[Senate Hearing 118-548]
[From the U.S. Government Publishing Office]
S. Hrg. 118-548
EXAMINING PROPOSALS TO ADDRESS HOUSING
AFFORDABILITY, AVAILABILITY, AND OTHER
COMMUNITY NEEDS
=======================================================================
HEARING
before the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
ON
EXAMINING THE PROPOSALS TO ADDRESS HOUSING AFFORDABILITY, AVAILABILITY,
AND OTHER COMMUNITY NEEDS
__________
MARCH 12, 2024
__________
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
58-372 PDF WASHINGTON : 2025
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 M. LUMMIS, Wyoming
TINA SMITH, Minnesota J.D. VANCE, Ohio
RAPHAEL G. WARNOCK, Georgia KATIE BOYD BRITT, Alabama
JOHN FETTERMAN, Pennsylvania KEVIN CRAMER, North Dakota
LAPHONZA R. BUTLER, California 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
----------
TUESDAY, MARCH 12, 2024
Page
Opening statement of Chair Brown................................. 1
Prepared statement....................................... 39
Opening statements, comments, or prepared statements of:
Senator Scott................................................ 3
Prepared statement....................................... 40
WITNESSES
Matt Josephs, Senior Vice President of Policy, Local Initiatives
Support
Corporation.................................................... 6
Prepared statement........................................... 42
Responses to written questions of:
Senator Warner........................................... 83
E.J. Antoni, Research Fellow, Public Finance Economist, The
Heritage
Foundation..................................................... 8
Prepared statement........................................... 55
Peggy Bailey, Vice President of Housing and Income Security,
Center on Budget and Policy Priorities......................... 10
Prepared statement........................................... 68
Responses to written questions of:
Senator Warner........................................... 85
Additional Material Supplied for the Record
Letter submitted by J. Ronald Terwilliger Center for Housing
Policy,........................................................ 87
Letter submitted by OSAH......................................... 90
Letter submitted by the NLIHC.................................... 92
Letter submitted by ABA.......................................... 97
Letter submitted by CCUA......................................... 99
Letter submitted by ICBA......................................... 100
Letter submitted endorsing the ``Homebuyers Privacy Protection
Act of 2024''.................................................. 101
Letter submitted by ACU.......................................... 103
Chart, ``Section 515 Numbers''................................... 105
Documents submitted endorsing the ``Homes for Every Local
Protector, Educator, and Responder (HELPER) Act''.............. 106
(iii)
EXAMINING PROPOSALS TO ADDRESS HOUSING
AFFORDABILITY, AVAILABILITY, AND OTHER
COMMUNITY NEEDS
----------
TUESDAY, MARCH 12, 2024
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 10:06 a.m., in room SD-538, Dirksen
Senate Office Building, Hon. Sherrod Brown, Chair of the
Committee, presiding.
OPENING STATEMENT OF CHAIR SHERROD BROWN
Chair Brown. The Senate Committee on Banking, Housing Urban
Affairs will come to order. Thank you to the three witnesses.
One is a returning witness. Thank you for all being here and
testifying.
Every part of the country, everywhere we turn, housing is
too expensive. Families have too few housing options. High
interest rates are pushing home ownership further out of reach
for families hoping to buy their first home, move for a job, or
buy a bigger home as their family grows. They're forced to keep
renting or to turn down job offers. Homeowners keep their homes
off the market because they feel trapped by current interest
rates that keeps the supply low and drives up prices more.
Meanwhile, all cash buyers, including out-of-State
investors, fueled by cheap Wall Street cash drive home prices
higher by buying the few homes that do come on the market. High
rates make it harder to build more homes and housing options,
which would bring down prices.
It's why I've called for the Fed to bring down interest
rates. Ohioans worrying about housing costs can't wait any
longer. We see more and more renters and homeowners in my State
and across the country whose only option is to pay more than
they can afford for housing. Because rents keep rising faster
than paychecks. High costs have pushed even more families,
including parents working full-time jobs into homelessness.
This isn't just happening in the big cities or on the
coast. It's happening in every State and cities and suburbs and
small towns and rural communities. Central Ohio businesses are
growing.
I hear constantly from mayors from county executives, from
business leaders, from workers that they're worried the housing
supply won't be able to keep up with the growth and cost could
rise even more. There just isn't enough housing across the
country from Akron to Bozeman to Charlotte.
Community leaders are worried that the high cost of housing
will limit their region's ability to grow and to thrive.
There's no place in the country and hasn't been for some time
from even before the pandemic, where a minimum wage worker
working full-time can afford even a modest two bedroom
apartment. The home health aides and administrative assistants
and retail workers whom we all depend on, aren't even paid
enough to afford a one room apartment.
We've been struggling to create enough housing for years,
for decades. Housing construction plummeted after the 2008
financial crisis. We've never made up for all the missing
homes.
So today, by some estimates, we're 4.3 million homes short
of what we need. And anyone who's taken the most basic economic
course knows that when supply is that low high prices follow.
Meanwhile, the homes we do have are getting older and need
critical repairs that families and seniors and housing
providers just can't afford. Leaving children exposed to toxic
lead, leaving seniors with dangerous fall hazards and unstable
roofs and sky-high utility bills.
Today we'll hear from Members of this Committee on both
sides of the aisle about their legislation to bring down
housing costs, making our existing housing stocks safer, and
expand housing options for both renters and homeowners.
I'm pleased that Senator Smith, who is one of the leaders
in these issues is here at the beginning, because this crisis
is sitting all types of housing in every community, we need
more than just one solution to these problems. I look forward
to hearing from colleagues about their proposals.
Senator Rounds, Senator Smith have a bill that they've
built a strong bipartisan consensus around, I believe six in
each party on this Committee alone to improve rural housing and
programs and prevent the cost of rural housing from going up
anymore. There are also proposals to improve HUD's housing
voucher program, keep housing affordable for manufacturing home
housing residents and many more.
I'm also offering proposals to bring down housing costs and
increase housing options, including addressing some of the
challenges I hear often from Ohio families. Housing Supply Fund
would help community development, financial institutions, and
affordable housing developers build and preserve more housing
that's affordable for homeowners and renters.
My Yes in God's Back Yard, YIGBY, another Washington
acronym, would support churches and other religious
organizations with unused land who want to put that land to use
for affordable housing. We should also expand solutions we know
are already doing good work.
The Grandfamily Housing Act, which I introduced with
Senators Casey, a Democrat from Pennsylvania, and Collins, a
Republican from Maine would build on success supporting
intergenerational families.
My Excess Urban Heat Mitigation Act of 2023 would help
communities eliminate urban heat islands to better protect the
health of seniors and families. And as eviction, no numbers
increase. We know what it takes to prevent families from being
turned upside down by an unnecessary eviction.
The Eviction Crisis Act introduced last Congress with my
colleague Senators Bennet from Colorado, Portman from Ohio, and
Young from Indiana, would build on successful models across the
country, and the success we saw from providing emergency rental
assistance at the height of the pandemic to reduce preventable
evictions.
As aspiring homeowners struggle more than ever to afford
their first home, I've also put forward three proposals to
expand access to affordable home ownership. The VA Home Loan
Awareness Act I introduced with Senator Braun, will help ensure
that veterans and servicemembers know about the affordable VA
home loan option when they go to take out a loan. They've
earned this benefit, they should know they have it.
This week I joined Senator Warnock in reintroducing the
Down Payment Tort Equity Act to provide assistance to first-
time, first-generation home buyers who are too often locked out
of the housing market by the lack of a downpayment.
And the HELPER Act, which I introduced was Senators Rubio
and Ossoff will create a new type of FHA mortgage to make first
time home ownership more affordable for law enforcement
personnel and firefighters and teachers, who are serving our
communities but can't afford to live there.
This commonsense bill supported by the Internal Order of
Police and National Association of Police Organizations, the
major county Sheriffs, the major cities Chief of Police, the
International Association of Firefighters, the American
Federation of Teachers, and the National Education Association,
and 200 other national organizations, mayors, Governors, State
and local groups across the country. They know firsthand how
critical it is to support the people who teach our kids and
keep us safe.
The proposals we'll hear today about aren't all the
solutions we need to solve our crisis, but they're a good
start. Yesterday we also received a budget from the Department
of Housing and Urban Development that outlines housing needs
along with proposals that can make our existing programs more
efficient and more effective.
I look forward to working with Ranking Member Scott, and
all the Members of this Committee to expand these proposals and
define bipartisan consensus around solutions that can help us
reduce costs and expand options for renters and homeowners.
Thank you.
Senator Scott.
OPENING STATEMENT OF SENATOR TIM SCOTT
Senator Scott. Thank you, Mr. Chairman. Thank you to the
panelists for being here with us this morning. Certainly, a
very important topic for us to discuss the state of housing.
Nearly a year ago, this Committee had an identical hearing
on today's topic of legislative solutions to address the
increasingly more difficult challenge of achieving the American
dream through home ownership.
Although I'm glad the Chairman has returned to this topic
and agreed to seriously engage on building consensus around
comprehensive housing legislation like My Road to Housing Act,
we have unfortunately watched a full year go by.
And during the last 12 months, Americans have been stripped
from the opportunity of becoming homeowners in many ways
because of the challenges brought to us by the current
Administration. One of the things I'd like to say as I think
this through a little bit, so many people have good intentions
on solving the problems surrounding housing.
But the truth is, when you look back 15, 16 years ago, the
financial crisis of folks providing more downpayment resources,
more assistance to become a first time homeowner without any
financial literacy and financial education as it relates to how
to own a home and how to take care of the home and being
prepared for planned obsolescence, things just become obsolete.
Without that education, you are simply renting the home
that you think you own. And then during the crisis, what we saw
was some of the highest levels of foreclosures where those
folks that were induced, or I don't want to use the word
seduced, but induced to make a decision to buy a home that they
could not afford because they thought they could afford the
mortgage payment and not all the instant nos that come along
with being a homeowner.
Let me say this too, when you think about the crisis and
the challenge of home ownership, those of us in Washington too
often think that the solutions come from Washington. That is
simply false. We can make a difference, but we are not the
primary place where the difference should be made.
As a former chairman of a county government, I can tell you
that the vast majority of the issues facing home ownership
happens on the local and the State level.
Frankly, when you have communities that refuse to allow for
an increase of homes to be built in their communities, then 10
years later you complain about the price of the homes in that
community, you can just look back and follow the breadcrumbs
back and see that when you don't use the opportunity to fill in
donut holes, when you don't use the opportunity to have high
density areas for homeowners, you will not have more homes on
the market. That is basic math.
You think about the States and the roles that they play.
This is not simply a Federal issue. This is primarily a local
issue and, and then a State issue. And in a very small part, we
can play on the Federal level. One of the things that we've
seen in the past that has been very effective was the creation
of opportunity zones in 2017 through the TCJA.
As I think about whether you're a Republican or a Democrat,
the one thing that's been celebrated across the country by blue
mayors and red Governors, so to speak, is the advent of
opportunity zones.
Think about my good friend who's a Democrat in Rock Hill,
South Carolina, Mayor John Gettys, who said that for the first
time in more than three decades, the opportunity to build homes
because of opportunity zones that lowers a price for
contractors to build, is there.
I think about Charleston and Greenville, South Carolina,
where you're seeing multimillion-dollar new investments,
building homes and apartments and townhouses, and condos
because of opportunity zones.
So there are things that we can do, but typically what
Government can do best from Washington, is just to get out of
the way and let the free market actually work. And that's why
the release of my Road to Housing Act is such an important part
of that consideration, because what we focus on is financial
literacy and financial education. We focus on reducing the red
tape.
I talk to mortgage companies across the country and one of
the things that they say left and right, is that the cost of
closing more than doubled in the last 10 years. Much of it due
to the regulatory red tape that comes with closing. But there
are other issues too, and I'll name just a few.
Number one, families are struggling more than ever to
afford their monthly rent and mortgage payments in large part
because of Bidenomics. Bottom line is that when you print and
spend trillions of dollars, it leads to high inflation.
High inflation causes the Fed to respond and the Fed's
response with the one tool they have, which is always a hammer
because everything's a nail, is increase the interest rates.
When interest rates go up, home ownership goes down.
Number two, housing costs did not go up in a vacuum. The
culprit is this Administration has runaway, unchecked, Federal
spending, aggressive interest rate hikes and onerous
regulations. That combination certainly cannot continue.
Number three, current Federal housing programs are not
working. We have to improve the status quo so we can provide
greater economic opportunity and safety across the Nation.
And finally, last year, HUD reported that homelessness,
homelessness has risen by more than 70,000 people, highest on
record. With more resources and more tools, we've seen more
people homeless in this country.
It's clear that this Administration's policies are
certainly to blame. To address these shortcomings it will take
new solutions like those included in my Road to Housing Act to
begin paving pathways toward prosperity.
But I'll point out the obvious. American families simply
cannot afford to wait for decades. The Federal Government has
spent trillions of dollars, trillions of dollars on various
housing subsidies. Despite this, folks who grew up where I grew
up, folks who are growing up today, where I grew up 50 years
ago, simply cannot afford a home better today than they did 50
years ago.
Since 1973, the basic percentage of African Americans
owning a home hasn't changed very much. The number is 44
percent. That has not changed a single point, not a single
point in the last few years.
That is why I proposed the Road to Housing Act, a
commonsense approach to housing that takes a comprehensive view
of Federal housing policy and recenters support around families
helping those who are homeless, renting, or ready to buy a
home.
This isn't a partisan issue. It isn't partisan to want to
reduce the red tape for home buyers. It's not partisan to
encourage innovation and competition in Federal programs to
better support families living in manufacturered housing, or
families who rely on HUD's assistance.
It's not partisan to preserve affordable housing units and
encourage private capital to play a role. It's certainly not
partisan to require greater accountability for our current
Federal housing programs.
So I look forward to hearing the additional proposals that
my colleagues will bring up today so that we can somehow find a
way to stitch together, for every corner of our country, a
better process to becoming a homeowner.
I also look forward to working with Chairman Brown to
ensure that the Committee hears from our housing regulators,
the American public deserves accountability and transparency to
understand how their dollars are being spent on housing
programs.
I thank you all for being here and I look forward to your
testimony and asking some questions. Thank you, sir.
Chair Brown. Thank you, Senator Scott. I'll introduce
today's witnesses.
Matt Josephs is a Senior Vice President of Policy at LISC,
the Local Initiatives Support Corporation. He previously worked
in policy development and implementation at Treasury's CDFI
Fund as a staff member on this Committee, and is a policy
analyst in Department of Housing and Urban Development's Office
of Public and Indian Housing. Welcome Mr. Josephs back to the
Committee.
E.J. Antoni is a Research Fellow and Public Finance
Economist at Heritage and a Senior Fellow at the Committee to
Unleash Prosperity. Dr. Antoni previously served as an
economist at the Texas Public Policy Foundation as an economic
consultant for FreedomWorks. Dr. Antoni, welcome.
Peggy Bailey is the Vice President of Housing Policy and
Income Security at the Center on Budget and Policy Priorities.
Previously served as a senior advisor on rental assistance at
HUD. Before her service at HUD, she was director of the Health
Integration Project, Vice President for Housing Policy at CBPP.
She's held roles with Corporation for Supportive Housing
and National Alliance and Homelessness. She has been to this
Committee before a number of times. Welcome back, Ms. Bailey.
Mr. Josephs, please begin.
STATEMENT OF MATT JOSEPHS, SENIOR VICE PRESIDENT OF POLICY,
LOCAL INITIATIVES SUPPORT CORPORATION
Mr. Josephs. Thank you very much, Chair Brown, Ranking
Member Scott, and Members of the Committee.
I'm honored to join you this morning to discuss the urgent
need to expand our Nation's affordable housing supply, and the
measures this Committee can take to support investments not
only in housing, but also in small businesses and community
development projects in low income, rural and urban
communities.
My name is Matt Josephs. I'm the Senior Vice President of
Policy for the Local Initiative Support Corporation. LISC is
one of the Nation's largest nonprofit housing and community
development organizations. We're also a certified CDFI and I
thank Senators Warner and Crapo for founding the Senate's
Community Development Finance Caucus, which now includes 24
senators, including 10 from this Committee.
LISC has local offices in 38 urban markets, stretching from
Greenville, South Carolina to Toledo to Phoenix, and to
Seattle. And we also have a rural program where we partner with
130 organizations working on the ground in rural communities in
49 States, Puerto Rico, and the Virgin Islands.
If there's one unifying truth across all of these markets,
whether urban or rural, small, or large, is that there's a
chronic shortage of housing. It is estimated that our Nation
has under produced on 3.8 million units of housing. And that's
the low end of the estimates. The peak of a decades long trend
of underproduction. The lack of housing supply is hampering the
ability of families of modest means to achieve financial
stability.
One in four renters pay more than 50 percent of their
income in rent, leaving little money available each month for
groceries, medicine, childcare and other necessities. In
addition, recent increases in home prices and interest rates
combined with the limited housing supply are keeping home
ownership out of reach for far too many families.
The lack of housing supply, both rental and home ownership
is also constraining economic development, particularly in our
rural communities where employers looking to open new plants
and facilities have nowhere to house their workforce.
Simply put, we need to build more homes. The most important
tool we have to build affordable rental housing is the low-
income housing tax credit. The housing credit has produced
close to 4 million homes since it was created in 1986.
We call on Congress to enact the Affordable Housing Credit
Improvement Act, which would create over 1.2 million additional
units of affordable rental housing over the next decade, and
would also make it easier to finance properties in rural
communities, native communities, and those properties serving
extremely low-income populations.
We also call on Congress to enact the Neighborhood Homes
Investment Act, which would spur the development and
rehabilitation of close to 500,000 homes for home ownership in
distressed urban and rural communities.
Enacting both of these bills would spur the production of
close to 2 million housing units over the next decade, cutting
into a sizable portion of the 3.8 million home supply gap.
We also call on Congress to pass the Rural Housing Reform
Act, which has the bipartisan support of the majority of the
Members of this Committee. This legislation would help create
thousands more units of affordable rental housing in rural and
native communities, while also enhancing home ownership
opportunity in those communities.
Last, we need to continue supporting other critical housing
production programs like HOME and the Capital Magnet Fund, as
well as rental subsidies provided through HUD's Section 8
program to help fill gaps in financing costs and to ensure that
we can target housing to those most in need.
But housing is just one of many important components of a
vibrant and healthy community. LISC also invests in small
businesses and retail establishments on commercial corridors
and rural main streets and in community facilities supporting
childcare, education, workforce, and community health.
That's why it's important that Congress also protect and
enhance critical community and economic development programs,
including the new markets tax credit and community development
block grants, which have become an essential tool for disaster
recovery efforts.
We also call on Congress not only to support continued
appropriations for the Treasury Department's CDFI fund, but
also to enact legislation to support new tools for CDFIs,
including fixes to the bond guarantee program, a tax credit to
support investments in CDFIs, and enhancement to the CDFI
fund's authorizing legislation to facilitate the establishment
of a secondary market for CDFI loans and investments.
These represent just a few of the legislative proposals we
highlight in our longer testimony. There are many promising
bills and proposals that have been developed by Members of this
Committee on both sides of the aisle, and we applaud you for
recognizing the urgency of the housing crisis and for putting
together thoughtful and meaningful responses.
We urge the Committee to consider these proposals so that
they may be advanced to the full Senate for action. Our
families and communities need support. We have the tools to
support them. We just need Congress to act and to act quickly.
Thank you very much and I look forward to answering
questions you may have.
Chair Brown. Thank you, Mr. Josephs.
Dr. Antoni, welcome.
STATEMENT OF E.J. ANTONI, RESEARCH FELLOW, PUBLIC FINANCE
ECONOMIST, THE HERITAGE FOUNDATION
Mr. Antoni. Chair Brown, Members of the Committee, thank
you for the invitation to discuss with you today the current
conditions in the U.S. housing market, including those impacted
by public policy, and especially the challenges encountered by
many Americans today seeking affordable and safe shelter
options.
I'm a public finance economist at the Heritage Foundation
where I research fiscal and monetary policy with a particular
focus on the Federal Reserve, and I'm also a senior fellow at
the Committee to Unleash Prosperity.
Since January of 2021, prices have risen across the
American economy a cumulative 19 percent, reaching monthly and
annual rates not seen in four decades. Housing prices in
particular have risen very quickly, even amidst generally fast
rising prices for all goods and services.
By any widely used metric, housing in the U.S. is
considered unaffordable today for most American families with
shelter prices having increased much faster than incomes.
The significant decrease in home ownership affordability as
well as the increase in rent prices over the last 3 years were
caused by several public policy choices, including elevated
levels of Federal expenditures and the imposition of
regulation.
Large Federal deficits financed by the Federal Reserve's
purchase of treasuries created inflation, systemic interest
rate risk, as well as severe supply constraints in both new and
existing homes. Unfortunately, many official metrics upon which
we rely to measure shelter costs, have greatly underestimated
things like the true cost of home ownership by a factor of four
to one.
That's something to keep in mind when reviewing for
example, this morning's very hot inflation print that showed
shelter costs have risen 20 percent since January of 2021.
Consequently, the typical American family's financial
situation is even worse than a first glance at the data would
indicate. The cost to own a median price home has increased
between 80 and 100 percent over the last 3 years, depending on
the source data and what factors you include in the calculation
like property taxes.
Consequently, home ownership affordability is near record
lows today in many major metropolitan areas of the country, it
takes more than 100 percent of the median household after tax
income to afford the median price home. In other words, it's
impossible.
Affordability has become a widespread problem in Western
communities in particular because of the high proportion of
restricted land in that area of the country. In fact, no major
metropolitan area west of Des Moines, Iowa, is considered
affordable.
Regulation has also imposed significant costs on the
housing market, and these costs are often excluded from
analyses of the problems plaguing home affordability. This is
especially true for efficiency standards and other well-meaning
measures which aim to reduce costs for Americans, but actually
end up increasing them instead.
Likewise, interventions that primarily increase demand for
housing without lifting, the restrictions on supply typically
just result in higher prices. Misallocations of capital
stemming from ineffective lending regulations also increase
costs in the market, both for borrowers and buyers in general,
through higher home prices and higher interest rates.
There are several actions Congress can take to alleviate
the cost of living crisis, especially regarding housing. First
and foremost is to reduce spending, which will reduce crowding
out and increase private market activity. It will also reduce
borrowing, taking pressure off of the loanable funds market and
reducing borrowing costs.
Second, Congress would be well advised to reign in the
Federal Reserve and prevent the violent fluctuations of money
creation and interest rates seen over the last several years.
Regulatory reform would also greatly impact housing
affordability, providing additional flexibility with things
like dwellings, which dwellings that qualify for subsidies is
just one example.
Rolling back ineffective mandates, especially surrounding
energy, would also lower costs. Additionally, steps could be
taken to increase financial literacy among borrowers and
renters.
Congress should also reevaluate existing subsidies, which
primarily increase demand and benefit landlords, lenders, and
other existing owners of capital.
Similarly, Congress would do well to examine the track
record of those regulations and other bureaucratic red tape,
which have curtailed the supply of homes, both single and
multifamily, and therefore driven up costs, which low-income
earners are the least likely to be able to afford. Banking
regulations deserve particular scrutiny in this regard.
Thank you kindly for your time and I look forward to
answering your questions.
Chair Brown. Thank you, Dr. Antoni.
Ms. Bailey, welcome back. Thank you.
STATEMENT OF PEGGY BAILEY, VICE PRESIDENT OF HOUSING AND INCOME
SECURITY, CENTER ON BUDGET AND POLICY PRIORITIES
Ms. Bailey. Thank you, Chair Brown, Ranking Member Scott,
and the Members of this Committee. I really appreciate the
opportunity to testify before you this morning. I appreciate
this hearing and your recognition that we need bipartisan
solutions to do better. We can do better by making it easier to
get rental assistance. We can do better by making that
assistance easier to use, and we can do better by advancing
innovative programs that test ways to give people agency and
autonomy.
The data paints a clear and sobering picture. Over 22
million renters in 2022 were paying more than 30 percent of
their income on housing costs. Twelve million of those renters
were paying 50 percent or more of their income on rent. Over
650,000 people were homeless on a given night in January, 2023,
an all-time high.
As shown by this chart, rent costs outpacing income gains
is a longstanding and has contributed to the affordability
crisis for decades. Despite these alarming facts, Federal
rental assistance remains woefully inadequate. Only one in four
eligible households receives assistance.
People with low incomes are disproportionately people of
color, and they are hit the hardest. 53 percent of people
without assistance who need it are people of color, 47 percent
are White. And of people experiencing homelessness, 37 percent
are Black, 27 percent are Latinx, and 2 percent are Native
American, all overrepresented compared to the general public.
Many of these bills introduced by Members of this Committee
can help people struggling to afford rent. And the Center on
Budget and Policy Priorities recommends additional steps we
should take to holistically address the housing crisis.
The provisions in the Fair Housing Improvement Act
introduced by Senator Kaine would prohibit voucher
discrimination by rental owners. The Choice in Affordable
Housing Act introduced by Senators Coons and Cramer would add
some flexibility to the inspection process and create a fund to
pay for things like security deposits to help renters access
housing faster.
While we have strong concerns about expanding The Moving to
Work program, Senator Scott's Road to Housing Act rightfully
prioritizes redeveloping public housing to address the
unacceptable conditions too many people are living in. We
recommend adding stronger tenant protections and an increase in
Rental Assistance Demonstration subsidies.
We also would like the Committee to consider the following.
We must improve the over 2,000 housing agencies' abilities to
work collaboratively across jurisdictions. We must allow for
alternative screening and more efficient intake rules, similar
to those allowed in the Emergency Housing Voucher program.
We must redesign housing agency service and administrative
fees, structures, and formulas, also similar to the Emergency
Housing Voucher program. Congress must allow voucher subsidies
to be used for security deposits, and we must give families
more time to use their assistance. 60 days is not enough to
prepare for a move and find housing.
Your proposals also have the ability to spur innovation by
the Administration and your colleagues, especially
appropriators. Senators Van Hollen and Young have done this
with their Family Stability and Opportunity Vouchers Act. While
more can be done, appropriators and HUD have found ways to make
progress on their proposals, which has made a huge difference
in the field.
With that in mind, please consider supporting two other
innovative ideas.
Policymakers should test providing rental assistance
directly to tenants, and Congress should authorize a
demonstration program that allows families to deposit a portion
of their rent increase from added earnings into an escrow
account to help build savings.
It will take big Federal Government investments and
structural changes to get to the world we want to see where
everyone who needs help gets it. Relying solely on market
forces hasn't and will never work. Multifamily development has
been mostly on the rise in recent years, as the market is
responding to the deficit in rental housing.
But much of that new supply in development can only be
afforded by people with high incomes. That's how landlords and
property owners make profit. Serving people with lower incomes
who can't afford to pay enough rent to cover maintenance and
basic operating costs means less profit or a loss.
So the market is responding exactly as we would expect.
Therefore, Government action is needed to help those where the
profit potential of the market is limited or nonexistent. As a
Nation, we have spent too long blaming and punishing people for
being poor, for not having a home, for being evicted, and for
struggling to pay their bills.
Part of this punishment has been programs designed to be
too hard to navigate, hard to administer and absent of self-
determination for the recipient. Many of the bills on the table
today would correct these problems and do a lot of good for
folks who need the help.
Thank you again for the opportunity to testify, and I look
forward to answering your questions.
Chair Brown. Thank you, Ms. Bailey. I'll begin the
questions. Senator Tester from Montana.
Senator Tester. Thank you, Mr. Chairman. I want to thank
you and the Ranking Member for having us here. And I want to
thank all three of you for testifying today. I appreciate it.
I believe in supply and demand. In fact, I'm a farmer, and
whenever there's a drought somewhere in the world, it's good
news for me, because that reduces supply while the demand stays
the same. Mr. Josephs, you said that there were 3.8 million
houses too short, and until that comes up, until we, until we
fix that supply problem, we're going to see housing prices
continue to elevate faster than a lot of other things.
So my question to you is--and I know there's a lot of folks
out there that are in the private sector that want to do good
work and they have money to do good work--what can the Federal
Government do to release those folks who want to invest in
housing to urge them to build more? What is the single most
important one? And if you want to go to some other ones, you
can too.
Mr. Josephs. Thank you for those comments.
Senator Tester. Need your mic on, please.
Mr. Josephs. Yes. Thank you. It's just like being on the
calls, right. Got to unmute.
Thank you for the questions. And the Chairman actually, I
think in his introductory remarks highlighted even higher
figure of underproduction. 3.8 million is really the low end of
some of the estimates that we've seen.
And how can Government help with this underproduction? You
know, we highlight, I think the biggest single tool for rental
housing is the low-income housing tax credit. And there has
been legislation introduced by Senator Cantwell and Senator
Young, the Affordable Housing Credit Improvement Act, which
several of you are already cosponsors of, so we appreciate
that. That bill alone could create 1.2 million more units of
affordable housing, including many in rural communities.
And most notably, there's been a backlog, and a lot of the
housing finance agencies they have a lot of shovel ready
projects ready to go. And so an additional infusion of credits
could immediately hit the ground running with those.
And on the home ownership side, we are also calling for the
enactment of the Neighborhood Homes Investment Act that would
create about 500,000 homes in distressed urban and rural
communities. And the problem we're trying to attack there is
that there is a value gap. The cost of developing or rehabbing
these homes is more than you can sell the home for.
And this is a particular problem in you know, kind of rust
belt and legacy cities, but also in rural communities where
you've had a lot of increase in construction costs. So with the
credit there, that's what, to your point Senator can really
attract new investors because they know they'll be made whole
when they make those investments.
Senator Tester. OK. And I appreciate that. You also talked
about a bill that would incentivize housing built in rural and
native communities called the Rural Housing Reform Act.
What makes that bill different than the other two you just
mentioned so that rural communities could take advantage of it?
Mr. Josephs. So this is more about the preservation of
existing housing. So you have the 515 program at USDA, which
has mortgages on multifamily properties and you can get some
rental assistance through the 521 program for those properties.
But when the mortgage matures, you can no longer get 521 rental
assistance.
So what you see is the risk of these properties falling out
of affordability. So that's what this legislation, that's one
of the primary things it would do, would decouple it. So you
could use the rental assistance on these properties or other
properties.
Senator Tester. There's been statements made earlier about
the Federal Government can't fix this, and I agree. The Federal
Government can help, and so can State government, and local
government and the private sector, absolutely.
You've looked around, I'm sure. Are there things that some
communities are doing that is unique that's working?
Mr. Josephs. At the local level, I mean inclusionary
housing has always been a very strong tool to encourage
developers as they're doing market rate housing to also include
units for affordability. ADUs--now this is probably more for
urban communities--but smaller dwellings are good.
I think and just making sure zoning allows for affordable
housing and density around transit communities, that kind of
stuff is, I think, very effective.
Senator Tester. OK. Thank you, Mr. Chairman. Look, there's
not a place I go in Montana, whether it's a very small town or,
or the bigger ones. And our bigger ones are about 100,000, so
the small ones are much, much smaller than that, that there
aren't housing challenges.
And some of it is no housing available and others--and
you've already addressed both of these--the others, the
housing's there, but it's dilapidated. And so we appreciate the
testimony.
Thank you, Mr. Chairman.
Chair Brown. Thank you, Senator Tester.
Mr. Josephs, your comments have been helpful in this
Committee, but in this Committee we don't use the term rust
belt. I thought I'd just let you know that.
Mr. Josephs. Oh, thank you, sir.
Chair Brown. Senator Rounds.
[Laughter.]
Chair Brown. That really wasn't meant to be funny, but
nonetheless.
Senator Rounds. Thank you, Mr. Chairman. And first I'd like
to thank the Chairman and Ranking Member for holding this
meeting today. I'd also like to thank you for being with us
today and for sharing your thoughts and your expertise.
We can all agree on the need for more affordable housing
and bringing the opportunity for our families to have a safe
and affordable place to live, whether it's an apartment or a
single-family home. Housing stability impacts so many of our
lives, our health, how our children learn at school, our
ability to build wealth and the social benefits of belonging to
a community.
As we discuss affordable housing, we need to remember, this
includes all income levels, ages, and locations, including
rural communities and Tribal lands. One piece of legislation
that would help increase the access to affordable housing is
the Rural Housing Service Reform Act that I introduced with
Senator Smith.
Senator Smith and I have worked together over the last 2
years to create this bipartisan commonsense legislation that
would provide the first meaningful update to the rural housing
service in years.
I want to thank my colleagues on the Committee, Senators
Lummis, Tester, Crapo, Fetterman, Daines, Van Hollen, Cortez
Masto, Britt, Warner, and Tillis for their support of this
legislation. With over half the Members of the Committee,
evenly split Republican and Democrat, this legislation is truly
bipartisan in nature.
The Rural Housing Service Reform Act would take large
strides toward making RHS more accessible to folks across the
entire country. The legislation would preserve workforce
housing by fixing a longstanding problem for USDA section 515
properties that now have maturing mortgages.
It would expand both access and affordability of housing on
Tribal land by codifying a pilot program that leverages native
community development financial institutions or CDFIs. And
finally, it would make much needed investments in technology
upgrades so that USDA can process loans quickly and
efficiently.
My first question is for Mr. Josephs. Could you speak to
how provisions in the Rural Housing Reform Act would increase
access to affordable housing across the country?
Mr. Josephs. Yes. Thank you for that question.
So what we're talking about is the Section 515 portfolio of
housing at USDA that we're losing, and in 5 years between 2016
and 2021, we've lost 921 section 515 properties, and some of
them, because the owners were opting out of their mortgages
early, and that was three times more than the USDA had
projected.
So we're losing them in a faster clip than we'd even
anticipated. So that's the criticality of this program is if
they are being lost, at least let's get rental subsidies
continuing there so they can keep being affordable to low
income families.
Senator Rounds. Thank you. And then, Mr. Joseph, one more
follow up. We've seen success in South Dakota with the USDA's
native CDFI relending demonstration program. It was a pilot
program that allows native CDFIs to leverage their really deep
ties in local communities and deploy loans to eligible native
borrowers.
Could you speak to the success of the program and how
expanding it could help increase housing affordability on
Tribal land elsewhere as well?
Mr. Josephs. Yeah, we think a relending model is a great
way to go. CDFIs have their roots in those communities, they
know the borrowers. It's easier for them to make those inroads
than the agency staff. So it is just a great tool. They also
use it for their community facilities programs. Utilizing the
CDFI network is a really smart way to go.
Senator Rounds. Thank you. And look, it works. It's one
thing these folks understand Tribal trust land and how to work
through the issues of title. It actually makes it work. Dr.
Antoni.
Mr. Antoni. Antoni.
Senator Rounds. Antoni, thank you.
Rising regulatory costs are a limiting factor on housing
supply, particularly for the entry level market in need of
inventory. According to a study done by the National
Association of Home Builders, on a dollar basis, applied to the
average price of new homes of $394,000 a year, regulation
accounts for $93,870 on the final house price.
Instead of creating new barriers to entry, we need to focus
on incentivizing local governments and the private sector to
work together to increase available housing stock in ways that
best suit the communities that they serve. Unfortunately, the
Department of Labor finalized a rule in August of 2023 that
only increased red tape.
Dr. Antoni, how has DOL'S final rule impacted the cost of
multifamily housing construction?
Mr. Antoni. Well, thank you, Senator for the question.
Unfortunately, instead of focusing on measures which will
remove red tape and therefore reduce costs, they have
essentially created a system where they are, I mean,
essentially they are going to increase costs on home builders,
and we have to remember that those costs are simply passed on
to the home buyer, or in this case the renter.
And so in instead of decreasing costs by allegedly making
things more efficient, whatever the case may be for those
renters, the reality is that the average renter is just never
going to actually recoup the initial costs that are being put
upon them in the form of higher rents.
A recent study, for example, showed that these regulatory
costs are actually three times higher than what DOL has
estimated them to be. And so when you're talking about a
regulation that really only has a marginal benefit and now you
explode the cost by three times the original estimate, there is
absolutely no benefit at all.
Senator Rounds. Thank you.
Thank you, Mr. Chairman.
Chair Brown. Thanks so much. Senator Smith of Minnesota is
recognized.
Senator Smith. Thank you, Mr. Chair, and thank you very
much for doing this hearing.
And I want to just start out by saying a few more things
about our bipartisan Rural Housing Bill. I want to thank my
colleague and partner Senator Rounds for highlighting the bill
and for talking about what is in this bill which would help to
preserve affordable rental and home ownership housing in rural
communities by reforming the Rural Housing Service at USDA.
You know, the Ranking Member said in his opening comments
that some current Federal housing programs aren't working. And
I think we resonate with that because the purpose of our bill
is to look at a Federal program, the Rural Housing Service,
which has been so important and say, yes, it needs to be fixed.
We want to make it work better, we want to reduce red tape.
And that's what our bill does. And I think that's why it
has gotten such strong bipartisan support, as Senator Rounds
described, 12 Members of this Committee evenly balanced between
Republicans and Democrats.
I also just want to point out that this bill is the result
of numerous bipartisan hearings and also input from folks at
the local level. We've heard so much from folks not only in our
two States, but people around the country who have told us what
we need to do to make rural housing service programs work
better.
I also want to point out that this is not something that's
just going to help a few people in a few areas. It has really
significant impacts. We're talking about programs that help
nearly 130,000 mortgages be more affordable for low income
Americans. We're talking about seniors, people living with
disabilities, and folks in very low wage jobs in rural
communities.
So that's over 400,000 Americans who count on the rural
housing service programs for a safe, decent, affordable place
to live. I'm sorry, Ranking Member Scott had to step out
because I would like to point out to him that in South Carolina
we're talking about homes for over 11,000 tenants with an
average income in South Carolina of only about $14,000, and I
could do the same for States all over the country that are
represented here on this Committee.
Mr. Chair, I'd like to submit for the record a chart that
lays out the numbers on how many Rural Housing Service
affordable units would be preserved by our bill, if that is----
Chair Brown. No objection. So ordered.
Senator Smith. Mr. Josephs, I know you responded to my
colleague Senator Rounds about why it is important that we move
this bill forward and that we pass it into law. And I just want
to thank you for your comments.
Is there anything else that you'd like to add that you
think we should be keeping in mind on this Committee as we
think about the importance of protecting and expanding
affordable housing in rural communities?
Mr. Josephs. Well, just a reminder to folks at how acute
the problem is in rural communities could be helpful. A full 44
percent of rural renters are cost burdened, and nearly half of
them are paying more than 50 percent of their monthly income
toward housing. Home prices are rising in rural communities as
fast, if not faster, than urban communities as well. So there's
an acute need.
Senator Smith. I appreciate that. I think a lot of times we
rightly focus on the challenges of affordability in urban
communities, and we forget that folks in rural areas are
suffering an extreme shortage of the housing, as you said, as
housing becomes more dilapidated, it gets run down. And then
that's part of what we're trying to achieve with our
legislation, which is to make it feasible for these homes that
are existing as affordable to stay there.
Ms. Bailey, I'd like to talk with you about something
several of us on this Committee have been working a lot,
thinking a lot about what we need to do to improve Federal
homelessness programs. And one thing that we note is that
during the height of the pandemic, a lot of levels of
government cut red tape to speed up the delivery of service for
people experiencing homelessness.
And because we knew that this crisis was--we had to respond
to it with urgency. Could you talk briefly about what lessons
we've learned about those flexibilities and what that might
tell us about how we want to continue some of those
flexibilities going forward?
Ms. Bailey. Absolutely. Thank you, Senator, for that
question. I think this is essential for the Committee to
consider. We learned so much from the programs in housing that
were delivered during the pandemic. Most importantly, the
flexibility for local providers to be able to administer the
programs as they see fit, to be able to meet the needs locally.
We also learned that there's a lot of paternalism laid over
the programs that inhibits--when we complain about access, how
slow it can be for people to find housing, a lot of that is
things that we can fix. We can take--we can make sure that
people can get housing quickly. We can make sure that landlords
get paid faster and that that assistance stays with people for
as long as possible.
The other piece that I want to mention though, too, is that
housing authorities need to get paid for the services that
they're delivering.
Senator Smith. Right.
Ms Bailey. They can become more proactive in delivering
services if we pay them well. And that's one of the other
things that we did during the pandemic.
Senator Smith. Well, thank you for those comments. Mr.
Chair, I once worked at the local level, and I tend to trust
folks at the local level to know best how to deliver these
programs. And I think that's, as you're saying, one of the
lessons that we learned.
Thank you.
Chair Brown. Thanks, Senator Smith. Senator Lummis of
Wyoming is recognized.
Senator Lummis. Thank you, Mr. Chairman so much. And I want
to talk about what I see as some of the really good work that
we've done in this Committee and highlight some of the
legislation we might want to move forward. So thank you, Mr.
Chairman.
To catch up and meet the needs of Wyoming, we've got to
build between 20,000 and 38,000 housing units this decade. We
have the smallest population in the Nation. So that gives you a
sense of how significant our needs are. And in some ways, they
pale in comparison to some of my colleagues here on the dais.
It's a daunting task, and the cowboy State is up to it, I'm
sure your States are too, but we can improve the tools that we
help make available to them. Senator Tina Smith likes to say
that without housing nothing else in your life works. And
you're right about that.
I'd like to add that without housing, nothing in your
community works either. Not your neighborhoods, not your
workforce, not your business, and not your economic growth. So
I've been really pleased to work with you Senator Smith and my
other colleagues on this Committee on some of the challenges
that we have with regard to housing. Solving the housing
shortfall is going to take committed bipartisan work, and it's
a great bipartisan subject.
So first we need to streamline the bureaucracy and take a
thorough look at what's been working and what hasn't. The
Federal Government threw a lot of money at housing needs and
homelessness during COVID. The impact has been higher housing
costs and more families competing for a shrinking supply of
affordable homes.
So spending money has not fixed our problem. And further,
when those houses at their inflated value are reappraised for
tax purposes, everybody's property taxes go up. So it's sort of
a vicious cycle.
I want to voice my support for Ranking Member Scott's Road
to Housing Act that offers commonsense reforms to existing
housing programs. I also appreciate the very thoughtful reforms
that Senator Rounds and Senator Smith have proposed in the
Rural Housing Service Reform Act.
I think together these pieces of legislation update
programs that are in desperate need of re reworking. I hope
this Committee moves forward on marking up these two important
pieces of legislation. Thank you, Senator Scott, Senator Smith,
Senator Rounds.
Second, we need to expand the housing supply by eliminating
barriers to construction and preserve the housing units we do
have. Regulation blocks the construction of new housing by
making it more expensive than it needs to be. Regulation adds
$94,000 to the cost of a new home and accounts for a whopping
40 percent of apartment development costs.
Now, I know a lot of these are assessed at the local level
and not at the Federal level, but we contribute to those
additional costs as well. We need to find room for housing
innovations such as modular housing, which delivers a high
quality product at a lower cost to buyers everywhere,
especially in States like mine.
We also need to preserve the housing that we do have. Rural
housing tends to be older and in need of repair, but small loan
sizes and an appraisal gap means it's very challenging for
rural homeowners to finance the repairs they need. That's why
I'm working with Senator Fetterman on the Whole Homes Repair
Act to pilot an approach that would shift existing funds to a
centralized source of grants for low income families, and it's
kind of fun to get to work with Senator Fetterman for the first
time.
Finally, interest rates. Irresponsible Government spending
spurred inflation, and home buyers and developers are paying
for it in the form of higher interest rates. We think of the
impact on mortgages, but high interest rates affect every step
of the development process from installing sewer, curb, gutter,
water, streets and other infrastructure, land acquisition
costs, construction loans, you name it.
The Federal Home Loan Bank system provides crucial
liquidity to our financial system. They're also a source of
creative ways to support housing and homeowners. And I'd like
to work with a system to understand how we can grow the
system's impact on the housing shortfall. After all, the middle
of their name is Home Loan Bank system.
Since 2010, housing development has lagged household
formation by 5 million units. That's 5 million additional
families that are competing for limited aging housing. It's
taken decades to get here. We're not going to solve this in a
single hearing, but we can make progress and we are making
progress. I think we've identified some really good ways to
help move this issue forward.
So I look forward to working with my colleagues on the
Committee to move forward with legislation on these issues. I
think it's a real bright spot in the portfolio bipartisan work
that's happening in Congress.
And thank you for letting me highlight it. Mr. Chairman,
Mr. Ranking Member, I yield back. Thank you.
Chair Brown. As I agree. Thank you for that. Senator Reed
of Rhode Island.
Senator Reed. Well, thank you very much, Mr. Chairman. I
too want to make some comments before I ask the panel
questions.
There's no question, we have an affordable housing crisis
throughout the United States, and I hope when we come to
reauthorize our infrastructure law, the Committee will look
seriously at many of these proposals that Senator Lummis and
others have indicated.
One measure I proposed is S. 3673, the Affordable Housing
and Home Ownership Protection Act. This measure is fully offset
and we provide $50 billion for affordable housing,
construction, and preservation.
And Senator Lummis and I introduced S. 3905, the Property
Improvement and Manufactured Housing Loan Modernization Act,
which would raise FHA Title 1 loan limits for manufactured
homes and property improvement loans, and make accessible
dwelling units eligible for Title 1 financing.
Senator Britt and I also introduced S. 3904, the Helping
More Families Save Act, which would create a pilot program for
family self-sufficiency programs, universal escrow accounts.
And the bill would help thousands of families currently living
in federally assisted housing to put a portion of their
earnings into an escrow account that they can tap later for
education, a vehicle, or a downpayment on a home.
And to make the experience of home buying less confusing
and less of a hassle, Senator Hagerty and I have introduced S.
3502, the Homebuyers Privacy Protection Act, and this
legislation will restrict the credit bureaus from selling
information to lenders when a potential buyer applies for a
mortgage.
These, so-called trigger leads, subject borrowers to
endless spam calls and come-ons that can lead borrowers into
making costs of mistakes.
And Mr. Chairman, I would ask unanimous consent to enter
into the record a joint letter of support for this legislation
from the Mortgage Bankers Association, Center for Responsible
Lending, and 21 other organizations.
Chair Brown. So ordered.
Senator Reed. Thank you.
And finally, Senator Collins and I have long introduced S.
735, a bill to strengthen the United States Interagency Council
on Homelessness. The Council is the only Federal agency with
the sole mission of preventing and ending homelessness, and our
bill will eliminate its termination date so it can continue to
coordinate and streamline assistance across the Federal
Government.
Thank you for allowing me Mr. Chairman to talk about the
legislation.
Mr. Josephs, could you tell us how do Title 1 and
manufacture homes support housing availability?
Mr. Josephs. Yes. Thank you, Senator. And also thank you
for your tremendous support over the years on the appropriation
side, supporting our critical housing programs like the Capital
Magnet Fund and others as well. So thank you for that.
I don't claim to be an expert in the Title 1 programs, but
my understanding of the legislation is by raising the loan
limits, you're keeping up with the costs of the production now
of the homes and the cost of sales.
So it kind of provides a viable funding source for those
low-to-moderate income borrowers to finance and purchase the
manufactured home; and includes ADUs I understand, which are an
important way to solve this housing crisis and other
improvements for energy efficiency of aging stock. So I think
all those are really helpful tools.
Senator Reed. Thank you, sir.
Ms. Bailey, the FSS program I think is extremely important
for families that we use it extensively in Rhode Island, but we
could make it better and more effective.
Could you give us some insights to how it helps families?
Ms. Bailey. Absolutely, Senator. And we're really excited
that you're introducing this legislation. It helps families be
able to save some money to be able to pay for things, like you
said, education, and their car breaks down so that they can't
get to work, and eventually in home ownership and even becoming
entrepreneurs and starting their own small businesses.
We've seen the FSS program really do great things for
families who are receiving assistance. And the one thing it
really tests is how we can use financial coaching and financial
assistance for families to help bridge the cliff that families
can face when assistance is ending. Now they'll have some
resources to be able to succeed and grow.
Senator Reed. Yeah, in Rhode Island, it's been a tremendous
program. There's really a disincentive to move up because as
you know, as your wages or family income increases, your
support goes down. So you're in this terrible dilemma. Here,
you have resources put aside, so you're not afraid of taking
the promotion because you'll lose money.
And I think that's great. And many of the folks we've
talked to have been able to put a downpayment together so they
can move from subsidized housing into their own home. And that
is probably the way--that's definitely the way to go.
So again, thank you all for your testimony and thank you,
Mr. Chairman.
Chair Brown. Senator Scott of South Carolina is recognized.
Senator Scott. Thank you, Mr. Chairman.
Far too long, the Federal Government's approach to housing
affordability has been one-size-fits-all, focused on subsidies
that actually increase demand for housing, despite billions of
dollars being spent through the American Rescue Plan, and the
so-called Inflation--makes me laugh every time I say that--
Reduction Act, the cost of housing, like the cost of living,
has only increased.
It's time for a new approach. One that actually deals with
the underlying challenges faced by individuals and our housing
market more broadly. My legislation, the Road to Housing Act,
makes targeted reforms to start addressing these issues.
Mr. Antoni, could you speak to some of the benefits of
targeted reforms like the Road to Housing Act, as well as talk
about how that could increase supply, encourage competition,
and frankly reduce the regulatory burdens that we see today?
Mr. Antoni. I'd be happy to, Senator. Thank you for the
opportunity.
One of the things that we often focus on when we're talking
about trying to solve the housing affordability crisis is to
increase demand, except that, that ends up making the problem
worse.
If we just have an exercise for a moment here. Imagine we
gave every renter in the country an extra $100 that they could
only use toward their rent, what would happen? Well, landlords
would simply just all raise the rent by $100 a month.
And so that's essentially what we typically see in a lot of
these Federal programs that aim to make life easier. They're
very well-intentioned programs, they aim to make life better
and make housing more affordable for renters. But instead, they
end up doing exactly the opposite--end up increasing costs, not
decreasing them.
And so things that focus more so on improving supply as
opposed to just simply increasing demand have a much better
track record. Likewise, if you can give more flexibility in
terms of options that regulators have at their disposal, so
that Federal money can be targeted in different ways, in other
words, allocated more efficiently, that also seems to have very
good results.
So doing things like expanding the definition of the kinds
of dwellings that would qualify for certain types of subsidies,
is a very good move in the right direction. Likewise, anything
you can do to broadly speaking, increase the financial literacy
of those who are poorly off today has an incredible improvement
on their quality of life.
And the reason for that is because the same characteristics
that have typically gotten them into the financial situation,
which they are today, are also going to impede them from
advancing further, and also impede them from wisely using
resources which the Federal Government or others put at their
disposal.
I mean, it's largely the same reason why so many people who
win the lottery, let's say, or so many NFL superstars end up
broke only a few years after they receive millions of dollars,
because they simply don't know how to manage their money. They
don't understand things like the costs that go into owning a
home and everything that that entails.
And so regulatory flexibility is a tremendous help.
Financial literacy is also a tremendous help as well.
Senator Scott. Well, you raise an important question about
financial literacy. I think that we all, hopefully we all can
share the importance here and understanding and appreciating
and agreeing, frankly, of the importance of financial literacy
period.
I'd say, however, that in the current environment, looking
at President Biden's recent State of the Union, he repeatedly
claimed that his economic agenda was working for the average
person in our country. But since he's taken office, mortgage
rates have ballooned by 150 percent. 150 percent. Rent is up 20
percent, homelessness in a single year increased by 12 percent.
I think it's a fair assessment to say that the Biden
policies are devastating and negatively impacting first time
home buyers. Would you agree with the time that we have left
about 45 seconds?
Mr. Antoni. I would, Senator. And frankly, it's shocking
how if you follow the chain of events, you can see how
trillions of dollars of Government spending led to so many of
the problems that we face today.
It caused the inflation, it caused the violent change in
interest rates, which helped freeze over both the supply of new
homes, as well as the supply of existing homes to the market.
And that has greatly contributed to the increase in price that
we have seen today.
Senator Scott. Thank you. I yield back my time.
Chair Brown. Thank you, Scott. Happily. Thank you.
Senator Scott. You're welcome.
Chair Brown. Senator Menendez, New Jersey is recognized.
Senator Menendez. Thank you, Mr. Chairman.
Ms. Bailey, the National Low Income Housing Coalitions 2023
Out of Reach report show just how hard it is for low-income
renters to afford even modest housing. In my State of New
Jersey, a medium income renter is barely able to pay for a one-
bedroom home.
The fact is that there aren't enough rental homes being
built, and part of that is because Federal lending programs
like HUD and the Federal Housing Administration having kept
pace with the market.
Ms. Bailey, is it true that FHAs multifamily loan limits
haven't been adjusted since 2003?
Ms. Bailey. Yes, that is true.
Senator Menendez. Because the limits haven't been updated
in so long over two decades, even after adjustments for
inflation and higher cost areas, FHA multifamily financing
simply isn't a viable financing tool in many parts of the
country anymore.
Would you say that these limits pose one of our challenges
to HUD and FHA meeting its mission to provide decent, safe, and
sanitary housing?
Ms. Bailey. Absolutely. The key thing to understand is
rarely is it one tool that we use to build any multifamily
development. It takes multiple tools to build just one
affordable housing development. So whether with the Low Income
Housing Tax Credit, the loans through HUD, the HOME program,
Community Development Block Grant dollars, all of that has to
work together. But none of them were actually created to work
together.
So it's really important to reform things in order to make
things align better, and that's definitely necessary with the
lending program.
Senator Menendez. I appreciate that. That's why I
introduced a bill for today's hearing that would modernize FHAs
ability to finance multifamily housing construction around the
country.
It's a simple commonsense proposal that would, among other
things, update FHAs lending ability to accurately reflect the
increase in construction costs over the past 20 years. And I
think this is one element of the supply side that Dr. Antoni
was talking about.
Flooding is one of the most frequent and most expensive
natural disasters impacting homes in the United States. And
while 40 percent of Americans live in coastal counties, just 4
percent of Americans have a flood insurance policy.
Ms. Bailey, isn't it true that low-income families
disproportionately face increased flood risk?
Ms. Bailey. That is true. Too many developments are in the
floodplain.
Senator Menendez. And so while FEMA has long struggled to
keep premiums affordable in the National Flood Insurance
Program, and with growing flood risk due to climate change, I
worry that many families face an impossible choice of being
overburdened with housing costs or foregoing insurance for the
most important financial asset, which is their home.
And the cost of flood insurance is directly tied to the
affordability of home ownership, especially if your mortgage
provider requires coverage. So if you cannot get flood
insurance because it is unaffordable and the marketplace is
just not taking care of it on its own and you need it in order
to get your mortgage, which most mortgage companies or banks
require, then you are locked out.
And so that's why our bipartisan NFIP Re Act, which creates
an affordability voucher program is incredibly important. And I
hope we can get to a pathway forward on that.
Finally, affordable housing is increasingly located in
areas that are far away from job centers, forcing workers to
pay higher transportation costs or work fewer hours. According
to one analysis, workers are spending $2,000 and 39 hours more
per year on commuting than before the pandemic.
Housing cannot be affordable unless people are able to get
to work where they live, which is why I led the charge with my
Livable Communities Act, which creates a Federal grant program
to incentivize the development of new affordable housing near
existing mass transit.
Mr. Josephs, can you explain how critical it is that we
keep other costs, like transportation in mind when developing
affordable housing?
Mr. Josephs. Yes, sir. And it was a great bill to support.
I think providing more opportunities to build near transit is
critical. It's saving the family commuting times. And when
you're lower income and paying for childcare every 15 minutes,
every half hour, it definitely counts. You're also reducing
emissions.
It just makes so much more sense to build near those. And
we particularly appreciated that you would require 25 percent
of the funding in high poverty communities. So it's a great
idea.
Senator Menendez. It is an opportunity to take the
infrastructure that exists, maximize it, and create greater
opportunities for people to be able to work successfully and
spend less of their disposable income on transportation and
related costs. I thank you, Mr. Chairman.
Chair Brown. Thank you, Senator Menendez.
Senator Tillis is recognized from North Carolina.
Senator Tillis. Thank you, Mr. Chair.
Mr. Chair, I don't know if this is already in the record,
but if not, I'd seek unanimous consent to enter Mr. Antoni's
article, ``Why Are We Raising Home Buyer Costs for Responsible
Borrowers'' into the record?
Chair Brown. No objection.
Senator Tillis. Thank you.
So, Mr. Antoni, I like the article. I particularly like,
the content of the article also. You taught me a new word,
defenestrated, which is throwing something out the window. I
didn't know that. I don't know.
Chair Brown. Senator Tillis, there's the great
defenestration of 1649. There is, correct.
Senator Tillis. Outside of your baseball knowledge?
Chair Brown. That's not baseball.
Senator Tillis. Surprised that you know that.
Chair Brown. Somebody threw a monk or a somebody, right?
Dr. Antoni, who was it? Somebody was. Anyway, in the Czech
Republic, I believe.
Senator Tillis. Well, Chat GPT gave me an update.
Chair Brown. Somebody check that out. [Ed.--The 1419, 1483,
and 1618 Defenestration of Prague.]
Senator Tillis. But I'm going to be honest, I did not know
that word, but I do----
Chair Brown. Senator Tillis, you now have 4 minutes left.
Senator Tillis. I do?
[Laughter.]
Senator Tillis. I do know, I guess, that the concern that I
have, and you've noted it in the article, the FHFA, the sort of
changing--I mean, I feel like we're almost creating a social
engineering dimension to what has historically been to fact-
driven actuarial underwriting process.
Your past history based on your ability to pay has weight
in what you ultimately have to pay for a loan. And if you are
more likely to default, you have to pay a slightly higher fee.
If you're less likely to default, you pay a lower fee.
But with the new rule, it seems to me you're sending the
message--the FHFA is sending a message to mortgage originators
that, you know, we're going to charge an average of about
$15,000 more to somebody with good credit over the next 30
years. We're going to save the person with marginal credit
about 8,000 a year.
How does that not potentially translate into problems later
on as these loans or after these mortgages default rate goes up
on ones that are being undercharged for the risk that they're
rated, after they flow from origination to distribution?
Mr. Antoni. Well, Senator, it's going to increase costs
across the system really throughout the housing market. And
frankly, we're seeing the exact same thing, just put on
steroids, I think with the Basel III endgame regulations that
are being pushed out.
Senator Tillis. And happily we've heard Chairman Powell say
that that needs a lot of work. But I think you're right. I
guess I'm kind of wondering, you know, where I struggled, when
I was getting my first house, my parents only owned a house
about half the time that I was growing up. And sometimes they
owned a trailer, sometimes we rented one. So, you know, I was
somebody who had to work my way through a journey to be able to
afford a house.
So I'm working hard, saving money, or borrowing money for
my first house in Atlanta, Georgia. It sounds like to me, if I
was reliving that experience that I had back in about 1988 that
I've got a good credit score now and my reward for working hard
and saving money and getting to that point and a downpayment,
is to have a higher underlying cost.
So why wouldn't this create a distance in for somebody
who's on the bubble? For me, you know, why would I work so hard
or avoid some of those things that I wanted to do if I know
that my credit rating is slightly lower, I'm going to get a
concession for that. Why wouldn't that create a disincentive
for people to continue to work on trying to improve their
credit?
Mr. Antoni. Senator, you raise a great point, which is that
if you incentivize something, be ready to get more of it. And
that's exactly what we're doing here. And as you divorce
default risk from interest rates as you force lenders to
consider other criteria that is irrelevant to that equation or
sometimes completely counter to that equation, again, you are
introducing systemic risk into this.
Senator Tillis. Well, you know, here's what I wish--and
we're going to submit a lot of questions for the record--but
here's what I wish we were having a discussion about. I just
had this discussion with a mayor and town manager and council
in my office. I asked them to go back and do what I continue to
do when we have these affordable housing hearings.
Here I think we're making a mistake. Should we provide
other ways to have people that are on the bubble of affording a
home, figure out a way to help them out? Absolutely. But not by
cooking the books on actuarial science. Not by making rating
for risk not be what it really is anymore. Where does it end?
Or do we just abandon it and come up with a completely
different way of providing mortgages?
But here's the other thing that we have to have. I've said
this in finance, and I'll say it in banking. I won't go too far
over, I won't throw the time limit out the window, Mr. Chair,
but I have to say this.
I wish that we could come together in this hearing on a
bipartisan basis to talk about the underlying cost of housing
that relates to overregulation and a lack of modernizing. Take
a look at why would it that my county commissioners, Democrats
and Republicans expressed concerns with the waters of the U.S.
because they knew it was going to increase the cost of
development. They knew that it was going to elongate the
permitting process, and time is money.
If we really want to work, we're going to have differences
of this. Some will be ideological mine is just pure math on the
latest advice from FHFA. But why don't we come together and
look at real savings without putting water, air, or home safety
at risk by taking a look at modernizing and reducing the
underlying cost of housing?
Because we're going to continue to have debates if we use
this as the only approach of doing it. But if we get in a room
on a bipartisan basis, I think we can take far more--make it
far more affordable than these games that are being played by
some of our regulators.
And I'm going to finish now. Sorry to go over, Mr. Chair
and I'll submit other questions for the record. Thank you all
for being here.
Chair Brown. Thank you, Senator Tillis. Senator Cortez
Masto of Nevada.
Senator Cortez Masto. Thank you. Thank you, Mr. Chairman. I
can't think of a more important hearing than the one today to
really talk about how we supply and build affordable housing in
our communities.
And I appreciate my colleague from North Carolina, because
I agree. I think there needs to be streamlined permitting at
the local and State and Federal level that this is part of the
problem and we need to address it.
There's three pieces of legislation though, that I have
introduced and around housing because I see the need for it in
my State. It's workforce housing. It is all of the above. And
it is important that we're working together, and I hope we are
able to pass this legislation. I just came from E and R and
there's a lack of housing for our wildland firefighters. I
mean, it touches everybody in our community and we just have to
focus on it.
One area I want to talk about is the Federal Home Loan Bank
system. According to the nonpartisan Congressional Budget
Office, the Federal Home Loan banks receive a 7 billion annual
subsidy with nearly all of it passed along to their member
banks, insurance companies, and credit unions.
Vast majority of that subsidy has no impact on housing.
Their mission is housing and economic development. I have
legislation that I've introduced the Federal Home Loan Bank's
Mission Implementation Act. I'm doing an updated version of it.
And what I'm recommending is that we at least double the
Federal Home Loan Bank's contribution to the Affordable housing
program from 10 percent to 20 percent. That's all we're asking
right now.
Mr. Josephs, can I ask you based on that, if we were able
to double the contributions to at least 20 percent, would it
help LISC build more homes?
Mr. Josephs. Absolutely. I think doubling it would add
several hundred million more dollars annually to this account
that would provide critically needed gap financing for rental
housing because that's primarily what it's used for right now,
and we're seeing bigger gaps.
But it also can help affordable home ownership
opportunities as well, because that's an eligible use of the
funds. So it's unequivocally yes. That would be a great, great
tool.
Senator Cortez Masto. Right. And I thank you. Because some
of the biggest challenge is the gap in financing, right?
Cobbling together financing to build housing is the biggest
issue that I hear in my State. Is that true?
Mr. Josephs. That's absolutely true.
Senator Cortez Masto. Yeah. And so the next area that I
also know that is important for this financing and a key piece
of building affordable housing, is the Home Investment
Partnership program.
HOME is the largest Federal, affordable housing block grant
in the country. My bill, the Home Investment Partnerships
Reauthorization and Improvement Act would improve the ability
of HOME to support home ownership, including providing
flexibility for servicemembers, their heirs, community land
trust, which we're trying to do in Nevada right now.
It would also provide local authorities the ability to
pledge five times their current allocation for investments.
This bill would help thousands of hardworking families in
Nevada and across the country, purchase and stay in their
homes.
Mr. Josephs, can you talk a little bit about the importance
of home in building affordable homes and how does the
legislation and an update of the HOME program help in today's
world of the challenge of building affordable homes?
Mr. Josephs. Sure. Yeah. The HOME program is really one of
HUD's flagship programs for affordable housing development. It
really is that glue, it's that missing piece often we're seeing
with our housing credit properties where there are gaps, we're
using the HOME dollars to help solve some of those gaps. But
it's so flexible, it can be also used for single family, home
construction, home owner rehabs, tenant based rental
assistance. So it's really a great flexible tool.
But what we really like about your legislation is
increasing the authorized funding levels because there's just
not enough to go around, establishing the loan guarantee
program you referenced to better leverage the Federal
resources, streamlining the administrative requirements, making
it consistent with other Federal programs and expanding the
ability of nonprofit housing organizations to really access
some of these funds. So a lot of great proposals.
Senator Cortez Masto. Thank you. And then finally I want to
talk about manufactured housing. This is an area that I also
have been focused on because I think it is part of the solution
to our affordable housing needs. And I've appreciated working
with the Ranking Member, Senator Scott, and ensuring the needs
of manufactured homeowners are included when we're talking
about housing.
But manufactured home communities are home to about 8.5
million Americans. And it's a very important source of
affordable housing. A few weeks ago had announced a request for
applications for a new program to fund new roads, water, sewer,
tornado shelters, and other infrastructure improvements for
manufactured home communities.
I'm proud that I led the creation of this program, the
Preservation and Reinvestment Initiative for Community
Enhancement, which was an enacted in 2022. But it was only
funded for 1 year. And my goal here now is to make it a, a
permanent key piece of funding.
Mr. Josephs, can you talk a little bit why this is just as
important for our manufactured housing?
Mr. Josephs. Well, again, the flexibility, right? The price
grants can be used to construct, to reconstruct, or repair
manufactured housing. It can be used to improve the facilities,
as you mentioned, the infrastructure to help protect the health
and the safety of the residents.
It can also be used for relocation assistance and eviction
prevention. So these, these kind of funds are critical, and
that sector certainly needs support.
Senator Cortez Masto. Thank you. Thank you, Mr. Chairman.
Chair Brown. Thanks, Senator Cortez Masto.
Senator Vance of Ohio is recognized.
Senator Vance. Thank you, Mr. Chairman. And thanks to our
three guests for being here.
Ms. Bailey, I wanted to direct my questions in your
direction because there's an issue where I think we disagree on
an issue where we agree on, and I kind of want to tease out
both of those because, you know, agree with Mr. Antoni that
there's a supply problem here, right?
We sort of want to be building more housing because that'll
drive down the cost. But I really worry about the demand side
problem with the housing problem that we have in this country.
And that'll tie into a bill that I have with Senator Hagerty,
he's also on this Committee to try to address some of that.
And the way that our community development block grants, I
think, should go to American citizens and lawful permanent
residents and not to people who shouldn't be in the country in
the first place.
But before I get to that, one of the interesting findings
from the research, Ms. Bailey, and I think this is an area
where you and I may disagree on, or at least we have some
disagreements in public policy, if I can assume that you agree
with all the views of your employer, which is always dangerous.
But I assume you probably have some alignment with them.
Is the way that illegal immigration, especially when you
have it at the scale that we have in this country right now,
probably 25 million, 10 million in the last three and a half or
so years, really does apply some interesting demand pressures
on local housing markets.
And in particular, there's a study that I want to call your
attention to. I won't ask you to comment on it because I don't
want to ambush you with it. But really, fascinatingly sort of
looked at local consequences of the immigration problem in
housing.
And what it found was that on a county and metropolitan
area level, increased illegal immigration really shot up the
price of rents and the price of housing. But then it
fascinatingly on the neighborhood level, it actually drove down
housing prices in the neighborhoods where illegal migrants
moved.
And the fascinating sort of dynamic is you ask yourself,
you tie this all together and you ask yourself, who's
benefiting on the housing market level from mass migration in
this country?
It's people who own homes in neighborhoods where immigrants
don't move. In other words, rich people, right? They're the
ones who benefit from this very large influx of illegal
immigration that we've had. And pretty much everyone else
suffers.
And I'm just sort of curious because I think genuinely you
are motivated by a concern like I am, that we want low income
people to be able to afford a house. We want Americans writ
large to be able to buy homes, especially first-time home
buyers. We know that's an important part of starting a family.
And I know that sort of on the migration question, you're
sort of on the opposite side of me. I guess my question is
just, given those sort of priors that each of us is bringing to
the conversation, would you sort of give me your sense of
whether you worry about this illegal immigration problem and
whether it is driving up housing prices in a way that makes
home buying unaffordable for Americans?
Ms. Bailey. So what I worry about is how we're helping
people be able to have a safe place to live. And the challenge
that I have with your construct is that it's set in an
environment of scarcity, that we just don't have enough. And I
just can't believe that in the wealthiest country in the world
that that's the case and construct that we should be operating
in.
So that fundamentally is the problem, is that we're not
thinking in ways that treat everyone with the humanity that
they deserve.
Senator Vance. I appreciate that Ms. Bailey. And I'm going
to move on to the other topic where we actually agree. But I
guess my response to that would just be, housing is sort of
fundamentally scarce, right? It's hard to build a new house.
It's hard to sort of develop the land to build a new house.
And I think all of us probably agree--at least I'd hope all
of us agree--that we need to increase the supply of housing
too. But you're still going to have scarcity in supply,
especially when you have multiple demand pressures on the
housing market. Now, illegal immigration is one, but there's
another one where I think I want to sort of get your views on
as well.
And if you could answer briefly, because we're running low
on time and I'm trying to talk fast here. But could you talk a
little bit about this phenomenon of institutional investors
buying single family homes and what you think that is doing to
the scarcity problem in the home buying market?
Ms. Bailey. So that is an issue that we're seeing across
the country, and it is creating a situation where homes that
would be affordable aren't. We need to do more locally to think
about how we can control how these predatory investors are
coming into communities and limiting resources, especially,
they're doing this a lot in communities of color. And that's
disturbing.
Senator Vance. Yeah. And I'd love to get more details on
that and we may follow up just off the record, because I'm sure
you have some insights there that we would benefit from. And
I'll have my staff do that.
But, you know, just two quick final comments here, being
mindful of time.
I think in the same way that you worry about institutional
investors buying up single family homes, and I do too, I think
we have to worry about, you know, 10, 15, 20 million illegal
aliens also applying those demand pressures.
And I think both of those things are conspiring against
American citizens and making it harder for folks to afford
homes. And I just, you know, encourage you to sort of think
about both sides of that coin, recognizing that we do live in
some world of scarcity.
And if I could put a pitch in Mr. Chairman for Senator
Haggerty and I's Bill, the No Community Development Block
Grants for Sanctuary Cities Act. One of the really disturbing
things is that we actually have about $3 billion going to the
community development block grant program. About a billion of
it goes into sanctuary cities.
And so if we're trying to limit this upward demand pressure
on home buying, this is one small effort that I think would be
useful in that. And with that, I yield back to, I guess, Madam
Acting Chairman. Thank you.
Senator Warren. Thank you. So we're in the middle of a
housing crisis all across America. Today, though I want to
focus on the housing crisis in Indian country. The Federal
Government has failed to live up to its promises to Tribal
Nations. And one of the ways that we've fallen short, we have
woefully underfunded programs for native communities.
In the 25 years since the Indian Housing Block Grant
program was created, Congress has consistently failed to put
enough money into the program, even to keep up with inflation,
let alone the massive housing needs in Indian country.
Ms. Bailey, you are an expert on the housing needs of
historically marginalized communities. How have Tribal
communities been affected by the Federal Government's failure
to adequately fund Tribal housing programs?
Ms. Bailey. Thank you, Senator. This is such a critical
issue that we don't talk enough about. And for Tribal nations,
housing quality is a huge issue. We haven't helped them invest
in housing in order to keep their properties from
deteriorating. Housing overcrowding is an issue, and
homelessness in general shows up differently in Indian country
than it does in non-Tribal areas.
So this investment is critically important to highlight.
Senator Warren. OK. So poor condition of the housing, a lot
of homelessness, a lot of overcrowding. You know, the Federal
Government's refusal to provide basic funding to native
communities is one of the reasons that I introduced my Honoring
Promises to Native Nations Act back in 2022.
One of the core promises of that bill is that Tribal
communities should be entitled to 5 percent of Federal dollars
as Tribal groups have demanded for years in order to fulfill
the Federal Government's trust and treaty obligations.
Today, as this Committee considers proposals to address our
housing crisis, I am reintroducing Rural Housing Service
provisions from the Honoring Promises as a standalone
legislation.
The Tribal Rural Housing Access Act would set aside 5
percent of Rural Housing Service funds for Tribes, native
community development financial institutions, native-owned
entities and Tribal members.
My bill has been endorsed by Native CDFI Network, National
Congress of American Indians, National American Indian Housing
Council, Housing Assistance Council, and National Rural Housing
Coalition.
Ms. Bailey, you've had a chance, I think, to look at my
bill. Would my bill help address some of the housing challenges
faced by native communities?
Ms. Bailey. Absolutely, it would. It's our understanding
that only about 1 percent of these resources currently go to
Tribal Nations. And so being able to increase that to 5 percent
would make a huge difference in all of the areas that are
necessary in Tribal lands.
I think another thing that is important that I want to
highlight is in order for them to be able to spend those
resources, it's critically important for us to look at how the
Department of Interior, the Department of Justice, and HUD are
working together.
We've got to improve the bureaucracy and streamline that so
that we can truly honor the Nation-to-Nation relationship we
should be having with Tribal Nations.
Senator Warren. That's a very powerful point. I want to
underscore though, in my bill, this wouldn't cost the Federal
Government an extra dime, but it would go a long way to
beginning to fulfill our trust and treaty obligations that we
have ignored for so long.
Other Members of this Committee have already done important
work on this issue. Senator Smith and Senator Rounds have a
bill that would set aside funds for native CDFIs to administer
the 502 Direct Loan Program, which plays a critical role in
helping low income individuals buy and rehabilitate homes.
Our bills go hand in hand. My bill counts every dollar of
Senator Smith and Senator Rounds set aside toward my 5 percent
set aside, and it sets aside funding for Tribes in other rural
housing service programs as well, including housing subsidies
for farm laborers.
Let me be clear, we need a major Federal investment to
increase our housing supply if we want to get out of this
affordability crisis. And a 5 percent set aside for Tribal
communities would be an important start.
Thank you, Mr. Chairman.
Chair Brown. Thank you, Senator Warren. I will ask my
questions now. Welcome again, thanks to the Committee Members
on this Committee.
Last year, I joined Senators Rubio and Ossoff to introduce
the HELPER Act. This questions for you, Mr. Josephs. HELPER Act
creates a new zero downpayment mortgage option with a one-time
fee, similar to a VA loan, as you know. So the first time home
buyers, teachers, firefighters, police officers, can actually
afford to live in the communities which they serve.
What challenges Mr. Josephs to law enforcement and other
public servants who are first time home buyers face, and how
could the HELPER Act allow them to achieve their dream of home
ownership?
Mr. Josephs. Yes. I think you're hitting the right issue
with the downpayments. There's a lot of mortgage ready
borrowers out there that would meet credit guidelines, but they
don't have enough upfront money to get the home. And if they
did, they might not have enough in savings to help maintain the
home.
So that is important. And also the insurance costs that can
drive up the cost of their mortgages by keeping those down, I
think those both very helpful approaches.
Chair Brown. OK. Thank you. One of the biggest costs,
again, Mr. Josephs, if not the biggest cost in building new
housing is land. Across the country, we've seen churches and
synagogues and schools with unused land who want to work with
local partners to add new affordable housing on their
properties, but they essentially don't know how to get started.
So how could giving religious groups tools and advice to
support these we call them YIGBYs as you know, developments,
help add affordable housing?
Mr. Josephs. Yeah. So we actually administer a faith-based
housing initiative in our Bay Area LISC offices to help do
exactly this, provide the education and technical resources.
Developing affordable housing requires a real specialized
knowledge and relationships to navigate project management,
funding deal structuring.
So what we do is we provide technical workshops. We provide
targeted technical assistance, a development coach, access to
grant funds to support predevelopment--funding, which is so
hard to come by, and even a stipend for the organization.
So if what you're proposing, kind of can fund some of that
stuff, then that is exactly what is needed.
Chair Brown. We will pursue that. Thank you.
Ms. Bailey, millions of families face eviction every year
when a family's evicted, as both Senator Lummis and Senator
Smith said, everything turns upside down in their lives, as we
know. Many have nowhere to go. They have trouble renting
another home for years to come.
How could the Eviction Crisis Act help prevent unnecessary
evictions and the costs that come with them?
Ms. Bailey. Thank you, Senator, for raising this issue. So
what we learned, we learned actually during the pandemic that
being able to help people avoid eviction is actually quite
simple.
The Eviction Crisis Act can build off of that, giving
people a little extra cash to be able to pay their rent that
month, helps stabilize them in housing, and avoid all of the
bad outcomes we know comes with evictions, including
homelessness.
Chair Brown. And you've mentioned a pilot in Ohio that's
helped improve maternal and infant health by giving housing
assistance to pregnant women and mothers who don't have stable
housing.
Is this the kind of program that could be expanded to help
moms and babies around the country?
Ms. Bailey. Absolutely. Well, we know and the health care
world knows this, and looking at how social determinants of
health work, that housing is one of the first and foremost
important social determinants of health.
And that is still true with pregnant people and moms who
are expecting babies, that we know that if we can give them a
solid foundation of a place to live, that it greatly improves
the health of the mom, reduces her stress, and improves
maternal outcomes.
Chair Brown. Too often there are, shall we say, minority
but bad owners who run HUD assisted affordable housing into the
ground, to the point where housing could be shut down,
residents pushed out of those communities. Owners who want to
preserve aging buildings can struggle to find resources
necessary to make needed repairs.
What would help preserve these homes so they're safe for
seniors and families who depend on them now and in the future?
Ms. Bailey. Well, we need to first think about landlords
and help and see if they need help in being able to make those
investments. We don't have standard pools of resources to be
able to help landlords make minor repairs or even help with
accessibility for seniors in their home, avoid trips and falls,
be able to get in and out of the shower and the bathtub.
So first we should help landlords pay for these things, but
we also need to do some better at oversight and administration
and make sure that landlords are being good faith actors.
And actually, I should add, the third thing that we need to
do is make sure that tenants have legal aid assistance to be
able to fight and protect themselves when landlords aren't
holding up their end of the bargain.
Chair Brown. Thank you.
Senator Van Hollen from Maryland is recognized.
Senator Van Hollen. Mr. Chairman, I would like to return
the favor to Senator Fetterman. The other day I had to run and
he allowed me to go first. So, Senator Fetterman, please.
Chair Brown. Senator Fetterman, your time is recognized.
Senator Fetterman. Thank you. Thank you.
So people across Pennsylvania has been made it very, very
clear that we are experiencing a housing crisis. 32 percent of
renters in Centre and Pike counties are paying more half of
their incomes in rent. Rents for the average one or two bedroom
apartments are up to as much of $1,000 dollars a month in
Indiana County, $1,200 a month in Montour County, and $2,000 a
month in the Lehigh Valley.
Franklin County is adding 2,000 jobs, but has no units
affordable for these workers. We are short 15,000 units for
income people in Pittsburgh, region alone. Shelters in Dauphin
County are in maximum capacity.
Addressing this housing crisis is at a top priority for me,
and I'm glad to be here today to discuss possible solutions.
I'm proud to introduce with my colleagues, the distinguished
Senator from Wyoming, the very bipartisan Whole Home Repairs
Act.
And now I want to just talk about the history of that. That
was inspired in my own State, spearheaded by Senator Saval, my
State senator. And I'd like to point out that Senator Saval
represents one of the bluest districts across the nation,
technically as well too. But that was embraced by his
colleagues in the Pennsylvania Senator from as red of any
district in, in Pennsylvania as well too.
So if this can happen in Pennsylvania, I hope that we can
have this now nationally as a model. And now we have success
stories on that.
Mr. Tyler of Hawley, Pennsylvania, 87 years old and worked
as a farmer, as a mechanic, and bartender, and a deputy
sheriff. His roof collapsed and left a hole in the ceiling, and
the water leaks and exposure had caused partial rotting of the
wall and the ceiling.
Wayne County Whole Home Repair funds were used to make
exterior repairs to the roof, ceiling, and the wall, as well as
weatherizing improvements that have reduced his heating bill by
two thirds. Remaining interior work will be completed this
month.
And now, Mr. Josephs, thank you for LISC's support for the
Whole Home Repairs Act. Can you please explain what repairs are
and what are not covered by existing Federal programs?
Mr. Josephs. Yes, thank you. Thank you for that question.
If I may first also add that 5.6 percent of all homes in rural
areas are inadequate. They need these kinds of repairs. And
it's estimated by the Federal Reserve Bank of Philadelphia that
there are repair needs of $149 billion on our housing stock, 57
billion in homes occupied by low income individuals.
So this is exactly the right tool that we need. Existing
Federal programs at HUD, USDA, DOE and others, they cover
certain things like lead remediation or weatherization,
sometimes loans for home repairs, but there's really no one
stop shop to get this kind of services. So I think that's the
great innovation of the bill.
Senator Fetterman. Yeah, and I just want to drill down on
this idea of, I mean--of course now it's a truly bipartisan
solution out Pennsylvania, and I was Lieutenant Governor at the
time, and I thought that was remarkable.
And you have one of my colleagues, again, from an
incredibly, incredibly blue district in Philadelphia, and now
found a huge audience from red counties and districts all
across Pennsylvania. And that's why I'm hopeful that there
might be a path forward, an expert like yourself now fully
endorses this.
Mr. Josephs. Totally. Yes, absolutely.
Senator Fetterman. OK. So we work to ensure the Federal
program would help both rural and urban areas.
Can you speak to the need of this kind of support across
these kinds of communities?
Mr. Josephs. Yeah. So I jumped the gun with the stats. In
rural communities, there's 1.4 million homes that are
classified as inadequate, so they need significant repairs.
That's 5.6 percent of the homes.
But also we know there's a lot of aging housing stock in
the country. At 43 years of age, the median home in 2021 as the
oldest it's ever been. In 1991, the median age of a home was 27
years.
So this is a problem that's really affecting rural
communities. It's also impacting urban communities where you
might have higher rates of vacancy and foreclosures. So it's a
tool that could be used in both.
Senator Fetterman. Mr. Chairman, 60 seconds?
Chair Brown. Certainly.
Senator Fetterman. Thank you.
Ms. Bailey, what's the need for home repair assistance and
how much of our housing stock are we going to lose, if we don't
have these kinds of investments?
Ms. Bailey. Well, thank you, Senator for that question. You
know, we could lose significant amounts of affordable housing
without these kinds of investments. This is exactly why
predatory entities can come into communities and purchase
homes, because people don't have the resources they need to fix
them.
So they make, you know, a reasonable choice to be able to
sell these properties. Or a family member who inherits the
property may decide to sell the property, where if they could
have access to some resources to renovate the property and
improve the infrastructure of that property, they would keep
it.
So it can prevent a lot of displacement. It could prevent
us losing affordable housing in communities.
Senator Fetterman. Thank you.
Chair Brown. And thank you. Senator.
Senator Van Hollen. Thank you, Mr. Chairman. Thank all of
you for your testimony. And Mr. Chairman, thank you for holding
another hearing on the vital issue of affordable housing. We
all know we have an affordable housing crisis in the country,
and there are two halves to this, and we need to attack it from
both sides.
A lot of discussion today, I know on the production side,
including using tools like the low income housing tax credit,
expanding that, new markets tax credit. And I think that's a
very important part. Clearly the supply side.
I do want to focus today a little bit on the choice voucher
piece of it and appreciate the President's budget requests. I
specifically want to drill down on a bipartisan proposal that
Senator Todd Young from Indiana and I have proposed, which is
to use choice housing vouchers but to also target some of them
toward families with young kids, six and under and provide
wraparound services in helping them move to areas of higher
opportunity.
Back in 2019, Senator Young and I introduced the Housing
Mobility Demonstration Act which quickly demonstrated the
effectiveness of this approach in terms of giving kids a big
leg up and a big opportunity.
Dr. Raj Chetty, researcher, has documented clearly the
benefits of this and found that where you add kids you know,
from able to move to areas of higher opportunity it has
increased their lifetime income by over $300,000 in terms of
better school opportunities and other things.
And so we introduced a bill based on the demonstration
project, it's a family voucher program with these wraparound
services, Family Stability and Opportunity Vouchers Act, to
create 250,000 new of these new mobility vouchers.
So I know that Mr. Josephs, I think you referenced this at
least in your written testimony. Could you speak a little bit
to the importance of passing this bipartisan bill, which I
should say not only has bipartisan sponsorship here in the
Senate, but as a broad range of organizations from across the
political spectrum supporting it?
Mr. Josephs. Yeah, the vouchers are a critical tool. You
have, on the one hand, the supply side you mentioned earlier,
low income housing tax credits that can build more supply, but
you have to be able to--particularly for the lower income
families, lowest income families--really provide a rental
subsidy as well.
So vouchers are a critical tool. And yeah, Raj Chetty's
research really demonstrated that the best benefit you get is
to the younger children that are moving into the higher
opportunity areas. So I think this is a great idea to promote
this kind of program.
Senator Van Hollen. Ms. Bailey, I know you've also looked
at these issues. If you can expand upon this a little bit,
because again, we want to make sure that we target resources in
a smart way, and this does appear to be something that is now
proven to be effective at lifting opportunities for kids.
Ms. Bailey. Yeah, and one important point is for folks to
understand that the number of vouchers that have been going to
families with kids, actually has been declining because we've
been targeting resources to a lot of folks who are single
adults for a good reason.
Part of the environment of scarcity we're living in right
now, we've rightly tried to end homelessness for veterans,
we've rightly tried to end chronic homelessness, and we've
rightly tried to get folks off of the street as quickly as
possible.
But one of the downturns of operating in this environment
of scarcity means that there are people we haven't prioritized,
and we haven't prioritized families with kids. And so that's
why it's really important to look at how to expand vouchers
across populations.
We know the benefits for families with kids that a
foundation of housing helps kids stay in school, gives them a
safe place to study, and being in communities that are properly
resourced. And we've got to make sure and do all we can to
greatly expand voucher assistance. So we're not operating in
these buckets of having to choose who we're going to help,
because unfortunately, someone loses and lately it has been
families with kids.
Senator Van Hollen. Well, I appreciate that very much, and
I'm a big supporter of the VASH vouchers for veterans and other
ways to help our veterans. We need to continue to do that, as
you say.
But this is also a tool that helps with intergenerational
way and leads to higher incomes for people who are kids now and
more wealth building. So I do hope, Mr. Chairman, I know you're
looking at a series of bipartisan bills to act on as a
Committee. This is a bipartisan bill that has proven to be
successful, and it just makes sense to expand it a little bit.
Chair Brown. Thank you. And Senator Scott and I are working
on a series of bipartisan bills that we hope we can have a
markup on. Senator Warnock of Georgia is recognized.
Senator Warnock. Thank you so very much, Chair Brown.
One of the biggest obstacles for working families who want
to purchase a home is a high upfront cost, including
downpayments and closing costs. According to realtor.com, the
median downpayment alone, downpayment, was over $30,000 in late
2023, a steep hill for a lot of families.
And with mortgage interest rates still very high, many
families may also be looking to buy points to reduce those
rates. These high upfront costs are especially hard on first
time home buyers who may not have the cash saved to cover these
expenses, even if they have good credit.
That's why I introduced the Downpayment Toward Equity Act,
a bill to provide direct assistance to first-time, first-
generation home buyers to help cover closing costs,
downpayments, and buy down mortgage rates.
Ms. Bailey, who would primarily benefit from this kind of
downpayment assistance?
Ms. Bailey. Thank you, Senator, for this question. You
know, primarily it would be it would be people of color that
would be able to benefit from this kind of assistance.
And people with lower incomes who don't have
intergenerational wealth, and so haven't been able to--they can
afford the mortgage and they can afford to--they've saved
enough money to be able to maintain their home once they
purchase it, but they don't have the huge amount of savings
that they would need would in order to enter into the----
Senator Warnock. I'm sorry. Would this be helpful to rural
families?
Ms. Bailey. It would absolutely be helpful to rural
families as well.
Senator Warnock. Thank you. Buying a home isn't just about
having a roof over your head. It's an investment in the future
of your family. It's the American dream. It's where most
people's wealth is.
According to a study from the National Association of
Realtors, the net worth of a typical homeowner is 40 times
higher than the net worth of a typical renter. How would
downpayment assistance decrease wealth inequality and the
racial wealth gap in our country?
Ms. Bailey. It would significantly help close the racial
wealth gap for the families that are able to afford to get into
home ownership.
Senator Warnock. Well, thank you so much. And I look
forward to working with my colleagues to continue furthering
the goal of making the American dream of home ownership a
reality for all. I think it's good for those families. It's
good for the country.
Metro Atlanta has a big problem. Private equity and other
large investment firms are buying up all the single family
homes and turning them into investment vehicles. An analysis by
the Atlanta Journal-Constitution found that more than 65,000
homes have been bought up by large investment firms in the past
decade, 65,000.
And according to a recent study out of Georgia State
University, 11 percent of all single-family homes available for
rent in Metro Atlanta are owned by just three corporate
landlords. That's more than 19,000 homes.
It's not possible for working families to compete with
private equity. To buy a home when any affordable properties on
the market are quickly snatched up by investment firms looking
to make a profit for their stakeholders.
Mr. Josephs, how can Congress help ensure affordable homes
in Atlanta and across the country are accessible to working
families and not just to large investment firms?
Mr. Josephs. So you're actually right. Between 2010 and
2021, the share of homes purchased by investors in majority
Black zip codes, increased from 13 percent to 30 percent. So
this has been a big problem.
One thing we could do: Senator Brown introduced some great
legislation to make sure that these investors are not taking
advantage of the tax code to do these kinds of investments,
these larger institutional investors. So that's a start.
We also think the Neighborhood Homes Investment Act can be
a counteraction to this because in that program, you have to
buy and improve homes for sale to lower income people. So it'll
be for sale properties. You can't just gobble up the homes and
leave them out there for rentals. It's for sale. You're going
to make improvements to the home. So we think that's another
great tool.
Senator Warnock. Well, thank you so very much. This is a
real problem. Everywhere I turn in my home State, literally, I
was just on the street Sunday walking and random citizens,
``Hey, hey, I'm glad to see you,'' and wanted to talk to me
about this very issue.
For private equity, a home is just a row on a spreadsheet,
tracking shareholder returns. Obviously, it's different for the
ordinary citizen who's trying to buy into the American dream.
We ought to use the tools available to us, do everything
possible to improve this situation. Thank you very much for
your testimony.
Chair Brown. Thank you, Senator Warnock. And the issue of
private equity, this Committee takes very, very seriously and
the damage it does. So thank you.
Thanks to the witnesses here today. Thanks for providing
testimony. I would like to submit to the record more than 200
letters from national, State, and local organizations and
leaders, including mayors and sheriffs and Governors in support
of the HELPER Act. It's a commonsense proposal to make sure
that the people serving our communities can afford to live
there.
I hope more of my colleagues will join the 20 Senate
cosponsors, both parties, 150 house supporters, both parties.
For senators who will submit questions for the record,
those questions are due 1 week from today, March 19th. To the
witnesses, you have 40 days to respond to those questions.
Thank you again. The Committee is adjourned.
[Whereupon, at 11:59 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
In every part of the country, everywhere you turn, housing is too
expensive and families have too few housing options.
High interest rates are pushing home ownership further out of reach
for families who were hoping to buy their first home, move for a job,
or buy a bigger home as their family grows. They're forced to keep
renting, or turn down job offers.
Homeowners keep their homes off the market because they feel
trapped by their current interest rates, and that keeps the supply low
and drives up prices even more.
Meanwhile all-cash buyers--including out-of-State investors funded
by cheap Wall Street cash--drive home prices higher by buying up the
few homes that do come on the market.
High rates also make it harder to build more homes and add housing
options, which would bring down prices.
It's why I've called on the Fed to bring down interest rates.
Ohioans worried about housing costs can't wait any longer.
We see more and more renters and homeowners in Ohio and across the
country whose only option is to pay more than they can afford for
housing. Because rents keep rising faster than paychecks, high costs
have pushed even more families--including parents working full time
jobs--into homelessness.
This isn't just happening in the biggest cities or on the coasts.
It's happening in every State, in cities and suburbs, in small
towns and in rural communities.
In central Ohio, businesses are growing. I hear constantly--from
mayors, from county executives, from business leaders, from workers--
that they're worried the housing supply won't be able to keep up with
the growth, and costs could rise even more.
There just isn't enough housing. And across the country--from Akron
to Bozeman to Charlotte--community leaders are worried that the high
cost of housing will limit their regions' ability to grow and thrive.
There is no place in the country where a minimum wage worker
working full time can afford even a modest two-bedroom apartment. The
home health aides and administrative assistants and retail workers we
all depend on aren't even paid enough to afford a one-bedroom
apartment.
We have been struggling to create enough housing for years--
decades.
Housing construction plummeted after the 2008 financial crisis. And
we've never made up for all of the missing homes.
And so today, by some estimates, we're 4.3 million homes short of
what we need. And anyone who's taken the most basic economics course
knows that when supply is that low, high prices follow.
Meanwhile, the homes we do have are getting older and need critical
repairs that families and seniors and housing providers just can't
afford, leaving kids exposed to toxic lead and leaving seniors with
dangerous fall hazards and unstable roofs and sky-high utility bills.
Today, we'll hear from Members of this Committee on both sides of
the aisle about their legislation to bring down housing costs, make our
existing housing stock safer, and expand housing options for both
renters and homeowners.
And because this crisis is hitting all types of housing, in every
community, we need more than just one solution to these problems.
I look forward to hearing from my colleagues about their proposals.
Senator Smith and Senator Rounds have a bill that they've built a
strong bipartisan consensus around, to improve rural housing programs
and prevent the cost of rural housing from going up anymore.
There are also proposals to improve HUD's housing voucher program,
keep housing affordable for manufactured housing residents, and many,
many more.
I am also offering proposals to bring down housing costs and
increase housing options, including addressing some of the challenges
I've heard from Ohio families and communities.
The Housing Supply Fund would help Community Development Financial
Institutions and affordable housing developers build and preserve more
housing that's affordable for both renters and homeowners.
My ``Yes In God's Backyard''--or YIGBY--Act would support churches
and other religious organizations with unused land who want to put that
land to use to for affordable housing.
We should also expand solutions that we know are already doing good
work.
The Grandfamilies Housing Act, which I introduced with Senators
Casey and Collins, would build on success supporting intergenerational
families.
My Excess Urban Heat Mitigation Act of 2023 would help communities
eliminate urban heat islands to better protect the health of seniors
and families.
As eviction numbers increase, we know what it takes to prevent
families from being turned upside down by an unnecessary eviction.
The Eviction Crisis Act, which I introduced last Congress with my
colleagues Senators Bennet, Portman, and Young, would build on
successful models across the country, and the success we saw from
providing emergency rental assistance at the height of the pandemic, to
reduce preventable evictions.
As aspiring homeowners struggle more than ever to afford their
first home, I've also put forward three proposals to help expand access
to affordable home ownership.
The VA Home Loan Awareness Act I introduced with Senator Braun will
help ensure that veterans and servicemembers know about the affordable
VA home loan option when they go to take out a loan. They've earned
this benefit--they should know they have it.
This week, I joined Senator Warnock in reintroducing the
Downpayment Toward Equity Act, to provide assistance to first-time,
first generation homebuyers who are too often locked out of the housing
market by the lack of a downpayment.
And the HELPER Act, which I introduced with Senators Rubio and
Ossoff, will create a new type of FHA mortgage to make first-time home
ownership more affordable for the law enforcement personnel,
firefighters, and teachers who are serving our communities but can't
afford to live there.
This commonsense bill is supported by the Fraternal Order of
Police, the National Association of Police Organizations, the Major
County Sheriffs of America, Major Cities Chiefs of Police, the
International Association of Fire Fighters, the American Federation of
Teachers, the National Education Association, and more than 200 other
national organizations, mayors, governors, and State and local groups
across the country.
They know first-hand how critical it is to support the people who
teach our kids and keep us safe.
The proposals we'll hear about today aren't all of the solutions we
need to solve our housing crisis. But they're a good start.
Yesterday, we also received a budget from the Department of Housing
and Urban Development that outlines housing needs, along with proposals
that can make our existing programs more efficient and effective.
I look forward to working with Ranking Member Scott and all of the
Members of this Committee to examine these proposals and find
bipartisan consensus around solutions that can help to reduce costs and
expand options for renters and homeowners.
______
PREPARED STATEMENT OF SENATOR TIM SCOTT
Thank you, Mr. Chairman and thank you for the panelist for being
here with us this morning and certainly, a very important topic for us
to discuss--the state of housing.
Nearly a year ago, this Committee had an identical hearing on
today's topic of legislative solutions to address the increasingly more
difficult challenge of achieving the American Dream through home
ownership.
Although I'm glad the Chairman has returned to this topic and
agreed to seriously engage on building consensus around comprehensive
housing legislation--like my ROAD to Housing Act--we have,
unfortunately, watched a full year go by.
And during the last 12 months, Americans have been stripped from
the opportunity of becoming homeowners--in many ways because of the
challenges brought to us by the current Administration.
One of the things I like to say as I think this through a little
bit--so many people have good intentions on solving the problem
surrounding housing. But the truth is when you look back 15, 16 years
ago to the financial crisis of folks providing more downpayment
resources, more assistance to become a first-time homeowner--without
any financial literacy or financial education as it relates to how to
own a home or how to take care of a home--being prepared for planned
obsolescence--things just become obsolete.
Without that education you're simply renting the home that you
think you own and then during the crisis what we saw was some of the
highest levels of foreclosures for those folks that were induced to
make a decision to buy a home that they could not afford because they
thought they could afford the mortgage payment and not all the
incidentals that come along with being a homeowner.
Let me say this too--when you think about the crisis and the
challenge of home ownership--those of us in Washington too often think
that the solutions come from Washington. That is simply false.
We can make a difference, but we are not the primary place where
the difference should be made.
As the former chairman of a county government, I can tell you that
the vast majority of the issues facing home ownership happens on the
local and the State level.
Frankly, when you have communities that refuse to allow for an
increase of homes to be built in their communities, then 10 years later
you complain about the price of the homes in that community, you can
just look back and follow the breadcrumbs back and see that--when you
don't use the opportunity to fill in donut holes, when you don't use
the opportunity to have high-density areas--for homeowners you will not
have more homes on the market. That is basic math.
You think about the States and the roles that they play--it's not
simply a Federal issue this is primarily a local issue, and then a
State issue, and in a very small part we can play on the Federal level.
One of the things that we've seen in the past that has been very
effective was the creation of Opportunity Zones in 2017 through the
[Tax Cuts and Jobs Act].
As I think about whether you're a Republican or Democrat--the one
thing that's been celebrated across the country by blue mayors and red
governors--so to speak--is the advent of Opportunity Zones.
I think about my good friend who's a Democrat in Rock Hill, South
Carolina, Mayor John Gettys, who said that the first time in more than
three decades the opportunity to build homes because of Opportunity
Zones that lowers the price for contractors to build--is there.
I think about Charleston and Greenville, South Carolina, where
you're seeing multimillion-dollar new investments building homes and
apartments and townhouses and condos because of Opportunity Zones.
There are things that we can do but typically what Government can
do best from Washington is just to get out of the way and let the free
market actually work.
And that's why my release of my ROAD to Housing Act is such an
important part of that consideration because what we focus on is
financial literacy and financial education, we focus on reducing the
red tape.
I talk to mortgage companies across the country, and one of the
things that they say left and right is that the cost of closing has
more than doubled in the last 10 years--much of it due to the
regulatory red tape that comes with closing.
But there are other issues too, and I'll name just a few.
Number one: families are struggling more than ever to afford their
monthly rent and mortgage payments, in large part because of
Bidenomics. Bottom line is that when you print and spend trillions of
dollars it leads to high inflation. High inflation causes the Fed to
respond and the Fed's response with the one tool they have--which is
always a hammer because everything's a nail--is to increase interest
rates. When interest rates go up, home ownership goes down.
Number two: housing costs did not go up in a vacuum. The culprit is
this Administration's runaway, un-checked Federal spending, aggressive
interest rate hikes, and onerous regulations. That combination
certainly cannot continue.
Number three: Current Federal housing programs are not working. We
have to improve the status quo so we can provide greater economic
opportunity and safety across the Nation.
And finally: Last year HUD reported that homelessness--
homelessness--has risen by more than 70,000 people--highest rate on
record. With more resources, and more tools, we've seen more people
homeless in this country. It's clear that this Administration's
policies are certainly to blame.
To address these shortcomings, it will take new solutions like
those included in my ROAD to Housing Act to begin paving pathways
toward prosperity.
But I will point out the obvious: American families simply cannot
afford to wait.
For decades, the Federal Government has spent trillions of
dollars--trillions of dollars--on various housing subsidies. Despite
this, folks who grew up where I grew up--folks who are growing up today
where I grew up 50 years ago--simply cannot afford a home better today
than they did 50 years ago.
Since 1973, the basic percentage of African Americans owning a home
hasn't changed very much. The number is 44 percent. That has not
changed a single point--not a single point--in the last few years.
That is why I proposed the ROAD to Housing Act, a commonsense
approach to housing that takes a comprehensive view of Federal housing
policy and re-centers support around families, helping those who are
homeless, renting, or ready to buy a home.
This isn't a partisan issue.
It isn't ``partisan'' to want to reduce the red tape for
homebuyers.
It's not ``partisan'' to encourage innovation and competition in
Federal programs to better support families living in manufactured
housing or families who rely on HUD's assistance.
It's not ``partisan'' to preserve affordable housing units and
encourage private capital to play a role.
It's certainly not ``partisan'' to require greater accountability
for our current Federal housing programs.
So, I look forward to hearing the additional proposals that my
colleagues will bring up today so that we can somehow find a way to
stitch together--for every corner of our country--a better process to
becoming a homeowner.
I also look forward to working with Chairman Brown to ensure that
the Committee hears from our housing regulators. The American public
deserves accountability and transparency to understand how their
dollars are being spent on housing programs.
I thank you all for being here and I look forward to your testimony
and asking some questions.
______
PREPARED STATEMENT OF MATT JOSEPHS
Senior Vice President of Policy, Local Initiatives Support Corporation
March 12, 2024
Chairman Brown, Ranking Member Scott, and Members of the Committee:
I thank you very much for the opportunity to speak with you today to
discuss the critical role that Federal policy plays in supporting
affordable home ownership, rental housing, and community development
projects throughout the country, and what additional actions Congress
can take to enhance these activities. I recognize that the Committee
has many priorities, and I applaud you for your focus on these critical
issues.
My name is Matt Josephs, and I am the Senior Vice President of
Policy at the Local Initiatives Support Corporation (LISC). LISC is a
nonprofit housing and community development organization and certified
Community Development Financial Institution (CDFI) with offices in 38
cities throughout the country, and a rural network encompassing 140
partners serving 49 different States, the U.S. Virgin Islands and
Puerto Rico. LISC's work supports a wide range of activities, including
affordable housing, economic development, building family incomes and
wealth, education, community safety, and community health. LISC and its
affiliates raise and deploy well over $2 billion annually in grants,
loans and equity capital into distressed urban and rural communities.
LISC believes that a safe, affordable home is one of the basic
requisites of life--a key to individual health, well-being and
financial security. We also believe that underserved communities
require community development investments to bolster local economies,
create jobs, improve quality of life, and allow residents to meet their
individual goals. This is why LISC takes a holistic approach to
investment, investing in affordable housing as well as in small
businesses, community facilities, commercial and retail space,
recreational space and other physical assets that contribute to overall
neighborhood revitalization.
In this testimony, I will discuss: (i) the current landscape with
respect to financing affordable housing and community development
projects; (ii) the role that CDFIs play in the housing and community
development financing ecosystem; (iii) the critical role of Federal
programs, policies and initiatives in supporting investments in housing
and community development; and (iv) actions Congress can take to
increase affordable housing and community development investments.
Current Landscape
Over the past few years, our Nation has experienced large swings in
the housing market due to the economic impacts of the pandemic and
consistent underproduction of housing supply. These impacts have been
disproportionately felt by lower-income families and households of
color, which experienced housing constraints before Covid. LISC has
seen throughout our national footprint that the greatest single housing
challenge is the lack of supply, in both the multifamily and single-
family markets, which is making housing increasingly unaffordable for
lower, moderate, and even middle income families.
Community development projects also experience challenges,
including a lack of access to capital for small businesses, operating
cost pressures on childcare operators and other community service
providers, and limited sources of funding available for commercial
corridor revitalization. As discussed further below, affordable housing
and community development organizations working in rural and high
poverty communities experience even greater challenges, due to less
overall capacity and resources to meet these needs.
Multifamily Housing
We are facing a severe housing shortage in this country. It is
estimated that our Nation has underproduced on almost 3.8 million units
of housing. \1\ This is not a recent trend. Housing starts peaked at
2.3 million in 1972 and have not topped 2 million in any year since
1978 despite a growing U.S. population. However, we are facing new
headwinds that are making it even harder to build quality affordable
housing.
---------------------------------------------------------------------------
\1\ https://upforgrowth.org/apply-the-vision/housing-
underproduction/
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Specifically, the housing sector has experienced increased costs
across the board, including for construction materials, labor,
insurance, and the debt needed to finance their properties. \2\ The
price of inputs to new residential construction (excluding capital,
labor, and imports) was up 20 percent year over year in February 2022.
\3\ LISC finances affordable rental housing projects across the
country, and in markets of all types, we have seen firsthand the
additional financing gaps created by these inflationary pressures.
These can threaten the likelihood of a project going to completion if
additional sources of scarce affordable housing funding can't be
secured.
---------------------------------------------------------------------------
\2\ Fannie Mae. ``COVID-19 and Multifamily Construction Costs''.
https://multifamily.fanniemae.com/news-insights/multifamily-market-
commentary/covid-19-and-multifamily-construction-costs
\3\ Harvard University. ``State of the Nation's Housing''. https:/
/www.jchs.harvard.edu/state-nations-housing-2022
---------------------------------------------------------------------------
The lack of housing supply has been the primary reason that the
multifamily rental market has experienced historic rent growth. Rents
increased a record 11.6 percent at the end of 2021 and remained at an
elevated pace during the first quarter of 2022. \4\ This was the
largest year-over-year increase in two decades and more than three
times the 3.2 percent average annual rise in the 5 years preceding the
pandemic. \5\ For the first time, the median asking rent in the 50 most
populous metropolitan areas is more than $2,000. \6\ Rent growth has
recently declined due to lower inflation rates, although it would take
far more declines to counteract the overall historic gains. \7\
---------------------------------------------------------------------------
\4\ Harvard University. ``State of the Nation's Housing''. https:/
/www.jchs.harvard.edu/state-nations-housing-2022
\5\ Ibid.
\6\ National Low Income Housing Coalition. ``Out of Reach''.
https://nlihc.org/sites/default/files/oor/2022/OOR--2022--Mini-Book.pdf
\7\ Dr. Christopher Herbert. Senate Banking Committee Testimony.
https://www.banking.senate.gov/download/herbert-testimony-2-9-23
---------------------------------------------------------------------------
High rent burdens contribute to housing instability for underserved
families. In no State, metropolitan area, or county in the U.S. can a
worker earning the Federal or prevailing State or local minimum wage
afford a modest two-bedroom rental home at fair market rent by working
a standard 40-hour work week. \8\ In addition, nearly half of all
renters are now considered cost-burdened since they spend at least 30
percent of their income on housing. \9\
---------------------------------------------------------------------------
\8\ National Low Income Housing Coalition. ``Out of Reach''.
https://nlihc.org/sites/default/files/oor/2022/OOR--2022--Mini-Book.pdf
\9\ Joint Center on Housing Studies Blog. https://
www.jchs.harvard.edu/blog/number-renters-burdened-housing-costs-
reached-record-high-2021
---------------------------------------------------------------------------
While the most severe affordability challenges continue to be at
the lowest end of the income spectrum, there have been growing
challenges felt by middle income households, particularly in high-cost
markets. City leaders from across the country have shared with LISC
their struggles with housing teachers, firefighters, nurses and
municipal workers, and related challenges in attracting talent to both
public and private sector jobs due to inadequate supply of quality
affordable housing. Renter cost burdens increased across all income
levels in 2021, although they were the largest among middle-income
groups. \10\
---------------------------------------------------------------------------
\10\ Christopher Herbert. Senate Banking Committee Testimony.
https://www.banking.senate.gov/download/herbert-testimony-2-9-23
---------------------------------------------------------------------------
Single Family Homes
The Nation's underproduction includes the single family housing
market too, resulting in higher prices for those homes that are on the
market. Home price appreciation nationwide hit 20.6 percent in March
2022--topping the previous high of 20.0 percent in August 2021 and
marking the largest jump in three decades. \11\ Home price increases
have cooled since the Federal Reserve began raising interest rates,
although prices generally remain high, and elevated interest rates make
it more difficult for first time homebuyers to purchase a home. Just
42.2 percent of new and existing homes sold between the beginning of
July and end of September 2022 were affordable to families earning the
U.S. median income of $90,000. \12\ This was the second consecutive
quarterly record low for single family housing affordability since the
Great Recession.
---------------------------------------------------------------------------
\11\ Harvard University. ``State of the Nation's Housing''.
https://www.jchs.harvard.edu/state-nations-housing-2022
\12\ https://www.nahb.org/news-and-economics/press-releases/2022/
11/housing-affordability-falls-to-more-than-10-year-low-as-rising-
interest-rates-take-a-toll
---------------------------------------------------------------------------
Home ownership disparities between racial and ethnic groups
stubbornly persist. In the second quarter of 2022, the home ownership
rate for White households was 75 percent compared to 45 percent for
Black households, 48 percent for Hispanic households, and 57 percent
for non-Hispanic households of any other race. \13\ These gaps in home
ownership rates have changed little over the last three decades. In
fact, the Black-White gap in home ownership rates was the same in 2020
as it was in 1970, just 2 years after the passage of the Fair Housing
Act of 1968, which sought to end racial discrimination in the housing
market. \14\ These disparities limit the ability of families of color
to achieve their home ownership goals and limits asset building
opportunities, contributing to our Nation's racial wealth gap.
---------------------------------------------------------------------------
\13\ https://home.treasury.gov/news/featured-stories/racial-
differences-in-economic-security-
housing#::text=housing%20equity%20wealth.-
Homeownership,households%20of%20any
%20other%20race
\14\ Ibid.
---------------------------------------------------------------------------
Many communities have also been significantly impacted by real
estate investors purchasing single family housing properties for rental
housing. Increases in investor-owned properties are associated with
rising rental prices, particularly in the most affordable segment of
the housing market. These investor purchases reached a record high in
2021, \15\ are geographically concentrated in the South and Southwest
sections of the Nation and are primarily in low cost, neighborhoods
with a majority households of color. \16\ Between 2010 and 2021, the
share of homes purchased by investors in majority Black zip codes has
increased from 13 percent to 30 percent; compared to increases from 7
percent to 12 percent in other zip codes. \17\ LISC has seen the
impacts of these practices in several of our local office markets,
including Atlanta, Charlotte, Jacksonville, Phoenix, Detroit, and
others. Increased investor activity has been linked with troubling
property management practices and, as critically, it limits the ability
of first time and minority families to purchase homes and build wealth.
\18\
---------------------------------------------------------------------------
\15\ Schaul, Kevin, and O'Connell, Jonathan. ``Investors Bought a
Record Share of Homes in 2021. See Where''. Washington Post. February
16, 2022.
\16\ Dr. Desiree Fields, Senate Banking Hearing: ``How Private
Equity Landlords Are Changing the Housing Market''. https://
www.banking.senate.gov/download/fields-testimony-10-21-21
\17\ Schaul and O'Conell.
\18\ Frankel, T., and Keating, D. (2018). ``Eviction Filings and
Code Complaints: What Happened When a Private Equity Firm Became One
City's Biggest Homeowner''. Washington Post. https://
www.washingtonpost.com/business/economy/eviction-filings-and-code-
complaints-what-happened-when-a-private-equity-firm-became-one-citys-
biggest-homeowner/2018/12/25/995678d4-02f3-11e9-b6a9-0aa5c2fcc9e4-
story.html
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Community and Economic Development
Just as there are significant challenges to investing in affordable
housing, so too are we seeing challenges to investing in other
community and economic development projects in our neighborhoods. Many
of these are long standing challenges, including: real and perceived
risks from the private sector, insufficient infrastructure, higher
levels of environmental remediation, less collateral availability,
fluctuating income flow from small businesses or nonprofit project
sponsors, and a longer timeline for economic returns. That is why lower
income communities and families are particularly vulnerable to any
disruptions to the economic markets, and the recent investment trends
we discussed in housing we also see with respect to community and
economic development investments.
For example, small businesses often face difficulties in raising
capital. Most banks will not consider loans of less than $250,000,
making it very difficult for businesses to raise start up funding. This
is a particular challenge for business start ups from lower income
owners, who likely do not have resources from friends and family that
can be used to cover upfront operating costs, nor access to peers that
have experience owning and operating successful larger businesses. Many
of these businesses rely on credit card and other higher interest loan
products to support their operations, which makes them particularly
vulnerable in higher interest rate environments.
We are seeing similar dynamics play out in the community facilities
financing space. LISC funds charter schools, workforce development
centers, federally qualified health care centers and childcare centers,
among other community based facilities. Banks generally require much
higher collateral from these projects because income flow can fluctuate
considerably from month to month, and because it may be difficult to
repurpose the properties if the bank is forced to foreclose and take
ownership.
We see particularly acute challenges in the childcare sector. While
investments in childcare are critical for ensuring a productive U.S.
workforce, the current economics of building and maintaining high-
quality early childcare education facilities creates significant
barriers to providers entering and staying in the market. Most notably:
Child care providers tend to operate at exceptionally thin
margins, leaving very little room to support debt on the
property. This inhibits providers' ability to acquire and/or
develop facilities, as well as renovate existing facilities to
meet the needs of a high-quality center.
Most providers--like other small businesses--should expect
to see operating losses during their startup phase. This is
prohibitive to providers entering the market or expanding,
especially given the thin operating margins and inability to
take on additional debt.
Many providers also experience barriers to participating in
the real estate and financing aspects of the facilities
process, including creating an operating budget, developing and
implementing information systems, working with an architect,
and engaging with the regulatory bodies that oversee building
codes.
These barriers are prevalent across markets, including urban,
suburban and rural communities. In high-cost markets, providers are
often priced-out from acquiring land or existing facilities, both
because of the significant upfront purchase costs, as well as the
capital needed to hold the land until the center is ready to open. And
in rural areas, many of which have depressed economic markets, extreme
unemployment, and dispersed populations, it is simply not economically
viable to build a high-quality center when it is unclear if enough
families will be able to attend, or if they will be able to pay a rate
that supports the facilities' operations. Family-based childcare is
often the only option in rural areas, but these providers are also
constrained by the depressed economic markets and dispersed
populations.
Rural Communities
We know from our work, and the data confirms, that rural America
experiences distinct economic and housing characteristics from the rest
of the United States. On the economic front, rural America has not
experienced population or economic growth at the rate of the national
average and many persistently poor rural areas have experienced
outmigration and population decline for decades. In fact, 81 percent of
persistently poor communities (those with 20 percent of the population
being at or below the poverty level for three decades) are outside
metropolitan areas, with geographic concentrations in Central
Appalachia, Mississippi Delta, border Colonias, Native American lands,
and southeastern communities. \19\ Rural America is often challenged by
undiversified local economies that are disproportionately impacted when
one larger employer leaves a community or when commodity and extractive
resource prices decline. In addition, rural America tends to have older
populations than the country as a whole, with 19 percent of residents
over the age of 65 versus 16 percent nationally. \20\ Communities with
a disproportionate number of older adults often have challenges
providing necessary services since these populations are more likely to
be on fixed incomes and have special needs.
---------------------------------------------------------------------------
\19\ Taking Stock, Housing Assistance Council.
\20\ Ibid.
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These economic realities create distinct housing needs in rural
areas, especially low-income rural communities. Over half of renters in
rural areas had incomes under $35,000. \21\ And while rural communities
may generally be more affordable than metro areas, the low median
incomes result in 44 percent of rural renters being housing-cost
burdened. \22\ Housing in rural America is distinguished in other ways,
including by higher rates of home ownership (73 percent vs. national
average of 65 percent); higher proportion of manufactured housing (13.4
percent, twice the national average); an older rental housing stock
which is more likely to have housing problems, including 5.6 precent of
housing being substandard; and specific local needs such as high
overcrowding rates in many Native American communities. \23\
---------------------------------------------------------------------------
\21\ Ibid.
\22\ Ibid.
\23\ Ibid.
---------------------------------------------------------------------------
Nowhere is the nexus between housing and economic development more
pronounced than in rural communities, which are increasingly hearing
from employers that would like to locate high quality construction and
manufacturing jobs to those communities but are facing the realities
that there isn't enough quality housing to support their workforce.
Role of CDFIs in the Community Development Finance Ecosystem
CDFI Activities
Community development financial institutions provide capital,
credit, and financial services in underserved communities and
individuals throughout the country. There are over 1,400 Treasury
certified CDFIs across the country, ranging from credit unions to small
nonprofit loan funds to large national organizations. Collectively,
CDFIs have $247 billion in total assets and serve communities of all
sizes in all 50 States, the District of Columbia, Puerto Rico, and
Guam. \24\ CDFIs serve borrowers and geographic areas that are not
readily served by mainstream financial institutions, providing loans to
first-time homebuyers, financing for affordable rental housing and
community facilities, and small business financing. In many cases,
CDFIs provide the gap financing or the early stage financing that
allows projects to secure conventional financing.
---------------------------------------------------------------------------
\24\ https://www.cdfifund.gov/sites/cdfi/files/2023-01/CDFI-Fund-
FY22-AFR-FINAL508.pdf
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The most recent data from the CDFI Fund shows how CDFIs are meeting
needs, with their primary lines of business split between business and
microfinance, consumer lending, and residential real estate finance, in
addition to other activities. \25\ In 2020, over $110 billion in
lending was originated by CDFIs for affordable housing, consumer
lending, and community development projects, with almost 77 percent of
the number of those loans for projects and people living in an
underserved community or for low-income households. \26\ Certified
CDFIs are also required to provide training and technical assistance
with their lending products, to ensure borrowers are successful. In
2020, over 4.6 million individuals received housing counseling,
financial education, business technical assistance, real estate
trainings, and other development services. \27\
---------------------------------------------------------------------------
\25\ https://www.cdfifund.gov/sites/cdfi/files/2021-10/ACR-Public-
Report-Final-10062021-508Compliant-v2.pdf
\26\ Ibid.
\27\ Ibid.
---------------------------------------------------------------------------
CDFIs serve communities of all sizes, including rural areas. A
recent Federal Reserve survey highlighted that 25 percent of CDFI
respondents reported serving small towns. \28\ CDFIs serving rural
communities are often the only entities providing affordable housing
and community development financing opportunities, due to contractions
in the banking sector over time and capacity limitations of local
organizations. These CDFIs though tend to have less sources of funding
to expand their financing, even though over 75 percent of them reported
increased demand for their lending products. \29\
---------------------------------------------------------------------------
\28\ https://fedcommunities.org/a-closer-look-at-rural-cdfis/
\29\ Ibid.
---------------------------------------------------------------------------
LISC Activities
LISC has been a certified CDFI since 1995 and provides support
relating to all components of the affordable housing financing and
community development ecosystem. We raise capital and manage the assets
of Low-Income Housing Tax Credit and New Markets Tax Credit investment
funds; provide training and technical assistance grants to nonprofit
housing developers and community development corporations; provide debt
capital for multifamily housing projects, commercial real estate
projects and small businesses; administer off balance sheet funds on
behalf of municipalities, private sector organizations and foundations;
support single family housing development and rehabilitation; and
support rural housing initiatives, both single family and multifamily.
In 2023 alone, LISC and its affiliated entities deployed over $2.5
billion in equity capital, loan capital and grants to provide support
to low income families and help revitalize distressed rural and urban
communities throughout the country. This included $1.2 billion of
equity investments in affordable housing that were secured by our
affiliate, the National Equity Fund, through the Low Income Housing Tax
Credit, including into funds that have been dedicated to support
veterans housing and housing that is developed by smaller, emerging and
minority developers. Since inception, LISC and its affiliates have
invested $29.7 billion in grants, loans, and equity in affordable
housing and community development projects, leveraging $82 billion and
supporting 489,000 homes and apartments.
LISC's single family work includes home repair, downpayment
assistance, single family development financing, and heirs property
assistance. Pioneered in 2015 by our Detroit LISC office, we offer 10-
year, interest free loans ranging from $5,000 to $25,000 to complete
home repairs, fix structural defects and resolve health and safety
issues such as lead, mold, and asbestos contamination. The Detroit
program has provided $13.6 million in financing to 688 homeowners, 95
percent of whom are Black, and 71 percent of whom are low-income
households. The loan fund structure draws upon three sources of
financing--Community Development Block Grant funds, private loan
capital and grant funding--and we are in the process of building out
similar programs in Memphis and other cities across the country.
LISC has also been significantly engaged in economic development
and commercial revitalization activities, including through Broadstreet
Impact Services--our affiliate organization that secures equity
investments and related debt through the New Markets Tax Credit
program. Through 2022, LISC has placed $1.14 billion in NMTC equity
investments in 172 different projects in low-income communities
throughout the country, supporting $3.67 billion in total development
costs. LISC NMTC investments have created or retained more than 23,000
construction and permanent jobs, developed 13.9 million square feet of
commercial and community space, and financed health care facilities
serving more than 242,000 patients and educational facilities serving
49,000 students.
LISC has also increasingly been investing in small businesses and
in the small business ecosystem. LISC is currently supporting a network
of over 140 business development organization (BDOs) throughout the
country, in both our urban and rural communities. BDOs offer
comprehensive business services, including planning, financial
coaching, assistance accessing new revenue streams, and more. They
function as a high-touch response system for emerging entrepreneurs and
legacy small business owners alike, helping them to launch, operate,
grow, develop resiliency, and create new jobs in their communities.
BDOs include community development corporations, CDFIs, chambers of
commerce, business improvement districts, merchants associations,
incubators, accelerators, and more.
LISC also has a strong commitment to improving rural communities
and in 1995, launched Rural LISC, a national program created to expand
our reach beyond urban areas. Today, Rural LISC partners with 140 rural
community-based organizations, including five financial intermediaries,
helping each organization identify challenges and opportunities, and
delivering the most appropriate support to meet those local needs. Over
half of our partners provide housing assistance to the small towns they
serve. LISC has renewed our commitment to rural communities through our
Rural LISC Promise, our pledge to catalyze at least 20 percent of the
community development impact that LISC makes, in any year, in rural
communities.
Critical Role of Federal Affordable Housing and Community Development
Programs
The Federal Government plays an essential role in supporting CDFIs,
as well as helping to fill market gaps for affordable housing and
community development projects. Below, we highlight some of the most
essential Federal programs supporting this work, many of which fall
under the purview of this Committee.
Multifamily Housing
The construction and preservation of nearly all affordable rental
housing relies heavily on Low-Income Housing Tax Credits. Housing
Credit properties often utilize other sources of Federal subsidy,
including the HOME Investment Partnership program, Capital Magnet Fund,
USDA Rural Housing Service programs, and rental assistance through
HUD's Section 8 Project-Based Rental Assistance, Project Based Voucher,
and Housing Choice Voucher programs. These rental assistance programs
are essential for affordable housing serving our Nation's poorest
households.
Low Income Housing Tax Credit
The Housing Credit is the Nation's most successful tool for the
production and preservation of affordable rental housing. Since its
enactment in 1986, the Housing Credit has produced just under 4 million
affordable homes, serving more than 8 million households, supporting
approximately 6 million jobs annually, and generating approximately
$250 billion in taxes and $700 billion in wages and business income.
What's more, properties financed with the Housing Credit must remain
affordable for a period of at least 30 years, and longer in certain
States.
The Federal statute generally requires all Housing Credit units to
be rented to tenants with incomes at or below 60 percent of area median
income (AMI), and that rents charged may not exceed 30 percent of the
applicable median family income. However, a significant percentage of
Housing Credit units are rented and affordable to tenants with
considerably lower incomes. According to recent HUD data on Housing
Credit resident demographics, 53 percent of all households living in
Housing Credit apartments are extremely low-income, meaning they earn
30 percent of AMI or less; and another 31 percent of households are
classified as very low-income (earning less than 50 percent of AMI).
This deep targeting is in large part due to the requirements in Federal
law that creates a preference for developments that commit to deeper
income targeting; and in many cases would not be possible but for
Federal, State, or local rental subsidies that well compliment the
Housing Credit program.
The success of the Housing Credit program can be measured not only
by the number of units of affordable housing it has produced, but also
by the financial strength of the properties developed. According to
periodic analysis by the national accounting firm CohnReznick, the
cumulative rate of foreclosure on Housing Credit properties is lower
than any other real estate asset class, well below 1 percent. This is a
tribute to the quality of underwriting at the original financing as
well as the multiple eyes on the development by the State housing
finance agencies, local governments, lenders, equity providers, and
developers.
Section 8
The Housing Credit is best able to reach the poorest households
when rental assistance is available, as the rents these families can
afford to pay often cannot support the property's basic operating
costs, let alone debt service. The Section 8 program provides vouchers
directly to project owners known as project based vouchers, but also
directly to renters known as tenant-based vouchers. Both types of
vouchers are critically needed if we are going to ensure that the
lowest income families have access to affordable housing. LISC is
supportive of efforts to increase Federal rental assistance resources
since only one out of four eligible households receive it, and since
it's so critical for housing extremely low-income families, including
for persons experiencing homelessness. \30\
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\30\ https://www.cbpp.org/research/housing/families-wait-years-
for-housing-vouchers-due-to-inadequate-funding
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HOME Investment Partnership Program and Housing Trust Fund
The HOME Program is the only Federal block grant to State and local
governments designed exclusively to create and preserve affordable
housing for low-income households. The funding is flexible and may be
used for a variety housing of activities that other sources may not
cover, including preservation of rental housing, homebuyer assistance,
rehabilitation of owner-occupied homes and tenant-based rental
assistance. For rental housing, HOME funds often provide either the
early support necessary to initiate new development or the critical
gap-financing needed to complete developments. States and localities
must provide at least a 25 percent match of their HOME funds from local
funds. These entities typically leverage HOME program funds by
generating more than $4 of other public and private funding for every
HOME dollar. HUD's Housing Trust Fund further enhances HOME dollars by
targeting additional resources to serve the lowest income families.
Capital Magnet Fund
The CMF provides competitive resources for CDFIs and nonprofit
housing developers to finance affordable rental housing and home
ownership projects and related economic development activities. It is
administered by the CDFI Fund and by law, an organization must leverage
its award with other sources of capital; the leveraged amount must be
at least 10 times the amount of the award. This funding is typically
utilized as gap sources in affordable rental housing projects. The CMF
programs has awarded grants totaling nearly $1.1 billion to CDFIs and
qualified nonprofit organizations and of reported projects, awardees
have attracted nearly $13.3 billion in total leverage. Recipients have
five years to complete projects after receiving an award. As of
September 30, 2022, awardees reported supporting 37,650 affordable
rental housing units, 5,500 affordable home ownership units, and
several community service facility projects, such as health care and
other community facilities that are located near affordable housing.
\31\
---------------------------------------------------------------------------
\31\ https://www.cdfifund.gov/sites/cdfi/files/2023-10/FINAL-2023-
CMF-Award-Book-100323.pdf
---------------------------------------------------------------------------
Federal Home Loan Bank Affordable Housing Program
The Federal Home Loan Banks are required to provide 10 percent of
their net income for the Affordable Housing Program (AHP), which can
support both affordable rental housing and home ownership. AHP is an
important gap financing source for many Housing Credit projects. In
addition, it can be utilized to support the purchase or rehabilitation
of a home, with at least one third of that amount set-aside for first-
time homebuyers.
USDA Multifamily Housing
The U.S. Department of Agriculture's (USDA) Section 515 Rural
Rental Housing Direct Loan Program has funded the creation of 533,000
affordable rural rental housing units since inception and there are
around 395,000 units of this housing remaining, which are located in
over 87 percent of all U.S. counties. \32\ The program hasn't funded
new construction in many years and current resources are utilized to
help preserve these properties as affordable, which is vital due to the
lack of other affordable housing options in many of these rural
communities and since many residents are elderly or disabled. More than
80 percent of Section 515 tenants receive Federal rental assistance to
make the rent affordable, with almost two-thirds funded through USDA's
Section 521 Rental Assistance program. Families living in these
properties have an average household income of $14,941 and two-thirds
are elderly or disabled. \33\
---------------------------------------------------------------------------
\32\ https://ruralhome.org/wp-content/uploads/2022/03/rural-
research-brief-usda-rural-rental-housing.pdf
\33\ Ibid.
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Single Family Housing
Home ownership is one of the primary ways that low- and moderate-
income families are able to build wealth and achieve financial
stability. Increasing affordable home ownership is a key component in
combatting historical policies that have precluded minorities and
others from purchasing a home and widened the racial wealth gap.
Unfortunately, we have very few Federal resources for both supply and
demand side affordable home ownership assistance; but those that we
have are critically important.
HOME, CMF, and AHP
As mentioned, HOME, AHP, and the Capital Magnet Fund can be
utilized for affordable home ownership purposes, including purchase
assistance, owner-occupied rehabilitation, and for development projects
in the case of CMF.
Housing Counseling
Many would-be first-time homeowners, including low-income and
minority families, need assistance when preparing to purchase a house.
Housing counseling provides prospective buyers the financial education
and counseling they need to purchase a home they can afford. Housing
counseling is also an essential tool for supporting current homeowners
who are experiencing financial distress. Research has shown that
housing counseling helps households avoid foreclosure and counseled
clients were almost three times more likely to receive a loan
modification and were 70 percent less likely to re-default on a
modified loan than were similar borrowers who were not counseled. \34\
To support both prospective and current homeowners, LISC supports full
funding of HUD's Housing Counseling program. This program provides
grants to HUD-approved housing counseling agencies and State housing
finance agencies. This assistance is crucial in ensuring distressed
families know their options for how to keep their homes.
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\34\ https://www.huduser.gov/portal/sites/default/files/pdf/
Housing-Counseling-Works.pdf
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USDA Rural Housing Service Single Family Programs
The USDA's Rural Housing Service administers several single-family
programs, which support affordable home ownership for low-income
families in rural communities. These include the Section 502 Single
Family Housing Direct Home Loan program and Section 523 Mutual Self-
Help Housing Technical Assistance program. The Section 502 Single
Family Housing Direct Home Loan program is the only Federal home
ownership program targeted to low-income and very low income rural
families. Over 60 years, the program has helped more than 2.1 million
families achieve home ownership and built over $40 billion in wealth.
The Section 523 Self-Help Housing Technical Assistance program has
helped more than 50,000 families achieve home ownership over the last
50 years. Under the program, families work together in groups to build
their homes and equity. Section 523 grants support the nonprofit
developers providing training, supervision, and technical assistance to
families. The program is targeted to low-income and very low-income
families and over 50 percent of participants are minority households.
The sweat equity gained by constructing a home, coupled with affordable
mortgages through the Section 502 Direct Home Loan program, allows low-
income rural families to achieve home ownership and build wealth.
Community and Economic Development
Investments in community resources help to spur broader economic
growth. Federal investments often fill gaps in project financing and
are at the core of funding that makes inclusive economic development
initiatives possible on the local level. This cooperative effort
joining Federal investment and locally led programs expands the entire
economic ecosystem by revitalizing neighborhoods, attracting
businesses, creating jobs, and broadening access to opportunity for all
residents. LISC supports robust investments in programs across Federal
agencies that promote comprehensive community development initiatives
and facilitate cross-sector partnerships, a few of which are
highlighted below.
CDFI Fund
The Treasury Department's CDFI Fund certifies institutions as CDFIs
and administers several different programs to support their capacity
and growth, including the CDFI Program, which invests in CDFIs to
increase their lending capacity. These resources have been instrumental
to the CDFI's sector's growth over time. In FY 2022, CDFI Program
awardees originated over $53 billion in loans and investments, financed
$12.7 billion for home improvement loans, $8.1 billion for business and
microenterprise loans, $5 billion for residential real estate
transactions, and $17.7 billion for consumer loans. LISC supports
increased funding for the CDFI Fund since the CDFI Program and its
other competitive award programs are greatly oversubscribed.
New Markets Tax Credits
The New Markets Tax Credit (NMTC) Program attracts investment
capital to low-income neighborhoods that have been left behind by the
traditional private marketplace. Under the program, investors receive a
tax credit for making equity investments in certified Community
Development Entities (CDEs), which in turn use the proceeds to make
loans and investments in businesses, real estate projects, and
community facilities located in underserved low-income communities. To
date, $57.5 billion of NMTC equity has been invested in distressed
rural and urban communities, supporting a wide variety of activities
including small businesses, manufacturing facilities, for sale housing,
charter schools, health care centers, childcare centers, and shopping
centers and grocery stores, to name but a few.
Community Reinvestment Act
The Community Reinvestment Act (CRA), enacted in 1977, requires
banks to invest in the communities, including low-income communities,
where they are conducting business. CRA has proven to be a critical, if
not the most critical, resource available to facilitate the flow of
private capital into underinvested communities. It has been successful
not only for the communities and community residents that have
benefited from these investments, but also for the banks--which have
managed to find new and profitable investment opportunities that
generally perform as well or better than other bank investments. While
CRA promotes many types of bank investments in lower income
communities, it has been particularly impactful with respect to
promoting affordable housing and home ownership opportunities for lower
income families.
As successful as the CRA has been, its regulations had not been
substantively updated since 1995--despite the fact that the banking
industry has undergone significant changes in that period, most notably
in the rise of interstate banking, internet banks, mergers of
institutions, and mobile banking. However, in October of 2023, the bank
examiners released finical regulations providing a much needed and
welcome overhaul of the CRA examination procedures. The regulations
were the result of significant public vetting over the last 6 years,
and we believe reflect an appropriate balance between the needs of low
income communities and the responsibilities of banks to demonstrate
that they are meeting these needs while also fulfilling their safety
and soundness requirements. The revised regulations also provide
clarity and transparency to both banks and community development
practitioners which we believe will result in a more functional and
efficient community and economic development finance ecosystem.
Capacity Building for Affordable Housing and Community Development
Organizations
HUD's Section 4 program strengthens the Nation's lower-income urban
and rural communities by bolstering nonprofit community developers that
build and invest in their neighborhoods. The program provides grants on
a competitive basis to national intermediary community development
organizations, which provide training, education, financial support,
and development assistance to local community development corporations
(CDCs). These funds are matched on a three-to-one basis, and then used
to leverage additional private capital. Total aggregate leverage has
consistently been in the range of $20 or more for each dollar of
Section 4 funding.
From 2018 to 2022, Section 4 funds have been deployed by 984 CDCs
and other nonprofit developers, resulting in the creation or
preservation of more than 42,000 homes and the attraction of over $10
billion in investment to communities. The Section 4 program is the sole
source of funding at HUD that provides financial support and
development assistance to CDCs to support their housing and community
revitalization efforts in all types of communities. LISC supports
increased funding for the Section 4 program to provide additional
capacity building support to CDCs serving urban, suburban, rural, and
Native communities.
LISC also supports dedicated programs at USDA, including the Rural
Community Development Initiative and the Rural Partnership Program,
that similarly focuses efforts on providing training and technical
assistance to nonprofit CDCs serving the unique needs of rural
communities.
Community Development Block Grants
The Community Development Block Grant (CDBG) program is a critical
source of community development funding that benefits low- to moderate-
income (LMI) communities. Established in 1974, the block grant program
allows grantees to meet locally identified needs, which promote
inclusive approaches to community and economic development.
When disaster strikes communities, the Community Development Block
Grant--Disaster Recovery (CDBG-DR) program provides the resources
needed to rebuild, expand resilience capabilities, and strengthen post-
disaster opportunities. Timely and well-targeted Federal assistance is
critical to an inclusive recovery, particularly in underserved and
rural communities. But the current funding mechanism is cumbersome and
inefficient, delaying the delivery of much-needed investments for aid
and recovery and leaving disaster-stricken communities stuck in
administrative limbo.
Actions Needed From Congress
We urge Congress to continue its commitment to supporting
affordable housing and community development efforts by enacting
critically needed legislation, most of which has bipartisan support,
that would expand existing programs or else create new programs where
there are gaps in the housing and community development financing
ecosystem.
Support Production and Affordability of Rental Housing
1. Enact the Affordable Housing Credit Improvement Act (S. 1557)
This legislation, sponsored by Senators Cantwell and Young,
includes about two dozen provisions to strengthen and improve the
Housing Credit, and if enacted would result in the production of close
to 2 million units of additional affordable housing over the next
decade. It currently has the support of 30 Senators, split evenly among
Democrats and Republicans. We have never seen an affordable housing
production bill with such deep and widespread support in Congress, and
this is by far the most important piece of legislation we can enact to
help put a dent into our current housing crisis.
2. Enact housing credit provisions in H.R. 2074
In a notable recognition of urgency of the housing crisis, two
Housing Credit provisions drawn largely from the AHCIA were included in
the tax bill that passed the House in December: a provision to restore
an increase to the allocation of credits that expired in 2021, and a
provision that would make it easier to utilize the housing credit
alongside private activity bonds. These two provisions would create an
additional 200,000 units of affordable housing over the next decade and
could help serve as a critical bridge while we wait for enactment of
the AHCIA.
3. Enact the Rural Housing Service Reform Act (S. 2790)
LISC supports the bipartisan Rural Housing Service Reform Act led
by Senators Smith and Rounds and supported by the majority of this
Committee. This legislation would make long overdue updates to RHS
programs, including allowing Section 521 Rental Assistance to continue
at properties after the USDA mortgage matures. This will help owners
leverage Housing Credits and debt to recapitalize these properties,
while ensuring tenants continue to be stably housed. In addition, it
permanently authorizes a delegated Section 502 Direct Loan Program for
Native CDFIs, while updating USDA's home repair loan limits.
4. Enact the Family Stability and Opportunity Vouchers Act (S.
1257)
LISC supports additional rental assistance to ensure that our
Nation's lowest income families are provided the housing stability they
deserve. Led by Senators Van Hollen and Young, this bill would fund new
housing mobility vouchers to help allow families to live in areas of
higher opportunity.
LISC also thanks Senator Scott for his leadership on the ROAD to
Housing Act. We particularly appreciate the need to expand the Rental
Assistance Demonstration program as a means to helping modernize and
preserve affordable housing units, provided there are appropriate
tenant protections.
We also applaud Senator Cortez Masto's incredible leadership on
housing and community development issues, including most notably the
Federal Home Loan Banks Mission Implementation Act, the PRICE Act (S.
3264), and the HOME Reauthorization bill (S. 3793). This trio of bills
would lead to a significant increase in the development and
rehabilitation of affordable housing financed through the Federal home
loan bank system, enhance and improve production of manufactured
housing, and provide numerous reforms to HUD's HOME program. LISC
strongly supports these legislative efforts.
Lastly, we support expanded asset building opportunities for
residents of HUD-assisted housing, including public housing and those
living in Section 8 Project-Based Rental Assistance properties.
Congress should authorize a pilot program to expand the successful
Family Self-Sufficiency Program by allowing increases in tenant income
to be deposited into an escrow account. This would expand the ability
for tenants to save for their goals.
Support Home Ownership Opportunities
1. Enact the Neighborhood Homes Investment Act (S. 657)
LISC, along with over three dozen other national organizations and
trade associations focused on housing and community revitalization, is
calling for the enactment of the Neighborhood Homes Investment Act.
This bipartisan legislation, introduced by Senators Cardin and Young,
currently has 8 additional cosponsors, with equal numbers of Democrats
and Republicans.
Neighborhood Homes is designed to attract private capital to
support investments in single family homes in distressed urban and
rural communities--where the costs of developing and rehabilitating
homes exceed the value of the home. Modelled after the successful Low
Income Housing Tax Credit, Neighborhood Homes would provide the
developer or investor with a tax credit to cover this ``value gap'',
for both for sale housing and for owner occupied rehabs.
Neighborhoods characterized by some combination of high poverty,
low median family income and low home values would be eligible for
investments. Neighborhood Homes Credit agencies would also have
additional flexibility to serve rural communities, as well as
communities impacted by natural disasters, that may not otherwise have
qualified based on the initial Neighborhood Homes requirements.
As noted above, Neighborhood Homes would fill the gap between the
cost of construction and the value of the property, with the private
market bearing construction and marketing risks--much as is done with
the Housing Credit. However, the Housing Credit, which was designed to
create affordable rental housing for low- and very-low-income families,
cannot readily be utilized to support home ownership housing. And while
tax exempt private activity bonds and mortgage credit certificates
(MCCs) do support homebuyers by reducing mortgage interest costs, these
incentives do not address supply-side development cost gaps.
The Neighborhood Homes Tax Credit would fill a missing void in our
affordable housing tax financing ecosystem, providing an effective and
necessary tool for bringing starter homes online, while also
revitalizing communities and providing affordable home ownership
opportunities for first time and minority homebuyers. Over the next 10
years, it is projected that Neighborhood Homes will result in the
development or substantial rehabilitation of 500,000 homes.
2. Enact the Whole Home Repairs Act (S. 3871)
LISC supports Senator Fetterman and Lummis' Whole-Home Repairs Act.
This bill is modeled off a successful Pennsylvania program, which
created a one stop shop to help with home repairs and weatherization
for underserved seniors and families.
3. Enact the Stop Predatory Investment Act (S. 2224)
We support the Stop Predatory Investment Act, led by Senator Brown,
which would restrict tax breaks for large investors purchasing single
family homes to convert to rentals.
4. Enact the HELPER Act (S. 1514)
We support Senators Brown, Rubio, and Ossoff's Homes for Every
Local Protector Educator and Responder Act (HELPER), which would create
a new Federal Housing Administration first-time homebuyer program for
teachers, law enforcement, and first responders.
5. Enact the LIFT Act (S. 2148)
LISC supports the LIFT Act, led by Senator Warner, which would
establish a program at HUD, working with Treasury, to provide low
fixed-rate 20 year mortgages for first-time, first-generation
homebuyers. This would allow borrowers to build equity at twice the
rate of a conventional 30 year mortgage.
6. Enact the Homebuyers Privacy Protection Act (S. 3502)
We support Senators Reed and Hagerty's bipartisan Homebuyers
Privacy Protection Act, since it would prohibit a credit reporting
agency from selling information when a consumer applies for a
residential mortgage.
Support Investments in CDFIs and Low-Income Communities
1. Enact legislation supporting CDFIs
LISC applauds Senators Warner and Crapo for cofounding the Senate
CDFI Caucus--which has grown to now include 24 Senators, 12 from each
side of the aisle, including 10 Members of the Banking Committee. This
has been a great resource for furthering conversations about CDFIs, and
has also resulted in the introduction of several key pieces of
legislation, including:
Scaling Community Lenders Act (S. 1442). Introduced by
Senators Warner and Crapo, this legislation would expand and
fund a secondary market loan-purchase program for loans issued
by CDFIs.
CDFI Bond Guarantee Program Improvement Act (S. 869).
Introduced by Senators Smith and Rounds, this legislation would
reauthorize the program for 4 years, reduce the minimum
issuance amount from $100 million to $25 million, and eliminate
the cap on the annual number of guarantees. LISC is a
participant in BGP and knows how important long-term capital is
to CDFI lending efforts. These reforms will allow smaller CDFIs
to be able to access the program and make it better able to
assist smaller project sizes.
Community Development Investment Tax Credit (S. 2963). LISC
supports this legislation, led by Senator Warner and Wicker,
which would provide an incentive for private-sector investments
in CDFIs. This bill would give a tax credit to investors that
make equity or equity-equivalent investments in CDFIs or that
provide them with long-term patient capital, investments the
CDFIs then use for their financing activities in low-income
communities. A CDFI tax credit would provide additional
resources for CDFIs and help overcome funding limitations in
the CDFI Fund's oversubscribed programs.
2. Enact the New Markets Tax Credit Extension Act of 2023 (S. 234)
NMTCs are predominantly used to support commercial revitalization,
businesses and community facilities in lower income communities, and
are one of the most effective of all Federal economic and redevelopment
programs--spurring over $120 billion of total investments in distressed
communities and creating over 1 million jobs to date. LISC has deployed
over $1 billion in NMTC financing since the program's inception, and we
have seen first-hand how our investments in businesses, commercial real
estate and community facilities have complemented our housing work and
improved the lives of residents in our communities.
Though NMTCs cannot be used to support residential rental
properties, some NMTC investments have nonetheless supported housing
activities--principally through investments in mixed-use commercial
redevelopment projects that include on site housing, and to a lesser
extent, home ownership activities. According to the Treasury
Department, NMTCs have helped to finance over 18,000 affordable homes.
The NMTC Program is set to expire in 2025. The Senate should pass
S. 234, sponsored by Senators Cardin and Daines, which would
permanently authorize the NMTC Program at $5 billion per year, and an
inflationary adjustment, and allow the credit to be used to offset the
Alternative Minimum Tax.
3. Enact the Reforming Disaster Recovery Act (S. 1686)
LISC supports the bipartisan Reforming Disaster Recovery Act since
we've seen firsthand how it takes too long for CDBG-Disaster Recovery
resources to reach communities. This bill would formally authorize
CDBG-DR, leading to quicker delivery of resources, while streamlining
administration of the program.
Conclusion
There can be little doubt we are currently in an affordable housing
crisis. Rents have been rapidly climbing, supply has been tightening,
costs of construction have been increasing, and we have underproduced
roughly 3.8 million homes. On the single family side, home prices have
cooled of late but still remain historically high, and elevated
interest rates make it even more difficult for first time homebuyers to
purchase a home. And sadly, home ownership disparities between racial
and ethnic groups stubbornly persist, with little gains made over the
past three decades. We face similar struggles at financing projects in
our distressed urban and rural communities, despite the best efforts of
the Government to support critical community and economic development
initiatives--including its support of the CDFI Fund.
The good news is that solutions are out there, and they have wide
bipartisan support in Congress. Restoring the lapsed 12.5 percent
increase to the formula allocation for the 9 percent housing credits
and passing the Affordable Housing Credit Improvement Act will create
close to 2 million additional affordable rental homes over the next
decade than would otherwise be built, while also supporting nearly 3
million jobs and bringing in $120 billion in additional tax revenue.
Enacting the Neighborhood Homes Investment Act will create 500,000
new starter homes, providing home ownership opportunities for first
time and minority homebuyers while simultaneously repopulating and
revitalizing under-resourced rural and urban communities. Enacting the
RHS Reform Act will help preserve rural affordable rental housing and
expand home ownership opportunities for Native communities. And
permanently extending the NMTC program will ensure that hundreds of
billions more of private capital will be invested in our distressed
rural and urban communities over the coming decade.
I thank you again for this opportunity to testify. I hope that the
conversations we have today will bring us closer to enacting these and
the other critical housing and community development bills addressed in
this testimony and put us on a path to ensuring that all families in
this country will be able to enjoy the health, well-being and financial
security that an affordable home in a livable community provides.
PREPARED STATEMENT OF E.J. ANTONI
Research Fellow, Public Finance Economist, The Heritage Foundation
March 12, 2024
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
PREPARED STATEMENT OF PEGGY BAILEY
Vice President of Housing and Income Security, Center on Budget and
Policy Priorities
March 12, 2024
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
FROM MATT JOSEPHS
Q.1. CDFIs finance a variety of activity in distressed and
underserved communities, which includes a successful track
record financing affordable housing. According to CDFI Fund
reporting, since 2010, CDFI Program award recipients have
financed the development of more than 425,000 units of
affordable housing. This equates to more than $60 billion in
home and residential real estate lending.
I, with Senator Crapo, introduced the Scaling Community
Lenders Act (S. 1442) to jumpstart a secondary market for CDFI
loans. Creating a secondary market for CDFI loans allows CDFIs
to recapitalize and continue their financing activities,
including affordable housing for low-to-moderate income
families.
Can you tell me how secondary market access would help your
CDFI's capacity to finance affordable housing activity and how
it might fill gaps in your capital stack?
A.1. The Scaling Community Lenders Act would authorize new
resources to activate and fund the long-dormant Section 113 of
the Riegle Act of 1994--the CDFI liquidity enhancement
program--allowing the CDFI Fund to support CDFI secondary
market access. Research has shown that CDFIs loans are high
performing, although in most cases they are nontraditional and
do not meet the underwriting and collateralization standards
required by conventional banks. As a result, there is not a
vibrant secondary market where CDFIs can sell these loans to
investors.
This legislation will kickstart a CDFI secondary market so
CDFIs have access to loan purchasers to obtain the capital
needed to finance additional affordable housing and community
and economic development activities for underserved people and
communities. A stable source of liquidity is even more
necessary in a high interest rate environment, since lenders
can become more liquid without taking on significant debt.
As noted in a LISC white paper titled ``Securitization for
Social Innovation'', ``the CDFI sector can collectively unlock
more liquidity than is currently available by utilizing
commercial asset-backed structures to trade CDFI assets for
cash. Such a secondary market would increase the amount of
institutional capital flowing to CDFIs while simultaneously
increasing the investment capacity of CDFIs beyond the current
limits of their balance sheets. Moreover, recent advancements
in accessing the capital markets like note and bond issuances
are typically feasible only for larger CDFIs with sizable real
estate-backed portfolios; this approach of purchasing assets
would be able to include CDFIs regardless of their size,
sophistication, or asset class focus.''
Q.2. Home ownership is the primary way many families build
wealth and achieve economic stability. Yet, too many families,
particularly families of color, have been unable to take
advantage of this opportunity, leaving them on the wrong side
of an ever-widening wealth gap. Last year, I was joined by
Senators Van Hollen, Warnock, Kaine, and Ossoff in introducing
the LIFT Homebuyers Act (S. 2295) that would provide low-income
first-time, first-generation homebuyers with a wealth-building
mortgage. By offering new homeowners a 20-year mortgage for
roughly the same monthly payment as a traditional 30-year loan,
LIFT will allow individuals traditionally underrepresented in
the housing market to grow equity twice as fast.
Could you each describe the importance of home ownership to
building wealth, as well as economic security, in distressed
and underserved communities?
A.2. Our Nation needs to enact policies that increase
opportunities for all Americans to achieve affordable and
sustainable home ownership. Home ownership is one of the
primary ways that low- and moderate-income families are able to
build wealth and achieve financial stability. Increasing
affordable home ownership is a key component in combatting
historical policies that have precluded minorities and others
from purchasing a home and widened the racial wealth gap.
Home ownership disparities between racial and ethnic groups
stubbornly persist. In the second quarter of 2022, the home
ownership rate for White households was 75 percent compared to
45 percent for Black households, 48 percent for Hispanic
households, and 57 percent for non-Hispanic households of any
other race. \1\ These gaps in home ownership rates have changed
little over the last three decades. In fact, the Black-White
gap in home ownership rates was the same in 2020 as it was in
1970, just 2 years after the passage of the Fair Housing Act of
1968, which sought to end racial discrimination in the housing
market. \2\ These disparities limit the ability of families of
color to achieve their home ownership goals and limits asset
building opportunities, contributing to our Nation's racial
wealth gap.
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\1\ https://home.treasury.gov/news/featured-stories/racial-
differences-in-economic-security-
housing#::text=housing%20equity%20wealth.-Homeownership,households%20of
%20any%20other%20race.
\2\ Ibid.
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This is why LISC supports legislative efforts to increase
affordable home ownership opportunities for first time
homebuyers and underserved families, including Senator Warner's
LIFT Act.
We also support the development of new starter homes in
traditionally underserved communities, as the lack of supply of
affordable homes is also a significant barrier to home
ownership. Right now, the single family housing affordability
gap is the highest it's been in 30 years. The Neighborhood
Homes Investment Act would support the development or
rehabilitation of 500,000 homes in the next decade, principally
in distressed communities. Close to two-thirds or NHIA eligible
communities are communities of color, which should not only
help revitalize these communities, but also provide home
ownership opportunities to first time, first generation and
minority homebuyers.
Q.3. In terms of assessing impediments to home ownership for
low- and moderate-income homebuyers, are downpayments and
closing costs the biggest obstacles? Should policymakers
prioritize assistance and incentives that facilitate innovative
solutions in these areas?
A.3. Recent research shows closing costs are a significant
obstacle to home ownership for first-time and low-income first-
time homebuyers, including Black and Hispanic borrowers. In a
Fannie Mae analysis of approximately 1.1 million home purchase
loans acquired in 2020, they found that more than 14 percent of
low-income first-time homebuyers had closing costs equal to or
exceeding their downpayment. Dr. Antoni noted in his testimony
that half of homebuyers today cannot meet closing costs without
receiving a gift or loan from family of friends; which quite
often isn't as readily available for lower income homebuyers.
Reducing such costs would allow additional low-income and
underserved families to achieve home ownership.
Research by Freddie Mac indicated that, as of January of
2021, there were 5.4 million Black people ages 45 and younger
that were potentially mortgage ready (3.4 million) or near
mortgage ready (2 million). For many of these families, their
income and credit scores were sufficient enough for them to
secure a home loan; but the lack of savings to cover
downpayment and closing costs were insufficient. It's
imperative that policymakers provide assistance to underserved
families that are prime candidates for home ownership if they
had access to upfront resources for downpayment and closing
costs.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
FROM PEGGY BAILEY
Q.1. Home ownership is the primary way many families build
wealth and achieve economic stability. Yet, too many families,
particularly families of color, have been unable to take
advantage of this opportunity, leaving them on the wrong side
of an ever-widening wealth gap. Last year, I was joined by
Senators Van Hollen, Warnock, Kaine, and Ossoff in introducing
the ``LIFT Homebuyers Act'' (S. 2295) that would provide low-
income first-time, first-generation homebuyers with a wealth-
building mortgage. By offering new homeowners a 20-year
mortgage for roughly the same monthly payment as a traditional
30-year loan, LIFT will allow individuals traditionally
underrepresented in the housing market to grow equity twice as
fast.
Could you each describe the importance of home ownership to
building wealth, as well as economic security, in distressed
and underserved communities?
A.1. Home ownership plays an important role in helping families
build economic mobility and has historically played a role in
helping families build wealth. Helping people purchase homes
and implementing policies that help families who own their
homes stay when investment comes to communities and places are
revitalized are critical to helping families realize the dream
of home ownership and have that dream actually realize
financial gains. We know the racial home ownership gap has
closed over the last 4 years but it remains wide. Therefore,
direct action will be needed to continue this progress.
Q.2. In terms of assessing impediments to home ownership for
low- and moderate-income homebuyers, are downpayments and
closing costs the biggest obstacles? Should policymakers
prioritize assistance and incentives that facilitate innovative
solutions in these areas?
A.2. Downpayment and closing costs are definitely obstacles to
home ownership and when you add credit building and banking
history are among the biggest hurdles people face when
purchasing a home. Yes, policymakers should facilitate
innovative solutions to helping families afford downpayments,
which includes helping renters (including renters receiving
assistance) save money and access services like financial
coaching, helping families pay or finance closing costs, and
improve people's--especially people of color--ability to build
credit, access banking, and have legal assistance to protect
against racism and discrimination by financial institutions.
Another way to help would be to help PHAs administer home
ownership voucher options that exist within the Housing Choice
Voucher program. PHAs could use technical assistance and
additional administrative funding to help them start up
programs and better assist participants, including by
connecting them to other resources to help pay for downpayments
and closing costs to make this program more effective.
Additional Material Supplied for the Record
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