[Senate Hearing 118-185]
[From the U.S. Government Publishing Office]
S. Hrg. 118-185
THE STATE OF HOUSING 2023
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HEARING
BEFORE THE
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING THE CURRENT STATE OF HOUSING IN OUR NATION
__________
FEBRUARY 9, 2023
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available at: https: //www.govinfo.gov /
__________
U.S. GOVERNMENT PUBLISHING OFFICE
54-466 PDF WASHINGTON : 2024
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SHERROD BROWN, Ohio, Chair
JACK REED, Rhode Island TIM SCOTT, South Carolina
ROBERT MENENDEZ, New Jersey MIKE CRAPO, Idaho
JON TESTER, Montana MIKE ROUNDS, South Dakota
MARK R. WARNER, Virginia THOM TILLIS, North Carolina
ELIZABETH WARREN, Massachusetts JOHN KENNEDY, Louisiana
CHRIS VAN HOLLEN, Maryland BILL HAGERTY, Tennessee
CATHERINE CORTEZ MASTO, Nevada CYNTHIA LUMMIS, Wyoming
TINA SMITH, Minnesota J.D. VANCE, Ohio
KYRSTEN SINEMA, Arizona KATIE BOYD BRITT, Alabama
RAPHAEL G. WARNOCK, Georgia KEVIN CRAMER, North Dakota
JOHN FETTERMAN, Pennsylvania STEVE DAINES, Montana
Laura Swanson, Staff Director
Lila Nieves-Lee, Republican Staff Director
Elisha Tuku, Chief Counsel
Amber Beck, Republican Chief Counsel
Cameron Ricker, Chief Clerk
Shelvin Simmons, IT Director
Pat Lally, Assistant Clerk
(ii)
C O N T E N T S
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THURSDAY, FEBRUARY 9, 2023
Page
Opening statement of Chair Brown................................. 1
Prepared statement....................................... 28
Opening statements, comments, or prepared statements of:
Senator Scott................................................ 3
Prepared statement....................................... 29
WITNESSES
Christopher Herbert, Managing Director, Harvard Joint Center for
Housing Studies................................................ 5
Prepared statement........................................... 31
Responses to written questions of:
Chair Brown.............................................. 104
Senator Warnock.......................................... 106
Senator Fetterman........................................ 108
Robert Dietz, Chief Economist and Senior Vice President for
Economics and Housing Policy, National Association of Home
Builders....................................................... 6
Prepared statement........................................... 60
Responses to written questions of:
Senator Sinema........................................... 112
Lance George, Director of Research and Information, Housing
Assistance Council............................................. 8
Prepared statement........................................... 75
Responses to written questions of:
Chair Brown.............................................. 114
Senator Fetterman........................................ 115
Additional Material Supplied for the Record
Statement submitted by Senator Cynthia Lummis of Wyoming......... 117
Letter submitted by Jeffrey Bode, President and CEO, Click n'
Close, Inc..................................................... 118
Joint letter submitted by Cedar Band of Paiutes Indians, Lower
Brule Sioux Tribe, and Rosebud Sioux Tribe..................... 124
Letter submitted by NAA and NMHC................................. 133
Statement submitted by Zillow.................................... 141
(iii)
THE STATE OF HOUSING 2023
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THURSDAY, FEBRUARY 9, 2023
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10:09 a.m., via Webex and in room 538,
Dirksen Senate Office Building, Hon. Sherrod Brown, Chair of
the Committee, presiding.
OPENING STATEMENT OF CHAIR SHERROD BROWN
Chair Brown. Welcome back to many of you, fewer of you, but
thank you for sticking around, Jack and Mike; I appreciate
that.
I want to welcome Senator Scott as the new Ranking Member
of this Committee. He has played an important role on this
Committee for nearly a decade. I also want to thank him for his
words about Senator Fetterman. We hope he recovers quickly. He
is a good man, and he was put on this Committee just a couple
of weeks ago, also, Senator Britt and my colleague from Ohio,
Senator Vance.
Ranking Member Scott and I have worked closely together to
advocate for our Committee's budget. We have agreed to
clarifying updates. I appreciate the work that he has done.
I am pleased especially to have worked with Senator Scott
on issues that matter to families across this country, from
making sure expecting moms have health care to supporting
investment in home revitalization so we can increase home
ownership opportunities for all Americans. I look forward to
the work we will do together over the next 2 years.
Last Congress, this Committee talked more about housing
than we had for a long time. Around town, this Committee for
years had been referred to simply as the Senate Banking
Committee, far too much about Wall Street, not nearly enough
about the issues that matter to people's lives--housing,
transit, community development, and frankly, small and regional
banks and credit unions.
We are starting this Congress with a hearing on housing
because it is one of the most important issues facing families,
from Aiken, South Carolina, to Zanesville, Ohio. Housing
determines so much about your life--how long it takes to get to
work, whether you have easy access to a bank or fresh food,
whether you worry about your kids getting sick from lead paint
or mold. It determines your access and your kids' access to
opportunity, and for far too many people, safe, affordable
housing, it is just too hard to find.
There is not a day that goes by that I do not hear about
the challenges that Ohioans are facing in the housing market.
In just the last few weeks, I have heard from Ohio seniors who
have lived in the same manufactured housing community for
years, sometimes decades, but they are now worried they will
lose their homes after an out-of-State investor bought,
literally, their neighborhood and raised their rents. I have
heard from renters in rural Ohio, whose rent went up almost 90
percent in a single year, the same kind of problems that the
Ranking Member has to endure in rural areas in his State.
I have heard from city council members and mayors who are
excited to have new jobs bringing economic opportunities for
their region, but now they are worried there simply is not
enough housing for new workers or that existing workers will be
priced out as we have seen happen to teachers and police
officers and firefighters.
The story is the same nationally. There just is not enough
quality housing at prices people can afford. It is not
happening just in Ohio. Nationwide, we are short an estimated
3.8 million homes, and the gap grows. In Ohio, we are short
50,000 homes. In Senator Scott's home State, it is 12,000. In
Senator Sinema's home State, the estimate is 123,000 homes.
Because there are not enough homes, renters and home buyers
are stuck paying more every month or living with peeling lead
paint or leaks, if they can find a home at all. In 2021, a
record number of renters, 21 million households, paid more than
30 percent of their income for housing. More than 30 percent,
that is about half the Nation's renters.
Many of these renters work fulltime jobs or more than one
job, but it just is not enough. Eleven of the 25 most common
occupations in the U.S. workers depend on--home health aides,
office support staff--nearly half of the most common
occupations do not pay enough to afford a one-bedroom apartment
anywhere in the country.
More renters are struggling in part because rents have
skyrocketed over the past 3 years. Nationwide, rents are 25
percent--25 percent--higher than they were in 2019. Some
places, rent has gone up even more than that.
And while rent growth is finally starting to slow in some
places, millions of families are still paying more each month
than they would have a year or two ago. That means less money
for food. It means less money for childcare. It means less
money for prescription drugs. Saving for a downpayment is, for
far too many families, just simply an impossibility. Combine
sky-high rents with higher home prices, with rising interest
rates, with too few homes in the market, home ownership looks
further and further out of reach for millions of families.
And the families who have already become homeowners are
feeling the squeeze, too. One in five homeowners pays more than
they can afford. That includes families who have to make tough
choices--choices about paying their water bills or their heat
or their mortgage--and seniors who have to put off critical
repairs to keep up with payments on a fixed income.
It is not just a problem in big cities or the Pacific Coast
and Atlantic Coast. It is not just a Republican problem or a
Democratic problem. It is every community's--rural, suburban,
urban, Tribal communities, every State in the country. As we
heard last Congress, communities from Bozeman, Montana, to
Tempe, Arizona, to Akron, Ohio, struggle with the lack of
affordable housing. A national problem will take all of us,
Senator Scott and I and many others, to work to solve it.
Today's witnesses are experts chosen together. Senator
Scott's staff and mine worked together. The Majority and
Minority chose these witnesses together. This bipartisan group
will help us understand the housing conditions facing renters
and homeowners across the country and what we can expect in the
months and years ahead. Their insights on the availability and
affordability of housing, the barriers to new development of
more affordable housing, the unique challenges in rural and
Tribal communities, that Senator Rounds knows so very well and
has worked with Senator Smith bipartisanly on a number of
solutions, will inform this Committee's work to make housing
opportunities available to families in all 50 States.
I look forward to hearing from witnesses today, to working
with all of my colleagues, including our three new Members, to
find common ground on addressing these challenges.
Senator Scott.
OPENING STATEMENT OF SENATOR TIM SCOTT
Senator Scott. Thank you, Chairman Brown. It certainly has
been a privilege to work with you, and we find common ground.
Sometimes common ground typically leads to common sense, and we
have found some common ground between the two of us.
We also very often, I believe, see the same problem. We see
different paths to get to the solution. Today is a day where we
celebrate bipartisanship. It may not be every day, but it is at
least today. And thank you for working together on consensus
witnesses to really understand and appreciate the plight of so
many Americans who are suffering through the challenges of home
ownership or renting.
As I said in my earlier comments, I grew up with a mom who
worked really hard, 16 hours a day. We rented through high
school. We lived with my grandparents when we were younger,
with my brother and my mother and I sharing a bed and a bedroom
in a rented house.
And so the problems that we see are not recent problems.
They span back through history. You think about where we find
ourselves. So today, we have an opportunity to really try to
understand why housing in this country has become so expensive
and out of reach to so many families.
Federal housing policies have long been disconnected from
the economic realities that we face. Recent spending bills have
contributed to what I call housing inflation, and I worry that
continuing to promote irresponsible Federal spending does not
address affordability challenges. In fact, in many ways, it may
be the root, too much money flooding into our market leading to
incredible inflation, and then the Fed tries to figure out how
to tamp down inflation by slowing the economy.
This Administration likes to talk about the need for more
affordable housing, but as we all know, talk is cheap and leads
to empty promises. For instance, when President Biden ends
Federal apprenticeship programs that produce high-paying jobs
in the skilled trades, he should not get to bemoan the lack of
construction workers, or when he fails to address domestic
supply chain bottlenecks, he should not feign surprise when
construction materials take months to arrive at job sites.
Threatening builders and housing providers with the
possibility of rent control will only further increase the gap
in housing supply. For decades, Washington's response to
housing challenges has simply been more spending. We need to
end this cycle and stop spinning our wheels.
While the trillions spent on numerous Federal housing
programs were well intended--I do not doubt that--the net
result, however, has made no meaningful and lasting impact on
home ownership rates, especially as we see burdensome
regulations push closing costs higher and higher, making the
path to home ownership even more difficult. For African
American families in particular, the home ownership rate
remains unchanged since 1968, unchanged, the year the Fair
Housing Act was signed into law.
For too long, assistance programs have served as
subsistence programs for the most vulnerable Americans. It is
past time to rethink the tax-and-spend strategies that keep
families trapped in generational cycles of poverty and find
real solutions to meaningfully impact households, breaking that
cycle of poverty.
Government must begin responsibly helping families rather
than doubling down on programs that fail to generate modest
results. We need to leverage the successes of American
capitalism by encouraging private investment in the housing
sector and eliminating needless barriers that artificially
restrict supply. And, most importantly, we should remember that
effective housing policy is driven by communities. It is
critically important the Federal Government encourages local
solutions to uniquely local problems.
These ideas are common sense and should not be
controversial. I sincerely believe Republicans and Democrats
should be able to find common ground on many of these important
matters that impact the American people.
I thank Chairman Brown for working together on building
this consensus panel, as you said earlier. With that, I would
like to welcome the witnesses, and I look forward to your
testimony.
Chair Brown. Thank you, Senator Scott, and thank you for
your comments about common ground as we are beginning to find.
So, thank you for that.
I will introduce the three witnesses. Dr. Christopher
Herbert, from left to right, is the Managing Director of the
Harvard Joint Center for Housing Studies. He is a lecturer at
the Harvard Graduate School of Design in the Department of
Urban Planning and Design. Welcome.
Dr. Robert Dietz is Chief Economist and Senior Vice
President for Economics and Housing Policy at one of the most
important housing organizations in the country, the National
Association of Home Builders. Prior to joining them, he worked
as an economist for the Congressional Joint Committee on
Taxation. He is a native of Beavercreek, Ohio, I believe, a
town in southwest Ohio, not far from Dayton and Springfield.
Mr. Lance George is the Director of Research and
Information at the Housing Assistance Council. Mr. George leads
the organization's research, data, and information efforts. So,
welcome, Mr. George.
Mr. Herbert, if you would begin your testimony.
STATEMENT OF CHRISTOPHER HERBERT, MANAGING DIRECTOR, HARVARD
JOINT CENTER FOR HOUSING STUDIES
Mr. Herbert. Thank you, Chairman Brown, Ranking Member
Scott, and Members of the Committee. Thank you for inviting me
to testify at this hearing.
I am Managing Director of the Joint Center for Housing
Studies of Harvard University, a lecturer in the Department of
Urban Planning and Design at the Graduate School of Design. I
am also a member of the board of directors of Freddie Mac.
Through its research, education, and public outreach
programs, the Joint Center for Housing Studies' mission is to
advance understanding of housing issues and to help leaders in
Government, business, and the civic sectors make decisions that
effectively address the needs of cities and communities. For
more than three decades, we have published our annual The State
of the Nation's Housing report, and I am pleased to have the
opportunity to share our work with the Committee today.
Perhaps the most apt description of the housing market
trends over the last year is that of a rollercoaster ride,
first marked by home prices and rents increasing at a dizzying
pace in response to pandemic-enhanced demand and against a
backdrop of restricted supply, and now in the midst of a
dramatic slide in response to the Federal Reserve's efforts to
bring inflation under control. While the forces behind these
trends are certainly out of the ordinary, they have illuminated
and exacerbated housing challenges that are not new, but rather
long, in the making.
Arguably the Nation's principal housing challenge is that
of affordability. The share of renters facing housing cost
burdens rose from the 2000s through the middle of the last
decade. While the last few years before the pandemic saw a
modest recovery, the cost-burdened share of renters has now
worsened substantially in the face of rising rents. While young
adults and people of color were able to make up some lost
ground in homeowning following the Great Recession, the
combination of very high home prices and now much higher
interest rates has priced most would-be owners out of the
market. Today's worsening affordability is particularly
concerning given the stubbornly high disparities in home
ownership rates for Black and Hispanic households.
One notable feature of the trends in housing affordability
over the last decades has been the spread of these problems to
those higher up the income ladder. The recent jump in renter
cost burdens has in fact been most pronounced among middle-
income renters. A key driver of this trend has been a
constrained supply of new homes, and particularly modest-priced
homes and apartments, which has put upward pressure on both
rents and home prices.
Climbing interest rates further limited the supply of new
single-family homes over the last decade, but over the last
decade multiple factors have been behind this lack of supply,
including regulatory barriers to new development, rising cost
of materials, and the lack of labor. Efforts to address these
barriers to expand the supply of homes are needed to improve
affordability.
But the most severe affordability challenge has continued
to be concentrated among the Nation's lowest-income households
who are outside the reach of the private market even under the
best of circumstances and so in need of greater public
subsidies to close the gap between what they can afford and the
cost of decent housing.
But housing affordability is not the only challenge we face
as a country. Housing policy has an important role to play in
responding to the economic trajectories of neighborhoods,
including where residents are at risk of displacement and in
communities that are suffering from disinvestment, where
housing investments can be an important part of a
revitalization strategy.
Housing policies and supports are also needed to be attuned
to our rapidly aging population, which presents a unique set of
housing concerns.
Finally, to maintain the quality of older, modest homes, to
reduce energy consumption to meet our goals for carbon
reduction, and to address the growing impact of severe weather
events on homes, our Nation's aging housing stock itself needs
investment.
I realize that I have outlined a broad set of challenges
that are perhaps daunting, but having a good quality,
affordable, and secure home in a thriving community is
foundational for a healthy and productive life for every person
in America. Addressing our housing challenges will take a
substantial commitment from the public, private, and nonprofit
sectors, but doing so would pay dividends for us all.
Thank you for turning your attention to these critical
issues and for your invitation to share this information today.
I look forward to addressing any questions you may have.
Chair Brown. Thank you, Dr. Herbert.
Dr. Dietz, welcome.
STATEMENT OF ROBERT DIETZ, CHIEF ECONOMIST AND SENIOR VICE
PRESIDENT FOR ECONOMICS AND HOUSING POLICY, NATIONAL
ASSOCIATION OF HOME BUILDERS
Mr. Dietz. Chairman Brown, Ranking Member Scott, and
Members of the Committee, thank you for the opportunity to
testify today. My name is Robert Dietz. I am the Chief
Economist of the National Association of Home Builders.
NAHB is proud to have the opportunity to testify before you
today, and we applaud the Committee for making housing the
focus of its first hearing of the 118th Congress. I look
forward to sharing our views on the state of housing and the
barriers our industry faces to increasing the production of
both for-sale and for-rent residences.
The primary and persistent challenge of the residential
market in 2023 is a lack of attainable, affordable housing in
both the single-family and multifamily markets, and the
fundamental cause of this challenge is a lack of construction
over the prior decade that has resulted in a structural deficit
of at least 1.5 million homes.
The causes of this underbuilding are complex, but we
commonly cite them as the ``5 Ls.'' It is a lack of labor, a
lack of lots, lumber and building materials, lending for
development and construction purposes, and of course, legal and
regulatory burdens. Solving just one of these challenges is not
enough. They must all be tackled.
For example, the construction industry faces a persistent
skilled labor shortage with currently more than 400,000 open
construction sector jobs needing to be filled. This will
require the industry to recruit, train, and retain workers in
the trades.
The regulatory cost burden is large and distorts the
market. NAHB estimates that about a quarter of a typically,
newly built, single-family home's purchase price is due to
various kinds of regulatory cost. This burden can be even
larger for apartment buildings due to delay costs and zoning
issues. These growing regulatory burdens, such as exclusionary
zoning practices, have made it very difficult to build entry-
level housing for first-time home buyers.
And, of course, everyone is aware of recent supply chain
issues, when lumber costs climbed and product and building
material delays were common. Construction material costs have
increased 36 percent since the start of 2020, ultimately
resulting in higher rents and higher home prices. This is
particularly true given the growing importance of new
construction as a source of supply during a period when
inventory of existing for-sale housing is low. NAR data, for
example, shows that resale inventory stands at just a 2.9
months' supply when 5 to 6 months would be balanced. These
supply chain issues continue. In NAHB surveys, about half of
single-family and multifamily builders cite ongoing delays with
electrical transformers as an example.
To solve these fundamental challenges of the homebuilding
sector will be a significant undertaking, requiring policy
action at all levels of Government to address the limiting
factors on the often neglected supply side of the housing
sector.
Safe, decent, and affordable housing provides fundamental
benefits that are essential to the well-being of families,
communities, and the Nation. Having access to affordable rental
housing is critical for younger households and working-class
families, and home ownership is a primary source of household
wealth for a typical family in the Nation.
For these reasons, NAHB is calling on Congress and the
Administration to make housing affordability a top national
policy priority, and the need is real. Nearly a third of
renters were cost-burdened in 2020, and reducing these burdens
is going to require additional construction. Unfortunately,
construction of new affordable rental housing is often
impossible without some type of public support such as the
successful Low-Income Housing Tax Credit or tax-exempt bond
programs.
And with home buyers experiencing a doubling of the 30-year
fixed rate mortgage over the past year as the Federal Reserve
fights inflation, single-family, for-sale affordability has
plummeted. According to the NAHB/Wells Fargo Housing
Opportunity Index, just 38 percent of new and existing single-
family homes are affordable to a typical family with median
income of $90,000. This is the lowest affordability measure in
the post-Great Recession period. Improving housing
affordability for renters and home buyers will also help fight
inflation.
With these goals in mind, Congress should pass legislation
that will help the homebuilding industry increase much-needed
housing supply, and helpful policy will focus on the supply
side challenges I have identified today. Addressing these
supply side bottlenecks would increase home construction,
expand housing inventory, and lower inflation. If action on
these issues is delayed, however, housing costs, which make up
about 40 percent of the Consumer Price Index, will continue to
be persistent drivers of inflation as well as remain a burden
on typical American families.
Thank you again for the opportunity to testify today, and I
look forward to answering your questions.
Chair Brown. Thank you, Dr. Dietz.
Mr. George, welcome to the Committee.
STATEMENT OF LANCE GEORGE, DIRECTOR OF RESEARCH AND
INFORMATION, HOUSING ASSISTANCE COUNCIL
Mr. George. Chairman Brown, Ranking Member Scott, Members
of the Committee, greetings and thank you for this opportunity
to testify on the state of housing in rural America. My name is
Lance George, and I am the Director of Research and Information
at the Housing Assistance Council.
The Housing Assistance Council, often referred to by the
acronym HAC, is a national nonprofit corporation that supports
affordable housing efforts in rural areas in the United States.
HAC helps build homes in communities across rural America. We
work with local community-based entities. These groups know
what is best for their communities. We just help enable them to
improve their housing conditions through an array of resources,
including research, data, information to help them form
strategies and solutions.
In many respects, the housing issues, characteristics, and
trends in rural America are no different than what Dr. Herbert
or Dr. Dietz presented on national housing trends, but there
are some unique differences in rural housing provisions and
markets as well.
Geography is important to this discussion. The people of
rural America reside in approximately one-quarter of the United
States homes, but these homes are located across 97 percent of
our Nation's land mass. There is immense diversity across rural
areas and small towns; yet, there is also a set of community
and market conditions that tie this landscape together.
With this preface, we wish to quickly mention five trends
in rural housing that we believe are of importance and interest
to this Committee.
First, the pandemic left its mark on rural America, and
housing markets remain uncertain. Housing instability is
particularly concerning for rural renters. Throughout the
pandemic, the Census Bureau's Pulse Survey consistently
revealed that renters nationally have been more likely to be
behind on their house payments and have less confidence in
their ability to make next month's rent than homeowners.
Second, rural mortgage markets are being impacted by high
interest rates and prices, too. Data from the Department of
Agriculture on its Guaranteed Home Loan product signals that
rural home buyers hit the brakes as well. As a proxy for rural
mortgage activity, USDA's loan guarantees plummeted by more
than 40 percent from their 2021 levels.
Number three, affordability is the greatest housing
challenge in rural America by far. Sometimes there is a
misperception that housing affordability and costs are not as
problematic in rural communities, but in reality over 5.6
million or one-quarter of rural households are considered
housing cost-burdened, and the incidence of cost burden has
increased markedly for rural households over the past few
decades.
Number four, manufactured housing is an often overlooked
but important source of housing in rural America, especially in
rural America. More than half of all manufactured homes are
located in rural areas, and manufactured homes make up 13
percent of all houses in rural and small-town communities,
twice the national rate.
Living in manufactured homes is often characterized by
unique financing and land tenure dynamics. The majority of
manufactured homes are financed with personal property or what
is referred to as chattel loans. Approximately 66 percent of
manufactured home loans are classified as high-cost, meaning
they have substantially high interest rates, which is more than
5 times the level of high-cost lending for all homes
nationally. And for manufactured homes secured by the home
only, that is, without land, that figure jumps to a staggering
90 percent high-cost loan rate.
Number five, race matters across the rural spectrum,
especially in housing. Race and ethnicity are central but often
complex components of our national history and struggles. One
highly visible impact of race in rural America are areas of
persistent poverty with substantial rates of non-White
populations, including the Lower Mississippi Delta and the
rural Southeast, the border colonias along the U.S.-Mexico
border, Native American lands, and among migrant and seasonal
farm workers. In these largely rural communities and
populations, the incidence of substandard and inadequate homes
is twice the national rate.
Finally, I would only like to add that we simply do not
know as much about rural housing conditions as we should. In
the research realm, we often use the term ``bias.'' Well, as a
rural researcher, I will present my own personal bias. The
level and quality of data for rural communities is just not
comparable to that of urban and suburban areas. The reasons are
varied, and the examples are many, but we would encourage the
Committee to promote greater rural data availability in
resources like the Census, the American Community Survey, and
the Home Mortgage Disclosure Act among others. We need quality
and accessible data to help inform strategies and solutions
that improve housing for all communities--urban, suburban, and
rural.
HAC appreciates the Committee's attention to housing issues
in rural communities. Thank you again for this opportunity to
testify today.
Chair Brown. Thank you, Mr. George.
The Ranking Member has a unanimous consent request,
briefly.
Senator Scott. Thank you, Mr. Chairman. I would move that
Senator Lummis' statement be included in the record.
Chair Brown. Without objection, so ordered. Thank you.
Start with Dr. Dietz and Dr. Herbert. We heard from the two
of you, and also from Mr. George, that we need more housing
supply across the board.
Dr. Dietz, what are the types of housing where we see the
greatest shortfall? You mentioned in your statement it is
almost impossible to build affordable rental housing without a
subsidy. What people are most likely to be priced out? And,
speak about that for a moment if you would.
Mr. Dietz. Yeah. When you talk to builders across the
country and prospective home buyers, the tightest part of the
housing market right now remains that small lot, entry-level
construction that is appropriate for a first-time or a first-
generation home buyer. So when you look at the data, more than
10 years ago, back in 2010, about 32 percent of new homes being
built were under 2,400 square feet. That 32 percent share has
now shrunk to about 24 percent, so we have seen a marked
decline in that entry-level construction.
And then the impact? It is harder for those younger
households to attain home ownership. So the result of that, of
course, then is people renting longer, which is one of the
reasons rents are higher, and then we have had a near doubling
of young adults who live with their parents over the last 20
years.
Chair Brown. A doubling.
Mr. Dietz. A doubling. It has gone from one in ten 25- to
34-year-olds to one in five.
Chair Brown. And that is over a 20-year period.
Mr. Dietz. That is over a 20-year period. So these are
longstanding issues.
Chair Brown. Dr. Herbert, comment, if you would, on my
question. Your thoughts on it?
Mr. Herbert. Yeah, I would agree with what Dr. Dietz said.
I think the shortage of single-family, particularly starter,
homes is really important. He used the metric of 1,800 square
feet. If we go down to 1,400 square feet, that was a very
common home in the early 80s, and now it is low single digits.
I was talking with a home builder, a national home builder,
the other day, who specializes in this segment of the market,
and they were saying there are communities that will mandate
that the smallest house you can build is 1,600 square feet, so
they cannot even build their entry-level house in that market.
So that restriction on building those starter homes is key.
Dr. Dietz has also talked about the need for more townhomes
and condos. That is a segment of the market that has really
been missing, too, as an affordable entry point.
And I would just also highlight the need for more modest
cost rental housing. What we have been building mostly over the
last decade has been very large, prime-location, multifamily
housing downtown, which has been needed, but it is very hard to
build at an affordable price point there.
So it is really we need to have lower density housing in
the suburbs but still making use of land that provides the kind
of garden apartment-style housing we used to build, more modest
rental housing as well.
Chair Brown. That comment you made about 1,600 and 1,400, I
would--not in this hearing now, but I would like to explore
that more with you, that it could answer some of these
problems, I think. So, pretty interesting comments.
Dr. Herbert and Mr. George, you both talked about home
repairs as a tool to help lower-income homeowners and seniors.
Talk about the benefits of home repairs, most importantly, what
resources can make those repairs affordable for families with
limited incomes. Start with you, Mr. George, then you, Dr.
Dietz.
Mr. George. Thank you, Senator. I think home repairs are
important, particularly to the older population in the United
States, and as you know, the population in rural America is
just older than the Nation as a whole and is maybe a harbinger
for things to come nationally. But oftentimes, older Americans
need resources and the ability to repair their homes, and I
think there are several resources that come to mind.
One, notably, I would like to reinforce from the work that
the Housing Assistance Council does is that capacity among
local housing providers is extremely important. So they are--
oftentimes, the local housing nonprofits are the connective
tissue or the catalysts that help turn these resources into
affordable homes and supply those vital home repairs. So I
think capacity at a local level is important.
Also, I would just quickly mention USDA Section 504 Home
Loan and Rehab Repair Program, which has assisted hundreds of
thousands of rural homeowners across the United States and is
particularly important to older homeowners.
So those are a couple of quick resources. Thank you.
Chair Brown. Thank you.
Dr. Dietz, your comments.
Mr. Dietz. Yeah, the remodeling sector is absolutely
critical as part of the reinvestment strategy. As Dr. Herbert
mentioned, we have got an aging housing stock. The typical home
in the United States right now is about 39 years old. About 15
years ago, it was kind of in the low 30s. That is a pretty
dramatic increase in that period of time.
So if we are looking to improve the housing stock, improve
energy efficiency, improve resiliency, making sure that
remodelers have access to skilled labor is going to be key.
Remodelers like to say, not only do I have to find skilled
workers, but they have to work in someone's home. So finding
those additional workers is important.
And I think policy tools can play a role. The Section 25(c)
and 25(d) Energy Efficiency Tax Credits are good tools, but
making sure that people can access cash-out refi mortgages to
get capital and reinvest in those homes, that is really where
the low-hanging fruit is when it comes to improving our housing
stock.
Chair Brown. And, Dr. Herbert, would you answer that
question, too?
But I want to--just because time is limited, if you would
work in an answer to this question also. I have cosponsored the
bipartisan Eviction Crisis Act with Senator Portman, my
colleague who just retired, from Ohio, Senator Young and
Senator Bennet, offering ways to reduce the number and impact
of evictions on the lives of families across the country. Matt
Desmond has written about it. And so, if you would also answer:
What lessons can we learn from the Emergency Rental Assistance
Program as we continue to work to reduce evictions?
Mr. Herbert. Thank you, Senator. Briefly, on the remodeling
question, I would echo what my colleagues have said and
highlight the fact that we have an older housing stock. We also
have housing that is in need of energy retrofits, and as you
mentioned in your question, an aging population that needs
housing that is adapted to meet their needs with mobility and
other ways to keep them safe.
In terms of how, I would highlight the importance of
grants, particularly for very low-income households who may
not--particularly elderly households who may not have the
ability to take on loans, and I would also highlight the need
for technical assistance for people to be able to assess the
need and help find a contractor and make sure the work is done
well.
In terms of the Emergency Rental Assistance program, I
think it is really--the evidence is quite clear that the
program was enormously helpful in keeping people, keeping
renters, in their homes and, at the same time, also enormously
helpful for landlords who were suffering from lost rental
payments. More than 3 million renters have received assistance
from that program. It has been remarkably well targeted. Some
two-thirds of those assisted have been--earned less than 30
percent of area median income; another 20 percent earned
between 30 and 50 percent.
And we saw during the pandemic enormous concern that we
were going to see evictions go through the roof, and what we
found from the data from the Eviction Lab in Princeton is that
in fact evictions stayed very low, in part because we had a
moratorium, but that emergency rental assistance was really
critical in making sure that people could stay stably housed.
Chair Brown. Thank you. Those comments are really
important.
Senator Scott.
Senator Scott. Thank you, Mr. Chairman.
Mr. George, your comments about the harbinger of things to
come as it relates to the aging population, aging housing
stock, and the need going forward, I think we could have an
entire hearing on the importance of aging in America. I think
it is by the year 2040 or so one out of five Americans will be
over the age of 65. We have got real challenges coming in what
we need. Would you agree with that?
Mr. George. I agree, Senator. Thank you.
Senator Scott. And we have a lot of work to do on that
topic.
I would also--I want to reflect a little bit the importance
of good Government policy versus bad Government policy. And Dr.
Thomas Sowell said it really well when he said that the goals
of rent control and its actual consequences are opposite
policies. I think that is well said, and I oftentimes wonder if
all of the great minds can use common sense when it comes to
delivering reality. Does reality actually marry the comments?
And Dr. Thomas Sowell's comments, I think, are best
reflected in the Twin Cities, in St. Paul and Minneapolis. In
St. Paul, Minnesota, we saw rent control go in, and when that
happened the census data showed that there was nearly an 80
percent drop in construction. Next door, Minneapolis did not
follow in that suit, and we saw construction permits increase
by nearly 70 percent. A stark example reinforcing the words of
one of the greatest economists, in my mind, of all time.
Despite the overwhelming evidence and wide consensus that
rent control or rent stabilization depresses supply,
exacerbates discrimination, reduces both quality and safety,
and makes housing less affordable, amazingly, this
Administration has chosen to evaluate the feasibility of
adopting such policies.
Dr. Dietz, how are renters impacted by policies that forbid
landlords, including mom-and-pop landlords, from setting rents
at market rates?
Mr. Dietz. Yeah, I think most economists would agree that
rent-control-type policies basically act as a tax on supply in
the long run. So they are counterproductive in the sense that
the ultimate solution to all the challenges that we are talking
about today is adding additional supply. So whether it is rent
control or other harmful regulatory policies that show up at
the local level, they drive production elsewhere.
And what we have seen in the last 10 years is those
communities that have been able to add affordable housing
stock, whether it is for renters or home buyers, they attract
businesses, they attract jobs. Columbus, Ohio, is a good
example of that with the new Intel facility. So it is getting
that regulatory burden, whether it is at the Federal level or
the State and local level, as low as possible so we can add the
stock necessary to house that workforce housing.
Senator Scott. Do wealthier households or poorer households
end up struggling with the consequences of these bad policies,
as I would describe them?
Mr. Dietz. Yeah, I would echo some of the data that Dr.
Herbert mentioned, which is if you look at the housing cost
burdens, whether for renters or home buyers, they tend to be
concentrated among lower-income individuals.
And as we said earlier, if you talk about the housing that
is most difficult to build, it is that smaller lot, slightly
more dense, walkable-type housing that is appropriate for
renters or first-time home buyers, and that is where the
regulatory burden emerges the hardest, and it is the kind of
housing that is most difficult to build.
Senator Scott. The Chairman and I both really--when we
heard the 1,600 square feet, we both said, wow. And 1,200 is
darn near as bad. My mother's first house that I talked about
earlier was 1,092 square feet, and so that is not even possible
in some areas. It is just ridiculous.
The prices of housing per square foot now has never been
higher. If you have to have a minimum square footage to build a
house, you are talking to first-time home buyers, and you are
just saying, please do not bother thinking about being a part
of the American Dream. Offensive, from my perspective.
Dr. Dietz, you also mentioned exclusionary zones. Talk to
me for a minute about that.
Mr. Dietz. So exclusionary zoning are policies, I think,
economists of the Left and the Right both agree are
inefficient. That is things like minimum lot size
requirements----
Senator Scott. Yep.
Mr. Dietz. ----that basically say, OK, if you want to build
that 1,400 square foot house, it has got to be built on a half-
acre or larger lot. In fact, if you look at the data for New
England, the typical lot size of a newly built home is 0.9
acres. It is almost a full acre. Well, you cannot build entry-
level housing if you have got those kinds of zoning rules.
So whether it is zoning rules or Federal regulatory
policies, what it has done is made it much more difficult for
those first-time home buyers to attain home ownership.
Senator Scott. I am running out of time, which is something
you will have to get used to, Mr. Chairman, but I will just say
this. As a guy who used to run a county and chairman of
Charlestown County government, many of the issues that we are
grappling with here in Washington really are local issues.
So one of the reasons why I asked you about exclusionary
zoning is because it is uniquely and specifically a local issue
that many parts of the country face. The truth is, though, that
we need to be able to bifurcate out responsibilities versus
somebody else's. Perhaps we can send smoke signals, but the
truth of the matter is some things need to be challenged on the
local level and not here in Washington.
Chair Brown. Thank you, Senator Scott.
Senator Menendez of New Jersey is recognized.
Senator Menendez. Thank you, Mr. Chairman, and let me
congratulate the new Ranking Member on his new position.
Senator Scott. Take your time.
Senator Menendez. If the Chairman lets me, I will. And,
thrilled to also now have him as a member of the Senate Foreign
Relations Committee, which I just came from, so we look forward
to seeing you there as well.
Senator Scott. Thank you, Senator.
Senator Menendez. Flooding is one of the most expensive and
most frequent natural disasters in the United States. Despite
this, just 4 percent of Americans have flood insurance. With
climate change bringing heavier rainfall and stronger
hurricanes, we need to ensure that flood insurance remains
affordable and homeowners are financially protected, but last
year, FEMA implemented a new premium methodology for the
National Flood Insurance Program that will lead to higher
premiums. The Agency itself has estimated that premium
increases will cause one million policyholders to drop coverage
and, therefore, dilute this already small pool.
And, to make matters worse, there is little transparency
about how FEMA is pricing the premiums, leaving the
construction industry in the dark about how to optimally build
flood-resistant homes.
So, Dr. Dietz, how have home builders been impacted by
FEMA's new premium system, and what would be the long-term
effects for coastal communities if flood insurance becomes too
expensive?
Mr. Dietz. Thank you for raising this issue, Senator. This
is something you hear about from builders across the country in
terms of not just the direct effect in terms of home buyers and
their cost of higher insurance premiums--and clearly, flood
insurance is an important part of making sure that we can build
housing in areas where you have got job creation and economic
activity--but it is the uncertainty of how those premiums are
calculated, as data person, that is particularly concerning.
How can you plan to do land development in an environment
where that calculation is not known, in other words, the
underlying equations? That makes it difficult to do land
development. And I think it is really important to keep in mind
that if you are talking about homebuilding, that process is
proceeded by 3 to 5, in some cases, 10, years of land
development.
So the uncertainty of it harms the land development
process, which then harms the lot supply process, and then
results in what we have talked about today, which is pricing
out home buyers from the market and makes home ownership more
expensive.
Senator Menendez. Yeah. And I would just note, if FEMA
itself recognizes that it is going to lose a million
policyholders and insurance is about spreading risk across the
widest base possible, you lose a million policyholders; that
means the rates go up for everybody else. And then we have
natural disasters in our States across the country, and the
Federal Government comes and helps instead of having an
insurance program that can mitigate as well as cover the cost.
It does not make any sense to me.
So that is why Senators Cassidy and Kennedy and I have
introduced bipartisan legislation that will reauthorize the
National Flood Insurance Program, keep premiums affordable,
invest in cost-saving mitigation measures to put the program on
a firm financial footing, and I look forward to working with
the Chairman and the Ranking Member on this critical issue.
I am concerned about two things as someone who has sat on
this Committee for quite some time. Affordable housing is
increasingly located in areas that are away from job centers,
forcing workers to pay transportation costs or work fewer
hours. Thankfully, the Infrastructure Investment and Jobs Act
passed the last Congress injected a much-needed $550 billion
into reviving our Nation's transportation systems.
So, Dr. Herbert, how can we leverage the investments of
IIJA to help connect affordable housing to good jobs, and how
critical is it that we build more affordable housing near
public transit so that we can connect people to good-paying
jobs and careers?
Mr. Herbert. Thank you for that question, Senator. It is
absolutely critical that we have well-located housing near
transportation systems. I believe in his opening remarks
Chairman Brown mentioned the importance of housing and
transportation. We talk about not just the housing cost burden,
but you have to add transportation costs which come with that
house to the housing cost to understand how much people are
burdened. So well-located housing can address housing
affordability by reducing that overall burden.
In terms of the Investment in Infrastructure and Jobs Act,
my center recently did an analysis looking at the opportunities
there to link that to housing. There is three ways. Much of
that money is actually by formula, so it makes it difficult.
But, one is to provide technical assistance to States and
localities to understand those connections. The second is to
take advantage of the competitive grant programs to instill in
those elements that require localities that get those grants to
take into account housing. And then the third is to use all the
formula grant programs to try to build into those, using
existing tools, maybe through best practices and the like, to
make sure that States and localities understand how those
investments can help.
Senator Menendez. Finally, the Urban Institute says that
16.1 million new household formations over the next 20 years,
80 percent of them will be senior households. Now it seems to
me that this increase in senior households is going to put a
huge demand on senior public and assisted housing capacity and
needs for the next Congress to consider. Do you see it that way
as well?
Mr. Herbert. Absolutely, Senator. In my written testimony,
I talked about the increasing number of senior renters with
worst-case housing needs. Since 2011, the Baby Boom generation
started turning 65, and over that same last decade period, we
have seen a 60 percent growth in senior renters who are either
50 percent of their housing--their income for housing or living
in some really inadequate housing. And this is, in many
respects, the tip of the iceberg as that older population,
particularly people 75 and older, where the Baby Boom edge is
just now--will continue to grow over time. So we are absolutely
going to see an enormous increase in need among our most oldest
residents.
Senator Menendez. Thank you, Mr. Chairman.
Chair Brown. Thanks, Senator Menendez.
Senator Vance, one of our new Members, from my State of
Ohio, is recognized. Welcome.
Senator Vance. Thanks, Mr. Chairman. And I guess since
there are no Republicans between me and you that makes me the
Ranking Member here? I am drunk with power for the next 5
minutes here. Thank you for having me.
Chair Brown. Keep thinking that way about this place.
Senator Vance. I wanted to direct my first question to Mr.
George. One of the things I have seen reported on lately is the
idea--and we have certainly seen evidence of this in the data--
that you have this massive influx from more Progressive States
into typically Red States, some very rural, from a very
affluent portion of the home buyer population. What have you
seen?
And I am talking places like Florida, Montana, Idaho, Utah,
and so forth. What effects are we seeing on housing prices from
this influx of a pretty affluent group of home buyers? Is
housing supply keeping up, and if not, why?
Mr. George. Thank you, Senator Vance, for that question. I
agree we are seeing this. It is hard to parse out in the data
because it is a still a relatively new phenomenon. There is no
doubt there was what we would call--and I am not a demographer,
but there was population churn as a result of the pandemic.
According to some of our analyses and mortgage analysis and
various other housing data analysis, it does appear as if much
of that population growth is in areas of high amenities or in
relatively close proximity to large metropolitan areas.
What we hear, again, we are trying to see in the data, and
we have seen this some in mortgage prices, but is an acute
shortage of rental housing in many of these communities. In
general, rural communities lack--many rural communities lack of
a good source of, or a good stock of, affordable rental
housing. And when you have that relatively small stock, much of
that is being, for lack of a better term, gobbled up or
purchased up in many rural communities. You know, it is
particularly causing affordability or housing affordability
challenges among rural renters.
Senator Vance. Great. Thank you.
Mr. Dietz, I want to direct this one to you. So actually,
staff brought this to my attention. I was not aware of this,
but if you look both at the United States but also a lot of
other OECD countries, you see this really stark decline in
productivity of construction workers going back to the 1970s. I
would love to hear your thoughts on what is driving that. When
we sort of think of all of the innovations and technology but
somehow we are less productive as a society than we were half a
century ago, what is going on there?
Mr. Dietz. Yeah, I mean, some of it could be a data issue.
Senator Vance. Sure.
Mr. Dietz. We are not measuring the remodeling sector
correctly. But I think if we think about the economics, the
challenge here is that the regulatory cost burden has grown
during that period of time. So when we are talking about
productivity, we are talking about output per worker,
literally, and the number of homes and apartments we build per
construction worker.
And, it is a real challenge. It is both an impact of the
labor shortage itself, but it does point to some opportunities.
If we can get the regulatory burdens down, I think we can see a
great deal of innovation in the home building sector, things
like offsite construction, more capitalization of the work
site, smarter products, and all those represent real market
opportunities for the industry.
Senator Vance. Yeah, I mean, it occurs to me that we all
agree and think it is important to have basic public safety for
both the construction workers but also the things that they
build, but if productivity has declined or stagnated for 50
years, that of course, means a lot of our construction workers
are not earning the wages they should be earning. It also means
a lot of the homes that we are building maybe not as high
quality as they should be.
I want to just sort of finish with one observation here,
and this obviously a focus. The immigration crisis that we have
in this country is a focus of especially this side of the
aisle, the Conservatives. It is something that we talk a lot
about.
But I want to make this observation because I think very
often we talk about the immigration problem, certainly in the
State of Ohio, for very good reasons. There is fentanyl
problem. Obviously, that affects the housing stock and the
housing situation a little bit. But it is mostly a human
problem, just the basic misery and the death and destruction
cause by it. We talk about it as a law and order problem.
But I want to plant the seed both for our colleagues on my
side of the aisle, colleagues elsewhere, and also for those of
you who are interested in this issue, that if you think about
what it means to have 20 or 25 million undocumented, illegal
immigrants in a country, in a situation where we are not
building enough housing, that puts incredible pressure. You
have way more buyers for way fewer homes, and that puts
incredible pressure on home buyers and people who just want to
live a good life.
I am a very strong believer that we should think about our
immigration problem and our immigration crisis as an economic
problem as much as a cultural or a law and order problem.
Immigration in this country right now, illegal immigration in
this country, means wage theft in the form of competition for
jobs from lower-wage migrants. And in this instance, in the
context of housing, illegal immigration means theft of the
American Dream of housing, when you have 25 million people who
should not be here, by law, competing with American citizens to
buy their first home, to rent a home, and that is a major
problem that we should be talking more about in the context of
the immigration crisis.
That is it. Thank you.
Chair Brown. Thanks, Senator Vance.
Senator Warner from Virginia is recognized.
Senator Warner. Thank you, Mr. Chairman, and let me also
welcome our new Members as well.
I am not going to ask a question in my first comment as
much as to share. I would like to share with all of you, and we
will send you some materials from my colleagues. I mean, lots
of indications about the racial wealth gap in this country, but
I mean, Black households and White households.
Last Congress, I think we had a relatively innovative
approach that said let us look at first-generation, first-time
home buyers. By definition, that is about 60 percent, roughly,
people of color. And if you qualify for that traditional 30-
year mortgage and you fit into this category, and you have to
start at a relatively small basis, rather than giving you a 30-
year mortgage, we will give you a 20-year mortgage and the
payment schedule will be based on 30.
So it is an indirect subsidy, but what it does for that
first-time home buyer is it literally allows them to accumulate
equity at almost twice the rate, just the plain math on a 10-
year basis. And I think we think about wealth gap, creating
that equity in an attainable manner is, I think, at least part
of the solution, number one.
Number two--and I want to get a quick response because I
have got a third question or third point I want to make--is I
am a big advocate around tax credits along the supply side. I
think everyone, you have all mentioned, we have really a huge
supply issue, particularly for affordable housing, low- and
moderate-income housing.
So I have supported LITEC, New Market Tax Credits.
Actually, Senator Portman and Senator Cardin had a really
interesting initiative, Neighborhood Homes Investment Tax
Credit. How do you go at that housing stock in distressed
communities? And we have got them all. Every one of us have got
some those that could rebuild that structure or fix it up to
code. In many cases, the equity may not be enough to refurbish
that building.
But, what can we do along the tax credit range to take
these or other initiatives and really target it to those
communities most in need? And I would ask relatively brief
responses, so we will go down the line.
Mr. Herbert. Senator, I would second that endorsement for
the Neighborhood Homes Investment Act that would close the gap
between what it costs to build housing and the market rate, and
it is necessary to prime the pump in these areas where demand
has fallen. So I think that is an incredibly important use both
for rehab and new construction, and so I would just second
that.
Mr. Dietz. Yeah, you know, consider expansion and
refinement of the Low-Income Housing Tax Credit is the most
successful production program for improving rental
affordability.
On the home ownership side, consider taking the now
modified Mortgage Interest Deduction after the 2017 Tax Reform
Act and converting it into a broad-based home ownership credit
that can be claimed whether you are an itemizer or not. That
would help on the home ownership side.
Senator Warner. Interesting suggestion.
Mr. George. Thank you, Senator. As we noted in our
testimony, there is a dearth of good quality rental housing in
many rural communities. So production at any level, the tax
credit is one of the largest production, rental production,
programs in the United States. It does not work as well in some
rural communities for various reasons. I am not an expert on
that, but I would just say we need production in rural America
of any scope. Thank you.
Senator Warner. Yeah, and again, I strongly support all
three of these. Mr. Chairman, I tell you I think there is a
number of our colleagues on the Republican side that are
interested on the supply issue around the tax credit, and I
would welcome folks like our new colleague to join in that
discussion.
One of the things that a lot of folks from the traditional
civil rights community have always advocated for as well is
downpayment assistance. I am not sure that is going to take
place for the current makeup in the House.
So one of the things I have been trying to explore--and I
would again--I will throw it out, would like your quick
responses, but if we could get a longer response, is as we
think about how we keep health care workers in rural
communities, for example, I am interested in the idea of
providing, giving an appropriate incentive for an employer to
provide a tax-assisted downpayment assistance that might, to
that employee, come on a tax-free basis. Help with that
downpayment. Help retain that workforce.
Have any of you done any work around employer-based tax
credits in terms of downpayment assistance?
Mr. Herbert. Senator, I have not although I have certainly
heard of employers who are struggling to get employees into new
markets. Most of the initiatives I have heard of have been
focused on the rental side, but I think that adapting this for
the home ownership side would have a lot of benefits as well.
So I think employers have a need and an incentive to
participate.
Mr. Dietz. And our research has tended to focus more on the
supply side, but you know, where employers get involved in the
housing market is making sure that builders in those markets
can construct and add supply to the marketplace because they
know they do not want to expand to markets where housing is not
available.
Mr. George. Thank you, Senator. I would only agree with the
other two commenters and also note that we hear, anecdotally to
some degree, that businesses that want to move into rural
communities do not have a good supply of housing across the
spectrum for low, moderate, and high----
Senator Warner. If we could combine that supply with some
of our existing tools but also with some level of downpayment
assistance, you have got a great retention tool, you have a
benefit to workers in distressed communities.
I am going to do some work on this, Mr. Chairman, and would
love to work with you and others on both sides of the aisle to
explore this. Thank you, Mr. Chairman.
Chair Brown. Thanks, Senator Warner.
The lady from Alabama, Senator Britt, for her first hearing
is recognized.
Senator Britt. Absolutely. Mr. Chairman, I want to thank
you and the Ranking Member for your warm welcome today at my
very first hearing. It is certainly an honor to be on this
Committee, and I look forward to being a very productive and
active part of it. So, thank you.
My first question is for Mr. Dietz or Dr. Dietz. We know
the Biden administration has actually put in more rules and
regulations in the first 2 years of their Administration than
Obama did in eight. When we look at that, it undoubtedly
contributes to inflation and to stifled economic growth across
the board, and I believe the housing sector is no exception to
that.
I understand the regulations add cost to building homes, 25
percent of the cost of constructing a single-family home and 40
percent of a multifamily home due to regulations. So I know
that you face regulations both at a State and a local level,
and I wanted to know if you could share some of those existing
regulations that are really driving up cost for home buyers.
Mr. Dietz. I think a good example at the Federal level is
the Waters of the U.S. rule, which is both confusing but adds
cost and makes it difficult to bring land to market, takes
longer, provides a lot of money for consultants to do studies,
but provides that uncertainty during the land development
process that can take 2, 3, 4, 5 years.
At the local level, we already talked about zoning rules,
but you also have rising impact fees, delay requirements, just
the delay itself of getting land approved, construction
projects approved. All of that results in higher rents and
higher home prices.
So if we are really serious about tackling housing
affordability, we need to find ways to reduce the red tape and
bring homes to market faster.
Senator Britt. Absolutely. Well, given those hurdles, can
you tell me, is it harder--single-family homes, multifamily
homes, who have been impacted more by this, ultimately?
Mr. Dietz. Well, if you listen to builders enough, which I
do--I travel across the country a lot--they will say, all of
us. Right? It is not necessarily a competition. They are all
sort of challenging in their own ways. Multifamily, it is more
density issues. With single-family, it is concerns about land
supply and lot development. With remodeling, it is the skilled
labor shortage. But you know, if we are looking at low-hanging
fruit, to improve the availability of housing in the country,
reducing housing regulatory costs is a big way to get there.
Senator Britt. And you are saying home buyers across the
board are impacted.
Mr. Dietz. I mean, it probably disproportionately affects
first-time buyers, first-generation buyers, because again that
entry-level construction, that townhouse construction is
difficult, too, that sort of light-touch density, but generally
speaking, it is driving up the cost of all forms of housing.
Senator Britt. So it is people that want to start the
American Dream that are being stifled, I guess.
Mr. Dietz. Exactly.
Senator Britt. So the past 2 years, inflationary policies
of the Biden administration have compounded the naive belief
that the inflation would be transitory. We have seen it hit us,
everything from groceries to gas, and obviously, home buying is
no exception to that.
The past year alone, the Federal Reserve has raised the
Federal Reserve Fund rates nearly 5 percentage points, and that
has materially impacted the price of housing, driving up
borrowing cost and monthly mortgage cost to the average
American home buyer.
What is your outlook of the housing demand, and how does
that impact the expected housing construction in the next, I
would say--you know, what do we see in the next 2 years, maybe
5 years, 10 years?
Mr. Dietz. Yeah, right now, we are in a bit of a downturn,
as Dr. Herbert talked about. Our expectation is that single-
family construction and multifamily construction are likely to
decline this year, but we see a turning point ahead for single-
family home building. In fact, after 12 straight months of
decline for builder sentiment that we measure each month, we
actually got an uptick in January. So I think in the short run
we are going to see some stabilization.
And then 2025 through 2030, if we can just get the
regulatory burdens out of the way, 2025 through 2030 will be a
pretty good runway for home building growth because we have got
to reduce that structural housing deficit that is in place,
that shortage.
Senator Britt. Absolutely. And as we talk, obviously, about
the home building, I think it is important to make sure that
people can get access to capital, that they can be financed. Is
there anything you can tell us about the status of the loan
market or anything that the Committee needs to consider to make
sure that capital is available for these people who want to
achieve the American Dream?
Mr. Dietz. Yeah, this is where we do not see enough focus.
I think when we talk about lending and loans in housing, we are
typically thinking about mortgages on the demand side. But keep
in mind about two-thirds of home construction is undertaken by
smaller builders, and they get their capital by going to
community banks and borrowing funds, so we call that
acquisition development and construction lending.
And one of the things we know about the business cycle is
that particular market tightens when we go into a downturn. So
the concern is we see mortgage interest rates begin to settle
back, a turning point comes in view, but builders and land
developers cannot get access to credit.
So there is a lot of different ideas in terms of how to
address some of those challenges. One would be extending the
secondary market that currently exists for purchase mortgages
over to builder and construction loans, and that would help
reduce some of the costs of credit and make sure that capital
is available, particularly in, I would say, like rural markets
where it is more difficult to obtain that kind of lending for
builders.
Senator Britt. Absolutely. Thank you so much, Dr. Dietz.
Chair Brown. Thank you, Senator Britt.
Senator Warren from Massachusetts is recognized from her
office, I believe.
Senator Warren. Thank you very much, Mr. Chairman, and
thank you all for being here today.
We know that housing is the largest expense for American
families every month, and the problem has just gotten worse.
New research shows that for the first time the typical American
renter is spending at least 30 percent of their income to cover
the average rent. That makes them rent-burdened by Federal
standards.
Now a severe shortage of homes paired with growing
persistence of greedy corporate landlords has made this problem
worse and put housing out of reach for many families. Fixing
this problem at its root is going to require serious
investments in building more housing, like those I call for in
my American Housing and Economic Mobility Act, and I am going
to keep fighting for this.
But the problems that renters face go far beyond the supply
problem. In too many places across the country, renters have
few protections from needless evictions, excessive fees, and
exorbitant rent hikes.
Dr. Herbert, you are one of the Nation's leading
researchers on the housing market, so let me ask you. There has
been a growing movement of tenants across the country calling
on the Federal Government to establish tenant protection
standards. Why is it important that the Federal Government act
to protect tenants?
Mr. Herbert. Thank you, Senator. Well, I would say that
there is lessons that we have learned from the previous
pandemic about the importance of housing and having stable,
secure housing, which led us to take steps nationally to have
an eviction moratorium and the like. I think there is a lesson
there that says this is an issue of national interest. It
should not be something that differs depending on what State
you are in.
The other precedent I would point to is in the mortgage
market, where we have a number of Federal statues, RESPA, TILA,
ECOA, that all relate to making sure that home buyers across
the country, wherever you live, are treated fairly in the
market. So I think there is a very similar parallel there
between homeowners and renters.
Senator Warren. That is a really important point, and it is
part of the reason that I led a letter with Congressman Jamaal
Bowman, joined by 47 of our colleagues, calling on President
Biden to take Executive action to protect tenants and bring
down rental costs.
Two weeks ago, the White House announced a framework for
enhanced renter protections, and I was glad to see this action.
It is an important first step, but we need more.
In fact, the day the White House's framework was announced,
the real estate lobby celebrated, and they bragged that they
had watered down the Administration's announcement. This is the
very same industry that spent over a hundred million dollars on
lobbying last year, including to fight against renter
protections. The National Apartment Association, the
organization that lobbies on behalf of corporate landlords,
said, quote, what we can say with certainty about the Biden
administration's blueprint for advancing a renter's bill of
right is that NAA's advocacy helped avert an Executive order.
Now, Dr. Herbert, what does it tell you that the landlord
lobby is celebrating an announcement that was purported to be
about protecting tenants?
Mr. Herbert. Well, Senator, what I would say is that in a
market where, as you said in your opening remarks, half of
renters are cost-burdened, more than a quarter are severely
burdened, we saw rents rising in high double digits and on top
of this pain, I guess I would just urge the apartment industry
and the industry--housing industry to take some ownership of
the question of what do we do and how do we protect renters.
Obviously, we want investors and owners of properties to make a
reasonable return, but it cannot come at the expense of people
being forced out on the streets.
Senator Warren. Yeah, I think that is exactly right. And
look, if the big corporate landlords see this blueprint as a
cause for celebration, then I think it is probably safe to
assume there is a lot more that the Administration could do to
meaningfully protect renters.
You know, in fact, they can start by making sure that the
Federal Government is not in the business of subsidizing law-
breaking corporate landlords. A U.S. House subcommittee
investigation found that four corporate landlords evicted
nearly 15,000 families during--during--the COVID eviction
moratorium. Some of these landlords receive Federal financing
to help them buy up housing on the cheap. I think that is
fundamentally wrong and that anyone that is breaking the law
should not be permitted to participate in these Federal
programs.
So I just want to say, thank you to all of you for being
here; thank you, Dr. Herbert.
The Administration has an obligation to ensure that
agencies are using all of their authorities to protect
families' access to housing, and where the agencies lack the
tools to forcefully protect renters, then I look forward to
working with my colleagues to pass legislation to get them the
tools that they need. It is going to take an all-of-Government
approach to bring down housing costs for American families, and
it is time for us to get to work on this.
Thank you, Mr. Chairman.
Chair Brown. Thank you, Senator Warren.
Senator Van Hollen of Maryland is recognized.
Senator Van Hollen. Thank you, Mr. Chairman. Thank all of
you for being here and for your testimony.
Dr. Herbert, I have a number of questions for you relating
to housing vouchers because I agree with the strong sentiment
that we have to get at the supply issue. Obviously, that is
fundamental to making sure that we have more affordable
housing, and I look forward to working with everybody here on
creative solutions to that. But while we need to start that
right away, it does not address the issue right away, and we do
need more, in my view, affordable housing vouchers. I know you
have testified about this in the past and written about it in
the past.
I have introduced legislation over the years that we are
going to continue to push for. It is a bipartisan bill. It is
called the Family Stability and Opportunity Vouchers Act. It
really does two things. Number one, it would provide more
affordable housing vouchers, period, so more people would have
access to affordable housing. But the opportunity part of the
bill is important. It is focused on families with young kids,
along with mobility services, to really provide opportunities
for more upward mobility, as the name indicates.
Could you talk a little bit about the need for additional
housing vouchers and how they can also be used to achieve
greater opportunity for families?
Mr. Herbert. Thank you, Senator, for that question. You
know, I would say we absolutely need more subsidies, and I
think we need to have a balance of subsidies. We talked a lot
today about supply. But you are right; housing vouchers are
more immediate, and they also address issues around access to a
broader range of communities. And thinking about different
market conditions and places where we have a tight supply,
vouchers may be challenging to use, but other places we have
plenty of housing.
And, as your bill points to, I think there is both a need
for more vouchers but more supports. There was a study done by
Opportunity Insights in conjunction with King County in
Washington State, where they provided counseling to voucher
holders to open up the range of information they had about
communities, and they found an enormous increase in people
coming from urban areas to looking and considering moving to
higher opportunities areas. That counseling helped. That
information helped. Support for moving costs helps, and also,
engagement with landlords. It is important to have landlords
who understand the program and are willing to engage to it.
So I think if we are really going to make vouchers work, to
have this ability to move to opportunity, we have to provide
information and supports to make it happen.
Senator Van Hollen. No, I appreciate that. As you
indicated, as I said as well, this is a bipartisan initiative
because it accomplishes those twin goals.
Can you talk about the challenges that we continue to face
where there are some homeowners that discriminate against those
who are using vouchers? Obviously, if we are going to work to
try to make sure that there are more opportunities here, we
need to make sure that that people are not discriminating
against those who are using a voucher as part of their rent
payment.
Mr. Herbert. Yes, Senator. And you know, in a number of
States, they have passed so-called source of income
discrimination laws which make it against the law to be able to
say I refuse to rent to you because of how your rent is going
to be paid, but in many States, those protections do not exist.
Landlords in those cases may decide they will not rent to
Section 8 vouchers, effectively closing off a whole range of
the housing stock to those folks. So expanding those
protections are a really important part of making sure the
voucher program can be used.
And I will say that there are ways in which the program can
be challenging for landlords. So I would use a carrot-and-stick
approach, where if you are going to do that I also would make
sure that you are addressing the concerns landlords about
equality inspections and the like. Doing both is important, but
certainly starting with do not discriminate is an important
first step.
Senator Van Hollen. I am happy to look at both, you know, a
requirement that people not discriminate based on source of
income but also--what are some of the carrots that you think
that need to be applied?
Mr. Herbert. Well, I think help with the property
inspections and making sure that those are not--you know, there
is a whole set of equality standards that can be somewhat
inconsequential. Matt Desmond's book, Evicted, talked about an
inspector looking for a shower curtain as a step. So I think
making sure that that process is not unduly cumbersome for the
landlords and the like. So I think it is really a question of
looking at it also from the landlords' perspective, to say, how
can we make this process simpler and less fraught for them?
Senator Van Hollen. Got it. Do either of the other
witnesses have any comments on this? Dr. Dietz.
Mr. Dietz. I would just issue a bit of caution. NAHB has
been supportive of voucher programs. We think they are
important, but you know, voluntary participation in the program
is better.
Keep in mind, for a typical multifamily owner-operator,
they tend to be smaller businesses. So as you layer additional
regulatory requirements on, it does increase the cost of
housing and, therefore, deters investment in the multifamily
sector.
Senator Van Hollen. Right. Just a quick follow-up, but just
so I understand, you agree that we should have a principle of
nondiscrimination by landlords based on the source of income of
the tenant. Do you agree with that principle?
Mr. Dietz. In principle but not in terms of requirement and
rules. The complexity of it is particularly difficult for
owner-operators.
Senator Van Hollen. No, I think this is, as I understand
Dr. Herbert's point, in terms of more incentives. The idea
would be to address--we agree on the principle?
Mr. Dietz. Sure. Incentives, yeah.
Senator Van Hollen. But understanding that there could be
additional administrative burdens that someone has to go
through, if we are addressing that issue, I am assuming that
you would support enforcing the principle.
Mr. Dietz. Our preference on incentives would be to expand
the Low-Income Housing Tax Credit program because that
increases supply.
Senator Van Hollen. Well, no, as I said at the outset, I
strongly support that and would like to see an expansion of
that as well on the supply side, but we also have to address
this immediate issue.
Thank you very much, Mr. Chairman.
Chair Brown. Thank you, Senator Van Hollen.
Senator Scott and I each have one question, one more
question. Then we will wrap up.
Mine is to Mr. George. HAC found that affordable rental
units developed under USDA's 515 program have been exiting the
program when their loans mature at a faster rate than
predicted. In the coming years, 515 buildings that are home to
thousands of families and seniors may be eligible to leave the
program. What would the consequences be for rural renters in
States like mine, where there are a number of them, if we just
let these affordable 515 units exit the program? What do we do
then to preserve affordable housing?
Mr. George. Thank you, Chairman Brown. Just to go back into
the larger discussion we had on the importance of rental
housing but a dearth of good quality rental housing in many
rural communities, in this particular source of rental housing,
if you go into a community, it is oftentimes among the best
rental housing in a rural community. But the impacts can be
profound, and they can be multiplying, the first of which, at a
degree which I do not think Congress would allow, if you let
every unit expire, you would lose somewhere between 350 and
400,000 vital affordable rental units in rural communities. The
second element I would note is the tenants in these properties
tend to be among the most vulnerable in the United States. Two-
thirds of the tenant occupancy are elderly or disabled, and
they have an average household income of just above $13,000,
and in many respects there would be no place for them to go.
That would be the final point. There are just not a lot of
other good options. This is not--again, these are not tenants
that are in the workforce. They are not highly mobile. And it
would be very difficult for them to find affordable housing in
many of these communities without this particular resource. It
is just a very valuable resource in rural communities.
Chair Brown. Thank you. Exactly what we thought and hoped
you would say, thank you. I have been into these communities
and know how vulnerable rural Ohio has become with the change
in the economy. So, thank you.
Senator Scott.
Senator Scott. Thank you, Mr. Chairman. Thinking about
housing affordability throughout South Carolina, I know that
when you travel to my family's home town of Salley, South
Carolina, that you see perhaps more manufactured homes or
mobile homes or modular homes. The theory that modular or
manufactured homes are of less quality and not as safe has
consistently proven not true. I would love for us to one day
visit the Innovative Housing Showcase put on by HUD at the
National Mall, where home builders in the manufactured housing
industry have an opportunity to demonstrate the innovations in
home construction.
My question, Dr. Dietz, is it seems that both manufactured
and modular housing show great promise in terms of constructing
decent, safe, quality housing that low-income families can
afford. What are the threats to more of these housing
opportunities being procured by modest families?
Mr. Dietz. There is a real potential here for offsite
construction, so particularly in home building, that is modular
and panelized construction. It is only about 3 percent of
single-family starts. In the late 90s, it was 8 percent. So
just getting back to the market share we had--we talked about
labor productivity in this sector--this is a way to do it.
But like any innovation in any business sector, it is about
rate of return, making sure the capital is available, and then
making sure the regulatory environment is not so harsh that you
cannot make those investments and then reap that investment
return. So we do think that is one area where we are going to
see innovation in housing and, we hope, housing affordability
in the long run.
Senator Scott. Any comments, Mr. George?
Mr. George. No, only to reiterate that this is an extremely
important source of housing in rural communities, but it is
often maligned and overlooked. I would agree completely,
especially since, you know, the construction of the what we
call commonly the HUD Code in 1976, the quality, safety, size,
amenities of these homes are indistinguishable from stick-built
homes. What we do see in some respects are sometimes consumers
have a foot in both worlds, where the quality of the homes are
very high, but elements about how the home was sold, financed,
appraised or warrantied are oftentimes in the automobile realm,
and sometimes consumers are not as well served by those
elements. And we are trying to make--I think it would be
laudable to try to make, particularly home financing, to
provide consumers of this product similar financing options
like conventional or stick-built homeowners with mortgages.
Senator Scott. Thank you.
Chair Brown. Thank you, Senator Scott. Thanks to the
witnesses today for being here and providing testimony. We
chose ``The State of Housing'' because that is, to me, the
number one priority on this Committee. So, thank you for your
leadership and for speaking out. Senators who wish to submit
questions for the record, they are due 1 week from today,
Thursday, February 16th. To the witnesses, you have 45 days to
respond to any questions. Thank you again. Any closing comment?
Senator Scott. Thank you, Chairman. I think we had a very
good hearing today, talking about the challenges and the
burdens that Government can put on the home building business
and, frankly, if you have more burdens on the business of
building homes, you have more burdens on the ability to achieve
the American Dream, which, for most of us, is home ownership.
I appreciate the consensus approach to this Committee. I am
sure we are going to have that on every single hearing we have
this year. I will wait for a response.
Chair Brown. Yes, Senator Scott.
Senator Scott. Thank you so much, sir.
Chair Brown. We will attempt to.
Senator Scott. Yes, sir. Appreciate that.
Chair Brown. Thank you. With that, the hearing is
adjourned. Thanks, folks.
[Whereupon, at 11:26 a.m., the hearing was adjourned.]
[Prepared statements, responses to written questions, and
additional material supplied for the record follow:]
PREPARED STATEMENT OF CHAIR SHERROD BROWN
Welcome back to many of you, and welcome to the new Members of this
Committee.
I want to welcome Senator Scott as the new Ranking Member of this
Committee.
Senator Scott has played an important role on this Committee for
nearly a decade.
I am pleased to have worked with him on issues that matter to
families across the country--from making sure expecting moms have
health care to supporting investment in home revitalization so we can
increase home ownership opportunities for all. I look forward to the
work we'll do together over the next 2 years, starting with today's
hearing on the state of housing.
Senator Fetterman, Senator Vance, Senator Britt--welcome. We look
forward to working with you on finding common ground and providing real
bipartisan solutions to the issues that matter to the people we serve.
I also wish Senator Fetterman a speedy recovery.
Last Congress this Committee talked more about housing than we had
for a long time. Around town, this Committee used to be referred to as
Senate Banking. It was far too much about Wall Street and not nearly
enough about the issues that matter to people's lives--about housing,
transit, community development, and small and regional banks and credit
unions.
We're starting this Congress with a hearing on housing because it's
one of the most important issues facing families from Aiken, South
Carolina, to Zanesville, Ohio.
Housing determines so much about your life--how long it takes to
get to work, whether you have easy access to a bank or fresh food,
whether you worry about your kids getting sick from lead paint or mold.
It determines your access--and your kids' access--to opportunity.
And for too many people, safe, affordable housing, and the
opportunity it provides, is just too hard to find.
There isn't a day that goes by that I don't hear about the
challenges that Ohioans are facing in the housing market.
In just the last few weeks, I've heard from Ohio seniors who have
lived in the same manufactured housing community for years--or even
decades--but are now worried they'll lose their homes after an out-of-
State investor bought their neighborhood and raised the rent.
I've heard from renters in rural Ohio whose rent went up almost 90
percent in a single year.
I've heard from city council members and mayors who are excited to
have new jobs bringing economic opportunities to their region. But now
they're worried there isn't enough housing for new workers, or that
existing workers will be priced out, as we've seen happen to teachers
and cops and firefighters.
The story is the same--there just isn't enough quality housing at
prices that people can afford.
Of course, this isn't happening just in Ohio.
Nationwide, we're short an estimated 3.8 million homes, and the gap
is growing.
In my home State of Ohio, we're short 50,000 homes. In Senator
Scott's home State, it's 12,000. And in Senator Sinema's home State,
they're short 123,000 homes.
And because there aren't enough homes, renters and homeowners are
stuck paying more every month or living with peeling lead paint or
leaks--if they can find a home at all.
In 2021, a record number of renters--21.6 million households--paid
more than 30 percent of their income for housing.
That's about half of the Nation's renters. Many of these renters
are working full-time jobs, or more than one job, but it just isn't
enough.
Eleven of the 25 most common occupations in the U.S.--workers we
all depend on, like home health aides and office support staff--nearly
half of the most common occupations don't pay enough to afford a one-
bedroom apartment anywhere in the country.
More renters are struggling in part because rents have skyrocketed
over the past 3 years.
Nationwide, rents are 25 percent higher than they were in 2019. In
some places, rent has gone up even more. And while rent growth is
finally starting to slow in some places, millions of families are still
paying more each month than they would have a year or two ago.
That means less money for food, less money for childcare, less
money for prescription drugs. Saving for a downpayment is nearly
impossible.
Combine sky-high rents with higher home prices, rising interest
rates, and too few homes on the market. Home ownership is looking
further and further out of reach for millions of working families.
And the families who have already become homeowners are feeling
squeezed, too.
One-in-five homeowners is paying more than they can afford for
their homes. That includes families who have to make tough choices
about paying their water or their heat or their mortgage, and seniors
who have to put off critical repairs to keep up with payments on a
fixed income.
This isn't just a problem in big cities or on the coasts. And it
isn't a Republican problem or a Democratic problem.
It's hitting every community--rural, suburban, urban, and Tribal
communities--and every State in the country.
As we heard last Congress, communities from Bozeman, Montana, to
Tempe, Arizona, to Akron, Ohio, are struggling with a lack of
affordable housing.
It's a national problem. And it will take all of us working
together to solve it.
Today's witnesses are experts chosen together by the majority and
minority. This bipartisan group will help us understand the housing
conditions facing homeowners and renters across the country, and what
we can expect in the months and years ahead.
Their insights on the availability and affordability of housing,
the barriers to new development of more affordable housing, and the
unique challenges in rural and Tribal communities will help inform this
Committee's work to make housing opportunities available to families
across the Nation.
I look forward to hearing from our witnesses today, and to working
with all of my colleagues--including our three new Members--to find
common ground on addressing these challenges.
______
PREPARED STATEMENT OF SENATOR TIM SCOTT
Thank you, Chairman Brown. It certainly has been a privilege to
work with you and we have found some common ground between the two of
us. We also very often see the same problem, and just see different
paths to get to the solution.
Today is a day when we celebrate bipartisanship. Thank you for
working together on consensus witnesses who will help us understand the
plight of so many Americans who are suffering through the challenges of
home ownership or renting. I grew up with a mom who worked really
hard--16 hours a day--and we rented through high school. We lived with
my grandparents when we were younger, with my brother, my mother, and I
sharing a bedroom in a rented house. The problems we see today aren't
recent problems--they span back across history.
And so today we have an opportunity to try to understand why
housing in this country has become so expensive and out of reach for so
many families.
Federal housing policy has long been disconnected from economic
reality. Partisan spending bills have contributed to housing inflation,
and I worry that continuing to promote irresponsible Federal spending
does not address affordability challenges. In fact, it may be the root
cause. Too much money flooding into our market and leading to
incredible inflation, causing the Fed to try to figure out how to tamp
down inflation by slowing the economy.
This Administration likes to talk about the need for more
affordable housing, but as we all know, talk is cheap and leads to
empty promises. For instance, when President Biden ends Federal
apprenticeship programs that produce high paying jobs in the skilled
trades, he shouldn't get to bemoan the lack of construction workers.
Or, when he fails to address domestic supply chain bottlenecks, he
shouldn't feign surprise when construction materials take months to
arrive at job sites.
Finally, threatening builders and housing providers with the
possibility of rent control will only further increase the gap in
housing supply.
For decades, Washington's response to housing challenges has simply
been more spending. We need to end this cycle and stop spinning our
wheels.
While the trillions spent on numerous Federal housing programs were
well intended, the net result has made no meaningful and lasting impact
on home ownership rates. Especially as we see burdensome regulations
push closing costs higher and higher, making the path to home ownership
more difficult.
For African American families in particular, the home ownership
rate remains unchanged since 1968, the year the Fair Housing Act was
signed into law. For too long assistance programs have served as
subsistence programs for the most vulnerable Americans.
It's past time to rethink the tax-and-spend strategies that keep
families trapped in generational cycles of poverty and find real
solutions to meaningfully impact all households--breaking the cycle.
Government must begin responsibly helping families rather than doubling
down on programs that fail to generate results.
We need to leverage the successes of American capitalism by
encouraging private investment in the housing sector and eliminating
needless barriers that artificially restrict supply. And most
importantly, we should remember that effective housing policy is driven
by communities--it is critically important the Federal Government
encourages local solutions to uniquely local problems.
These ideas are common sense and shouldn't be controversial. I
sincerely believe Republicans and Democrats should be able to find
common ground on many of these important matters that impact the
American people. I thank Chairman Brown for working together on
building this consensus panel.
With that, I would like to welcome the witnesses and I look forward
to your testimony.
______
PREPARED STATEMENT OF CHRISTOPHER HERBERT
Managing Director, Harvard Joint Center for Housing Studies
February 9, 2023
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
PREPARED STATEMENT OF ROBERT DIETZ
Chief Economist and Senior Vice President for Economics and Housing
Policy, National Association of Home Builders
February 9, 2023
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
PREPARED STATEMENT OF LANCE GEORGE
Director of Research and Information, Housing Assistance Council
February 9, 2023
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
RESPONSES TO WRITTEN QUESTIONS OF CHAIR BROWN
FROM CHRISTOPHER HERBERT
Q.1. You mentioned in your testimony that restrictive zoning
hinders the construction of affordable starter homes. What
types of zoning requirements can restrict the ability to build
these more affordable homes, and have we seen any communities
successfully address those barriers?
A.1. In my testimony I relayed an anecdote I had recently heard
from a homebuilder who specializes in entry-level housing that
a community in Colorado had a minimum house size of 1,600
square feet that made it impossible for them to build their
most common entry-level home. However, systematic information
on zoning restrictions is extremely limited so it is difficult
to document the extent to which such restrictions limit the
building of small single-family homes generally. However, one
systematic analysis of zoning codes in all jurisdictions in
Connecticut has found that even in a State that outlawed the
use of minimum house sizes there were a number of jurisdictions
that imposed such limits, including a number that set a minimum
house size of 2,000 square feet. \1\ But a related and very
common regulatory limit that makes it difficult to build entry-
level homes are minimum lot size requirements that increase
land costs per home. The same study of Connecticut's zoning
found that 91 percent of all land in the State was zoned
exclusively for single-family homes and in 73 percent of these
areas the minimum lot size was at least 0.92 acres and in 45
percent of these areas the minimum was 1.84 acres.
---------------------------------------------------------------------------
\1\ Bronin, Sarah C. ``Zoning by a Thousand Cuts''. Cornell
Journal of Law and Public Policy, February 24, 2022.
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But this issue is by no means limited to Connecticut as
another recent study on zoning in Texas concluded that minimum
lot sizes in that State also constrained housing supply
generally and specifically of homes on 5,000-7,000 square foot
lots that have strong demand. \2\ In addition, a study by
researchers at the University of Pennsylvania examining survey
results on regulatory conditions in suburban jurisdictions
across the country and how they have changed over the period
from 2006 to 2008 found that increases in minimum lot sizes
were one of the most significant trends toward more restrictive
development over this period. \3\ Slightly more than 40 percent
of jurisdictions were found to have increased minimum lot
sizes, with the share reporting a minimum size of over \1/2\
acre increasing from 39 to 52 percent. In addition to minimum
lot sizes, another important way in which zoning restricts the
development of entry-level housing is through limiting
development to detached single-family homes. The same
Connecticut study found that very little land is zoned as of
right for multifamily housing that would allow for duplex,
triplex, town home, or condominium development.
---------------------------------------------------------------------------
\2\ M. Nolan Gray and Salim Furth. ``Do Minimum-Lot-Size
Regulations Limit Housing Supply in Texas?'' Mercatus Research,
Mercatus Center at George Mason University, Arlington, VA, May 2019.
Available at: https://www.mercatus.org/students/research/research-
papers/do-minimum-lot-size-regulations-limit-housing-supply-texas.
\3\ Gyourko, Joseph, Jonathan S. Hartley, and Jacob Krimmel. ``The
Local Residential Land Use Regulatory Environment Across U.S. Housing
Markets: Evidence From a New Wharton Index''. Journal of Urban
Economics 124 (2021):103337.
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There has been a growing movement to address these limits
on more modest entry-level housing. At the jurisdiction level,
the City of Minneapolis in 2020 changed its zoning to allow for
three homes to built as of right in all areas of the city. \4\
Similarly, the City of Charlotte as part of its comprehensive
plan process also upzoned many areas of the city formerly
limited to single-family detached homes to allow for townhomes
and duplexes. \5\ There have also been significant initiatives
at the State level to overrule local resistance to such higher
density development, including the elimination of single-family
zoning in many areas of the State by both California and
Oregon. \6\ The State of Massachusetts has passed a new mandate
for all communities served by the mass transit system to zone a
specified minimum amount of land within a half-mile of a
transit stop for as-of-right housing at a density of 15 units
per acre to allow for an increase of each town's housing stock
by 10 percent over time. \7\
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\4\ See Minneapolis 2040 at https://minneapolis2040.com/.
\5\ See Charlotte's Unified Development Code available at https://
charlotteudo.org/wp-content/uploads/2022/08/CLT-UDO-Adopted-08-22-
22.pdf.
\6\ Von Hoffman, Alexander. ``Single-Family Zoning: Can History Be
Reversed?'' Housing Perspectives, October 5, 2021, Harvard Joint Center
for Housing Studies. Available at: https://www.jchs.harvard.edu/blog/
single-family-zoning-can-history-be-reversed.
\7\ Information on this regulation is available at https://
www.mass.gov/info-details/multi-family-zoning-requirement-for-mbta-
communities.
Q.2. What challenges do private, public, and nonprofit sectors
face when attempting to reduce the cost of construction by
pursuing more efficient means of building homes through offsite
production? What policies can help reduce barriers and cost for
more efficient means of building homes through offsite
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production?
A.2. Several recent studies have explored the potential and the
challenges of more widespread use of offsite production
methods. Most recently, a study conducted by researchers at Abt
Associates for the Terwilliger Center for Housing Policy at the
Bipartison Policy Center identified a series of obstacles to
greater use of modular housing, including the need for a steady
flow of production to support the high fixed costs of a factor,
the long learning curve for adopting this new method, the lack
of experienced installers, and difficulties in the Government
inspection process. \8\ This study suggests that one way in
which the public sector can support the development of the
sector is through support for minimum purchase commitments that
support the development of factories to produce these homes. It
also cites examples of two public programs, one by the State of
Colorado providing financial support for starting offsite
factories and another by the State of Virginia housing finance
agency providing grants of up to $500,000 to support innovative
construction techniques, which included support for a new
modular housing factory.
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\8\ Burnett, Kimberly, Jeffrey Lubell, Lindsay Elam, and Mary
Tingerthal. ``Using Economies of Scale To Produce Starter Homes''. Abt
Associates and the Bipartisan Policy Center, November 2022. Available
at: https://bipartisanpolicy.org/report/economies-produce-starter-
homes/.
---------------------------------------------------------------------------
A 2018 report by the Terner Center for Housing Innovation
at the University of California at Berkeley also explores the
potential of and barriers to offsite production. The list of
barriers is similar to that of the Abt Associates study,
highlighting the need for consistent production to support the
factory and the challenge of timely inspections of modules. \9\
The Terner Center study also focuses on the challenges of using
traditional construction financing which does not align with
the high upfront costs of factory production and argues that
the public sector could play a role in providing loan
guarantees that could facilitate the development of financing
for this form of production.
---------------------------------------------------------------------------
\9\ Galante, Carol, Sara Draper-Zivetz, and Allie Stein.
``Building Affordability by Building Affordably: Exploring the
Benefits, Barriers, and Breakthroughs Needed To Scale Off-Site
Multifamily Construction''. Terner Center for Housing Innovation, UC
Berkeley. March, 2017. Available at: https://ternercenter.berkeley.edu/
wp-content/uploads/2020/08/offsite-construction.pdf.
---------------------------------------------------------------------------
A study by the American Enterprise Institute was more
pessimistic about the potential for the offsite construction
industry to achieve greater scale in the U.S. reviewing the
history of previous initiatives that failed to gain traction.
\10\ The study notes the advantage of the flexibility of
existing homebuilding methods to adapt to specific demands and
unique site features as well as the high transportation costs
for modular components as difficult barriers to overcome.
However, the study does note the significant cost advantage of
manufactured homes and concludes that if all offsite
construction methods were subject to a similar single national
code there would likely be much greater production of modular
and panelized construction methodologies.
---------------------------------------------------------------------------
\10\ Fisher, Lynn M., and Scott Ganz. ``Will Homebuilding Finally
Evolve? Lessons From the American Experience With Factory-Built
Housing''. AEI Economic Perspectives, American Enterprise Institute,
April 22, 2019. Available at: https://www.aei.org/research-products/
report/will-homebuilding-finally-evolve-lessons-from-the-american-
experience-with-factory-built-housing.
---------------------------------------------------------------------------
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
FROM CHRISTOPHER HERBERT
Q.1. The Federal Reserve rate hikes have clearly affected the
broader economy. However, within the housing market, prices
still remain stubbornly high. This is unusual considering how
interconnected the housing market is with borrowing rates. One
possible explanation is homeowners with low, fixed rates are
locked into their current homes due to higher borrowing costs,
which in turn further locks housing supply.
Who is bearing the brunt of the rate hikes in the housing
market? Is it fair to say low-income and first-time home buyers
are feeling the most economic consequences? Which generation is
being affected the most by these market conditions?
A.1. Interest rate hikes are certainly most consequential for
first-time homebuyers as they attempt to qualify for a
mortgage. Lower-income households will also be more impacted.
However, higher interest rates are also consequential for
current homeowners who would like to change homes but face much
higher mortgage costs if they do. Homeowners who would like to
tap home equity for home improvement, funding education or
businesses also face higher costs. But all told, it seems fair
to say though that the largest impact is on younger households
who are unable to afford to buy a home.
Q.2. If rate hikes won't free up supply and lower prices, how
can we open up supply in the short run? ls there a legislative
solution you would recommend to approach this problem?
A.2. Higher interest rates will make it more difficult to
supply new housing, adding to the shortfall in supply that has
been evident in recent years. Of most concern for policy is the
shortage of affordable housing, including subsidized rental
housing. Perhaps the most effective legislative solution would
be to increase funding for the Low-Income Housing Tax Credit to
expand the supply of below mark rate rental housing. Proposals
such as the Neighborhood Homes Investment Act which would
provide subsidies to expand the rehabilitation and new
construction of housing in distressed communities could also
help expand the supply of affordable housing.
Q.3. For the first time since it began tracking data, the
Federal Reserve Bank of Atlanta designated the Atlanta housing
market as unaffordable, keeping more and more prospective
homeowners in the rental market. All the while, rents continue
to rise, causing folks to spend a significant proportion of
their income on rent. Last Congress, I introduced the Rent
Relief Act, which would give low- and middle-income folks who
spend over 30 percent of their income on a rent a fully
refundable tax credit.
Do you believe supplementing rent, especially for
vulnerable renters, is effective at keeping people housed?
A.3. Households facing very high housing cost burdens are
clearly more vulnerable to experiencing homelessness and so
providing subsidies would certainly reduce this risk. A recent
book by Gregg Colburn and Clayton Page Aldern undertake a
thorough review of factors that might explain differences in
the rate of homelessness across markets in the United States
and conclude that the most important factor is differences in
the cost and availability of rental housing. \1\
---------------------------------------------------------------------------
\1\ Colburn, Gregg, and Clayton Page Aldern. ``Homelessness Is a
Housing Problem: How Structural Factors Explain U.S. Patterns''. Univ.
of California Press, 2022.
Q.4. Do you recommend any other short-term solutions to protect
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low and middle-income renters?
A.4. The Emergency Rental Assistance that was provided during
the pandemic to help renters make up arrears to avoid eviction
has proven quite effective at both stabilizing renters and in
supporting landlords who would otherwise experience higher
financial losses. While the economic impacts of the pandemic
are fading the financial challenges facing low-income renters
continue as indicated by the continued high share of renters
reporting being behind on rent in the Census Bureau's Household
Pulse Survey. Providing ongoing support for this form of
emergency rental assistance would be a significant improvement
in the Nation's rental housing safety net. In addition, funding
to provide tenants with advice and counsel about their rights
as tenants and help with housing search as well as support for
the cost of moving could also help to improve renter stability.
Q.5. Foreign and out-of-State investors have had an outsized
influence on Georgia's residential real estate market over the
past decade. The buy-to-rent model has been particularly
prevalent in the metro Atlanta area and targeted toward Black
and Brown communities, keeping more and more Georgians from
home ownership.
Do you think the issues I brought up in my two previous
questions are some of the symptoms of this investor activity?
A.5. The previous questions were related to affordability in
the rental market overall. There have been very few studies
that I am aware of that have examined the relationship between
the extent of investor activity in a market and growth in
overall rents. One study by researchers from the Federal
Reserve Bank of Philadelphia examined this question and did
find that investor activity explained about a third of the
change in single-family rent growth across the markets studied
(although they did not examine changes in overall market
rents). \2\ Another study does examine rent changes at the
neighborhood level in cases where two large single-family
investors merged and find that rents increased by 0.5
percentage points more in these neighborhoods compared to other
neighborhoods where the two firms operated, suggesting that
investor activity does push up rents faster than they otherwise
would have risen. Still, with overall rent increases of several
percentage points in most years this degree of increase is only
a portion of the overall rise in rents. In short, while there
is some evidence that investor activity is contributing to
increases in rents it does not explain a majority of these
increases.
---------------------------------------------------------------------------
\2\ Lambie-Hanson, Lauren, Wenli Li, and Michael Slonkosky.
``Leaving Households Behind: Institutional Investors and the U.S.
Housing Recovery''. Research Department Working Papers, Federal Reserve
Bank of Philadephia, WP19-01, January 2019.
Q.6. Why do you believe investors are choosing to target
---------------------------------------------------------------------------
Atlanta and the surrounding areas?
A.6. Investors appear to have been drawn to sunbelt markets
generally because of relatively low cost of housing compared to
high-cost coastal markets and also because the housing stock is
generally newer and more standardized in typology that makes
valuation and management easier. The faster growth of these
States also provides more stable demand for housing. Finally,
these States generally experienced higher levels of foreclosure
following the Great Recession that provided an opportunity for
investors in these areas that they are now able to build on.
Q.7. How do Georgia's tenants' rights, which are largely
determined at the State level, compare to the rest of the
Nation?
A.7. Not being a legal scholar, this is not my area of
expertise. However, several sources suggest that Georgia's laws
are among the most favorable for landlords in the country in
terms of ability to evict quickly, charge fees, and enter
properties. \3\
---------------------------------------------------------------------------
\3\ See, for example, reviews by: ConsumerAffairs (https://
www.consumeraffairs.com/moving/best-states-for-renters.html), Roofstock
(https://www.consumeraffairs.com/moving/best-states-for-renters.html),
and SparkRental (https://sparkrental.com/anti-landlord-laws-worst-
cities-states-for-investors/).
---------------------------------------------------------------------------
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR FETTERMAN FROM ROHIT CHRISTOPHER HERBERT
Q.1. I have grown increasingly concerned about the outsized
role private equity is playing in the housing space, including
reported growth in the manufactured housing sector. Observers
have seen institutional investors target manufactured housing
communities, purchasing the land and raising rents, increasing
evictions, and deferring even basic maintenance.
As private equity increases its presence in manufactured
housing communities, what impact will we see on residents'
pocketbooks? Could you share any data or specific examples you
have regarding increases in rent or fees after private equity
firms purchase manufactured housing communities.
A.1. Concerns about investors raising rents substantially on
residents of manufactured housing communities has been covered
widely by the media, although I am not aware of any academic
studies that have documented the extent of this phenomena. \1\
The academic Esther Sullivan of the University of Colorado at
Denver has done a number of studies examining the impact of
rising rents and evictions in manufactured home communities,
which highlight the devasting impact that these increases have
on residents. \2\
---------------------------------------------------------------------------
\1\ See for example: Kasakove, Sophie, ``Investors Are Buying
Mobile Home Parks. Residents Are Paying a Price''. New York Times,
March 27, 2022; Kolhatkar, Sheelah. ``What Happens When Investment
Firms Acquire Trailer Parks''. The New Yorker, March 8, 2021;
Bhattarai, Abha. `` `We're All Afraid': Massive Rent Increases Hit
Mobile Homes''. Washington Post, June 6, 2022.
\2\ Sullivan, Esther. ``Displaced in Place: Manufactured Housing,
Mass Eviction, and the Paradox of State Intervention''. American
Sociological Review 82, no. 2 (2017): 243-269.
Q.2. What do we know about the role federally backed loans are
---------------------------------------------------------------------------
playing in these purchases?
A.2. There is no systematic information that I am aware of on
the extent of these purchases or the prevalence of different
forms of financing for these purchases. However, in 2021
several high profile media reports found cases where
manufactured home community residents facing significant rent
increases lived in communities that had been acquired using
financing from the Government-sponsored enterprises, Freddie
Mac and Fannie Mae. \3\ In response to these concerns the
Federal Housing Finance Agency required the agencies to
increase their protections for residents on loan they financed
under their Duty to Serve mandates. \4\ Since 2022 both GSEs
require manufactured home park borrowers to include a series of
mandated tenant protections as part of their loan terms
including renewable lease terms, written notice of rent
increases, grace periods for late rental payments, and rights
governing the sale of a manufactured home at an MHC. However,
there are certainly other protections that could be extended to
residents as part of FHFA's oversight of this aspect of GSE
lending.
---------------------------------------------------------------------------
\3\ See, for example, Arnold, Chris, Robert Benincasa, and Mary
Childs. ``How the Government Helps Investors Buy Mobile Home Parks,
Raise Rent and Evict People''. National Public Radio, December 18,
2021. Available at: https://www.npr.org/2021/12/18/1034784494/how-the-
government-helps-investors-buy-mobile-home-parks-raise-rent-and-evict-
pe.
\4\ Federal Housing Finance Agency, Listening Session on
Manufactured Housing, July 12, 2022. Available at: https://
www.fhfa.gov/Media/Documents/FHFA-Listening-Session-on-Manufactured-
Housing-07-12-2022.pdf.
Q.3. How could Fannie Mae and Freddie Mac better support
residents seeking to purchase these properties, particularly as
---------------------------------------------------------------------------
co-ops or other community ownership structures?
A.3. Resident ownership of manufactured home communities has
been proven effective at increasing affordability and stability
in these communities. A number of factors are needed to support
resident purchase of these parks, including State laws
requiring adequate notice of sale, a right of first refusal by
residents, and tax incentives to support these transactions.
\5\ Access to long-term, affordable financing is also key to
supporting these transaction. Both GSEs do provide such
financing, \6\ although the scale of these efforts could be
increased. However, such an increase would be most likely in
conjunction with efforts by policymakers to increase tenants
right to purchase. A 2021 policy brief by Enterprise Community
Partners outlines a number of ways in which there could be
greater financial and other supports for these transactions.
\7\
---------------------------------------------------------------------------
\5\ National Consumer Law Center. ``Promoting Resident Ownership
of Communities''. January 2021. Available at: https://www.nclc.org/wp-
content/uploads/2022/08/cfed-purchase-guide.pdf.
\6\ See https://www.multifamily.loans/freddie-mac-manufactured-
housing-community-resident-owned-loan/ and https://
multifamily.fanniemae.com/financing-options/specialty-financing/
manufactured-housing/non-traditional-ownership-pricing-incentive.
\7\ Abu-Khalaf, Ahmad, Flora Arabo, and Steven Swann. ``Preserving
the Affordability of Manufactured Homes in Land-Lease Communities''.
Policy Brief, Enterprise Community Partners, 2021. Available at:
https://www.enterprisecommunity.org/sites/default/files/202110/
Manufactured%20Home%20Communities%20Policy%20Brief-updated.pdf.
Q.4. I am incredibly proud of the work Pennsylvanians have been
doing to preserve our existing housing supply, like through the
Whole-Home Repairs Program. In 2022, the Pennsylvania State
legislature passed a first-in-the-Nation law establishing this
program, which uses funding from the American Rescue Plan Act
to provide streamlined grants for homeowners and landlords to
repair and weatherize their homes. Instead of needing multiple
grants to address specific repair needs, recipients can address
the totality of habitability, safety, accessibility, or
sustainability concerns.
What impact will there be on affordability and supply if we
fail to maintain existing housing?
A.4. According to the U.S. Department of Housing and Urban
Development's Worst Case Housing Needs 2021 Report to Congress
among very-low income households earning less than 50 percent
of Area Media income there are 5.1 million renters receiving
rental assistance. \8\ But this represents just over one in
four of households at this income level who are generally
available for rental subsidies. Of the remaining households,
most are facing either severe or moderate housing problems,
paying more than 50 percent or 30 percent of income on housing,
or living in severely or moderately inadequate housing. Still,
some 3.5 million households at these income levels live in
affordable, decent quality housing provided by unsubsidized
housing. For low-income households earning 50-80 percent of
AMI, who are increasingly facing rent burdens, the number
living in affordable, unsubsidized housing is even larger at
3.7 million. In short, existing housing affordable to low-
income households without subsidies is of great importance for
millions of renter households.
---------------------------------------------------------------------------
\8\ U.S. Department of Housing and Urban Development. Worst Case
Housing Needs 2021: Report to Congress. Available at: https://
www.huduser.gov/portal/sites/default/files/pdf/Worst-Case-Housing-
Needs-2021.pdf.
---------------------------------------------------------------------------
As my Center's work has documented, renters who face
housing cost burdens are forced to cut back on spending on
essentials such as food, health care, transportation and
savings and face an increased risk of housing instability. \9\
Our work has also documented the significant loss of affordable
rentals over the last decade as market pressures have pushed up
rents across the board in markets across the country so that
the number of rentals for $600 or less declined by 3.9 million
between 2011 and 2019.
---------------------------------------------------------------------------
\9\ Harvard Joint Center for Housing Studies. America's Rental
Housing 2022. Available at: https://www.jchs.harvard.edu/americas-
rental-housing-2022.
---------------------------------------------------------------------------
Policies that support the preservation of existing housing
at lower rents would have great benefit. Such approaches could
include favorable loan terms, grants, or tax breaks in exchange
for limiting rent increases on these properties. In addition,
there is also a need to support investments to maintain older
homes, with a particular need for supports for low-income
households who may have difficulty affording these investments.
Researchers at the Federal Reserve Bank of Philadelphia have
estimated that there is a need for $149B in investment to
remedy deficiencies in the existing housing stock, including
$57B for homes occupied by low-income households. \10\
---------------------------------------------------------------------------
\10\ Divringi, Eileen. ``Updated Estimates of Home Repair Needs
and Costs'', Research Brief, Federal Reserve Bank of Philadelphia,
March 2023. Available at: https://www.philadelphiafed.org/-/media/frbp/
assets/community-development/reports/23-02-home-repairs-update.pdf.
Q.5. What do we know about the match--or mismatch--between the
---------------------------------------------------------------------------
current housing supply and our aging population's needs?
A.5. I am very glad you are asking this question as my Center
has an initiative specifically focused on the challenges we
face in meeting the housing needs of a rapidly aging society
and has produced a broad range of research on this topic. \11\
First, there is enormous unmet need for affordable rental
housing for older adults. Over 10 million households headed by
someone 65 and over are cost burdened (paying more than a third
of their income on housing); half of these pay more than 50
percent. Nearly three-quarters of renters earning under $15,000
per year are cost burdened. To compensate, households often cut
back on food and medical care, which can be detrimental for
those with chronic health conditions. Renters, often on fixed
incomes, are particularly at risk of rising housing costs, and
have a much smaller personal safety net: in 2019, the median
older renter had a net wealth under $6,000.
---------------------------------------------------------------------------
\11\ For more information on the Joint Center's work in this area
see https://www.jchs.harvard.edu/research-areas/aging.
---------------------------------------------------------------------------
At last measure, over 2.2 million older, very low-income
renter households had ``worst case housing needs,'' defined as
having severe cost burdens, living in severely inadequate
housing, or both. Only 36 percent of income-eligible older
adults receive Federal housing assistance, and trends point to
greater demand for support in the coming years: the number of
income-eligible households will increase with population growth
and widening income disparities, and rentership rates are
rising, in part because people now nearing retirement were
particularly hard hit by the foreclosure crisis. Expanding
rental assistance can provide needed stability to these
households--and also help address a growing homelessness crisis
among older adults.
Affordability challenges are disproportionately felt by
older people of color. Longstanding disparities in access to
well-paying jobs and home ownership opportunities have resulted
in steep gaps in home ownership with White households and
greater financial insecurity, particularly for older Black and
Hispanic households.
Second, very little of the Nation's housing stock offers
even the most basic of accessibility features. Our analysis
shows that less than 4 percent of homes offer a no-step entry,
single-floor living, and wide enough doors and hallways to
accommodate a wheelchair. Older people are also most likely to
report difficulties entering, navigating, and using different
parts of their homes. Support is needed for renters and
property owners, as well as older homeowners, to make
modifications and maintain housing in safe condition.
Third, the need for assistance and services that support
older adults with activities of daily living and household
tasks is escalating. Service-enriched affordable housing has
been shown to support independence--and reduce health care
costs--but need outstrips supply. Demand will grow for supports
and services delivered to middle-income older adults who
typically also cannot afford assisted living settings.
Finally, our research shows that many older adults live in
places that lack livability features, such as neighborhood
services, transportation alternatives, safe streets, and
opportunities for engagement. These all contribute to
wellbeing, and can even combat isolation and loneliness, both
serious health issues in their own right. This lack points to
the need for support for the development of new housing options
in well-located areas where these needs can be met.
Q.6. Can you outline the historical relationship between rental
building repairs or infrastructure improvements and
affordability, eviction rates, or rent increases?
A.6. Unfortunately I am not aware of any studies that have
examined the relationship between building repairs and
infrastructure improvements and these outcomes.
Q.7. How will an effort like the Whole-Home Repairs Program
fill in gaps in existing grant and loan opportunities?
A.7. The Whole-Home repairs program does hold great potential
for improving the ability of lower-income households to invest
in improvements in the quality and energy efficiency of their
homes. As the Joint Center documented last year, there are a
variety of Federal, State, and local programs that support
remodeling but they vary widely in eligibility, uses of funds,
and the amount of funding available relative to the need. \12\
It will be valuable to study the implementation and outcomes
from this Pennsylvania program to assess how well it fill the
gaps in the significant need for repairs referenced above as
well as the ``deferral gap'' that makes a home ineligible for
the Weatherization Assistance Program until other physical
deficiencies are remedied.
---------------------------------------------------------------------------
\12\ Mayes, Taylor, and Carlos Martin. ``Home Repair Programs
Serve Critical Needs for Low-Income and Vulnerable Homeowners''.
Housing Perspectives, Harvard Joint Center for Housing Studies, June
27, 2022. Available at: https://www.jchs.harvard.edu/blog/home-repair-
programs-serve-critical-needs-low-income-and-vulnerable-homeowners.
---------------------------------------------------------------------------
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
FROM ROBERT DIETZ
Q.1. The demand for affordable housing has far outpaced the
supply of available units. According to the Arizona Department
of Housing, the State is short 250,000 units to meet the
demand. We know that supply chain disruptions, zoning
constraints, and other local barriers have impacted the
development of affordable housing. A few weeks ago, I held a
roundtable discussion in Arizona with industry experts and
housing developers. It was brought to my attention that the
Department of Energy is proposing a rule that would require
electrical transformers to use amorphous steel cores. Can you
tell me about the availability of amorphous steel, other
industries that will be in direct competition with affordable
housing developers to obtain this material, and the impact you
see this Federal regulation having on the development of
affordable and available housing units?
A.1. Amorphous metals are used to manufacture countless items,
including: Solar cells, casings for electronics and
telecommunications equipment (such as cell phones), protective
coatings for petroleum drill pipes and for boiler tubes in
electrical plants, armor-piercing ammunition being developed by
the military.
Amorphous metals are also used in aerospace, medical
devices, electric motor parts, and robotics. \1\ Both amorphous
and grain-oriented electrical steel (GOES) will continue to
experience increasing demand both domestically and
internationally. Demand for amorphous metals will be driven by
global electric grid modernizations as well as increased demand
for higher-efficiency industrial motors.
---------------------------------------------------------------------------
\1\ Industries and Applications of Amorphous Metals, Heraeus Amloy
(available at https://www.heraeus.com/en/landingspages/hat/markets-hat/
markets.html#anchor-2) (last visited March 25, 2023).
---------------------------------------------------------------------------
Although amorphous metals are not yet suited to EV motors,
\2\ amorphous metals are extremely well suited for other
applications in EV manufacturing and will experience increased
demand with that segment of the automotive market in addition
to use in high-efficiency, high-cost transformers.
---------------------------------------------------------------------------
\2\ Development of Motor with Amorphous Metals, Hitachi (Nov. 18,
2018) (available at https://www.hitachi.com/rd/sc/story/amorphous/
index.html) (last visited March 25, 2023).
---------------------------------------------------------------------------
Energy rationing policies in China caused a global deficit
of electrical steel as the country accounts for more than 70
percent of worldwide production. This resulted in increasing
prices in 2021-2022. Prices began to stabilize as China's
output normalized but are expected to increase as demand for
both GOES and NOES increases in large part due to regulations
and infrastructure plans developed by the world's advanced
economies in recent years.
While NAHB supports efforts to address energy conservation
throughout the country, it is concerning that DOE's efforts to
change energy efficiency standards in distribution transformers
are coinciding with an unprecedent shortage in distribution
transformers affecting the ability of NAHB's members and other
interested stakeholders from completing, or even starting
projects to meet downstream customer demands.
Lack of adequate competition is compounded by severe
disruptions in the supply chain for these and other products,
which continue to create significant issues for downstream
stakeholders and to date remain unresolved. Continuing
shortages remain unresolved and significantly impede industry
efforts to meet requirements of even minimal user needs.
For example, a decline in imports of finished transformers
has added exponentially to the problems being experienced by
end users. Prior to the pandemic, the United States relied on
imports for 82 percent of its large transformers. The number of
high-capacity transformers has fallen substantially due to both
the pandemic as well as restrictive trade policy. Imports of
transformers rated for 50kVA-500kVA has fallen from 1.6 million
in 2018 to 537,000 in 2022. Mexico has exported more than twice
as many units to the United States in 2022 than the next
largest international supplier, France, but the number of units
exported is still 66 percent lower than it was in 2018.
Imports of transformers rated 16kVA-50kVA have shown a
similar downward trend, declining 150,000 units--or 33
percent--between 2021 and 2022. The 2-year total fell nearly
one-third between 2018/2019 and 2021/2022. Vietnam, Mexico, and
China were the leading source countries in 2022. Consequently,
vastly reduced imports into the United States are exacerbating
the current transformer crisis across the country.
Restrictive trade policy has also decimated the available
supply of GOES in the United States. Without electrical steel,
transformers cannot be made. Without transformers, new
residential development cannot occur, adversely affecting
roughly one-sixth of the U.S. economy.
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RESPONSES TO WRITTEN QUESTIONS OF CHAIR BROWN
FROM LANCE GEORGE
Q.1. What kinds of capacity challenges do rural communities
face when doing economic development and housing stability
work? What types of tools could help to increase local capacity
to support investments in rural communities?
A.1. The power of capacity building in rural communities cannot
be overstated. Rural communities often have small and part-time
local governments, inadequate philanthropic support, and a
shortage of the specialists needed to navigate the complexities
of Federal programs and modern housing finance, and compete for
government and philanthropic resources. Targeted capacity
building through Federal investments in training and technical
assistance is how most local organizations build the skills,
tap the information, and gain the wherewithal to do what they
know needs to be done. Without deeply embedded, high-capacity
local organizations, available Federal funding and other
capital will never evenly flow to rural communities.
A variety of Federal programs invest in local organizations
with the training and technical assistance they need to serve
their communities effectively. The Rural Capacity Building
(RCB) Program at the U.S. Department of Housing and Urban
Development (HUD) and the Rural Community Development
Initiative (RCDI) at the U.S. Department of Agriculture (USDA)
are two critically important capacity building programs that
focus specifically on rural areas. Other targeted programs,
like the Community Facilities Technical Assistance and Training
Grant and the Multi-Family Housing Non-Profit Transfer
Technical Assistance Grant, fund hyper-targeted technical
assistance for specific Rural Housing Service programs. HAC
supports increased funding for these programs, as well as new
capacity building programs like the Rural Partnership Program,
and the creation of a robustly funded Federal rural housing
intermediary.
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RESPONSES TO WRITTEN QUESTIONS OF
SENATOR FETTERMAN FROM LANCE GEORGE
Q.1. People across Pennsylvania have shared with me their
struggles with rising rents and home prices in our cities,
suburbs, and rural regions. It has been reported that apartment
rents have increased 40 percent in central Pennsylvania since
2017, and the median metro sale price increased 6.9 percent
from October 2021 to October 2022. In many areas, demand is
vastly exceeding supply. Projections vary, but the National Low
Income Housing Coalition estimates that the State is short
266,000 rental homes affordable and available for extremely
low-income renters.
One of the existing tools we have to address housing
shortages in rural areas is the Department of Agriculture's
(USDA) Section 515 Rural Rental Housing Loan Program. Yet
despite the real potential of this program to increase the
stock of needed affordable rental housing, funding has been
cut. There have been no new rural rental homes financed under
Section 515 since 2011.
How can Congress use existing programs like Section 515 to
kickstart rural housing development?
A.1. An important source of housing in many rural communities
are rental homes financed by USDA. Today, there are nearly
13,000 USDA rental properties providing around 400,000
affordable homes to families and individuals across rural
America. However, due to Federal funding cuts, no new USDA
direct financed rental housing has been developed in years, and
the existing properties are increasingly losing their
affordability provisions. Once the mortgage on the property
matures, the units lose their rental subsidy and thus their
affordability. For many rural communities, these units
constitute the only affordable rental housing available.
Significant Federal commitment is needed to address this rising
crisis. We elaborate on the Federal tools needed in the
responses to Questions 2 and 3 below. But more generally,
programs like Section 515 are important to maintaining a
healthy housing ecosystem in rural communities. Economic and
community development can be hobbled by a lack of workforce and
low-income housing sources, especially housing for rent.
You can explore more about rural multifamily production in
this 2018 study from the Urban Institute and HAC entitled ``A
Platform for Production''. The key takeaways from that report
suggests the following core strategies for improving affordable
rental housing production across rural communities:
1. Increase public-sector resources for the production of
new affordable rental housing in rural America.
2. Set priorities and preferences, and provide incentives,
for development projects in rural communities with the
most-severe needs.
3. Minimize risk and attract private-sector investment by
using innovative strategies.
4. Improve the capacity of Federal agencies to mobilize and
coordinate funding to rural communities.
5. Improve developer capacity in underserved rural places
and provide incentives.
6. Promote more flexible building types for rental housing
in rural communities.
7. Establish, maintain, and provide access to a national
and/or statewide database of existing market analyses
in diverse types of rural markets.
8. Encourage proactive local planning for rental housing
development, prioritizing areas where local
infrastructure and services already exist.
Q.2. Additionally, USDA loans from the main period of Section
515 activity are reaching maturity, meaning that the bulk of
the USDA's stock will exit the program within this decade.
What mechanisms can the Federal Government leverage to
preserve this rental housing stock?
A.2. HAC supports increased funding for the USDA Section 515
program to allow for new multifamily construction to resume;
increased funding for the Multifamily Preservation and
Revitalization (MPR) program, the Preservation Revolving Loan
Fund (PRLF) program, and the Multifamily Preservation Technical
Assistance program, to address the preservation needs of the
multifamily portfolio; the extension of rural rental assistance
to all USDA multifamily units; and improved protections for
tenants in USDA properties that are being preserved. All of
these tools would help to preserve and expand this important
rental stock. Additionally, other Federal and State programs,
such as the Low Income Housing Tax Credit, can help to preserve
Section 515 properties.
Q.3. Are there certain incentives we know help willing owners
restructure their loans and remain in the program?
A.3. USDA has a few programs that help to restructure Section
515 loans or otherwise keep properties in the program. The MPR
program, mentioned above, helps owners to restructure their
loans to stay in the program. However, the MPR program is
woefully underfunded compared to the need, which is projected
to be $30 billion over the next 30 years to preserve 80 percent
of the portfolio, according to informal USDA estimates.
Additionally, the Multifamily Preservation Technical Assistance
program helps owners navigate the complex process of preserving
properties or transferring them to new mission-driven owners
who will preserve the properties. USDA also rolled out a new
Simple Transfer Pilot in 2022 to streamline property transfers,
but only certain properties and transactions are eligible for
this streamlining. Adding some prioritization for transfers to
nonprofits and smaller preservation deals into Federal funding
streams could help the smallest, lowest capacity communities
better preserve their properties. And finally, some advocates
support ``decoupling'' the Section 521 rental assistance from
the Section 515 mortgage to ensure that rental assistance can
continue after the mortgage matures. This decoupling concept
could be tested as a pilot initially, to assess its efficacy
before being expanded to the entire portfolio.
Additional Material Supplied for the Record
Statement submitted by Senator Cynthia Lummis of Wyoming
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Letter submitted by Jeffrey Bode, President and CEO, Click n' Close,
Inc.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Joint letter submitted by Cedar Band of Paiutes Indians, Lower Brule
Sioux Tribe, and Rosebud Sioux Tribe
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Letter submitted by NAA and NMHC
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Statement submitted by Zillow
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]