Housing and Economic Policy experts testified on the high cost of housing and possible policy solutions to help lower prices. They appeared before the senate committee. This runs about one hour 20 minutes. This country has not done enough to produce the housing we need from 20002015, about half the country well 7. 3 million homes short on housing production. The shortage, of course, makes housing more expensive and congress has not done his job for years and it was just last year that we hosted in this committee the first hearing on the state of housing in america in nearly a decade. One of the first things we did after he took the chairmanship was talk about housing because the foundation of everything in our lives and it determines so much about your life. It eats up the biggest chunk of most peoples paychecks. One eviction says the rent eats first. For a lot of families, it means crippling stress at the end of each month, how do i pay my rent and then can i pay my electric or water bill or internet or credit card . For years, the market is not produced enough housing that working people can afford. Home health aides and nursing assistants in restaurant workers working fulltime have long been paid too little to afford even a one bedroom apartment, let alone fulfill the dream of actually owning their own home. Young, aspiring homeowners have faced insurmountable barriers to homeownership. Parents were the debts were denied the dream of homeownership or ripped out by predatory lending. Over the past few years, when mortgage costs were affordable, some of these families thought maybe now is a chance to buy a home but they found themselves competing with wealthy borrowers for too few homes and they werent losing out to a family with more money, they were out bid by wall Street Investors from out of town paying in cash. Families spent more than a year looking for a home. One man even resorted to standing on the side of the road wearing a sandwich board asking someone, anyone to sell them their home and he put in 18 unsuccessful bids. There is just nothing to buy and i with home prices rising in Mortgage Rates going up, homer homeownership is increasingly out of reach. 4 million families will now be renting in a rug in a rental market that was already too tight and rentals top 2000 per month if you can find a place to rent at all. Renters are trying to find a place they can afford step this exasperated exacerbates the wealth gap we have and puts this out of reach especially for families of color one millions of existing homeowners have 40 times the wealth of the average renter, they so there will skyrocket as home values soared and disproportionately, people of color fell behind. We have under invested in housing and communities for decades and now we see the consequences. A recent report found a shortage of 3. 8 million homes nationwide doubled shortfall we had two years ago. Unless we act, its tough to see how renters will ever catch up. The answer is clear, we need more Housing Available to buy for the millions of homeowners starting out and we need more housing for renters especially those in the lowest income and our Committee Members are trying to find solutions, senator van hollen has a bipartisan proposal. We know the market doesnt build housing. Senators reid and cons of a bill to increase Energy Efficiency of housing. Senator menendez has a proposal to help communities to make comprehensive housing in transit invested investments. Senator warman senator warren wants to produce more housing that tribal committees can afford. Senator masto from nevada has proposal to fund repairs and manufacturing housing committees to keep those communities and keep part of our housing in this country to keep those communities affordable residence in senators warnock and van hollen are sponsoring a proposal to invest in any for local projects. I look forward to hearing from the three Witnesses Today to support housing and communities and we cannot delay this problem any longer. Its been decades building and its not a republican or democratic problem. Congress must do better. Home price increases are not being created in a vacuum. Inflation youll by reckless spending and lacks monitoring policy has been an enduring phenomenon. Adjusted for inflation, we have fallen almost every month since President Biden took office. The average American Real wages have fallen by 5 . Even worse for bluecollar workers. It comes as no surprise that homeownership has become increasingly unaffordable and with respect to home housing specifically, demand far outpaces supply in many regions. Why is this happening and why isnt the Housing Market naturally correcting these imbalances . There were some bad policy decisions. During covid, the federal government made a number of mistakes. 80 billion went to rental assistance vouchers and other subsidies and thats above and beyond the hundreds of billions in ordinary housing subsidiaries we spend every year and a significant sum of that remains unspent. The administration and democrats in congress dropped hundreds of billions of dollars to stimulate an already Strong Economy and they unnecessarily expanded foreclosure and eviction moratoriums. Outside of the covid emergency, the number of the cost of subsidized housing balloon. We provide tax breaks, Tax Deduction on local properties, low Income Housing tax credits, we subsidize mortgages with guarantees, the fha, the v. A. And mortgage insurance and guarantees and down payment assistance programs. We have usda and hud programs, Public Housing funding, section 202 housing for the elderly in section 811 and rural rental housing, home block grants, homelessness assistance, its unbelievable stop and its a fact that the vast majority of the massive Government Support of housing subsidizes demand rather than supply. Even more amazingly, all this spending has been meaning hasnt meaningfully changed rates over the decade or narrow the racial homeownership cap stop in 1970, 52 years ago, the homeownership rate in america was 64 . Today trillions of dollars later, its 65 . Black homeownership levels are almost the same as when the Fair Housing Act was passed in 1968. These Government Policies have run up a lot of debt but they mostly just made housing more expensive step if the administration were serious about lowering housing cost, he could start by removing misguided trade barriers the drive up the cost of construction. Materials of koskinen trust test consumers billions. They had played at least 14 billion more just on aluminum imports because of the tariffs. Tariffs have contributed to pricing increases but the administration is continuing to promote a reckless spending agenda that will make soaring housing costs even worse. The white house released a plan that supposedly would boost housing lie but instead use the opportunity to add upward pressure on housing by introducing a proposal to increase spending by 75 billion dollars in housing vouchers and 80 billion on Public Housing. Additional spending of this kind will further fuel inflation. The white house plans proposing too much risk for taxpayers. The bipartisan efforts, the white house now embracing the gse conservatorship as a means for social engineering of its housing and Racial Equity policy. The fhfa relaxed its investor and secondhome loans and reduced the gse guaranteed fees and required the gses to develop equitable Housing Finance. The gses new programs limits eligibility based on race and goes on to give certain borrowers based on the color of their skin. Republican sent a letter yesterday expressing grave concern about the legality and the discriminatory nature of these new programs. I hope the director will reconsider the discrimination on the basis of race and act to protect taxpayers from excessive risk of conservatorship. Racial discrimination is always wrong and this is no exception. Relaxing underwriting requirements do change political prayer his wrists low income families to wealth loss. The state of the Housing Market only affirms the urgency of gse reforms to improve Housing Affordability for owners which should favor policies that leverage the power of free enterprise. We should phase out the subsidies like down payment assistance and focus on a narrow subset of borrowers and should end the conservatorship to ensure that this and future administrations will not influence the pricing and allocation of mortgage credit step we have spent countless sums and got virtually nothing to show for it stop its time for meaningful reform. Thank you. Are Witnesses Today is a chief economist and Vice President of research of the National Association of retailer of realtors. Also the regular of this committee, served as a commissioner in the financial crisis in the Great Commission and the congressional budget office. Thanks for your years of Public Service and joining us on this committee frequently. Ms. Peggy bailey is the Vice President for housing policy and recently served as a Senior Advisor and rental Assistance Department of urban development. I will begin with dr. Yu, welcome. Thank you for inviting me to testify at this hearing was to i am the chief economist and senior Vice President of research at the National Association of realtors. I lead the Research Team as we gather pertinent and timely housing data and oversee Research Activity pertaining to the real estate industry. Most of our 1. 5 million members are Small Business owners, 87 are classified as independent contractors. The most pressing concern expressed by our members over the years has been consistently lack of inventory and its impact on the Housing Market. Housing market activity since the onset of the pandemic has been quite sick rising and extraordinary. Home prices set new records. Beginning this year marked test Market Conditions have shifted dramatically. Our latest home sale activity shows three straight months of the through june. The latest data on an annualized basis, five. 12 million home sales are low the 2019 annual total. In other words, current Sales Activity is trending below prepandemic activity. Singlefamily Housing Starts, the Building Activity in june also fell for the Third Straight month and is now at the lowest point since the lockdown months in 2020. Even as home sales have softened in recent months, the median home price continue to set new records. In june, there was a rise from 13 percent. Appreciation rate has shown closer to 20 . Home prices are set to decelerate in the home sales softening conditions. But i do not foresee any National Home price decline. Some local markets may pull back somewhat from record high home prices but any shortterm price adjustment in these markets, if they occur, will be less consequential compared to the immense longterm Housing Affordability challenges facing the country. Lack of supply in the Housing Market is not a new phenomenon. It is certainly more noticeable now but even before the pin demo, we estimated nearly five6 million housing unit deficits in relation to the population and job growth in the country. The fast rising rents and home prices are a direct consequence of the housing shortage that persisted even before the onset of the pandemic. What does this mean to be priced out . When a solid majority of americans are homeowners. Homeowners today are enjoying gains from home price growth. After reasonably accounting for 30 price rise over the past three years, and very little cash refinancing that has been taking place, my estimate as of 2019, my estimate of the typical homeowner wealth conservatively is at 320,000 so there will be a median network for a home net worth for a homeowner. The median renter network is likely to be in the 510,000 dollars range, a vast difference between renter and homeowners. Homeowners are quite content about the recent market developments and have fewer financial worries than nonowners. This is the crux of the current housing crisis. Renters are paying ever higher rent with disappearing prospects of ever realizing the American Dream which Many Americans associated with ownership,not oe difficult to obtain due to the housing shortage but the same housing shortage pressures are causing rates to accelerate in the current environment and crowding out people. Unless we can address supply issues, the affordability will continue to be an ongoing issue for Many Americans for many years to calm many years to come. Thank you for the opportunity to present my statement today. Thank you, chairman brown. Its an honor to be able to talk about the state of housing in america. There are high and rising prices in the rental and the homeowner sector. This has occurred despite the fact that last year, we saw a record increases in supply, the largest number of singlefamily homes in 13 years. All of that should lead you to suspect the problem is on the demand side of the market and i think there is a lot of evidence thats the problem. Weve recently seen additional subsidies, fiscal policies that senator toomey mentioned in his Opening Statement but in particular, the monetary policies of the Federal Reserve stop in addition to keeping Interest Rates low, they had a quantitative easing that in buying 30 billion of mortgagebacked securities each month. Why they chose to allocate 30 billion dollars capital to the Mortgage Market, i dont know that it had the unmistakable impact of fueling demand in the housing sector and house prices appreciating came with it stop thats about to reverse the one thing we can expect in a stressed Housing Market over the next year or so is the feds reserve reversing course and rates will be higher. Weve seen the impact on that already. They will also unload about 35 billion dollars per month of the mbs, essentially switching the impact on the Mortgage Market and that will have a big impact. The fed needs to do this. If you look to the Consumer Price index, shelter is about third of the Consumer Price index. If the fed wants to hit a 2 target and shelter is inflation is at 6 , Everything Else has to be at zero and that wont happen. They need to bring them shelter Price Inflation and tighten financial conditions. Its traditional to lower the demand for housing and the construction of housing and lower the production of furnaces and water he is and water heaters and all the things that go into it. Ironically, they are in the position of having to do this because of the elegy errors weve made at a time when there is low inventory. I suspect a very stressed Housing Market over the next couple of years. There is this an array of subsidies that exist and ive done little to change the overall rate of ownership in the United States and i would highlight the continued role of the gses. They remain seriously undercapitalized. They have undertaken this initiative for equitable Housing Finance plans. These are demand subsidies by another name. They go the wrong direction at the wrong time and have an array of defects in the form of social engineering and racial discrimination. I would very much fear this is a return to the gses in the past that exposed taxpayers to a normas risk which resulted in generational wealth lost for many communities of color and the housing bubble. I think would be wise for the fha to finalize a rule and make sure the taxpayer gets protected. If there will be policy changes, they should focus on the supply side and the production of housing. I would second the recommendation of dropping the tariffs that make construction more expensive. I think it would be wise to think hard about the workforce available in the construction sector and that would mean returning to some of the programs that were in place under the Previous Administration and were abandoned stop Immigration Reform is a great way to a 4 to improve the availability and that should be on the table. It would be wise to pare back any permitting obstructions and other unwanted land use restrictions at the local level to increase the supply stop thank you for the chance to be here and i look forward to your questions. Thank you for being here. Miss bailey, thank you for joining us. Chair brown and Ranking Member to me and members of the committee, thank you for the opportunity to testify before you today stuff i am the Vice President for housing policy with the center on budget and policy proposals. The nations most pressing housing problem centers on the millions of people with low and extremely low income were not able to afford stable housing step several factors contribute to this problem. First, we obviously lacked sufficient supply of affordable rental housing step over the last 18 months, we had a Housing Development boom but this may have plateaued and is not enough to overcome the existing rental housing deficit. Plus, without federal and state intervention, the new units will largely the unaffordable for people with low income. Second, shortages of Affordable Housing singlefamily homes means renters that might be ready for homeownership stay in rental housing longer, reducing vacancy rates and driving up rental costs. Also, we are losing affordable rental housing as Properties Come to the end of their initial affordability obligation, typically 2030 years or become so deteriorated that they must be demolished without being replaced and finally, often missing from the housing supply discussion is the importance of housing vouchers. They help low income families afford housing buffer families with the lowest income, its too simplistic to call them subsidies. These families do not have incomes high enough to afford any quality Housing Units because landlords must set rents at these high enough levels to cover their own cost to operate the building, to properly maintain the building and pay any debt they own. Weve seen what happens to rental housing when operating costs are not adequately funded. Thats what has happened to public funding and federal programs with inadequate or no ongoing operating support. Vouchers correct this mistake by helping families afford rent and getting landlords and owners the resources they need to pay their bills and maintain their properties which bolsters supply. To make this point clearer, the average extremely low income renter household had an averaging of about 11,000 in 2019. 30 benchmark for Housing Affordability, about 280 per month but in 29 came of the average market rental unit operating costs were 520 per month and over 580,000 per month if the landlord paid utilities. These figures have surely risen substantially since then step in the past, our solution was to build Public Housing and now we use housing vouchers which allow people more choice of where to live in are a tool to reduce segregation of people with low income which are disproportionate people of color in neighborhoods that have story not been invested in. Housing agencies can process these batches to guarantee the developments that includes Units Available with lower incomes. Investing in the Housing Voucher Program and mitigate the need for new, affordable units by allowing people who live in high all the units and their in their desired neighborhood to stay in place. We are confident housing agencies if they have money for their vouchers and administrative costs would be able to use many additional vouchers, particularly if resources are targeted to agencies that already have high utilization rates. The emergency Housing Voucher Program funded through the American Rescue plan demonstrates how the agency can utilize new vouchers. Even under difficult rental markets. So far, theyve been able to have improve the lives of 26,000 people. To effectively address these issues, congress should support major increases to the housing voucher per, the Senate Transportation hud Sub Committee should fund 140,000 new vouchers passed by the House Appropriations committee along with adequate ending for voucher administration, increase Capital Funding house funding for Capital Housing and defend existing Affordable Housing, remove their ears to homeownership and as noted, we cannot forget the unique housing challenges for People Living in tribal lands coming using resources from native american alaskan natives and native hawaiians are essential. Thank you for the opportunity to testify and i look forward to answering your questions. We will begin from with the senator from georgia. Thank you. Since 2019, rent in georgia has increased 13. 7 . Its one of the highest increases in the country as far as Income Growth over the same time. For the First Time Since it began tracking data, the Federal Reserve of atlanta has deemed the atlanta Housing Market is unaffordable. That forces more and more prospective homeowners, as you pointed to keep paying too much. This is not just the city of atlanta step everywhere in georgia, people are feeling the pinch. Dauphin county has a population of 25,000 has a lower homeownership of nobility index than fulton county. The best way we can lower prices to increase supply and ive supported several bills that do just that but georgians dont have the luxury to wait several years for home prices to fall. What are some Immediate Solutions we can offer renters especially those who spend a significant portion of their income on rent to help them provide the relief they so desperately need to . Thank you for that question. The most immediate thing we can do to help renters is to provide rental assistance, mainly through the housing choice Voucher Program which can immediately give renters the resources they need to afford other things that senator brown mentioned in his Opening Statement, who, transportation and school supplies, giving some a housing voucher will allow them to pay only 30 of their income toward rent so it frees up more income for other needs. Do you think offering tax cuts would be helpful . It would be helpful but to give them more cash to pay their basic bills can be more helpful. Ok, when we passed the American Rescue plan, one of the provisions in that bill was the single largest tax cut for middle and low income families in history. I regret that we could not get it done. Do you think that kind of tax cut could have been helpful . Absolutely, those provisions in the American Rescue plan help reduce significantly poverty for children so extending those in doing more of those can only help low in middle income families. George is in the middle of a housing crisis as i pointed out. Understanding how large Institutional Investors and wall street private equity firms from outside georgia is an important part of this puzzle. Institutional buyers made up 13 of the residential sales in 2021. Institutional landlords do not look to acquire properties uniformly. Institutional buyers made up 19 of all sales. The second highest in the nation and according to a survey, mostly outofstate investors made almost 43 of all purchases in the atlanta area in late 2021. Dr. Yeung, what effect is that having on Housing Markets in cities like atlanta and surrounding areas . We hear that from our members in georgia that institutional buyers are coming in and they are pushing away firsttime buyers especially those requiring first generation buyers. They have very little chance and furthermore, it changes the dynamic of the neighborhood where you have a landlord overseeing homeowners rooted in the community. What data do we need to fully understand how Institutional Investors are influencing our Housing Market . The Data Collection is an fortin so the 13 of institutional buyers, they may be up grading it but there is also people who are permanent corporate landlords and i think thats where the concern is where its essentially leading to more of a renter nation rather than giving an opportunity to buy a home. I think we need research to effectively understand how private equity is impacting marcus in atlanta and across the country and i look forward to introducing legislation soon to address that issue. Thank you so much. Thank you for letting the most Junior Member of the senate go first. Thank you, senator warnock, senator toomey is recognized. Im going to follow up on the point you made and i think ms. Bailey touched on this point which is that in recent years, we have seen a big surgeon supply. The data suggest thats true about most singlefamily and multifamily housing most it seems to me, given an light of that fact and when you look at the prices across the economy, a lot of the price escalation is probably a reflection of the general inflationary environment. Does that make sense . As you point out, the fed made it particularly egregious in my mind by choosing to allocate credit in the mortgage space where there was no problem. Its not as if credit wasnt functioning. For months and months after we were well past the crisis, they kept pumping money into subsidizing origins which lowered the rate of mortgages relative to where they would other wise be at a time when the Housing Market was clearly overheating as the economy was generally. It certainly seems as though we need more supply. You touched on a few of the factors that seemed to be contributing to higher costs and material costs, the great permitting and land use which restricts the ability to build new homes, the labor shortage. Can you elaborate on whats holding back the supply that the market seems to be looking for . I dont think any single one of those issues stands out as the key. Its a combination stop there are too many impediments to finding suitable land, building the density necessary. If you have an urban area, you need to produce affordable rental units and finding the workers to do it. Those problems are across the economy. And they dont go away with the wave of a one so we have an idea of why but its unrealistic to think people love to solve this problem weekly but that read buyers and an arms Residential Construction boom which is the wrong thing for the economy now. We have to put in place a longterm strategy. Im concerned about further demandside subsidies making the pricing problem worse. I think of the analogy of what weve seen in Higher Education for years. With all good intentions, theres all kinds of federal grams that have subsidized Higher Education and we have seen skyrocketing costs and Higher Education long before inflation occurred generally in the economy. It was happening there because the federal money government kept throwing money at it but we see these proposals are further demandside subsidies stop your fellow witness was quoted as saying a proposal for down payment assistance featured in the build back better plan would add demand on top of already Strong Demand so it will push up housing prices further. He also stated that a game for current homeowners thats a gain for current homeowners but not homebuyers. Is that a big part of the net effect of these further demandside subsidies . I completely agree on this is a common strategy federal policy that rather than dealing with the supply problem, you subsidize the demand further. With respect to the f hfa, weve seen this new requirement thats the equity finance plan. The plan proposes subsidizing down payments and other mortgage costs like appraisals and title insurance. This seems to be a mechanism that is likely to contribute to inflation but its also a very disturbing exercise of social engineering on the part of unelected folks at fhm. Do you see that home mechanism as consistent fhfa to return the gses to solve it condition and conserve their assets . Is this part of their mission . It is not and after 14 years, they are still not adequately capitalized and they are now expanding the credit locks. As a result, they will be at greater risk of losses and thats exactly the wrong direction to take. Thank you you, mr. Chairman. Senator tester from montana is recognized. I dont think montana is an outlier here, just about everywhere in the country there is housing shortages. In the faster growing areas its come to the point where we have teachers in montana that dont take the job or live in a camp ground because housing is to unaffordable. Weve got a lot of folks from texas or the coast moving into montana. That would make me think that there would be houses for sale in texas and in San Francisco and l. A. In those kind of places but im not hearing about housing surpluses there. Could you give me an insight as to whats going on and why one month we have housing surplus and then six months later, not near enough houses . Any Economic Data physically on housing, there could be some volatility month to month. We have simply not built enough. With people moving into your state, there was a housing shortage in texas or maybe moving to montana creating the demand and causing a housing shortage in your area but thats a drop in the could compared to the housing shortage they are currently experiencing. Every once in a while senator toomey and i agree. One of the things thats obvious is the fact that weve got a problem. It is having some major impact on Economic Growth in the small town because there is no no place for a workforce to live for renters to live and doing the right thing is in horton. We dont want to exacerbate the problem. Its been said we need a longterm plan. Could you give me an insight, this problem will fix itself but it may take 30 years. I dont think 30 years is particularly good for businesses that have a hard time on the best of circumstances. Could you give me some insight as to what would be in the longterm plan that would result in more houses on the market . Probably you want to take the dollars that are currently devoted to demand subsidies that senator toomey mentioned and channeled those toward things which would generally expand the duction of housing including providing the land necessary. The federal government owns 40 of the land in california. Land is scarce in the california Housing Market so they might supply some land. You are talking about is investing in workforce training . I dont think we need a big new workforce training program, we have those. We need to think hard about ever immigration strategy and have it work as a tool of Economic Policy. I think we had some promising apprenticeship programs that were started under the Previous Administration but have been abandoned. Those would be promising ways to go. Ms. Bailey, from a rural perspective, what would you view the state of housing in Rural America as an is a markedly different than urban america . Its important have a focus on Rural America. I think the issues are related but need to be addressed in a different way. Its not necessarily the case that we should build 200 unit building in Rural America. When he things like manufactured housing and tools to finance smaller projects to exist throughout a community so that it lends with the rest of the community and we can address the housing need in Rural America. The low income tax credit is not designed to do that stuff we need tools like what President Biden included in his fy 23 budget, the 50 million of supply that would allow for smaller projects to be able to be financed so they dont rely on the low income tax credit and dont need as many pieces of the capital to be created. Thanks to all three of you, appreciate you being here. Ms. Bailey, thank you and i appreciate what you said about manufactured housing. Ondemand generally, weve seen reports that Housing Starts are up but a 3000 per month rental in washingtons is not help a homeowner in idaho. Is the housing we are building matching up with incomes . If ntalk tough that and what we need to do to make sure we have enough housing to support families . You are hitting the nail on the head on the challenge. As i said in my testimony, we been in a Development Boom over the past 18 months. As the joint center for housing studies shows, the average rent those multifamily properties is about 1800 per month where the median renter can only afford about 1000 per month. That shows you that the market is targeting units to the upper end of the market and not making units affordable. We need strategies that enhance supply and add capital dollars to supply. But then add subsidies to make those units affordable so we can properly operate those oldies and owners can pay their bills and programs like the housing choice Voucher Program do that. They allow for renters, especially low income renters to afford market housing. Expand on what ms. Bailey said about making housing more affordable for families. Its not a oneyear solution but we have to combine a subsidy with the longterm supply solution. When you look back in history, there were times when we encountered recession and came out of the recession and often when we came out of it, it was housing reduction, building more apartments and singlefamily home. The recent Great Recession was different because the Housing Market came slowly with small mom and pop builders. If we look at it in the past, we had a tremendous amount of economic boom whether its an apartment or singlefamily. It would lessen the pressure on the housing costs something to address is that we need to boost supply and address the short term needs for people in difficult situations. We know the feds raised Interest Rates three times so far this year and they may do it again. Discuss with rising Interest Rates means for home owners in terms of their monthly costs. How many people do you estimate this would push out of the homeownership market . You combine the impact of the higher prices along with higher Mortgage Rates versus one year ago or even december of last year, we estimate that monthly mortgage payments on a typical home in america have risen by close to 50 . Consider what people find very dear, it has risen by 48 in our estimation from the changing prices. So the Monthly Payment goes up . Now for existing homeowners were locked in, they are fine. What effect does that have on the rental market . You see homebuying demands often which people who thought they had a chance to buy a home, they have to renew their lease and now we are seeing rental demand rising and that we are seeing rent acceleration. The rent is rising about 5 privatesector information says prices are rising faster than that. We have very low vacancy rates for apartments. Ms. Bailey, any additional thoughts . This is extremely important for low income families. They feel the pressures the most which leads to housing instability for them. So pushing someone maybe was on the verge of buying a home back into the rental market and the pressure that puts all the way down to lower income renters . Exactly. Senator hagerty of tennessee is recognized. Thank you very much. You and i have met before. You attended the at Vanderbilt University so good to see you. And your testimony, you did a convincing job of relaying how prices have been moving up dramatically in the United States. One of the issues i wanted to discuss with you is the artificial increase for Affordable Housing. You seem to describe a supply problem very well. How would this incentivize builders to go on a different direction . And artificially inflated wage is included in the price of the unit. It doesnt make sense to have a law that does that stop you should pay prevailing wages set by Market Conditions. It leads to higher costs and it changes the builders calculation of what kind of units to build. It is on that list of things thats causing the cost of building to be related in taking those costs out would be a good idea. 830 per square foot impact, that could be a 30 per square foot impact could be a significant increase. Your point is well taken that it would have a negative impact on price. I want to stay with you for a few more minutes. There is now a Voucher Program being negotiated, about 140,000 vouchers, roughly 30 billion of more demand coming into a market place that is constrained on the supply side. What would you predict the impact of this . A permanent expansion in subsidies will raise the price, thats an unmistakable implication of this. At the moment, you could spend that money next year. The fed is trying to cool the market to put taxpayer dollars to no particular good effect. Id like to talk about whats happening right now with the fed. I think their job is and honestly difficult because of the policies that have been implemented whether they are waging war in the oil and gas industry, the policies that drove the stimulus package that was passed in a partisan basis in march of last year. The fed has been required to put mortgagebacked securities on their Balance Sheet and they are letting those run off right now stop chair powell said he would not rule out selling these mortgagebacked securities. I can imagine what impact that might have in the marketplace and raising rates. You think about this in the context of the federal wired actions how does that impact these inflationary policies and the effect theyre having on the Housing Market . The spread between the 10 year treasury this morning was at 3 . Under normal circumstances, Mortgage Rates should be about 4. 8 . Now we have a 5. 8 rate because of the undoing of want to take a easing. Because of quantitative easing. We have a larger spread which is leading to home sales declines. We have 1. 5 million members a ross the country stop members across the country. We hope it is peaking and it will decelerate so anything to constrain the inflation, then we can say we topped out on inflation and maybe the rates will decline somewhat. It seemed inflation is seeming to go in one direction and that is up. I am concerned about the direction its going. The policy decisions being made by this administration seem to be in favor of more inflation. Im concerned about the impact on the Housing Market and in my home state, we are hearing where Mortgage Rates are up which makes house home owning less attractive. Thank you all for your testimony. Senator menendez of new jersey is record. Home ownership has been a corner ship of the American Dream and countless American Families have purchased homes as a pathway to the middle class but the homeownership rate for black and hispanic households is significantly less then it is for white households. What do you believe are the top three reasons that the black and hispanic homeownership rates have consistently lagged behind white households. Americas a great country but we have to recognize some past stakes stop legal discrimination was taking place prior to the Fair Housing Act. We are seeing the down payment as the major barrier for firsttime buyers so they try to save and sometimes it requires getting help from family members and sometimes you have the members of a minority household were less able to get assistance from family members which places others at a disadvantage over the other stuff one has to look at the proper reddit underwriting standards. There is something that is preventing minority households from adding a mortgage even though their circumstances involve changing credit scoring models. The financial responsibility of paying rent on time and utility bills on time, they will be in a better position to take on responsibility of homeownership stop the lack of supply means home prices zoom up. The prices rising faster for home equity value so that will be a major difference. I appreciate that and i would say federal policies create a racial segregation, a dual credit market, institutionalized redlining and other structural narratives, some of which you have mentioned that contribute to the differences between the rates of ownership stop what is not mentioned is how property taxes have contributed to lower black and hispanic homeownership rates and this is worsened the racial gap. Wellestablished by historians that black and hispanic households have been subject to higher property tax assessment than their white counterparts, higher property tax writs reflect a double penalty on home owners. Im sorry, i cant hear myself higher property taxes lead to higher values. Being taxed more for less limits the ability to build wealth through homeownership. When their neighborhoods become gentrified, there Property Values increase, leaving them vulnerable to dish vulnerable to foreclosures of the are unable to pay their increase in property tax bills. The state and local property taxes which is commonly returned referred to as salt allows homeowners to deduct their property taxes. Its essential for preserving homeownership especially for black and latino homeownerships. Thats one of the many reasons why on tuesday, the naacp passed a resolution to support lifting the trump 10,000 salt cap. This has been a favorite target of my republican colleagues. Republicans want to get rid of this deduction because they want to create an environment where states and local governments are forced to cut taxes, defund public education, privatize Public Services and adopt fee for services. Its how state municipalities would basically pay for education, health care, public author programs, transportation and Public Safety and even though students may not claim the salt action themselves, they benefit salt step these factors can be captured in a distributional analysis. Thats what makes salsa different and an entire coalition of states and counties in governors came together to push back against this elimination by president reagan in the same group came together in 2017 for the unified support of all demo rats. This is not about democrats. Its about who gets to benefit from the American Dream. This is about whos entitled to hold onto that wealth and pass it to the next generation. This it is about attending school and i went to use that hearing to drive that point. The senator from virginia is recognized. Thank you for holding this hearing. A lot of us are interested in that issue and it is kind of a onetwo punch with this area. I want to repeat something. One of the things we discovered in covid drove home and drove it and calling drove home and norm is racial wealth gaps enormous racial wealth grabs g aps. The biggest driver is not necessarily Job Opportunities or educational background. Increasingly, it is about homeownership and we saw disproportionate leave during covid. Relief during covid under the tpp ppp program. Community banks work with their traditional customers and i was proud of the fact that chairman and other senators and groups, we worked with the Trump Administration and got 12 billion to have access to capital. One of the things i worked with was a proposal. It is the lift act, which addresses the racial wealth cap. One approach is to look at firsttime buyers, that definition would drive about 60 people of color because they dont have the same level of Home Ownership as other communities do. There are lots of white families that dont have any homeownership and anything its as if you qualify with a traditional 30 year mortgage we dont want to put people into homes that they cannot afford, if you qualify for that traditional 30 year mortgage, and meeting certain criterias, we would provide a 20 year mortgage rather than a 30 year mortgage and we call this the lift act and it will directly address the racial wealth gap issue and put points on the board for a lot of families to give them that equity they need to make sure they have the line on getting a College Education are having that equity for having the equity. In your testimony, you talk about the widening homeownership gap between whites and nonwhites families . And you talk about how the lift app might apply can you talk about how the lift act might apply . I am a numbers guy. One of the requirement for all High School Students is that we run the mortgage will be calculated numbers to the mortgage cap later calculator. Given the wide homeownership rates cap between various racial groups to address some of the past. Past mistakes. We have to understand we have to combine it with increased supply because if we are simply raising the demand opportunity but with limited supply, most of the game would go through the current owners and given the current disparity in homeownership, the current owners are likely to be White American so we have to address the issue. We have to assure that supply comes along so that demand can access those increased supply. I agree that his wife i did not focus on the question this lift program would only be applicable to firsttime firstgeneration homebuyers because we know that the second game third generation, you should build the equity. You have immediately immediate available eligibility. When following the recommendations, that would help alleviate some of the project pressure at the upper end of the market that would alleviate the fact that we dont have the tenants vacancies we need to control costs and it will allow the upper income individuals to move into the homeownership space so that we can we would have the Units Available for renters. Anything that helps firsttime, firstgeneration owners homeowners helps renters as well. Thanks, senator cortez from nevada is recognized. An important issue across the country but including in nevada. The issue of afforded Affordable Housing. Dr. Yun, in nevada, 28 percent of homes persons in the last biggest area were bought by investors. They bought 1. 5 million worth of homes in nevada isnt the only place where corporations are snapping up singlefamily homes stuff my question is what trends are you seeing in home purchases by investors and what impact this is having on home prices like the Las Vegas Metro area . That is an extra demand especially if the funding money is backed by wall street funding. The home prices will naturally be higher. As they are purchasing singlefamily homes and turning it into rentals, that is making less chance for firsttime buyers and firstgeneration buyers to have a chance because often the down payment comes from a cell by previous home. Firstgeneration or firsttime buyer will have that and consequently it makes it difficult for the firsttime buyers. Is my biggest concern that is my biggest concern. I saw a lot of investor and equity owned homes being bought and purchased and this is my concern. They are turning it into rentals and the rental prices are increasing exorbitantly. For so many, this is the challenge in trying to understand it and make sure we can help renters and homeowners have access to homes. Let me talk about vouchers. When i talk to developers, they tell me they cannot build an Apartment Building that is affordable to people and earning other 50,000 a year without a subsidy. How are vouchers important without a subsidy . Landowners and renters and for a wide array of renters, there is no more than 30 of their income so doctors pretty plate vouchers play the role what the laminate loner needs to maintain the property. It not only gives the tenants the stability but it is also for the property managers. Exactly. Thank you. Senator warren is recognized. Our nation has faced a Affordable Housing crisis predicted. For decades. Everyone needs housing. There is not enough to go around. It is a classic case of the man outstrips supply. We will and up with higher prices and is severe lack of supply has relentlessly pushed out the cost of rent for families taking bigger and bigger bite budgets that are now doubly strained by rising prices from everything from gasoline to groceries. Rents are up 6 more than they were a year ago and higher help and costs are limited are one of the biggest drivers of inflation so to tackle rising costs, the Federal Reserve is raising Interest Rates but we should be clear of the impact of the hikes on the market. The fed claims the hikes will bring down prices for families by obtaining inflation. Do you expect the feds Interest Rate hikes will meaningfully bring down rental costs for families . The rental component in the price impact index, is about 30 . Given that there will be fewer by activities, rents will be rising so one can say the rental correspondent compliant will be rising faster components will be rising faster. The actions will likely increase rent. It will not bring down rental costs or the costs of food or gas or other necessities. That have spiked because of hutus were in ukraine and he will not so click fix the supply chain and it wont stop corporate price gouging but by increasing borrowing costs, the rate hikes will do two things. It is more expensive to build housing and second, making more expensive for families to take out a revision by a home a mortgage and buy a home. People renting and buying homes are worse off when the fed just up the rates but are there any participants in the Housing Market who are relatively better off under these conditions, like investors and private equity firms . The multiple offers were prevalent through last year and the multiple offers are less occurrence which means people are still that are still in the market are able to grab path probably easier and Corporate Investors will be that kind. Cash buyers, which makes it difficult for the firsttime buyer to pick up a mortgage. Private equity are buying in an school of housing and rent it out to families at a premium. In the First Quarter of this year, investors for just one out of every five homes that were sold, which is a national record. Ms. Bailey, if private bailey equity and other big investors by more of the housing stock, what will be the impact of rent prices . I think we can expect that rents will increase, putting more pressure on families incomes and having them stretch their then budgets then budgets thin budgets. Can lead to gentrification of neighborhoods and displacement. That is a challenge when equities firms equity firms purchase policies. The solution to bring down housing costs is clear. Build more housing and loosen big investors grip on the market to make sure it is families that have an opportunity to buy a home. There is a third step that the Federal Reserve chairman should take. Thank twice think twice before tearing through aggressive rate hikes that will only make the housing crisis worse. Thank you for being with us. The war senator warren. That concludes the questioning. Thank you to the west what is this. For tuesday, july 28 ari, thursday, july 28. Sorry, thursday, july 28. The hearing is adjourned. [laughter] [scattered conversation]