    [House Hearing, 118 Congress]
    [From the U.S. Government Publishing Office]

                         HOW MANDATES LIKE ESG DISTORT
                           MARKETS AND DRIVE UP COSTS
                           FOR INSURANCE AND HOUSING
    =======================================================================

                                    HEARING

                                   BEFORE THE

                     SUBCOMMITTEE ON HOUSING AND INSURANCE

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 14, 2023

                                   __________

                               Serial No. 118-40

           Printed for the use of the Committee on Financial Services

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                www.govinfo.gov

                                    __________

                       U.S. GOVERNMENT PUBLISHING OFFICE
    53-379 PDF                  WASHINGTON : 2026

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

                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                   PATRICK McHENRY, North Carolina, Chairman

    FRENCH HILL, Arkansas, Vice          MAXINE WATERS, California, Ranking
        Chairman                             Member
    FRANK D. LUCAS, Oklahoma             SYLVIA R. GARCIA, Texas, Vice
    PETE SESSIONS, Texas                     Ranking Member
    BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
    BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
    BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
    ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
    ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
    ROGER WILLIAMS, Texas                AL GREEN, Texas
    TOM EMMER, Minnesota                 EMANUEL CLEAVER, Missouri
    BARRY LOUDERMILK, Georgia            JAMES A. HIMES, Connecticut
    ALEXANDER X. MOONEY, West Virginia   BILL FOSTER, Illinois
    WARREN DAVIDSON, Ohio                JOYCE BEATTY, Ohio
    JOHN W. ROSE, Tennessee              JUAN VARGAS, California
    BRYAN STEIL, Wisconsin               JOSH GOTTHEIMER, New Jersey
    WILLIAM R. TIMMONS, IV, South        VICENTE GONZALEZ, Texas
        Carolina                         SEAN CASTEN, Illinois
    RALPH NORMAN, South Carolina         AYANNA PRESSLEY, Massachusetts
    DANIEL MEUSER, Pennsylvania          STEVEN HORSFORD, Nevada
    SCOTT FITZGERALD, Wisconsin          RASHIDA TLAIB, Michigan
    ANDREW R. GARBARINO, New York        RITCHIE TORRES, New York
    YOUNG KIM, California                NIKEMA WILLIAMS, Georgia
    BYRON DONALDS, Florida               WILEY NICKEL, North Carolina
    MIKE FLOOD, Nebraska                 BRITTANY PETTERSEN, Colorado
    MICHAEL LAWLER, New York
    ZACHARY NUNN, Iowa
    MONICA DE LA CRUZ, Texas
    ERIN HOUCHIN, Indiana
    ANDREW OGLES, Tennessee

                        Matthew Hoffmann, Staff Director

                                     ------

                     SUBCOMMITTEE ON HOUSING AND INSURANCE

                        WARREN DAVIDSON, Ohio, Chairman

    MONICA DE LA CRUZ, Texas, Vice       EMANUEL CLEAVER, Missouri, Ranking
        Chairwoman                           Member
    BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
    BLAINE LUETKEMEYER, Missouri         RASHIDA TLAIB, Michigan
    RALPH NORMAN, South Carolina         RITCHIE TORRES, New York
    SCOTT FITZGERALD, Wisconsin          AYANNA PRESSLEY, Massachusetts
    ANDREW R. GARBARINO, New York        SYLVIA R. GARCIA, Texas
    MIKE FLOOD, Nebraska                 NIKEMA WILLIAMS, Georgia
    MICHAEL LAWLER, New York             STEVEN HORSFORD, Nevada
    ERIN HOUCHIN, Indiana                BRITTANY PETTERSEN, Colorado

                            C  O  N  T  E  N  T  S

                                  ----------

                             Friday, July 14, 2023
                               OPENING STATEMENTS

                                                                       Page
    Hon. Monica De La Cruz, Vice Chairwoman of the Subcommittee on
      Housing and Insurance, a U.S. Representative from Texas........     1
    Hon. Emanuel Cleaver, Ranking Member of the Subcommittee on
      Housing and Insurances, a U.S. Representative from Missouri....     3

                                   STATEMENTS

    Hon. Bill Huizenga, a Member of the Financial Services Committee,
      a U.S. Representative from Michigan............................     2

                                   WITNESSES

    Mr. Bill Boor, President & CEO, Cavco Industries, Inc. and Vice
      Chairman, Manufactured Housing Institute, on behalf of the
      Manufactured Housing Institute (MHI)...........................     5
        Prepared Statement...........................................    36
    Ms. Alicia Huey, Chairman, National Association of Home Builders
      (NAHB) and President, AGH Homes, Inc...........................     6
        Prepared Statement...........................................    51
    Mr. Jerry Theodorou, Director, Finance, Insurance and Trade, R
      Street Institute...............................................     8
        Prepared Statement...........................................    60
    Ms. Caroline Nagy, Senior Policy Counsel for Housing, Corporate
      Power, and Climate Justice, Americans for Financial Reform
      (AFR)..........................................................     9
        Prepared Statement...........................................    71

                                    APPENDIX

                  ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

    Hon. Scott Fitzgerald:
        DOE Press Release dated May 18, 2022, ``DOE Updates Mobile
          Home Efficiency Standards to Lower Household Energy Bills''    79
    Hon. Maxine Waters:
        Written statement of the Private Equity Stakeholder Project
          (PESP).....................................................    83
        Written statement of Public Citizen..........................    87
    Williams, Hon. Nikema:
        Picture displayed during the hearing.........................    92

                     RESPONSES TO QUESTIONS FOR THE RECORD

    Ms. Alicia Huey:
        Written responses to questions for the record from
          Representative McHenry.....................................    93
        Written responses to questions for the record from
          Representative Waters......................................    95
    Ms. Caroline Nagy:
        Written responses to questions for the record from
          Representative Waters......................................    96
        Written responses to questions for the record from
          Representative Nikema Williams.............................    98
    Mr. Jerry Theodorou:
        Written responses to questions for the record from
          Representative Waters......................................   101
        Written responses to questions for the record from
          Representative Nikema Williams.............................   101

                         HOW MANDATES LIKE ESG DISTORT
                           MARKETS AND DRIVE UP COSTS
                           FOR INSURANCE AND HOUSING

                                  ----------

                             Friday, July 14, 2023

                 U.S. House of Representatives,
                 Subcommittee on Housing and Insurance,
                               Committee on Financial Services,
                                                        Washington, DC.

        The subcommittee met, pursuant to notice, at 9:11 a.m., in
    room 2128, Rayburn House Office Building, Hon. Monica De La
    Cruz [vice chairwoman of the subcommittee] presiding.
        Members present: Representatives Davidson, Luetkemeyer,
    Norman, Fitzgerald, Garbarino, Flood, Lawler, De La Cruz;
    Cleaver, Velazquez, Tlaib, Pressley, Garcia, Williams of
    Georgia, and Pettersen.
        Ex officio present: Representative Waters.
        Also present: Representative Huizenga.
        Ms. De La Cruz. [presiding]. The Subcommittee on Housing
    and Insurance will come to order.
        Without objection, the Chair is authorized to declare a
    recess of the subcommittee at any time.
        Today's hearing is entitled, ``How Mandates Like ESG
    Distort Markets and Drive Up Costs for Insurance and Housing.''
        I now recognize myself for 5 minutes for an opening
    statement.

    OPENING STATEMENT OF HON. MONICA DE LA CRUZ, VICE CHAIRWOMAN OF
    THE SUBCOMMITTE ON HOUSING AND INSURANCE, A U.S. REPRESENTATIVE
                               FROM TEXAS

        The subcommittee has convened today for a hearing entitled,
    ``How Mandates Like ESG Distort Markets and Drive Up Costs for
    Housing and Insurance.'' This hearing is part of the
    committee's continuing work this month to investigate the far-
    reaching impacts of a new trend in the financial services
    world, forced government ESG mandates.
        For those who are not familiar with it, ESG is the latest
    progressive buzzword for environmental, social, and governance
    factors. ESG is a form of virtue signaling where companies can
    proclaim how enlightened they are based on their environmental,
    social, or corporate governance actions, even if they have to
    ignore their fiduciary duty to their stakeholders or decrease
    the value of their goods and services to consumers. Those that
    give into the ESG movement think that it will make their
    company more popular with progressive agitators and investment
    companies. Those that do not give in are pilloried and
    protested for having the audacity to focus their business, on
    their business. Essentially, ESG is, in many cases, a modern
    shakedown tool brought to you by today's cancel culture.
        Now, some might ask, what is wrong with a company becoming
    more involved in environmental, social, or corporate governance
    issues and telling their customers about its values? The
    problem becomes when ESG is not being offered as a choice, but
    as a mandate. ESG mandates, like so many other government
    mandates before it, are always offered up as harmless tweaks on
    the path towards social enlightenment, free from cost or ill
    intent, that will make the markets work better.
        Of course, the reality is the exact opposite. Mandates like
    ESG distort markets, drive up costs of products, reduce
    consumer options, create scarcity, and misalign investment
    capital. Made-up metrics, like ESG scorecards, are created to
    determine which companies are in the good graces of left-wing
    activists. These modern-day social credit systems drive a wedge
    within open markets by directing investments to companies that
    satisfy progressive demands. Your company's access to capital
    should not be dependent on being more, ``woke,'' than your
    competitors. The far left should not be able to cancel your
    business because you do not comply.
        ESG scores and mandates create a social credit system that
    makes life harder for American consumers, businesses, and
    retirees with little or no discernible benefits. So, today's
    hearing will explore the impact of the growing ESG movement on
    two different industries, housing and insurance, and what it
    means to consumers because ultimately, it is the job of
    government regulators to protect customers from collusion and
    unfair practices.
        With that, I would like to yield 1 minute to my colleague,
    Mr. Huizenga.

      STATEMENT OF HON. BILL HUIZENGA, A MEMBER OF THE FINANCIAL
        SERVICES COMMITTEE, A U.S. REPRESENTATIVE FROM MICHIGAN

        Mr. Huizenga. Thank you, Madam Chairwoman. I appreciate the
    opportunity to address this subcommittee.
        Last year, the Supreme Court ruled in West Virginia v. EPA
    that government bureaucracies cannot arbitrarily expand their
    own regulatory reach outside of the legal process. This new
    form of regulatory activism ignores reality, forcing American
    companies to defend themselves against regulations and rules
    that are immaterial to their business model. The rush to
    implement ESG policies in housing and insurance will come at a
    price, leaving taxpayers and our constituents with fewer
    choices and higher costs. Republicans will continue to defend
    capitalism, as Democrats continue to push their far-left
    ideology on the American people through the regulatory process.
        I appreciate you allowing me to waive on to the
    subcommittee, and with that, I yield back.
        Ms. De La Cruz. The Chair now recognizes the ranking member
    of the subcommittee, the gentleman from Missouri, Mr. Cleaver,
    for 5 minutes for an opening statement.

      HON. EMANUEL CLEAVER, RANKING MEMBER OF THE SUBCOMMITTEE ON
       HOUSING AND INSURANCE, A U.S. REPRESENTATIVE FROM MISSOURI

        Mr. Cleaver. Thank you, Madam Chairwoman. The title of
    today's hearing is, ``How Mandates Like ESG Distort Markets and
    Drive Up Costs for Insurance and Housing.'' A mandate, by
    definition, is a statute, law, rule, regulation, code, or
    ordinance duly adopted by any government authority, and in the
    United States, as in most nations, we have different levels of
    government and different branches of government and mandates at
    each level. No mandate is the same. Mandates of costs have
    benefits, which must be debated on their individual merits.
    Each of the witnesses with us today, based on what I have seen
    in their testimony, has their own mandates to discuss, and I
    would hope that this hearing will take on a clear focus by the
    end.
        Let me just say this. In terms of cost, I am very concerned
    about the severe financial and nonfinancial costs for failures
    to adequately address environmental, social, and governance
    concerns. The best things in life are not always free.
        Nature also has a mandate, and we are going to have to deal
    with it, whether we want to or not. In recent years, we have
    seen frequent and severe natural disasters in the United
    States, including hurricanes, wildfires, and floods due to
    climate change, and an increase in people living in high-risk
    areas, such as coastal areas vulnerable to severe storms and
    flooding, has worsened the impact of these events. Low- and
    moderate-income and minority households are disproportionately
    exposed to risk due in large part to historical discrimination
    and underinvestment in infrastructure in their communities.
    This has the most material impact on insurance costs.
        According to FEMA, roughly two-thirds of communities facing
    hazardous risk have not yet adopted hazard-resistant building
    codes, which, if adopted in all future construction, would
    avoid more than $600 billion in cumulative losses from floods,
    and insurance paying out large amounts of money. In addition,
    current energy codes extend habitability during these weather-
    induced incidents by as much as 120 percent during extreme
    cold, and up to 140 percent during extreme heat, while reducing
    death by 80 percent, and 30 percent, respectively. Communities
    that regularly adopt modern energy codes also save money for
    residents and businesses and improve community health and
    resilience. Thirteen percent of U.S. households are now
    severely energy-burdened and are paying more than 10 percent of
    their income on energy.
        The crisis of insurance costs is not ESG mandates, but just
    the opposite. There are significant costs for failing to
    implement ESG mandates that are passed on to others and pushed
    off to be paid at another time. ESG mandates will continue to
    be irreplaceable in reducing risks that drive costs, and in
    improving the resiliency of current and future housing stock
    with an eye toward affordability and racial equity.
        Democrats are leading the way on this issue that we are
    required to address. We went through and approved the
    Infrastructure Investment and Jobs Act, as well as the
    Inflation Reduction Act, to help industry and local governments
    better address the underlying issues. In housing, social
    considerations were ignored, and discriminatory zoning known to
    increase the cost of housing development and drive both
    economic and racial segregation have flourished. Democrats are
    leading the way on these solutions as well, through the Housing
    Supply and Affordability Act, the Yes In My Backyard Act, my
    American Housing and Economic Mobility Act, and several pieces
    of legislation put forward by Full Committee Ranking Member
    Waters.
        The reality is that while reducing barriers is essential to
    fixing the supply problem, it will not be enough to address
    market failures. Even with commonsense regulatory reforms,
    builders cannot deliver low-enough rents without subsidy and
    robust government support for housing that must be built with a
    long-term aim at being able to withstand the environments in
    which they are built. I hope that we can have a good discussion
    today rather than denying the importance of ESG mandates, but
    to actually discuss how we can best move forward with ESG
    concerns in a sensible way.
        Madam Chairwoman, I would like very much to ask for a
    moment of personal privilege.
        Ms. De La Cruz. Without objection, it is so ordered.
        Mr. Cleaver. Thank you very kindly. I have been here on
    this committee for almost 19 years, and we have had a lot of
    people who have been here with us, and those people have made
    the committee work, made the committee actually function both
    on the Republican and Democratic sides. From time to time, we
    have to say goodbye to some of our staff members, and today,
    Franklin Thornton is having his last day with the committee. He
    has been here for a while.
        Many of us will remember that all during the COVID crisis,
    he was the first face we saw every morning, for good or bad,
    but he was there and gave us great comfort. He made sure that
    everyone was connected during a very turbulent time in our
    country. So, I just wanted to express, on behalf of all of us,
    our appreciation for his work, and it may be of some importance
    to his mom and grandmother to know that your offspring has been
    very good to us.
        [applause]
        Mr. Cleaver. Thank you very kindly, Madam Chairwoman.
        Ms. De La Cruz. Thank you for your service, Mr. Thornton.
        Today, we welcome the testimony of: Mr. Bill Boor, the
    president and CEO of Cavco Industries, and the Vice Chairman of
    the Manufactured Housing Institute; Ms. Alicia Huey, the
    chairman of the National Association of Home Builders, and the
    president of AGH Homes, Inc.; Mr. Jerry Theodorou, the director
    of finance, insurance, and trade at the R Street Institute; and
    Ms. Caroline Nagy, the senior policy counsel for housing,
    corporate power, and climate justice at Americans for Financial
    Reform.
        We thank you for taking the time to be here today. You will
    each be recognized for 5 minutes to give an oral presentation
    of your testimony. Without objection, each of your written
    statements will be made a part of the record.
        Mr. Boor, you are now recognized for 5 minutes to give your
    oral remarks.

    STATEMENT OF BILL BOOR, PRESIDENT & CEO, CAVCO INDUSTRIES, INC.
    AND VICE CHAIRMAN, MANUFACTURED HOUSING INSTITUTE, ON BEHALF OF
                   THE MANUFACTURED HOUSING INSTITUTE

        Mr. Boor. Thank you, Madam Chairwoman, Ranking Member
    Cleaver, and members of the subcommittee for the opportunity to
    testify today. My name, again, is Bill Boor. I am the CEO of
    Cavco Industries, the third-largest U.S. producer of factory-
    built homes. Last year, we delivered over 19,000 homes to
    deserving families. Today, I am testifying on behalf of the
    Manufactured Housing Institute, of which I am the Vice Chair.
        With regard to ESG, good companies understand that
    considering all stakeholders, including the environment, is
    good business. The challenge lies in the tradeoffs and the
    execution. Narrowly-considered mandates and regulations which
    are only focused on one aspect of ESG often result in
    unintended consequences. While well-intended, it is undeniable
    that a lack of broad perspective in these mandates can get in
    the way of companies being able to move the ball forward on
    environmental and social improvements, while at the same time
    creating jobs, building the economy, and delivering solutions
    to problems such as affordable housing.
        I want to discuss an example of a well-intended regulatory
    mandate that if allowed to proceed as proposed, will directly
    hurt those who are on the cusp of affording a home. This is the
    energy efficiency standard being imposed by the Department of
    Energy, which will drive up costs of manufactured homes without
    achieving the DOE's energy objective. The question is not just
    one of whether there is a return on the added upfront cost, but
    whether the prospective homeowner can even afford the cost at
    all. Based on studies of price sensitivity, if the added costs
    of the DOE rules are conservatively estimated at $6,000, over
    900,000 households will be priced out of homeownership, so the
    tradeoffs and consequences are very real.
        I want to emphasize that I am proud of the manufactured
    housing industry's record. By virtue of our controlled and
    efficient processes, we are inherently more environmentally-
    friendly than other sources of housing. We have a long history
    of consistent and ongoing quality and energy improvements, and
    we have a strong and positive working relationship with our
    regulator, HUD. This is an industry that agrees with the
    objective of continuing to improve energy efficiency, not one
    that needs to be dragged into doing the right thing.
        As a result of what I view as a legislative misstep, we now
    face two regulators with overlapping, but different, mandates.
    HUD is expected to provide one set of Federal standards
    considering product safety, quality, cost, and the objective of
    increasing affordable housing. However, as a result of an
    unvetted rider in 2007, the DOE is now separately seeking to
    singularly drive energy efficiency with disastrous consequences
    for lower-income families. Briefly, the DOE rule holds
    manufactured housing to more stringent standards than other
    forms of construction. It significantly underestimates the
    burden placed on lower-income homebuyers, and it is impractical
    given our unique manufacturing and transportation processes.
        The DOE's execution of their mandate has many problems, but
    fundamentally, the process and what they have been asked to do
    is flawed. Fortunately, it could be readily corrected with H.R.
    3327, the Manufactured Housing Affordability and Energy
    Efficiency Act of 2023. Clarifying HUD as the sole regulator,
    and requiring DOE energy mandates to be worked through the
    established HUD process, does not stop our path on energy
    efficiency. It requires this one objective to be considered
    through an already-established holistic process.
        Back to the subcommittee's topic, this is a microcosm of
    ESG challenges. Well-intended but myopic attempts to regulate
    singular topics are bound to mislead if they are not subjected
    to a holistic evaluation.
        There are many other ESG-related topics I would like to
    cover, but I know my time is limited. For example, there is a
    role for the Federal Government to eliminate zoning barriers
    that prejudicially preclude our homes from needed areas. We are
    not looking for advantages, just an even playing field where we
    can compete with quality, lower-cost homes.
        The central point I would like to make is that providing
    affordable homes is an incredibly important social need that
    manufactured housing is uniquely positioned to serve. Factory-
    built housing is the least-expensive form of unsubsidized
    homeownership, and enables us to do good work in responsible
    ways. We can dramatically increase affordable housing, while
    modeling corporate responsibility, if singularly-focused ESG
    regulations are worked through established holistic processes.
    Thank you.

        [The prepared statement of Mr. Boor can be found on page 36
    in the appendix.]

        Ms. De La Cruz. Thank you. Ms. Huey, you are now recognized
    for 5 minutes to give your oral remarks.

      STATEMENT OF ALICIA HUEY, CHAIRMAN, NATIONAL ASSOCIATION OF
          HOME BUILDERS (NAHB) AND PRESIDENT, AGH HOMES, INC.

        Ms. Huey. Thank you, Madam Chairwoman, Ranking Member
    Cleaver, and members of the subcommittee. I am pleased to
    appear before you today on behalf of the National Association
    of Home Builders (NAHB) to share our views on how burdensome
    regulation and mandates promoted by government support for
    environmental, social, and corporate governance policies impact
    our industry's ability to increase the production of quality,
    affordable housing.
        My name is Alicia Huey. I am NAHB's 2023 chairman of the
    board, and a custom home builder from Birmingham, Alabama.
    NAHB's typical member builds 10 or fewer homes per year, and is
    a small business, so most of us are not directly impacted by
    ESG investing decisions. However, as ESG considerations are
    given more credence in various approaches to address climate
    change and other social issues, they are becoming increasingly
    relied upon to justify regulatory actions. As a result,
    government support of ESG policies is more and more likely to
    impact housing production and affordability.
        As the ESG debate moves forward in this country, NAHB
    members are increasingly concerned about the far-reaching
    impacts and how we will be challenged to comply. ESG policies
    have already caused insurance companies to drop out in some
    areas and to raise rates in others. Lenders are being urged to
    minimize the risk associated with their portfolios and may
    cease lending in certain locations or increase their borrowing
    rates. Likewise, small businesses doing business with publicly-
    traded companies may be required to provide their ESG risk data
    to those larger companies as supply chains continue to stifle
    residential construction projects across the nation.
        We also worry that ESG disclosure requirements could
    further impede or prevent availability of the needed building
    supplies. Finally, we are concerned that overreliance on ESG
    factors often ignores the central tenants of consumer choice,
    market needs, and project feasibility, which are key
    considerations for home builders.
        Like myself, NAHB members live in the communities in which
    they build. We are stewards of the environment, hire local
    workers, provide housing at a diversity of price points, run
    our businesses in responsible ways, and make positive
    contributions to the social and economic fabrics of our towns.
    However, government regulations continue to make it more
    difficult to provide an affordable housing product to our
    customers. Residential construction is one of the most heavily-
    regulated industries in the country. To emphasize the impact of
    this regulation burden, NAHB recently did a study which shows
    that approximately 24 percent of the price of a newly-built
    single-family home is due to the broad set of regulatory
    burdens imposed by the local, State, and Federal Governments.
    On the multifamily side, up to 41 percent of apartment
    development costs are due to regulations.
        Many actions have been taken over the past few years to
    insert ESG considerations into Federal policies and regulations
    that add more uncertainty, delays, and costs to the
    homebuilding process, and negatively impact housing
    affordability. These include: recent legislation that uses the
    lure of Federal dollars to pressure State and local governments
    to adopt costly and restrictive energy codes; a growing effort
    in communities to cite ESG policies to gain support for laws
    and ordinances that ban the use of natural gas and propane
    within new construction and in existing homes, greatly limiting
    consumer choice; a push by the Department of Energy to increase
    energy efficiency standards for electrical distribution
    transformers during a time when a historic backlog is hampering
    development across the country; continuing regulatory
    uncertainty surrounding the most recent, ``Waters of the U.S.''
    ruling under the Clean Water Act; a recent decision by FEMA in
    California to suspend a critically-important floodplain mapping
    program that will result in homebuyers needlessly having to
    purchase flood insurance; and proposals being considered by
    Federal agencies that will have the unintended consequence of
    discouraging private sector participation in rental markets.
        Finally, I have highlighted already a growing insurance
    crisis made worse by perceived risk and pressures to address
    ESG. That is making it more difficult for both existing and
    potential new homeowners to secure available and affordable
    insurance and is impacting development of affordable rental
    housing.
        Thank you again for this opportunity, and I look forward to
    working with all of you.

        [The prepared statement of Ms. Huey can be found on page 51
    in the appendix.]

        Ms. De La Cruz. Thank you. Mr. Theodorou, you are now
    recognized for 5 minutes to give your oral remarks.

    STATEMENT OF JERRY THEODOROU, DIRECTOR, FINANCE, INSURANCE AND
                       TRADE, R STREET INSTITUTE

        Mr. Theodorou. Vice Chair De La Cruz, Ranking Member
    Cleaver, Chairman Davidson, and esteemed members of the
    subcommittee, thank you for holding today's hearing and for the
    invitation to testify. My name is Jerry Theodorou, and I lead
    the R Street Institute's Finance, Insurance and Trade Program.
    My focus at R Street is analysis of the property and casualty
    insurance industry. My research, publications, public
    presentations, and congressional testimony have focused on
    drivers of insurer performance and the impact of market and
    external factors on insurers, policyholders, and the economy.
        Today's hearing is timely because environmental, social,
    and governance factors can influence insurers' performance,
    and, by extension, the availability and cost of insurance for
    consumers and businesses. Government mandates impacting the
    insurance industry, including ESG mandates, can distort
    insurance markets, leading to less choice and higher costs for
    insurance buyers. Examples of the ways that government or
    regulatory mandates can distort insurance markets include
    monopolies for certain insurance products, and intervention in
    how insurers may calculate their rates. For example, workers'
    compensation insurance is provided by a State-run monopoly in
    four States: Ohio, North Dakota, Washington, and Wyoming. The
    absence of private insurers there deprives employers of product
    choice in such a noncompetitive market.
        In North Carolina, a rate bureau promulgates insurance
    rates. The State's rate bureau has been compared to a cartel
    because insurance companies set and use the bureau rates,
    depriving customers, buyers of insurance, of a choice.
        In California, regulatory overreach has disrupted the
    insurance market in three ways: by prohibiting insurers from
    incorporating reinsurance costs into ratemaking; by prohibiting
    insurers from factoring current weather trends into rate
    calculations; and by allowing intervenors to challenge rate
    change requests with the implementation of the intervener
    process intransparent. As a result, many national insurers are
    curtailing their California insurance business.
        ESG mandates can also impact the availability and cost of
    insurance if insurers are barred from insuring certain energy
    risks; because power plants cannot operate without insurance,
    they will find coverage outside the standard market from
    Lloyds, or from the surplus insurance marketplace, where costs
    are generally higher.
        ESG mandates can also adversely impact the insurance
    industry's large investment portfolio. The property and
    casualty industry holds $1.2 trillion in bonds. Life insurers
    hold an additional $3.4 trillion in bonds. This is nearly 10
    percent of the aggregate $51-trillion U.S. bond market.
        If ESG mandates compel or prohibit investment in certain
    issues, insurers' investment income can be compromised, leading
    to higher insurance rates to meet shareholder return
    expectations. The core activity of insurers is to allocate
    capital to risk. Premiums reflect risk magnitude. Past losses
    and claims payments are signals that inform insurers about
    risk. If government bodies mandate rating factors that
    insurance companies may or may not incorporate into pricing,
    rate is decoupled from risk, and the market is disrupted. If
    insurers are coerced to price policies without regard for risk
    magnitude, they will abandon markets.
        If ESG is mandated, with the government replacing the
    judgment of the private sector, it will have deleterious
    impacts, but if it is private sector-driven, it can be a useful
    tool in the toolkit. Mandates impacting insurers' coverage,
    price, or investment decisions render insurers less able to
    fulfill their three critical roles in the economy: paying for
    claims from disasters and other losses, enabling businesses to
    take on risks that they would not otherwise take; and buying
    municipal, government, and corporate bonds to support our
    nation's infrastructure and to satisfy America's need for
    capital in corporate America. Because the insurance industry
    plays such a vital role in the economy, mandates that may
    disrupt the industry deserve serious consideration. Exploration
    of the impact of ESG on insurers is, therefore, a timely and
    important undertaking.
        Thank you for having this hearing, and thank you for
    listening to my views. I look forward to your questions.

        [The prepared statement of Mr. Theodorou can be found on
    page 60 in the appendix.]

        Ms. De La Cruz. Thank you. Ms. Nagy, you are now recognized
    for 5 minutes to give your oral statement.

    STATEMENT OF CAROLINE NAGY, SENIOR POLICY COUNSEL FOR HOUSING,
     CORPORATE POWER, AND CLIMATE JUSTICE, AMERICANS FOR FINANCIAL
                              REFORM (AFR)

        Ms. Nagy. Thank you. Vice Chair De La Cruz, Ranking Member
    Cleaver, and members of the subcommittee, thank you for the
    opportunity to present testimony on behalf of Americans for
    Financial Reform. We are a nonprofit, working to lay the
    foundation for a strong, stable, and ethical financial system,
    one that serves the economy and the nation as a whole.
        Our housing and climate change crises are taking a
    tremendous toll on everyday working people. Following years of
    heavy losses from climate-exacerbated natural disasters,
    insurers in States across the country are raising rates and
    pulling out of markets altogether. Just this week, Farmers
    Insurance announced that it will pull out of Florida. In
    Louisiana, 11 insurers have gone bankrupt in the last 2 years,
    and 10 have left the State, and this is just the beginning.
    This problem will continue to grow worse each year, each
    decade, until the climate crisis is mitigated.
        This hearing also comes at a time of unprecedented housing
    unaffordability and homelessness. In 2021, the number of
    tenants with unaffordable rents reached an all-time high, with
    49 percent of U.S. renters paying more than a third of their
    income on rent. Although homeownership is still a goal for
    many, it is increasingly unattainable when high rents hamper
    the ability to save for a down payment and home prices continue
    their meteoric ascent.
        In terms of factors influencing insurance prices, with the
    exception of the National Flood Insurance Program (NFIP),
    insurance is regulated at the State level, and our States are
    home to a broad diversity of political viewpoints. Some, like
    California, have adopted more-stringent consumer protections,
    such as procedural limits on rate increases, while other
    States, like Florida, have passed anti-ESG laws. Yet, insurers
    are raising rates and withdrawing coverage in both of these
    States, which indicates that ESG is not the main driver of
    insurance unaffordability.
        What, then, is behind these price increases? First,
    obviously, climate change is contributing to increasingly-
    frequent and severe natural disasters. This has translated into
    massive, often unsustainable losses for insurers. Climate
    change is, in effect, upending the risk calculus on which our
    insurance system has been based.
        Second, reinsurance rates for catastrophic property
    coverage have greatly increased in recent years. July
    reinsurance renewal costs have increased--that is this July--by
    30 percent to 50 percent for some U.S. policies. The
    reinsurance market is global and unregulated, meaning that we
    have little to no control over their rates or what they do.
        Third, unsustainable land use practices. Many States and
    localities continue to permit or even encourage new housing
    construction in disaster-prone areas. These problems are
    obviously very complex, and there is no one simple solution.
    This really requires many agencies and levels of government
    acting in tandem to truly meet this challenge.
        First, we need to support climate financial regulatory
    efforts. Financial regulators and institutions must manage and
    mitigate climate financial risks. Many lenders and insurers are
    contributing to the climate crisis by internalizing short-term
    profits through their investments in risky, carbon-intensive
    industries, while externalizing the costs onto their consumers,
    and ultimately withdrawing when the physical climate risks get
    too high.
        We must also improve insurance data collection. Right now,
    we do not even have access to the data necessary to understand
    insurance trends on a national level, which is why we support
    the Federal Insurance Office's limited data request for ZIP
    Code-level data on homeowners insurance policies, and we urged
    the Office to go further in seeking more granular data.
        We should consider developing a public reinsurance program
    for States. Reinsurance price increases are a major driver of
    insurance pricing, and a public reinsurance program could allow
    States and communities to opt in, in exchange for agreeing to
    consumer protections and limiting or ending development in
    hazardous areas.
        We must support climate-resilient communities. The
    Inflation Reduction Act provided a large amount of Federal
    funding to make our homes more energy-efficient and climate-
    resilient. FEMA also has hazard mitigation grants and buyout
    programs, and these resources are deeply needed, and we will
    need more of them just to meet the current demand.
        We need to support States in lowering disaster losses by
    limiting or ending new development in hazard-prone areas,
    investing in climate-resilient infrastructure, and requiring
    insurers to provide premium reductions when property owners
    undertake home hardening improvements that will improve their
    vulnerability.
        My testimony has mostly focused on insurance. With regards
    to housing, we should require tenant protections on FHFA-
    financed properties and crack down on private equity abuses.
        Thank you for the opportunity to provide testimony on these
    urgent issues. I look forward to answering your questions.

        [The prepared statement of Ms. Nagy can be found on page 71
    in the appendix.]

        Ms. De La Cruz. Thank you. We will now turn to Member
    questions, and the Chair now recognizes herself for 5 minutes
    of questioning.
        My background is in insurance and financial services. I
    have been in that industry, or was in that industry for over 20
    years, so I find particularly interesting the comments, and
    suggestions, and your thoughts as witnesses for this
    subcommittee hearing. Coming up to Washington, D.C., as a small
    business owner myself, and never having a political position
    besides this one, I have found it very disturbing how, when I
    sit in these meetings, the answer always seems to be more
    government regulation, more government involvement, or rolling
    out the government checkbook in order to help people all over
    this country, when as a small business owner myself in the
    past, I thought the answer was often looking at my own business
    and seeing what I could do for efficiency, how I could help my
    customers and my consumers.
        Ms. Nagy, you mentioned Florida, and I am from Texas, so
    Florida and Texas have a unique kinship in how California has
    had stricter regulations when it comes to price increases for
    insurance versus California and Florida. The first thing that
    comes to mind is the company that I worked with--just because
    something happens in California and they regulate more, does
    not mean that the prices go away or the increases go away.
    Instead, that price is actually distributed to all of those
    other people to absorb the decisions that States like
    California make.
        During the time of historic inflation, we just heard how
    the president of the National Association of Home Builders said
    that nearly a quarter of average sales for new family homes
    have been due to some of this increasing regulation, this ESG
    policy. In addition, add on to that the historic inflation
    under the Biden Administration. Could you please share with me
    how we might be able to look at, instead of having more
    regulations, ways that we could cut regulations and reduce
    costs that would ultimately be handed down to the consumer to
    be able to purchase more homes, to get more insurance?
        Ms. Nagy. Thank you, Congresswoman De La Cruz. When
    thinking about the State-to-State differences, sometimes it is
    hard to make comparisons, because Florida has had a lot of
    hurricanes in recent years, and Texas and California have not.
    I think, though, if I was going to choose where I would rather
    be a consumer of insurance, I would pick California. In
    California, the insurance premiums are significantly lower; for
    a home worth $500,000, an average rate payer in California is
    paying $1,822, compared to $4,629.
        Ms. De La Cruz. I am going to interrupt you right there.
    You are comparing apples and oranges.
        Ms. Nagy. Yes.
        Ms. De La Cruz. We just talked about how insurance is based
    on risk. In the State of Florida, you have hurricanes, just
    like South Texas, where I am from. There is also high wind risk
    as well that you do not have in California, so it is unfair to
    compare the costs because the cost of insurance is based on the
    amount of risk. You do not have hurricanes, and you do not have
    the same wind elements that you have in South Texas or in
    Florida, so we think it is unfair to compare those two when you
    are talking about apples and oranges.
        In the State of Texas, the National Flood Insurance Program
    (NFIP) was just recently here asking for more money because
    they are going broke. They took flood insurance away from
    insurance companies like my own and made it a government
    program, and guess what? We were asked to waive their debt
    because they are absorbing--and when I say, ``they,'' I am
    talking about the American taxpayer--the cost of these
    government subsidies. So, I have real concerns about further
    government regulation and the ultimate cost to consumers. With
    that, I yield back.
        I now recognize the ranking member of the subcommittee, the
    gentleman from Missouri, Mr. Cleaver.
        Mr. Cleaver. Thank you very much, Madam Chairwoman. I love
    my grandmothers, both my maternal and paternal grandmother. I
    loved spending the night with my maternal grandmother because I
    could make no mistakes. I could do nothing wrong. The only
    problem I had is when she wanted me to go to the store, which
    is not a bad thing, except that I had to pass by Ms. Nancy's
    house. Ms. Nancy had a Rottweiler, and I explained to my
    grandmother over and over and over that I was scared of that
    Rottweiler, whose name was Satan. She would say, do not worry
    about the Rottweiler. Just do not look him in the face. Just
    walk by. She did not tell him that because he tried to climb
    the fence on me every time, so I learned the lesson that
    ignoring something will not make it go away and will not make
    it friendlier. If it can get out, it will be Satan on this
    whole planet if we continue to ignore climate change.
        Ms. Nagy, there is a growing concern about the lack of
    capacity in the insurance and reinsurance markets and the
    downstream impact it is having on consumers and property
    owners, mainly through massive cost spikes, coverage
    limitations, and exclusion of risk. Even worse, the problem is
    reaching crisis levels and has begun to raise serious alarm
    across the entire financial system, with trillions of dollars
    in uncovered and uncoverable risk. How do we stabilize the
    situation and prevent massive exposure to taxpayers in the wake
    of these disasters?
        Ms. Nagy. Thank you for that question, Congressman. I live
    in upstate New York, and as I testify before you today, my
    neighbors in upstate New York and in Vermont are facing the
    heartbreaking loss of life, and the devastation of homes,
    businesses, and beloved local institutions, all from an
    unusually severe rainstorm. I think we can say that this is no
    longer an issue that is a hypothetical. It is here right now.
    We all saw this very House building shrouded in wildfire smoke
    from the devastating Canadian wildfires that burned a greater
    area than any previous year on record, even before the wildfire
    season had begun, not to mention that we just went through the
    hottest June in recorded history.
        Financial regulators and institutions must manage and
    mitigate climate financial risks, not simply push the costs off
    onto consumers. Many lenders and insurers are contributing
    significantly to the climate crisis by internalizing short-term
    profits through their investments, and financial regulators
    really need to monitor these risks and risk management methods
    to protect consumers, financial institutions, and the financial
    system.
        In terms of how we can support localities, the first thing
    that we need to do is support hazard mitigation planning
    programs and buyouts where they are desired by the property
    owners. Land use is a very local issue, and there are rare
    times when Federal programs or regimes really impact things at
    that level but given the incentives for local governments to
    increase property tax revenue, there is always going to be a
    need to provide better incentives for States to reduce this
    development.
        I think also in terms of planning grants, hazard
    mitigation, and building stronger building codes, one person's
    unnecessary regulation is another person's life saver. I think,
    as we all saw with the recent implosion of the Titan
    submersible, regulations do have benefits, they do protect
    people, and I know I would rather be in a safer, more-resilient
    building in the case of any emergency.
        Mr. Cleaver. Thank you very much.
        Mr. Boor, would it not be better if we were spending a
    couple of hours dealing with this problem that is real, rather
    than debating whether or not we ought to do anything, and all
    of the issues that we do not want to pay any more money, we
    have to then write regulations? Would it be better if we spent
    the time trying to figure out how we deal with this problem
    that is not going to go away?
        Mr. Boor. Yes, I absolutely agree. I think the industry's
    position is we want to make progress, and we have made good
    progress. I will give you a little bit of background, when the
    DOE early on in the process of promulgating these rules----
        Chairman Davidson. [presiding]. The gentleman's time has
    expired. I now recognize the gentleman from Missouri, Mr.
    Luetkemeyer, who is also the Chair of our Subcommittee on
    National Security.
        Mr. Luetkemeyer. Thank you, Mr. Chairman. Mr. Theodorou, I
    want to focus for a second on some of the self-inflicted
    problems in certain State insurance markets like California,
    which you mentioned, that seem to have a regulatory bias
    against insurers transferring risk from their balance sheets to
    the global reinsurance marketplace. From what I have seen, the
    ESG regulatory activism in California might be the worst of
    all. Right now, California is the only State in the country
    that does not allow insurers' rates to be based on their actual
    reinsurance costs, so as reinsurance costs go up, insurers
    cannot have their rates reflect those higher costs.
        As a result, more reinsurers are starting to treat
    wildfires as a primary risk and not a secondary peril. The cost
    of reinsurance has shot up while the cost to primary insurance
    companies of underwriting wildfire risk has stayed more or less
    flat. The net result here is either insurers have to purchase
    less reinsurance, or they will pull back from issuing new
    homeowners coverage in the State, as three of California's top
    insurers have done in this past year. So, Californians get
    fewer options and higher prices while the willing risk capacity
    of a $630-billion global reinsurance market goes underutilized.
        Mr. Theodorou, does it make any sense to you that
    California would deliberately discourage the use of reinsurance
    at a time when its primary insurers are actively fleeing its
    homeowners market? How would the great use of global
    reinsurance and risk sharing help to benefit Californian
    consumers?
        Mr. Theodorou. Thank you, Congressman Luetkemeyer, for that
    question. Indeed, in California, where the cost of reinsurance
    is not permitted to be included in insurance rate making, you
    have a Catch-22. The reinsurance rates are going up because the
    risk is going up, and the insurers have their hands tied, and
    they cannot get more than a 6.9-percent increase. If it goes
    into the intervener process, it may be extended beyond the 60
    days, so it is unfortunate that California cannot use
    reinsurance to its benefit.
        To the question earlier about reinsurance, reinsurance
    capacity is there. The citizens in Florida got a billion
    dollars of reinsurance from Warren Buffett's Berkshire
    Hathaway, and the Texas Windstorm Insurance Association (TWIA)
    secured over a billion dollars of reinsurance protection from
    the private reinsurance industry, and also from the catastrophe
    (CAT) bond industry. So, reinsurers do have the capital, and
    they are willing to deploy it if they can make a fair margin.
    There are people who are standing on the sidelines, as
    Berkshire Hathaway was last year, when they did not participate
    in the Citizens Program because the rates were inadequate.
        Mr. Luetkemeyer. It would seem to me that if you were
    incentivized to use the reinsurance market more, it would
    actually drive down your costs. I know when I was chairman of
    this subcommittee 6-1-2-years ago, we were working on flood
    insurance, and we wanted to use the reinsurance market to help
    that situation. If we would have done it in the previous 20
    years, we actually would have paid all of our claims, never had
    any tax bills go to the taxpayers, and still have had coverage
    at a minimum rate increase. So, there is a place for it. What
    is the percentage of increase in insurance costs due to ESG
    regulations?
        Mr. Theodorou, do you know offhand?
        Mr. Theodorou. I do not have a number for it. The main ESG,
    not litigation, legislation is directed at State public pension
    funds.
        Mr. Luetkemeyer. Okay. Ms. Huey, one of the questions that
    I have is with regards to the increasing cost of financing
    homes, and how many people are unable to finance a home as
    costs go up due to rules and regulations. Can you give me an
    idea of what the cost of rules and regulations are from the
    standpoint of your average cost of a home? What would be the
    average cost of rules and regulations to the taxpayer or to the
    homeowner?
        Ms. Huey. Yes, sir. Thank you very much for that question.
    The latest study that NAHB has conducted, that was published in
    May of 2021, showed that regulations imposed by all levels of
    government accounted for $93,870 of the average price of a new,
    single-family home, and that average price was around $397,000,
    so that is about almost 24 percent of the price of a new home.
    Our studies also showed that for every $1,000 increase, 149,000
    people are priced out of the market.
        Mr. Luetkemeyer. Okay. For every $1,000 increase in the
    cost of financing a home, 149,000 people are unable to get
    themselves into a home. Is that what you just said?
        Ms. Huey. Yes, sir.
        Mr. Luetkemeyer. Thank you very much.
        Chairman Davidson. The gentleman's time has expired. The
    gentlewoman from New York, Ms. Velazquez, is now recognized for
    5 minutes.
        Ms. Velazquez. Thank you, Mr. Chairman. Ms. Nagy, worsening
    climate-driven natural disasters all over this country, not
    just along the coasts, are impacting the affordability and
    availability of property insurance that helps mitigate risk. A
    recent report by the National Multifamily Housing Council
    indicated that the average increase nationwide for property
    insurance coverage at apartment communities was a staggering 26
    percent through early 2023. In some markets or at some
    properties, like many affordable housing communities, we have
    seen triple-digit increases. Soaring operational costs like
    this are straining property operations and adding to the cost
    of housing. How can this committee work towards providing some
    relief and drive greater capacity in the insurance and
    reinsurance markets to help address the soaring costs faced
    across the country?
        Ms. Nagy. Yes. The issue of insurance for multifamily
    housing, and particularly for new, affordable multifamily
    housing development, is a major issue, and this is another area
    where I think consumer protections do have a role to play. In
    New York City, we are seeing insurers ask questions about how
    many folks living in this apartment are going to be receiving
    Section 8 benefits and in any other area of New York housing
    law, that would be a source of income discrimination.
        Ms. Velazquez. Right.
        Ms. Nagy. With the insurers, we do not know what formulas
    they are using. They really treat their rate setting as a
    proprietary black box, and as a result, we have seen a lot of
    discrimination in how prices are set using algorithmic models
    to model things like crime rates. So, this is obviously an
    issue that is very concerning.
        State regulators really have a role to play there, but so
    does the Federal Government, and that is why the Federal
    Insurance Office's data request is so important. That is why we
    support it, because we really cannot even know what the problem
    is until we get a sense of what is happening at the different
    State levels so we can better come here, as the Vice Chair
    said----
        Ms. Velazquez. So, there is a role for the Federal
    Government?
        Ms. Nagy. Absolutely, yes.
        Ms. Velazquez. Okay. Thank you.
        Ms. Huey, is there anything you would like to add?
        Ms. Huey. No, ma'am. Thank you.
        Ms. Velazquez. Okay. Mr. Huey, it is no secret that low-
    and moderate-income (LMI) communities and communities of color
    are often the most impacted by devastating flooding and other
    climate-related events. Within these communities, affordable
    housing or smaller rental properties can be disproportionately
    impacted as the current structure of Federal flood resiliency
    and disaster mitigation efforts is directed elsewhere. How can
    we leverage Federal resources and tools to drive better
    disaster protection and mitigation efforts toward the most-
    vulnerable communities?
        Ms. Huey. I'm sorry, could you repeat the question?
        Ms. Velazquez. How can the Federal Government redirect
    resources to mitigate the impact of climate change in LMI
    communities and communities of color? How can we leverage
    further resources and tools to drive better disaster
    protection?
        Ms. Huey. Yes, ma'am. Thank you for that question. I
    believe that with all housing, and certainly government
    assistance programs and things like that, if we look at the
    existing housing stock that we have, new construction is
    already so energy-efficient, and we build such a tight house in
    new construction because of the regulations that we have now,
    and we are happy to do that, but if we look at the existing
    housing stock, and I cannot remember the exact number of
    housing that there is, that is where we can address a lot of
    climate change, I believe. Homes and projects that were built
    in the 1970s to give them incentives for better insulation,
    higher Seasonal Energy Efficiency Ratio (SEER) units and HVAC
    units, caulking around the windows, and things like that would
    go a long way in helping climate change.
        Ms. Velazquez. My time is up. Thank you, Mr. Chairman.
        Chairman Davidson. I thank the gentlewoman. The gentleman
    from South Carolina, Mr. Norman, is now recognized for 5
    minutes.
        Mr. Norman. Thank you, Mr. Chairman. Ms. Nagy, let me ask
    you a question I asked some environmental activists who came by
    my office: Do trees have lives? Do trees have lives like
    people? Do they grow, and then there is a point that they die?
    I asked the activists the same question, and they said, what
    are you getting at? I said, it is a very simple question, do
    trees have lives, and they actually said, no, it is left
    untouched. In California, if you ask any forester the reason
    why you have forest fires, it's because you have these
    regulations that are letting thatch build up 2 and 3 feet. That
    does not make sense, and then for the commissioner in
    California to let government bureaucrats dictate rates that
    private insurers can charge is ludicrous.
        In your role, you have a great example to actually go talk
    to a forester, and it can be maintained. If you are never going
    to cut a tree, if a tree lives forever, if you are never going
    to cut them and log them at a proper time to allow nature to
    take place, to allow the forest to breathe, if you are never
    going to take thatch away, that is kind of a tinderbox. Then,
    you have a problem, and that is a lot of the reason that
    California is having the problems that they are having.
        Mr. Boor, in your industry, you serve over 22 million
    Americans who buy manufactured housing. You and I were talking
    the other day--and I appreciate you coming by--about some of
    the issues you are facing with this rule in the most-affordable
    housing market that there is. If you go into a manufactured
    housing plant, they are doing an amazing job that site builders
    cannot do. It is controlled by a building such that rain and
    weather does not affect it. Tell me some of the things you were
    telling me about these regulations that are going to ruin the
    most-affordable housing and the most-promising housing in the
    country. Go over a few things.
        Mr. Boor. Yes, I appreciate the opportunity. I think, to
    your point, manufactured housing really is serving the lower
    price point. When we talk about affordability, people tend to
    talk about it at the median, and I think we are at the place
    where the rubber meets the road of whether or not people can
    buy a house. Yes, to give you some specific examples about the
    changes that would be required by these regulations, we would
    have to build thicker walls. You go from 2-by-4----
        Mr. Norman. Give me an example, from 2-by-4 to what?
        Mr. Boor. 2-by-4 to 2-by-6.
        Mr. Norman. 2-by-6.
        Mr. Boor. We would have to dramatically increase the
    insulation. That would cause us to increase eave heights. By
    doing that, we have to get higher-pitched roofs that, frankly,
    would not work for the transportation of many of our homes to
    sites. It would require heating and cooling equipment that,
    frankly, is not available to our industry right now in the
    sizes that would require and there are a lot of aspects like
    that on windows that would require argon gas, for which our
    industry currently does not have a supply. So, we would be
    redesigning hundreds of thousands of floor plans and trying to
    get those approved through the Design Approval Primary
    Inspection Agency (DAPIA) process and the HUD certification. It
    would be a very difficult transition for sure, but it would
    dramatically change the design and increase the cost for
    prospective homebuyers.
        Mr. Norman. Would not it be behoove someone who has been
    putting regulations on you--it does not matter what agency--to
    come to your plant? When I have a problem, I go to carpenters.
    I do not go to bureaucrats who would not know a nail from a
    toilet. So, would it not behoove those making regulations to
    come by your plant or come by a plant and look at it?
        Mr. Boor. Yes, and we have another process under HUD where
    if you have worked through the HUD process, we have a consensus
    committee there that is made up of consumer advocates, people
    from the industry, who can help to understand how to come up
    with regulations that actually work for our industry, and that
    is what we encourage at the front end of DOE's process. I
    started to speak earlier about how at the front end, myself and
    other CEOs in the industry met with White House staff, and our
    message was, hey, we are on board, let's go raise the standards
    for energy efficiency, but let us be part of that so that we
    can make sure the mandates and rules that are put forth
    actually work for our industry.
        Mr. Norman. Agencies work for us. We do not work for
    agencies. We pay their salary. A lot of times, that is
    forgotten in the real world of America and the real world of
    business. I would just urge you to keep at it, and invite every
    one of the panelists to a plant, and let them take a look at
    it. Thank you so much.
        Mr. Boor. Sounds good. Thank you.
        Chairman Davidson. The gentlewoman from Michigan, Ms.
    Tlaib, is now recognized for 5 minutes.
        Ms. Tlaib. Thank you so much, Mr. Chairman. This is, I
    think, our third hearing on this. It is bizarre to me, because
    one of the things that I have been really appreciative of in
    previous Administrations, and others have been talking about,
    is movement around weatherization and even manufactured homes,
    doing the kind of upfront, and it does cost money upfront, but
    it leads to reducing reliance--energy efficiency actually leads
    to lower bills for many of the families, and they cannot afford
    it, so it is not all going right out the window. We do not have
    some of those investments at the front end.
        So it is really bizarre for me, and we continue to hear
    this as, oh, the whole housing crisis is because of this. I am
    taken aback, because we all know it existed before ESG even was
    invented or created. I know in my district, for instance, the
    tax foreclosure crisis was just unbelievable. We had one of the
    worst tax foreclosure crises in the country. These are families
    who actually own their homes, but they could not pay their
    property taxes. ESG had nothing to do with it. Nothing.
    Actually, probably if it did, maybe there would have been some
    sort of best practices or policies implemented, but they are
    also acting like ESG is binding. Is ESG binding, Ms. Nagy?
        Ms. Nagy. It really depends on whether, by law, it is the
    standard.
        Ms. Tlaib. Yes, they decide. Is it binding?
        Mr. Theodorou. It depends on the legislation and possible
    litigation.
        Ms. Tlaib. I know, but right now, are ESG policies binding?
        Mr. Theodorou. They are not.
        Ms. Tlaib. It is advisory, right? It is like, you should
    look into this.
        Mr. Theodorou. It is a factor that can be looked at because
    it may have correlation with risk magnitude, and it is
    consistent with fiduciary duty in the investment community.
        Ms. Tlaib. Sure. How about you, ma'am?
        Ms. Huey. Code requirements are binding. Yes, ma'am.
        Ms. Tlaib. They are binding. They are requiring them to
    look at these things because what, because it is actually
    increasing their mortgage payments? Is it increasing the cost
    of homes? I do not understand.
        Ms. Huey. The 2021 energy code would increase the cost of a
    home--I think some of our members say about $31,000 in their
    area.
        Ms. Tlaib. One of the things that my colleagues talk about
    is manufactured homes, and it is about 11 percent, I think. Is
    it 11 percent, Mr. Boor, of single-family homes are
    manufactured housing? Is that correct?
        Mr. Boor. Yes, from that to the mid-teens.
        Ms. Tlaib. Yes. One of the things that they were trying to
    advance is energy-efficient standards for manufactured homes,
    which many have claimed have made them unaffordable. The data
    shows that the cost to comply with energy standards, actually
    those improvements reduce maintenance and utility costs for
    manufacturing and housing residents in the long term. Is that
    correct?
        Mr. Boor. That is not correct.
        Ms. Tlaib. Really? Why is that?
        Mr. Boor. There are----
        Ms. Tlaib. Tell me, because you are all acting like this
    environmental, the whole little policies around looking at the
    fact that we have a climate crisis, is increasing the cost of
    manufactured homes, which we all know is because of private
    equity firms, because of investors. Ms. Nagy, you know I am
    right. All of this existed before that, and now that we are
    telling them, hey, you have to be more responsible, then all of
    a sudden, we are saying, no, no, no, no, no. You know that you
    are the reason we have to increase costs on these folks.
        Mr. Boor. Private equity firms are not generally involved
    in the manufacture----
        Ms. Tlaib. I am just telling you, this is over-generalized
    because it is only 11 percent of your business.
        Mr. Boor. If you allow me----
        Ms. Tlaib. You are saying right now that is not the reason
    that manufactured homes are rising in cost. You are saying it's
    ESG.
        Mr. Boor. I am saying it is a contributor and it is
    binding.
        Ms. Tlaib. It is a contributor?
        Mr. Boor. It is a contributor.
        Ms. Tlaib. When did ESG come up in the manufactured homes
    industry?
        Mr. Boor. ESG is a framework.
        Ms. Tlaib. When?
        Mr. Boor. It is the mandates----
        Ms. Tlaib. When? When did it come about? When did they
    start talking about it? 2019? 2018?
        Mr. Boor. We are facing these DOE requirements----
        Ms. Tlaib. When did they start talking about ESG in your
    industry? No, I really mean it, because this is the bizarre
    thing; I never even heard of ESG until now. I am really
    curious, because to me and my families have seen the rising
    cost of housing, but not because of ESG. It is because of all
    of the other issues I wish we would be more targeted around
    talking about, because a majority of the homes in my district
    are less than $100,000, but we cannot get some of these banks
    to actually loan to them because it is not profitable.
        So, somebody who wants to buy a $60,000 or $70,000 home in
    Wayne County, Michigan, cannot find somebody to lend to them
    because it is not profitable. Literally, everybody else is
    swallowing up these homes, because 60 or 70 investor firms come
    together, buy a bunch of them, and turn them into rental
    properties. We literally have a block where two people own
    their homes. The rest of them are renters, and they are paying
    way more than what they would have paid if they had gotten a
    mortgage from some sort of banking industry.
        I am not disrespecting you all, but please do not make this
    about ESG. You are actually failing your members, and your
    industry, and literally your sector by focusing on ESG and not
    the root causes of why the cost of housing is going up in our
    country.
        Chairman Davidson. The gentlewoman's time has expired. I
    will note that votes have been called. There are 12 minutes
    remaining, and about 412 people who have not voted yet, so
    given the number of people who are here, my plan is to come
    back. If you would like to ask questions, we will continue the
    hearing immediately following votes. I would ask Members to get
    your final vote in early so we can come back and get some
    semblance of a quorum here and move forward with questions.
        Before we adjourn, I think we have time for at least one
    more, so I will now recognize the gentleman from Wisconsin, Mr.
    Fitzgerald, for 5 minutes.
        Mr. Fitzgerald. Thank you, Mr. Chairman. For about 150
    years, State insurance regulators and laws have regulated
    insurance companies. The Federal Insurance Office (FIO) has
    grown increasingly aggressive in collecting data from insurance
    companies, most recently issuing proposed data collection to
    assess climate-related financial risk. The FIO intentionally
    chose to not collaborate with State regulators on this climate
    data call. Treasury's own proposal concedes it could take 350
    hours for the industry to produce the data. That is why I plan,
    and I think some other members of the committee will be part of
    this, to repeal the FIO's subpoena power in the coming weeks.
        Mr. Theodorou, can you just quickly discuss the Federal
    Insurance Office and their accumulation of power in recent
    years?
        Mr. Theodorou. Thank you, Congressman Fitzgerald, for the
    question. Indeed, the Federal Insurance Office was created as
    part of the Dodd-Frank Act because it was thought that
    insurance companies were, in part, responsible for the global
    financial crisis, which was not the case. It was banking and
    some nonbank lending institutions, and the role in statute of
    the FIO is to monitor the insurance industry. There are no
    regulatory powers there.
        As you have suggested there, Congressman, there has been
    more intrusion and requests, data calls, and I think
    duplicative data calls because most of the large insurers,
    especially the publicly-traded ones, already make detailed
    granular climate disclosures, either in their 10-K or in other
    publications or disclosures. So to me, it is disturbing that it
    is like the nose of the camel is in the tent, and then the rest
    of the body is going to follow. It strikes me as an agency that
    is looking for a purpose because monitoring and writing reports
    has not helped the industry, that I have seen, in a material
    way.
        Mr. Fitzgerald. Yes. Ms. Huey, can you talk about the
    importance of giving communities the flexibility of more self-
    sufficiency in their ability to protect themselves in the face
    of things like floods and wildfires and tornadoes? This is what
    the industry is looking at is, what are the risks associated
    with what we have seen, not necessarily in climate change, but
    just some of the extreme weather that we have seen.
        Ms. Huey. Yes, sir. Thank you very much for the question.
    Local decision-making is critical as local experts are more in
    tune to the local conditions and the needs of those communities
    and municipalities, but with that authority must come the
    flexibility to do what makes sense for the community. For
    example, in the codes arena, local governments must retain the
    ability to amend model codes to accommodate local conditions
    and cost-effectiveness concerns, which include consideration of
    risk and reasonable steps that can be taken to reduce those
    risks. Communities must also be open to reconsidering local
    zoning and helping developers overcome NIMBY (Not In My
    Backyard) and other challenges so that development can occur in
    places that are best suited for community growth and where much
    of the market needs it to be.
        Mr. Fitzgerald. Very good. Thank you. Mr. Chairman, I will
    just ask unanimous consent to enter a Department of Energy
    press release into the record. I think the featured press
    release from DOE is very telling.
        Chairman Davidson. Without objection, it is so ordered.
        Mr. Fitzgerald. Mr. Boor, does the rule from DOE that we
    were talking about earlier in any way affect mobile homes? Will
    this help anyone currently residing in a mobile home? I cannot
    see where this would help them.
        Mr. Boor. No, the rules would affect new homes, so no one
    currently in a home would be helped.
        Mr. Fitzgerald. Will this help anyone currently residing in
    a manufactured home?
        Mr. Boor. No.
        Mr. Fitzgerald. No.
        Mr. Boor. Only new homes will be subject to it.
        Mr. Fitzgerald. Yes. So, what you are telling me is that
    DOE probably does not even understand or fully understand the
    rule that they have actually issued?
        Mr. Boor. Yes, I think their assumptions about the benefits
    are dramatically overstated.
        Mr. Fitzgerald. There is probably an underlying
    misunderstanding about your industry, right? Can you just talk
    about this?
        Mr. Boor. The rules are based on site-built standards, and
    our processes just do not work that way. We can get a lot of
    the benefits. We have done a separate study through the HUD
    committee, and we can get a lot of the way to where they are
    trying to get from energy efficiency, but with process-
    appropriate approaches.
        Mr. Fitzgerald. Yes. This is real-world, tangible stuff,
    whether it is 11 percent, like my colleague just referred to,
    or some other percentage of Americans who are living in
    manufactured homes. This is real to them. There is real cost
    associated with it.
        Mr. Boor. Yes.
        Mr. Fitzgerald. There are departments like DOE that, quite
    honestly, are out of touch with what is going on in the
    streets, and that is really what this committee should be
    about. So thank you, and I yield back.
        Chairman Davidson. I thank the gentleman. I now recognize
    the ranking member of the full Financial Services Committee,
    the gentlewoman from California, Ms. Waters, for 5 minutes.
        Ms. Waters. Thank you very much, Mr. Chairman, for this
    important hearing that you are holding on housing, and
    particularly, as I understand it, as it relates to ESG.
        I would like to bring to your attention a particular issue
    that I think so many Americans are facing right now. For Ms.
    Nagy, the number of people paying unaffordable rents recently
    reached an all-time high, with the average U.S. renter now
    paying 30 percent or more of their income on rent. Monthly
    mortgage payments have also reached all-time highs, surpassing
    $2,900 per month. In fact, in my State of California, someone
    making the minimum wage would need to work nearly 3 full-time
    jobs to afford a 2-bedroom rental home.
        California is not alone. There is currently not a single
    State or county in the United States where a minimum-wage
    worker can afford fair market rents. Meanwhile, corporate
    landlords, who continue to grow their market share of housing,
    have used inflation as an excuse to hike rents and accumulate
    excessive profits on the backs of tenants. This is why last
    month, I introduced the Housing Crisis Response Act of 2023,
    which would make historic investments to increase our nation's
    affordable housing supply, reduce rents, and help end
    homelessness. Do you believe Federal investments are needed to
    fully address the nation's worsening housing and homelessness
    crisis?
        Ms. Nagy. Yes, absolutely, Congresswoman. We have a severe
    national shortage of homes that people with the lowest incomes
    can afford. Nationally, we need 7 million homes that are
    affordable to Americans who live below the poverty line or who
    earn below 30 percent of the area median income. Unfortunately,
    because of actors like Blackstone, we are losing what remains
    of our affordable housing stock at a rate faster than we can
    replace it due to rising rents and stagnant incomes. Many homes
    that were once affordable to lower-income people have seen
    their rental or purchase prices increase; in just 3 years, 36
    States lost more than 10 percent of their lower-rent units, and
    14 States lost 15 percent. So, we do need to build a lot more
    affordable housing, and we need zoning reform to do it because
    in much of the country, only single-family zoning is allowed.
        We also need to look at the Federal Government's role here.
    The FHFA spends billions of dollars purchasing and guaranteeing
    multifamily properties. As we have seen, this has really
    resulted in very poor conditions for some tenants, because
    there are some deals that only pencil out if you evict the
    lower-paying tenants or if you skimp on maintenance and
    repairs. The FHFA has a number of requirements for receiving
    it, some loan guarantees, and I think it is past time to
    consider the well-being of the folks who live in these
    buildings, because while housing is regulated at the local
    level, this is a national problem, and the Federal Government
    does have a role to play here.
        Ms. Waters. Thank you so much. Given all of this
    information, all of this knowledge, and the crisis that we have
    in this country, do you support the Federal investments for
    affordable housing in my bill, the Housing Crisis Response Act,
    including specific investment for green and resilient housing?
        Ms. Nagy. Yes, absolutely. The resources in that bill
    really should have been passed earlier, because we have a huge
    need in deferred maintenance and public housing.
        Ms. Waters. I want to ask Ms. Huey the same question. Do
    you support the Federal investments for affordable housing in
    my bill, the Housing Crisis Response Act?
        Ms. Huey. Ma'am, I know that we have supported your
    legislation in the past, and I believe that our association is
    looking at that legislation. So, we are looking into it, yes,
    ma'am.
        Ms. Waters. Thank you. Keep looking. I yield back the
    balance of my time.
        Chairman Davidson. I thank the gentlelady. Recognizing that
    we have 2 full minutes remaining for votes, we will adjourn. It
    should be roughly 11:00 when we come back. I would estimate it
    might take until 11:10 or so if we wrap up there. So, I guess,
    be prepared in that time range. I correct that. We will not
    adjourn. We will recess. We will adjourn at the end of the
    hearing.
        The subcommittee stands in recess.
        [recess]
        Chairman Davidson. The committee will come to order.
        The gentleman from Nebraska, Mr. Flood, is now recognized
    for 5 minutes.
        Mr. Flood. Thank you, Mr. Chairman. Mr. Boor, one of the
    most detrimental regulations impacting the manufactured housing
    industry has been the Department of Energy's proposed energy
    conservation standards for manufactured homes. This regulation
    would impose stringent new requirements on the construction of
    manufactured homes, raising costs on one of the few affordable
    options for consumers, especially in rural areas like Nebraska,
    in my district. Fortunately, the DOE has decided to delay the
    compliance date for this rule after significant stakeholder
    feedback. Can you speak to the impact this proposed rule would
    have on the production of manufactured homes?
        Mr. Boor. Yes, thank you for the opportunity. We have
    processes under the HUD code where every plan for a house is
    engineered and approved. The rules would cause us to basically
    have to redesign every floor plan because of costs that are
    added in the weight of the house, the thickness of walls, the
    elevation of the roofs, and the number of windows that could be
    included. So, it is really a complete redesign of all of our
    designs that would then have to go through a recertification
    process. A lot of the costs involved are the actual changes to
    the design once you get through that process.
        The other thing that is still undetermined is how the DOE
    rules would actually be tested, how the compliance process
    would go. We estimate that could cost another $1,500. What I
    would like to point out is that it is hard to give you one
    number as far as the total cost because we have different house
    designs, and each one is going to be a little bit unique, but I
    think a rough number for the actual changes to the design might
    be in the range of $6,000. There is a big range around that.
    Add another $1,500 potentially for the cost of compliance,
    which has not really been defined by DOE at this point, so
    let's just say, $7,000 to $7,500.
        That may not sound like a lot, but I will make two points.
    One is the typical cost-benefit analysis looks at, will that
    money get paid back for the homebuyer over 10 years? Using
    DOE's analysis, which we do think is somewhat flawed, but we
    did not change it, we just updated for current costs, for the
    vast majority of our homes, that would not get paid back, and
    the bigger point is that $7,000 for a customer might be
    $50,000.
        Mr. Flood. I appreciate your answer. I am going to reclaim
    my time. You and I are on the same page.
        Mr. Boor. Okay. Thank you.
        Mr. Flood. People need to understand that. I want to just
    switch gears here and go to the auto insurance market. The
    average California annual rate for auto insurance in 2023 was
    $2,462, and meanwhile, the average rate in my home State of
    Nebraska is $1,538. That is a striking difference of almost
    $1,000 annually. California fashions itself as the home of
    innovation, but its broken insurance and regulatory framework
    does not even allow drivers to voluntarily share telematics
    data with their insurers in exchange for lower rates to reward
    good driving. For those who may not be familiar with the term,
    telematics can be installed in a car to track speed, harsh
    braking, or other indicators that may affect an insurance rate.
    Basically, by allowing drivers to opt into this, you are giving
    them an opportunity to lower their rates by demonstrating that
    they are a good, safe driver.
        Mr. Theodorou, can you discuss how the use of innovative
    technology like telematics in auto insurance could lower rates,
    something Californians miss out on, and of which Nebraskans
    have taken advantage?
        Mr. Theodorou. Thank you, Congressman, for the question.
    Indeed, telematics can lower costs. If we look at the history
    of automobile insurance ratings, we start with bureau rating
    where the rates were set; then segmentation, looking at city
    drivers versus farmers, for example, looking at risk factors;
    then more granular segmentation; and then the development of
    Big Data, so pulling in different data elements because
    insurance companies are, by and large, in the data management
    business. They look at the data.
        Telematics data makes it even more specific by looking at
    things like hard braking or turns that are very abrupt, and it
    feeds this information back to the driver and to the insurance
    company so that the risk, based on the quality of the driving,
    helps to determine the price. The capital is allocated
    according to the level of the risk, so it is sort of
    counterproductive to ignore this kind of data. It is being used
    in the trucking industry; commercial auto insurance is
    benefiting from trucks that have front-facing cameras that look
    at driver behavior, are they falling asleep, for example, and
    feed this data back, and this lowers costs.
        Mr. Floor. Thank you, Mr. Theodorou. I must yield back.
        Chairman Davidson. The gentleman's time has expired. The
    gentlewoman from Texas, Ms. Garcia, is now recognized for 5
    minutes.
        Ms. Garcia. Thank you, Mr. Chairman, and thank you to all
    of the witnesses today. I just want to be mindful of the topic
    of today, ``How Mandates Like ESG Distort Markets and Drive Up
    Costs for Insurance and Housing.'' Mr. Chairman, I have to
    admit, I have sat and listened to all of the opening
    statements, and I am not sure that any one of our witnesses
    really gave us any example or any real data in connection
    between the disclosure requirements, which is simply about data
    and being transparent to disclose what you are doing, to how it
    actually distorts markets and drives insurance costs. I have
    been listening but, again, it is just a reminder to the people
    back home that, again, this is just about transparency. It is
    about making sure we have the data to make the right decisions
    in terms of investors and consumers.
        So instead of addressing real problems that my district
    faces, like high housing and insurance costs and accessibility,
    we are here today because Republicans are trying to forbid
    simple, commonsense data from being available to the public.
    For some reason, they have gotten this anti-ESG and anti-woke
    crusade, whatever that means. It is really perplexing because,
    again, in my district, we are worried about natural disasters,
    we are worried about the next hurricane season, we are worried
    about flooding, because in Houston, and in Texas, generally,
    that has happened more often than we can talk about.
        Ms. Nagy, I think you said California and Florida have a
    lot of floods, and Texas does, too, in Houston, and our region
    is very flood-prone. For us, it is not about if we will have a
    disaster; it is about when it will come, so that is why
    insurance and housing costs are of utmost importance to me and
    my constituents, and it is very, very relevant right now,
    especially as we are facing hurricane season.
        I know that my home State has already tried to dabble in
    this issue. They passed a bill, SB 833, that bans ESG risk
    analysis in the insurance sector, and, surprise, surprise, it
    drew a lot of opposition from a host of insurance trade groups.
    Again, ESG is data and disclosure. I think all our witnesses
    here, frankly, have failed to connect the dots as to how that
    affects the markets, increases the insurance rates, and impacts
    housing. Any Republican-led constraints on risk analysis or
    limitation on data should be seen as antithetical to the entire
    business model of the insurance industry.
        There is now widespread concern that Texas bill will deter
    more insurance companies from entering Texas markets at a
    moment when growing flood risk has already made the Texas
    insurance market highly vulnerable. I have already heard about
    insurance companies leaving other high-growth States like
    California and Florida, as was mentioned earlier, denying
    consumers choices and coverage they desperately need and
    deserve. This is what it is all about, being able to give the
    consumer and the investor the choices to make the right
    decisions based on the data that is disclosed.
        So, Ms. Nagy, I have a question for you. Given that
    insurance is a major channel through which climate risk is
    transmitted to the financial system, can you speak to the
    dangers of restricting insurance companies from using data and
    risk analysis in doing their business?
        Ms. Nagy. Yes. I think I understand. Are you referring to
    the Texas anti-ESG law that prohibits insurers----
        Ms. Garcia. Right, but we do not have to speak specifically
    about the Texas law. I think this is what some of my colleagues
    would like to do nationally, but can you speak to the dangers
    of restricting insurance companies because, again, I think, was
    it you who mentioned that we really have no role in this other
    than the national flood insurance? All insurance goes through
    their State systems for doing business, so I am really not even
    sure why we are having this hearing. We should be focused on
    extending the National Flood Insurance Program, and improving
    it, and making it affordable, and making it accessible,
    especially to flood-prone areas like mine. Apparently, we are
    dealing with it, so could you tell me what the dangers are?
        Ms. Nagy. Absolutely. Climate change is real, and insurers
    need to be able to take that into account when setting rates.
    The public, too, deserves transparency in terms of how our rate
    is being set and where are folks having higher or lower rates.
    I think, both cases--sorry.
        Ms. Garcia. Mr. Chairman, I did have a couple of other
    questions. I will submit them to you for the record to get the
    responses in writing.
        Chairman Davidson. I appreciate the gentlewoman.
        Chairman Davidson. The gentleman from New York, Mr. Lawler,
    is now recognized for 5 minutes.
        Mr. Lawler. Thank you, Mr. Chairman. It is amusing to
    listen to some of my colleagues feign ignorance about ESG and
    the impact it has on the market. They know exactly what impact
    it has on the market because they have been advocating for
    government intervention in our market economy for years. If you
    look in my State of New York, as I mentioned in yesterday's
    hearing, with the New York State pension fund and the New York
    City pension funds, and what they do to try and dictate to
    companies and shareholders, it is remarkable. You look at our
    housing market and you see what New York is doing just this
    year: banning gas stoves, banning natural gas hookups. This is
    a State, and California being another one, where they are
    absolutely seeking to use their influence to upend the
    marketplace. They do not believe in free markets. They do not
    believe in consumer choice. In fact, they are trying to limit
    consumer choice, and what it does is it drives up the cost of
    housing.
        So at the very time they talk about the need for affordable
    housing, when you limit choice within energy, you drive up the
    cost. The average homeowner would have to pay about $30,000 to
    $35,000 to convert their home from gas to electric. That causes
    a more difficult challenge for someone to purchase a home. So
    if we want to actually address the challenge of affordability,
    if we want to reduce costs, then we need to actually allow the
    marketplace to work.
        In New York, 60 percent of New Yorkers rely on natural gas,
    and 70 percent of electricity is generated by natural gas. So
    if we are going to increase the need for electricity by
    converting everyone from gas to electric, how are we actually
    going to create that needed electricity? There are a lot of
    policies that get enacted precisely because of ESG that are
    having a profound negative impact on the marketplace and on the
    economy.
        As I mentioned in yesterday's hearing, New York State's
    pension fund just returned a negative 4-percent return on
    investment, and what does that do? That hurts the taxpayers,
    because the pension fund has a guaranteed 7-percent return, so
    who picks up the tab? The taxpayers, at the same time New York
    is facing a $13-billion budget deficit and California is
    looking at a $35 billion dollar budget deficit. Great policies.
    Really working out well.
        It is a disaster, because we want to say this is what
    should be instead of letting people choose what they would
    like. Most Americans would like companies and corporations to
    focus on their product. You build homes, so build homes. Why
    are you getting involved in politics? You sell goods, so sell
    goods. Stop getting involved in politics. People are tired of
    it, and shareholders certainly want to know that there is a
    return on their investment. Otherwise, why invest in the
    company if you are going to have a loss? What is the point?
    Where do you get the capital from if that happens? We are
    making really bad policy decisions in the name of politics, and
    it is creating havoc all over the place, because politics now
    consumes everything. Leave the politics for the committee
    rooms, for the chamber, and let businesses do what they are set
    up and intended to do. We see every day the impact of this.
        So yes, ESG does have a profound impact on our economy,
    yes, it does have a profound impact on our housing and
    insurance markets. Yes, we should be environmentally-conscious,
    and, yes, we should be making decisions to reduce carbon
    emissions, but we also need to make decisions that allow for
    the economy to grow and that create a situation where we have
    clean, cheap, reliable energy policies that positively impact
    the marketplace. With that, I yield back.
        Chairman Davidson. The gentleman's time has expired. The
    gentlewoman from Georgia, Ms. Williams, is now recognized for 5
    minutes.
        Ms. Williams of Georgia. Thank you, Mr. Chairman, and thank
    you to all of our witnesses for joining us today. Mr. Chairman,
    I would like to ask for unanimous consent to enter this picture
    into the record.
        Chairman Davidson. Without objection, it is so ordered.
        Ms. Williams of Georgia. Thank you. I appreciate the
    opportunity to speak on this topic, because I am living through
    my own experience directly related to the impact of climate
    change on housing and insurance, so I bring my full lived
    experience to this hearing today. If you look at the image
    behind me, this is my 7-year-old son, my Carter Cakes, holding
    a golf ball-sized piece of hail from a hailstorm that was in my
    neighborhood on March 26th of this year. I live in Atlanta,
    Georgia.
        Now, you all might be wondering, what is so extraordinary
    about a picture of hail? It was quite exciting for Carter, but
    that Sunday evening, my entire neighborhood experienced a
    catastrophic hailstorm which dropped these golf ball-sized
    hailstones on our homes, causing so much damage to our roof
    that we had to file an insurance claim. I would like to say
    that the story ends there, but sadly, it does not. Because of
    this extreme weather event, which was out of my control and
    happening more and more frequently, especially in the warm
    State of Georgia, I was notified that my insurance agency,
    State Farm, decided not to renew my homeowners insurance. So as
    of July 29th, I have no idea what I am going to do. My
    husband--who is with me here today--and I do not know what we
    are going to do for homeowners insurance, because State Farm
    will not renew our policy because we filed a claim. I was
    devastated, because this is a necessity for homeowners, and it
    is a requirement for most mortgages, including mine.
        As insurance companies increase premiums and refuse to
    renew policies due to increasingly-common extreme weather,
    first-time homebuyers from marginalized communities will be the
    most impacted. This can ultimately stall any progress that has
    been made in closing the racial wealth gap through
    homeownership, one of the primary drivers of wealth generation
    for Black and Brown communities. This means that in places like
    Atlanta, my home, and, unfortunately, the national leader in
    the racial wealth gap, my constituents' hard-earned equity is
    being destroyed by climate change because it is real.
    Unfortunately, I am not the only American who has been or will
    be dropped by their insurance agency due to extreme weather
    events beyond our control. Just look at the insurance companies
    pulling out of States like California due to wildfires or
    Louisiana due to floods.
        Insurance companies are actively evaluating the risk of
    insuring homes in the areas most impacted by extreme weather
    and realizing how detrimental climate change is for their
    business. Because climate change is real, and it does have an
    economic impact on the long-term profitability of companies,
    clearly, climate change needs to be considered in the decisions
    of insurance companies. We also need to make sure that our
    most-marginalized communities who are most impacted by climate
    change are not prevented from building wealth through
    homeownership.
        Ms. Nagy, am I getting your name right?
        Ms. Nagy. ``Nagy.''
        Ms. Williams of Georgia. ``Nagy.'' What actions can the
    Federal Government take to lower insurance costs for Americans
    and make sure that homeowners remain insured?
        Ms. Nagy. Thank you for that question, Congresswoman
    Williams. I am so sorry that happened to you. That is really
    not fair because you were doing everything you were supposed
    to. You were paying money for your insurance, and it sounds
    like they were happy to take your money----
        Ms. Williams of Georgia. Every month.
        Ms. Nagy. ----when things were going well. Then, all of a
    sudden when you need them, once you actually have a problem,
    they withdraw coverage. That does not sound like a good
    neighbor. That sounds like a fair-weather friend, and you are
    not alone. Unfortunately, 400,000 Floridians lost access to
    property insurance in 2022 alone, so this is what a lack of
    regulation is doing to consumers who are doing nothing wrong,
    and this is a real problem and one where the Federal Government
    should step in.
        Now, obviously, the Federal Government does not regulate
    insurance because it is a State issue, but I do think there are
    things that States can do or that the Federal Government can
    do. I am very interested in examining public reinsurance
    options because, as we know, the reinsurance market is global.
    They are not even in this country, so we do not have very much
    to say about what they are doing with their rates, how they are
    setting them. I think that is one major area to explore, and I
    think you could have buy-ins like consumer protections. You
    cannot just drop people when they have problems. You have to
    continue to provide services or have State-run plans that
    should be more affordable to you.
        Ms. Williams of Georgia. Mr. Chairman, I am out of time,
    but I have many more questions because the impact of this is
    personal for me and my neighbors. I would love to present them
    so that I could get written responses for the record.
        Chairman Davidson. For the record.
        Ms. Williams of Georgia. Thank you.
        Chairman Davidson. I thank the gentlewoman.
        The gentleman from New York, Mr. Garbarino, is now
    recognized for 5 minutes.
        Mr. Garbarino. Thank you. Thank you, Mr. Chairman, and
    thank you to the witnesses for being here. Ms. Huey, I want to
    start with you. When we talk about this issue, no matter what
    trendy new terms or acronyms we are using, I think we are all
    mostly in agreement that we should be doing more to make smart
    upfront investments in homes and infrastructure that will
    ultimately save lives and taxpayer dollars, and do it in a way
    that is not burdensome for homeowners or consumers. For
    instance, we have all heard the statistic that $1 spent on
    resilient construction will save $11 in future costs, but I
    think we often talk about this in the context of new
    construction, which, while very important, results in us losing
    focus on existing homes and ensuring we are giving folks the
    tools they need to upgrade older homes that were built long
    ago. Can you talk about the costs to homeowners and, frankly,
    all Americans, if we continue to ignore older homes and just
    focus on new homes?
        Ms. Huey. Thank you very much for the question. I really do
    think, as I stated earlier, that if we can offer some sort of
    incentives to existing homeowners to upgrade their HVAC units,
    to increase the energy efficiency of their homes--right now,
    the 2021 Energy Code has us going from five air changes to
    three air changes in a home. If you have gotten a window
    cracked, that could be 30 air changes. The house built in 1970
    probably has 30 or 40 air changes in an hour. So if we could
    increase the efficiency of those homes, it would go a long way
    in helping with climate change. Existing homes are already so
    energy-efficient. You are really just tweaking something that
    is not going to make a big difference in the energy efficiency
    of a home, but it is going to cost a lot in new construction.
        Mr. Garbarino. Thank you. Yes, and I just had to have my
    air conditioner fixed. It is about 30-some-odd-years-old, it is
    in the tank, but it is definitely, I am sure, not very
    efficient.
        We just talked about new construction a little bit and
    making home costs more affordable and just better for
    Americans. In New York, there is talk of, and I know my
    colleague brought up, a ban on gas stoves. Currently, between
    60 and 70 percent of New York families have a natural gas
    stove. The State of New York, the Governor, and the legislature
    recently pushed for a gas stove ban for new buildings in its
    most-recent budget. This first-in-the-nation ban will increase
    energy costs for New Yorkers, stress the electric grid, and
    eliminate consumer choice, all while having a minimal
    environmental impact.
        Furthermore, adding further government red tape and
    regulation on new construction will further drive up housing
    costs and that will price working families out. Unfortunately,
    we are seeing these same ill-advised policies pushed on the
    Federal level as well, with recent efforts from the Department
    of Energy and the Consumer Product Safety Commission.
        Ms. Huey, how do these efforts affect the housing industry,
    and, if implemented, would these efforts drive up costs for
    Americans?
        Ms. Huey. Thank you, again, sir, for the question. There
    are many homebuyers who want a gas stove in their home; I know
    that I do. As a home builder, I believe it is my job to provide
    my customers with appliances of their choice. Gas stoves are
    used by 40 million homes nationwide and have proven to be a
    safe and efficient appliance of choice for families for well
    over a century. The recent push from Federal agencies to
    regulate gas stoves will drastically limit their availability
    across the country.
        Recently, for someone, a custom home, and she loves to
    cook. I put in one of the gas stoves, and when we were going on
    the walkthrough, she looked at me and said, ``Is the government
    really going to take my gas stove from me?'' I said, ``No,
    ma'am, they are not.'' Thank you.
        Mr. Garbarino. New York City is trying to get rid of coal-
    fired pizza. It is just brick oven pizza. It is terrible. Last
    question, Ms. Huey, for you. Often, overly-rigid local,
    environmental, and land use standards prevent homeowners from
    being able to make responsible decisions to reduce their risks
    in their homes from devastating natural disasters. One example
    is California, where stringent building requirements have
    hampered infill growth in areas at low risk of wildfires, and
    have instead driven homeowners into the highly-vulnerable
    wildland urban interface, putting them at increasing risk of
    extreme wildfires. Can you talk about the importance of giving
    communities the flexibility to force development that lets them
    be more self-sufficient and protect themselves in the face of
    things like deadly floods, wildfires, and tornadoes?
        Ms. Huey. Yes. Thank you again, sir, for the question. I
    discussed that a little bit earlier, and I believe it is in my
    written testimony. Giving local jurisdictions the choice of
    certain codes that they impose, I think, is imperative because
    the climate in every municipality is different. I am from
    Alabama, from Huntsville down to Mobile, where it is warmer, so
    I think it is imperative that we give the choice to those local
    municipalities. Thank you.
        Mr. Garbarino. Thank you. I yield back.
        Chairman Davidson. The gentleman's time has expired. The
    gentlewoman from Massachusetts, Ms. Pressley, is now recognized
    for 5 minutes.
        Ms. Pressley. Thank you, Mr. Chairman. I have been in
    Congress now for almost 4 years, but prior to that, I was on
    the municipal level for 8 years, and I was an aide for 16
    years, so I have been in government long enough to know that it
    moves slowly, at a deliberate speed. I am a patient woman, but
    on the issue of climate change, we have run out of time, and
    now is not the time for anti-science, anti-environment culture
    wars. Now is the time for action to confront the climate crisis
    because our communities simply cannot afford to wait any
    longer.
        More and more individual lives are being impacted. More and
    more homes and communities are destroyed by natural disasters
    each year, whether it is tornado, wildfire, or hurricane, which
    is one of the many reasons why I am grateful that President
    Biden signed into law my legislation, the Post-Disaster Mental
    Health Response Act but to those who would seek to weaponize
    what it means to be woke, I am unapologetically woke. I am
    awake, and my eyes are wide open, because I owe it to my
    constituents to not look away.
        In my district, the Massachusetts 7th, failure to address
    climate change means greater flood damage to frontline
    communities like Chelsea, Everett, and East Boston. To my
    colleagues across the aisle who seek to obstruct and oppose
    legislation and policies that will help our shared constituents
    around the country protect their homes from climate change, it
    not only alarming that you would move in this way; it is
    downright dangerous.
        Ms. Nagy, since U.S. property catastrophic reinsurance
    rates increased by as much as 50 percent on July 1st, renewals,
    my constituents have had to pay more to protect their homes and
    their livelihoods. Can you highlight the impact of these price
    increases on the insurance rates paid by consumers?
        Ms. Nagy. Yes, thank you, Congresswoman. As I said earlier,
    the reinsurance industry is not located in the U.S., so we
    really do not have any much of a say over the rates. They tell
    insurers, and insurers pay them, and that is how insurers are
    able to then offer their products to individuals. So, the idea
    of having a public reinsurance option for States to opt into
    could be a really powerful incentive to truly limit development
    in some of the most disaster-prone areas, because while we can
    all agree that folks should not be there, at the local level,
    they are often more concerned about property tax revenue above
    everything else, so you get this very short-sighted decision-
    making.
        I think that the Federal Government can do a lot more to
    support making our homes more energy-efficient in new
    construction by having things like induction stoves, and I
    actually did--I am a homeowner who switched out a gas stove for
    an induction stove in the last year, and it was not because I
    am really woke, or maybe I am, but I do not even know what the
    word means anymore, but----
        Ms. Pressley. I'm sorry, I have to reclaim my time, only
    because I am running out of it. I do have one more question for
    you.
        Ms. Nagy. Okay.
        Ms. Pressley. I did want to say again on the issue of these
    price increases on insurance rates, these insurance premiums
    will rise for our constituents if insurance companies and their
    investors continue to bury their heads in the sand and fail to
    account for climate risk. We are already seeing a disturbing
    trend with some of the largest companies deciding to stop
    selling new policies and leaving people without insurance
    coverage at all.
        This is all clearly a result of climate change. It is not a
    question of whether it is going to happen, because it is
    already happening, and investors are saying they do not have a
    good sense of the climate risks that companies are facing. That
    is why it is critical that the government takes action. True
    enough, climate change is an existential threat, and, I would
    argue, so are the so-called leaders who deny that it is
    happening.
        Ms. Nagy, will disclosures for financial and business risks
    associated with climate change, like ESG, strengthen our
    insurance market and help families protect their homes?
        Ms. Nagy. Yes.
        Ms. Pressley. Thank you. I agree, and I yield back.
        Chairman Davidson. I thank the gentlewoman, and I now
    recognize myself for 5 minutes for questions.
        We wanted to have this hearing and talk about the dynamics
    in the market. Frankly, how do you accurately assess risk and
    how do you price risk? It is clear that losses are getting more
    frequent and larger, and when you think about insurance, you
    have to be able to price that in. It costs more money. It
    happens more often. So, how in the world do prices not go up?
    They have to go somewhere.
        If you look in California, they decided they were going to
    impose price controls so that you cannot raise premiums, and
    also you cannot drop customers. So, you go on site and you say,
    the gasoline stored in the outbuilding next to the pine straw
    next to your woodhouse is a risk, we would really like you to
    mitigate it. No, and then the insurer still cannot drop the
    customer? Are you kidding me? You have to be able to price
    risk.
        Part of the goal of the recognition of the ESG code that
    apparently is going to go out of fashion, if I listen to Larry
    Fink--just do not call it ESG--but we are still going to do it.
    They will come up with a new label. It is a shape-shifting
    ideology, but the reality is we are dealing with more-frequent
    and bigger losses. A lot of those are looking at environmental
    places like California with wildfires, and Florida with weather
    events, flooding, and hurricanes, and in my State, more often,
    it is tornadoes, but you have to price that risk in order to
    stay in business.
        The alternative is things like the National Flood Insurance
    Program, where we have actually drafted bills, we have had
    hearings on, and we are working to get towards a markup this
    year, but they do not have to make money, right? They do not,
    so they do not. They lose quite a lot. The Federal Government
    offers the National Flood Insurance Program because insurers
    cannot really accurately cover all of those things, so it is a
    supplement to the market, and the Federal Government is
    involved there.
        Terrorism risk insurance, another thing the Federal
    Government gets involved in. Overwhelmingly, it is a State
    issue, and I think the best way to think about housing is as a
    State issue. You have different planning and zoning codes
    because, frankly, the risk of earthquakes in California is
    bigger than it is in Ohio, and we like the idea of building
    codes. We do not want things to happen in America like what
    happened in Turkey because they did not have big building
    codes. We should trust that our buildings are resilient for the
    area they are built in but too often, when regulators decide
    that they are going to be the ones, central planners are going
    to decide instead of the market, they get it wrong, and they
    oppose one-size-fits-all rules that do not accommodate all the
    flexibility that markets need.
        Prior to coming to Congress, I was in manufacturing, and
    for me to get the supply chain right to design and build
    something, I needed some lead time. Some things we can turn
    around quickly, but other things take a little longer.
        Mr. Boor, when I think about manufactured housing, part of
    the way that we make it affordable is that it is manufactured
    on site, all the planning and zoning for electrical and
    plumbing and whatnot can be done there, and it is normally
    regulated by HUD. Now, we have the Department of Energy
    dropping in something that is not only hard to comply with on
    the timeline, but it disrupts the regulatory certainty that the
    industry needs. Could you talk about how that impacts your
    ability to deliver an affordable product?
        Mr. Boor. Yes. We are really uncertain where we are going
    to be heading from the overlapping requirements by very
    different regulators if the DOE process continues. I want to be
    clear: We are not talking about not moving the ball forward on
    energy efficiency. We are talking about doing it in a holistic
    fashion, where the impacts are thought through, and we can make
    great strides. I think we are on a path right now where we are
    going after, ``E,'' at the expense of, ``S.''
        Chairman Davidson. Thank you. Thank you for making that
    point, and hopefully, we can remedy it.
        Mr. Theodorou, when I think about pricing risk, you have
    committed a lot of work to it. I just wonder if you could
    highlight some of the issues that we are confronting in the
    insurance space?
        Mr. Theodorou. Thank you, Chairman Davidson, for the
    question. Indeed, the price of reinsurance has risen in the
    January 1st renewals, the June 1st renewals, and the July 1st
    treaty renewals, and it is a major part of the costs of
    insurance policies. After administrative expenses and claims,
    is the cost of reinsurance, and it is getting higher. The good
    news is that there is capital out there that is coming in:
    private capital, pension funds, sovereign wealth funds, and
    other asset owners.
        Chairman Davidson. I appreciate that. I just have to get
    one more question in, but part of the problem for insurance is,
    if you cannot insure a site that you are going to develop, it
    is hard for builders to do it, and you cannot get the cover to
    provide for the market.
        Briefly, Ms. Huey, could you highlight the challenge there?
        Ms. Huey. Yes. Thank you, Mr. Chairman. On July 1st, FEMA
    halted parts of the Mapping Program under the National Flood
    Insurance Program. Home builders were getting conditional
    letters of map revision and letters of map revision to prove
    that the homes they built were no longer in the floodplain,
    which requires the homebuyer to purchase flood insurance. By
    delaying this program for an indefinite period of time, we have
    a great fear that this will only increase the cost of homes. It
    is unclear how many future communities----
        Chairman Davidson. I apologize, Ms. Huey. Thanks for
    getting as much in as you could. My time has expired. I really
    appreciate our witnesses for traveling, for being here, and for
    providing your expertise, and I thank my colleagues for
    spending some extra time, understanding the impact of this
    issue. I hope we will inform future legislation.
        The Chair notes that some Members may have additional
    questions for this panel, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 5 legislative days for Members to submit written questions
    to these witnesses and to place their responses in the record.
    Also, without objection, Members will have 5 legislative days
    to submit extraneous materials to the Chair for inclusion in
    the record.

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