[Senate Hearing 117-742]
[From the U.S. Government Publishing Office]
S. Hrg. 117-742
``THE RENT EATS FIRST'': HOW RENTERS AND
COMMUNITIES ARE IMPACTED BY TODAY'S
HOUSING MARKET
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HEARING
BEFORE THE
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
ON
EXAMINING HOW TO MAINTAIN AFFORDABLE HOUSING
__________
AUGUST 2, 2022
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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
53-563 PDF WASHINGTON : 2023
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SHERROD BROWN, Ohio, Chairman
JACK REED, Rhode Island PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey RICHARD C. SHELBY, Alabama
JON TESTER, Montana MIKE CRAPO, Idaho
MARK R. WARNER, Virginia TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia KEVIN CRAMER, North Dakota
STEVE DAINES, Montana
Laura Swanson, Staff Director
Brad Grantz, Republican Staff Director
Elisha Tuku, Chief Counsel
Dan Sullivan, Republican Chief Counsel
Cameron Ricker, Chief Clerk
Shelvin Simmons, IT Director
Pat Lally, Hearing Clerk
(ii)
C O N T E N T S
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TUESDAY, AUGUST 2, 2022
Page
Opening statement of Chairman Brown.............................. 1
Prepared statement....................................... 36
Opening statements, comments, or prepared statements of:
Senator Toomey............................................... 3
Prepared statement....................................... 37
WITNESSES
Matthew Desmond, Maurice P. During Professor of Sociology and
Director of the Eviction Lab, Princeton University............. 6
Prepared statement........................................... 39
Responses to written questions of:
Chairman Brown........................................... 80
Laura Brunner, President and CEO, Port of Greater Cincinnati
Development Authority.......................................... 7
Prepared statement........................................... 53
Responses to written questions of:
Chairman Brown........................................... 86
Senator Smith............................................ 89
Rosanna Morey, Small Property Owner.............................. 9
Prepared statement........................................... 58
Darion Dunn, Managing Partner, Atlantica Properties.............. 10
Prepared statement........................................... 59
Diane Yentel, President and CEO, National Low Income Housing
Coalition...................................................... 12
Prepared statement........................................... 61
Responses to written questions of:
Chairman Brown........................................... 91
Senator Smith............................................ 94
(iii)
``THE RENT EATS FIRST'': HOW RENTERS AND COMMUNITIES ARE IMPACTED BY
TODAY'S HOUSING MARKET
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TUESDAY, AUGUST 2, 2022
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10 a.m., via Webex and in room 538,
Dirksen Senate Office Building, Hon. Sherrod Brown, Chairman of
the Committee, presiding.
OPENING STATEMENT OF CHAIRMAN SHERROD BROWN
Chairman Brown. The Senate Committee on Banking, Housing,
and Urban Affairs will come to order.
Before we begin I will probably embarrass her but want to
call her out. Irene Gray is working her last week as a
stenographer in the U.S. Senate. She has been here 27 years,
and we thank her for her quiet, effective, really crucial work
to preserve the hearings. Even when Senator Toomey and I do not
say much of note, she still has to take it down. So we just
appreciate your good work for this country and your unsung hero
as a public servant, contracted or not, as a public servant, so
thank you. Thank you.
This hearing is in a hybrid format. Four of our witnesses
are joining us in person, sitting in front of Senator Toomey
and me. Ms. Morey is joining remotely. One or more of our
Committee colleagues may attend from their office.
Yesterday was the first of the month. For millions of
Americans, that means the rent was due. For many renters, that
rent keeps going up and up and up.
Two weeks ago in this Committee we heard from witnesses
about the soaring cost of housing and how it hurts the millions
of families priced out of buying their first home, and imperils
the renters who are just one illness or job loss or car repair
away from eviction, as one of our witnesses documented in his
book.
This problem is squeezing people all across the country,
working all kinds of jobs, even jobs that were supposed to be a
ticket to the middle class.
This is not a new problem.
For decades, so many Americans have struggled to scrape
together the rent each month. Too many have lived in shoddy
housing with rodents, mold, or broken appliances.
That is why, 90 years ago, this country began investing in
affordable housing, so that everyone would have a safe,
affordable place to live. But the funding we put into that
effort has never kept up with renters' needs, or even the basic
maintenance of aging federally assisted housing.
For the past decade, about half of renters have been paying
more than one-third of their incomes just to keep a roof over
their heads, and we know renters' challenges are only getting
worse.
We are 3.8 million homes short of what we need. Not a
single State in the country has enough housing. And for the
lowest-income renters, there are just 36 units affordable and
available for every 100 renters who need them. That means
renters cannot, as we might say, vote with their feet in the
housing market because there is nowhere for them to go.
This huge shortage of housing means that renters have to
make do with what they have got, even if their house has
dangerous lead paint on the walls, or the landlord will not fix
the heat, or their bathtub has been clogged for weeks. With
housing so difficult to find, renters are forced to ask
themselves whether it is worth it to push for a repair from the
same person who can put an eviction on their record and decide
whether they have a place to sleep at night.
The shortage of housing also means rents are going up for
pretty much everyone. Rents are up 15 percent nationally,
compared to a year ago. In some cities, like Austin, Texas, or
Senator Menendez on this Committee, his city of Newark, rents
are up more than 25 percent. When rents rise, it makes
everything in someone's life just a little bit more precarious.
More and more families are just one emergency away from losing
their home.
Renters see the pain from all these rent increases--the
missed trips to visit family, the car repair they are forced to
put off, the second job they have to take--just to make ends
meet.
Wall Street investors just see opportunity. They do not see
the pain, or they just do not care. More and more, investors
are buying up single-family homes, homes that first-time
homebuyers usually buy, and renting them out at sky-high rates.
Twenty-eight percent of homes sold at the beginning of this
year went to investors.
Think about that. Investors, too often from out of town,
who do not care about the community and just want to make a
quick buck, are buying more than a quarter of homes, not bought
by families who want to put down roots, who dream of seeing
their kids grow up in that neighborhood and go to that local
school.
That number is up from 16 percent just a couple of years
ago. And the biggest investors with the deepest pockets--the
ones who own more than 100 properties--nearly doubled their
share of these purchases.
Ms. Brunner has seen it first-hand in Cincinnati, where a
single company based in Texas bought up 29 properties on one
street in Price Hill, 29 properties on a single street. In that
neighborhood now, more than half of all homes are now rentals.
And the city is left to chase down these out-of-State landlords
who are letting these homes fall apart.
Families need a landlord they can talk to, who lives in the
community. Cities need landlords who want to actually take care
of their buildings and help families stay in their homes. But
big Wall Street firms promising investors double-digit yields
and running up double-digit eviction rates are pricing out
those who make a community home, good landlords, renters,
first-time homebuyers alike.
And they are not just buying up single-family homes. They
are targeting mobile home communities and apartment buildings--
we see that across the country--anywhere that adds to their own
bottom lines.
Last week, the House Select Subcommittee on the Coronavirus
Crisis published a report showing that, at the height of the
pandemic, just four of these massive landlords--four--filed
nearly 15,000 evictions--4 landlords, 15,000 evictions.
When a renter who has fallen behind on rent or cannot get
her landlord to fix her heat, we often hear that it is her
individual problem. We hear that it is just between the renter
and his landlord, or that his local Government is to blame for
its bad policies.
And it is true that every eviction, every rent hike, every
unlivable home is a personal crisis for an individual family.
But all of these individual crises have added up to a big,
national problem. It costs all of us more in education costs
when kids have to change schools every 6 months or so. It costs
all of us in lost productivity when the workers supporting our
businesses and schools, and our first responders, cannot find
an affordable place to live. It costs all of us more in health
care when people cannot store their medicine because they do
not have a place to live.
This is not someone else's problem. It affects all of us,
and we need to work together to solve it. We have to expand the
supply of safe, affordable housing across the country, for
renters and homeowners, at all income levels. We have to
maintain the affordable housing we currently have, so we do not
fall even further behind on our housing supply. And we have to
help renters find and remain in homes they can afford with
financial assistance, including emergency assistance, and
support bipartisan eviction prevention efforts, like mediation,
through the Bipartisan Eviction Crisis Act.
I look forward to hearing from our witnesses today about
how we can tackle these challenges facing renters and grow the
number of good landlords. It will benefit all of us.
Senator Toomey.
OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY
Senator Toomey. Thank you, Mr. Chairman. Let me join the
Chairman in recognizing and thanking Ms. Irene Gray for her
years of service to the Committee, to the Senate, and to the
country. We really do appreciate your good, solid, consistent
hard work. Thank you.
The fact is, across America, every month Americans are
falling further and further behind because of President Biden's
out-of-control inflation. Paychecks are not keeping up with
rising prices. After adjusting for inflation, wages have
declined 5 percent since President Biden took office. The fact
is, working Americans are getting poorer every day.
And our Democratic colleagues' wasteful spending, growth-
killing regulation, and excessively accommodative monetary
policy are exactly what caused 40-year high inflation and now
an economic contraction. And what is the response we hear from
our Democratic colleagues? They want to jam through a reckless
tax-and-spending bill that will make this disastrous situation
even worse.
Hiking corporate taxes will slow economic growth and
especially harm America's manufacturing sector, and spending
billions more will fuel inflation. This new wasteful spending
will mostly go toward corporate welfare for green energy,
subsidies for wealthy people to buy Teslas, and a political
handout right before the elections to higher-income Americans
who buy Obamacare plans.
In addition, the bill includes spending on housing, which
is the topic of today's hearing. Under the Biden
administration, of course, the cost of housing has skyrocketed.
Housing prices increased 18 percent in the last 12 months.
Rents have jumped 14 percent. Affordable housing is growing
further and further out of reach for many.
But you would not know that from reading the Democrats'
bill. Its housing provision creates a $1 billion slush fund for
``greening'' subsidized housing. I guess the theory is at a
time of surging housing costs the solution is to put solar
panels on Section 8 housing.
As I have said before, Government, and especially this
Administration, have often been the problem, not the solution,
when it comes to housing. There are countless ways that
needless Government regulation drives up housing costs. Time-
consuming permitting processes drive up the cost of building
new rental housing. Overly burdensome environmental impact
reviews further add to that cost.
Tariffs on steel, lumber, and other building materials have
the same effect. Rent control laws reduce the supply and
quality of rental housing. Demand-side housing subsidies get
capitalized into higher house prices and higher rents.
Loose GSE and FHA underwriting standards drive those house
prices and rents still higher. The GSEs then respond by
subsidizing investors in single-family rental housing, but that
just further drives up house prices and crowds out aspiring
homeowners.
More recently, the Democrats and this Administration have
taken this Government failure to the next level. They have
dropped hundreds of billions of dollars of helicopter money to
stimulate an already strong economy. Eighty billion of that
went to rental assistance, vouchers, and other housing
subsidies, further inflaming demand.
The President even extended the illegal eviction moratorium
that has deterred investment in new rental housing and led to
some renters not paying rent even when they could afford to.
Predictably, landlords have responded by increasing rents and
requiring larger security deposits.
Today the Democrats will propose more of the same. We will
likely hear them make the case for new so-called tenant
protections. We will likely hear them arguing for making the
COVID rental assistance program permanent.
But doubling down on failed liberal housing policies is not
going to fix our rental housing market. Instead it will just
make housing more expensive. Today we will also hear from
landlords about how Government intervention makes it harder and
more expensive to be a landlord, and that leads to higher costs
for renters.
To improve housing affordability for all Americans whether
renters or owners we should pursue reforms that leverage the
power of free enterprise to increase housing supply and make
markets more competitive. A healthy market competes not just on
price but also service and product quality. To that end, we
should scale back the role of Government and increase the role
of private capital.
We should avoid the temptation to adopt new so-called
tenant protections or permanent rental assistance that will
have negative unintended consequences, including increasing
housing costs. We should phaseout demand-side subsidies that
drive housing costs higher. We should end the failed GSE model
that fosters excessive risk-taking and contributes to a boom/
bust housing cycle.
Localities should revisit their permitting processes and
other obstacles to new housing construction. We should prohibit
the GSEs and other Federal programs from subsidizing rental
units in jurisdictions that impose rent controls, and we should
get the GSEs out of the business of subsidizing single-family
home investors. And we should keep the GSEs focused on their
affordability missions by keeping them out of social policy.
Meanwhile, I hope the Administration will finally engage on
housing reform. Treasury has still not met its obligation to
deliver a housing reform plan to Congress. It is now 10 months
overdue.
Instead of pushing a reckless tax-and-spending bill, the
Administration should look to opportunities for bipartisan
legislation, like housing finance reform, that relies on free
enterprise, not Government, to make housing affordable for all
Americans, whether they own or rent. Thank you.
Chairman Brown. Thank you, Senator Toomey.
I will now introduce the five witnesses.
Professor Matthew Desmond is the Maurice During Professor
of Sociology at Princeton and the author of the book Evicted.
He is also Director of the Eviction Lab at Princeton. Mr.
Desmond, welcome.
Ms. Laura Brunner is President and Chief Executive Officer
of the Port of Greater Cincinnati Development Authority in
Hamilton County, Ohio. Prior to joining the Port in 2011, Ms.
Brunner spent 15 years in accounting. Ms. Brunner, welcome.
Ms. Rosanna Morey is a small property owner living in
Seaford, New York. She is joining us, I believe, from either
her home or her office in New York. Welcome, Ms. Morey.
Mr. Darion Dunn is the Managing Partner at Atlantica
Properties, a real estate investment and asset management
company in the State of two of our Members of this Committee,
Senator Ossoff and Senator Warnock. Mr. Dunn is also a civil
engineer, I understand.
And Ms. Diane Yentel is the President and CEO of the
National Low Income Housing Coalition. She was once Vice
President of Public Policy and Government Affairs at Enterprise
Community Partners. She has served as Director of Public
Housing, Management, and Occupancy Division at HUD in
Washington, and she is almost a regular in this Committee. Ms.
Yentel, welcome. Professor Desmond, if you would begin. Thank
you.
STATEMENT OF MATTHEW DESMOND, MAURICE P. DURING PROFESSOR OF
SOCIOLOGY AND DIRECTOR OF THE EVICTION LAB, PRINCETON
UNIVERSITY
Mr. Desmond. Chairman Brown, Ranking Member Toomey, and
Members of the Committee, thank you for the opportunity to
testify before you this morning.
My name is Matthew Desmond. I am a Professor of Sociology
at Princeton University, where I direct the Eviction Lab, which
is a research group dedicated to understanding the causes and
consequences of housing instability.
I come before you today gravely concerned about millions of
American families brutalized by our country's painful and
utterly predictable rental housing crisis. Since 1985, rent
prices have exceeded income gains by 325 percent. Most poor
renting families today spend at least half of their income on
housing costs, with 1 in 4 spending over 70 percent of their
income on shelter costs alone.
Last year, rents increased faster than they ever have on
record. Nationwide, median asking rent increased by 17 percent
in a single year, but some cities saw rent increases double
that. Since last March, rents have risen 30 percent in Orlando,
29 percent in Cincinnati, 22 percent in Dallas. This is the
inflation crisis on steroids.
When the price of gas goes up we can adjust, carpooling to
work. When the price of food goes up we can adjust, eating out
less. But when the cost of housing shoots up, what can families
do? They often are already living in the cheapest apartments
available. They cannot double-up with relatives because of
local occupancy laws. They cannot move if they want to keep
their jobs and family ties and the schools. So all they can do
is cut back on other necessities like health care and
educational enrichments and food.
As a direct result of the housing crisis, the United States
has a much higher eviction rate than other industrialized
democracies. The number of eviction filings has increased by 21
percent since 2000, rising to 3.6 million cases filed in an
average year.
Eviction is incredibly harmful to families and communities.
It leads to job loss and homelessness, to depression and
suicide. Babies born to mothers who experience an eviction
while pregnant are significantly more likely to have adverse
birth outcomes, which have been shown to have life-long and
even multigenerational effects. The evidence is in and the
evidence is clear. Eviction is not just a condition of poverty.
It is a cause of poverty.
Why have rents risen so aggressively? One possibility is
that property owners' expenses have gone up, and to maintain a
steady income owners have to pass on rising housing costs to
tenants in the form of higher rents.
But this is not what the data show to be happening. Rather,
in recent years owners of multifamily properties have seen
their rental revenues increase at a faster rate than their
expenses. This has been especially true for properties located
in low-income neighborhoods. The owners of these properties saw
their rental revenues increase by 47 percent between 2012 and
2018. Their expenses during that time only increased by 14
percent.
Both the private housing market and the Federal Government
have failed to provide American families with enough affordable
housing. As a result, property owners have seized the
opportunity to increase rents, knowing they have a captive
tenant base.
We need to increase the supply of affordable housing, but
families need relief now, not 10 years from now when the doors
open but today. Congress could provide much-needed relief by
deepening investments in housing vouchers. I urge this
Committee to pass the Eviction Crisis Act and the Family
Stability Opportunity Vouchers Act, two bipartisan-sponsored
bills that would help stem the bleeding. And you can extend the
emergency rental assistance, which did so much to prevent an
eviction spike during the pandemic.
When we boost incomes for working families, for Government
programs, or economic growth but do not address rents, income
gain are often recouped by the housing market. Studies have
shown that when States raise minimum wages, landlords respond
by raising the rent. The implication is that investing in
affordable housing is not only necessary to stabilize families
and communities, it is also essential because the success of
all other economic mobility efforts depend on it.
Now is not the time for inaction, for indecisiveness, or
for the same old, tired debates about spending. We could pay
for deeper investments in housing in dozens of ways. Simply
collecting unpaid Federal income tax from the top 1 percent of
households would bring in an estimated $175 billion a year.
What we can no longer do is look renting families in the face,
families now living in cars and garages and attics and storage
sheds, in the richest country on the planet, and tell those
families, ``You know, we would love to help you but we just
cannot afford it,'' because that is a lie.
Chairman Brown. Thank you, Professor. Ms. Brunner, welcome.
STATEMENT OF LAURA BRUNNER, PRESIDENT AND CEO, PORT OF GREATER
CINCINNATI DEVELOPMENT AUTHORITY
Ms. Brunner. Chairman Brown, Ranking Member Toomey, Members
of the Committee, thank you for the opportunity to testify
today on how renters and communities are impacted by today's
housing market and how institutional investors are changing the
landscape of single-family housing in Hamilton County.
My name is Laura Brunner, President and CEO of the Port of
Greater Cincinnati Development Authority. The Port is a public,
quasigovernmental agency focused on mending broken real estate
to promote job creation, home ownership, and equitable
development. Our work is guided by the belief that real estate
should work for everyone. We focus on the acquisition and
rehabilitation of blighted residential and commercial
properties to provide housing options across multiple price
point, resulting in the revitalization of neighborhoods.
The Port operates the Hamilton County Land Bank, whose
mission is to return vacant properties back to productive use.
Since 2012, we have successfully sold more than 1,000
properties. Since 2015, the Port's residential program has
created more than 100 new and renovated, market rate and
affordable homes, investing $24 million to catalyze private
investment.
Housing development is not simply a byproduct of economic
development but rather an engine of economic stability and
growth. Simply, homes create long-term wealth. Real estate is
one of the fastest ways to shrink the wealth gap and to help
restore the middle class. In Cincinnati, Black home ownership
is only 33 percent. Nationally, about 42 percent of Black
households own their home, compared to 72 percent of White
households.
Housing and home ownership are the foundation of everything
else in our lives, and for too long redlining and segregation
has stifled Black residents from this opportunity. This has
become increasingly hard today as institutional investors
continue to crowd out the housing market across the country.
Last summer, we asked the city of Cincinnati for the names
of the five worst landlords. It took months of rigorous
research to uncover that over 4,000 single-family homes in
Hamilton County had been purchased by these 5 landlords.
Tracking the acquisitions was an arduous task due to the high
volume of LLCs used. There is a theme out there: out-of-town
investors hiding behind a cloak of anonymity.
As evidence by the city of Cincinnati's lawsuit against
VineBrook last year, this type of investor model results in
poorly maintained properties and negligent landlord practices.
Investor-landlords are also more likely to evict their clients,
their tenants. Institutional investors may only own 1 percent
of single-family homes but this may mean 50 percent of homes on
a single street. When the geographical impact is so
concentrated it has a negative, game-changing effect on what it
means to live in a neighborhood. It has an impact on
neighboring homes where surrounding property values see
downward pressure.
Institutional investors found a very profitable new sector.
They have been purchasing large volumes of single-family homes
in the region's disinvested neighborhoods and turning them into
rental properties. They make all-cash offers and box out first-
time and low-income buyers. Our low home values and high rental
rates make our city attractive. It is a cash cow for investors
but a money pit for renters. In the second quarter of 2021, 1
in 6 home sales were purchased by large investors, and we know
that it is significantly higher at price points below $250,000.
Just last month, Cincinnati had the largest jump in rental
prices in the country, so we feel we had to do something to
insulate renters. In December 2021, the Port placed a bid on
194 single-family homes formerly owned by a California-based
firm that fell into receivership. The receiver reached out to
the Port when the auction of the properties was imminent. We
could not help but see this opportunity as a partial antidote
to the threat. In January 2022, the Port closed on this
acquisition and launched the CARE Homes Initiative. No other
institution, to our knowledge, has taken on a project similar
in scope and challenge to this acquisition.
Because of our risk tolerance, we were able to create an
innovative financing model that included zero public subsidy.
The Port leveraged its non-tax revenue to issue bonds to pay
$14.5 million, outbidding more than a dozen investors. The
Port's intent with the CARE Homes Initiative is to create
viable pathways to home ownership for current tenants of these
homes.
Working in Neighborhoods, a nonprofit with a successful
track record, provides assessment, financial literacy training,
and homebuyer education for all interested tenants as they take
this step to buy their new homes.
Of course, bold ideas rarely come without risk. It is clear
that some of these homes have not been touched or upgraded
since they were built in the 1950s. Balancing the financial
performance needs of the homes with the human needs of tenants
is challenging. This reality reinforces the significance of the
Port's efforts to interrupt the cycle of predatory investor
ownership of these properties.
It is our duty to make real estate work for our community,
particularly our most vulnerable residents. Now more than ever,
bold policies and leaders are needed to ensure that housing
markets meet the needs of our communities.
Thank you for the opportunity to testify.
Chairman Brown. Thank you, Ms. Brunner. Ms. Morey, you are
recognized from New York.
STATEMENT OF ROSANNA MOREY, SMALL PROPERTY OWNER
Ms. Morey. Thank you for the invitation to testify today
and for the opportunity to share my story. My name is Rosanna
Morey. I live on Long Island in New York, and am a small
landlord of an owner-occupied home with a rental unit. I am a
single mom with an incurable cancer that progressed before the
pandemic began. I rented the apartment in my home on a month-
to-month lease to help with bills and to ease the burden on my
life. As my health declined I saw no other option but to speak
to the tenant and provide notice for her to vacate so that my
sister could stay with me and help me and my teenage son who
has learning disabilities. The tenant refused, and so began
holdover filings and proceeding.
The pandemic hit and the eviction moratorium was put in
place, which, by the way, was originally intended only for
nonpayment and COVID-related hardship cases. But somehow all
cases were lumped together, and did not take long for the
tenant to stop paying rent. ``Because I effing can, and you can
thank your Governor for that'' was the response that she gave a
police officer when he asked why she continued to stay.
I had to work three jobs while undergoing treatments to
make ends meet. She spitefully and incessantly smoked, knowing
that I was sick and that it made me violently ill. She violated
the lease, which clearly prohibited smoking, because my son was
asthmatic; she did not care and there was nothing I could do.
The stress of all of this even contributed to my having a TIA,
or a mini-stroke.
I could go on with countless stories of deplorable
behavior. Thanks to Governor Hochul's and Federal eviction
moratorium extensions, this tenant was basically given the
right to abuse the situation. She was allowed to live rent-free
for 2 years, even though gainfully employed. She ignored any
and all rules outlined in a binding lease agreement that she
signed and agreed to, and the situation allowed her to destroy
my property, knowing that there would be no recourse.
I was one of the very, very lucky people who received money
from the Landlord Rental Assistance Program, or LRAP, New
York's emergency rental assistance program for landlords whose
tenants were unwilling to apply for Federal emergency rental
assistance. However, it was only 1 year's rent that I had to
pay income taxes on, but the tenant was not required to pay
taxes on the forgiven debt. The money from LRAP did not cover
the entire back rent, nor the $10,000 in legal fees, nor the
$25,000 it ended up costing me to rebuild and clean the area
that she destroyed, even leaving feces everywhere and rotting
food in the kitchen.
The overall aftermath and any new regulations that
landlords would be subjected to will continue to drive them
away from renting out properties. Policies such as the eviction
moratorium led to abuse as in my case and many others, and has
caused a 2-year backlog in court. This has contributed to the
housing shortage because landlords are still housing nonpaying
tenants while waiting for their due process. ERAP and LRAP also
did not really help landlords because a tenant that expects the
Government to pay will simply not pay their own rent. This
perpetuates a ``who cares'' attitude and impacts landlords'
livelihoods, and worse yet, permanently creates an emergency
rental assistance program that just makes it easier for
Government officials to re-impose an eviction moratorium or
lockdown orders, something we can all agree is bad.
The eviction moratorium that occurred during COVID led to
Government interference beyond what should have ever been
allowed. The Government should not discourage landlord
participation, as that will just drive them away and make
housing more expensive for all.
With too many restrictions, affordable housing providers
like myself will reconsider renting going forward. Some will
just sell and leave, some will put more stringent requirements
and tenant screening criteria in place, and some will just
raise the rents to cover themselves ``just in case.'' We are
already starting to see the impact of all of this as social
media videos have begun to circulate teaching prospective
tenants how to create fake W2s and bank statements, et cetera,
because so many chose not to pay rent that now they cannot
provide the documentation required for a new apartment, and
this cannot continue.
Landlords are not in the business of evicting, but we
should be able to in certain circumstances.
Today, I am asking policymakers to consider landlords,
particularly small mom-and-pop landlords, and single parent
landlords trying to make ends meet, and sick landlords like
myself just trying to get by, because after all, we have
families to support too.
Thank you, and I look forward to answering your questions.
Chairman Brown. Thank you, Ms. Morey. The next witness is
Mr. Dunn. Welcome.
STATEMENT OF DARION DUNN, MANAGING PARTNER, ATLANTICA
PROPERTIES
Mr. Dunn. Thank you. Chairman Brown, Ranking Member Toomey,
and Members of the Committee, good morning. Thank you for the
invitation to testify today and share my story.
My name is Darion Dunn. I am the Managing Partner of
Atlantica Properties, a company that I started with my younger
brother and business partner, Trenton Dunn. Atlantica
Properties is a real estate investment and development firm
with a mission to empower individuals by establishing thriving,
holistic communities. I was born and raised in Atlanta,
Georgia, by parents who taught me that ``home'' is more than a
place. It is an ideal. I graduated from Georgia Tech where I
studied civil engineering and economics.
I have dedicated my life's work to creating and preserving
affordable housing. After acquiring my first rental property
over 20 years ago, I have since participated in the ownership,
management, and development of nearly 1,000 housing units. I
know that expanding affordable housing in our Nation is
possible and critical to solving our housing affordability
challenges, but the Government, at all levels, must empower,
not restrict, housing providers from doing what they do best,
providing places to call home for our residents at all income
levels.
My company is able to offer affordable rents in part
because we have a thoughtful, long-term approach to property
ownership. We have owned many of our rental properties for over
a decade, while nearby properties have traded hands upwards of
five times in the same period.
I am fortunate to have built a successful real estate
company that operates on an institutional level, yet I have
never forgotten my humble beginnings as a landlord with very
limited resources. I saved money from my day jobs for the
downpayment for single-family rental homes and apartment
properties. It is not surprising that the majority of rental
homes and small multifamily properties in this country are
owned by individuals and small businesses like mine. In fact,
over 70 percent of tenants in the United States live in
properties that have 20 units or less, including single-family
homes.
Small landlords represent a majority of the rental property
industry, but policymakers tend to overlook the contributions
and struggles of this group of business owners. My
responsibility to our residents includes keeping my business
viable so I can continue to serve those that are most
vulnerable to the ever-worsening affordability crisis, and
Government should seek to help me do that.
Our tenants are our partners, and our business cannot exist
without them. The symbiotic relationship between tenants and
landlords was put on full display during the height of the
COVID pandemic. The financial pain felt by tenants was
ultimately felt by landlords, and vice versa. Fortunately, my
company did not have a large percentage of delinquent tenants
during the pandemic like many others in my industry. However,
we did have tenants who were unable or unwilling to pay rent
for extended periods of time, with the worst case being a
current tenant that has not paid rent since October 2020.
While we have fortunately been able to withstand these
challenges, the majority of small landlords cannot sustain
these types of setbacks. Emergency rental assistance programs
have been a welcomed safety net, although many housing
providers have experienced significant delays in receiving
these funds, due to challenges with local execution of the
program.
Despite Federal resources to help during the pandemic, the
inventory of affordable housing is eroding as small landlords
opt to or are forced to sell their properties. With supply
already outstripped by demand, we cannot afford to lose these
market players.
We need more mission-driven housing providers. So, I
support business practices and public policies that strengthen
the tenant-landlord bond, as opposed to those measures that pit
one side against the other. Examples of good measures include
lease insurance to cover property damage and lost revenue,
reform of the Section 8 program, incentives to encourage
housing preservation and conversion of unused commercial
property to housing, and access to favorable debt and equity
for non-LIHTC deals.
Evictions are a last resort, but we must ensure that
moratoriums do not discourage vulnerable populations from
paying their rent and building their credit. For example, our
company doubled down on tenant financial literacy training
during the pandemic. We educated tenants on the importance of
avoiding eviction filings and creditor collections. We also
implemented a program to report positive rent payments to the
credit bureaus, which has led to 75 percent of our tenants
improving their credit scores.
I will close by reiterating that we must increase housing
supply and provide incentives to strengthen the tenant-landlord
relationship. There is still time to restore the legacy of
affordable housing in America, and I promise to continue my
efforts to make the ideal of ``home'' a reality for generations
to come.
Thank you for the opportunity to be here today. I look
forward to answering any questions.
Chairman Brown. Thank you, Mr. Dunn.
Ms. Yentel, welcome. You are recognized for 5 minutes.
STATEMENT OF DIANE YENTEL, PRESIDENT AND CEO, NATIONAL LOW
INCOME HOUSING COALITION
Ms. Yentel. Thank you. Chairman Brown, Ranking Member
Toomey, Members of the Committee, thank you for the opportunity
to testify today.
Prepandemic, millions of extremely low-income households,
disproportionately people of color, struggled to remain housed,
and more than half-a-million people experienced homelessness.
Ten million of the lowest-income households paid at least half
of their limited income on rent, leaving them without resources
to put food on the table, purchase needed medications, or
otherwise make ends meet. Any financial shock would cause them
to fall behind on rent and face eviction, and in the worst
cases, become homeless. These same households lost wages, had
increased costs, and were at risk of losing their homes during
the pandemic.
The Federal Government responded to the clear and growing
need by providing unprecedented resources and protections.
Congress provided $46 billion in emergency rental assistance.
President Trump implemented a national eviction moratorium,
which was extended by a bipartisan Congress and further
extended by President Biden. These resources and protections
kept millions of renters, who otherwise would have lost their
homes during a global pandemic, stably housed.
Now, as resources are depleted and protections expire, low-
income renters are faced with rising inflation, skyrocketing
rents, eviction filing rates that are reaching or surpassing
prepandemic averages, and in many communities, increasing
homelessness. Every $100 increase in median monthly rent is
associated with a 9 percent increase in homelessness. Last
year, monthly rents increased, on average nationally, by nearly
$200.
Rising rents are driven by increased demand, limited
supply, and a mostly unregulated market that allows landlords
to raise rents without regard to the impact on tenants.
Institutional investors are purchasing homes at an increasing
rate and they are raising rents, charging higher fees as a
profit-making strategy, and filing for eviction at alarming
rates. A lack of national renter protections places tenants at
risk of unjust treatment, housing instability, and evictions.
Underlying all these challenges is a longstanding,
pervasive, and severe shortage of 7 million homes, affordable
and available to the lowest-income people, which the private
market, on its own, cannot adequately address. The shortage is
a structural feature of the country's housing system, impacting
every State and nearly every community. Yet, Congress only
funds housing assistance for 1 in 4 eligible households and has
failed to preserve our country's limited supply of public and
other deeply affordable housing.
To address a decades-long housing crisis that has only
worsened during COVID-19, Congress must enact long-term
solutions, such as expanding rental assistance for all eligible
households in need, preserving and expanding the supply of
deeply affordable homes, providing short-term assistance to
prevent evictions and homelessness, strengthening and enforcing
renter protections, and incentivizing or requiring local
governments to eliminate restrictive local zoning.
These solutions must be paired with reforms to break down
barriers that prevent access to critical resources and that
deepen racial disparities. Although the best opportunity to
advance long-term solutions is the reconciliation bill moving
through the Senate now, it looks unlikely that the bill will
address the housing crisis in any meaningful way, leaving
renters and people experiencing homelessness to suffer from
continued inaction.
So, as champions like Chairman Brown and others on the
Committee continue working toward long-term solutions in
Congress, the Biden administration must take immediate action
to protect tenants from exorbitant rent hikes and prevent more
homelessness.
The bottom line is this: the country's lowest-income
seniors, people with disabilities, and working families are
struggling to stay housed in this housing market. Without
decisive and quick action by the Biden administration and
Congress, too many more renters will fall into homelessness,
with all its associated costs to children, families,
communities, and the country. We can prevent this outcome but
only if we act and act soon.
Thank you again for the opportunity.
Chairman Brown. Thank you, Ms. Yentel.
Ms. Brunner, your story of the CARE Homes Initiative, it is
quite a story. Thank you for sharing that. I mean, just the
arduousness, the difficulty of making that happen, thank you
for your commitment to do that.
But talk for a moment, if you would, what other areas in
Ohio are seeing similar--I do not expect you to know the
details that you know in Cincinnati, of course, but are seeing
big investors come in, and more importantly, what would help
the Port and other organizations like it be able to fix up more
homes and keep them affordable for renters, or return them to
affordable home ownership? Talk that through, if you would.
Ms. Brunner. Thank you for the question, Mr. Chairman. We
became aware of this issue about a year ago when there was an
article in the Wall Street Journal that featured Cleveland,
Ohio, and the rapid increase of ownership by these
institutional investors there, and that is what made us start
to study what was happening here in Cincinnati.
I think Ohio, in general, is typical of a target area
because of our home values relative to the rental market. So I
do not have any specific information but I know this is
something that is happening throughout Ohio.
Yes, the LLCs, when we got the names of five different
investors that had the most significant code violations from
the city of Cincinnati, and then went to figure out how many
homes they owned in our country, you cannot look up the entity
name because it is common in real estate that LLCs are used for
real estate ownership. But we did find that one particular
investor had 91 LLCs just in our county.
So that means there is this lack of transparency, which
makes accountability harder, and that is one of the changes
that we would recommend is that there is some kind of
registration process that would make it easier for the local
jurisdictions to then track and hold accountable these property
owners for the condition of the properties.
And we also discovered that many of them are still
receiving home ownership credits on their property tax bills,
so that is something else that should be changed. And we
certainly do not want to have less costs for them than other
businesses, because what they are doing is, you know, these are
businesses so they should pay higher taxes.
And I also think that, you know, we are looking into two
other ideas. We do not know the extent to which Opportunity
Zone funding has been used for the investment in these
properties. We know that a very significant amount of
investment is in low census tract areas. So it would be a
concern, certainly, if Opportunity Zone funding is used for
this, which is, I think, not the intent. And I think there
needs to be some analysis of REET taxation and the implications
that it has for this asset class.
Chairman Brown. Thanks, Ms. Brunner.
Professor Desmond, two questions, if you would kind of
answer them together. First addressing what Ms. Brunner said
about LLCs. Tell us how it has affected your ability to track
who is filing evictions around the country, because I know that
is a big part of the work you are doing at the Eviction Lab.
And then if you would also speak for a moment about the
Eviction Crisis Act, how it would help us better understand and
prevent evictions.
Mr. Desmond. Thank you, Chairman Brown. The growth of LLCs
in the rental housing market has expanded precipitously over
the years. Studies have linked LLC ownership to property
neglect. This is not because landowners who register under LLCs
own older stocks. It seems to be LLCs invite moral hazard. What
prevents liability also seems to prevent accountability and can
invite negligent behaviors. Studies have also linked LLC
ownership to property disinvestment, tax abandonment, even
completely walking away from properties.
One of the landlords I spent time with in Milwaukee, I
asked her, ``What happened to this house that I spent a lot of
time with?'' and she said, ``I just gave it back to the city.''
And what she meant was she just stopped paying taxes on it and
let it go into tax foreclosure. Tax foreclosure should not be
part of the business strategy, but for some landlords that use
LLCs it is.
It is also the case that it seems to be the case that a
small number of landlords do an outsized number of evicting.
Now we cannot know who exactly those people are because we do
not know who owns our cities. If we did, we could design
policies that would target the root of the eviction crisis.
The Eviction Crisis Act would do a lot to get us to a
better place when it comes to stemming evictions. First, it
would allow us to track eviction data, which is the only way to
understand if evictions are, for example, violating the Fair
Housing Act. The Federal Government does not collect eviction
data. The only group that does is my group, at Princeton, on a
national level, and I promise you I will not do this forever.
The second thing the Eviction Crisis Act does is look at
legal reform and inside the courts, and see if we can make a
more humane and rational way to adjudicate the process.
And third, it looks at rental assistance, and if we could
figure out a way to make small dollars go a long way. For
example, in Cincinnati last year, I believe 1 in 7 evictions
were for less than $500. So for some cases, the line between
homelessness and staying in your home does not cost that much
money.
Chairman Brown. Thank you. Ms. Yentel, your comments on
that, what the Eviction Crisis Act would do, in your view.
Ms. Yentel. Sure, I would point primarily to the last piece
that Matt mentioned--making emergency rental assistance a
permanent program and permanently funding it at $3 billion
annually. The legislation was initially introduced as
bipartisan legislation in the Senate in 2019. Even before the
pandemic, there was bipartisan understanding and agreement that
short-term rental assistance could help some families who can
otherwise make ends meet absorb an unexpected financial shock
and avoid eviction and the spiraling into poverty that results.
It was initially envisioned as a pilot program. And then,
of course, 2020 came--the pandemic and $46 billion in emergency
rental assistance. We have had our pilot program. Emergency
rental assistance has been successful. Forty billion of the $46
billion has been spent or obligated. Six million families have
been helped. Over six million payments have been made.
So, now it is time to take all the lessons that we learned
during the pandemic, from the 500 programs that were stood up
across the country, and put that into authorization and funding
for a permanent emergency rental assistance program. And again,
I am really pleased to see that the legislation is bipartisan
and does have bipartisan support.
Chairman Brown. Thank you. Senator Toomey.
Senator Toomey. Thank you, Mr. Chairman.
Ms. Morey, thank you for being with us remotely today. I
appreciate your testimony. I feel badly for the circumstances
you are in. I certainly hope your prognosis is good and that
you are feeling well.
You know, I read your testimony so I know the story, but we
did not have a good audio connection for much of your opening
comments. So I just want to clarify a few things for people who
might not have been able to understand what you were saying.
First of all, my understanding is you own your own home and
attached, or as part of that home, there is an apartment, and
that you rented that apartment out on a month-to-month lease to
a tenant. Right?
Ms. Morey. That is correct.
Senator Toomey. Right. And then at some point, because of a
deterioration in your health, you decided that you really
needed to have your sister move into that apartment who could
help you. And so you provided the notice to your tenant that
you, at some point, would not continue to renew the lease, and
your tenant, nevertheless, refused to leave the apartment. Is
that right?
Ms. Morey. That is correct.
Senator Toomey. Did I understand you to say that she stayed
in the apartment without paying at least the full rent--I do
not know if she paid any rent--for 2 years?
Ms. Morey. Close to.
Senator Toomey. Close to 2 years she stayed in the
apartment. And you could not do anything about that. Why?
Ms. Morey. Because housing courts were closed, and even
when I tried to open a different case because of her smoking--
so more of an emergency type of hearing or filing, that was
going to start the clock over again, meaning that my last
filing would go away and the new filing would then take its
place.
Senator Toomey. And with an eviction moratorium in place
would you be able to evict this person?
Ms. Morey. Yes, if there was no eviction moratorium in
place, if I heard you correctly, yes.
Senator Toomey. Right. If there was no eviction moratorium
then you could. If there is an eviction moratorium then you
would not.
Did this person seem to know that you were not in a
position to be able to evict her?
Ms. Morey. Yes.
Senator Toomey. And so took advantage of that.
And so let me ask you. Having gone through this experience
and knowing what you know about the Government's willingness,
certainly at times, to impose a ban on evictions, do you regret
having rented your place out?
Ms. Morey. I do not regret it, but a guarantee of no
moratorium, there would have to be more than that. I would have
to feel supported and protected by my Government. There would
have to be protections for risk mitigations [inaudible] in
order for me to ever consider renting again.
Senator Toomey. Right. You know, we have been hearing a lot
about the supply of housing. That is true. We have a shortage,
and this is, to me, a very compelling story of the unintended
consequence of what is meant to be helpful to tenants but
actually becomes very harmful when some people inevitably abuse
this.
Mr. Dunn, in your testimony you said, and I quote,
``Government actions that raise my costs ultimately impact my
residents and my ability to provide affordable housing,'' end
quote. So I assume that like any other business if there are
higher costs imposed on you from the outside, at some point you
have got to pass that on to your customers, the renters,
whether it is in higher rent or a higher security deposit, or
some combination thereof.
If higher costs are imposed on you, are you going to have
to impose those costs ultimately on renters?
Mr. Dunn. Generally that is the case. There is a
misconception that landlords are mostly big business, and as we
have heard today that over 70 percent of landlords are small
businesses.
Senator Toomey. Yeah, and I do want to get to a point about
that.
Mr. Dunn. And also those costs have to be passed on because
there are such relatively small margins, like in any business.
I mean, some businesses have less than 10 percent of a cash-
flow margin and up to maybe 20 or 30 percent. So if costs are
raised by even 10 or 20 percent, that could absolutely wipe out
any profit.
Senator Toomey. Right. So it has to get passed on.
So a cost such as, I do not know, you know, higher tax or a
higher maintenance cost on your building, is an obvious one.
But there is another kind of cost which would be if the
Government imposes an eviction moratorium that has the effect
that some percentage of rent is not going to be collected
because people know that you have no recourse if they do not
pay the rent.
So most people will still continue to pay their rent on
time because they know it is the right thing to do, and they
will. But there will be some percentage that will choose not
to. And so knowing that, if you are living under an eviction
moratorium where the Government is imposing that cost in the
form of lost revenue, do not most landlords have to pass that
on in the form of a higher rent to people who are paying their
rent?
Mr. Dunn. The moratoriums can create--it can threaten the
relationship between tenants and landlords. Most tenants, as
you said, they pay their rent. They are responsible. But when
you have a system that does not protect the other side of the
partnership--and you often hear me use that word,
``partnership''--it is not about the tenant, it is not about
the landlord. It is about the tenant-landlord partnership. And
when one side of that partnership is not protected it hurts the
entire system.
So when you have a moratorium in place that does not allow
one side of the partnership to thrive, that entire system
breaks down.
Senator Toomey. And the cost is going to have to be borne
by people who are paying.
The last point I want to make, it has come up repeatedly
from witnesses, and my colleagues have made the point about
increasing percentage of single-family homes, especially that
are owned by private investors. And there are a lot of people
that are very concerned about that.
I would just underscore that the people who are most able
to afford the burden, the costs, over ever more regulations are
large corporations that can spread that out in a big legal
department as opposed to the mom-and-pop tenant.
And, by the way, we tolerate the GSEs subsidizing the
financing of private investors in these single-family homes. If
people would prefer to have local landlords and people owning
their own homes, one thing we could do is forbid the GSEs from
engaging in these subsidies. I would urge my Democratic
colleagues to consider that.
Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Toomey.
Senator Menendez, of New Jersey, is recognized.
Senator Menendez. Thank you, Mr. Chairman.
Ms. Yentel, the National Low Income Housing Coalition's Out
of Reach report shows in stark detail just how hard it is for
low-income renters to afford even modest housing. In my home
State of New Jersey, a medium-income renter is barely able to
pay for a one-bedroom home. A renter earning minimum wage would
need to work 80 hours a week, or two full-time jobs, to afford
a one-bedroom house.
However, the data is actually even worse than that because
affordable housing availability impacts other parts of a
family's budget. For example, affordable housing is
increasingly located in areas that are far away from job
centers, forcing workers to pay higher transportation costs.
Given this, how important is it that we build more
affordable housing near public transit so that we can connect
people to good-paying jobs and careers and opportunities?
Ms. Yentel. Thank you for the question, Senator Menendez.
It is important that Congress not only invest in more deeply
affordable homes for the lowest-income people but also ensure
that low-income, extremely low-income people, and people of
color can live near transportation and the opportunities that
that presents for them.
We also have to be careful when we work on transit-oriented
development to ensure that it does not create displacement or
gentrification. And the affordable housing component of TOD is
the best way to do that--to ensure that we are preserving
existing affordable housing in neighborhoods connected to
transportation and building more so that the lowest-income
people are not displaced if new development comes near those
transit stations.
Senator Menendez. Thank you. That is why I led the charge
on my Livable Communities Act, which creates a Federal grant
program to incentivize the development of new affordable
housing near existing mass transit. And, you know, we hope to
see some of that happen.
By the way, my preface to the question, you do not dispute
any of what I said in terms of the realities of where it is for
rental incomes in terms of people's challenge to meet that?
Ms. Yentel. Absolutely. Rents are far out of reach,
certainly for minimum wage workers, other low-wage workers, and
for seniors, and people with disabilities on extremely limited
fixed incomes. But we also find that rents are far out of reach
even for the average renter, who often earns about $5 to $6
less an hour than what rent costs in their communities.
So, a big part of the housing crisis that we are facing
today is stagnant or declining wages for the lowest-income
people and skyrocketing rents that they cannot afford.
Senator Menendez. And when people cannot find a place to
call home and they are displaced then society bears the burden.
Talk about who bears the burden.
Ms. Yentel. Oh, absolutely. Inaction is expensive. You
know, as a country, we pay to allow for homelessness and
housing poverty to persist. And we pay for it through increased
health care costs for families and parents; we pay for it
through lessened educational attainment for kids. Families that
are unstably housed or precariously housed earn less over their
lifetimes. They pay less in taxes.
So, the flip of that is also true. When we invest in
affordable housing there are savings to be found in many other
areas of our life and throughout the Federal Government.
Senator Menendez. Thank you. Professor Desmond, the
coronavirus brought unprecedented challenges to all of us,
including renters across America, many who were already
struggling prior to the pandemic. However, with the CARES Act
eviction moratorium and the emergency rental assistance funding
provided by the Consolidated Appropriations Act and the
American Rescue Plan we were able to keep millions of people
from being evicted.
What has the Eviction Lab's data shown about how these
programs help renters stay in their homes?
Mr. Desmond. Both programs are historic and incredibly
successful. Between the end of the CDC's eviction moratorium
and July, roughly 216,000 evictions that would be expected
under normal conditions did not happen. The biggest reductions
in evictions were seen in low-income African American and
Hispanic communities, areas mostly affected by the eviction
crisis. At the same time, during the days that the moratorium
existed, foreclosures were down historically in the country too
because the Federal Government also rolled out forbearance for
homeowners.
And so this was a policy that was one of the most important
Federal policies in the lives of low-income renters since the
invention of public housing.
Senator Menendez. And finally, what lessons can we learn
from the pandemic with regard to targeted housing assistance
programs to the communities that need it most to ensure funding
is deployed as rapidly and efficiently as possible?
Mr. Desmond. One of the consequences of the emergency
rental assistance program is the development of channels in
every State to get money in the hands of tenants that need it
and a way to make property owners whole. It would be a waste to
let those channels go by the wayside since we have built them
through the pandemic.
Senator Menendez. Thank you. I understand Senator Cramer is
next.
Senator Cramer. Thank you, Mr. Chairman and Ranking Member.
Thanks to all of our witnesses for being here.
Mr. Dunn, it seems we pretty much can all agree, to some
degree, on the problem. I will tell you, in listening to
Senator Toomey's questioning, my mind started going down the
usual path of what is the ultimate end to the constant
Government distortion of markets, the sticks and the carrots
that seem to just create a higher price and very little in
regard to providing more supply? I mean, the biggest problem
with inflation, the cause of inflation, is when demand outpaces
supply. So we keep incenting demand and do not do enough, in my
view, to incentivize supply. And I am not really sure where it
all ends.
But one part of that scenario that we do not talk about
enough is the cost of regulation. And there has been a study
that I am sure you are familiar with, recently that predicts
about 40 percent of the cost of multifamily and single-family
rent is regulation.
Can you speak a little bit to Government regulation, and
again, I am sincere when I say I think we struggle to find the
balance. Every time we try to solve a problem we incentivize
one side or the other and all we do is escalate costs. Can you
speak a little bit to that imbalance, and what is the right
balance, if you have a sense of what that might be?
Mr. Dunn. Yes, Senator Cramer, and you are correct. The
National Homebuilders Association, they did do a study in
looking at all levels of Government regulation adds about 40
percent to the cost of building homes and to the cost of
building real estate and developing real estate, and that is
directly passed on to the very people we are trying to help.
So we have to make sure that we are dealing with the root
cause of the issue, which is a lack of supply, and everyone,
even every witness here today, we agree that that is the
problem. And we need to focus our efforts and focus our dollars
on every level of the Government--local, State, and Federal
level--on making sure we are creating more housing.
And when we create solutions that, in many cases I even
understand why they are being created, in the short term, to
help one side, it does not help the problem and it does not
solve the problem that we need more housing. We have to make
sure there are plans that create more units and not initiatives
that pit one side against the other. We have to make sure that
tenant-landlord bond, which is sacred, has a place to live in
this country.
Senator Cramer. And you do not advocate, and I do not think
any of us advocate no regulations. Obviously there needs to be
protections put in place. But I agree. Honestly, the problem is
easier to identify than the solution, I readily admit. When the
incentives create a distortion to the point where the cost of
rent is going up faster than the rest of the economy, that is
not the right solution.
But I am kind of with you. I would like to see us focus
more on the supply side, but I am not sure that completely does
it either because sometimes you can end up with just an
overabundance of that as well.
Anyway, with that thank you all. And, by the way, I still
have a minute and a half. If anybody else wants to comment on
the same question, either from a different perspective, I would
be happy to listen.
Ms. Yentel. Well, I would be happy to share that related to
regulations or State and local laws, one of the biggest
challenges to increasing affordable housing supply is often
restrictive local zoning that inhibits the supply of any kind
of apartments, and especially affordable apartments. And this
drives up costs for everybody and it exacerbates segregation
and other racial disparities.
So, States and localities will need to do more to limit or
entirely remove those restrictive zoning laws if we are to be
able to build the number of homes that the country needs.
And the Federal Government can use the levers that it has,
primarily by creating incentives or requirements that are tied
to Federal funding, especially the big pots of funding through
the bipartisan transportation infrastructure bill. That can
create a very compelling incentive for local communities if
they are able to receive those funds only if they do more at
the local level to reduce restrictive zoning.
Senator Cramer. The only thing that concerns me about that
is that--that sounds swell until the local community decides it
is not worth the funding, in which case you have solved no
problem.
Ms. Yentel. Well, that is why we should think bigger than
the housing funds, where typically we do look at incentives for
restrictive zoning, and we should look to the much bigger pots
of money that all communities want, related to transportation
funds, highways, et cetera.
Senator Cramer. Thank you. Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Cramer.
Senator Reed, from Rhode Island, is recognized.
Senator Reed. Well thank you very much, Mr. Chairman.
Professor Desmond, what we have noticed is that a lot of
institutional investors, private equity firms, et cetera, have
been getting into buying residential homes in significant
numbers, and that could disrupt the entire market. I know real
estate is typically a really local issue in terms of realtors,
in terms of individual sales, in terms of all those factors.
Do you have an assessment yet as to why they are getting
in, what they might do, and where are the downsides?
Mr. Desmond. Thank you, Senator Reed. So we have seen the
rise of institutional investors in the single-family rental
market after the 2008 foreclosure crisis, because there was a
market opportunity. The average cost of a home dropped by 27
percent after the foreclosure but rents did not decrease during
the last recession. That gave institutional investors a chance
to buy up single-family homes below market rent and rent them
at market rents. And that is why you have seen increasing
investment in sunbelt cities, like Atlanta, Charlotte, Phoenix,
for example, where institutional investors have the bigger
chunk of the market.
Nationwide, it seems about 2.3 percent of the single-family
rental market is now owned by institutional investors, but even
that relatively small footprint is much bigger in places like
Atlanta, where in some neighborhoods a third of the single-
family market is owned by institutional investors.
Why should this concern us? Because research has linked
institutional investment to higher housing costs, as
institutional investors raise rents much more aggressively than
smalltime landlords. There is also research linking
institutional investors to property neglect, putting more onus
on tenants for upkeep, and also they evict at much higher rates
for much lower amounts of money.
Senator Reed. Thank you very much. And the other issue,
recalling my service here in '08, '09, and '10, is that are we
seeing these institutional investors taking the ownership and
then creating derivatives or other financial products based on
their ownership? Is that happening?
Mr. Desmond. I am not sure how to answer that question at
this time.
Senator Reed. OK. Very good.
And both Ms. Yentel and Professor Desmond, what kinds of
Federal investments in housing supply would be the most
effective to ease family housing costs and help renters? Any
thoughts? Professor Desmond and then Ms. Yentel.
Mr. Desmond. Sure. So the Housing Choice Voucher Program
has been an incredibly effective program. You know, families,
when they receive a housing voucher, move to better
neighborhoods. Their kids do better in schools. Their kids
literally eat more and become healthier and less anemic.
So an incredibly cost-effective, successful way to expand
more housing security, more economic mobility for families
across the country is simply to take a program that we have,
that already works really well, and expand it to all the
families that need it.
Senator Reed. Ms. Yentel, your comments?
Ms. Yentel. I absolutely agree and would add that when it
comes to housing supply our country's newest and most deeply
targeted housing supply program is the national Housing Trust
Fund, thanks to your leadership in creating it and getting it
enacted. The program, at its current funding level, 100 percent
of those dollars are to build or preserve apartments affordable
to extremely low-income households. And many of those
apartments are up and running now, housing some of the most
marginalized, vulnerable people in our country, including
people who are previously chronically homeless, kids who are
aging out of foster care, survivors of domestic violence, and
so on.
The only problem with the program is that it is woefully
underfunded, given the need. This year was its largest funding
level yet, and it is still at under $1 billion for the entire
country. So, that program needs to be significantly expanded so
that we can build the number of homes that are needed and
ensure that they are affordable to the people with the greatest
and the clearest needs, which are extremely low-income renters.
Senator Reed. This shall come as no surprise but I
completely agree with you. Our challenge is to come up with the
funding sources to keep the Housing Trust Fund very, very
active going forward.
With that, Mr. Chairman, I will thank you and thank the
panel. Thank you very much.
Chairman Brown. Thank you, Senator Reed.
Senator Tester, from Montana, is recognized from his
office.
Senator Tester. Yeah. Thank you, Chairman Brown. Thanks for
having the hearing.
Look, I come from Montana, and many Montanans have had
trouble finding available housing. It is the same way across
the country. The price points have gotten too high. It has
gotten worse during the pandemic, because so many people think
that the entire State is like the show Yellowstone, and I guess
that is OK but that is really not true.
And across our communities in Montana, some places are
seeing median sale prices of a home rise 40 percent in the last
year alone. This is pushing more and more people from potential
home ownership to looking for homes to rent.
So Ms. Brunner, what impact do these challenges have on the
ground in communities like yours?
Ms. Brunner. Thank you for the question, Senator. I think
that there is a profound impact on local families when home
ownership opportunities are taken away from them, and an
amazing impact on the neighborhoods that are replaced by
institutional investors owning the properties.
And if I can build on the question that was asked earlier
about the motivations for these investors, one of the things
that has fueled is what Professor Desmond talking about, and
obviously with the home prices crashing, going back to the time
of the 2008 housing crisis, and then there has been, since that
time, an amazing amount of institutional money and nonrecourse
debt that has been available.
So many of these investors have been able to buy properties
without any guarantees of the debt. And the portfolio that we
purchased, for example, it was in receivership not because the
portfolio failed but because the owner just walked away, and
then the judge put the properties into receivership for the
protection of the investors and lenders.
So there has been too much capital out there chasing places
for investment, and then this product has really been created
out of whole cloth. Instead of investing in apartment buildings
and office buildings and industrial buildings, all of a sudden
single-family houses became the desirable sector. And there has
been so much money chasing it, and the debt has been too easy
to get.
And then as you go back into the individual neighborhoods,
when you have 4,000 houses in a community the size of Hamilton
County, in every single neighborhood, it makes a difference.
And we are getting calls from jurisdictions throughout the
county on a regular basis, asking what we can do to help them
fight back.
Senator Tester. OK. And also in my State a growing number
of homes for rent are being converted into vacation rentals, in
many, many communities, which puts additional stress on already
low housing supply.
Ms. Yentel, are there strategies that have worked to
prevent local residents from being displaced or ease the impact
due to tourism? I know it is a two-edged sword, but quite
frankly, when these homes are taken off the market because
families cannot afford to buy them because they are used for
vacation rentals, that adds to the problem. Are there any
strategies out there?
Ms. Yentel. Well, sure. Any time that rental units, and
especially affordable rental units, are taken off the market
and used for some other purpose than housing low-income people,
that exacerbates the existing shortage of homes affordable to
them in that community.
So, it points back to the real need to, in places where
there are not enough homes for the people who live there or
want to live there, we need to build more. And to build more
market-rate apartments, we need local communities to remove
restrictive zoning laws and allow the market to build those
units and have them affordable to middle- or higher-income
renters.
For the lower and especially extremely low-income renters,
the private market, on its own, cannot build and operate
apartments that are affordable to them because they cannot pay
enough in rent to cover the costs to build and operate the
apartments. So, for them, Federal subsidies are needed--either
in the form of rental assistance to be a bridge between what
they can afford and what rent costs, if there are an adequate
number of homes and the people living in them can afford them,
or, in the form of building apartments and ensuring that they
are deeply affordable to extremely low-income people through
programs like the national Housing Trust Fund.
Senator Tester. Ms. Yentel, as long as you are warmed up,
we do not have any immigration policy in this country, quite
frankly, and we need one, because it would help with workforce,
it would actually have some positive impacts on reducing
inflation, but nonetheless, we are locked up on that issue in
Washington, DC, and we have an incredible paralysis.
Do you have any thoughts on where we can get workforce to
build these houses?
Ms. Yentel. I am sorry. I do not fully understand the
question.
Senator Tester. The point is if we are going to increase
supply we have got to have workforce. We have got no workforce.
We have got no immigration policy and we do not have enough
folks to build houses. Do you have any thoughts on that?
Ms. Yentel. That is a really important and good question. I
do not have immediate solutions to share, but I would love to
follow up with your office afterwards to share some.
Senator Tester. Super. Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Tester.
Senator Warner, from Virginia, is recognized from his
office.
Senator Warner. Thank you, Mr. Chairman. I appreciate you
having this hearing, and Ms. Yentel, if you have got those
solutions on workforce in terms of building housing, let my
office know as well. We are all overdue on an immigration
solution. One of the things I know, I have worked with the
Chairman and others on, is that as we think about a project
that I have been involved in, unsuccessfully, for well over a
decade, in terms of Fannie and Freddie reform, the idea of
having something approximating a 15- to 20-basis-point fee on
all of the work that Fannie and Freddie does on mortgages would
create a dedicated source of funding for not only first time
home ownership but also potentially into the National Housing
Trust Fund to deal with the rental issue as well.
One of the things I have worked on a lot has been home
ownership, and my question, Ms. Yentel, I am going to come to
you, is on rental housing. I have been a big advocate, along
with others on this Committee, on Community Development
Financial Institutions, CDFIs. I am proud of the fact that
along with Senator Crapo and a number of Members on this
Committee we have started a CDFI Caucus in the Senate to try to
make sure we get more capital into these entities that help
fund low- and moderate-income housing. We have seen, through
COVID, a disproportionate impact on communities of color.
I think we need to do that, and I think there is this
virtuous circle, that I know, Ms. Yentel, you talked about as
well, but providing more affordable housing either in the
rental market or in terms of even home ownership ends up
helping communities all across the income spectrum.
But I am going to go to you, Ms. Yentel, because your group
did a recent study called ``The Gap: A Shortage of Affordable
Rental Housing.'' In a State like mine, the Commonwealth of
Virginia, we have got about 150,000 shortage of affordable
rental housing units.
We have got certain tax programs that you, Ms. Yentel, and
others have pointed out. We just do not have enough private
capital going into building affordable rental housing.
What can we do, as the Federal Government, beyond some more
traditional programs, to incent more private capital going into
this underserved market?
Ms. Yentel. Well, I would actually bring it back to the
public investments that are needed, especially as we talk about
where the data shows the clearest and the greatest needs are.
The data are very clear that the most severe shortage of homes
affordable is for the lowest-income people. In fact, extremely
low-income renters are the only segment of the population for
which there is an absolute shortage of homes affordable to
them. And this has ripple effects up the income ladder, and
addressing this shortage can provide relief up the income
ladder too, especially when we are talking about Federal
resources. I think it is very important that we ensure that
these limited resources are targeted where the greatest needs
are.
The work that you have done on first-generation homebuyers,
and assisting more first-generation people to become
homebuyers, I think that is very important, and for renters
too, because all housing is on a continuum. And when we have a
situation like we do today, where potential first-generation
homebuyers are locked out of the markets because single-family
home prices are so high, that keeps them in the rental market.
They tend to have higher incomes than other renters. That can
drive up costs.
And as I have said before, our housing system is like a
game of musical chairs. And when the music stops playing, it is
always the lowest-income people or people with no incomes who
are left standing, without any homes at all.
Senator Warner. Can I just ask you--I mean, I understand we
need this Federal subsidy, but unless we are going to do 100
Federal financing, how do we take those Federal incentives to
incent private capital beyond kind of what some of the tax
credit programs, to actually get us more supply of low-income
rental housing? I mean, I an just wondering if there is
anything else. Should we simply fund the existing tax credit
programs or are there other examples of creative initiatives
you have seen in your work that we ought to put into the
toolkit?
Ms. Yentel. Well, we can do direct grants, as we do through
the national Housing Trust Fund, and that is effective for
communities to be able to use those funds to build and preserve
apartments affordable to the lowest-income people. Tax
incentives are also helpful in attracting private capital. The
Low-Income Housing Tax Credit is certainly a very successful
program that should be expanded and reformed to ensure the
communities that receive those tax credits can do more, again,
to build apartments for those lowest-income people.
Senator Warner. Can I just say, Mr. Chairman, I think we
all, or most of us on the Committee support that National
Housing Trust Fund, but the erratic level of funding to that,
one of the ideas, even though we may not have fully agreed on
all the housing finance reform, the idea that at least putting
some dedicated fee on those mortgages that get the Government
guarantee, that would provide a more stable source of funding
for the National Housing Trust Fund. I hope we can revisit.
Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Warner.
Senator Warren, from Massachusetts, is recognized.
Senator Warren. Thank you, Mr. Chairman.
America's renters are struggling, and the Fed's interest
rate hikes are making it both more expensive to build more
housing and more expensive to take out a mortgage to buy a
home. This could lock more families into the rental market and
push rents even higher.
Now big Wall Street firms are watching this with dollar
signs in their eyes. Private equity, real estate investment
trusts, and big corporations have gobbled up more and more of
the rental market and now serve as landlords to thousands and
thousands of Americans.
In 2018, nonindividual investors owned 26 percent of the
rental stock, up from 18 percent in 2001. On a recent earnings
call, executive at the private equity firm Blackstone bragged
that slowing housing construction, that is less supply, and
higher mortgage costs, quote, ``provide a lot of support,'' end
quote, for their bottom line since, quote, ``people will still
have to live somewhere.''
So Professor Desmond, you are the leading expert on
predatory housing schemes so let me ask you. As corporate
landlords like Blackstone buy up rental properties what will be
the impact on families who are in those homes?
Mr. Desmond. Senator Warren, first, those families will pay
more, and sometimes a lot more. Institutional investors are on
record by raising the rents double digits. Even in the single
quarter, those families also might experience a reduction in
housing quality as institutional investors divest from housing
as part of their business model. They saddle tenants with extra
fines and fees, including tenants that cannot make the rent at
the beginning of the month, just because they do not get paid
on a monthly basis.
Plus those tenants are often outgunned not only politically
but in court, where many of those tenants do not have access to
a lawyer but over 90 percent of landlords do. That leaves those
families in an incredibly vulnerable situation.
Senator Warren. Right. You know, in fact, thanks to an
investigation by the House Select Subcommittee on the
Coronavirus Crisis, we know that during the height of the
pandemic corporate landlords illegally evicted families by the
thousands, violating Federal and State moratoriums that had
been put in place to protect tenants.
So today, with families struggling with these rapidly
rising rents that you talked about, and with the economy at
risk of being pushed into recession by the Fed's overzealous
interest rate hikes, it is urgent that we take steps to protect
renters from predatory schemes and ensure that corporate
landlords at least follow the rules that are in place.
And that is one reason I proposed creating a new Tenant
Protection Bureau, which would allow tenants to easily file
complaints against unscrupulous landlords and to provide
officials with the data they need to enforce tenant protection
laws.
Ms. Yentel, how could a Tenant Protection Bureau protect
families' rights and force these Wall Street landlords to
actually follow the rules?
Ms. Yentel. It could be tremendously helpful, Senator
Warren. As you said, that report only verified what we knew was
happening during the pandemic, which was that some of these
corporate landlords were flouting the law. And we pushed
throughout the pandemic for the Federal Government to hold them
accountable, to apply the penalties to them for not following
the CDC eviction moratorium. But there was no single agency
that was charged with or empowered to do that, and so it did
not happen.
If we had a Tenant Protection Bureau in place during the
pandemic, it could have prevented untold harm and evictions of
some of the most marginalized people. And if we had it today,
it could help further enforce tenant protections, prevent
egregious rent hikes, and let tenants hold their landlords
accountable.
Senator Warren. That is a very powerful answer and I
appreciate it.
Look, to ensure that every family has access to a safe and
affordable place to live, we have got to build more housing.
That is the ultimate answer. We need more supply. There is no
way around it. These investments are overdue.
But it is also urgent that right now we stand up to big
corporate landlords and to protect tenants from these predatory
schemes that could push them out on the street, and a Tenant
Protection Bureau would be a good start.
So thank you very much. Thank you for your work. Thank you
for being here. Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Warren.
Senator Van Hollen, of Maryland, is recognized.
Senator Van Hollen. Thank you, Mr. Chairman, and thank all
of you for your testimony here today.
And I think there is consensus that we need to address the
housing supply issue, and there may be some Federal tools we
can use to incentivize local jurisdictions to reduce barriers
to housing supply. But I think all of us know we are not going
to snap our fingers today and in the next 6 months, a year, a
couple of years, create all of the supply we need.
So I think we should also be focused on using proven public
policy tools to provide more families with affordable housing
and allow families that have been trapped in poverty to move to
areas of opportunity.
Professor Desmond, I want to start with you because you
mentioned in your written testimony a bipartisan bill that I
introduced with Senator Todd Young called the Family Stability
and Opportunity Vouchers Act, which would provide families with
young kids the opportunity to move to an affordable home but
also wraparound services, to make transitions to other
neighborhoods with higher opportunity.
Could you first briefly talk about the fact that people
have looked at this, the empirical evidence that shows this is
effective, and second, what is the impact on that program,
which we are trying to expand significantly because it has been
successful? What is the impact of some of the institutional
investors buying up properties in some of the areas these
families want to move to?
Mr. Desmond. Thank you for the question, Senator. The
bipartisan bill that you helped introduce and sponsor would be
incredibly impactful for families in all sorts of ways. Housing
is bound up with opportunity. So it is not just about how much
rent you are paying but it is also where you are living, where
your kids are going to school. The promise of a housing voucher
is to expand choice and opportunity for so many Americans
denied it.
The empirical research on this is very clear. When families
have the opportunity to move to neighborhoods with lower rates
of poverty, lower rates of crime, higher rates of public
safety. Their lives are improved in so many different ways.
Let me just give you one datapoint. Children who go to
schools with higher levels of integration do far better their
peers who go to segregated schools, even when those segregated
schools are flooded with resources. So these programs work, not
to mention just giving families a breath and relief so they can
pay what they should be paying for housing costs instead of
driving them into poverty.
The institutional investment in our markets is the opposite
of this. It is the view that housing is a commodity, that it is
something that should only be for profit, and it is an
opportunity denier and a poverty spreader.
Senator Van Hollen. I appreciate that observation which is
why this trend is alarming. The challenge we, of course, have
is discrimination based on source of income, where, in certain
places, I think the majority of places around the country,
landlords can discriminate against people with vouchers because
of the source of income. Can you talk about that challenge and
whether it is made even more difficult if you have an
institutional investor with no connection to the neighborhood?
Mr. Desmond. So source-of-income discrimination, as you
know, in most counties there is no law against just saying no
to a family just because they have a voucher. The evidence
suggests that when source-of-income laws are put in place they
do help families get housed quicker and into better
neighborhoods. There is a higher success rate with vouchers
with those laws intact.
With respect to institutional investors on this question,
you know, when you take the landlord and tenant relationship
that Mr. Dunn has so eloquently talked about today, and you put
a lot of distance between folks that are working together, and
you make that relationship purely financial, landlords do not
have a lot of skin in the game to give tenants a break when
their kid gets sick or when they have to go to a dentist
appointment. So it does suggest that those landlords not only
are going to react in a more kind of impersonal way, it
suggests that they might build in a kind of discrimination that
is beneficial to their profit motive, including source-of-
income discrimination.
Senator Van Hollen. Thank you. There is a whole lot of
additional territory to cover.
Ms. Yentel, I just have a little bit of remaining time.
Could you comment briefly on the Family Stability and
Opportunity Vouchers Act and why it would be important to move
that forward?
Ms. Yentel. Well, it would be important for all the reasons
Professor Desmond said. The only thing that I would add is that
the legislation--500,000 new vouchers, targeted toward families
with young children--could effectively end family homelessness.
And the funds that are included for mobility counseling are
especially important because that allows counselors to help
these families with finding communities that are best for them
and then helping them obtain and retain housing in those
communities. So, it is a very important bill.
Senator Van Hollen. Thank you. Thank you, Mr. Chairman.
Chairman Brown. Thank you, Senator Van Hollen.
Senator Cortez Masto is recognized from her office.
Senator Cortez Masto. Thank you, Chairman Brown, Ranking
Member Toomey.
I want to start also by thanking Irene Gray, our
stenographer, who has served the Senate for over 27 years.
Thank you for your service, and I wish you well.
I also want to thank the Ranking Member and the Chairman
for this important hearing. Similar to what I have heard from
all of my colleagues I, too, am concerned about institutional
investors and the impact it is having in Nevada, where we are
seeing all these properties being purchased.
I know in my State, in 2021, 29 percent of the homes
purchased in the Las Vegas metro area were bought by investors.
My challenge is I cannot tell how many are institutional. I
think it has everything to do with what I heard earlier about
too many LLCs, not enough transparency, and being able to track
this.
Ms. Yentel, can I ask you, because we have heard the
negative impacts by some of these institutional investors--I am
not saying it is all of them but some of them that we have had
and heard in our community--can you share some examples of
communities effectively countering the pressures on home prices
brought on by purchases from institutional investors?
Ms. Yentel. So, I would say that the challenges that low-
income tenants face from institutional and other landlords are
primarily based on the fact that we have few tenant protections
throughout the country, and there is a tremendous power
imbalance that tilts heavily in favor of landlords, especially
institutional investors, at the expense of low-income renters.
And so, we need to rebalance that power so it is more equal,
and so tenants have protections against exorbitant rent hikes,
against these kinds of fees for profit strategies, and against
the increased evictions. And there is a whole set of tenant
protections that should be implemented at the Federal, State,
and local levels.
Senator Cortez Masto. Well, let me ask you this as we talk
about finding that balance, because I do think it is important.
We were talking about vouchers and the positive impact it does
have for stability for tenants, but can you talk a little bit
about what vouchers also do and bring to property managers, and
benefits as well?
Ms. Yentel. Sure. It is reliable income for property
owners, for landlords. If they have a tenant who has a Section
8 voucher, then they will get regular rent paid each month, and
they have the benefit of knowing that that rent will be stable
and will be continuous. So, it is a benefit for landlords as
well.
Senator Cortez Masto. And also gives them the ability to
prepare for and help them upkeep their property as well. Is
that right?
Ms. Yentel. Well, the rents are pegged at the fair market
rate, which should be enough for landlords to be able to
operate and maintain their properties.
Senator Cortez Masto. Let me jump to Professor Desmond
because you included manufactured home communities in your
book, Evicted, and thank you so much for the work that you
provided in Evicted. Very enlightening.
Can I ask you this? The other area I am concerned about is
manufactured homes being purchased by private equity as well
and the impact that we are seeing also on the security and
stability of the tenants. Can you talk a little bit about what
you are seeing there as well with respect to our manufactured
home communities? This is the first time I have heard so many
in my State that are now losing their stability, losing their
homes, and these private equity companies are coming in and
purchasing up all of these communities.
Mr. Desmond. Senator, I think your concern is warranted.
What we have seen as institutional investors buying up
manufactured housing, which is an enormous source of housing
for low-income Americans, and often evicting entire mobile home
parks and displacing entire communities.
Let me just give you one example of how institutional
investing is different, also, than just normal landlording. So
only about 5 percent of Americans are paid on a monthly basis
right now, but rent comes due at the beginning of the month. So
for that 95 percent of Americans, often they cannot make rent
during the first of the month.
So if you have an institutional investor as your landlord
you often get just an eviction notice by computer, by
algorithm, and you pay to stay. You pay the late fees and the
eviction fines to stay, but by our estimate that increases your
housing costs by 20 percent, which means the rental housing
crisis, as scary as it is on paper, is even worse if you are
under those kinds of conditions.
Senator Cortez Masto. Thank you. I noticed my time is up.
Thank you again.
Chairman Brown. Thank you, Senator Cortez Masto.
Senator Smith, of Minnesota, is recognized.
Senator Smith. Thank you, Mr. Chair, and thanks so much to
all of our testifiers for being here today. It is extremely
helpful.
Two weeks ago in the Housing Subcommittee that I chair we
held a hearing on homelessness and how we can work together to
address this important issue, and as the Chair knows, Senator
Rounds, my Ranking Member, and Chair Brown, and many
Subcommittee Members were participating in that. It was very
helpful. And it is directly connected to this hearing today
because we know that without a safe, affordable place to live
nothing in your life works, and at our Subcommittee all of our
witnesses agreed that the primary cause of homelessness is,
again, this deep under-supply of affordable housing.
I think we are obviously seeing in this Committee hearing
today that this housing supply problem affects all segments of
the housing continuum, and we are seeing how these shortages
are affecting the rental housing market, the home ownership
market, and it is a big deal in rural and suburban and urban
communities as well.
So I want to come first to Dr. Desmond, thinking about this
backdrop of the hearing a couple of weeks ago on homelessness.
What do you see as the relationship between homelessness and
the broader problem of housing affordability? Could you just
talk a bit more about that homelessness issue?
Mr. Desmond. Certainly, Senator. As Ms. Yentel offered in
her comments, when the rent goes up so does homelessness. There
is a direct connection between rental costs rising and shelter
capacity expanding, people moving from a home they pay 50
percent of their income to, to one that they pay 70 percent, to
maybe their car, a shelter, to the street. So there is a direct
link.
The reporting out of California on this has been incredibly
telling. Sixty percent of people that live on the street in
Oakland are from Oakland, lived in Oakland, often were
homeowners in Oakland, and through one reason or another,
coming back to the housing crisis, ended upon the street as
citizens and natives of that State.
Senator Smith. And there is this misperception that people
become unhoused or become homeless because they have an
underlying health problem like a substance use disorder or
mental health issue. But yet is it not true that those are the
kinds of health issues that develop because you are
experiencing homelessness?
Mr. Desmond. Both can be true, but the intervention is very
clear. You know, if you provide families homes first, no matter
their mental health state or their struggles with addiction or
other social problems they might be facing, when we intervene
in their housing situation they get healthier, they can take
their medication, we can provide stable and consistent mental
health interventions.
So, you know, it is not rocket science. The solution is
housing.
Senator Smith. The solution is housing, and this is not
like we do not know what to do. It is just a question of
whether we have the will to do it.
So we acknowledge that there is a severe supply challenge
with affordable housing. Some would argue that strategies like
rental assistance basically serve to fuel demand for housing,
thereby driving up housing costs, that it is not a supply side
tool.
Is that accurate? Ms. Yentel, would you like to respond to
this? I mean, does not rental assistance make economics of
affordable rentals work better for developer and rental
property owners?
Ms. Yentel. Yes. So, when it comes to very low, extremely
low-income households, the amount that they can pay in rent
without subsidies does not cover the costs to build and operate
housing. So, Federal intervention in the form of subsidies is
necessary, and Housing Choice Vouchers are highly effective in
communities where there is a sufficient supply of homes but the
people living in them cannot afford them. So, it acts as a
bridge between what people can afford and what rent costs, and
allows them to stay stably and affordably housed.
Senator Smith. So to suggest, it seems to me, that these
kinds of strategies, which are necessary to make housing
affordable, is purely a demand-side solution and not getting
the economics of having more affordable housing seems to me to
be the right way of looking at this.
Ms. Yentel. That is exactly right. As long as we have
seniors or people with disabilities on extremely fixed incomes,
as long as we have families working very low-wage jobs that are
essential to our communities, we have to acknowledge that
Federal subsidies are necessary to make homes affordable for
them.
And we have to fund those solutions at scale.
Senator Smith. Earlier in the conversation that we have
been having here there was a discussion that I really
appreciated about how local zoning restrictions contribute to
making affordable housing more expensive to build. My hometown
of Minneapolis has done, I think, a model job of creating much
more inclusionary zoning.
Could you just briefly address what we could be doing at
the Federal level to support that kind of local, more inclusive
zoning?
Ms. Yentel. And yes, your State is leading the way, really,
for the country to look at ways to remove restrictive zoning.
Local zoning is, as its name suggests, a local issue, but there
are Federal incentives or requirements that can be put on local
communities. If we look at the large pots of money that States
and localities need to run their communities, we should put
incentives or requirements on those funds for local communities
to do more to remove restrictive zoning.
Until we address all of the restrictive zoning that is
inhibiting the supply of any kind of apartments--and especially
affordable apartments, even if we are successful in getting the
level of funding that we need from the Federal Government--we
will not be able to build. So, the Federal Government should
use the levers it has at hand to incentivize or require
communities to do more.
Senator Smith. Thank you very much. Thank you, Mr. Chair.
Chairman Brown. Thank you, Senator Smith.
Senator Warnock, of Georgia, is recognized.
Senator Warnock. Thank you so very much, Chairman Brown.
According to data from the 2020 American Community Survey,
around 45 percent of Georgians spend more than 30 percent of
their income on rent, and 1 in 5 spend more than half of their
income on rent. We may assume that these numbers are from high-
rent cities but that is not true. It is not just high-rent
cities. In both Jenkins County and Taylor County, two rural
counties in the southeast part of my State, 1 out of every 3
households--1 out of 3--spends more than half their income on
rent.
Georgians are being crushed by rent all over the State.
There is no question that we need more housing stock, and I
support many initiatives that would do just that. But Georgians
do not have the luxury to wait. They are trying to pay the rent
right now. They cannot wait several years for rents to fall. So
even as we put forward policy that would increase housing stock
we have to address the housing insecurity that people of
Georgia are dealing with right now.
Ms. Yentel, how long would you estimate that it will take
for our housing supply to finally catch up to demand?
Ms. Yentel. It will take years, if not more than a decade.
It is a matter of this restrictive local zoning that needs to
be addressed and removed, the supply chain issues, workforce
issues, and many more issues, to build the housing. It will
take many years for us as a country to dig ourselves out of the
supply hole that we created.
Senator Warnock. So we cannot wave a magic wand. It will
not go away next year.
Ms. Yentel. That is right.
Senator Warnock. Or the year after that.
Ms. Yentel. That is right.
Senator Warnock. Or the year after that. So presumably
rents will continue to rise in the meantime?
Ms. Yentel. They will continue to rise. Maybe they will
start to come down. Even if they do, when we look back to
prepandemic times, many of those numbers in Georgia were likely
the same. So, even if rents come back to where they were before
the pandemic, there are 10 million households throughout the
country that are paying at least half of their limited incomes
on rent. So yes, they will continue to struggle.
Senator Warnock. So we had this problem prior to the
pandemic, which was then exacerbated by the pandemic. So do you
think that offering tax cuts to rent-burdened families, to
ordinary, hard-working families, would help bridge the gap
until we can fully address the housing supply issue?
Ms. Yentel. Absolutely. Cash in people's pockets helps them
pay their bills. And whether it is in the form of continued
extended child tax credits, which did more to help alleviate
child poverty in our country than anything in recent time, or
whether it is in the form of renters' tax credits that can also
support low-income renters to afford the rent, they can have a
meaningful impact on housing affordability.
Senator Warnock. Right. I am a big proponent of tax cuts
for hard-working, ordinary families who really could use it,
and it seems to me that we need to provide solutions now, given
the housing supply issue for Georgians who are feeling squeezed
by the rent. And that is why I am offering and working on
legislation right now to do just that, offer tax cuts to
families with runaway rent costs.
I want to pivot to another question in the few minutes I
have. The Low-Income Housing Credit Program, also known as
LIHTC, is the most important system for supporting the
development of affordable housing. Since Congress created it,
the LIHTC program has financed over 3.6 million affordable
rental units. However, this affordability is only maintained
during the tax credits time period, which is at least 15 years
but could potentially be much longer.
One way the affordable period can be reduced, though, is if
the property owner requests regulatory relief through a
qualified contract.
Ms. Yentel, if I can ask you again, can you say more about
what it means for a LIHTC property owner to request a qualified
contract? What is that?
Ms. Yentel. So, it means that owners can essentially get
out of the length of the affordability requirements under the
Low-Income Housing Tax Credit Program. It is something of a
loophole in the program that needs to be closed.
Senator Warnock. Great. I am sorry to interrupt but I am
going to be out of time in just a moment. So if another entity
buys this property they could raise the rent.
Ms. Yentel. That is right, even after the Federal
Government has expended resources to build and maintain that
property.
Senator Warnock. Do owners commonly inform the tenants of
their buildings that their property might be sold and lose its
affordability requirements?
Ms. Yentel. They do not.
Senator Warnock. They do not. Do you think it would be
helpful for HUD to collect and publish data on the LIHTC
program, for instance, whether property owners have waived the
right to qualified contracts. Would that be helpful
information?
Ms. Yentel. Absolutely. More transparency in all Federal
housing programs is a good thing. At the National Low Income
Housing Coalition, we have a National Housing Preservation
Database where we show where properties are at risk, not under
qualified contracts but where their affordability is expiring
in coming years, to give that data and transparency for local
communities to come up with solutions. But HUD and the
Department of Treasury can and should do more.
Senator Warnock. Thank you so much. LIHTC has been very
important around the affordability question, and I am working
on legislation also that will allow us to collect and study
data from the LIHTC properties in order to better the program.
Thank you so very much.
Chairman Brown. Thank you, Senator Warnock.
I might add that Senator Warnock's comments about tax cuts,
I might add for the benefit of his fellow Georgian on the
panel, that Senator Warnock, about 18 months ago, almost as
soon as he came to the Senate, joined me and Senator Bennet on
working on the child tax credit, which, and we have talked
about that, how that relieved the pressure for so many of your
tenants, Mr. Dunn, for that year it was in effect. At the end
of the month, when they got $250 or $300 tax credit it relieved
the anxiety they felt to pay the rent and they did not have to
deny their family or their children or themselves in those last
days of the month. So thank you, Senator Warnock. Thank you.
I will close. One of my favorite Abraham Lincoln stories is
Lincoln one time said to his staff, who wanted to keep him in
the White House and win the war and free the slaves, and
preserve the union, and Lincoln said, ``No, I have to go out
and get my public opinion bath.'' And Lincoln would do that
when Presidents could do that, perhaps more openly than they
can today.
And I urge my colleagues to go out and meet people in their
community who struggle to afford rent. Most of us do not
interact a whole lot with people who are about to be evicted.
They may call our office but we do not have that personal touch
enough. I urge my colleagues, if we are not doing that as much
as perhaps we should, to talk to their staff, talk to people
who work at the front desk, who drove to work today, ask what
it is like to rent in D.C. or in Tennessee or Georgia or
Pennsylvania.
Ask them how many times they have to call their landlord to
get a repair made, whether it is a leak that goes unrepaired,
what the rent increase was if they had to cross their fingers
and hope the rising rent would not force them to move. Those
are everyday stories of people we may come into contact with
and do not explore and ask them questions. And I would hope
more of us, including myself, would do that.
Thanks to the witnesses, all five of you, remote and the
four of you here.
For Senators who wish to submit questions they are due by
close of business 1 week from today, Tuesday, August 9th. To
our witnesses, according to our Committee rules, we ask you to
respond to any questions within 45 days from the day you
receive them.
Thank you again. The Committee is adjourned.
[Whereupon, at 11:55 a.m., the hearing was adjourned.]
[Prepared statements and responses to written questions
supplied for the record follow:]
PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
Yesterday was the first of the month. For millions of Americans,
that means the rent was due.
And for many renters, that rent keeps going up and up.
Two weeks ago in this Committee, we heard from witnesses about the
soaring cost of housing and how it's hurting the millions of families
priced out of buying their first home, and imperiling the renters who
are just one illness or job loss or car repair away from eviction.
This problem is squeezing people all across the country, working
all kinds of jobs--even jobs that were supposed to be a ticket to the
middle class.
This isn't a new problem.
For decades, so many Americans have struggled to scrape together
the rent each month. Too many have lived in shoddy housing with
rodents, mold, or broken appliances.
That's why, 90 years ago, this country began investing in
affordable housing--so that everyone would have a safe, affordable
place to live.
But the funding we put into that effort has never kept up with
renters' needs, or even the basic maintenance of aging federally
assisted housing.
For the past decade, about half of renters have been paying more
than \1/3\ of their incomes just to keep a roof over their heads.
And renters' challenges are only getting worse.
We're 3.8 million homes short of what we need. Not a single State
in the country has enough housing.
And for the lowest income renters, there are just 36 units
affordable and available for every 100 renters who need them.
That means renters can't vote with their feet in the housing
market--because there's nowhere for them to go.
The huge shortage of housing means that renters have to make do
with what they've got--even if their house has dangerous lead paint on
the walls, or the landlord won't fix the heat, or their bath tub has
been clogged for weeks.
And with housing so tough to find, renters are forced to ask
themselves whether it's worth it to push for a repair from the same
person who can put an eviction on their record and decide whether they
have a place to sleep at night.
The shortage of housing also means rents are going up for pretty
much everyone.
Rents are up 15 percent nationally, compared to just a year ago. In
some cities, like Austin, Texas, or Newark in Senator Menendez's State
of New Jersey, rents are up more than 25 percent.
When rents rise, it makes everything just a little bit more
precarious. More and more families are just one emergency away from
losing their home.
Renters see the pain from all these rent increases--the missed
trips to visit family, the car repair they're forced to put off, the
second job they have to take--just to make ends meet.
Wall Street investors just see opportunity.
They don't see the pain.or they just don't care.
More and more, investors are buying up single-family homes--homes
that first-time homebuyers usually buy--and renting them out at sky-
high rates.
Twenty-eight percent of homes sold at the beginning of this year
went to investors.
Think about that:
Investors, too often from out of town, who don't care about the
community and just want to make a quick buck, are buying more than a
quarter of homes--not families who want to put down roots, who dream of
seeing their kids grow up there.
That number is up from 16 percent just a couple of years ago. And
the biggest investors with the deepest pockets--the ones who own more
than 100 properties--nearly doubled their share of these purchases.
Ms. Brunner has seen it first-hand in Cincinnati, where a single
company based in Texas bought up 29 properties on one street in Price
Hill. 29 properties on a single street.
In that neighborhood, more than half of all homes are now rentals.
And the city is left to chase down these out-of-State landlords who
are letting homes fall apart.
Families need a landlord they can talk to, who lives in the
community.
Cities need landlords who want to actually take care of their
buildings, and help families stay in their homes.
But big Wall Street firms promising investors double-digit yields
and running up double-digit eviction rates are pricing out those who
make a community home--good landlords, renters, first-time homebuyers
alike.
And they aren't just buying up single-family homes. They're also
targeting mobile home communities and apartment buildings--anywhere
that adds to their own bottom lines.
Last week, the House Select Subcommittee on the Coronavirus Crisis
published a report showing that, at the height of the pandemic, just
four of these massive landlords filed nearly 15,000 evictions. 15,000.
When a renter who has fallen behind on rent or can't get her
landlord to fix their heat, we often hear that it's her individual
problem.
We hear that it's just between the renter and his landlord, or that
his local government is to blame for its bad policies.
And it's true that every eviction, every rent hike, every unlivable
home is a personal crisis for an individual family.
But all of these individual crises have added up to a big, national
problem.
It costs all of us more in education costs when kids have to change
schools every 6 months.
It costs all of us in lost productivity, when the workers
supporting our businesses and schools, and our first responders, can't
find an affordable place to live.
It costs all of us more in health care, when people can't store
their medicine because they don't have a place to live.
This isn't someone else's problem. It affects all of us. And we
need to work together to solve it.
We have to expand the supply of safe, affordable housing across the
country, for renters and homeowners, at all income levels.
We have to maintain the affordable housing we currently have, so we
don't fall even further behind on housing supply.
And we have to help renters find and remain in homes they can
afford with financial assistance, including emergency assistance, and
support eviction prevention efforts, like mediation--through the
Bipartisan Eviction Crisis Act.
I look forward to hearing from our witnesses today about how we can
tackle the challenges facing renters and grow the number of good
landlords. It will benefit all of us.
______
PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
Thank you, Mr. Chairman.
Every month Americans are falling further and further behind
because of President Biden's out of control inflation. Paychecks aren't
keeping up with rising prices. After adjusting for inflation, wages
have declined 5 percent since President Biden took office. Working
Americans are getting poorer every day.
Democrats' wasteful spending, growth-killing regulation and
excessively accommodative monetary policy are exactly what led to 40-
year high inflation and contracted our economy. And what is the
response of Democrats in Washington, DC? They want to jam through a
reckless tax-and-spending bill that will make this disastrous situation
even worse.
Hiking corporate taxes will slow economic growth and especially
harm America's manufacturing sector. And spending billions more will
fuel inflation. This new wasteful spending will mostly go towards
corporate welfare for green energy, subsidies for the wealthy to buy
Teslas, and a political handout right before the elections to higher-
income Americans who buy Obamacare plans.
In addition, the bill includes spending on housing, which is the
topic of today's hearing. Under the Biden administration, the cost of
housing has skyrocketed. House prices increased 18 percent in the last
12 months. Rents jumped 14 percent.
Affordable housing is growing further and further out of reach for
many. But you wouldn't know that from reading the Democrats' bill. Its
housing provision creates a $1 billion slush fund for ``greening''
subsidized housing. Because at a time of surging housing costs, of
course, the solution is to put solar panels on Section 8 housing.
As I've said before, Government, and especially this
Administration, have often been the problem, not the solution, when it
comes to housing. There are countless ways that needless Government
regulation drives up housing costs time-consuming permitting processes
drive up the cost of building new rental housing. Overly burdensome
environmental impact reviews further add to that cost.
Tariffs on steel, lumber, and other building materials have the
same effect. Rent control laws reduce the supply and quality of rental
housing. Demand-side housing subsidies get capitalized into higher
house prices and higher rents.
Loose GSE and FHA underwriting standards drive those house prices
and rents still higher. The GSEs then respond by subsidizing investors
in single-family rental housing, but that just further drives up house
prices and crowds out aspiring homeowners.
More recently, the Democrats and this Administration have taken
this Government failure to the next level. They've dropped hundreds of
billions of helicopter money to stimulate an already strong economy.
$80 billion of that went to rental assistance, vouchers, and other
housing subsidies, further inflaming demand.
The President even extended the illegal eviction moratorium that
has deterred investment in new rental housing and led to some renters
not paying rent even when they could afford to. Predictably, landlords
have responded by increasing rents and requiring larger security
deposits.
Today the Democrats will propose more of the same. We'll likely
hear them make the case for new tenant protections. We'll likely hear
them arguing for making the COVID rental assistance program permanent.
But doubling down on failed liberal housing policies will not fix
our rental housing market. Instead it'll just make housing more
expensive. Today we'll also hear from landlords about how Government
intervention makes it harder and more expensive to be a landlord, which
leads to higher costs for renters.
To improve housing affordability for all Americans--whether renters
or owners--we should pursue reforms that leverage the power of free
enterprise to increase housing supply and make markets more
competitive. A healthy market competes not just on price but also
service and product quality. To that end, we should scale back the role
of Government and increase the role of private capital.
We should avoid the temptation to adopt new so-called tenant
protections or permanent rental assistance that will have negative
unintended consequences, including increasing housing costs. We should
phase-out demand-side subsidies that drive housing costs higher. We
should end the failed GSE model that fosters excessive risk taking and
contributes to a boom/bust housing cycle.
Localities should revisit their permitting processes and other
obstacles to new housing construction. We should prohibit the GSEs and
other Federal programs from subsidizing rental units in jurisdictions
that impose rent controls.
We should get the GSEs out of the business of subsidizing single-
family home investors. And we should keep the GSEs focused on their
affordability missions by keeping them out of social policy.
Meanwhile, I hope the Administration will finally engage on reform.
Treasury has still not met its obligation to deliver a housing reform
plan to Congress--it's now 10 months overdue.
Instead of pushing a reckless tax-and-spending bill, the
Administration should look to opportunities for bipartisan
legislation--like housing finance reform--that relies on free
enterprise--not Government--to make housing affordable for all
Americans, whether they own or rent.
PREPARED STATEMENT OF MATTHEW DESMOND
Maurice P. During Professor of Sociology and Director of the Eviction
Lab, Princeton University
August 2, 2022
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
PREPARED STATEMENT OF LAURA BRUNNER
President and CEO, Port of Greater Cincinnati Development Authority
August 2, 2022
Chairman Brown, Ranking Member Toomey, Members of the Committee on
Banking, Housing, and Urban Affairs: thank you for the opportunity to
testify today on how renters and communities are impacted by today's
housing market and how institutional investors are changing the
landscape of single-family housing in Hamilton County.
My name is Laura Brunner, CEO and President of The Port of Greater
Cincinnati Development Authority. The Port is a public,
quasigovernmental agency focused on mending broken real estate to
promote job creation, home ownership, and equitable development
throughout Hamilton County. Our work is guided by the belief that real
estate should work for everyone.
With tools, resources, and experience, The Port is in a unique
position to pioneer diverse models of real estate equity, developing
innovative solutions to complex issues. Our Public Finance Practice
acts as a financing conduit, offering resources such as the issuance of
tax-exempt debt, Property Assessed Clean Energy bonds, tax increment
financing, among others, to further stimulate private investment in
commercial real estate and fund critical economic development efforts
across the region. Through our Driving Real Estate to Accelerate
Microenterprise (DREAM) Loan fund, we've infused much-needed capital to
projects in disinvested neighborhood business districts and minimized
barriers for neighborhood microenterprise and entrepreneurs. The Port's
Communities First Down Payment Assistance program offers downpayment
and closing cost assistance grants to eligible homebuyers across the
State.
Our Neighborhood team focuses on the acquisition and rehabilitation
of blighted residential and commercial properties to provide housing
options across multiple price points from affordable to market-rate,
resulting in the revitalization of neighborhoods and disinvested
commercial districts. The Port operates the Hamilton County Landbank,
whose mission is to return vacant properties back to productive use. In
cooperation with our governmental and nongovernmental partners, the
Landbank facilitates the rehab and reutilization of vacant, abandoned,
or tax-foreclosed real properties until end users are identified for
highest and best use of these properties. Since 2012, we have
successfully disposed of more than 1,000 properties.
The Homesteading & Urban Redevelopment Corporation (HURC) is
another Port-operated entity dedicated to improving the quality of
housing stock and increasing home ownership throughout the region. This
program is primarily focused on income-qualified affordable homes and
requires a significant amount of subsidy. With average sale prices for
HURC homes ranging from $75,000 to $165,000, we are able to offer
lower-cost options for buyers in low-to-moderate income areas. There is
an estimated shortfall of 40,000 affordable housing units in Hamilton
County and HURC is actively addressing this shortage by bringing much
needed quality units online. \1\
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\1\ https://www.lisc.org/greater-cincinnati/what-we-do/housing/
research/
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The Port also leads a more targeted neighborhood real estate rehab
initiative known as the Rehab Across Cincinnati & Hamilton County
(REACH) program. REACH focuses on accelerating neighborhood
reinvestment by acquiring and renovating pivotal blighted properties in
target areas which have seen a long-term decline in housing value. It
has a transformational impact on neighborhoods plagued with limited
housing activity, creating new market comps and making communities
attractive for future investment. Since 2015, The Port's residential
program has created more than 100 renovated and new market rate and
affordable homes across the region.
Housing development is not simply a by-product of economic
development; but rather, an engine of economic stability and growth.
The Port recognizes that a sufficient supply of housing, affordable to
households of all income, is the foundation for economic mobility and
opportunity. Jobs provide financial stability, and homes create wealth.
Real estate is one of the fastest ways to shrink the wealth gap and to
help restore the middle class. In Cincinnati, Black home ownership is
only 33 percent. Nationally, about 42 percent of Black households own
their home, compared to 72 percent of White households, and ``if the
typical Black-owned home was worth the same as the typical White-owned
home, Black wealth would more than double.'' \2\ Housing and home
ownership is the foundation of everything else in our lives, and for
too long, the lingering legacy of redlining and segregation has stifled
Black residents from the opportunity available to their White
counterparts.
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\2\ https://zillow.mediaroom.com/2021-04-26-Housing-Gains-Could-
Grow-Black-Wealth-More-Than-500-Billion-in-a-Decade
---------------------------------------------------------------------------
Home ownership remains an integral part of the American Dream.
Owning a home is a symbol of financial success and a vehicle for
accumulating wealth and building equity. However, the idea of the
American Dream is even more so about opportunity and upward mobility.
The reality is that not everyone wants to be a homeowner and not
everyone has the means to purchase a home, but everyone should have
access to a place to live and a pathway to home ownership. Locally, a
recent report found that the Cincinnati metro area has more than 81,000
extremely low-income renters, but only 33,000 available units they can
afford. Roughly 67 percent of the extremely low-income households are
severely cost burdened and spend more than half of their income on
rent. \3\ Access to affordable rentals and the ability to save enough
money to purchase a home have become increasingly hard today, partly
due to institutional investors infiltrating the housing market across
the country.
---------------------------------------------------------------------------
\3\ https://nlihc.org/gap/state/oh
---------------------------------------------------------------------------
Our attention to investor activity in the local housing market came
out of a conversation with the City of Cincinnati's property
maintenance division and quality of life team around code enforcement.
We wanted to know who the worst landlords in the Cincinnati area were.
It took months of rigorous research to uncover that over 4,000 single
family homes in Hamilton County had been purchased by just five
institutional investors since 2013. Tracking the acquisitions was an
arduous task and required review of numerous real estate transactions
and auditor data in an effort to connect large corporate investors
organized as Real Estate Investment Trusts (REITs) and LLCs to specific
names. Property purchase price information was limited because of
varying LLC names and a long list of transfers to themselves.
Eventually, we were able to track consistencies in owner name and
addresses on the Hamilton County Auditor's website. Tracking this
information was messy work, but it led us to the same five worst
landlords identified in our initial conversation with the City. The
results are sobering. Through our research, we uncovered over 90
different LLC's affiliated with VineBrook Homes, the largest outside
investor in the regional housing market. It became very clear that this
ownership structure is based on the maximization of profit by hiding
behind a cloak of anonymity.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
As evidenced by the City of Cincinnati's lawsuit against VineBrook
last year, the lack of transparency with this type of investor model
results in poorly maintained properties and negligent landlord
practices. The failure of an investor of this magnitude has harrowing
consequences on a community. We've been told by institutional investors
that they only own about 1 percent of single-family homes; however, in
Hamilton County, this could mean 50 percent of the houses on a single
street. When the geographical impact is so concentrated, it has a game-
changing effect on what it means to live in that neighborhood. It has
an impact on ownership, where more than half of the homes on one street
are converted into rental properties. It has an impact on neighboring
homes, where surrounding properties see a downward pressure on property
values. It has an impact on the overall fabric of a community. This
model is opportunistic, not strategic, and it's happening at the
expense of the most vulnerable members of our society.
Since the foreclosure crisis of 2008, institutional investors have
been purchasing large volumes of single-family homes in the region and
turning them into high-priced rental properties. What we found in our
research is that they typically purchase homes in geographically
targeted areas, usually the region's most disinvested neighborhoods.
They make all-cash offers for the properties and box out first-time and
lower-income buyers. Our low home values and high rental market make
these properties attractive. It's a cash cow for investors but a money
pit for renters.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Institutional investors found a very profitable new sector. They
claim to be responding to existing demand and limited supply. Yes,
demand may be high, and supply may be limited, but in the Cincinnati
region, these investors are not building new homes or expanding
options. They are switching homeowner properties to rental properties
and hiking up rents. Studies have found that investor landlords are
also more likely to evict their tenants and poorly maintain their
properties. \4\ They are maximizing profits at the expense of
vulnerable tenants and fundamentally changing the landscape of single-
family housing in the region. In Q2 of 2021, one in six home sales were
purchased by large investors, and we know that is significantly higher
at price points below $250,000. Just last month, Cincinnati had the
largest jump in rental prices in the country. Monthly rent for single-
family homes in the area increased $267, or 23 percent, in the past
year. \5\ These are the types of numbers that made it clear to us that
it was our moral imperative to interrupt the cycle of investor activity
in the local real estate market and make a radical change.
---------------------------------------------------------------------------
\4\ https://www.nytimes.com/2022/04/23/us/corporate-real-estate-
investors-housing-market.html
\5\ https://blog.dwellsy.com/single-family-rentals-drive-rent-
increases-may2022/
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In December 2021, The Port placed a bid on 194 single-family homes
formerly owned by a California-based firm that fell into receivership.
Because of our public and private relationships, and the depth of our
work in the region, Colliers International (a real estate broker with
offices in Cincinnati and the receiver of this portfolio) reached out
to The Port looking to sell. We couldn't help but see this opportunity
as the antidote to the threat. Purchasing the portfolio could chart a
new path back to home ownership for these families and properties. In
late January 2022, The Port closed on this acquisition and launched the
Creating Affordable Real Estate (CARE) Homes Initiative.
To our knowledge, no other institution has ever taken on a project
similar in scope and challenge to this purchase. It is a high-risk
acquisition; but because of our risk tolerance, we were able to create
an innovative financing model that included no public subsidy. The Port
leveraged its nontax revenue to issue taxable and tax-exempt bonds to
pay $14.5 million to acquire the portfolio of homes, outbidding over a
dozen investment firms. An Ohio-based investor purchased the bonds
issued to provide the financing to purchase the properties.
The Port's intent with the CARE Homes initiative is to create
viable pathways to home ownership for current rental tenants of these
homes. The properties purchased in our portfolio are predominantly
located in low-income disinvested census tracts. Data shows that in
Hamilton County, Ohio, the median household income in 2019 was just
over $57,000 annually. In the City of Cincinnati, the median household
income was a little over $42,000 annually. As a result of corporate
ownership, many of the residents of the CARE Homes portfolio have had
minimal opportunity to accumulate wealth through equity. Changing that
narrative is the driving force behind what we are doing. Through
financial and home ownership training, we believe we can create a sea
change in our neighborhoods when it comes to transitioning from renting
to home ownership. This program is about longevity and building
communities rich in opportunity for local families.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
For this initiative to be successful, we knew we had to leverage
strong community partnerships. As a result, we formed the CARE Homes
Advisory Group, a diverse group of local nonprofit partners and housing
advocates, including: The Legal Aid Society of Greater Cincinnati, the
Community Action Agency, Metropolitan Area Religious Coalition of
Cincinnati (MARCC), Housing Opportunities Made Equal (HOME), the
Homeownership Center of Greater Cincinnati, Working in Neighborhoods
(WIN), Talbert House, Price Hill Will, Sisters of Charity, Santa Maria
Community Services, the Local Initiatives Support Corporation (LISC),
and the Cincinnati Metropolitan Housing Authority (CMHA.) Each of these
organizations play an important role in navigating the complexities of
this initiative.
Our collaborative approach led us to partner with a local, HUD-
certified homebuyer training nonprofit. Working in Neighborhoods (WIN)
will provide assessment, financial literacy training, and homebuyer
education for all interested tenants to best position them for
stability and wealth creation as they take the step to buy their homes.
WIN trains more than 300 families per year through its home ownership
program and has achieved a 95 percent retention rate of their
participant's ability to close on and maintain their homes. In
addition, more than 10,000 residents have sought out WIN for their home
ownership assistance, creating a pipeline of future home buyers. They
truly are an ideal partner for this mission.
Of course, bold ideas rarely come without big challenges. We
quickly learned that the reality of the portfolio of homes posed
difficult financial, operational, and physical challenges. As we
continue to evaluate the condition of each home, early indications show
a considerable amount of work needed to stabilize and improve several
of these properties. Many have code violations and necessary
maintenance that were left unaddressed and deferred when purchased by
the previous investor. It's clear that some of these homes have not
been touched or upgraded since they were built in the 1950s.
Furthermore, our portfolio is debt financed and operates without public
subsidy, meaning limited access to flexible cash and no financial
cushion to rely on. Balancing the financial performance needs of the
homes with the human needs of tenants struggling with increasing costs
of living is extremely challenging. This reality reinforces the
significance of the portfolio purchase and The Port's efforts to
interrupt the cycle of investor ownership of these properties. It is
clear that when an investor squeezes a single-family house for profit,
the community is left holding the bag.
The question then becomes, ``Can this model be replicated?'' Our
answer to that question is yes. It can, and it should; but it is not to
be taken lightly. Taking on high-risk projects with high-interest debt
rather than grant funds isn't easy. It can be replicated when there are
entities and organizations that can merge private sector speed with
public sector mission-based approaches. Larger development financers
perceive our CARE Homes financing model as a type of Environmental,
Social, Governance (ESG) bond, a quickly growing area of the bond
market. We know there is a way to leverage the growing interest for ESG
to do similar initiatives in other markets.
The Port's CARE Homes initiative is a critical intervention that
disrupts institutional investors' constraints on local families and
properties. The purchase of this portfolio protects renters from the
threat of rising rent prices while offering them a pathway to home
ownership. As we navigate the complexities of our new initiative, it is
clear that much more work is needed to combat the impact of predatory
housing practices of institutional investors. Now, more than ever, bold
policies and leaders are needed to ensure the housing market meets the
needs of its community. Housing is a basic human need, and we strongly
believe that everyone deserves the right to live in a decent and safe
home. The Port has worked diligently over the years to restore
neighborhoods and communities to places of opportunity. By adding to
our housing supply and putting properties back to productive use, we've
been able to provide housing affordability and ownership opportunities
to residents and drive lasting change in our region. Investor activity
in the single-family housing market poses a direct threat to the
revitalization and growth of our neighborhoods--the change we worked so
hard to build over the years. When presented with the opportunity to
buy the CARE Homes portfolio, we did not hesitate. We knew it was our
duty to play a part and make real estate work for our community,
particularly our most vulnerable residents.
Chairman Brown, Ranking Member Toomey, and Members of the
Committee, thank you again for the opportunity to testify before you
today. I look forward to your questions.
______
PREPARED STATEMENT OF ROSANNA MOREY
Small Property Owner
August 2, 2022
Thank you for the invitation to testify today and the opportunity
to share my story.
My name is Rosanna Morey, I live on Long Island in New York, and am
a small landlord of an owner-occupied home with a rental unit. I am a
single mom with an incurable cancer that progressed before the pandemic
began. I rented the apartment in my home, on a month-to-month lease to
help with bills and to ease the burden on my life. As my health
declined, I saw no other option but to speak to the tenant and provide
notice for her to vacate so that my sister could stay with me to help
me and my teenage son who has learning disabilities. She refused, and
so began holdover filings and proceeding.
The pandemic hit and the eviction moratorium was put in place,
which, by the way, was originally intended only for nonpayment and
COVID-related hardship cases. But, somehow, all cases were lumped
together. It did not take long for the tenant to stop paying rent.
``Because I effing can, and you can thank your governor for that'' was
the response she gave a police officer when he asked why she continued
to stay.
I had to work three jobs while undergoing treatments to make ends
meet. She spitefully and incessantly smoked, knowing that I was sick
and that it made me violently ill. She violated the lease, which
clearly prohibited smoking because my son was asthmatic; she didn't
care and there was nothing I could do about it.
I could go on with countless stories; thanks to Governor Hochul's
and Federal eviction moratorium extensions, this tenant was basically
given the right to abuse the situation. She was allowed to live rent
free for 2 years, ignore any and all rules outlined in a binding lease
agreement that she signed and agreed to, and allowed her to destroy my
property knowing there would be no recourse.
I was one of the very lucky people who received money from the
Landlord Rental Assistance Program, or LRAP, New York's emergency
rental assistance program for landlords whose tenants were unwilling to
apply for Federal emergency rental assistance. However, it was only 1
year's rent that I had to pay income taxes on, but the tenant was not
required to pay taxes on the forgiven debt. The money from LRAP did not
cover her entire back rent, nor the $10 thousand in legal fees, nor the
$25 thousand it cost me to rebuild and clean the area that she
destroyed, even leaving feces everywhere.
The overall aftermath and any new regulations that landlords would
be subjected to will continue to drive them away from renting out
properties. Policies such as the eviction moratorium led to abuse as in
my case and many others and has caused a 2-year backlog in court. This
has contributed to the housing shortage because landlords are still
housing nonpaying tenants while waiting for their due process. ERAP/
LRAP also did not really help landlords because a tenant that expects
the Government to pay will simply not pay their own rent. This
perpetuates a ``who cares'' attitude and impacts landlords'
livelihoods. Worse yet, permanently creating an emergency rental
assistance program just makes it easier for Government officials to re-
impose an eviction moratorium or lockdown orders, something we can all
agree is bad.
The eviction moratorium that occurred during COVID led to
Government interference beyond what should have ever been allowed. The
Government should not discourage landlord participation as that will
just drive them away and make housing more expensive for all.
With too many restrictions, affordable housing providers like
myself will reconsider renting going forward. Some will just sell and
leave, some will put more stringent requirements and tenant screening
criteria in place, and some will just raise the rents to cover
themselves ``just in case.'' We are already starting to see the impact
as social media videos have begun to circulate teaching prospective
tenants how to create fake W2's and bank statements, etc. because so
many chose not to pay rent that now they cannot provide the documents
required for a new apartment. This cannot continue.
Today, I am asking policymakers to consider landlords, particularly
small mom-and-pop landlords, and single parent landlords trying to make
ends meet, and sick landlords like myself just trying to get by,
because after all, we have families to support too.
Thank you and I look forward to answering your questions.
______
PREPARED STATEMENT OF DARION DUNN
Managing Partner, Atlantica Properties
August 2, 2022
Chairman Brown, Ranking Member Toomey, and Members of the
Committee, good morning. Thank you for the invitation to testify today
and share my story. My name is Darion Dunn. I'm the Managing Partner of
Atlantica Properties, a company that I started with my younger brother
and business partner, Trenton Dunn. Atlantica Properties is a real
estate investment and development firm with a mission to empower
individuals by establishing thriving, holistic communities. I am a
member of the Atlanta Apartment Association, the Georgia Apartment
Association and the National Apartment Association. I was born and
raised in Atlanta, GA, by parents who taught me that ``home'' is more
than a place--it is an ideal. I graduated from Georgia Tech where I
studied Civil Engineering and Economics, and it was during those
formative college years that my passion for real estate and affordable
housing was set into motion.
I knew at an early age that I wanted to help shape the world's
built environment. So, I've dedicated my life's work to creating and
preserving affordable housing. After acquiring my first rental property
over 20 years ago, I have since participated in the ownership,
management and development of nearly 1,000 housing units. I know that
expanding affordable housing in our Nation is possible and critical to
solving our housing affordability challenges, but the Government, at
all levels, must empower, not restrict housing providers from doing
what they do best, providing places to call home for our residents at
all income levels.
My company is able to offer affordable rents in part because we
have a thoughtful, long-term approach to property ownership. We have
owned many of our rental properties for over a decade, while nearby
properties have traded hands upwards of 5 times during the same period.
I'm fortunate to have built a successful real estate company that
operates on an institutional level, yet I've never forgotten my humble
beginnings as a landlord with very limited resources. I saved money
from my day jobs for the downpayment for single family rental homes and
apartment properties. It's not surprising that the majority of rental
homes and small multifamily properties in this country are owned by
individuals or small businesses like mine. In fact, over 70 percent of
tenants in the United States live in properties that have 20 units or
less, including single family homes.
Although small landlords represent a large majority of the rental
property industry, it is far too common for policymakers to overlook
the contributions and struggles of this group of business owners.
My privilege and responsibility to provide housing to our residents
includes keeping my business viable so I can continue to serve those
that are most vulnerable to the ever-worsening-affordability crisis.
Government actions that raise my costs or reduce my revenue, ultimately
impact my residents and my ability to provide affordable housing.
Our tenants are our partners, and our business cannot exist without
them. The symbiotic relationship between tenants and landlords was put
on full display during the height of the COVID pandemic. The financial
pain felt by tenants was ultimately felt by landlords, and vice versa.
Fortunately, my company didn't have a large percentage of delinquent
tenants during the pandemic like many others in my industry.
However, we did have tenants who were unable or unwilling to pay
rent for extended periods of time, with the worst case being a current
tenant that hasn't paid rent since October 2020. Local and Federal
eviction moratoriums prevented us from taking responsible legal action.
While we have fortunately been able to withstand these challenges,
the majority of small landlords can't sustain these types of setbacks.
Emergency rental assistance programs have been a welcomed safety net,
although many housing providers have experienced significant delays in
receiving these funds, due to challenges with local execution of the
program.
Despite Federal resources to help during the pandemic, the
inventory of affordable housing is eroding as small landlords opt to or
are forced to sell their properties. With supply already outstripped by
demand, we cannot afford to lose these market players.
We need more mission-driven housing providers. So, I support
business practices and public policies that strengthen the tenant-
landlord bond, as opposed to those measures that pit one side against
the other. Examples include lease insurance to cover property damage
and lost revenue; reform of the Section 8 program; incentives to
encourage housing preservation and conversion of unused commercial
property to housing; and access to favorable debt and equity for non-
LIHTC deals.
Evictions are a last resort, but we must ensure that moratoriums
don't discourage vulnerable populations from paying their rent and
building their credit. For example, our company doubled down on tenant
financial literacy training during the pandemic. We educated tenants on
the importance of avoiding eviction filings and creditor collections.
We also implemented a program to report positive rent payments to the
credit bureaus, which has led to 75 percent of our tenants improving
their credit scores.
I will close by reiterating that to address our housing
affordability challenges we must both increase supply and provide
incentives to strengthen the tenant-landlord relationship. There is
still time to restore the legacy of affordable housing in America, and
I promise to continue my efforts to make the ideal of ``home'' a
reality for generations to come.
Thank you for the opportunity to be here today. I look forward to
answering any questions.
PREPARED STATEMENT OF DIANE YENTEL
President and CEO, National Low Income Housing Coalition
August 2, 2022
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
FROM MATTHEW DESMOND
Q.1. Addressing Homelessness--Recently we have heard proposals
to criminalize homelessness, including imposing fines or
criminal penalties for people experiencing unsheltered
homelessness. What effect do you believe proposals to
criminalize or otherwise penalize people experiencing
homelessness are likely to have? What do we know about the best
ways to address homelessness?
A.1. Proposals to criminalize behaviors and activities
associated with homelessness have been made across the United
States. Several localities have adopted such proposals into
law. Often referred to as civility laws, quality-of-life
ordinances, or other similar terms, such laws come in many
forms, from fines and forced relocations to banishment and
imprisonment. Designed around the goals of enhancing public
safety and guiding people living on the street to services,
civility laws, research has shown, are not very effective when
it comes to addressing homelessness or poverty. Moreover, they
inflict harm on individuals and divert resources from policies
and interventions shown to be more effective. \1\
---------------------------------------------------------------------------
\1\ National Law Center on Homelessness and Poverty, ``Housing Not
Handcuffs 2019: Ending the Criminalization of Homelessness in U.S.
Cities'' (Washington, DC: National Homelessness Law Center, 2019), 50-
53; Forrest Stuart and Katherine Beckett, ``Addressing Urban Disorder
Without Police: How Seattle's LEAD Program Responds to Behavioral
Health-Related Disruptions, Resolves Business Complaints, and
Reconfigures the Field of Public Safety'', Law & Policy 43 (2021): 390-
414, 390.
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Quality-of-life regulations impose fines or other sanctions
for behaviors and activities associated with homelessness
(e.g., sleeping on the sidewalk, panhandling). Studies have
tracked a steady increase in and expansion of quality-of-life
laws and regulations over the past several decades. As they
have increased in number, they have become more expansive in
reach. In a 2018 survey conducted by the National Homelessness
Law Center, 72 percent of cities had at least one law
restricting camping in public and 76 percent of cities
prohibited scavenging in garbage or dumpsters. In practice,
these regulations effectively criminalize street homelessness
itself. \2\
---------------------------------------------------------------------------
\2\ National Law Center on Homelessness and Poverty, 2019, 38, 41,
44, 47; Steve Herbert and Katherine Beckett, `` `This Is Home for Us':
Questioning Banishment From the Ground Up'', Social & Cultural
Geography 11 (2010): 231-245.
---------------------------------------------------------------------------
Studies have demonstrated that the effects of laws
criminalizing behaviors associated with homelessness include a
loss of social networks for unhoused people. When a person is
banished from a public space, for example, and ordered or
forced to move, he is cut off from the people and places he
knows, including services and resources such as shelters he
might use. Laws target by association, as well. People or
groups not experiencing homelessness themselves, but delivering
services, resources, and aid, can be cited, fined, and ordered
to leave in certain jurisdictions. In direct contradiction to
their stated goals, such laws have been shown to drive unhoused
people to avoid systems and services. \3\
---------------------------------------------------------------------------
\3\ Herbert and Beckett, 2010, 236-237; Katherine Beckett and
Steve Herbert, ``Penal Boundaries: Banishment and the Expansion of
Punishment'', Law & Social Inquiry 35 (2010): 1-38, 18, 20; Forrest
Stuart, ``From `Rabble Management' to `Recovery Management': Policing
Homelessness in Marginal Urban Space'', Urban Studies 51 (2014): 1909-
1925, 1920; Stuart and Becket, 2021, 395.
---------------------------------------------------------------------------
Laws criminalizing homelessness have also been found to
cause a loss of employment and the creation of additional
barriers to attaining jobs and securing better living
conditions and housing. By exacerbating the challenges they
face, such laws make it more difficult for people living in
deep poverty to establish stability in terms of income or
housing, thereby reducing the chances they will escape
homelessness. Researchers have linked civility laws to
heightened levels of hostility, rejection, harassment, and
violence experienced by unhoused people. The impact of
banishment, a particular type of punishment imposed on an
individual through quality-of-life ordinances, has been
compared to the pain and trauma experienced by incarceration.
\4\
---------------------------------------------------------------------------
\4\ Herbert and Beckett, 2010, 237, 239; National Law Center on
Homelessness and Poverty, 2019, 1516; Bidish Sarma and Jessica Brand,
``The Criminalization of Homelessness: Explained'', The Appeal, June
29, 2018; Sara Rankin, ``Should Homelessness Be a Crime? Our State
Grapples With Its Answer'', Firesteel, August 27, 2014; Beckett and
Herbert, 2010, 5-6, 15, 19; Steve Herbert, Katherine Beckett, and
Forrest Stuart, ``Policing Social Marginality: Contrasting
Approaches'', Law & Social Inquiry 43 (2018), 1491-1513, 1499; Stuart,
2014, 1922; Forrest Stuart, ``On the Streets and Under Arrest: Policing
Homelessness in the 21st Century'', Sociology Compass (2015) 940-950,
947.
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Civility laws increase the chances that people living in
homelessness will encounter the criminal justice system through
arrest or actual incarceration. Among the people incarcerated
in this country's jails and prisons, unhoused people are
overrepresented. Research shows that many civility laws violate
civil liberties and due process afforded by the Constitution,
which correlates with studies that show such laws reduce
unhoused people's trust in law enforcement. \5\
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\5\ Stuart and Beckett, 2021, 392, 394; Herbert and Beckett, 2010,
235, 242; Sarma and Brand, 2018; Herbert, et al., 2018, 1499; Rankin,
2014; Beckett and Herbert, 2010, 7; National Law Center on Homelessness
and Poverty, 2019, 15.
---------------------------------------------------------------------------
Studies have shown that laws criminalizing homelessness
typically do not reduce crime or homelessness. Across the
country, as laws criminalizing homelessness have increased, the
number of people experiencing homelessness has continued to
rise. \6\
---------------------------------------------------------------------------
\6\ Herbert and Beckett, 2010, 233; Herbert, et al., 2018, 1499,
1502; Beckett and Herbert, 2010, 15; National Law Center on
Homelessness and Poverty, 2019, 15, 27; Beckett and Stuart, 2010, 15.
---------------------------------------------------------------------------
Civility laws do not address the root causes of
homelessness. In his seminal analysis of the causes of
homelessness, Dennis Culhane emphasized the need to account for
the complex interdependence of both structural and individual
factors. While several pathways to homelessness, or structural
factors, are at work, so too are the actions, choices, and
circumstances available to individual people; both must be
accounted for in considering why they become unhoused. By
putting the focus on the individual person experiencing
homelessness as the cause and source of that homelessness,
civility laws disregard the structural factors contributing to
it. \7\
---------------------------------------------------------------------------
\7\ Sarma and Brand, 2018; Stuart, 2014, 1917; Herbert, et al.,
2018, 1499, 1502; Stuart and Beckett, 2021, 394; Dennis Culhane, ``On
Becoming Homeless: The Structural and Experiential Dynamics of
Residential Instability'', 1990, 267-268.
---------------------------------------------------------------------------
Research also demonstrates that laws criminalizing
homelessness are expensive to enforce and lead to increased
costs for towns and cities. Those costs will likely continue
increasing as civility laws continue to be proposed and
enacted. Once passed, they divert funds, steering money and
attention away from interventions that could dig below the
surface to better address the root causes of homelessness and
poverty. \8\
---------------------------------------------------------------------------
\8\ National Law Center on Homelessness and Poverty, 2019, 16;
Herbert, et al., 2018, 1502; Sarma and Brand, 2018.
---------------------------------------------------------------------------
Addressing homelessness in full will require a mix of
programs and policies--from the immediate and temporary to the
short- and long-term. Examples of immediate and temporary
interventions that have had some success include using vacant
and surplus parking lots to provide a safe and legal place for
people living out of cars, and the provision of alternative
locations before police sweeps of encampments. Examples of
short- and long-term ways to address homelessness include
eliminating exclusionary zoning and allowing for the creation
of community land trusts, accessory dwelling units, tiny homes,
and other types of new housing accommodations. \9\
---------------------------------------------------------------------------
\9\ National Law Center on Homelessness and Poverty, 2019, 91-93,
97, 102.
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Programs and policies that have had some success in
addressing homelessness include those designed to get people in
homes. Housing first and supportive housing policies, which
remove requirements that are often associated with housing
programs, are reported to have helped Bergen County, New
Jersey, end chronic homelessness, and Charlotte, North
Carolina, reduce arrests by 82 percent. But we must not limit
ourselves to reactive solutions. We must support proactive
approaches, as well, and look to policies designed to keep
people in homes. An eviction can be the last thing keeping
someone from becoming unhoused. If we are to address
homelessness, we must do a better job of preventing evictions.
Data show that preventing evictions is an efficient and
feasible way to reduce homelessness. Expanding protections for
low income renters, through legislation guaranteeing the right
to counsel in housing cases and other interventions, could also
help prevent homelessness before it happens. \10\
---------------------------------------------------------------------------
\10\ National Law Center on Homelessness and Poverty, 2019, 20;
Devin Rutan and Matthew Desmond, ``The Concentrated Geography of
Eviction'', The ANNALS of the American Academy of Political and Social
Science 693 (2021): 64-81, 64, 66.
Q.2. State and Local Experiences of Eviction--Have you observed
differences in the frequency of eviction filings or evictions
between localities and States? To what do you attribute these
differences? Do you have recommendations for ways to ensure
that renters are protected from avoidable evictions no matter
---------------------------------------------------------------------------
where they live?
A.2. Variations in eviction rates have been observed across
States and cities as well as across neighborhoods and
buildings. Factors explaining these differences range from
high-level policies, in particular State laws and regulations,
to the decisions of individual landlords. To better protect
tenants from avoidable evictions, the Federal Government could
issue national guidance to promote policies and interventions
that have been shown to be effective, in addition to making a
series of more direct interventions.
From 2000 to 2018, the average annual number of eviction
filings in the United States exceeded 3.6 million, equating to
seven filings each minute. Yet evictions do not take place in
the same way or with the same frequency in each part of the
country. Researchers have observed significant differences in
eviction and eviction filing rates across county, State, and
regional lines. Data from 2000 to 2018 reveal a higher rate of
eviction filings in Southeastern American States than in any
other region of the country. While the filing rate in South
Carolina topped 23 percent in 2018, it was roughly half of that
in North Carolina at 11.7 percent. That same year, West
Virginia and Pennsylvania had more comparable filing rates--
roughly 5 and 7 percent respectively--though nearby Maryland's
filing rate approached 70 percent. Yet even within the same
State, eviction caseloads differ drastically from city to city.
A renter in Austin, Texas, for instance, faces a lower risk of
eviction than one in Houston. Geographic variance was observed
before the pandemic and has continued after most pandemic
protections have ended. \11\
---------------------------------------------------------------------------
\11\ Ashley Gromis, Ian Fellows, James Hendrickson, Lavar Edmonds,
Lillian Leung, Adam Porton, and Matthew Desmond, ``Estimating Eviction
Prevalence Across the United States'', Proceedings of the National
Academy of Sciences 119 (2022): 1-8, 3, 5; Lillian Leung, Peter
Hepburn, and Matthew Desmond, ``Serial Eviction Filing: Civil Courts,
Property Management, and the Threat of Displacement'', Social Forces
100 (2021): 316-344; Peter Hepburn, Olivia Jin, Joe Fish, Emily
Lemmerman, Anne Kat Alexander, and Matthew Desmond, ``Preliminary
Analysis: Eviction Filing Patterns in 2021'', Eviction Lab, March 8,
2022; National Eviction Map, Eviction Lab, Princeton University, 2022.
---------------------------------------------------------------------------
How can such variations in eviction rates across the
country be explained? What is more, how can they inform Federal
strategies for protecting renters from avoidable evictions, no
matter where they live? Research has demonstrated that State
and local laws have a direct impact on eviction rates. In the
case of the previously cited Maryland, for example, the 2018
filing rate of 70 percent resulted in large part from State
housing law, which strongly incentivized property owners to
open an eviction case on any tenant who fell behind.
(Maryland's eviction judgment rate in the same year was lower
than its filing rate.) Laws pertaining to three specific
issues--namely, waiting periods between eviction notice and
filing, eviction filing fees, and attorney representation in
court--play a crucial role in determining the frequency of
evictions. Eviction data reveal three major points around which
the Federal Government can craft national guidance for States
and localities on how to protect renters from avoidable
evictions. \12\
---------------------------------------------------------------------------
\12\ Gromis, et al., 2022.
---------------------------------------------------------------------------
First, researchers have identified notice requirements, or
the amount of time a landlord must give a tenant after notice
but prior to an eviction being filed, as a strong indicator of
divergent filing rates across States. When no notice is
required, eviction filing rates run high; when more notice is
required, filing rates run low. Studies indicate that
standardizing the notice periods required in jurisdictions to 7
or 14 days would help prevent avoidable evictions. Including
the right to cure, or the right for tenants to stay in place
after being served an eviction if they pay all back rent and
late fees, in notice requirements would create further
regulatory protections for renters. \13\
---------------------------------------------------------------------------
\13\ Leung, et al., 2021, 339; Gromis, et al., 2022; Philip
Garboden and Eva Rosen, ``Serial Filing: How Landlords Use the Threat
of Eviction'', City & Community 18 (2019): 638-661.
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Second, researchers have observed an inverse relationship
between eviction filing fees and filing rates in the case of
serial filings. When filing fees are lower, eviction filing
rates are higher; when fees are higher, eviction rates are
lower. Evidence demonstrates that, as legal and regulatory
factors such as fees slow down the eviction process and/or make
it more expensive for landlords, the less likely it is that
they will utilize serial filing as a source of revenue. On top
of this, regulations on the fees that landlords can charge and
collect from tenants during the eviction process would create
an additional layer of protection for renters. \14\
---------------------------------------------------------------------------
\14\ Gromis, et al., 2022; Leung, et al., 2021, 70.
---------------------------------------------------------------------------
Third, when it comes to attorney representation in housing
court, tenants are outnumbered. Although many localities
mandate that corporate landlords hire attorneys in civil
eviction cases, tenants do not have the right to legal
representation in such cases in most cities and States. While
roughly 80 percent of landlords are represented by attorneys
when they come to housing court, only 3 percent of tenants are.
In jurisdictions that have enacted right to counsel
legislation, tenants involved in eviction cases are more likely
to remain in their homes. In Cleveland, for example, 93 percent
of represented renters facing eviction avoided displacement.
Federal right to counsel legislation will require strong
bipartisan support. But passing a national law is not the only
way the Federal Government can help call attention to tenants'
right to counsel as a tool for preventing avoidable evictions.
Congress could work to deepen Federal investment in the Legal
Services Corporation (LSC). LSC funds could be used to support
tenants in housing court and help reduce the stark disparity in
attorney representation. \15\
---------------------------------------------------------------------------
\15\ John Pollock, ``Using Right to Counsel as an Eviction
Diversion Strategy'', National League of Cities, 2022; ACLU, No
Eviction Without Representation: Evictions' Disproportionate Harms and
the Promise of Right to Counsel (Washington: ACLU Research Brief,
2022), 10; Ingrid Gould Ellen, Katherine O'Regan, Sophia House, and
Ryan Brenner, ``Do Lawyers Matter? Early Evidence on Eviction Patterns
After the Rollout of Universal Access to Counsel in New York City'',
Housing Policy Debate 31 (2021): 540-561.
---------------------------------------------------------------------------
Drilling down to the more local level, research has
revealed variations in eviction and eviction filing rates
between rural and urban areas, from neighborhood to
neighborhood, and among individual buildings. Eviction is more
common in some neighborhoods than in others because a
relatively small number of landlords, and therefore buildings,
evict large numbers of tenants every year. As few as 100
buildings drove one in six evictions in Cleveland and two out
of every five evictions in both Fayetteville, North Carolina,
and Tucson, Arizona. Moreover, researchers have found that
large-scale property owners evict tenants more frequently than
small-scale owners do. A forthcoming study focused on public
housing authorities (PHA) as a specific subset of largescale
landlords indicates variation in the number of serial eviction
filings--multiple evictions filed against the same household at
the same address by the same landlord--among PHAs from State to
State. \16\
---------------------------------------------------------------------------
\16\ Matthew Desmond and Carl Gershenson, ``Who Gets Evicted?
Assessing Individual, Neighborhood, and Network Factors'', Social
Science Research (2016): 1-16; Robert Goodspeed, Elizabeth Benton, and
Kyle Slugg, ``Eviction Case Filings and Neighborhood Characteristics in
Urban and Rural Places: A Michigan Statewide Analysis'', Housing Policy
Debate 31 (2021): 717-735; Devin Rutan and Matthew Desmond, ``The
Concentrated Geography of Eviction'', The ANNALS of the American
Academy of Political and Social Science 693 (2021): 64-81; Henry
Gomory, ``The Social and Institutional Contexts Underlying Landlords'
Eviction Practices'', Social Forces 100 (2022): 1774-1805; Lillian
Leung, Peter Hepburn, and Matthew Desmond, ``No Safe Harbor: Eviction
Filing in Public Housing'', Forthcoming; Leung, et al., 2021, 316-319.
---------------------------------------------------------------------------
Just as variations in eviction data have been observed in
relation to landlords and property owners, so have they been
observed in relation to tenants. Research has demonstrated that
eviction impacts renters living in distinct locations at
differing rates. On the whole, Black and Latinx renters, and
women in particular, disproportionately carry the weight of
evictions in the United States; they are threatened with
eviction more often, and they are evicted more frequently, than
White renters. Black and Latinx renters are also the most
likely to receive serial eviction filings compared to White
renters. The same forthcoming study on PHAs previously cited
indicates that PHA residents face a far greater risk of being
filed against serially than their counterparts renting in the
private market. Among several other reasons, these findings are
noteworthy because research has shown that landlords utilize
serial filings to earn additional revenue from tenants. \17\
---------------------------------------------------------------------------
\17\ Peter Hepburn, Renee Louis, and Matthew Desmond, ``Racial and
Gender Disparities Among Evicted Americans'', Sociological Science 7
(2020): 649-662; Gomory, 2022; Leung, et al., 2021, 316-319.
---------------------------------------------------------------------------
Research suggests an opportunity for the Federal Government
to offer guidance to States and localities on targeting top
evictors through regulation. Variations in eviction rate by
neighborhood and at the building level are significant because
they identify discretion as a critical determining factor in
eviction filings, highlighting the extent to which some
landlords turn to eviction more readily than others. Targeted
interventions directed at eviction hotspots and serial evictors
might include building inspections and tax audits of landlords
and corporations that own buildings responsible for a
disproportionate number of filings in any single locality or
State. With studies revealing a link between eviction filing
rates, top evicting landlords, and levels of neighborhood
instability, regulating practices by the individual and
corporate landlords, as well as the public housing authorities,
responsible for the majority of eviction filings would benefit
not only renter households but also the community writ large.
\18\
---------------------------------------------------------------------------
\18\ Desmond and Gershenson, 2016; Rutan and Desmond, 2021, 78-79.
---------------------------------------------------------------------------
To fully address evictions and protect renters and families
across the country from avoidable evictions, we need short- and
long-term solutions, from the local through the national level.
Beyond offering guidance to States and localities, the Federal
Government can work to protect renters from avoidable evictions
in three key ways: by extending the Emergency Rental Assistance
(ERA) program, by increasing the total supply of both housing
choice vouchers and affordable housing, and by collecting
eviction data on a national scale.
The ERA program was responsible for historic reductions in
residential instability during the height of the pandemic. At
the end of 2021, several months after the national eviction
moratorium expired, eviction filings were down 53 percent in
Albuquerque, New Mexico, for example. ERA funding protected
renters in various ways, including through rental assistance
and eviction diversion programs. Renters with no savings and
unstable incomes often need only a small amount of rental
assistance to avoid an eviction. Research has shown that,
although most evictions are for one or two months of rent, many
eviction cases are initiated for relatively small sums of
money. For example, in 2021, one in seven eviction cases in
Cincinnati involved a claim of less than $500. In many cities,
including Philadelphia and Durham, ERA funding was used to
implement diversion programs, which typically combine legal
representation, rental assistance, and remediation to prevent
evictions and have been shown to help prevent forced moves.
With ERA funds nearing or at their end, however, rental
assistance, diversion programs, and other policies centered on
renter protections will be difficult for localities and States
to maintain. Extending and expanding the ERA program, by tying
it to diversion programs for instance, would address immediate
needs while also helping to prevent evictions going forward.
\19\
---------------------------------------------------------------------------
\19\ Eviction Tracking System, Eviction Lab, Princeton University,
2022; Hepburn, et al., 2022; Renee Louis, Alieza Durana, and Peter
Hepburn, ``Preliminary Analysis: Eviction Claim Amounts During the
COVID-19 Pandemic'', Eviction Lab, Princeton University, August 27,
2020; Mark Treskon, Solomon Greene, Olivia Fiol, and Anne Junod,
``Eviction Prevention and Diversion Programs: Early Lessons From the
Pandemic'' (Washington, DC: Urban Institute, April 2021); Juan Pablo
Garnham, ``Eviction Diversion: Preventing Eviction Before Going to
Court'', Eviction Lab, Princeton University, September 2, 2021;
Jennifer Ludden, ``Eviction Filings Are Up Sharply as Pandemic Aid
Starts To Run Out'', NPR, May 4, 2022; Veronica Gaitan, ``The Central
Importance of Housing'', Housing Matters, November 2, 2017.
---------------------------------------------------------------------------
Another way for the Federal Government to address our
Nation's immediate needs is to increase the number of housing
choice vouchers. The Family Stability and Opportunity Vouchers
Act, introduced in the Senate in 2021, would create 500,000 new
housing vouchers for families in need and would improve
services to increase housing and neighborhood choice. Given
that families spend an average of 26 months on waiting lists
for rental assistance, this act would increase residential
stability and help to prevent family homelessness. In the
longer term, we need to increase the supply of affordable
housing by deepening investments in development and expanding
public housing offerings. Research shows that families with
access to safe, affordable housing are healthier, happier, and
better able to save money so that they can plan for their
longterm futures. \20\
---------------------------------------------------------------------------
\20\ Public and Affordable Housing Research Corporation, ``Trends
in Housing Assistance and Who It Serves'', 2019, 13.
---------------------------------------------------------------------------
Finally, the Federal Government should begin collecting
data on evictions and eviction filings on a national scale.
While recent studies have allowed us to make critical advances
in our knowledge of evictions in the United States, they also
underscore the need for ongoing and extensive study. In
particular, they point to the dire need for the Federal
Government to collect eviction-related data. The U.S.
Department of Housing and Urban Development could collect and
track high-quality information on evictions, both in subsidized
properties run by public housing authorities in its purview,
and in rentals on the private market.
Reliable data on evictions enable us to assess the scope of
the problem and to evaluate the effectiveness of housing
policies at the local, State, and Federal levels. These data
provide a powerful lens for understanding the prevalence,
causes, and consequences of housing instability. They are also,
however, the only tool with which the Federal Government can
detect violations of the Fair Housing Act caused by the
eviction process. And they require large-scale data
infrastructure and resources. The only source of national data
on eviction comes from the Eviction Lab at Princeton
University. The Federal Government taking the lead in data
collection would, in tandem with the other interventions
recommended above, help prevent evictions going forward and
would add to a more comprehensive and informed public policy.
\21\
---------------------------------------------------------------------------
\21\ Gromis, et al., 2022.
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------
RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
FROM LAURA BRUNNER
Q.1. Addressing the Growth of Institutional Investor Owners--
Ms. Brunner, your testimony included many of the challenges for
communities and families that are caused when institutional
investors buy up homes. What solutions are you at The Port and
other communities across the country pursuing to address these
issues? What State or Federal changes would help address these
issues?
A.1. The Greater Cincinnati area, like many jurisdictions
across the Nation, continues to grapple with housing inventory,
housing affordability, and an influx of institutional investors
targeting the single-family housing market. Just last year,
real estate investors bought $750 million worth of homes in
Columbus, Cleveland, and Cincinnati. \1\ When institutional
investors buy homes in bulk quantities like this, it poses
serious challenges for communities and families, resulting in a
difficult market for private homebuyers, and a tough rental
market for those seeking affordable housing. Cincinnati rents
rose 26 percent year over year in August. It is the largest
percentage jump in rents among the top metropolitan areas in
the country, and the second time in the past 3 months in which
Cincinnati has led the Nation in fastest pace of rent
increases. \2\
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\1\ https://www.redfin.com/news/investor-home-purchases-q4-2021/
\2\ https://www.redfin.com/news/redfin-rental-report-august-2022/
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In January 2022, The Port of Greater Cincinnati Development
Authority outbid over a dozen investment firms and purchased
194 single-family homes that were formerly owned by a
California-based firm and fell into receivership. It was our
opportunity to disrupt the cycle of investor activity in the
local real estate market and chart a new path back to home
ownership for families and properties. It was a high-risk
acquisition, but because of The Port's risk tolerance, we were
able to create an innovative financing model that included no
public subsidy. The Port leveraged its nontax revenue to issue
taxable and tax-exempt bonds to pay $14.5 million to acquire
the portfolio of homes. An Ohio-based investor purchased the
bonds issued to provide the financing to purchase the
properties.
The goal of the CARE (Creating Affordable Real Estate)
Homes initiative is to create viable pathways to home ownership
for current rental tenants of these homes. As a member of the
economic development community, The Port recognizes both the
moral and the business-driven imperatives to ensuring people
have a chance to build wealth. Purchasing the CARE Homes
portfolio created an opportunity for us to provide shortand
long-term solutions for renters and neighborhoods across
Hamilton County. We were able to prevent immediate eviction and
displacement of tenants. After acquiring the portfolio, we
identified 160 delinquent renters, ranging anywhere from one
month to over a year of delinquency. Through constant and
diligent communication, we were able to submit 57 rental and
utility assistance applications on behalf of our tenants and
secured $274,000, with $236,000 currently under review. In
addition, we signed up eight tenants for Section 8 assistance,
all of whom did not know they were eligible.
Of the 60 vacant properties in the portfolio of homes, six
were re-leased after moderate rehabilitation, roughly 10 were
shown to Community Development Corporations and community
partners, one sold to a volunteer rehab program, six are
currently being bid for renovation, and the remaining vacant
properties are in the planning phase and will move forward with
renovations in suitable order. Renovations range from minor
issues such as a new coat of paint, to major interior and
exterior repairs of leaky roofs or rotted framing. Maintaining
and improving these properties gives us an opportunity to
convert the single-family homes from rental back to owner-
occupied, further increasing the available supply of affordable
homes and meeting the housing needs of low- and moderate-income
families in our region.
Though the intent of the CARE Homes initiative is to offer
a pathway to home ownership, we understand that not all tenants
are able or even want to purchase their home. To assist tenants
with this process, we partnered with a local, HUD-certified
homebuyer training nonprofit. Working in Neighborhoods (WIN) is
providing renter counseling and transition planning for those
who prefer to continue renting, as well as assessment,
financial literacy training, and homebuyer education for those
interested in home ownership. Our goal is to best position our
tenants for stability and wealth creation as they take the step
to buy their homes. To date, eight tenants have started or are
currently in the screening process.
We strongly believe that what we are doing will help
provide stability to residents and neighborhoods and have a
major impact on the local housing market. Everyone deserves a
safe, affordable place to live, but large investor purchases of
residential property like we're seeing in Hamilton County is
adding to the housing crisis and threatening housing
affordability for the lowest-income households in our
community. The CARE Homes initiative is not a silver bullet by
any means, but it is a creative response to a very complex
problem. Now more than ever, comprehensive policy solutions and
significant Federal investments are needed to combat the
shortage of affordable and available housing, as well as the
massive movement of private equity into single-family housing
markets.
The Emergency Rental Assistance (ERA) program is assisting
several tenants in our CARE Homes portfolio who are facing deep
rental and utility debt. Though a temporary measure, the
current distribution of ERA funds and backlog of assistance
applications is a true testament to the significant role rental
assistance plays in addressing housing needs among families
with the lowest incomes. Locally, the Cincinnati-Hamilton
Community Action Agency (CAA) is assisting with the allocation
of these funds and has distributed over $30 million to more
than 7,000 households since February 2021. With a backlog of
6,000 applications to process, CAA suspended new applications,
further proving the remaining need for assistance is still very
high. \3\ Congress must expand investments in rental and
utility assistance to relieve the current backlog of
applications and help those in dire need.
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\3\ https://spectrumnews1.com/oh/columbus/news/2022/09/19/
emergency-rental-assistance-deadline-looms-as-agencies-manage-massive-
case-backlog
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In addition to providing emergency assistance to stabilize
renters from unforeseen crises such as the COVID-19 pandemic,
governmental agencies must address housing affordability and
availability issues by strengthening existing Federal financing
and offering long-term, sustainable solutions. Expanding the
capacity of Low-Income Housing Tax Credit and increasing
funding in Department of Housing and Urban Development (HUD)
programs, such as Community Development Block Grants and the
Housing Trust Fund, would play a significant role in preserving
and increasing affordable housing supply. In order to have a
real impact, Federal policies must include incentives for State
and local jurisdictions to reduce restrictive zoning and land-
use regulations. Constraints on land development, including
density limitations, minimum parking requirements, and historic
preservation requirements, increases costs and hinders growth.
These efforts will have minimal impact unless there is
Government intervention around abusive practices of
institutional investors in the single-family housing market. If
left unchecked, big corporations and investors will continue to
take homes off the market and push up prices to increase
personal profit margins, all at the expense of the most
vulnerable members of our communities. One way to discourage
institutional investor ownership of single-family homes is to
make the model less attractive to investors. Currently, the
cashflow is sheltered by depreciation. In the early years, as
they are purchasing properties, the depreciation is a major
advantage. They are able to make cash distributions, and
because of depreciation, they are tax-free. Single family homes
are depreciated at a rate of 3.636 percent each year for 27.5
years. One way to disincentivize this is to specifically target
single family home depreciation and make it like commercial
real estate, which is depreciated over a period of 39 years.
Another way to reduce the attractiveness of these
investments is to preclude investment in single family homes as
an eligible asset class for opportunity zone funds.
At the State and local level, efforts should be made to
increase the reporting requirements to improve transparency.
This would also help ensure that these landlords are not
receiving preferential tax treatment such as homeowner credits
on property taxes.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SMITH
FROM LAURA BRUNNER
Q.1. One way to support the construction of new units is to
look at restrictive zoning rules that make it difficult to
build new properties. Restrictive local zoning rules are a
topic that has generated bipartisan interest. My home town of
Minneapolis has been a leader in tackling zoning issues as a
way of expanding affordable housing. As a quasipublic real
estate developer, I'm sure you have an interesting perspective
on this issue.
In your experience, how do restrictive zoning or land use
rules affect affordable housing supply?
A.1. Zoning requirements such as density, parking, height, and
setback, remain a significant barrier to housing affordability
and development. Diversifying the housing stock in
neighborhoods results in better access to economic opportunity.
In Hamilton County, with over 49,000 households severely cost-
burdened and spend more than 50 percent of their income on
housing costs, there have been efforts to reduce density
limitations as a way to combat the shortage of affordable
housing. \1\
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\1\ chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://
www.lisc.org/media/filer-public/a1/16/a116fbab-4be3-4704-98e6-
83f633b7d893/asset-upload-file30-13212.pdf
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Large sections of Cincinnati are zoned single family or
have a minimum lot sizes that are extremely large. If a
developer or builder wants to construct a multifamily or even
split their lot to add density, they are required to go in
front of the zoning board and ask for a variance. This creates
three barriers to development, the first being the hearing adds
additional time (6-8 weeks minimum) to the development
timeline, and even the application fees and required
documentation are costly.
The process to rezone a property can be extremely
burdensome, especially for an individual new to development or
someone looking to build for the first time. More often than
not, a builder will end up hiring a consultant or engineer to
draw up the required documentation and walk the project through
the process which adds considerable costs. Those who cannot
afford to do so may eventually choose not to move forward with
a project.
Q.2. How do these restrictions affect the cost of building?
A.2. In addition to these restrictions, the rising costs of
building materials has made it extremely difficult to expand
affordable housing. While a $1,000 application fee for a
variance might not seem excessive, it's the difference between
including the refrigerator in the structure or not. It is
practically impossible to build affordable housing units
without subsidy and every dollar truly matters. Also set back
requirements can vary in different areas thus eliminating the
potential for a standardized infill structure that could be
ordered and constructed in bulk. Many of these neighborhoods
were decimated by the foreclosure crises and therefore have
multiple vacant lots on streets that were previously bustling
with activity. Being able to have a few standardized
floorplans/structures that could be constructed in bulk would
not only give the developer economy of scale savings but would
also simplify the construction process overall leading to a
larger pool of contractors able to participate in the bidding
process.
Q.3. What is our best tool for incentivizing affordable housing
supply?
A.3. Housing development incentives can help accelerate and
expand affordable housing in many ways. Expanding the capacity
of Low-Income Housing Tax Credit and increasing funding in
Department of Housing and Urban Development (HUD) programs,
such as Community Development Block Grants and the Housing
Trust Fund, would play a significant role in preserving and
increasing affordable housing supply. In addition to funding
incentives, regulatory incentives such as flexible design
standards and density bonuses could allow for additional
density and increased production of affordably priced units.
In order to have a real impact, Federal policies must
include incentives for State and local jurisdictions to reduce
restrictive zoning and land-use regulations. Constraints on
land development, including density limitations, minimum
parking requirements, and historic preservation requirements,
increases costs and hinders growth. Local government should
simplify the development approval process at the permitting
level and reduce the fees for each step to help incentivize
affordable housing supply.
------
RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
FROM DIANE YENTEL
Q.1. Addressing Homelessness--Recently we have heard proposals
to criminalize homelessness, including imposing fines or
criminal penalties for people experiencing unsheltered
homelessness. What effect do you believe proposals to
criminalize or otherwise penalize people experiencing
homelessness are likely to have? What do we know about the best
ways to address homelessness?
A.1. Efforts to criminalize homelessness or impose punitive
requirements are counterproductive and make it more difficult
for people to exit homelessness. Nearly all people experiencing
homelessness are not unsheltered by choice but because they
lack access to affordable housing, physical and mental health
care, or adequate and humane emergency shelter. Arrests, fines,
incarceration, and criminal records make it more difficult for
individuals experiencing homelessness to access the affordable
housing, health services, and employment necessary to exit
homelessness.
Proposals that impose punitive requirements--such as time
limits, work requirements, forced treatment, and sobriety--are
ineffective and ignore the primary driver of homelessness: the
severe shortage of housing affordable to the lowest-income and
most marginalized people. Forcing people into congregate
shelters and using a mandatory, punitive, behavior modification
approach is based on outdated models that failed to rehouse
people. These earlier models set housing as the end goal--
requiring individuals to first participate in various
supportive programs, abstain from drugs and alcohol, and adhere
to set a of behavioral requirements before accessing housing.
Costs were very high, and results were very limited. Rather
than responding to individuals' needs, participants would often
become stuck at a certain point during the program or fall
short of unattainable requirements. Individuals unable to
succeed in the one-size-fits-all approach languished in large
shelters or were forced into institutions, with no path back to
housing.
To end homelessness, policymakers must invest in proven
solutions at the scale necessary. Housing First is a
bipartisan, evidence-based practice supported by multiple,
national studies that show it is the most effective approach to
ending homelessness for most individuals and families. In
addition to being a proven strategy to end homelessness,
Housing First is a responsible, accountable way to spend
taxpayer dollars on homelessness issues because it can improve
quality of life and other outcomes, lead to better treatment
outcomes, and reduce taxpayer spending on public services,
including emergency health and criminal legal systems.
Under the Housing First model, stable, affordable, and
accessible housing is provided to people experiencing
homelessness quickly and without prerequisites, and voluntary
supportive services--such as substance use and mental health
counseling and employment training, among others--are offered
to help improving housing stability and well-being. It is a
flexible model that can be adapted to address the unique needs
in local communities and tailored to the challenges facing
individuals.
Housing First is not ``housing only.'' It includes an array
of support services needed to live stably in the community.
Housing First recognizes that stable housing is required for
effective psychiatric and substance use treatment and for
improved quality of life. Once stably housed, individuals are
better able to take advantage of wraparound services to help
support housing stability, employment, and overall health.
Without stable housing, attaining these goals becomes much more
difficult.
The Housing First model rapidly ends homelessness for most
individuals and families. The model is particularly effective
among people who have been homeless for long periods of time
and have serious psychiatric disabilities, substance use
disorders, and/or other disabilities.
Further, this model is more effective at increasing service
utilization than non-Housing First programs and can lead to
better treatment outcomes. While an earlier study found no
difference in treatment outcomes between Housing First and
high-barrier programs, several more recent studies indicate
that Housing First participants are more likely to report
reduced usage of alcohol, stimulants, and opiates. Critics'
fears about increased substance use and psychiatric symptoms
have not been supported by research findings.
Finally, the Housing First model is more cost-effective
than allowing people experiencing homelessness to remain in
shelters, jails, or hospitals. Housing First can improve health
care and employment outcomes and reduce arrests and
incarceration. Studies show that Housing First reduces costly
hospital visits, admissions, and duration of hospital stays
among homeless individuals, and reduces public system spending.
Q.2. State and Local Experiences of Eviction--Have you observed
differences in the frequency of eviction filings or evictions
between localities and States? To what do you attribute these
differences? Do you have recommendations for ways to ensure
that renters are protected from avoidable evictions no matter
where they live?
A.2. During the pandemic, States and localities across the
country have recognized the vital role tenant protections play
in preventing evictions. NLIHC has been tracking the passage of
tenant protections and found that in 2021 alone, States and
localities passed or implemented over 150 new laws or policies
to protect tenants from eviction and keep them stably housed.
Research from Princeton University's Eviction Lab found
that eviction moratoriums--especially those that froze the
earliest stages of the eviction process--were effective in
reducing eviction filing rates. However, State-level eviction
prevention policies enacted during the pandemic varied
significantly, leaving some renters with far more protection
than others. While policies specifically designed to shield
households from eviction and housing instability were
effective, variations in statewide renter protections meant
that where a renter lived had a significant impact on how well
they were protected from eviction.
Some States have enacted laws preempting local governments
from adopting critical renter protections. According to the
Urban Institute, as of 2020, 33 States had preemption laws in
effect that prevent local governments from adopting some type
of affordable housing or tenant protection, such as source-of-
income discrimination protections, short-term rental
regulations, and inclusionary zoning policies. Texas, Iowa, and
Indiana enacted State laws barring cities and counties from
adopting and enforcing source-of-income antidiscrimination
laws. Texas's law preempts measures passed in Austin and Dallas
that prohibit source-of-income discrimination. Three cities in
Iowa--Des Moines, Iowa City, and Marion--have such ordinances
in effect and must adjust to the new State law by 2023. While
Atlanta passed a source-of-income antidiscrimination law in
2020, the ordinance is not legally enforceable because it
conflicts with a State law barring local governments from
expanding the State's fair housing law, which does not prohibit
source of income discrimination.
The patchwork of State and local renter protections, as
well as State preemption of local housing policies, place low-
income renters in communities across the country at greater of
risk of eviction, and in worst cases, homelessness. A lack of
Federal renter protections allows corporate landlords to
purchase properties and engage in abusive practices in pursuit
of profit. Real estate investors have been buying low-cost
homes at an increasing and unprecedented rate, leading to
increases in rental prices and putting low-income renters at
greater risk of eviction. Increased institutional investor
ownership in the rental market can have negative impacts on
renters, and has been associated with decreased affordability,
increased fees, lack of upkeep, higher rates of eviction, and
worsening displacement, particularly within Black
neighborhoods.
To ensure the safety and just treatment of renter
households across all jurisdictions, Congress should enact
legislation to establish critical national protections for
renters. Congress should prohibit source-of-income
discrimination to help ensure that landlords do not
discriminate against renters who receive rental assistance or
other sources of income. Additionally,
Congress should establish and fund a national right to
counsel to help more renters stay in their homes and mitigate
harm when eviction is avoidable. Further, NLIHC supports
legislation to create Federal ``just cause'' eviction standards
to ensure greater housing stability and prevent arbitrary and
harmful actions by landlords. Congress should enact additional
measures to protect renters nationwide, including expanding the
``Fair Housing Act'' to ban discrimination based on sexual
orientation, gender identity, marital status, and source of
income; establishing anti-rent gouging protections for renters;
ending arbitrary screening and eviction policies to ensure
access for people exiting the criminal legal system; and
supporting tenant organizing.
In the absence of quick Congressional action, the Biden
administration must take immediate steps to protect America's
lowest-income and most marginalized renters from the harmful
impacts of inflation and rising rents, high rates of eviction
filings, and increasing homelessness. To respond to
unprecedented and unwarranted increases in rent prices and
housing instability, the Biden administration should establish
critical renter protections to help keep renters stably housed.
Just as several States have in place laws to prevent price or
rent gouging after natural disasters, the Biden administration
should implement anti-rent gouging measures to prevent
landlords from imposing exorbitant rent increases on tenants in
the wake of a global pandemic. There is clear precedent and
need for using Federal price controls to stem unreasonable rent
increases.
The Biden administration should also expand renter
protections, such as source-of-income protections, just-cause
eviction standards, and anti-price gouging protections, to
those living in properties with federally backed mortgages.
There is recent precedent for tying renter protections to
federally back loans and other assistance. During the pandemic,
the Federal Housing Finance Agency (FHFA) required that
property owners receiving forbearance suspend evictions for
nonpayment of rent, and the agency prohibited these property
owners from charging late fees or penalties or requiring
tenants to pay past due rent in a lump sum. Property owners who
failed to comply with these renter protections were subject to
remedies under their loan documents, which could include moving
the loan into a technical default and revocation of the
forbearance.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR SMITH
FROM DIANE YENTEL
Q.1. In May, the Biden administration announced a ``Housing
Supply Action Plan'' to ease burden of housing costs by
boosting the supply and quality of housing. The initiative
includes legislative and administrative actions, including
efforts to:
Provide new financing mechanisms to preserve and
build more affordable housing where gaps currently
exist;
Reward jurisdictions that have reformed their
zoning and land-use policies; and
Improve and expand existing Federal financing.
And just last week, the Biden Treasury Department announced
new guidance to allow States and local governments greater
flexibility in boosting housing supply using ARP dollars.
Do you have thoughts on whether these initiatives will be
helpful?
A.1. The Biden administration's ``Housing Supply Action Plan''
includes important measures to increase the supply of housing.
The Administration's commitment to using Federal transportation
funds to reduce restrictive local zoning laws, which can
inhibit or prohibit the construction of apartments and are
often deeply rooted in racial exclusion, is especially
promising. By supporting manufactured housing, accessory
dwelling units, and small-scale developments, the
Administration can increase affordable housing options in
communities nationwide. Streamlining Federal financing and
funding sources can help lower costs and speed development.
An underlying cause of America's housing crisis is a market
failure that results in a severe shortage of rental homes
affordable to people with the lowest incomes. Nationwide, there
is a shortage of seven million homes affordable and available
to extremely low-income renters. The Administration's Housing
Supply Action Plan outlines a series of actions to increase the
supply of housing, but these measures will not reach people
with the lowest incomes without additional Federal subsidy.
Without public subsidy, the private market cannot produce new
rental housing affordable to extremely low-income households
because the rents that are affordable to the lowest-income
households typically do not cover the development costs and
operating expenses of such new housing. Because the private
market consistently fails to provide adequate, affordable
housing for extremely low-income households, the Government has
a critical role to play in correcting this structural failure.
The Administration cannot solve the crisis on its own. In
addition to outlining steps the Administration is taking to
lower housing costs, the Biden administration's Housing Supply
Action Plan calls on Congress to enact investments in housing
development and preservation.
To increase the supply of deeply affordable and accessible
housing, Congress should expand funding for the national
Housing Trust Fund to at least $40 billion annually. The HTF is
the only Federal housing program exclusively focused on serving
households with the lowest incomes and most acute housing
needs. The ``American Housing and Economic Mobility Act'' (S.
1368/H.R. 2768), introduced by Senator Elizabeth Warren (D-MA)
and Representative Emanuel Cleaver (D-MO), would address the
shortage of affordable rental homes for people with the lowest
incomes through a robust investment of nearly $45 billion
annually in the national Housing Trust Fund. The bill also
includes resources to repair public housing, build or
rehabilitate housing in tribal and Native Hawaiian communities,
and create and preserve affordable homes in rural areas.
The ``Inflation Reduction Act of 2022'' excludes vital
affordable housing investments needed to address skyrocketing
rents and the severe shortage of affordable, accessible rental
homes available to the lowest-income renters. The House
previously passed the ``Build Back Better Act'', which included
$150 billion in targeted affordable housing investments to
bridge the widening gap between incomes and rising housing
costs and address the severe lack of deeply affordable,
accessible rental homes. By leaving the act's historic
affordable housing investments out of the reconciliation
package, Congress has missed a once-in-a-generation opportunity
to address homelessness and housing poverty in the United
States.
The new guidance released by the U.S. Department of
Treasury will increase the ability of State, local, and tribal
governments to use State and Local Fiscal Recovery Funds
(SLFRF) to develop affordable housing and help lower housing
costs. NLIHC has been tracking the use of SLFRF for affordable
housing and homelessness prevention and services. As of May
2022, 55 of the 112 jurisdictions in our sample had allocated
more than $13.7 billion for housing activities. NLIHC has
weighed in on Treasury's SLFRF guidance and urged the
Administration to issue clear guidance on how communities can
use SLFRF to meet the housing needs of people with the lowest
incomes. The updated guidance and ``Affordable Housing How-To
Guide'' released by Treasury and the Department of Housing and
Urban Development will help State and local governments use
SLFRF to invest in affordable housing.
Q.2. And what more we can do here?
A.2. As the U.S. faces record rent increases and rising
evictions, it is more important than ever that Congress
increase investments in long-term solutions to the underlying
shortage of affordable, accessible homes and improve renter
protections for the lowest-income people.
Only through a combination of administrative action and
robust Federal funding can the country truly resolve its
affordable housing crisis.
A stronger housing safety net is needed to prevent
evictions and homelessness and to reduce housing instability
among the lowest-income renters. Addressing the roots of the
housing affordability problem requires a sustained commitment
to (1) bridging the gap between incomes and rent through
universal rental assistance, (2) investing in new affordable
housing and preserving affordable rental homes that already
exist for America's lowest-income and most marginalized
renters, (3) providing emergency assistance to stabilize
renters when they experience financial shocks, and (4)
establishing and enforcing strong renter protections.
NLIHC looks forward to a continued partnership with members
of Congress and the Administration in advancing the large-scale
investments and antiracist reforms needed to repair the gaping
holes in our country's social safety net and ensure that every
renter has an affordable place to call home.
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