[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.
[all]