[Senate Hearing 118-555]
[From the U.S. Government Publishing Office]
S. Hrg. 118-555
CHALLENGES IN PRESERVING THE U.S. HOUSING STOCK
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
HOUSING, TRANSPORTATION, AND COMMUNITY DEVELOPMENT
of the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
ON
EXAMINING THE CHALLENGES IN PRESERVING THE U.S. HOUSING STOCK
__________
APRIL 16, 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
58-503 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
Catherine Fuchs, Republican Policy Director
Cameron Ricker, Chief Clerk
Shelvin Simmons, IT Director
Pat Lally, Assistant Clerk
______
Subcommittee on Housing, Transportation, and Community Development
TINA SMITH, Minnesota, Chair
CYNTHIA M. LUMMIS, Wyoming, Ranking Member
JACK REED, Rhode Island MIKE CRAPO, Idaho
ROBERT MENENDEZ, New Jersey MIKE ROUNDS, South Dakota
JON TESTER, Montana JOHN KENNEDY, Louisiana
CATHERINE CORTEZ MASTO, Nevada BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona J.D. VANCE, Ohio
RAPHAEL G. WARNOCK, Georgia KATIE BOYD BRITT, Alabama
JOHN FETTERMAN, Pennsylvania
Tim Everett, Subcommittee Staff Director
Kelsey Pristach, Republican Subcommittee Staff Director
(ii)
C O N T E N T S
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TUESDAY, APRIL 16, 2024
Page
Opening statement of Chair Smith................................. 1
Opening statements, comments, or prepared statements of:
Senator Lummis............................................... 2
WITNESSES
Jesse Ergott, President and CEO, NeighborWorks Northeastern
Pennsylvania................................................... 5
Prepared statement........................................... 23
Responses to written questions of:
Senator Crapo............................................ 70
Robin Davey Wolff, Senior Director for Rural Communities at
Enterprise Community Partners.................................. 7
Prepared statement........................................... 55
Responses to written questions of:
Senator Crapo............................................ 71
Christopher Volzke, Deputy Executive Director, Wyoming Community
Development Authority.......................................... 8
Prepared statement........................................... 63
Responses to written questions of:
Senator Crapo............................................ 71
Additional Material Supplied for the Record
Statement submitted by Guy Cecala, National Board of Directors
Chair, Rebuilding Together..................................... 73
Letter submitted by HAC.......................................... 74
Statement submitted by NLHA/IRHP................................. 83
(iii)
CHALLENGES IN PRESERVING THE U.S. HOUSING STOCK
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TUESDAY, APRIL 16, 2024
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Subcommittee on Housing, Transportation, and Community
Development,
Washington, DC.
The Subcommittee met at 10 a.m., in room SD-538, Dirksen
Senate Office Building, Hon. Tina Smith, Chair of the
Subcommittee, presiding.
OPENING STATEMENT OF CHAIR TINA SMITH
Chair Smith. Well, good morning, and the Subcommittee on
Housing, Transportation, and Community Development will come to
order.
So without a safe, decent, affordable place to live, we
know that nothing else in your life works. Not your job, not
your education, not your health, not your family, not anything.
So if your roof is leaking, or the apartment that you've
lived in for years has a big rent increase, or you're having
trouble getting around your home as you age, all of these
challenges are going to stick with you in every single part of
your life.
And we know that nearly half of the homes in this country
are more than 40 years old. And of those homes and the
Americans living in them, as they continue to age, it's
important for us to understand that it will take--what it will
take to keep our homes habitable, affordable, and accessible,
both for current residents and for the future.
Around the country, around 400,000 apartments that the
Government helped build years ago in small towns and rural
places are on the verge of becoming unaffordable without action
by Congress.
Our bipartisan Rural Housing Service bill would address
that. And I'm so grateful for Senator Lummis for her
cosponsorship of that legislation. That would help to preserve
about 9,000 of these affordable units just in Minnesota, where
the average tenant income is only about $17,000 a year.
So today in this hearing, I am looking forward to hearing
about the ways that Pennsylvania has worked to keep up older
homes that are in need of repairs. And I believe that the
people who know best how to do this are going to be those that
are closest to the work. So I know that all of you on this
panel will have some really good lessons to share with us.
In addition, I'm interested in hearing about how some home
modifications have helped seniors to live in their homes as
they age in place. After all, if the installation of a ramp or
a lift or an accessible shower can help keep a senior stay
independent, then that allows them to lead the life that they
choose, and helps also to save taxpayer dollars when compared
to the cost of nursing home care, just as one example.
So I'm hoping that we can learn a lot today on this
hearing. I'm grateful for all of you being here, and I
particularly appreciate Senator Lummis's partnership on this
hearing. Senator Lummis, you are recognized for your opening
statement.
OPENING STATEMENT OF SENATOR CYNTHIA M. LUMMIS
Senator Lummis. Thank you, Madam Chairman. We've been
talking a lot in this Committee about the need for new homes.
But today we're really going to focus on the challenges of
ensuring the housing stock we do have remains safe and in use.
To catch up and meet the needs in Wyoming, we'll need to
build somewhere between 20 and 38,000 housing units this
decade. And in Wyoming, that's a lot, because we're the
smallest population in the Nation, as you know, and it goes up
every time an existing house falls into disrepair and becomes
uninhabitable.
Home preservation is particularly a problem in rural areas,
where houses tend to be older and more likely to need major
repairs are abandoned. You know, I moved back into the house I
grew up in and on the ranch, and the foundation and the
basement are made of cinder block.
And so getting that those French drains set up, and all of
the exterior work that needed to be done to protect the
basement from water leakage, was extremely expensive for me.
And you know, I've got nothing to show for it because it's all
the kind of expense that is hidden from public view.
Our rural homeowners work hard to achieve the American
dream, and they're more likely to own their own homes outright.
But inflation has made things much more expensive lately, and
home repairs and construction costs have risen, just have gone
up dramatically.
So when a major repair is needed, rural homeowners are
often unable to obtain the mortgage or home equity line of
credit that could fund these projects. Banks and appraisers can
be in short supply in rural areas. Heaven knows, I know that
firsthand. It's hard to bring an electrician or roofer to your
home to make repairs. They're hard to find.
When these properties are abandoned by their owners, that's
often the end. There's no economic incentive to rehabilitate
the homes, and they often aren't replaced either. Right now,
I'm trying to repair the little bunk house on our ranch. We
think it was the first home to proof up a homestead in Wyoming.
It has hand-hewn logs on the inside.
We've moved it twice. It is--now it's covered with
concrete, and it's in desperate need of repair. And I'm just
starting to repair it. There's no way the cost of repairing
would justify the cost of doing it, because it's so tiny. This
is a labor of love. This is not a labor of good economic sense,
and that's true on a lot of rural farms and ranches.
So when the properties are abandoned by those owners,
that's often the end. They're not usually replaced.
So despite the housing shortage, building new homes in a
rural area, especially at a price that's affordable to a
working family, is just not feasible. Rates are high, and to
cover costs means that developers either add more square
footage or sell for higher cost per square foot.
When it comes to affordable housing, Congress needs to
consider the burden of regulation and what we could be doing
better. And that's true of local governments as well. Local
governments place a tremendous burden on affordable housing
with regulations.
We know that the high cost of regulations have limited the
construction of new homes, but I'd also like to hear today
about how we're limiting access of repairs, and why existing
programs haven't helped as many families as they could.
So here's an example. Building codes change over time as
building materials and construction techniques evolve. We don't
require a home that renovates their kitchen to install
sprinklers or widened doorways in other parts of the house, but
that can be a requirement when HOME Investment Partnership
Program funds are used. Burdens like this limit the number of
families that can be helped by these programs.
So I'd like to talk today about what changes we need to
make, so the money the Federal Government spends on houses goes
to support the broadest number of families, and is spent
efficiently and responsibly. I appreciate the work of Senator
Smith and Rounds on the Rural Housing Service Reform Act, and
I've partnered with Senator Fetterman on the Whole Homes Repair
Act. And I think both of these are small efforts that really
will help.
But it took decades for our housing challenges to evolve,
and fixing them is going to take very different approaches, and
different approaches in different parts of the country. So I
want to thank our witnesses for being here today, and I look
forward to hearing your solutions to preserve the housing stock
we already have, as we work to fix the affordable housing
shortage.
And Madam Chairman, I yield back.
Chair Smith. Thank you so much, Senator Lummis.
So for witnesses, we're going to now go to witness
introductions, and I will turn to Senator Fetterman to
introduce Jesse Ergott. And then I will introduce Ms. Wolff,
and then Senator Lummis will introduce our last witness.
Senator Fetterman.
Senator Fetterman. All right. And thank you to the
Chairwoman from Minnesota and my colleague from Wyoming.
Today, the witness is Jesse Ergott, and he is the president
and CEO of NeighborWorks Northeastern Pennsylvania. This
organization is dedicated to creating stable, vibrant
communities by providing critical housing assistance, financial
guidance, and commuting development services.
A committed advocate, Mr. Ergott has been active on
multiple local, State, and national boards, and cofounding
NeighborWorks Association of Pennsylvania, and on the National
NeighborWorks Association board.
During Mr. Ergott's 16-year tenure in NEPA, he has helped
launch their Aging in Place program, numerous blight reduction
efforts, and their administration of the Whole Homes Repairs
Program, is in Lackawanna and Waynes Counties in my home State.
NeighborWorks NEPA's focus is working with communities to
ensure access to quality homes, which has a positive effect on
neighborhood, community, and region. I'm proud to have him here
today, and I look forward to hearing his testimony.
And I also want again the opportunity to shout out my
colleague to Wyoming to co-supporting this. And I really wanted
to talk about what we're really here today. You know, we really
have a crisis here in Pennsylvania, and we need a very kind of
crisis-level kinds of response.
And I really want to discuss that the genesis of this, the
whole home bill came from my home State, Pennsylvania, and that
was actually championed by my former colleague in the
Pennsylvania Senate. His name's Senator Saval, outside of
Philadelphia. And on the political side, it's safe to say that
Senator Saval is fairly, fairly left. Is that accurate, Mr.
Ergott?
[Laughter.]
Senator Fetterman. Yeah. And yet, generously, yeah. But
yet, even some of the most conservative members of the
Pennsylvania Senate all understood and realized the value in
this, and they signed on that. And truthfully, that was
actually remarkable, particularly as Senator Saval was a first-
term senator as well.
And I guess that really illuminates just how this is a red-
county, this is a blue-county kind of an issue, and we have a
housing crisis regardless of where you are, and this is a very
smart way in order to target and allow people to maintain in
their homes and remain in dignity as well.
So I am grateful to be here to have that conversation, and
I turn that over to Mr. Ergott.
Question?
Chair Smith. Senator Fetterman, we're going to complete the
witness introductions, and then we'll go to our testimony.
Thank you very much.
Next, I'd like to introduce Ms. Robin Davey Wolff, who is
the senior director for rural communities at Enterprise
Community Partners, where she leads their housing and economic
development strategies, including the provision of direct
technical assistance to nonprofit organizations, Government
agencies, and Tribal communities across the Nation.
Prior to joining Enterprise, Ms. Wolff served as the deputy
director of Community Resources and Housing Development
Corporation, a nonprofit housing developer and service provider
with an extensive rural portfolio.
She also has worked on the creation of the Colorado Housing
Finance Authority Developers Guide and the Native Housing
Developers Guide.
Ms. Wolff resides in Denver and holds a B.S. in corporate
corporate communication from the University of Texas, Austin,
and an M.A. in global finance, trade, and economic interchange
from the University of Denver's Joseph Korbel School of
International Studies.
And I'll turn now to Senator Lummis for the final
introduction.
Senator Lummis. Thank you, Chairwoman Smith.
I'm pleased to introduce Christopher Volzke, deputy
executive director of the Wyoming Community Development
Authority. He currently acts as the chief operating officer for
the Authority, with a focus on internal operations, program
development, and strategic planning for Wyoming housing policy.
He's a fantastic representative of Wyoming with a deep
family history in farming and ranching, so he's the right
person to be here from Wyoming today.
I'm so pleased you can join us, Chris, and I look forward
to hearing your remarks.
Madam Chairman, I yield back.
Chair Smith. Thank you so much.
We will now turn to our witnesses for their opening
statements. You each--ask each of you to keep your testimony to
about 5 minutes. There's a clock in front of you to remind you
of how much time you have left.
And we'll start with Mr. Ergott. Thank you very much.
STATEMENT OF JESSE ERGOTT, PRESIDENT AND CEO, NEIGHBORWORKS
NORTHEASTERN PENNSYLVANIA
Mr. Ergott. Well, thank you, Chairwoman Smith, Ranking
Member Lummis, Senator Fetterman, and Members of the
Subcommittee for the opportunity to testify this morning on the
challenges our Nation faces with preserving our housing stock.
My name is Jesse Ergott, and I have the privilege of serving as
the president and CEO of NeighborWorks Northeastern
Pennsylvania, headquartered in the city of Scranton.
NeighborWorks Northeastern Pennsylvania was founded over 40
years ago, specifically to assist modest-income families who
were finding it difficult to obtain financing for home repairs
and improvements.
Now, over four decades later, we serve our neighbors across
the region in multiple ways, including home ownership
assistance, foreclosure prevention services, comprehensive
community development initiatives, aging-in-place programming,
and critical home repairs. We've repaired or approved over
1,600 homes to date and have also helped to facilitate numerous
community improvement projects addressing blight and neglect in
our neighborhoods.
All this work has been deeply rooted in our core
organizational belief that home is where it all starts. We
believe that having a safe, dignified, and stable place to live
leads to better health, more financial opportunity, better
educational outcomes, and other real benefits for individuals,
families, and our community. We've been supported in this work
as a longstanding chartered organization in the National
NeighborWorks Network and as a proud member of the National
NeighborWorks Association.
The current housing challenges facing our Nation touch all
types of communities, urban, suburban, and rural areas alike,
and span all income levels. The lack of available housing to
meet an individual's specific needs can have a ripple effect
that negatively impacts regional economies, hampers
revitalization efforts by local government, and can ultimately
lead to economic stagnation and the deterioration of our
neighborhoods.
While there are many different concurrent strategies needed
to address these challenges, one key element must be the
modernization and preservation of as much of our housing as
possible. Implementing coordinated and scaled efforts to
preserve our existing housing stock is becoming more important
than ever. Deteriorating housing stock can be a root cause of
other types of community instability and housing insecurity.
My testimony speaks to creative efforts taking place in the
Commonwealth of Pennsylvania, including the Pennsylvania Whole
Home Repairs Program, to invest in the preservation of our
existing housing stock, while also addressing the individual
needs of our neighbors. With one of the oldest housing stocks
in the country, combined with an aging population that also
marks us as one of the most elderly States, Pennsylvania can be
a fertile testing ground for creative policies and solutions
that will benefit the rest of the Nation.
As homes age and deteriorate, preservation of housing in
many communities becomes even more significant due to the
nature of the housing itself. Although aging, many homes are
irreplaceable, meaning if the units were lost, they either
could not or would not be replaced because of a lack of
economic incentive to build new single-family units in those
communities. Likewise, when there's extensive deferred
maintenance, there can be little to no economic incentive for
investors to purchase these homes in many markets.
Pennsylvania's Whole Home Repairs Program has been a
critical new tool in our State and region to address this
challenge. While other State and Federal resources have been
available for decades to address housing preservation, we have
found many to be very challenging to use on the front lines.
These programs tend to be broad in their potential uses, but
burdensome in implementation and difficult to leverage with
other resources.
By contrast, the Whole Home Repairs Program is specific in
its intended use and very flexible in its practical
implementation. We currently manage approximately $1.2 million
in whole-home repair funding for two counties in our footprint,
which has helped us to leverage and stretch another $3.5
million in Federal, State, and private investment into our
aging-in-place program and home repair work.
This ability to leverage, layer, and unlock other funds has
been critical. For example, our partners at a local Community
Action Agency have used the funds to great effect to address a
large deferral list for their weatherization program. And at
NeighborWorks, we can layer whole-home repairs funding with
other Federal resources, including HUD's Older Adult Home
Modification Program and funding from the Administration for
Community Living.
The flexibility of this program also extends to the way it
is administered, which can be tailored at the municipal and
county levels to meet the most pressing needs of local
communities and residents.
Advancing programs like the Whole Home Repairs Act will be
an important next step in providing scaled investment and
preserving our Nation's housing stock.
Thank you again for the opportunity to testify today on
this important topic. I look forward to answering any questions
the Subcommittee may have. Thank you.
Chair Smith. Thank you.
Thank you so much, Mr. Ergott.
We'll now turn to Robin Davey Wolff. Thank you.
STATEMENT OF ROBIN DAVEY WOLFF, SENIOR DIRECTOR FOR RURAL
COMMUNITIES AT ENTERPRISE COMMUNITY
PARTNERS
Ms. Wolff. Chair Smith, Ranking Member Lummis, and Members
of this Subcommittee, thank you so much for the opportunity to
speak with you today. My name is Robin Davey Wolff, and I'm the
senior director of rural communities at Enterprise Community
Partners, where I work to lift up and support the needs of
rural housing developers, providers, and residents across the
country.
Before joining Enterprise, I worked as an affordable-
housing developer, serving rural communities across the State
of Colorado with programs for renters and homeowners. It was
through this work I first became familiar with unique
challenges of preserving and developing affordable housing in
rural communities, places where we often struggle to meet
economies of scale, and where resources developed are more
scarce.
Communities across the country are losing affordable
housing supply faster than new homes can be developed. Targeted
resources, programs, and policies are critical to maintain the
existing affordability of multifamily properties, because once
affordable units are lost, they are difficult and cost-
prohibitive to replace.
At Enterprise, my team and I focus a great deal on the
preservation of USDA Section 515 housing stock, supporting
affordable housing providers across the country as they work to
preserve homes at great risk of losing affordability.
This program, which houses approximately 400,000 low-income
rural renters, is projected to lose up to 137,000 units over
the next 10 years. Much of this housing was developed 50 years
ago, is in danger of losing its rental assistance, and needs
significant repair.
Each week, my team and I receive new inquiries from
nonprofits, and housing authorities, and local leaders who want
to preserve the 515 properties in their communities, but who
are struggling to understand the best way to recapitalize the
housing, and to fund the needed repairs and improvements.
I want to thank the Subcommittee and the full Banking
Committee for the work that has been done to address housing
preservation, including the Whole Home Repairs Act introduced
by Senators Fetterman and Lummis, which is being discussed
today.
I also want to thank Senator Smith and Rounds for their
work on the Rural Housing Service Reform Act, which would give
property owners of 515 and prospective buyers of those
properties the flexibility to keep this housing affordable and
in good condition.
That said, additional resources still must be leveraged to
preserve all units at risk. And the need for affordability
preservation extends beyond currently subsidized housing stock.
In rural and urban communities alike, market pressures and
disinvestment pose significant threats to existing affordable
housing.
As I discuss in my written testimony, a full ecosystem of
funding types is needed. We must expand and modernize programs
that are already in place, such as the low income housing tax
credit, the home program, and the Indian Housing Block Grant
program.
There are also newly proposed programs that would be
helpful in preserving and expanding the housing supply.
Chairman Brown has introduced several pieces of legislation
that would further facilitate housing preservation, the Housing
Supply Fund Act, the Affordable Housing Preservation and
Protection Act, and the Yes in God's Backyard Act, which
promotes faith-based development.
We are rapidly losing affordable units, and there is a
profound need for directed tools, resources, and policies to
mitigate and prevent the loss. Affordable housing helps
households avoid housing cost burden and contributes to housing
stability, creating positive outcomes that can last for
generations.
Simply put, we cannot build our way out of our housing
crisis. Preservation of affordable housing is necessary to
address the critical lack of affordable housing supply.
Preservation is faster and more cost effective than new
construction. It also provides housing stability and prevents
displacement of existing residents, homeowners and renters
alike.
For this reason, the inclusion of home ownership and home
repair in the preservation and conversation is very important
and appreciated. The need for single-family home repair is
especially true in rural communities, where we see higher rates
of home ownership and homes in need of significant repair.
Housing preservation is a critical component of
Enterprise's strategy to connect low income households to
opportunity. From our home repair programs in Detroit and
Cleveland, to our rural multifamily preservation work, and our
housing resilience programs, Enterprise works with nonprofits,
developers, local governments, landlords, and homeowners to
improve financial health, resiliency, and sustainability of
homes.
I am appreciative of the opportunity to share my
experiences and perspectives today. On behalf of Enterprise, I
would like to thank the Subcommittee, especially Chair Smith
and Ranking Member Lummis, for their leadership on rural and
Tribal housing issues, as well as their bipartisan cooperation
on issues that affect so many Americans in every corner of the
country.
I hope the conversations we have today will bring more
attention to the needs surrounding housing preservation and
home repair, and that together we can make home and community
places of pride, power, and belonging for all.
Chair Smith. Thank you so much for your testimony.
And now we'll turn to Mr. Volzke.
STATEMENT OF CHRISTOPHER VOLZKE, DEPUTY EXECUTIVE DIRECTOR,
WYOMING COMMUNITY DEVELOPMENT
AUTHORITY
Mr. Volzke. Chair Smith, Ranking Member Lummis, Members of
the Committee, thank you for the opportunity to testify today
about the challenges in preserving the U.S. housing stock. I'm
Christopher Volzke, deputy executive director of the Wyoming
Community Development Authority.
Since 1975, the WCDA has been championing affordable
housing in Wyoming. WCDA was created as an instrumentality of
the State, though we receive no State funding for our programs.
I'm grateful for the opportunity to speak about housing and
specifically from a rural housing lens.
My written testimony, which your offices have a copy of,
includes more specifics regarding inventory, data elements,
programmatic examples, and legislative consideration. However,
due to time constraints, I'll focus my verbal testimony on
Wyoming and rural America in general. That's more of my
wheelhouse anyway.
I've not only spent most of my career in the housing space,
but I've lived exclusively in rural States, South Dakota,
southwest Minnesota, and Wyoming. I'm from a fifth-generation
farming and ranching family, and had a high school graduating
class of sixteen. You can say I've not only worked in rural
housing, I've lived it.
Our Nation's stock for ownership housing is aging. As homes
get older, they require necessary repairs and upgrades to
remain habitable. Unfortunately, many working families have
trouble accessing affordable financing to pay for such
projects. I applaud Ranking Member Lummis for acting to tackle
this issue when you introduced with Senator Fetterman the Whole
Homes Repair Act, which would establish a repair grant program
for low- and moderate-income homeowners.
One of the most important Federal resources we have for
rental preservation is the Home Investment Partnerships
program. This is why I want to thank Senator Cortez Masto for
introducing the Home Investment Partnerships Program
Reauthorization and Improvement Act, which would make a number
of changes to HOME.
Moving to a more local perspective, the state of housing in
Wyoming is complex, it's expensive, and it's lacking. The WCDA
recently published a statewide housing needs assessment. It's a
lengthy report, 300 pages, which I feel further illustrates the
point that this is not a problem we solve with one silver
bullet. Rather, it's a complex set of dials, each needing to be
adjusted, so we can collectively bring about change.
The median household income in Wyoming cannot afford the
median home value in every county. The situation is no better
if you rent; 38 percent are cost-burdened per HUD, meaning that
in many cases, renters are spending close to half of their net
pay on housing.
From a demographic perspective, the population of Wyoming
is aging. Our fastest growing age group is 65-plus and expected
to increase another 40 percent by 2030.
Not only is our population aging, but housing stock in
Wyoming includes 32 percent of inventory built over 50 years
ago. That's pre-1970; and 66 percent built prior to 1990. They
need new roofs, furnaces, and windows.
Additionally, the needs of the owner may have changed, and
conditions for accessibility and a needed upgrade for
homeowners to age in place.
As we transition to the discussion around rural capacity,
especially those isolated from major cities, they face
difficulties accessing the technical expertise and incur high
costs for material transport, making it challenging to attract
developers due to their small-scale housing needs.
A city manager, a clerk, even a mayor can be part-time
positions while they work their full-time career outside of
city administration. And this creates a barrier for rural
municipalities to fully participate in the process when
programs become available.
I also touch on community banking needs to assist rural
populations in my written testimony. I mentioned the Whole
Homes Repair act earlier. I don't need to look any farther than
central Wyoming to imagine the impact. Mills, Wyoming is one of
the top 20 cities in Wyoming in terms of population. The city
has a bit over 4,000 residents. And yes, you heard that
correctly; 4,000 residents will get you in the top 20 in
Wyoming. We're talking about rural Wyoming, after all.
At the same time, Mills is in the bottom 20 percent for
income. The median household income is barely above 44,000. And
that's household, that's not individual. The city has an old
housing stock, with 69 percent of its households built prior to
1990. We must invest in transforming the housing stock we have,
rather than losing it to obsolescence.
In rural America, we pride ourselves in pulling ourselves
up by our bootstraps and lending a helping hand when needed. We
look to embrace the challenges posed by our aging single-family
housing stock and solving the rental affordability for the
future.
I'd be remiss if I didn't take a few moments to thank our
allies in Wyoming and here in DC for your willingness to engage
in this conversation and partner on solutions.
I would also like to specifically thank my team back at the
WCDA. You show up every day. You put in the hard work, work
that makes real life impacts for your fellow Wyomingites. Be
proud and thank you.
Finally, I'd like to close with a quote from a recent post
of Governor Gordon's team. ``The world needs more cowboys and
cowgirls. In Wyoming, we need more housing for our cowboys and
cowgirls.''
[Laughter.]
Mr. Volzke. Thank you, and I look forward to the
conversation.
Chair Smith. Thank you very much.
Thanks to all of you for your excellent testimony.
We will now turn to a round of questions from my
colleagues, and I will begin with Senator Fetterman.
Senator Fetterman. Oh, I'd defer to the--either one,
please.
[Laughter.]
Chair Smith. OK. All right, well, then, in that case, I'd
be happy to start.
Thank you again very much for your testimony.
And I'd like to--I'm going to start with you, Mr. Ergott. A
couple of years ago, HUD secretary Marcia Fudge came to
Minneapolis, and we had an opportunity to visit with some
homeowners in the Older Adult Home Modification program. It was
really great to see firsthand how a little bit of assistance
making that house that they had lived in for years and years
and years work for them as they were in their sixties and
seventies. Just what a difference it made in their lives. Just
simple modifications, like grab bars, or a ramp to make a
shower accessible were just a huge change.
So could you talk a little bit about the intent of this
program, how it fits with other things that your organization
does, and what in particular you think Congress could do to
make this grant funding work better for communities and
families.
Mr. Ergott. Thank you for your question. The Older Adult
Home Modification program has really been a significant
opportunity for organizations and communities who are seeking
to help seniors age-in-place safely and with dignity. As you
mentioned, things like grab bars, accessible bathrooms,
wheelchair ramps, really can be a game-changer in keeping
seniors in their homes for as long as they want to live there.
Some of the challenges with the programs are sometimes its
limit, you know, funding. So if you can only do about $5,000
worth of modifications with that----
Chair Smith. Mm-hmm.
Mr. Ergott. ----it can take care of a lot of great smaller
needs, like we mentioned. But, you know, if you're modifying a
bathroom or adding a grab bar, and the roof is leaking----
Chair Smith. Mm-hmm.
Mr. Ergott. ----it still doesn't stabilize that older adult
in their home, which is why programs like the Whole Home
Repairs Act can provide that kind of additional leverage for
those funds.
Chair Smith. I see what you're saying. So if it's $5,000,
and you got to come up with $15,000, and how do you come up
with the other 10? And how do you see those two programs
working together, if we were--you know, when we're successful
in passing Senator Fetterman and Senator Lummis' bill?
Mr. Ergott. Well, we can attest that they work very well
together, you know, when we have, for example, a home that
needs that $15,000 worth of various repairs. So it might need
some kind of accessibility improvements; it might need a new
furnace; you know, it might even need a wheelchair ramp. You
can really be creative with how you layer those funds together
from those two programs and others, frankly, to kind of
accomplish the whole need of that home, to keep that homeowner
in their home safely and with dignity.
Chair Smith. Thank you very much.
Ms. Wolff, I'd like to ask you a bit about Tribal housing.
Senator Lummis and I have both made Tribal housing a real
priority in this Subcommittee. And we also know that there are
significant challenges with housing stock on Tribal lands,
where we see properties that are four times more likely to see
have major physical deficiencies, like even things as basic as
plumbing and heating just not working at all. So could you talk
a bit about those challenges and what you think we should be
doing to address that uniquely in Indian country?
Ms. Wolff. Certainly. I think Enterprise is really
committed to serving Tribal Nations. You have met with my
colleague Tonya Plummer, also, who talks a lot about this and
is an enrolled Tribal member herself, and who gives our team
tremendous perspective and cultural awareness as we enter into
working on Tribal housing.
Really, the biggest challenges with getting Federal
resources out to Tribal communities, partly you also, many of
them are coming through State agencies. And there are a lot of
requirements related to how those dollars go out, and related
to things on the back end, such as recapture. They are
sometimes in conflict with Tribal sovereignty, to be frank. And
I think----
Chair Smith. I'm sorry to interrupt, but----
Ms. Wolff. Yeah.
Chair Smith. ----do you see those as primarily Federal law
challenges, or State law challenges, or a mix?
Ms. Wolff. I think it's--I really do think it's a mix. I
think it's partly how States deploy Federal dollars.
Chair Smith. Right.
Ms. Wolff. And how they underwrite those dollars. What
additional requirements, as Senator Lummis was talking about,
sort of additional requirements that come with dollars. States
can tack on additional requirements if you're going to use
their HOME dollars, for example.
Also remember, Tribal Nations are generally rural
communities, so they're non-entitlement communities. They're
not entitlement communities de facto.
Chair Smith. Right.
Ms. Wolff. And so they have to work through additional
agencies in order to access these dollars.
The way that that's not true is through, like, programs
like the Indian Housing Block Grant, which is a tremendous
program. But we've been talking about how a suite of resources
is necessary to layer and leverage together. And when you're
focused on only one set of dollars, then Tribal homes are not
getting access to that full capital stack.
Chair Smith. Right.
Ms. Wolff. And so I think this has really been the
challenge that we're facing. I'm excited to have other
resources come to the table. The real key is flexibility with
how those resources are deployed, and that those resources are
sensitive to Tribal sovereignty.
Chair Smith. I really appreciate that point very much. And
I also just have to acknowledge that we have been waiting to
reauthorize NAHASDA for--what, since 2013?
Ms. Wolff. Yes.
Chair Smith. And so a source of great frustration for me
and others, I know, so.
Well, lots to talk about, but I will turn now to Senator
Lummis.
Senator Lummis. Thank you, Chairwoman.
This is a question for all witnesses. Some Federal programs
like CDBG or NAHASDA, which is that Federal block grant program
for Tribal housing, can be used for repairs and rehab, but in
practice, they're not. So can you talk about why in practice
it's hard to spend CDBG or HOME funds on rehabilitation and
repairs?
Mr. Ergott, would you like to begin?
Mr. Ergott. Sure. No, I think that's a very relevant
question to all the challenges that we see locally,
specifically in the HOME program, which we administered for the
city of Scranton for many years. Some of the challenges we are
running into is that when you use a HOME dollar to start to
repair a home, you have to take care of all of the necessary
issues in that home, no matter if it's $5,000 or $50,000.
And the challenge is, with matching and leveraging those
dollars is very difficult. And so you're stuck with trying to
put a significant amount of dollars--and when you look at our
homes in northeastern Pennsylvania, there are many needs, and
it's rare that you have a small price tag on that total
renovation cost. And so you can use a lot of funds on very few
properties.
And so it's one of the reasons that we started to back away
from using that program, frankly. And I know in Pennsylvania,
only about 25 percent of HOME funds are actually used for home
repairs. That's, you know, that's the stat we have from the
State. And that just kind of speaks to the fact that they're
just difficult to implement and layer with other types of
funding.
Senator Lummis. Thank you.
Ms. Davey Wolff.
Ms. Wolff. Yeah, I think this is a particularly interesting
question for rural communities, because they do not get direct
entitlement allocations of HOME and CDBG. So in that effect,
they are also just harder to access. Again, you're having to
navigate another--it depends on HOME or CDBG, the process for
navigating that. There's a tremendous amount of administrative
hoops you have to jump through in order to access those dollars
for rural communities.
I also want to point out that they're really just
critically underfunded resources. And so there's a lot of
different demands for those funds. CDBG has been flat-funded
since fiscal year 2022, and HOME has received a $250 million
cut in FY24. So I think that part of it is just, there's not
enough of those funds to leverage in, and home repair doesn't
end up being really the priority for that.
We do see HOME dollars going into multifamily rehab often,
and it does work. It can work in communities that have USDA
housing stock. HOME can be part of that rehabilitation and
repair. Again, sometimes there's additional hoops that need to
be jumped through. Sometimes there's misunderstanding of
whether or not you can use HUD dollars in a USDA program. They
are allowed to be leveraged, but often that's also where the
technical assistance comes in about helping those agencies that
are on the ground to navigate how to layer those resources
together.
Senator Lummis. Do you ever see something like Habitat for
Humanity go in on some of these projects? And does that help
you utilize HOME funds, or is it irrelevant?
Ms. Wolff. Sure. So I live in Denver, Colorado. We have a
very strong Habitat affiliate in Denver, and Habitat uses a lot
of Federal resources for their programs and leverages them into
home repair and to home ownership. And it does help those
dollars stretch, because Habitat has a tremendous amount of
fundraised resources as well. And so it's a significant source
of leverage for those programs.
Senator Lummis. Thank you. Same question, same last two
questions for you, Christopher, but I want to point out
something interesting to you. Fort Fetterman in Wyoming is a
very famous fort involved in the Bozeman Trail, a very historic
fort, it turns out in conversation with Senator Fetterman, he
is related to Wyoming's Fort Fetterman.
Mr. Volzke. Fantastic.
Senator Lummis. Yeah. So very historic note.
[Laughter.]
Senator Lummis. There you go.
Anyway, Mr. Volzke.
Mr. Volzke. Thank you for the question. So I'm going to
focus mainly on CDBG. We've had some testimony here on HOME
already.
So CDBG, I like to call it a little bit of a sticky widget
for the municipalities. It's a great program. We can do very
flexible as far as what we can usually do.
At the same time, it can be complicated for small
municipalities to do correctly. You know, as the State
allocating agency for CDBG, we only have one entitlement
community at Cheyenne. Otherwise, everything else has to go
through the WCDA.
What you normally find in these communities is they want to
deploy those funds, because it's a limited resource for larger-
community impacts. We've seen a lot of water and sewer. And I
think, you know, some of these people may think, ``What's water
and sewer? Isn't that already set up?''
I mean, I think we have to remember, like the rural nature
of Wyoming, we have the population smaller than what's in
interior DC We're less than 600,000 people, yet we have the
square footage or mileage, so to say, of the size of Germany.
So you've got, you have to--infrastructures--infrastructure
dollars fairly far, they're pocketed. And for municipality to
bite off and do a CDBG program that's going to be a home-repair
style, it's an administrative burden. The only community I'm
aware that has actually tried that and accomplished it, this
was years ago, was Casper. And they've since backed away from
that. And we're doing other programs with Casper, but more on
a, not on a home repair.
So I just don't know if CDBG and home repairs are a good
match. Hence the reason the Whole Home Repairs Act seems to be
a better deployment of those dollars.
In regards to your second question on Habitat for Humanity,
you know, we do deploy these funds and CDBG to units of local
government. So local government would have to sponsor, say,
this, Habitat for Humanity to do that. We haven't necessarily
seen that happen here in Wyoming. We'd be happy to see, you
know, do that if there's the ability to do that. But once
again, it kind of comes down to a capacity thing, and with the
amount of municipalities coming in for the money, so.
Senator Lummis. Thanks, Madam Chairwoman.
Chair Smith. Thank you so much.
Senator Tester.
Senator Tester. I want to thank the Chair and Ranking
Member for having this hearing. It's very, very important.
I also want to thank the panelists for being here.
Sometimes we have hearings, and the panelists are great, but
they're not panelists that actually have solutions. I think all
three of you have solutions, and I want to commend both the
Chairman and the Ranking Member for having the folks here that
are here.
Look, housing is a big issue everywhere. It's a big issue
in Montana, communities of all sizes. In many areas, there
aren't houses available, and if there are houses available,
nobody can afford to buy them that makes a reasonable wage.
In some of our more rural communities, housing is not fit
to live in, unless it's rehabbed.
It's the first thing I hear about when I talk to Main
Street businesses. We just had a sawmill shut down in Montana,
and this is just one example of many. And the reason they shut
down, lack of workforce; lack of housing, even if they had the
workforce.
So if we're going to have an economy and communities that
are vibrant, both of them, I think we need to get the Rural
Housing Service Reform Act passed, something that Senator Smith
and Senator Rounds both have been working on, because our rural
communities have significant housing needs.
I think our urban communities do, too. But the bottom line
is if we're going to get housing on track in rural America,
this is one step in the right direction.
So Ms. Wolff, could you just let me know as concisely as
you can, more concisely than I just said, how this bill will
make sure that we preserve housing in rural areas ,so that
those communities can continue to grow.
Ms. Wolff. Sure. Thank you, Senator Tester, for your
question.
Enterprise supports the Rural Housing Service Reform Act,
which is led by Senators Smith and Rounds and is supported by
the majority of the Committee. This legislation is going to
make long overdue updates to RHS programs that are really
needed, including allowing Section 521 rental assistance to
continue at properties where the USDA mortgage expires.
Right now, that's a big concern, because we have have a tie
of that rental assistance to the mortgage on the property. We
have many mortgages; the peak starts in 2028, but we are
already right now on the cusp of losing a tremendous amount of
housing to just mortgage maturity.
And with that housing stock, we are also going to lose
rental assistance. So I'm really excited about the
conversations around decoupling that are included.
It's also going to help leverage--tack housing credits into
debt to recapitalize the properties, while ensuring that the
tenants can continue to be stably housed. It allows for
different resources to come in. This is super important, since
there are around 400,000 units of Section 515 housing
remaining.
On the single-family side, the bill would also build off
the successes using the Section 502 direct lending program for
native communities, which we're very much in support of as
well, and make important updates to USDA's home repair loan
limits, which I think could really be leveraged by the Whole
Home Repairs Act and other sources such as that.
So all really important to have that RHS Reform Act put in
place.
Senator Tester. Thank you.
Mr. Ergott, manufactured homes have long been a widely
utilized option for affordability in Montana.
Recent years, we've seen out-of-State investors come in and
buy manufactured-home communities. They start with adding fees,
and then they jack up rent, and all of a sudden those
affordable-housing options aren't so affordable anymore. And
quite honestly, the people they're putting at risk don't have a
lot of options, period.
So what tools do we have to keep the big national investors
from buying up, whether it be in Montana or any other State,
buying up these manufactured-home communities, eliminating the
only affordable option for many of the hardworking families,
and for Montana seniors. What can we do about that?
Mr. Ergott. So thank you, Senator Tester. We, in
northeastern Pennsylvania, it's not one of our primary areas of
expertise or work, but what I do know is that many across our
network, in the National Labor Works Network, are helping to
try to organize local mobile-home parks, manufactured-home
parks, to purchase ownership themselves. And so finding ways, I
think, to empower the folks who live in those homes, and enable
them to find their own local solutions to ownership, is a way
to control some of that before the out-of-town investors come
in.
Senator Tester. Thank you.
Mr. Volzke, I do not have a question for you at this moment
in time, but I appreciate you being here. Your description of
what's going on in Wyoming versus Washington, DC, is a pretty
damn good description of why one-size-fits-all policies don't
work in Washington, DC. Because the distance issue in a State
like Wyoming, our good neighbor to the south, is just a killer
in rural America. So if we don't take that into account, it
becomes a problem. So thank you for being here.
Chair Smith. Thank you Senator Tester.
Senator Fetterman.
Senator Fetterman. Thank you. So Mr. Volzke, strange as it
might sound, but I've spent a lot of time in Wyoming, and I
know that a town about 4,000 size is meaningful and a big deal
in Wyoming. In fact, I was a small--I was a mayor of a town of
roughly that size as well. So I understand that.
So let me ask you a question. Do you have leaky roofs in
Wyoming?
Mr. Volzke. Yes, I'd say there's leaky roofs across the
State.
Senator Fetterman. Do furnaces break down?
Mr. Volzke. Unfortunately, the mechanics also break down in
Wyoming, correct.
Senator Fetterman. Oh, yeah. Well; why, we need to confirm.
Mr. Ergott, do roofs leak in Pennsylvania?
Mr. Ergott. Senator, many of the roofs leak in
Pennsylvania, yeah.
Senator Fetterman. And furnaces? Do they break down?
Mr. Ergott. Often. Yeah.
Senator Fetterman. Hmm. Well, that's--and in my community
and in western Pennsylvania, they do, and they do. And this is
the kind of a bill that it can address to those kinds of a
thing.
It's also that once a roof is breached, and now the home is
allowed to deteriorate, and become unhabitable, and then that
becomes abandoned, and that creates all kinds of other costs as
well. And it's not very cheap to actually demolish them.
And that's a significant issue in my community is right
now. For every abandoned home, that becomes a 20,000 to 25,000
IOU to demolish, and that's one less home for someone to live
in. And this is the kind of bill that can address that with the
kind of flexibilities of that.
Have any of you, when you are providing some kind of
service, did you ever ask them, ``Who are you voting for?'' Or
``What are your political beliefs are?''
Mr. Ergott. No. No.
Senator Fetterman. So it's really agnostic to politics or
red or blue counties. It's just something for all of us, for
Americans, that they have these kinds of very common issues,
and it allows them that typically skew more elderly, and they
just want to remain in dignity and this kind of security of
living in their home. Is that accurate? Seems pretty reasonable
as well.
And also when you often deal with the Government, things
can be less inefficient then. But this is the kind of
flexibility that allows those things to directly is all. Is
that accurate?
Mr. Ergott. [Nods.]
Senator Fetterman. Flexibility can be helpful in that.
Right? And it addressed these very specific kinds of a thing.
And it is undeniable that making someone's bathroom more
comfortable or usable means, or bars and things, that's
helpful. But to that point earlier, it's like you can't live
with a better bathroom if you can't heat your house, or it's
leaking, and it may sit there. So this really gets that.
And this also allows that if you are forced to leave your
home, that cannot preserve any kind of wealth or anything as
well.
So this undermines a lot of different things as well. And
this was born in a senator from Pennsylvania in a very, very
blue, liberal, and that was embraced by a very, very
conservative members of my former chamber in Pennsylvania. And
now as politics become more and more, you know, divisive and
everything, it's encouraging to have something like this we
could, hopefully we can come together and acknowledge, that we
want to, you know, we want to serve everyone and allows them to
provide elderly to live in dignity, and to preserve our housing
stock, and remind everybody that, as what my colleague from
Montana pointed out, that we need kind of solutions like that.
So I want to thank all of you on what your works do and how
important that is. Small town, where I live in right now,
regardless of where in this Nation, this is the kind of bill
that can address that and allow people to live in dignity and
to preserve our housing stock in a Nation that is now faced
with a significant housing crisis. So I want to thank you for
coming here and joining us today.
And I turn back to our Chairwoman.
Chair Smith. Thank you so much, Senator Fetterman, and
thanks for your work on this legislation.
I believe that Senator Cortez Masto will be joining us
shortly.
But in the meantime, I'll turn to Senator Lummis, if you
have any additional follow-up questions.
Senator Lummis. Thank you, Madam Chairwoman.
A quick question for Mr. Volzke. We talked earlier about
CDBG and HOME. So now I'd like to turn to CDFIs. What are some
of the reasons that banks and even community-focused lenders
like CDFIs have not been able to provide sufficient financing
for needed repairs and rehab in rural areas?
Mr. Volzke. Thank you for the question, Ranking Member
Lummis. I think it's a very interesting piece of this
particular equation, because you would think, we have a
financing mechanism out there, why can't these people just go
get some loans from their local bank and solve this, right?
The fact of the matter is, you know, banks have a different
profile. They're looking at the credit, and they're looking at
that risk profile, whether that's a national bank or even a
community bank. So they're governed to make sure that the risk
they're putting out there, whether it's a cash-out refi,
whether it's a HELOC, that person has the ability to repay.
Unfortunately, if you've got a 540 FICO and a 45 percent
debt ratio, you may not qualify for any bank financing, but
that doesn't make your leaking roof go away, right? So that's
kind of the impact of the people that we're trying to help
through, say, the Whole Homes Repair Act bill. Right? You're
capturing the folks that don't have access to credit.
Even though folks that do have access to credit, typically,
especially in a rural area, it's going to be more expensive. By
way of example, I know a couple who recently the wife became
wheelchair-bound, and they needed to do some accessibility
modifications to the kitchen and ramps and et cetera. They
needed about $20,000.
They go and do a cash-out refi. Most banks are going to
sell that in the secondary market to Fannie or Freddie. You now
have got to find a appraiser.
The nearest appraiser is a 3-hour round trip.
Senator Lummis. Yeah.
Mr. Volzke. You've got the cost of that coming in, and then
also just the cost of doing that loan, that $20,000 suddenly
became like 23 or $24,000, just for the origination fees on it.
So even if you got the ability to, it can be very costly.
CDFIs? I think in certain States, they're very robust, and
they maybe can be a more nuanced approach. Unfortunately, in
other areas of the country, you have very few CDFIs. I'm only
personally aware of one in the State of Wyoming. There may be
some others that I haven't ran into, but we've only interacted
with one here in Wyoming.
Senator Lummis. Is that the one on the reservation?
Mr. Volzke. It is, yes. Thank you. Yeah, so that's the only
CDFI I am aware of in the entire State of Wyoming.
So that's also a little more nuanced and not going to solve
our statewide problems. So you've kind of got this dual edge
thing of community lending, whether it's accessible and the
cost, and then the CDFI piece doesn't--it's not a one-size-
fits-all.
Senator Lummis. OK. Thank you so much. I note that we've
been joined by our colleagues, Senator Cortez Masto. So I will
yield additional time to her.
Chair Smith. Thank you, Senator Lummis.
Senator Lummis. Thank you, Senator Cortez Masto.
Senator Cortez Masto. Thank you.
And I have to thank both the Chair and Ranking Member for
their continued focus on really addressing affordable housing
needs. So thank you so much. It is an issue in Nevada I've been
working on, to address affordable housing needs.
So Mr. Volzke, let me ask you. This is regarding the HOME
Investment Partnerships Program. I have a piece of legislation
that reauthorizes the legislation. It's S. 3793.
But can you do me a favor? Why is the home program so
important to our ability to invest in affordable housing,
construction, and preservation? Can you touch on that a little
bit?
Mr. Volzke. Yes. Thank you for the question, Senator. For
us, you know, HOME is one of the most-used programs we have for
rental rehabilitation and rental creation. That's primarily how
we use that program in Wyoming. It's got some other
flexibilities that could be used for other items, but to be
quite honest, we've never quite cracked the code on how to do
that for single-family development and rehab.
It's a little scattershot. Other States will use that. Some
States for their single-family piece will use it for
downpayment assistance. We roll that into our mortgage revenue
bonds. We finance those. So we don't want to take HOME dollars
and use them for something that I can solve in a different way.
So really, it's one of the main tools to help create
inventory and rehab inventory that the--otherwise, the private
market isn't doing 50 percent AMI units. So it's a good tool.
Senator Cortez Masto. And that's what I hear in Nevada as
well. And that's why for me, this piece of legislation is so
important, not just in Nevada, but as you identified, in
Wyoming and other communities as well. And I'd hope all of my
colleagues join me in this legislation.
Let me touch on something else as well. It's the Mortgage
Revenue Bond and Mortgage Credit Certificate programs. Again,
this is--there's a piece of legislation that I have focused in
this space.
And again, Mr. Volzke, let me ask you this. How do State
housing finance agencies use the Mortgage Revenue Bond and
Mortgage Credit Certificate to improve middle-class families'
ability to buy homes?
Mr. Volzke. Yeah. So in Wyoming, the Mortgage Revenue Bonds
is really our bread and butter for how we finance what we call
our first-time homebuyer program. And that's, I think, what
most people in Wyoming recognize, and they see the WCDA
acronym, they think first-time home buyers.
Those tax-exempt bonds allow us a lower cost of issuance,
and then we're allowed to pass that savings on to prospective
homebuyers that are trying to buy. It kind of depends on the
market, but a lot of times, especially the rates being higher,
we get actually a better competitive advantage in the tax-
exempt revenue space. So we could be sometimes up to a point
lower. And a point lower on a 30-year mortgage for a first-time
homebuyer can sometimes be the difference between whether they
qualify to buy a home. or whether they're still in the rental
space.
So opening equity and the ability for them to share in
wealth creation.
Senator Cortez Masto. And this is in my legislation. But
why is it essential to increase the Mortgage Revenue Bond and
home improvement loan limit from 15,000 to 50,000?
Mr. Volzke. Yeah. So that's a piece of the legislation that
would allow for rehabilitation work. And it hasn't been
adjusted, from my understanding, in decades, and I think we've
heard plenty of testimony here that $15,000 is most likely not
going to create the necessary rehabilitation pieces; or maybe
it'll address one of the rehabilitation pieces, but not
holistically. So I think it's a more all-in number that allows
a homeowner to properly get their house ready for the next 10
years, 20 years.
Senator Cortez Masto. And thank you. And again, legislation
that actually, Senator Cassidy and I introduced, the Affordable
Housing Bond Enhancement Act, really focuses on all these
issues that we're hearing about. We've heard from our housing
communities. How do we address this? How do we bring affordable
housing?
We know that at the end of the day, putting together
affordable housing is cobbling financing together. It is not
easy. You need people that understand it, but we also need
those programs that we can rely on to help address and bring in
that financing. So that is key for all of us.
I thank you for giving me the opportunity, as I bounce
around between Committee hearings this morning, to come in and
talk about this important issue.
Chair Smith. Thank you, Senator Cortez Masto.
Senator Lummis.
Senator Lummis. You know, this question is for you, Madam
Chairwoman, I'm glad you came. It seems like we're getting good
momentum, good feedback, good validation for these bills, from
a variety of panels and witnesses.
What do you think are the chances that we can put together
sort of a package of housing bills and bring them to the full
Banking Committee, and get a vote, and get these bills moving
before the end of the calendar year? I know we don't have
many--a surprisingly few number of days on the Senate calendar
that are available for things other than, you know, budgets and
the big stuff, but these bills seem to have so much--use case
has been established. The bills have good support. What are the
chances?
Chair Smith. Well, thank you for that, Senator Lummis. And
I agree with you that there are a group of bills that are
defined by being really focused on solutions to problems, and
that are bipartisan. And I know that the Chair is very
interested in moving forward a set of bills that would allow us
to take action. Not only on the Rural Housing Service bill, but
on many of these other bills that have bipartisan support and
that are within the jurisdiction of this Committee.
And so I think all of the Members of this Committee should
give that message to both the Chair and the Ranking Member,
that we think it would be really valuable to do a markup and to
move them forward.
Senator Lummis. Thank you. I will make a point of doing
that with the Ranking Member. I know housing has always been a
high priority of his----
Chair Smith. Yes.
Senator Lummis. ----on this Committee, so I think we're in
a decent position to rattle some cages around here.
Chair Smith. Thank you. I think we could make real headway.
Thank you for sharing that.
Senator Lummis. Thanks very much, Madam Chairwoman.
Chair Smith. Chairwoman, I have just one follow-up
question, and then I think we'll be ready to conclude, unless
any of my colleagues have other questions.
Ms. Wolff, when I was asking you about Tribal housing
issues, you noted that a lack of understanding of Tribal
sovereignty is often a barrier for program implementation, both
at the Federal and the State level. And I wanted you just to
elaborate on that a bit and explain to us kind of where the--
where that breakdown is. I note that in Federal policy, there
is frequently a challenge with Federal agencies not always
grasping how Tribal sovereignty affects the way that these
programs are implemented.
Ms. Wolff. Yes. Thank you for the question. And I want to
say I'm still a learner about this as well. And I've been
working--I've had the privilege to support our Tribal Nations
team through a deployment of technical assistance, primarily in
the State of California last year, as they were working to
leverage State resources into Tribal housing.
But again, I continue to learn, and as we're all learning
about this, this matter. And each Tribal Nation is different.
And it's a different Government. It's own Government, and we
have to think about it as Government-to-Government relations.
And I think that's just something different for many of us to
wrap our heads around, for our bureaucracies to wrap their
heads around, because we're so used to all the different boxes.
So an example of kind of where you might run into this is
the State resources might say you have to have a--this is also,
I think, not really responsive to rural communities either. But
a State resource might say, ``You need to have your transit
committee sign off on this''----
Chair Smith. Yeah.
Ms. Wolff. ----you know, ``in order to build X amount of
housing units.''
Well, there's no transit community. And so then the
conversation needs to be, ``Well, can we have the Tribal
council, which is the authority, sign,'' and it was, ``Well,
that requires a waiver, because that's not the transit
authority.''
And so those--like, even those little things make it so
hard and so difficult to access, that many Tribes have just
given up on trying to access those resources at that level. So
I think that's just one small example.
I think the other piece that's really interesting in terms
of direct kind of conflict is a conversation of recapture. And
we understand that as you're deploying Federal dollars, you
want to have a way to ensure those dollars are underwritten, or
as a bank, that you can foreclose, they can take back. But we
have to recognize that this is on Tribal land. And so you can't
really foreclose on a property in the same way, because that
land--it would be similar also to being in a community land
trust----
Chair Smith. Right.
Ms. Wolff. ----is entrusted to the Tribe. And so there are
things like that that are subtle, but create real, real
obstacles for Tribes accessing those dollars.
Chair Smith. Thank you very much. I appreciate that. I
think that's absolutely right. And too often, I think Federal
and State agencies treat Tribal governments as if they are, you
know, some other form of nonprofit or grantee, rather than
appreciating that Government-to-Government relationship. And so
it's a real challenge we have to keep working on.
Ms. Wolff. Yes.
Chair Smith. Well, I want to thank our witnesses for being
here today and for providing excellent testimony.
I want to let my colleagues know--for Senators who wish to
submit questions for the record, those questions are due 1 week
from today, which will be Tuesday, April 23rd.
For our witnesses, you will have 45 days to respond to any
questions for the record.
And thank you again. I think we've gotten great input and
feedback as we think about legislation that we want to move
forward. So I'm grateful for your testimony.
And with that, this hearing is adjourned.
[Whereupon, at 11:19 a.m., the hearing was adjourned.]
[Prepared statements, responses to written questions, and
additional material supplied for the record follow:]
PREPARED STATEMENT OF JESSE ERGOTT
President and CEO, NeighborWorks Northeastern Pennsylvania
April 16, 2024
Thank you, Chairwoman Smith, Ranking Member Lummis, and Members of
the Subcommittee, for the opportunity to testify this morning on the
challenges our Nation faces with preserving our housing stock. My name
Jesse Ergott, and I have the privilege of serving as the President and
CEO of NeighborWorks Northeastern Pennsylvania (NeighborWorks
Northeastern PA) headquartered in the City of Scranton.
NeighborWorks Northeastern PA was founded in 1981 by a group of
local lenders, resident leaders, and officials in the city of Scranton
specifically to assist modest-income families who were finding it
difficult to obtain financing for home repairs and improvements. With
growing instances of blight and neglect in our neighborhoods, a more
creative approach to providing resources was sorely needed to preserve
home ownership opportunities for our neighbors. In our early years, our
work focused on a few target neighborhoods in Scranton and consisted of
pooling both private capital from various local lending institutions
and public dollars from the City of Scranton to assist our neighbors
with paying for and managing critical home repairs.
Now, 43 years later, NeighborWorks Northeastern PA has an expanded
geographic footprint including 7 counties throughout the region and
serves our neighbors in multiple ways, including home ownership
assistance, foreclosure prevention services, comprehensive community
development initiatives, aging in place services, and critical home
repairs. Over the course of our history, we have helped create over
1,200 new homebuyers, repaired or improved 1,600 homes, provided home
ownership and financial counseling to thousands of residents, and
helped to facilitate countless community improvement projects and
investment valued at over $250 million.
All this work has been deeply rooted in the following core
organizational belief that ``Home is Where it All Starts''. We believe
that having a safe, dignified, and stable place to live leads to better
health, more financial opportunity, better educational outcomes, and
other real benefits for individuals, families, and our community.
We have been supported in this work as a longstanding chartered
organization in the National NeighborWorks Network and a proud member
of the National NeighborWorks Association (NNA).
NeighborWorks America is a private nonprofit organization,
established by Congress in 1978 as the Neighborhood Reinvestment
Corporation (P.L. 95-557) to expand opportunities for people to live in
affordable homes, improve their lives and strengthen their communities.
NeighborWorks pursues this mission through its support of a network of
nearly 250 nonprofit housing and community development organizations
like ours, which provide on-the-ground support to families and
communities in every State, the District of Columbia, and Puerto Rico.
The experience of this national network is extremely relevant to
today's hearing, as our organizations have extensive collective
experience in various housing preservation efforts. For example,
NeighborWorks organizations across the country facilitated the repair
of 82,500 homes in fiscal year 2023 alone.
Addressing our Nation's significant housing challenges will require
comprehensive solutions. These challenges touch all types of
communities--urban, suburban, and rural areas alike, and span all
income levels. The lack of available housing to meet an individual's
specific needs can have a ripple effect that negatively impacts
regional economies, hampers revitalization efforts by local government,
and can ultimately lead to stagnancy and deterioration of
neighborhoods.
Building more affordable housing to increase supply, improving
access to capital, addressing localized zoning impediments to smart
community growth, and cutting red tape which currently makes various
Federal programs difficult to implement are just a few of the
approaches that are needed. One key element in this continuum of
strategies needs to be the modernization and preservation of as much of
our existing housing as possible.
Deteriorating housing stock can be a root cause of other types of
community instability and housing insecurity. My testimony speaks to
creative efforts taking place in the Commonwealth of Pennsylvania, such
as the Pennsylvania Whole Home Repairs Program, to invest in the
preservation of our existing housing stock while also addressing the
individual needs of our neighbors.
Housing Preservation: The Challenge
So how did we get here and what are the issues driving the need to
invest in preserving our housing stock? Although the challenges we face
in Pennsylvania, and particularly in northeastern Pennsylvania, are
especially acute due to our aging housing stock and an older
population, this also means we have a unique opportunity and fertile
testing ground for policies and solutions that may benefit the rest of
the Nation.
Pennsylvania has one of the oldest housing stocks in the country,
with 26 percent of existing homes built prior to 1939 compared with 12
percent across the country. \1\ In fact, Pennsylvania's housing stock
is on average 16 years older than the national average. Housing is even
older in northeastern Pennsylvania, where in many communities upwards
of 40 percent of homes were built more than 85 years ago. Most of the
homes in Pennsylvania are single family structures (76 percent), with
some rural counties in our region seeing single family dwelling numbers
closer to 85 percent. Home ownership rates in both Pennsylvania (70
percent) and our northeastern counties (67 percent) are higher than the
nationwide average (65 percent).
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\1\ ``Pennsylvania Comprehensive Housing Study, May 2020. https://
www.phfa.org/forms/housing-study/2020/pennsylvania-comprehensive-
housing-study-full-report.pdf
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As homes age and deteriorate, preservation of housing in many
communities becomes even more significant due to the nature of the
housing itself. Although aging, many homes are irreplaceable, meaning
if the units were lost, they either could not or would not be replaced
because of a lack of economic incentive to build new single-family
units in those communities. Likewise, when there is extensive deferred
maintenance, there can be little to no economic incentive for investors
to purchase these homes in many markets.
Challenges for Seniors
Aside from our older housing stock, possibly the most important
trend shaping housing issues in Pennsylvania is our aging population.
The statewide population of seniors has increased by 14 percent in the
last two decades and Pennsylvania is now one of the most elderly States
in the country, with over 17 percent of its population aged 65 or
older. The 2020 Census estimates that 18.4 percent of all citizens in
Lackawanna, Luzerne, and Wayne counties in northeastern Pennsylvania
are 65 years of age or older, and another 14 percent are considered
``future seniors'' (aged 55-64). \2\
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\2\ Aging in Place, The Institute for Public Policy & Economic
Development, at Wilkes University.
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The combination of one of the oldest housing stocks in the Nation
with one of the oldest populations presents a unique challenge,
especially when it comes to preserving existing housing. Seniors tend
to own their own homes (76 percent home ownership rate in Pennsylvania)
\3\ but also live on lower (and many times fixed) incomes, making it
more challenging to tackle larger repairs or absorbing other increases
in the cost of their housing (such as taxes, etc.), which ultimately
increases the likelihood of deferred maintenance for these properties.
The vast majority of seniors we serve express interest in staying in
their homes and neighborhoods as they age, and a lack of affordable and
physically viable housing options in their communities often leaves
them without other options even should they seek them.
---------------------------------------------------------------------------
\3\ ``Forecasting State and National Trends in Household Formation
and Homeownership'', The Urban Institute.
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Older homes are also more likely to have higher utility costs due
to insufficient insulation, inefficient windows and doors, and outdated
heating and cooling systems. In addition, most were not built with ease
of access in mind, and steep stairs, narrow entryways, high-sided tubs,
and other similar features often create accessibility barriers for
homeowners as they age. Ultimately, these older homes often equate to a
smaller amount of accessible housing with universal design elements
such as low or no threshold entryways, wider doorways, and walk-in
showers. A third of Pennsylvanians aged 65 or older have a disability,
which may require adaptive housing modifications or a move to
accessible and/or supportive housing.
To illustrate this issue, I have personally visited several homes
where the homeowner was restricted to living on their first floor due
to a lack of ability to get up the stairs safely. This often meant
sleeping in a chair or on a couch for extended periods of time. And
without a full bathroom on the first floor, they often ended up sponge-
bathing in their kitchen or bathroom sink.
In northeastern Pennsylvania, the typical structure we encounter is
a two-story home which has an entryway with multiple steps, one full
bathroom upstairs (and perhaps a half-bath on the main level), steep
and narrow stairways, and a small laundry area in the basement. Homes
typically have deferred maintenance ranging from a few thousand dollars
(smaller accessibility improvements and repairs) to over $30,000 for
significant structural and systems repairs).
A critical question to ask is how these types of repairs can be
funded, especially for modest-income working families and seniors on
limited incomes. Previous data released by The Federal Reserve Bank of
Philadelphia showed that in northeastern Pennsylvania, 50 percent of
all requests for conventional home improvement financing were denied
for low-to-moderate income borrowers. With limited access to private
capital to help address these much-needed repairs, individuals and
communities often turn to various Federal, State, and local funding
sources to address these needs.
Existing Federal Investments in Housing Preservation
In our experience, only a relatively small amount of funding from
existing Federal programs which include home rehabilitation as an
allowable use is utilized for this purpose. For example, the Community
Development Block Grant (CDBG) program and HOME Investment Partnership
funds can provide a meaningful amount of resources, but many
communities opt to use them for other purposes due to the challenges
involved in utilizing them for home repairs. These programs tend to be
broad in their potential uses, but onerous in practice and difficult to
leverage with other resources.
Specific to HOME funding, the requirement to address all
deficiencies in a property, instead of just tackling the most critical
repairs, can lead to putting in an excessive investment of resources
into one project and diluting their overall impact on an area. These
requirements were a critical factor in NeighborWorks Northeastern PA
deciding to discontinue managing HOME-funded owner-occupied rehab
programs on behalf of the City of Scranton.
Another example of this is the U.S. Department of Energy's
Weatherization Assistance Program. This program can provide a
significant amount of funding to make homes more energy efficient and
habitable, but other issues in the home including moisture/mold, old
electrical wiring, roof damage or other structural problems can prevent
an eligible client from receiving WAP services unless they are able to
correct the specific problems with other funding.
These are just a few examples of the barriers that can exist to
utilizing existing Federal funding to address housing preservation at a
scale that makes a difference in our communities. Finding ways to
remove these barriers and incentivize the use of these programs for
housing preservation would help to leverage and expand other local and
regional efforts.
A Critical Opportunity: The Whole-Home Repairs Act of 2024
The Whole-Home Repairs Act, which is based on Pennsylvania's highly
effective program of the same name, would be a much-needed addition to
the relatively small list of Federal resources focused on addressing
housing preservation.
Pennsylvania's Whole Home Repairs Program received bipartisan
support due to the universal nature of home repair needs in the
Commonwealth. Rural, urban, and suburban communities across the State
all tend to have modest-income homeowners with older housing and
deferred maintenance needs; it is an issue which is apparent to anyone
who lives here. Pennsylvania State Senator Nikil Saval, who spearheaded
its creation, helped to craft a flexible program that could address
home repairs at scale. Here are some of the major benefits of the
program model:
1. Flexibility. Whereas other funding sources (HOME, CDBG, etc.)
tend to have broad potential uses but are restrictive in their
uses for home repair, the Whole-Home Repairs Program is
specific in its intended use and flexible in its practical
implementation. The funding can address any/all issues of
habitability, accessibility, energy efficiency, and safety and
can be prioritized on at a local (or even a home-by-home)
level.
2. Maximizing Use. Has the ability to only address the issues that
are most critical for safety and stability in the home without
needing to tackle every other issue. This helps to maximize the
impact of the funds by spreading them out.
3. Speed. By eliminating burdensome requirements and red tape, we
have found that some projects are often able to be completed in
a matter of weeks or even days depending on the circumstance.
4. Layering and Leverage. Because of the program's flexibility, the
funds are extremely leverageable and can be effectively layered
into projects in ways that wouldn't be possible with other
Federal funds, ultimately resulting in more creative funding
strategies for individual rehabilitation projects and more
impact for the program overall.
5. Local Strategies and Oversight. By putting the implementation of
the program at the local municipal/county level, local leaders
can tailor the program to meet the most critical needs of their
communities and residents. This autonomy allows administrators
to be better stewards of public funds and to build the program
into larger local and regional efforts.
6. ``Unlocking'' Other Funds. Programs like the Weatherization
Assistance Program are not able to fund projects at homes with
other significant repair needs. Much time can be lost in
evaluating and assessing properties that ultimately cannot be
assisted due to the lack of other resources to address the
deferral items. The Whole-Home Repairs Program can address
these deferrals and leverage other Federal, State, and local
investments.
These factors, along with a backlog of need in many parts of the
State, contributed to an unprecedented public response to the program.
Many counties had to close their application process during the first
few days because they had already reached their maximum project limit.
The most recent data reported to the Pennsylvania Department of
Community and Economic, the statewide administrator of the program,
showed that there are over 16,500 homes currently on waitlists for
funding across the State.
I believe these same benefits which are unique to this program
could be expanded to other areas of the country through the pilot
program created by the Whole-Home Repairs Act.
Integrating Whole-Home Repairs With Aging in Place Strategies
In our case, the flexibility of the Whole-Home Repairs Program has
allowed NeighborWorks Northeastern Pennsylvania to effectively
integrate it into our comprehensive Aging in Place Program.
NeighborWorks Northeastern PA's Aging in Place program provides
homeowners in our region aged 60 and above with services that focus on
assisting them with continuing to live safely and with dignity in their
home and community. After over 3 decades of managing various home
rehabilitation programs utilizing a variety of Federal, State, local
and private funds, we found that approximately 70 percent of applicants
requesting assistance were seniors. This ultimately led to a shift in
our focus to providing home modifications and repairs exclusively to
seniors over the past 5 years.
When tackling a project for an older adult, our primary concern is
to remove any barriers that the homeowner may have to remain in their
home. Often, we have found that older homeowners have a variety of
challenges that create instability in their housing situations. We seek
to take a holistic approach to addressing habitability and
accessibility to address as many issues as possible to both fix the
property and preserve or improve the homeowner's health. By taking this
approach, we have been able to attract significant new health-focused
public and philanthropic resources to our housing preservation efforts.
For example, our Aging in Place program has secured a $1 million
grant from the HUD Older Adult Home Modification Program (OAHMP), an
additional $1 million from the Administration for Community Living
(ACL), and ongoing LIHEAP and Medical Assistance (waiver) resources for
home modifications, energy needs, and accessibility improvements
through local Area Agencies on Aging. These funds, along with flexible
resources from Pennsylvania's highly successful Housing Affordability
and Rehabilitation Enhancement (PHARE) fund, have allowed us to address
hundreds of home modification and accessibility improvement projects
across 3 counties. Many of these projects include critical safety
modifications such as grab bars, wheelchair ramps, bathroom
modifications, tub cuts, and other accessibility improvements.
However, home modifications are often only one piece of the puzzle
when it comes to housing stability. For example, providing an
accessible bathroom for a homeowner is impactful, but if that same
homeowner has a leaking roof or major structural issue in their home,
their housing stability remains threatened. As most other funding
sources we had access to don't allow for larger structural repairs, the
Whole-Home Repairs Program was the missing piece for our Aging in Place
program.
Now, in addition to providing a bathroom modification, wheelchair
ramp, or stairlift, we can replace the roof, improve energy efficiency,
and replace an old furnace. The Whole-Home Repairs Program has allowed
us to take a comprehensive approach to addressing issues of the whole
home and as well as the critical needs of the person living in it.
NeighborWorks Northeastern PA manages a total of approximately $1.2
million in Whole-Home Repairs Program funding for two counties, and
these funds are currently helping to stretch and leverage an additional
$3 million in State, Federal, and philanthropic investments.
Working with a team of Certified Aging in Place Specialists (CAPS),
Occupational Therapists, Residential Housing Inspectors, a Construction
Manager and licensed and reputable constructions teams, we take a
personal and professional approach to assessing and identifying the
housing repair and accessibility needs of older adults throughout
northeastern Pennsylvania. The various assessments conducted by this
team helps to prioritize the work that needs to be accomplished at the
home and to identify which funding sources will be layered into the
project. Projects are then bid out per relevant requirements from the
various funding sources and/or local municipalities. We have found that
this model allows us to deploy funding quickly and in a comprehensive
manner.
Repairs and improvements address time-sensitive needs like roof
repairs, accessibility improvements (stairs, porches, entryways, etc.),
systems replacement (heating/cooling units, water heaters, etc.) and
unsafe electrical or plumbing conditions. Other improvements focusing
on the home's long-term habitability are also addressed when possible,
such as siding, windows, insulation, ventilation systems, and other
items impacting the home's energy efficiency and overall envelope. Each
older adult referred to the Aging in Place program to utilize Whole
Home Repair services is also given access to each of the other services
offered through the Aging in Place program (small home repair,
volunteer led repair services, smart home technology, social isolation
prevention, community resource connection, and financial guidance), all
of which allow each older adult to continue to reside safely and with
dignity in their homes and communities.
Whole-Home Repair Success Stories
The Whole-Home Repairs Program has made a direct and measurable
impact on our neighbors here in northeastern Pennsylvania, and a small
sample of success stories are included below.
In one of our rural counties, the program assisted a family of
five, comprised of three children and two adults. The father, a
veteran, struggles with PTSD, and the mother is a postal worker within
the community. They were in urgent need of various and time-sensitive
improvements, including a new roof. Through the Whole-Home Repairs
Program, these major safety concerns were able to be addressed quickly
and efficiently.
In another rural county, the program assisted a 64-year-old retiree
living by herself in an older home which is in good condition except
for the roof, which is over 30 years old. Her monthly income is
$3,206.60 from Social Security and retirement benefits. A contractor
was secured to address the aging roof, and the property was stabilized
for a total cost of $17,070.
In Scranton, Mr. and Mrs. Walter Gardner are both in their 80s and
have lived in their family homestead in the city since 1955. Mr.
Gardner is a veteran. In early February, NeighborWorks Northeastern PA
received a call from the Gardners reporting a complete lack of heat in
their home. A Plumbing and Heating specialist was sent to the home and
confirmed the furnace had a cracked heat exchanger, necessitating a
full replacement. It was also relayed that the Gardners' carbon
monoxide detector was going off and the Scranton Fire Department and
UGI Utilities were also deployed to the home. The source of the CO
being emitted into the home was caused by the broken furnace, as
emissions were escaping through the crack in the heat exchanger rather
than being ducted out with the exhaust, creating a dangerous situation.
Due to the availability of Whole Home Repair Funds, NeighborWorks was
able to facilitate the installation of a new furnace within 5 days from
that initial phone call, likely preventing even more costly repairs
from froze pipes and other issues resulting from lack of heat in the
home. The Gardners received a new Comfort Maker 95 percent Efficient
Hot Air Furnace utilizing a total of $6,800 of Whole Home Repair
funding. NeighborWorks was also able to use this situation as an
opportunity for our Certified Aging in Place Specialist to assess and
plan for other critical home repairs and safety modifications needed in
the home
Another older client we have served resides in the City of
Carbondale. Despite having replaced a portion of his roof in recent
years, he had a leaking roof and missing gutters, both of which
contributed to water infiltration into his home, a deteriorating and
leaning chimney, and a completely corroded boiler that wasn't working
properly. We have been able to provide a new boiler for him and repair
some other plumbing problems and a potentially dangerous ventilation
issue that he had, in addition to replacing the leaking areas of his
roof as well as installing gutters where they were missing to minimize
and/or hopefully eliminate the water infiltration into his home. Whole-
Home Repairs funding allowed us to address all these issues at once.
Conclusion
We know that safe, dignified, and affordable housing options are
critical to the health of any community. However, many communities are
facing shortages across much of the housing continuum, including
affordable rental units, entry-level homes for first-time homebuyers,
and accessible dwellings for seniors as they age. These factors and
others have created an extreme sense of urgency in many communities
like ours to preserve the housing that exists before it deteriorates
past the point of economically viable rehabilitation. Passing the
Whole-Home Repairs Act will be an important first step in providing a
scaled investment in our Nation's aging housing stock by empowering
States and municipal governments to address the housing preservation
needs of their own communities.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
PREPARED STATEMENT OF ROBIN DAVEY WOLFF
Senior Director for Rural Communities at Enterprise Community Partners
April 16, 2024
Chair Smith, Ranking Member Lummis, and Members of the
Subcommittee, thank you for the opportunity to share perspectives on
the needs related to Affordable Housing Preservation and Home Repair
with you today.
My name is Robin Davey Wolff. I am the Senior Director of Rural
Communities at Enterprise Community Partners, where I work to lift up
and support the needs of rural housing developers and providers across
the country. Enterprise is a national nonprofit on a mission to make
home and community places of pride, power and belonging for all. To
make that possible, we listen to what our communities need and bring
everything under one roof to deliver it to them. That means we advocate
on a nonpartisan basis for sound public policy at every level of
Government; we develop and deploy programs and support community
organizations on the ground nationwide; we invest capital to build and
preserve rental homes; and we own and operate 13,000 apartments and
provide resident services for 23,000 people.
This end-to-end approach, combined with more than 40 years of
experience and thousands of local partners, has enabled Enterprise to
build and preserve affordable homes nationwide, invest $72 billion in
communities, and improve millions of lives. This month, we are
celebrating the one millionth affordable home that Enterprise has
created and preserved since our founding. Our strategic priorities are
advancing racial equity, building climate resilience and upward
mobility, and creating and preserving housing people can afford.
Enterprise's Tribal Nations and Rural Communities Team has sought
to support safe, decent, and culturally appropriate housing in rural
communities and on Tribal lands since 1997. Our commitment to rural and
Tribal communities is deep: over the last 20 years Enterprise has
invested more than $1.1 billion in grants, loans and equity, and
developed more than 40,000 affordable homes in rural communities
nationwide. Prior to joining Enterprise, I worked for an affordable
housing developer serving rural communities. I now apply that
experience to help rural nonprofits, housing authorities, Tribes and
Tribally Designated Housing Entities (TDHE) preserve and develop
affordable housing in their communities. Our team offers direct
technical assistance, training, peer learning sessions, and other
capacity building services to expand access to home ownership
opportunities and develop or preserve affordable rural rental homes.
Much of this work is supported by Federal contracts through the
Department of Housing and Urban Development's (HUD) Rural Housing and
Economic Development program, the United States Department of
Agriculture's (USDA) Rural Community Development Program and the USDA
515 Technical Assistance Program, through which we are able to support
affordable housing providers across the country as they work to
preserve housing at risk of losing affordability due to mortgage
maturity or prepayment. According to USDA projections, the USDA Section
515 program, which currently provides stable affordable housing to
approximately 400,000 low-income rural renters nationwide, is projected
to lose up to 137,000 affordable-housing units over the next 10 years
due to mortgage maturities. Work is being done to address this,
inclusive of the recently approved Rental Decoupling pilot in the
Consolidated Appropriations Act, 2024 (H.R. 4366) and the Rural Housing
Service Reform Act (RHSRA), recently introduced legislation that our
team has worked on in partnership with Senator Smith and Rounds'
office, which would include various provisions to modernize the USDA
rural housing programs. That said, these programs and reforms alone are
not adequate to stave off the loss of affordability we are facing
nationally.
In this testimony, I will discuss (1) The need for housing
preservation; (2) The challenges communities across the country are
facing as they work to preserve existing affordable housing; (3) The
need for affordable single-family preservation and home repair
programs; (4) The Enterprise approach to address housing preservation
challenges; and (5) Ways congress can take action to support the
preservation and production of affordable housing.
The Need for Housing Preservation
The country is in the middle of an affordable housing crisis.
Communities across the country are losing a vital source of the
existing affordable housing supply faster than new affordable units can
be developed. With each year that passes, more mortgages and
affordability restrictions expire, and countless nonrestricted
properties are lost to the market, making more homes unaffordable. It
is not possible to build new homes fast enough to make up for those
that are being lost. We must prioritize affordable housing preservation
in addition to new construction. Depending on the level of
rehabilitation needs, preservation can often be faster and more cost
effective than new construction.
Harvard's Joint Center for Housing Studies published a report
stating that since 2012, the market has lost more than 2.1 million
units renting for less than $600 and 4.0 million units renting for $600
to $999. During the same period, the market gained 8.4 million units
renting for at least $1,400, driven by rent increases and high-end new
construction. Not only have rents risen, but they have outpaced incomes
over the last two decades. Among renter households with an annual
income under $30,000, the median amount of money left over after paying
for rent and utilities was just $310 a month. \1\
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\1\ Joint Center for Housing Studies of Harvard University,
``America's Rental Housing 2024'', 2024, https://www.jchs.harvard.edu/
americas-rental-housing-2024.
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Data from the 2022 American Community Survey (ACS) supports this
and clearly shows that newer properties are more expensive than older
ones. More specifically, the most recently built rental units (those
built in 2020 and later) command a 35 percent premium over the median,
and even properties built in the 2010s are 24 percent more expensive on
average than the median rental unit. \2\ Older properties are at risk
of being acquired and upgraded above the point of affordability.
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\2\ Ibid.
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The Benefits of Housing Preservation
Preservation is often more cost-effective than new construction and
avoids significant changes to the existing built environment,
mitigating community concerns over neighborhood change that can stall
or prevent new affordable development. It should be further noted that
preservation directly affects some of our lowest income and most
vulnerable populations. Displacement of renters in subsidized units
that lose their restriction and subsidies are at far greater risk of
homelessness or living in unsafe conditions.
Targeted resources, programs, and policies are critical to maintain
the existing affordability of multifamily properties and mitigate the
risk that they will be lost permanently from the affordable housing
supply. Once affordable units are lost, they are very difficult and
cost prohibitive to replace, risking the displacement of long-time
residents.
The Challenge of Preserving Multifamily Housing Stock
Many existing affordable rental homes are in small- to medium-
multifamily (SMMF) properties (defined as having between 2 and 49
units). In fact, this housing stock is the largest single source of
housing affordable to low-income households.
The 2022 ACS data tells us that 23 million SMMF units exist in the
U.S., and 87 percent of those units are occupied by renters. 80 percent
of SMMF units are affordable to households with incomes at or below 80
percent AMI. \3\ This represents 52 percent of all affordable housing
in the country. 95 percent of these units receive no Federal project-
based subsidy. Of the 996,000 SMMF units that are subsidized, about 22
percent are set to expire by 2027. \4\
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\3\ Enterprise Community Partners calculations of 2022 1-year
American Community Survey, as provided by IPUMS USA, University of
Minnesota, www.ipums.org. AMI is calculated based on HUD Section 8
income limit data for the applicable year.
\4\ Ibid.
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Market pressures and disinvestment pose significant threats to this
housing stock. There is limited financing to keep properties
affordable. Without robust investment in this housing, residents are at
risk of eviction, displacement, and homelessness.
The Low-Income Housing Tax Credit (Housing Credit), which is our
Nation's most effective tool for the development of affordable rental
housing, is oversubscribed and requires improvements to better address
the needs of smaller properties. A program that does not rely on tax
credits and that prioritizes preservation presents an opportunity to
slow the loss of affordable units, provide stability for low, moderate,
and very low-income residents who live in these homes, keep communities
intact by combating residential and cultural displacement, and deepen
the impact of all affordable housing strategies.
Single-Family Preservation and Home Repair
On the single-family side, including Home Repair in this
conversation is crucial and appreciated. The impact of a well-run home
repair program can prevent utility shut offs, foreclosure, and
homeowner displacement. The need for single family home repair is
especially true in rural communities where we see higher rates of home
ownership than the national average (73 percent vs. national average of
65 percent).
Single-family housing in rural communities is, in general, older
stock which is more likely to have deferred maintenance and capital
needs that should be addressed. This is particularly true for
households living in manufactured homes, which make up a significant
portion of housing for lower-income families living in rural
communities. \5\
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\5\ Housing Assistance Council, ``Rural Research Brief'', July
2020, https://ruralhome.org/wp-content/uploads/2021/05/Manufactured-
Housing-RRB.pdf.
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Homeowners often feel stuck when they try to address the needed
repairs. The market simply does not work for people living on low or
fixed incomes. Costs of labor and materials are high, driving up the
average cost of a home repair project and conventional loans are at
high rates, which makes funding needed repairs more expensive. This is
true even when there is significant equity in the home.
We must continue to identify new strategies to meet the needs of
vulnerable homeowners beyond the existing offerings. In rural
communities the USDA 504 Home Repair program, which provides subsidized
loans and grants for seniors over the age of 62, is useful but often
does not allow for enough funding to get homeowners to where they need
to be when it comes to truly safe and decent housing. This source can
be leveraged with other sources. Many States and localities operate
home repair programs funded with HUD's Community Development Block
Grant (CDBG) program or the HOME Investment Partnership (HOME) program
funds, for instance. New programs should leverage these existing
programs to allow for more significant or comprehensive repairs.
The Enterprise Approach
Enterprise Community Partners has decades of experience supporting
repair of small properties and preserving affordable rental housing.
Enterprise deploys capital to produce new housing, preserve
existing affordable housing and build the capacity of our partner
organizations. In the preservation realm, Enterprise supports the
acquisition, rehabilitation, and refinancing of affordable housing, in
addition to providing grants that support nonprofit partners'
preservation efforts. Over the last 10 years, Enterprise has invested
more than $6.6 billion in the preservation of affordable housing, which
accounts for 54 percent of Enterprise's total investment in affordable
housing and n has ensured the continued affordability of 140,000 homes.
Enterprise cochairs the ``A Call To Invest in Our Neighborhoods''
(ACTION) campaign, a coalition of over 2,400 of local, State, and local
organizations and businesses advocating working together to protect,
expand, and strengthen the Housing Credit. Part of the coalition's
advocacy has been focused on the bipartisan, bicameral Affordable
Housing Credit Improvement (AHCIA) Act. This legislation would not only
increase the supply of Housing Credit developments but would also
streamline the program to better meet the needs of rural communities,
veterans, seniors, Native Americans, and extremely low-income families.
Ultimately, strengthening and expanding the program is foundational to
advancing racial equity and economic mobility for low-income Americans
across the country.
City and Regional Solutions:
Enterprise Advisors and market teams work with cities and regions
to develop comprehensive housing strategies that address the unique
housing challenges in that location. Based on complex data analysis,
stakeholder interviews and expertise in affordable housing programs,
Enterprise helps develop preservation strategies that are tailored to
individual communities, such as an emphasis on the preservation of
Naturally Occurring Affordable Housing (NOAH) or the development of
preservation-related funds.
Support for Community-Based Organizations, Developers, and Landlords:
Enterprise supports existing property owners to improve the
financial health, resiliency, and sustainability of their properties so
they can continue to provide affordable homes for local communities.
Preservation grants support either organizational infrastructure or
project redevelopment. To strengthen partners' organizational
infrastructure, Enterprise builds organizations' current staffing,
software, and professional development models, and provides the
operating capital necessary to effectively pursue preservation.
Through project redevelopment grants, Enterprise supports the
actual redevelopment of existing real estate by assisting with
predevelopment expenses, staffing, consultants, or capital.
Training and Resources:
Through the Rural Rental Housing Preservation Academy and the
Preservation Next Training Academy, Enterprise organizes a series of
training sessions for affordable housing developers across the county
and advocates to acquire, rehab, and stabilize affordable homes and
prevent resident displacement.
Enterprise also provides online resources, information, and tools
to help:
Developers acquire, rehab, and preserve affordable homes
Practitioners and advocates to understand preservation
opportunities and advocate for resources and policies
Existing owners and operators to improve the stability and
sustainability of their properties
Policy Advocacy:
Enterprise works with a broad range of public and private partners
to advocate for policies at the local, State, and national levels that:
Protect, expand, and improve tenant protections
Replicate best practices and policies in eviction
prevention
Increase resources to enable the acquisition and
preservation of affordable housing by mission-minded owners and
residents
Investing in Healthy, Sustainable, and Resilient Homes:
Properties that are currently affordable and that need
preservation, both subsidized and unsubsidized, are often older and
suffering from deferred maintenance. Preservation can address unmet and
ongoing capital needs and repairs that affect health, safety, and
sustainability.
More than 38,000 homes have been created or rehabilitated to meet
the Enterprise Green Communities Criteria since its inception in 2004.
When buildings meet energy efficiency standards, both property owners
and tenants can see savings in their utility costs, which improves the
affordability of the property.
Home Repair Programs
Enterprise is leading Home-Repair programs in several markets
across the country:
Detroit Home Repair
Enterprise Community Partners serves as manager of the Detroit
Home Repair Program, which is a $20M initiative providing no
cost support to low-income households in Detroit. The program,
which aims to support 1,000 households, has a waiting list of
over 14,000. To date, over $4.3MM has been in deployed for
repairs in over 200 homes, including $1.2MM in energy-
efficiency and weatherization measures. The University of
Michigan estimates that 37,630 Detroit households live in
inadequate conditions (exposed wiring, broken furnaces) and
local program sponsors estimate total repairs costs at well
over $5B. It is this type of local work and knowledge that
highlights the need for additional focus and resources, like
those outlined in the Whole-Home Repairs Act of 2024 led by
Senator Fetterman, that could be leveraged to meet the existing
needs of the communities where we work.
Lead Safe Cleveland Coalition and Home Fund
Enterprise is a founding member and program manager of Lead
Safe Cleveland and its $45M Fund which aims to implement lead
safe practices in over 40,000 rental properties throughout the
city.
Make It Home Cleveland
Enterprise and the City of Cleveland with others is piloting a
repair and purchase program for Cleveland homeowners who live
in tax forfeited properties. The program aims to work with 50
households in 2024.
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,
which would expand existing programs or else create new programs where
there are gaps in the housing and community development financing
ecosystem.
Support Production and Preservation of Affordable Housing
(1) Enact the Rural Housing Service Reform Act (RHSRA) (S.
2790)
RHSRA is a bipartisan and bicameral bill introduced by Chair
Smith and Senator Mike Rounds and would help preserve rural
affordable rental housing and expand home ownership
opportunities for Native communities This legislation does this
by improving the tools that USDA has available to address the
housing preservation crisis that USDA faces by allowing for
decoupling of rental assistance from USDA multifamily mortgages
to ensure families living in USDA-financed properties are not
cut off from rental assistance. Furthermore, the legislation
would improve rural vouchers by allowing the value to change
based on the fluctuations in tenant income and unit rent
levels, and by expanding its use to tenants in properties with
maturing mortgages. The bill would also allow for funding to
improve the agency's capacity through additional staffing and
upgrading of outdated technology that the agency uses. This
bill also would make the highly successful USDA Section 502
Native CDFI Relending Program, Multifamily Preservation and
Revitalization Program, Multifamily Transfer Technical
Assistance Program, and the Rural Community Development
Initiative permanent. Finally, the bill will raise outdated
funding caps, bring multifamily foreclosure process in line
with those at HUD, increase data transparency, and require
studies on the efficacy of programs.
(2) Enact the Affordable Housing Credit Improvement Act (AHCIA,
S. 1557)
This legislation, sponsored by Senators Maria Cantwell (D-WA)
and Todd Young (R-IN), has 34 cosponsors, including leads,
split evenly between Democrats and Republicans. The bill has
several financing provisions that will expand production and
preservation of affordable housing. It also includes several
dozen provisions that would enable State Housing Credit
agencies to strengthen program administration. Some of the
changes would update rules to improve access for veterans,
students, and victims of domestic violence and human
trafficking. 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 in our current
housing crisis. The AHCIA will create or preserve close to 2
million additional affordable rental homes over the next
decade.
(3) Enact Housing Credit provisions in the House-passed Tax
Relief for American Families and Workers Act of 2024 (H.R.
7024)
We are excited to see that two key provisions of the AHCIA Act
were included in the bipartisan and House-passed tax package,
the Tax Relief for American Families and Workers Act of 2024.
This bill would make it easier to finance affordable rental
housing in two key ways: it would restore the 12.5 percent
increase to the 9 Percent Credit, which expired in 2021, from
2023 (retroactively) until 2025, and it would lower the 50
percent Private Activity Bond (PAB) threshold for the 4 Percent
Credit to 30 percent for 2 years. Together, the provisions
could finance an estimated 200,000 additional affordable homes
nationwide through new development and preservation; generate
over $34 billion in wages and businesses income; support over
304,000 jobs; and generate nearly $12 billion in Federal,
State, and local tax revenue. \6\
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\6\ Enterprise Community Partners, ``A Crucial Moment for the
Housing Credit and the Future of Affordable Housing'' February 2024,
https://www.enterprisecommunity.org/blog/crucial-moment-housing-credit-
and-future-affordable-housing.
(4) Enact the New Markets Tax Credit (NMTC) Extension Act of
---------------------------------------------------------------------------
2023 (S. 234)
This bipartisan legislation introduced by Senators Ben Cardin
(D-MD) and Steve Daines (R-MT) would permanently authorize the
NMTC program (which is set to expire in 2025) at $5 billion per
year--adjusted annually for inflation--and exempt investments
in the credit from the Alternative Minimum Tax. 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.
While the NMTC is not intended 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. The Treasury Department indicates that the NMTC has
helped to finance over 18,000 affordable homes.
(5) Enact the Neighborhood Homes Investment Act (NHIA, S. 657)
This bipartisan legislation reintroduced by Senators Cardin and
Young would create a Neighborhood Homes Tax Credit (NHTC),
which would spur the renovation or development of one- to four-
unit homes in once-thriving urban, suburban, and rural
communities that now have distressed, blighted neighborhoods
and low home ownership rates.
Modeled after the Housing Credit, the NHTC would cover the
``value gap'' between the cost of building or renovating a home
and the market-rate price at which it can be sold to low- and
middle-income homebuyers. This credit would provide low- and
middle-income households with more equitable opportunities for
home ownership and upward economic mobility. If enacted, the
NHTC could finance the construction or renovation of an
estimated 500,000 homes over the next decade.
(6) Tax-Exempt Controlled Entity Issue
An issue has arisen with regard to the proper interpretation of
an arcane provision of the tax code designed to prevent tax-
exempt entities from indirectly benefiting from tax incentives
provided to taxable entities who either lease property to, or
are in partnership with, tax-exempt entities. Because of the
Preferred Stock Purchase Agreements between the Treasury
Department and the GSEs, some lawyers for Housing Credit
investors have been questioning whether the GSEs, which pay
taxes, could be considered TECEs, because Treasury is a tax-
exempt entity that controls the GSEs. This interpretation has
caused concern among Members of Congress, and a bipartisan
group of 20 Senators sent a letter in June to Sec. Yellen
requesting clear guidance on the issue. Otherwise, rural areas
could be particularly devastated, as the GSEs invest
significantly in these areas, and Housing Credit investments in
these communities could dry up.
The potential application of this law to Fannie Mae and Freddie
Mac is interfering with their ability to invest in Housing
Credit properties because the law would require slower
depreciation and loss of certain energy and rehabilitation tax
credits. GSE Housing Credit investments help the GSEs fulfill
their Duty to Serve requirements set by FHFA, bringing capital
to underserved markets, including rural multifamily housing. If
this issue does not get resolved, investments by State and
local equity funds could also be negatively impacted.
We request that congress encourage the Treasury Department to
provide clear guidance on this tax issue so that GSE capital
can begin flowing again to underserved rural areas.
(7) Enact the Stop Predatory Investment Act (S. 2224)
This legislation would preserve the affordable housing stock by
restricting tax breaks for large institutional investors
purchasing single-family homes to convert to rentals and
incentivizing affordable rental housing and the construction of
new housing supply. Enterprise supports this legislation led by
Committee Chair Sherrod Brown (D-OH) and Members of the
Subcommittee.
(8) Enact the Native American Housing Assistance and Self-
Determination Reauthorization Act of 2023 (S. 2285)
The Native American Housing and Self Determination Act of 1996
(NAHASDA) was the first instance of Congress recognizing that
the United States' trust responsibility to Tribal Nations
includes ``working with Tribes and their members to improve
their housing conditions and socioeconomic status.''
To meet this responsibility, NAHASDA created the Indian Housing
Block Grant (IHBG) and eliminated the ability of Tribes to
access almost all other HUD programs, such as Housing Choice
Vouchers, HOME, and public housing operating fund dollars.
However, the authorization for NAHASDA last expired in 2013,
leaving necessary improvements unaddressed. While last year's
appropriations saw the largest increase for the IHBG program,
funding level remained flat in inflation-adjusted dollars from
2011-2021 and has been a decreasing percentage of the HUD
budget since its creation. Enterprise supports as much
increased funding for the IHBG as possible, and the passage of
the Native American Housing Assistance and Self-Determination
Act of 2023.
(9) Enact increased appropriations and modernizations of key
housing and community development programs
Section 4
HUD's Section 4 Capacity Building for Community Development and
Affordable Housing (Section 4) program enhances the technical
and administrative capacity of community development
corporations and community housing development organizations
(CHDOs) so they can help strengthen rural and urban communities
across the Nation by developing affordable housing, financing
small businesses, revitalizing commercial corridors and helping
address local health care, childcare, education, and safety
needs. These organizations are critical stakeholders in
community development, working in neighborhoods across the
country to address unique challenges and provide critical
services that create jobs and enhance economic opportunity. An
example of a successful public-private partnership, Section 4
leverages more than $20 for every $1 invested by the Federal
Government, making it very cost-effective. Enterprise urges
Congress to provide at least $50 million in annual
appropriations for the Section 4 Program to ensure these
community development organizations can further expand their
important work.
The HOME Program
No program is better suited to address the wide range of
housing challenges we face as a Nation than HOME, which is our
country's most flexible and proven affordable housing program
for delivering resources to urban, suburban, and rural
communities. Not only is HOME central to efforts that combat
the affordable rental housing crisis, but it also meets
critical home ownership needs by allowing States and localities
to provide downpayment assistance to creditworthy homebuyers,
lower mortgage interest rates and assist with homeowner
rehabilitation. Enterprise urges Congress to provide the
highest possible funding levels for HOME in appropriations
legislation. We also urge Congress to enact the HOME Investment
Partnerships Reauthorization and Improvement Act (S. 3644) led
by Senator Cortez Masto which would reauthorize and modernize
the HOME program.
The CDBG Program
CDBG is a critical resource for communities nationwide to
invest in low- and moderate-income neighborhoods, producing and
preserving homeowner and rental housing, providing fundamental
infrastructure, vital public services and public improvements
and spurring economic development and public-private
partnerships at the local level. The flexible nature of these
funds also allows them to address a wide range of challenges
faced by both small rural towns and major metropolitan areas,
making it an effective tool for localities in their effort to
stabilize and maintain affordable housing and vibrant
communities. These funds are commonly also used for water and
sewer, sidewalks, and other community enhancement projects.
Enterprise encourages Congress to provide the highest possible
funding for CDBG in appropriations legislation.
USDA Rural Housing Service Programs
USDA's Rural Housing Service (RHS) programs are vital to rural
communities. The USDA Section 515, USDA Section 514/516,
Section 521 Rental Assistance Programs, Multifamily
Preservation and Revitalization Program, provide critical
affordable rental housing throughout rural America. The 515
Multifamily Transfer Technical Assistance Program helps
communities preserve the rental stock. RHS programs that
support affordable home ownership include the USDA 523 Mutual
Self Help Program, 502 direct loan and guaranteed loan programs
and the 504 Home Repair Program provide tremendous opportunity
for rural residents. The Rural Community Development Initiative
works to build capacity of housing providers in rural
communities. Enterprise urges Congress to provide robust
funding for USDA Rural Housing Service programs in the upcoming
fiscal year.
HUD's Native American Programs
The Indian Housing Block Grant (IHBG) program is one of the
only dedicated sources of housing construction, rehabilitation
of rental assistance funding available to Tribal Nations, who
do not receive money from programs like HOME or Housing Choice
Vouchers. Enterprise urges Congress to provide increased
funding for the formula and competitive grants.
Community Development Financial Institutions (CDFI) Fund
CDFIs are an essential tool for delivering needed capital to
historically underserved areas, financing a range of activities
from consumer and small business credit to affordable housing
and community projects that support health and education.
Providing better access to debt relief, working capital, and
consumer loans to small business and nonprofit borrowers
through CDFIs increases the capacity for economic growth and
opportunity that would not otherwise be available in some of
our Nation's most distressed communities. Enterprise urges
Congress to allocate robust funding for the CDFI Fund in annual
appropriations to continue providing transformative resources
to vulnerable communities.
Capital Magnet Fund
Enterprise continues to support efforts to increase and
preserve the Capital Magnet Fund (CMF). This critical resource
provides flexible funds to attract private investment into
developing, preserving, rehabilitating, or purchasing
affordable single-family and rental housing properties. CMF
award recipients must leverage their award with other sources
of capital, and the leveraged amount must be at least 10 times
the CMF award amount, although in practice it has been 20 times
or greater. The CMF program 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 5 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.
This public-private partnership is a critical source of funding
for CDFIs and nonprofit housing developers financing affordable
housing and related economic activities. The CMF program is
funded through a very small, annual assessment fee on new
business revenues generated by Fannie Mae and Freddie Mac. This
funding source must be protected, with any subsequent reforms
of the housing finance system ensuring a continued supply of
funding for this program. Enterprise also urges Congress to
work with Treasury to encourage streamlining and additional
flexibilities in the program.
Preservation and Reinvestment Initiative for Community
Enhancement (PRICE) Program
The PRICE program is a competitive grant program for housing
residents and communities to preserve and revitalize
manufactured housing and eligible manufactured housing
communities. The program was first funded in FY23 and received
additional funding in FY24. The program provides resources to
support residents of manufactured housing through repairs and
rehabilitation of homes. Eligible uses of funds include
infrastructure, planning, resident and community services
(including relocation assistance and eviction prevention),
resiliency activities (defined as reconstruction, repair, or
replacement to protect the health and safety of manufactured
housing residents and to address weatherization and energy
efficiency needs), and assistance for land and site
acquisition. Enterprise urges Congress to provide robust
funding for this program and to continue to work with HUD to
ensure that the program remains effective for tenants of
manufactured housing and manufactured housing communities. We
also support the passage of the Preservation and Reinvestment
Initiative for Community Enhancement Act led by Senators Cortez
Masto, Shaheen, and Smith, which would permanently authorize
the program.
Public Housing Capital Fund
Public Housing remains one the largest source of affordable
housing for low-income families, the elderly, and persons with
disabilities. With nearly 900,000 units across all 50 States,
which is why is it important that Congress provide increased
funding to the Public Housing Capital Fund. The Capital Fund
provides funds to Public Housing Agencies for the development,
financing, and modernization of public housing developments.
Due to underfunding and disinvestment in Public Housing, it is
estimated that the backlog of public housing capital needs is
more than $70 billion. Enterprise urges Congress to provide
increased funding to the Public Housing Capital Fund and to
continue to support other forms of Public Housing preservation
such as the Rental Assistance Demonstration (RAD) program.
Enterprise thanks Committee Chair Scott for his leadership on
the ROAD to Housing Act. We particularly appreciate the
provision to expand the RAD program as a means to help
modernize and preserve affordable housing units, provided there
are appropriate tenant protections.
Conclusion
While we do need more housing supply, we simply cannot build our
way out of our housing crisis. Preservation of affordable housing is
necessary to address the critical lack of affordable housing. We are
rapidly losing affordable units, and there is a profound need for more
targeted tools, resources, and policies to mitigate and prevent the
risk of loss of affordable properties. Preserving existing affordable
housing is both cost-effective and crucial for maintaining and
increasing the supply of affordable homes. Preservation also provides
housing stability and prevents displacement of existing residents and
families, homeowners and renters alike.
We at Enterprise are committed to finding solutions and helping the
organizations on the ground preserve and develop housing in their
communities. The preservation of affordable housing is a critical
component of Enterprise's strategy to connect low-income households to
opportunity. Affordable housing helps households avoid housing cost
burden and contributes to housing stability, creating positive outcomes
that can last for generations.
I am appreciative of the opportunity to share my experiences and
perspectives today. On behalf of Enterprise Community Partners, I would
like to thank the Committee, and especially Chair Smith and Ranking
Member Lummis for their leadership on rural and Tribal housing issues,
as well as their bipartisan cooperation on issues that affect so many
Americans in every corner of the country. I hope that the conversations
we have today will bring more attention to the needs surrounding
housing preservation and home repair--in addition to the other critical
housing and community development bills addressed in this testimony and
that together we make home and community places of pride, power, and
belonging for all.
______
PREPARED STATEMENT OF CHRISTOPHER VOLZKE
Deputy Executive Director, Wyoming Community Development Authority
April 16, 2024
Introduction
Chair Smith, Ranking Member Lummis, and Members of the Committee,
thank you for the opportunity to testify today about the Challenges in
Preserving the U.S. Housing Stock. I am Christopher Volzke, Deputy
Executive Director of the Wyoming Community Development Authority.
Since 1975, the WCDA has been championing affordable housing in
Wyoming. WCDA was created by State statute, as an instrumentality of
the State, for the purpose of raising capital to finance affordable
housing. WCDA receives no State funding. WCDA's largest housing program
is the Single-Family Mortgage Purchase Program for first-time
homebuyers. In addition to its single-family programs, WCDA currently
administers five major Federal housing and community development
programs: the Low-income Housing Tax Credit (LIHTC) Program, the
National Housing Trust Fund (NHTF) Program, the HOME Investment
Partnerships Program (HOME), the Community Development Block Grant
Program (CDBG), and the HOME Investment Partnerships American Rescue
Plan Program (HOME-ARP). Together, these five Federal programs have
funded more than 5,500 units of affordable rental and home ownership
housing across the State, along with dozens of water, sewer, and other
public infrastructure projects.
I am grateful for the opportunity to speak about housing, and
specifically from a rural housing lens, which can be overlooked during
national scope conversations. I'd like to structure this testimony to
discuss Wyoming-specific and rural housing needs, provide demographic
and supporting examples, and finish with contemplation over the role of
certain pieces of legislation.
In the aftermath of the Great Recession, construction of new for-
ownership homes has not kept up with demand. As a result, our Nation's
stock of for-ownership housing is aging. According to the American
Community Survey, the median age of owner-occupied homes in the United
States is 40 years old. A little less than half of the owner-occupied
homes were built before 1980, and around 35 percent were built before
1970.
As homes get older, they require necessary repairs and upgrades to
remain habitable. Unfortunately, many working families have trouble
accessing affordable financing to pay for such projects. I applaud
Ranking Member Lummis for acting to tackle this issue when you
introduced with Senator John Fetterman the Whole-Home Repairs Act of
2024 (S. 3871), which would establish a whole-repair grant program for
low-and moderate-income homeowners.
Wyoming
Moving to a more local perspective, the State of housing in Wyoming
is complex, expensive, and lacking. The WCDA recently published a
Statewide Housing Needs Assessment. \1\ It is a lengthy report, 300
pages, which further illustrates the point that this is not a problem
we can solve with one silver bullet. Rather it is a complex set of
dials, each needing to be adjusted until we can collectively bring
about change.
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\1\ https://www.wyomingcda.com/demographics/
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Summary of Key Housing Datapoints in Wyoming:
Housing Supply: Current housing needs indicate the State
has over 50,000 households under 100 percent Area Median Income
(AMI) with at least one housing problem including cost burden,
\2\ overcrowding, \3\ lack of complete kitchen facilities, or
lack of complete plumbing facilities. In addition, as the State
is projected to experience moderate population growth in the
coming years and between 2021 and 2030, the State will need to
add between 20,700 and 38,600 additional units of housing.
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\2\ Cost burden is defined by HUD as a monthly housing cost
(including utilities) exceeding 30 percent of monthly income and severe
cost burden is monthly housing costs (including utilities) exceeding 50
percent of monthly income.
\3\ Overcrowding is defined by HUD as more than 1 person per room
and severe overcrowding is defined as more than 1.5 persons per room.
Rental Market: The rental market experienced an increase in
the amount of cost burdened households overall from 32 percent
in 2010 to 38 percent in 2021. Among households with incomes
between $20,000 and $35,000, the increase was from 41 percent
in 2010 to 67 percent in 2021 and among households with income
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between $35,000 and $50,000, from 13 percent to 35 percent.
Home Ownership Market: The typical home value is
unaffordable to households earning the median income in every
county in Wyoming in 2023. In addition, 44 percent or close to
1 out of every 2 homes was sold to someone making 151 percent
of the AMI. While only 1 out of 4 homes sold went to someone in
the middle band of 80 percent-120 percent AMI and those making
less than 80 percent AMI were limited to 12 percent of home
sales.
Demographic Trends: The population of Wyoming is aging; the
proportion of individuals aged 65 and over has risen from 12
percent in 2010 to 17 percent in 2021. This demographic is
expected to increase by another 40 percent+ by 2030. The
percentage of seniors living alone is greater than 1 out of 10
Wyomingites (12 percent). It is crucial to prepare for the
growth of that population because they are more likely to
require housing accessibility modifications, in-home care,
meals, transportation, health services, and institutional care
facilities.
When discussing challenges to housing preservation, the
conversation can differ based upon what definition we are discussing.
The first way of looking at preservation is the affordable nature of
the stock. This is a focus to keep affordable housing that is
restricted or naturally occurring, exactly that, affordable. The second
conversation is the actual preservation of the physical unit itself.
The question becomes, as units age, does the owner have the ability to
maintain or adapt the housing as needed.
Typical in Federal rental programs such as LIHTC, HOME, or NHTF is
at a certain point after the affordability period has run its course,
the rental community needs large capital inputs to be rehabilitated. We
have a process for that. By using those same Federal programs in a way
that can infuse the necessary capital back into the project, we can
ensure it is rehabilitated to quality and safe standards for the
tenant, the project has the capital health it needs to operate, and it
is locked back into a new affordability period--thus achieving the end
goal of preserving the affordable rental stock. By way of example, in
my own backyard of Casper, we have partnered with the Wyoming Housing
Network to use HOME funds to rehabilitate 127 units. This project
included elements such as shoring up foundations, asbestos mitigation,
stair access repair, and full interior updates. The rehabilitated units
will now extend the life of the property and improve the health and
well-being of the people living there, all while remaining part of our
affordable housing stock.
Similarly, single family ownership properties eventually age. We
have aging housing stock in Wyoming with 32 percent of inventory built
over 50 years ago (pre-1970) and 66 percent built prior to 1990. They
need new roofs, furnaces, and windows. Also, the needs of the owner may
have changed, and conditions for accessibility become a needed upgrade
for homeowners to age in place. This is a real concern, as demographics
data in Wyoming demonstrate that the disability rate in the State is
12.9 percent, with the rate of disability increasing with age. For
people over the age of 75, the rate of disability exceeds 48 percent.
As we transition to the discussion around rural capacity, it hits
home as I come from a fifth generation farming and ranching family with
roots in rural South Dakota. Rural areas, especially those isolated
from major cities, face difficulties accessing technical expertise and
incur high costs for material transport, while also making it
challenging to attract developers for their smaller-scale housing
needs. It is common for many smaller municipalities to have part-time
city positions. A city manager, clerk, or even mayor, can be a part-
time position while they work their full-time career outside of city
administration. This creates a barrier for rural municipalities to
fully participate in the process when programs become available. Part
of the equation for funding needs to include adequate technical
assistance to help rural communities to navigate rules that they may
not be familiar with. Otherwise, even a well-funded program may not be
properly enacted in these areas.
Critical infrastructure, including water, sewer, electricity,
floodplain management, roads, and others, presents a major barrier for
rural communities in making homes livable, often at prohibitive costs.
The USDA Rural Development as you can imagine is a strategic partner
for rural America. Their expertise and specific programs tailored to
our constituents fill a need that other Federal programs do not. Yet,
like many other agencies, they are underfunded. Water infrastructure is
a major concern in a high elevation arid State like Wyoming. USDA-RD
community development loans can help keep community infrastructure
functioning. To give an example, the USDA-RD recently helped the
Wyoming city of Manville with a partial loan and partial grant to fund
and update their water system. Manville is a community of approximately
100 Wyomingites. With the cuts to USDA-RD, this program will no longer
be able to offer the grant portion of the funding had they been
applying in the upcoming cycle. As you can imagine, even at subsidized
rates, a community of 100 does not have the tax base to fund a roughly
$4.7M water project. While this may be a specific example to a Wyoming
community, there are hundreds of similar sized communities across the
mountain plains region. These are communities similar to where I grew
up: ranchers and farmers working hard to provide for our national food
supply, but with aging infrastructure that their housing depends on.
As mentioned earlier in my testimony, Ranking Member Lummis, along
with Senator John Fetterman recently introduced the Whole-Home Repairs
Act of 2024 (S. 3871), which would establish a whole-repair grant
program for low- and moderate-income homeowners. A similar yet much
smaller version of this concept exists within the USDA-RD as the 504
program. This program allows very low-income persons (VLIP) to qualify
for low interest loans and grants for necessary home repairs. This has
shown to be a successful program directly tackling the needs we are
discussing today. The Whole-Home Repairs Act works to amplify the
impact of this concept to the low- and moderate-income homeowners. This
vision of Senators Lummis and Fetterman allows our working-class
citizens to access the help they need to keep their homes in a safe,
sanitary, and repaired state.
The bipartisan legislation proposes establishing a nationwide 5-
year pilot to assist homeowners facing critical home repair needs and
combat the housing crisis. Escalating repair and utility expenses often
compel low-income homeowners and renters to endure conditions such as
mold, lead paint, faulty plumbing, and other hazards to health and
safety. When households cannot manage repair costs, it results in
housing deterioration, contributing to the affordable housing
challenges.
This proposed legislation could be instrumental in changing
communities. I don't need to look any farther than central Wyoming to
imagine the impact. Mills, WY, is one of the top 20 cities in Wyoming
in terms of population. The city has a bit over 4,000 residents; and
yes, you heard that correctly, a city of 4,000 can be in the top 20 in
Wyoming. We are talking about rural America after all. At the same
time, Mills is in the bottom 20 percent for income, as the median
household income of Mills in 2021, was $44,115. The city has an
increasing property age with 69 percent of households built prior to
1990. At the same time close to 1 out of 4 property owners are cost-
burdened and more than 1 out of 3 renters are cost-burdened. This
example of a rural community with limited resources is exactly the type
of place that could benefit from the legislation and alter the
trajectory of its residents.
While I know this program could help rural Wyoming, similar
communities exist all across the Nation. Retaining and rehabilitating
our existing housing stock is urgently important, as in many
communities there is not the capacity, let alone the ability to absorb
the higher building expense to add inventory. We must invest in
transforming the housing stock we have, rather than losing it to
obsolescence.
Inventory
While it may not be the exact focus of this hearing, housing rarely
can be discussed without a more holistic view. As such it is important
to also touch on new inventory constraints as an important piece of the
housing problem. Rural projects lack the density and proximity that
make most urban projects work. A series of constraints can compound new
inventory creation.
Prior to my relocation to Wyoming, I was fortunate to spend nearly
a decade with the Hopkins family, who are the fourth-generation family
owners of a community bank serving South Dakota and Minnesota. The
community bank model is at the heart of lending in rural America.
Construction costs for housing projects in rural communities can be
significantly higher compared to urban areas. This challenge is
amplified in rural regions that already struggle with limited returns
on investment, hindering small-scale market-rate developments. A
possible solution is to support rural and small-scale developers by
offering tools or programs like credit enhancements and guarantees to
reduce development risks, which could include guarantees on
infrastructure costs to create buildable lots.
Additionally, costs for credit can unduly fall on rural borrowers.
In the scope of rural consumers accessing financing for home
preservation or necessary updates, two main tools exist. Traditionally
consumers can access funds from a cash out refinance of the collateral,
or agree to a home equity line of credit (HELOC). I am excluding
unsecured personal lines or loans, as they typically have even higher
borrower costs due to the interest rate needing to offset the lack of a
security. The majority of cash out refinances are sold on the secondary
market. These transactions can be caught in appraisal scrutiny by those
who don't understand that a comparable can be a town away based on
limited listings and sales in small communities. Rural appraisals can
also cost more due to the nature of the available appraisers and
associated travel costs. Secondary market models that allow for
valuation flexibility could ease some of this strain. HELOC financing
typically resides on the financial institution's balance sheet,
allowing for some flexibility in terms of valuation method. However,
financial lenders must weigh their loan risk with the customer profile.
High loan to value loans may not meet the lending matrix or may carry
higher costs. When considering the origination cost to access funds
either through a cash out refinance or a HELOC, the percentage of
expense to the loan proceeds can make the cost of borrowing prohibitive
to consumers.
The workforce housing crisis extends to nearly all counties,
particularly impacting households with incomes ranging from 80 percent
to 120 percent of the AMI. The scarcity of affordable, accessible, and
quality single-family and multifamily housing in these income brackets
often forces families into costly housing options that do not
adequately meet their needs. Moreover, the housing shortages at all
price points pose significant challenges for businesses in attracting
new employees and retaining their current workforce.
The lack of affordable and available housing remains a significant
barrier to economic prosperity for many, limiting business and
workforce opportunities in these communities. This shortage hampers
efforts to attract new workers, potentially leading to reduced capital
investment in rural projects or businesses opting not to establish
themselves in Wyoming.
In Wyoming, both urban and rural counties are grappling with a
shortage of new and renovated single-family and multifamily housing
across all price ranges. The lack of affordable, accessible, and high-
quality housing stems from several factors, including a scarcity of
shovel-ready land, the steep costs of construction, a limited pool of
construction workers, and insufficient capital. This situation has led
developers, investors, and families to hesitate in making new
investments in construction or renovation, especially in rural areas
where the high construction costs often outweigh potential returns on
investment.
One solution that may hold promise are the technical advances in
manufactured and modular housing to promote affordable and accessible
housing in rural Wyoming, addressing workforce challenges. Like many
States in the mountain plains region, we have a short building season.
Manufactured housing has the ability to be constructed in a more
efficient process, in a controlled environment, and can be done in any
weather condition. In the past, manufactured housing may have simply
meant constructing a stick-built property using the same methods, just
under a roof. The process in many businesses now more closely resembles
that of a car assembly line. This allows for less waste and tighter
building tolerances. These units are then able to be moved on-site and
set with utilities, reducing the construction timeline and allowing for
more housing to come online during a given season.
Legislation
The last topic I'd like to visit is that of legislation and how it
may offer solutions. Legislative reform is multifaceted and even
considerate bills contain underlying costs. These financial commitments
must be weighed against the public need for such programs and if viable
alternatives exist. Oftentimes there are multiple solutions to the same
problem, so finding the optimal path forward can be complex. With that
mindset in the forefront, I offer commentary on possible options for
Committee consideration.
One of the most important Federal resources we have for
preservation is the HOME Investment Partnerships program. HOME is a
flexible block grant which States like Wyoming use to meet our most
pressing affordable housing needs for rental housing, including new
construction and rehabilitation.
Despite how essential the program is, HOME has never been fully
funded. It was last reauthorized in the mid-1990s at just over $2
billion, but actual appropriations have never reached that level. In FY
2024, Congress provided only $1.25 billion for HOME, a $250 million cut
from the previous year. We expect Wyoming will receive approximately
$3.5 million. With that amount of resources, Wyoming will again need to
choose whether it is better to focus those funds on preservation
activities or new construction.
In the decades since Congress last reauthorized HOME, we have
learned much. Needs and priorities have also evolved. This is why I
want to thank Senator Cortez Masto (D-NV) for introducing the HOME
Investment Partnership Program Reauthorization and Improvement Act (S.
3793), which would make a number of changes to HOME, including
adjusting the authorized funding for the program to reflect inflation.
Some of the programmatic changes this bill makes would help us to cut
unnecessary red tape, which will allow us to use these funds more
efficiently.
According to the Joint Center for Housing Studies at Harvard
University, America's rental housing stock has never been older than it
is now, with the median age of properties as of 2021 sitting at 44
years. Many of these properties no longer meet habitability and safety
standards due to structural deficiencies and lack of basic features
like electricity and hot and cold running water. Others are habitable
but still in need of major repairs or lack accessibility features
needed for an aging populace.
In the last century, our Nation invested billions of dollars in
affordable rental housing through direct subsidy and insurance programs
run by the U.S. Department of Housing and Urban Development (HUD) and
the U.S. Department of Agriculture (USDA). Most of this housing was
built decades ago. Beginning in the 1980s, the Government largely
changed the way it supports affordable housing production by instead
using the tax code to incentivize the production of affordable rental
housing, creating what became the most successful housing production
program ever, the Low Income Housing Tax Credit (Housing Credit).
Today, the Housing Credit is the cornerstone of how we finance
affordable rental housing. But it is called on to do more than new
construction. We rely on the Housing Credit to preserve the affordable
housing we initially financed with HUD and USDA programs,
recapitalizing and rehabilitating these properties so that they do not
fall into obsolescence as they age or transition to market rate. State
agencies receive a finite amount of Housing Credit authority each year.
With it, they must decide how much to devote to new production in areas
of opportunity to support economic growth, and how much to use to
preserve the aging housing stock that we cannot afford to lose. We
simply do not have enough to do it all.
That is why I say thank you to the Members of the Subcommittee who
have cosponsored the Affordable Housing Credit Improvement Act (S.
1557). This legislation would restore a cut in resources the program
suffered when a modest temporary increase expired after 2021 and build
on top of that by expanding the program by 50 percent. It would also
modify the rules related to the use of tax-exempt Housing Bonds so that
State Housing Finance Agencies like the WCDA could make more efficient
use of bond resources. Moreover, this legislation would make
programmatic reforms that would streamline the way the Housing Credit
works, increasing its efficacy making common sense changes so that we
can do more to preserve affordable rental housing for our most
vulnerable residents. If passed, the Affordable Housing Credit
Improvement Act would allow a national projection of financing nearly 2
million additional affordable homes, including preservation of existing
properties.
Aspects of this bill--enacted on a temporary basis--are included in
legislation currently before the Senate, the Tax Relief for American
Families and Workers Act. Even though temporary, these changes would
provide financing for over 200,000 additional homes nationally.
There are two other legislative priorities that, while not under
the jurisdiction of the Banking Committee, I feel should garner
consideration in preserving the supply of affordable for-ownership
homes. With the support of Housing Finance Agencies across the Nation,
the National Council of State Housing Agencies (NCSHA) urged Congress
to pass the Affordable Housing Bond Enhancement Act (AHBEA; S. 1805),
which was introduced by Banking Committee Member Senator Catherine
Cortez Masto (D-NV) and Senator Bill Cassidy (R-LA). This bill would
make a number of simple, but effective changes to the Mortgage Revenue
Bond (MRB) and Mortgage Credit Certificate (MCC) programs. MRBs and
MCCs are the primary means by which State Housing Finance Agencies
(HFAs) finance their affordable home ownership programs.
Among other changes, the AHBEA would increase the MRB home
improvement loan limit from $15,000, where it has been since 1980, to
$50,000. The limit would also be indexed to increase with inflation.
The current loan limit, which has not been increased in 44 years, is
not adequate to cover the costs of most rehabilitation projects.
Increasing the loan limit will open up a new avenue for HFAs to
preserve affordable for-ownership homes.
Further, the Neighborhood Homes Investment Act (NHIA), introduced
by Ben Cardin (D-MD) and Todd Young (R-IN), would establish a new tax
credit, the Neighborhood Homes Credit, modeled after the highly
successful Housing Credit. It would incentivize developers to construct
new or substantially rehabilitate housing by closing the value gap, up
to 35 percent of eligible development costs. In many census tracts and
rural areas, developers cannot sell homes for what it costs to
construct or substantially rehabilitate them, known as the ``value
gap''. It is estimated that the equity raised by the Neighborhood Homes
Credit would finance the building and substantial rehabilitation of
500,000 affordable homes nationwide for low- and moderate-income
homeowners over the next 10 years.
Finally, for legislative topics, I want to raise awareness about
another issue that I believe is impacting preservation of affordable
housing in Wyoming and across rural America. The Government Sponsored
Enterprises (GSEs) Fannie Mae and Freddie Mac are important
participants in the Housing Credit program, able to invest up to $1
billion each in 2024. They are also required by Congress to serve rural
areas and support preservation under their Duty to Serve obligations.
However, a little-known tax issue is currently preventing the GSEs from
participating in multi-investor Housing Credit funds.
These multi-investor funds are better able to invest in small,
rural deals because the risk associated with these deals is spread
across multiple properties and multiple investors, in contrast to
proprietary funds that have just a single investor and invest in only a
small number of developments. Fannie Mae in particular has been active
in multi-investment funds since the GSEs re-entered the Housing Credit
equity market in 2018. Freddie Mac currently invests only in
proprietary funds.
The issue at hand is the question of whether or not the GSEs are
so-called Tax-Exempt Controlled Entities (TECEs) due to the Preferred
Stock Purchase Agreement with the Treasury. Other investors in multi-
investor funds have become worried that they might be TECEs, which are
ineligible for certain tax benefits that impact the yield investors
make on these investments. Unfortunately, the inclusion of a TECE in a
multi-investor fund taints the fund for all participating investors.
Thus, while this question is open, other investors will not join a fund
in which the GSEs participate.
This TECE issue has forced Fannie Mae to pull out of multi-investor
funds, leaving many of these funds scrambling to make up for the
investment Fannie otherwise would have provided. This is having a
direct negative impact on Housing Credit investment. In fact, Fannie
Mae even reduced its Duty to Serve commitment to rural investment for
2024.
Last year, Senators Warner (D-VA) and Moran (R-KS) led a bipartisan
letter to Treasury signed by a total of 20 Senators urging the
Secretary to issue guidance that the GSEs are not TECEs. However,
Treasury has not yet done this, as the legal issues are complex.
Treasury is continuing to investigate possible solutions. In the
meantime, we believe that Credit pricing in rural areas is suffering
because of this. Our last allocated round of Tax Credits had the lowest
pricing that we have encountered during underwriting review: pricing in
the low 80s, when not that many years ago credits were priced in the
90s. While tax credit pricing is driven by a variety of variables, such
as Community Reinvestment Act (CRA) needs, and the supply of other
credits in the market, this new development may be an additional cause
for consternation in the market.
All of the Legislative initiatives mentioned seek to solve a common
problem. Yet, they go about the process in unique ways. Open dialogue
regarding the merits and costs will be necessary to find common ground
and determine the best route.
Closing
In closing, rural housing challenges while sharing many of the same
constraints as housing in general, have unique nuances. Unfortunately,
those most greatly affected are Wyoming's most vulnerable populations,
including the working poor, individuals with physical and mental health
challenges, those experiencing homelessness, and the elderly.
In Rural America, we pride ourselves in pulling ourselves up by our
bootstraps and lending a helping hand when needed. We look to embrace
the challenges posed by our aging single-family housing stock,
including how needed repairs that contribute to a healthy and safe
living environment are financed. We desire to partner with State and
local home improvement and repair programs that are successfully
enabling homeowners to age in place, improve the energy efficiency of
their homes, and make critical health and safety repairs. This includes
our Federal partners from the U.S. Departments of Housing and Urban
Development, Agriculture, and Energy. Finally, we look to discuss ideas
and policy considerations for scaling successful programs, as well as
opportunities for interested parties to invest in or support home
improvement and repair programs that work.
I would be remised if I didn't take a few moments to thank our
allies in Wyoming and here in Washington, DC, for your willingness to
engage in this conversation and partner on solutions. I also would like
to specifically thank all of the team back at the WCDA. You show up
each day and put in the hard work; work that makes real life impacts to
your fellow Wyomingites. Be proud and thank you. Finally, to close I'd
like to quote a recent post by Governor Gordon's team; ``The world
needs more Cowboys and Cowgirls, and . . . Wyoming needs more housing
for our Cowboys and Cowgirls.'' Thank You.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO
FROM JESSE ERGOTT
Q.1. The Biden administration recently announced it would cap
annual income limit and maximum rent increases for LIHTC and
Section 8 projects at 10 percent year-over-year.
What impact will this change have on existing properties in
high-cost areas?
A.1. While I represent an organization that does not currently
engage in affordable housing development through the LIHTC
program or property management utilizing Section 8, I can share
a response to this question based on general experience in the
affordable housing space and from insights gathered from
colleagues who are more directly involved in this work. The
decision by the Biden administration to limit rent increases
has generally been well received by tenant advocates as an
important cost-control measure to protect the most vulnerable
renters, many of whom are considered severely cost burdened,
from egregious rent increases. While these protections may be
especially helpful in the short term to tenants in high-cost
areas where there is additional pressure for pricing increases,
there is concern that this cap will also limit the ability of
developers/owners to keep pace with rising operating costs
should the need arise. In some areas, especially those where a
property may already receive a maximum rent and a typical
increase may be more than 10 percent due to market conditions,
the cap may ultimately result in lower rental income than is
needed to sustainably operate a LIHTC property. Many developers
and property managers also seek to provide other critical wrap-
around services to tenants, but if normal operating costs can't
be covered through rents and subsidies, these services are
often the first to suffer by losing funding.
Q.2. What impact will this change have on new LIHTC development
in general and in high-cost areas specifically?
A.2. In general, while adding protections for economically
vulnerable renters can be considered a ``win'', there also
seems to be a level of concern among affordable housing
developers who now have another factor to consider when making
a decision regarding whether or not to move forward with a
project, especially in a high-cost area where price increases
may need to be factored into the sustainability plan for the
project. Costs for developing affordable units have risen
significantly in recent years across the board, and the
assembly of capital stacks and long-term financing plans for
the projects tend to already be incredibly complex. For
properties currently under development, this change will affect
future anticipated rents which ultimately alters the
supportable debt of the project.
If a project in a high-cost area requires a price increase
greater than 10 percent to be sustainable, then the 10 percent
cap will likely lead to a larger financing gap and will
increase the need to seek other types of funding (tax credits,
soft financing, bonds, grants, etc.) which can be difficult to
secure. Taking these factors into account during the
development process, there is concern that this change could
discourage the creation of additional affordable housing supply
by adding another challenge to the already long list of
barriers developers face to bringing (badly needed) new units
online.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO
FROM ROBIN DAVEY WOLFF
Q.1. The Biden administration recently announced it would cap
annual income limit and maximum rent increases for LIHTC and
Section 8 projects at 10 percent year-over-year.
What impact will this change have on existing properties in
high-cost areas?
A.1. At this time, Enterprise does not believe that capping
annual income limits and rent increases at 10 percent will have
a negative impact on Housing Credit properties, even for
properties in high-cost areas. Enterprise Community Partners
has over 40 years of experience in affordable housing,
investing $72 billion nationwide and creating one million
homes. Enterprise is one of the largest Low-Income Housing Tax
Credit (Housing Credit) syndicators in the country, with more
than 1,300 properties in our portfolio. We also own and operate
115 properties serving 24,000 residents in the Mid-Atlantic.
Many of these properties are in high-cost areas.
As part of our standard underwriting of a Housing Credit
property, we assume that expenses and rent will increase at a
rate well below 10 percent. An in-depth analysis of the
reasonableness of initial rent levels and operating expenses
allows us to rely on a more moderate level of annual increases,
though we model to ensure financial stability even if higher
levels should occur.
Q.2. What impact will this change have on new LIHTC development
in general and in high-cost areas specifically?
A.2. Enterprise does not believe that the imposition of a 10
percent limit on increases in income and rents will have a
chilling effect on the development of new Housing Credit
properties, even in high-cost areas. Enterprise is a mission-
based organization with the creation and preservation of
affordable housing as our central tenet. In general, Enterprise
has not observed tenant incomes increasing at an annual rate
close to 10 percent. Because rent limits for a unit are based
on what would be affordable for a target percentage of AMI,
rather than the tenant's actual income, allowing rent to
increase more than 10 percent each year could quickly make
Housing Credit homes unaffordable to residents if their income
is not keeping pace. Operating expenses have increased,
especially in high-cost areas; however, every effort should be
made to avoid passing off those costs to Housing Credit tenants
in the form of higher rent. An increase over 10 percent would
certainly not be sustainable for residents.
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RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO
FROM CHRISTOPHER VOLZKE
Q.1. The Biden administration recently announced it would cap
annual income limit and maximum rent increases for LIHTC and
Section 8 projects at 10 percent year-over-year.
What impact will this change have on existing properties in
high-cost areas?
What impact will this change have on new LIHTC development
in general and in high-cost areas specifically?
A.1. Thank you for the question. Maintaining the balance of
resident affordability and ownership costs is an important
piece of long-term rental preservation. We are understanding of
the owners and know how much the cost of managing housing has
increased, especially in insurance, cost of goods, salary, and
staffing costs. That said, we also have to consider the
population that we serve, and their capacity to absorb cost
increases. Many States already have an overlay on rental caps.
Locally here in Wyoming, our State overlay contemplates rent
cap restrictions on the non-LIHTC funding sources (HOME &
NHTF); yet we remain 3-4x oversubscribed on new development
applications indicating a healthy market. In underwriting a
multifamily property, long term projections do not expect a 10
percent year over year increase in rents; rather that type of
assumption would most likely be a red flag for a new
development application. While there may be isolated cases
where these caps pose challenges, I don't view this as a
widespread industry issue, nor do I perceive it impacting
investor interest in the Housing Credit. Instead, factors like
Community Reinvestment Act (CRA) reform and new energy credits
are more likely to have a lasting impact. So as with other
policy changes, they should continue to be evaluated to ensure
they support project viability amidst evolving market
conditions.
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