendez for setting the standard.
    That was tongue-in-cheek, of course.
        One of the things I would say, as I said prematurely
    earlier, is that Republicans and Democrats both agreed that we
    should find a way to make the American dream more attainable
    and more achievable for the average person in this Nation, no
    matter the color of their skin. That is something that we
    should all celebrate, and, frankly, we should all believe. I am
    not completely convinced that others believe that as much as I
    do, but it certainly is the case that we want Americans to
    achieve the American dream, and nothing speaks of the American
    dream, in my opinion, more than home ownership. As a kid who
    grew up really in apartments and in family members' homes, the
    thought of having my mother own her own home and have a garage
    attached to her home that she is able to drive into and to be
    safe as she gets out of the car as opposed to just having an
    apartment complex where she has to be very, very careful when
    she is getting out of the car after a 16-hour shift or an 8-
    hour shift that ends at 11 p.m., it is part of the reason why
    this issue is so incredibly important to me personally and why
    I, like so many other Americans, millions of Americans, dreamt
    of home ownership as a way of not really creating equity in
    America but simply having a safer, healthier environment for my
    mother to come home to. And as we have this conversation, I
    hope we do not overlook the fact that we are all striving to
    accomplish something that is sustainable.
        Senator Menendez said it well, that we have to have
    responsible decisions made around home ownership, and I think
    we can actually increase the number of people eligible for home
    ownership in a responsible manner by including within the
    scoring models that we use for creditworthiness those folks who
    are paying rent on time. In so many of the models looked at by
    the GSEs, they do not consider things that are simple.
    Thankfully, we have passed legislation, my legislation, the
    Credit Score Competition Act, that allows for these credit
    agencies to look at whether you are paying your utilities on
    time, whether you are paying your phone bill on time, whether
    or not you are paying your rent on time. Those are three strong
    indicators that we should use to increase the number of people
    in this Nation, and specifically minorities in this Nation, who
    are already creditworthy. But we are not using the information.
    That is wrong. We should change the model so that those who are
    creditworthy have a chance to be a homeowner. It is that
    simple.
        I would ask Mr. Peter and Ms. Rice, am I missing something
    on that specific point? And knowing Chairman Brown will not
    give me 7 more minutes, I would ask you to have short answers
    so I can get to my next question.
        Ms. Rice. You are absolutely right, Senator Scott. That is
    one of the reasons why the National Fair Housing Alliance
    started our Tech Equity Initiative, to de-bias all of the
    technologies that are used in the housing and financial
    services space. Thirty-plus years ago--and I am telling my
    age--when I was a loan underwriter, the two most critical
    pieces of information that I looked at to determine whether or
    not a consumer was creditworthy and could pay their mortgage
    obligation was: What is your current housing payment, how well
    do you pay your rent? And what is your housing payment shock?
    And if those two things were on point, my job was 80 percent
    done. As you know, Senator Scott, we do not consider those two
    key factors today in the underwriting process, as you just
    said. The reason is there is no infrastructure to collect that
    information, and we need to build that, and the GSEs could go a
    long way to doing that.
        Senator Scott. Thank you.
        Mr. Peter, can you give me a quick answer to that question
    so I can get to my last one?
        Mr. Peter. Yes, thank you, Senator. So, fundamentally, the
    problem in the housing market today is that we have a supply
    shortage, and this supply shortage in combination with Federal
    housing policies which tend to stimulate demand only ends up
    with prices higher and higher. Currently we have 10 to 15
    percent home price appreciation. This has been going on for a
    year. If this goes on for another year or 2 more years, it is
    going to be pricing many, many----
        Senator Scott. Mr. Peter, let me ask you a more specific
    question. If we use more variables in understanding someone's
    creditworthiness, would we see an increase in access to the
    American dream called home ownership?
        Mr. Peter. Senator, we can expand the base. However, if we
    do not have more houses available----
        Senator Scott. That is a different conversation. So the
    answer to the question is yes or no?
        Mr. Peter. Sure. Yes.
        Senator Scott. OK. So there is no question, if you live in
    Charleston, South Carolina, there is no doubt about it. We have
    more buyers in the market than we have sellers. We have a real
    problem with capacity, and I understand that. The point of my
    question was whether or not, if we started looking at the
    entire financial picture of a borrower, would more borrowers be
    creditworthy than the ones that do exclude their rent, their
    electric bill? And I believe that answer is pretty clear. And
    knowing that my time is up, I am going to, until Chairman Brown
    cuts me off, make a statement as opposed to asking another
    question, because my thought is that Senator Menendez made a
    really good point, which is that you look at the average net
    worth of the household that owns a home, it is about 255; one
    that rents is about 6,300. We should certainly bridge that gap.
    That should be part of what we do as members of the Senate and
    Congress, is to look at ways for us to close the chasm in the
    most responsible way.
        I oftentimes walk into hearings and asking myself, based on
    the title of the hearing, am I in the same place as my friends
    on the other side? And sometimes the answer is yes, and
    sometimes the answer is no.
        I would suggest that we focus on the problem, and even if
    we come to solutions from different pathways, that we do not
    demonize folks who disagree with your approach to solving a
    problem. I actually think that making the borrower who is
    already creditworthy a focus of my attention actually increase
    home ownership in the minority community faster than other
    ways. I think if we can address the assessment issues, which
    are more a county issue than it is a national issue, on the
    county level, having been a chairman of the county council,
    understanding the 5-year rotations for assessments, certainly
    if your property values increase faster in your more affluent
    communities but you do not have assessments but every 5 years,
    that is like common sense.
        The challenge is that it is not specifically aimed at any
    race of people. That is something that we should pass down to
    the States and to the local level. We should spend our time in
    this area focusing our attention as much as possible on those
    issues that we should control--not that we can control but that
    we should control from the Federal level.
        Thank you so much for the extra 2 minutes and 12 seconds. I
    know that it hurts your heart, but it warmed mine, Senator.
    Thank you, Chairman Brown.
        Chairman Brown. Thank you, Senator Scott.
        Senator Warner from Virginia is recognized for 5 minutes.
        Senator Warner. Well, thank you, Mr. Chairman. I appreciate
    Senator Menendez and Senator Scott on the new 8-minute Brown
    rule. I promise I will not try to take the whole 8 or 9
    minutes.
        Let me actually echo what Senator Scott just said. I agree
    with him and was proud to cosponsor his legislation on trying
    to have a smarter, more reflective credit scoring process. But
    I do think we need to appreciate the fact that home ownership
    is one of the biggest indicators of wealth in this country, and
    we all have cited many times the roughly 10:1 ratio of White
    families over Black families and a lot of that due to the home
    ownership rate differential. And, remember, all those rate
    differentials were based on prepandemic data. So my fear is the
    numbers are even worse right now.
        Echoing what Senator Scott said, looking at this, you know,
    what will help minorities, what will help all first-generation
    homebuyers, I have been working on a proposal, Chairman Brown,
    that I hope to solicit bipartisan support for that would say
    taking advantage of these record-low interest rates with a
    slight one-time Federal subsidy on bringing down the interest
    rate, can we create a 20-year mortgage product that would be
    available to first-generation homeowners, and
    disproportionately that will hit people of color. I am not sure
    anyone--my kids--should take advantage of that if I can help
    co-sign a note, oftentimes first-generation homeowners do not
    have that ability, they do not have someone who has accumulated
    wealth. But a 20-year mortgage note, that would, in the way we
    have been able to do the pricing, end up with a similar pricing
    to what a 30-year mortgage would be, that would accomplish two
    goals. One, it would not drive up the house prices that Mr.
    Peter and others have talked about, if we could deal with that
    affordability issue. It would allow individuals literally, the
    compounding effect, if you got a 20-year mortgage, you are
    accumulating wealth in that mortgage at twice the rate as you
    would with a 30-year mortgage. Five years in, you have got
    twice as much equity in a 20-year note than if you had a 30-
    year note.
        Ms. Rice, I will start with you, and then I will go to Mr.
    Peter. If we have this kind of product out there and we
    recognize the wealth differential, a lot due to home ownership,
    wouldn't this be one way in a fair approach offering this to
    only first-generation homebuyers where we might be able to
    tackle this problem?
        Ms. Rice. Thank you, Senator Warner. It is a very great
    question. Yes, in fact, the National Fair Housing Alliance has
    been working in tandem with the Center for Responsible Lending
    and the Urban Institute to conduct research that has landed us
    squarely on the point that you just raised. Our research shows
    that by focusing resources to first-generation homebuyers, we
    will be hitting more of the underserved groups that we are
    trying to help and who have been disproportionately impacted by
    our legacy of unfair and inequitable practices. And, yes, I do
    think that your 20-year mortgage product is a great product to
    add into the ecosystem. We need as many products and programs
    as we can, quite frankly, that are implemented via an equity
    lend, not in a discriminatory fashion but via an equity lend.
    And so I encourage--and I am sure you are already doing this--
    to ensure that there is a cloak of the Affirmatively Furthering
    Fair Housing mandate in the implementation of that program to
    make sure that it is being distributed through the right
    channels so that it can reach those underserved consumers,
    recognizing that communities of color disproportionately are
    unbanked or underbanked. This is not an income issue. This has
    nothing to do with income. It is sheerly a virtue--it is a
    construct of the fact that we are a highly segregated society
    based on race and opportunity. The opportunities are equally
    segregated, so we have got to make sure that people can
    actually have access to these programs.
        Senator Warner. And I agree with you, Ms. Rice, and one of
    the reasons why I am working with Chairman Brown and my
    colleagues in our December bill, I was proud to get $12 billion
    to go into community development financial institutions, CDFIs,
    who have a history and a focus on the underbanked community.
        Mr. Peter, I am going to go to you in my last--this will be
    the last comment I will make, and I think after you are done,
    it will go to Senator Van Hollen. But I think one of the things
    we are trying to structure here is focusing on equity
    accumulation, not on simply subsidizing interest rates so that
    we do not end up having the effect of pushing up home prices.
    Let me grant you your premise of your earlier comment. We do
    need more housing stock supply. But, Mr. Peter, could you go
    ahead and comment at least on this notion of increasing our
    investment in trying to accumulate equity rather than pushing
    up home prices in a 20-year mortgage, and how you might deal
    with that.
        Mr. Peter. Thank you, Senator Warner. Yes, I fully support
    your proposal of just a 20-year term, and in general, I support
    any solution that focuses on wealth building. And the beauty of
    the 20-year loan term is that, as you said, it does not get
    subsidized and does not lead to higher home prices. And, also
    the research that we have done, it shows, once we looked at
    foreclosures after the great financial crisis, we found that
    after accounting for risk factors, we found that loans of 15-
    and 20-year loan term had half the default rate of a 30-year
    term. So this would actually help--a 20-year loan term would
    actually help tamp down foreclosure risk, and it would build
    wealth. As you said, after 5 years you have built up twice as
    much equity. After 20 years you own your home outright, so you
    have actually money available to pay for your kids' education,
    you have money to save for retirement, and also you are
    paying--with a 20-year term, you are paying yourself in effect
    instead of paying interest to the bank. So the interest savings
    that you accumulate over the term of the loan also could
    potentially be used for additional wealth building.
        However, I would also add that in the housing market there
    are plenty of other policies out there such as the competition
    between Fannie, Freddie, and FHA that oftentimes ends in a race
    to the bottom of lending standards, in general the risk level
    of FHA, so I think we need to be careful that we kind of
    balance both approaches of wealth building, but not at the same
    time doing too much to promote demand while we have a supply
    shortage.
        Senator Warner [presiding]. I agree with you, and I know we
    will go to Senator Van Hollen. We do need to work on the GSEs
    and others to make sure that if we are able to get this 20-year
    product, we could also get an after-market securitization
    market. And I think Chairman Brown is gone, and I think I was
    supposed to call on Senator Van Hollen on his instruction next.
        Senator Van Hollen. Thank you, Senator Warner, and I thank
    all of you for your testimony.
        Mr. Rothstein, in your book ``The Color of Law'', you point
    out that after decades of explicit segregationist policies, the
    so-called race-neutral policies can still continue the
    discriminatory impacts and effects. You mentioned that
    transportation falls into that category, and you mentioned it
    earlier this morning, but as you know, in Baltimore, Baltimore
    City residents spend significant time and planning to establish
    a Red Line, a Metro east-west line; $900 million was going to
    be made available by the Federal Government. Unfortunately,
    Maryland's Governor pulled the plug on it.
        Can you comment on the Red Line as an example of how we
    could have helped remedy some of this historic segregation?
        Mr. Rothstein. I mentioned earlier this topic that you
    specifically addressed, the Red Line, the cancellation of that
    line that would have enabled African-Americans to access better
    jobs and better retail opportunities and better housing. And it
    was canceled in order to shift money to highways that would
    speed the commute of suburbanites into the city.
        I said earlier that this should be deemed a violation of
    the Fair Housing Act because it has a disparate impact on
    African-Americans, and I would say also, in response to Senator
    Scott's comment before, that the exploitation of African-
    Americans by lagged assessment systems is not simply a county
    problem. That is also a violation of the Fair Housing Act and
    should be deemed so.
        So I agree with you that the biggest problem we face is not
    race-explicit policies today. They are policies that are
    superficially race-neutral, but have a disparate impact on
    African-Americans in particular and other minorities. They
    reinforce segregation.
        Let me just mention one other that has been--it seems to me
    everybody on this panel and every Senator who has spoken have
    agreed that the zoning laws that we have in this country
    exclude African-Americans in effect, not explicitly racially
    but in effect for many opportunities for housing, and they
    constrict the housing supply. When Ben Carson was appointed
    Secretary of Housing and Urban Development by President Trump,
    the first thing he said he was going to do was withhold Federal
    funds from communities that maintained exclusionary zoning
    laws. There was a lot of verbal laudatory statements about
    abolishing exclusionary zoning, but the people who support it
    somehow lose faith in it, and we never heard from that again.
        So I think if you are looking for a bipartisan approach to
    housing, one of the first things that you could address is
    zoning laws that have a disparate impact, race-neutral zoning
    laws that have a disparate impact on African-Americans and
    other minorities. Opening up housing supply that that would do
    would not solve the problems of segregation, but it is a
    necessary first step if we are going to address those problems.
        Senator Van Hollen. Well, I appreciate that, and I think,
    you know, in President Biden's American Jobs Plan, he does
    discuss these issues both in terms of zoning but also in terms
    of remedying the transportation policies, which as you say in
    many cases were race-neutral on the surface, but had these
    impacts, and we are feeling them in Baltimore. You know, my
    dear friend, former Congressman Elijah Cummings, the Red Line
    was one of his goals, and it was a real tragedy to see the plug
    pulled on that. We are going to look to see if we can somehow
    remedy that.
        Speaking of the Biden administration, I was pleased to see
    that today the Secretary of HUD announced that they are going
    to reinstate the Obama administration fair housing policy. That
    is an important step.
        On the issue of housing, Dr. Reece, you mentioned in your
    written testimony the Housing Mobility Demonstration Project. I
    am sure you are familiar with the Thompson v. HUD case in
    Baltimore City that demonstrated deliberate policies over years
    in Baltimore for housing segregation. Baltimore City was one of
    the worst in the country. That case resulted in a consent
    decree that includes a mobility program, housing mobility
    program. Senator Young of Indiana and I have introduced a
    proposal to add 500,000 new mobility vouchers, and President
    Biden includes something in his plan, too.
        Can you comment on why these mobility vouchers can be
    important?
        Mr. Reece. Yes, thank you, Senator. And I actually with my
    time at the Kirwan Institute worked on the design of the remedy
    in Thompson v. HUD. And as you have seen in Thompson v. HUD,
    families are prospering and thriving from being in healthier
    environments.
        This builds upon this extensive body of literature, most
    recently the work of Raj Chetty, that shows just the profound
    economic benefits, particularly for kids, if we can get them
    into healthy homes and healthy neighborhoods. I would argue
    that right now mobility programs are underfunded generally in
    comparison to other housing programs, so I think anything to
    provide additional mobility vouchers would be beneficial from
    not only just a fair housing perspective, but also from a child
    development perspective and economic development perspective,
    because we know the long-term benefits of these programs are
    quite profound.
        Senator Van Hollen. Well, thank you. I see that my time is
    up. I had some additional questions for others, but I will now
    turn it over to Senator Cortez Masto.
        Chairman Brown [presiding]. Yes.
        Senator Cortez Masto. Thank you, everyone. This is such an
    important conversation, as you can see, everybody
    participating. I think we can all agree we have concerns about
    the discrimination that we see, particularly in mortgage
    lending as well as interest in housing discrimination.
        So let me just jump right into it because I was listening
    to you, Mr. Rothstein, and you were talking about zoning laws
    that exclude African-Americans and engage in disparate
    treatment. Whether they intend to or not, it is happening. What
    other tools do local and regional governments have to
    proactively prevent housing discrimination? Before we get to
    the Federal laws and enforcement of that, what locally do local
    governments have to really lean into this to also address
    housing discrimination besides addressing the zoning laws, Mr.
    Rothstein, if you have any other ideas?
        Mr. Rothstein. Well, you know, we keep on talking about
    things--the Federal policy, but they are also in the purview of
    local government. There are municipalities across this country
    that do have their own downpayment assistance programs,
    recognizing that they also are responsible for the segregation
    that Government created. So it is not simply the Federal
    Government that can do this.
        Another important issue not of local but of State
    Government is enforcement of the Fair Housing Act's basic
    nondiscrimination proposals--provisions that continue to be
    violated. I am sure you are aware of the explosive survey that
    Newsday did, Long Island Newsday 2 years ago of continued
    steering by real estate agents of African-Americans who can
    afford to buy homes in healthier neighborhoods and who were
    steered away from this. Well, we are ignoring and have been
    ignoring for many years the important role of State Government
    in licensing real estate agents. This is not a problem that
    simply is the responsibility of the real estate agency itself
    to fix. Those real estate agencies that are steering Whites to
    White neighborhoods and African-Americans to Black
    neighborhoods--and it continues to exist as that Newsday expos?
    shows--are violating their States' nondiscrimination policies
    that can be enforced by the State licensing agencies, and that
    would be an important local policy that I think should be
    followed. So those are just two of them.
        Senator Cortez Masto. Well, thank you, and I appreciate
    that. And let me just highlight because I know there was a
    recent report from the National Association of Realtors who
    found that Black households are more than twice as likely as
    White ones to be rejected for mortgage loans. So I know the
    realtors are really trying to address this as well, and I
    appreciate your comments.
        Ms. Rice, anything else to add to that, particularly when
    it comes to looking at identifying and flagging repeat
    offenders of housing discrimination across the country? Is
    there more that can be done at the local and State level?
        Ms. Rice. Yes, thank you for the question, Senator Cortez
    Masto. There is quite a bit that local and regional governments
    can do. One of the first things they can do is fully enforce
    the Affirmatively Furthering mandate, the Affirmatively
    Furthering provision of the Fair Housing Act, which, as you
    know, has to be implemented on a voluntary basis. There is no
    private right of action with that particular provision of the
    law.
        In my home State of Ohio, a great example of this in
    Zanesville, the city of Zanesville for over 50 years denied
    water service to a predominantly African-American neighborhood
    called ``Coal Run'' even though the residents of Coal Run paid
    their taxes and paid additional assessments to get water lines
    extended to their homes. After 50 years, they still were having
    to catch water to take back and to cook and to do other things
    in huge tin cisterns in their backyards.
        Senator Cortez Masto, the city extended water lines up to
    the neighborhood of Coal Run, around Coal Run, and then back
    out Coal Run to purposefully not give these residents water.
    That is a violation of the AFFH provision, and the city could
    have absolutely voluntarily complied and provided these
    consumers water access.
        That same thing is happening in hundreds of communities
    throughout the United States of America today. We still have
    the problem and challenge of local communities not only not
    implementing the AFFH provision, but local communities like the
    city of Cleveland could adopt their own local community
    reinvestment ordinances in order to say, look, we are going to
    invest in banks that invest in all of our communities and serve
    all of our communities.
        And I just wanted to add on to one point that Richard made,
    and that is that State licensing, real estate licensing
    divisions can require their real estate professionals to get
    fair housing training, and they can oversee their housing
    training to make sure that it is of high quality. That is not
    being done in most States in America, and if we did that, that
    would go a long way toward expanding fair housing.
        Senator Cortez Masto. Thank you. And so I have legislation,
    the Housing Fairness Act of 2021, that would reaffirm HUD's
    commitment to fair housing enforcement by increasing funding
    for fair housing programs, making improvements to the Fair
    Housing Initiatives Program, reinstating the Affirmatively
    Furthering Fair Housing rule, and providing additional funds
    for research into housing discrimination. I want to thank my
    colleagues Senators Van Hollen and Menendez for cosponsoring
    it. And I know, Ms. Rice, thank you to the National Fair
    Housing Alliance for endorsing this. I think it is so important
    that we continue to provide and support independent groups of
    folks that are out there that are actually looking to address
    this problem. We need to bring it to the attention of our local
    and State Governments, holding them accountable, but making
    sure we are doing right by homeowners as well. So thank you for
    that.
        I know my time is almost up. I do not know--oh, I do. So I
    am going to pass it off--oh, is Senator Brown back?
        Chairman Brown. I am. Thank you, Senator Cortez Masto.
        Senator Smith is recognized for 5 minutes.
        Senator Smith. Thank you, Chair Brown, and I noticed that
    our colleagues were just skipping right over your formal role
    of handing the ball from one of us to the other of us. But I
    am----
        Chairman Brown. I have been in the Finance Committee for a
    while. Thank you.
        Senator Smith. That is fine. I really appreciate this
    Committee and all of the testifiers today. I want to just start
    by thanking my colleague Senator Rounds for bringing up the
    issues around Native housing. Senator Rounds is the Ranking
    Member of the Housing Subcommittee that I chair, and I am
    looking forward to working on those issues with him there and
    also issues of rural housing and discrimination in rural
    housing, which is such an important issue.
        I really also appreciate the conversation today about the
    Federal legacy of housing discrimination and what we can do to
    turn that legacy around.
        Today, though, what I would like to focus in on is the ways
    in which local governments' policies have had discriminatory
    impacts and what tools we have to address that and to encourage
    zoning reform at the local level.
        So many zoning laws, as we know, at the local level were
    created to racially segregate neighborhoods, even after the
    civil rights laws outlawed overt housing discrimination. In
    fact, these zoning policies restrict high-density housing
    options, were often intended to limit racial and economic
    diversity in certain neighborhoods, and were aimed at
    maintaining or even raising housing values in areas that were
    mostly where White families lived in single-family homes.
        Now, in Minneapolis, this is one of our worst legacies. We
    have some of the worst housing disparities of any place in the
    country, and in an effort to flip that around, in 2019
    Minneapolis adopted the 2040 plan, which is a long-term
    planning document that includes support for local zoning
    reform, and they developed housing priorities specifically with
    the goal of expanding access to affordable housing and quality
    housing everywhere in the city where the city is actually quite
    segregated to this day.
        The plan, for example, would reduce minimum parking
    requirements for new housing production. It would legalize
    triplexes citywide, and it would allow for bigger residential
    buildings to be built along transit corridors. And one of the
    goals was, of course, to increase housing supply, but also
    another specific goal was to reduce racial disparities.
        So I would like to ask, if I could, Ms. Rice and Mr. Reece,
    if you could comment on this, if you could comment on whether
    you think the 2040 plan is going in the right direction, what
    the impact is of local zoning requirements and reforms like
    this, and what the Federal Government can do to encourage
    zoning reforms like this to move us toward a more anti-racist
    policy. Ms. Rice, why don't you go first?
        Ms. Rice. Sure. I was going to let my colleague Jason go
    first.
        Senator Smith. Either one.
        Ms. Rice. Thank you so much, Senator Smith, for that
    question. We absolutely think the 2040 plan is the kind of plan
    that local jurisdictions need to be undertaking in recognizing
    the role that local governments have played in fostering
    segregation. Many of the exclusionary and restrictive zoning
    ordinances that were put in place during the 1940s, 1950s, and
    1960s and 1970s were put in--in fact, even up until today, were
    put in place to restrict the ability of people of color to move
    into those neighborhoods. In fact, the first time that the
    disparate impact doctrine was used under the Fair Housing Act
    by the Nixon administration was to address an exclusionary
    zoning ordinance that the city of Blackjack had put in place in
    order to keep out residents of color.
        So this is a longstanding tool that has been used to create
    segregation, and these zoning ordinances, as I mentioned in my
    statement, are still in place today, and they are still serving
    their purpose of driving racial inequality.
        One of the reasons why we are still seeing the disparities
    that we are seeing when it comes to racial disparities is
    because so many of these systems are still in place and they
    are still serving their function.
        The Federal Government can help create incentives for
    jurisdictions to eliminate exclusionary zoning ordinances by
    essentially applies, as I said before, the Affirmatively
    Furthering Fair Housing mandate to all of the areas to which it
    should be applied. AFFH should be applied not just to housing
    but also to community development, and if we do that, we will
    see much broader voluntary compliance with the AFFH provision.
        Senator Smith. Thank you.
        Mr. Reece, I just have--I am actually a little over time,
    but I would love to hear your comment briefly, please.
        Mr. Reece. Yes, thank you, Senator. What the Twin Cities is
    doing now the whole country is looking at because it does
    potentially set a model going forward about how we can reform
    zoning laws, particularly laws that limit anything other than
    single-family housing. My one word of advice, looking at the
    scholarship around this, is that density alone will not produce
    affordability unless we are attentive to making sure that other
    kind of inclusionary housing tools are in place, things like
    community land trusts, support for home ownership, for first-
    gen homeowners, and also then the alignment of other kind of
    subsidized housing within these spaces as we up the density
    within these places.
        I do think there is also a role for, in addition to what
    Ms. Rice referenced in terms of AFFH, incentivizing and
    thinking of ways to get local communities to collaborate
    together to reform these laws. Regions are going to be more
    economically sustainable if these land use regulations are
    aligned across regions, and the problem is, you know, it takes
    resources, it takes time, planning, to build the relationships,
    to get the consensus and the buy-in to do that. I referenced
    the Sustainable Communities Initiative. I think that is a great
    example of how you can run a competitive grant program that
    encourages this kind of multijurisdictional collaboration to
    take down these exclusionary barriers that we know are so
    detrimental and so deeply intertwined with our racial equity
    issues today.
        Thank you, Senator.
        Senator Smith. Thank you so much.
        Thank you, Chairman Brown.
        Chairman Brown. Thank you, Senator Smith.
        Senator Ossoff from Georgia is recognized for 5 minutes.
        Senator Ossoff. Thank you, Mr. Chairman. I appreciate the
    opportunity. Thanks to our panel.
        Last year, in meetings in communities across Georgia, even
    in the midst of the COVID-19 pandemic, in fact, in many cases
    because the COVID-19 pandemic exacerbated the financial
    distress in which so many families found themselves, and
    because the impacts of the pandemic were disproportionate along
    class and race lines, affordable housing is one of the most
    consistently raised issues in community meetings. And I would
    like to just offer you, Ms. Rice, and you, Mr. Reece, each the
    chance to offer for this Committee, as we consider how to build
    legislation that will be a comprehensive infrastructure and
    jobs plan over the next couple of months, what do each of you
    please believe are the one or two most important considerations
    or policy objectives which may currently be neglected in the
    prevailing discourse around this bill as we craft it as it
    relates to affordable housing and equity, race and class
    equity, and access to affordable housing? I would like to begin
    with you, Ms. Rice, please?
        Ms. Rice. Senator Ossoff, thank you so much for the
    question. So I have a litany of things, but I will only mention
    two.
        One is to make sure that we are addressing both supply and
    demand side issues in the infrastructure bill. It is critically
    important, and one of the things I do want to lift up is that
    in every State in America, we already have an existing sort of
    cadre of naturally occurring affordable housing, but much of it
    is not in pristine condition. And so we need laws like the
    Neighborhood Homes Investment Act which we are championing to
    be enfolded into the infrastructure bill to help buildup the
    infrastructure of naturally occurring and already existing
    affordable housing across the country. But we have to address
    those supply side issues, but we also have to address the
    demand side as well, because if we do not, we will just be
    further exacerbating inequality. We have to make sure that
    marginalized communities are able to access these new
    affordable housing opportunities that will be coming online via
    the infrastructure bill.
        The second one is we have to make sure that we are paying
    attention to the already existing inequitable landscape on top
    of which this infrastructure bill will be unfolded. We did not
    pay attention to that with the implementation of the CARES Act,
    and that is why the CARES Act ended up exacerbating inequality
    and the wealth divide. So we have to take that into
    consideration to make sure that we are building equal access to
    these opportunities in the infrastructure bill.
        Senator Ossoff. Thank you so much, Ms. Rice.
        Dr. Reece.
        Mr. Reece. Thank you, Senator. I would completely agree
    with Ms. Rice's comments. Going back to an earlier discussion
    today, I do think the proposals like the Livable Communities
    Initiative could be very profound in assuring that alignment in
    transportation infrastructure and housing infrastructure. In
    addition to that, I think as we think about housing, we have to
    understand and realize the importance of the social side of
    housing. Expanding HUD's self-sufficiency program even further
    I think would be a beneficial step in helping prepare families
    to potentially even step out of the existing affordable units
    into home ownership into the future, as well as to prepare
    financially to economic shocks that could come in the future,
    just like we have dealt with with the COVID pandemic.
        I was evaluating a housing mobility program just recently
    where coaching and social support were critical to help
    families avoid losing their housing, even though most of them
    lost their employment due to the recession following the
    pandemic. So these types of programs, even though they are not
    often seen as important as, say, big transportation projects,
    they are critical to the sustainability of families within
    these housing units and to their development and ability to
    access home ownership later.
        Senator Ossoff. Thank you, Dr. Reece and Ms. Rice. With the
    little time I have left, I think you touched upon the
    importance of the quality of the affordable housing stock. I
    was recently meeting with community leaders in Albany, Georgia,
    and for homeowners without discretionary income, there is
    unrepaired damage from natural disasters that is a decade old.
    How would you propose Congress ensure that communities like
    Albany can invest in retrofitting and upgrading damaged housing
    stocks? Because the quality of a family's housing has a huge
    impact on quality of life, state of mind, opportunity.
        Ms. Rice. Sure. The Neighborhood Home Investment Act,
    Senator Ossoff, is specifically designed to address that issue,
    where we have people who are living in housing that is not in
    pristine condition, but they need a little bit of gap because,
    as we know, sometimes you need more work done into the home
    than what the market value of the housing can bear. And so the
    Neighborhood Home Investment Act is specifically designed to
    provide that gap, to sort of bridge the gap so that consumers
    can get the sufficient funds that they need in order to upgrade
    their housing.
        Senator Ossoff. Thank you, Ms. Rice. Thanks to the panel.
        Mr. Chairman, I yield back.
        Chairman Brown. Thank you, Senator Ossoff.
        Senators Tester, Warren, Sinema, Warnock, Shelby, Crapo,
    Tillis, Kennedy, Hagerty, I guess none of them are here. So,
    Senator Toomey, any closing remarks that you would like to
    make? If not, I can just close.
        OK. Thank you all--oh, Senator Warnock is here. Senator
    Warnock, you are recognized for 5 minutes.
        Senator Warnock. Sorry about that. Thank you so much, and
    thank you--can you hear me?
        Chairman Brown. Yes.
        Senator Warnock. Thank you, Mr. Chairman, for holding such
    an important hearing. And, sadly, there has been a long
    documented history of racial discrimination within our housing
    system, particularly among Black and Brown brothers and
    sisters. And there are also many reports of studies and surveys
    that have documented the fact of these discriminatory
    practices, how they have contributed to the growing racial
    wealth gap in our country. There is a reason why the geography
    of our country literally looks the way it does.
        One often overlooked driver of racial wealth inequality
    with our housing system is how lenders and the appraisal market
    assess the value of Black and Brown homeowners compared to
    White homeowners. We know this to be the case. In fact, a 2018
    Brookings Institution study found that homes in neighborhoods
    where the share of the population is 50 percent Black are
    valued at roughly half the price as homes in neighborhoods with
    no Black residents. The report also stated that homes of
    similar quality in neighborhoods with similar amenities are
    worth 23 percent less in majority Black neighborhoods compared
    to those with very few or no Black residents. And across all
    majority Black neighborhoods, owner-occupied homes are
    undervalued by $48,000 per home on average, amounting to $156
    billion in cumulative losses.
        Ms. Rice, could you expand on how racial disparities within
    the home appraisal market exacerbates the wealth gap in our
    country? And, Dr. Reece and Mr. Rothstein, would you like to
    add on to that response? That is fine.
        Ms. Rice. Sure. Senator Warnock, thank you so much for the
    question. This is a critically important issue, and we are
    seeing many, many anecdotal stories about appraisal bias
    appearing in the newspaper. There is the story of the couple in
    San Francisco who purchased their home for roughly $900,000,
    put $400,000 of investment in it, only to have it appraised at
    $50,000 higher, right? And then they had a White friend come
    and essentially move into the home. They eliminated all of the
    traces of a Black family being the actual owner, and when the
    second appraisal was done, it was appraised at $500,000 higher.
        Well, we are hearing stories like that throughout the
    United States, and, in fact, I mentioned in my statement that
    we are currently investigating a case of appraisal bias in
    Maryland, in Prince George's County, Maryland, in a
    predominantly African-American community where the appraiser is
    refusing to give the appropriate valuation to a multimillion-
    dollar development--these are multimillion-dollar homes in this
    development--because the appraiser said there is no way any
    house in Prince George's County in this particular area would
    be valued at this high of a price point.
        I have worked on appraisal cases throughout my entire fair
    housing history. I have seen many, many instances of appraisal
    bias, and it is an unfortunate problem of the systemic issues
    that we have in this Nation, but also these are signs of
    individual discrimination that we are seeing perpetuated as
    well. And so we have to enforce the Fair Housing Act. We have
    to make sure that their housing organizations are sufficiently
    funded so that they can investigate these cases. And we also
    have to make sure that HUD is sufficiently funded that it is
    restaffed, because the Fair Housing Division at HUD has been
    gutted. So we have to make sure that we are building back the
    Office of Fair Housing and Opportunity and also that DOJ has
    the resources that they need to investigate these cases.
        Senator Warnock. Thank you so much, and I read the article
    about the family you mentioned in San Francisco, in California.
    This is a real impact on people's actual lives and the wealth
    gap. It is an important issue for me. I have been there, and I
    know the experiences of millions of Black and Brown families in
    this country, which is why I, along with Senator Klobuchar and
    Representative Cleaver, sent a letter to Federal banking
    regulators and housing agencies as well as the appraisal
    subcommittee urging them to do all they can to address the
    valuation disparities.
        It looks like I am out of time, but thank you so very much
    for your hard work on this issue.
        Chairman Brown. Thank you, Senator Warnock.
        Senator Toomey, any closing remarks? If not, I will close.
    As Mr. Rothstein noted, we heard a lot of agreement today that
    exclusionary zoning and land use policies are part of the
    problem of housing segregation and high housing costs today. We
    heard similar testimony across the panel at our March hearing
    on housing needs. President Biden has also called, as we know,
    for policies to address this issue as part of the American Jobs
    Act. I look forward to working with my colleagues to work on
    this issue as part of the housing investments that we have all
    discussed today.
        Thank you to our witnesses for being here today. Thank you
    for the really incisive testimony from all five of you.
        And for housekeeping, for Senators who wish to submit
    questions for the record, those questions are due 1 week from
    today, Tuesday, April 20th. To this, you have 45 days, if you
    would, to respond to these questions.
        Thank you again. With that, the hearing is adjourned. Thank
    you all so much.
        [Whereupon, at 12:06 p.m., the hearing was adjourned.]
        [Prepared statements and responses to written questions
    supplied for the record follow:]
                  PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
        On Sunday, we marked the 53rd anniversary of the passage of the
    Fair Housing Act.
        53 years ago, jarred by the assassination of the Reverend Dr.
    Martin Luther King, our country finally made it illegal to refuse to
    sell a home or rent an apartment to someone based on the color of their
    skin.
        This was an historic moment and a hard-fought victory for civil
    rights activists. And it was not so long ago when you look at the long
    arc of history.
        Black Americans had endured centuries--that's generation after
    generation after generation--of slavery, only to be locked into second-
    class citizenship by the Black Codes and Jim Crow laws that made it
    nearly impossible to get a good-paying job, keep a reliable bank
    account, and--as we all know--even to vote.
        As my friend Joyce Beatty said recently, we cannot change our
    history. But we can learn from it, and we can build a far better
    future--one that brings us closer to making our founding ideals real
    for everyone.
        Fair housing took longer to pass through Congress than voting
    rights, desegregation of public spaces, and even equal opportunities
    for employment.
        As important as these advancements were, they did not come in time
    to help communities of color benefit from the historic investments we
    made in American families and communities in the last century.
        Beginning with the New Deal and continuing through the 1960s, we
    tried a new, grand experiment in this country--we invested in workers
    and in the infrastructure they needed to succeed. And in the process,
    we built the largest, broadest middle class the world has ever seen.
        But that deal remains unfinished--too many were purposefully left
    out.
        We created the Federal Housing Administration to make the dream of
    home ownership, and the wealth that comes with it, available to
    millions more families.
        But FHA limited its loans to neighborhoods that were deemed
    ``good'' investments--neighborhoods with White, nonimmigrant residents.
    Neighborhoods with Black and immigrant residents and near industrial
    sites were ``redlined'' and called ``hazardous.''
        From 1934 to 1968, FHA helped finance more than $120 billion worth
    of loans--and 98 percent went to White borrowers.
        We put Americans to work building the interstate highway system,
    the infrastructure that would unleash new levels of American
    prosperity.
        But Federal highways cut through Black and minority neighborhoods,
    severing tight-knit communities and destroying homes and small
    businesses, replacing them with traffic and pollution.
        Following these decades of exclusion and destruction, the Fair
    Housing Act offered enormous promise. It didn't just ban racial
    discrimination--it also required that new Federal funds be used in ways
    that would affirmatively further fair housing.
        In other words, we recognized it wasn't possible to start from
    scratch. Our housing system had our history woven into it, and we would
    need to take active steps to include Black Americans, and all those who
    been left out.
        George Romney, the father of our colleague, became HUD Secretary
    the year after the Fair Housing Act was passed. He set out to fulfill
    that mission--to require communities to use their Federal grants to
    build better housing and take active steps to include everyone, as
    required by the law.
        But he didn't get very far. President Nixon and his Southern
    Strategy blocked Secretary Romney's implementation of the Fair Housing
    Act--and it stayed that way for decades.
        Housing discrimination was illegal beginning in 1968, but
    communities of color lived in the cities we'd already built and then
    abandoned, and lived with the wealth inequality we'd already grown.
        Minority communities continued to lose out on investment.
        FHA no longer used redlining maps, but communities of color still
    saw banks take their deposits, and still refused to make them mortgage
    loans.
        Congress passed the Community Reinvestment Act, requiring banks to
    serve the communities whose money they relied on to make profits. But
    the same neighborhoods--the ones that had red lines drawn around them a
    few decades earlier--never got the same investment that others did.
        And nearly three decades later, lenders seemed to finally discover
    the minority communities they'd been neglecting for decades. But that
    discovery didn't lead to positive investment to help communities build
    wealth and grow new businesses.
        Instead, predatory lenders wiped out the hard-won gains Black and
    Brown families had made in the years since 1968. They targeted people
    in lower-income and minority communities for predatory subprime loans
    and refinances.
        In 2003, President Bush's HUD Secretary, Mel Martinez, told this
    Committee that predatory lending posed, quote, ``a significant danger
    to minority and women homeowners targeted for equity-stripping loans,''
    and that some loans had ``abusive terms and conditions'' that may
    violate the Fair Housing Act.
        And of course, we all know what happened. We remember the
    foreclosures that swept through neighborhoods in waves. We remember the
    signs that went up on home after home.
        Black and Latino homeowners were 70 percent more likely to face
    foreclosure.
        Today, Black, Latino, and Asian families are far less likely to own
    a home than White families. The Black home ownership rate is as low as
    it was 53 years ago, when housing discrimination was still legal.
        The wounds of redlining remain as fresh as ever.
        We know where you live determines so much about your life--what
    school your kids go to, the kinds of jobs available, how far you have
    to travel to get to work, the air you breathe, the water you drink,
    even how long you live.
        Residents in those neighborhoods that were systematically excluded
    from investment--many of them people of color--have lower life
    expectancies and are more likely to have preexisting conditions.
        Take a walk around Cleveland, where you can still see the scars of
    the foreclosure crisis in the same neighborhoods that were colored in
    red in the maps of the 1930s.
        Come to my zip code, 44105, where we had the most foreclosures in
    the country in the first half of 2007.
        And in these same neighborhoods, you'll find higher rates of lead
    exposure, toxic pollution, and infant mortality. Take a look at maps of
    COVID-19 deaths--they match up with those redlining maps pretty well.
        Our past is still determining people's lives today. That's why this
    hearing, and the work of this Committee, matters.
        We can't change our history--but that cannot mean we throw up our
    hands and tell millions of Americans, ``sorry, this is the best we can
    do.''
        We know it's not.
        Remember all those infrastructure investments we made in the 1930s,
    and in the years after World War II? Remember how we created millions
    of new homeowners and grew the middle class?
        There is no reason we can't do the same thing again--but this time,
    we bring everyone along.
        On this Committee, we have an opportunity to address the legacy of
    housing discrimination. And we have an obligation, under the law that
    this body passed 53 years ago, in the wake of Dr. King's assassination.
        I look forward to hearing from today's witnesses about how we can
    begin to do that.
                                     ______

                PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
        Mr. Chairman, thank you.
        Let me say from the outset that racial discrimination in housing is
    a real and sad part of our Nation's history. We can't ignore that--it's
    a fact. It's also a fact that Government policies contributed to this
    discrimination. Some Federal Government policies were designed to
    increase segregation.
        We all know the Federal Housing Administration--the FHA--engaged in
    redlining practices. For decades, FHA insurance was often limited to
    newer developments outside of inner city neighborhoods, exacerbating
    segregation. We also know Davis-Bacon wage requirements were designed
    to protect White union labor and prevent Blacks from competing for
    federally funded construction jobs. Even today, Davis-Bacon continues
    to impede lower-income and minority workers from opportunities and to
    drive up the construction costs for Government-assisted housing.
        Some State and local government policies have also exacerbated
    segregation. Some zoning practices--such as prohibitions on multifamily
    housing and minimum lots sizes--can have legitimate purposes for many
    communities. However, they sometimes do great harm by pricing low-
    income and minority families out of neighborhoods, and reducing the
    support of affordable housing for such families. These zoning practices
    and other regulatory barriers to housing development are particularly
    prevalent in Democrat States and cities. For example, California cities
    have long restricted multifamily construction, driving up housing costs
    and reducing affordability.
        In my view, this history shows us that when it comes to housing in
    America, including housing discrimination, Government has been the
    problem, not the solution. Unfortunately, the Biden administration does
    not seem to have learned this lesson. Its multitrillion dollar welfare
    plan, with a bit of infrastructure sprinkled in, seems designed to
    repeat many of the mistakes of the New Deal and Great Society. After
    Congress has just finished spending more than $80 billion for housing
    in response to COVID--on top of the $50 billion we annually spend on
    HUD programs alone, not to mention the billions we spend on other
    housing programs and then tens of billions more we forgo in tax
    revenues to subsidize--the Biden administration is now calling for $213
    billion in new spending for housing in this so-called
    ``infrastructure'' plan.
        Amazingly, the Administration wants Congress to spend $40 billion
    to restore public housing projects--places where people don't want to
    live. Housing projects are notorious concentrations of poverty, crime,
    and other social ills. Research shows that moving families out of
    housing projects and integrating them in communities decreases violent
    crime. But rather than focusing on sensible alternatives, the Biden
    administration wants to keep families in housing projects. More public
    housing will only commit more Americans to a substandard living
    arrangement and increase Government dependency.
        We also shouldn't rush to put families in homes they can't afford.
    Relaxing underwriting requirements or expanding downpayment assistance
    programs for low-income families, especially in an overheated housing
    market is a recipe of disaster. If home values drop, these borrowers
    run the real risk of losing their homes and any wealth they thought
    they had accumulated. We have seen this happen before, most recently
    during the 2008 housing crisis when Government monetary and housing
    policy created a housing bubble, the bursting of which caused the
    financial crisis and great recession.
        The Administration's infrastructure plan also calls for $20 billion
    in tax credits for building and rehabilitating homes and making them
    more energy efficient. These tax credits will predominantly benefit
    developers and investors largely because they are not targeted to low-
    income families. In fact, homes built with tax credits can be sold to
    purchasers with incomes up to 140 percent of area median income.
        The Administration's plan also prioritizes using union labor to
    upgrade homes. This unfairly excludes lower-income, nonunionized
    laborers and increases construction costs that will be passed onto
    homeowners.
        Today, we'll hear from two witnesses who'll discuss how Government
    intervention, even when well-meaning, has contributed to inequality.
    Howard Husock is a housing researcher and scholar. As Mr. Husock will
    note, many ``race-conscious'' policies haven't actually increased home
    ownership opportunities or wealth in underserved communities. Public
    housing has deprived many minority communities of the opportunity to
    build wealth. The Community Reinvestment Act is out of date and poorly
    designed to encourage lending in minority neighborhoods without
    tracking whether investments help or hurt families. And overly
    prescriptive Affirmatively Furthering Fair Housing requirements that
    put only a handful of low-income families in subsidized rental homes in
    affluent areas does little to support minority families or help them
    build wealth through home ownership.
        We'll also hear from Tobias Peter, an expert in housing finance. He
    notes that policies aggressively encouraging minorities to buy homes--
    especially during a boom when houses are more expensive--expose
    borrowers to greater default risk during dips in the market. He argues
    that risky lending harms low-income and minority borrowers who purchase
    homes when home prices are inflated. And he believes that local
    governments need to remove zoning restrictions and other regulatory
    barriers to housing that artificially constrain the supply of housing
    and drive costs up.
        It's important to remember that the legacy of discrimination is a
    direct result of Government supported policies. As we consider how to
    address the housing challenges we face, we must not repeat the mistakes
    of the past. Now is not the time to double down on failed efforts. That
    means we should not keep American families in dilapidated and
    segregated housing projects; we should not let bureaucrats in
    Washington make local housing decisions that undermine communities; and
    we should not inappropriately push families to purchase homes they
    can't afford in the long run.
        The lesson we need to learn and apply is: When it comes to housing
    in America, Government is the problem, not the solution.
                                     ______

                    PREPARED STATEMENT OF RICHARD ROTHSTEIN
    Senior Fellow, Emeritus, NAACP Legal Defense and Educational Fund, Inc.
                                 April 13, 2021
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                        PREPARED STATEMENT OF LISA RICE
     President and Chief Executive Officer, National Fair Housing Alliance
                                 April 13, 2021
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                       PREPARED STATEMENT OF JASON REECE
       Assistant Professor, City and Regional Planning Section, Knowlton
               School of Architecture, The Ohio State University
                                 April 13, 2021
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      PREPARED STATEMENT OF HOWARD HUSOCK
     Executive Senior Fellow, Philanthropy Roundtable, and Adjunct Fellow,
                         American Enterprise Institute
                                 April 13, 2021
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     PREPARED STATEMENT OF TOBIAS J. PETER
      Director of Research, Housing Center, and Research Fellow, American
                              Enterprise Institute
                                 April 13, 2021
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                         FROM RICHARD ROTHSTEIN

    Q.1. Your testimony shares the story of Levittown, where Black
    veterans were systematically denied the ability to purchase
    affordable homes despite having benefits from the G.I. bill.
    What specific tactics were used to discriminate against Black
    veterans and deny them housing in Levittown?

    A.1. Banks would not lend William Levitt the funds to buy the
    land and build 17,000 Levittown homes unless the loans were
    federally guaranteed/insured. The Federal Housing
    Administration and Veterans Administration would only
    guarantee/insure Levitt's loans if he made a commitment only to
    sell to Caucasians. These Federal agencies required Levitt to
    place a clause in the deed of every home prohibiting resale or
    rental to non-Caucasians. This requirement was spelled out in
    the FHA's Underwriting Manual, distributed to appraisers
    nationwide to guide them in their recommendations regarding
    whether a developer's application for Federal bank guarantees/
    insurance should be approved. Realtors who handled the sale of
    homes in Levittown and other subdivisions nationwide were
    required to follow this Federal policy and they refused to show
    homes to African-Americans who attempted to purchase one. I
    described all this in greater detail in my book, The Color of
    Law. If Senator Sinema would like a copy of the Underwriting
    Manual, I would be please to provide one to her.

    Q.2. In spite of passage of the Fair Housing Act, which
    discriminatory tactics in homebuying that occurred in Levittown
    still persist today? Which tactics have changed, and what new
    forms (if applicable) do they take?

    A.2. The Fair Housing Act is very weakly enforced, and many,
    though not all realtors still engage in extensive
    discriminatory behavior. Newsday, a Long Island newspaper whose
    circulation area includes Levittown, published an investigative
    report documenting the unlawful behavior of realtors to
    preserve segregation in Long Island. The citation for this
    investigative report is here, including videos of real estate
    agents who discriminated against black homebuyers (New York
    State does not require two-way consent for recording
    conversations, so Newsday reporters wore hidden buttonhole
    cameras to assemble their evidence): Ann Choi, Keith Herbert,
    Olivia Winslow, and Arthur Browne. 2019. ``Long Island
    Divided''. Newsday, November 17; https://projects.newsday.com/
    long-island/real-estate-agents-investigation/. The Federal
    Government (HUD) conducts ``audit'' studies of real estate
    agents' compliance with the Fair Housing Act once a decade, but
    the studies only make statistical reports and are not used for
    enforcement activities. HUD has no proactive program of
    enforcement and relies on complaints made (usually) to local
    fair housing centers. But since a consumer of real estate
    agency services has no way to know whether he or she has been
    receiving treatment that is different from that received by
    consumers of another race, complaint data are not an indication
    of the extent of ongoing discrimination.

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