Transcripts For CSPAN3 Hearing On Tax Incentive Impacts On Affordable Housing 20220914

They also addressed concerns over private equity firms and Real Estate Companies buying properties and low income communities, which could push out long term residents. The finance Committee Meets this morning to discuss housing. This comes at a time when americans are getting clobbered by climbing rents and home prices. Key drivers of inflation. Data released last week showed that rents increased in june, that the fastest rate since 1986. Buying a home is getting more expensive. Many young people who have modest incomes and big Student Loan Debt feel like the dream of Home Ownership has slipped out of their reach. The root causes, the United States isnt building enough housing. Its bill in that way for decades. And the shortage is affecting citizens and cities all over america. For example, my hometown of portland is skyrocketing rents and low supplies suitable housing. Its also an issue, though, in central oregon. Southern oregon, and eastern oregon, where they cant build enough housing fast enough to keep up with demand. I would be willing to bet that every member on this panel is hearing the same story. Now, we can talk about a number of issues this morning. And i would just like to raise a relatively new issue that deserves real scrutiny. And that is private equity firms and sophisticated armed with terabytes of housing data, our hoover ring up properties nationwide. They are jacking up rents, they are using algorithms to outbid americans who just want to own a home. Why do these big guys want to get into a Housing Market . Because they are upward of 330 million in the country, and there arent enough homes for all of them. Huge demand, limited supply. Typically people on a budget are going to come out on the losing end of that sort of thing every time. The cost of housing has also been pushed up by snarls of state and local red tape. They often banned the kind of construction that is needed and perpetuate segregation. In some places, it can take years of tireless work to get a ruling on permits. And then you have the big upfront costs. My home state of oregon is one of the states stepping up on this issue. Others need to do the same. Its also a fact that one housing costs go up, homelessness goes up. You can save a lot of individual suffering and tax player dollars tomorrow by building more Affordable Housing today. When it comes to housing, the u. S. Needs to build and build some more. The finance committee plays an Important Role in helping get shovels in the ground. Thats because much of the housing policy deals with tax policy. I propose the dash act, with a decent affordable and safe housing for all bill. Its about getting housing to all. It will create affordable rental units and boost housing. And encourage the construction of more middle Income Housing without taking a single penny away. Local officials in oregon need incentives to build more middle class housing. The finance committee has had a coalition working on important housing issues for a long time. Senator cantwell, as we know, is doing important work on this, conducting legislation. She has long been the housing champ, leading big legislative expansions and creating more than 150,000 new Affordable Homes. I think she would agree, thats a good down payment for housing. At the same time, recognizing there is lots and lots more to do. There is another act which i am proud to sponsor. One of our colleagues is here, that bill adds even more flexibility to build even more housing. An estimated 2 million new units nationwide. Senator cardin has also proposed an important bill, called the Neighborhood Homes and investment act. That will be a big magnet for Affordable Housing struggling communities. And finally, senator crepe oh continues our bipartisan work. Authoring the life long act, where the bill creates more flexibility for states and tribes to use existing funds to get more Affordable Housing built. With costs where they are today, the alternative is a whole lot of unfinished construction plans that stall out before the out of the gate. Finally, while there is bipartisan interest in getting this approach done legislatively, the treasury also has substantial authority to accomplish a lot of what we are seeking to do on their own with rule changes. Today, we are going to make sure that the direction is Getting Congress to move more quickly together, and getting it done will provide important progress. Again, ensuring access to more opportunities for more federal housing. Every member of this community has an interest in this. I suspect that we wont be here eating our cereal tomorrow, we will be in the finance room. I can tell you, a lot of my colleagues have a lot of interest in that moving forward. I want to thank senator cradle for his good work. Thank you, senator wyden. And i appreciate you holding this hearing. You are highlighting once again another bipartisan issue here. And this is important. Last week, we learned that Consumer Price inflation reached 21 . The Consumer Price index was up 4. 6 in june. To continue battling inflation, which was fueled by last years American Rescue plan, the Federal Reserve must aggressively raise Interest Rates and may raise rates later this month by as much as a 4 . Inflation must be contained, or we run the risk of the fed having to repeat what it did in late 1980 to combat runaway inflation. Painfully, then, over night Interest Rates were driven to near 20 , which crushed economic activity, including Housing Markets, and helped lead to a deep and long recession. Higher Mortgage Rates follow, making it all the more challenging for americans to buy homes. Housing affordability is a critical issue in idaho and all across the country. Nationwide, there is a shortage of about 7 million affordable rental homes, middle to lower income americans and the gap between demand and supply increases each year. To provide more Affordable Housing, there are existing tools in the tax tool box that provide incentives for builders to create more affordable for homes. For example, they are responsible for generating a majority of all Affordable Housing created in the United States today, and generally enjoys bipartisan work in congress. In idaho, there are 284 projects located across the state, providing 12,000plus units. These projects vary in size under split between rebooted rural, we put 72 target towards families and 28 for seniors and the elderly. One such project is the department in boise, which targets homeless veterans. Several members of this committee have been active in working to improve existing court for equal housing credits and to create new incentives. As i indicated on a bipartisan basis. Senator jeanne in cantwell, as well as several other members, introduced the Affordable Housing credit improvement act, which would expand and improve for developing Affordable Housing. Senators portman and carter introduced the neighboring homes investment act, which would create a federal tax credit that covers the cost difference between building and renovating a home in rural and urban areas. Numerous other finance Committee Members are also interested in finding Affordable Housing solutions. I think all of them while lie tech and other critics are part of the solution to develop Affordable Housing, we must address housing costs generally. Foremost in the current economy is the need to reduce inflation. Unfortunately, its been allowed to run rampant and unnecessary Federal Reserve actions will probably raise the cost of housing. Builders are also feeling the effects are more expensive building materials. Making it even more expensive to get materials to construction sites. Additionally, several economic factors have led to a shortage of Affordable Housing. One way to alleviate the shortage would be to look into more manufactured housing. During this time at hud, former secretary carson created the office of innovation to evaluate new ways to provide housing. And in doing so highlighted the improved efficiency and suitability of manufactured homes. Zoning laws and regulatory barriers which are often uncoordinated and unnecessary or overly cumbersome also present a challenge to Affordable Housing by creating excessive costs that Restraint Development of Affordable Housing. Many of the markets with the most severe shortages in Affordable Housing have the most restrictive state and local barriers to development. We must work to reduce regulatory barriers which requires outside the box approaches as well as teams work from local state and federal governments, and the private sector. This includes initiatives like Opportunity Zones that were part of the tax credit and jobs act, an area where senator scott has done a great deal of good work. Data released as recently as may of 2022, by the Opportunity Zone funding directory shows 49 point 18 billion has been committed to anticipated investments and 60 of those funds Top Investments and Affordable Housing in Community Development. Homes are more than just physical structures. Homes are a foundation for family stability and community cohesiveness. Its critical that we make the American Dream of homeownership as attainable for as many people as possible. ,. ,. Let me go through our witnesses. Andrea bell is here. Its so good to have you. Shes the executive director of the housing and Community Services, she has served in different capacities there since 2019. Previously, misspell was the Health Administrator for medicaid. So we are very glad you are here. Our second witness, we welcome him. Hes worked closely with us over the years. The chairman of the National Association for Home Builders and spent 45 years building homes and commercial buildings. We are very pleased that he and the Home Builders are participating. Our third witness is a senior fellow at the Hoover Institution. Our distinguished professor of economics at the university of los angeles. I will just say to mr. Oh hany, my mother, my late mother worked at the Hoover Institution for many years and was the ultimate compliment. They said, mrs. Wyden is so good. But she still is a democrat. We are very pleased that you are here. Our fourth witness is we welcome you. President and ceo of National Association for Affordable Housing lenders. Previously, mr. Roberts was a treasury official working in this who. We appreciate his leadership. The fifth witness will be dana white. She is a chief production officer for walker and dunlap. She previously served as the commissioner for the Housing Administration in 2020. Shes also got extensive experience in executive Branch Management and budget. She also worked for the Senate Committee on banking. We welcome her, because were going to have so many senators participate. Were going to have to stick really closely to the five minute rule. Miss bell, he traveled for this. You can started off. Wonderful. Well, thank you, mister chairman. And Ranking Member crepe, members of the committee. First off, i just want to acknowledge and appreciate the opportunity to testify on the vital role the tax incentives play in our Nations Housing delivery system. For the record, im andrea bell, director of housing and Community Services for the state of oregons Housing Finance agency. First off mister chairman, thank you for your steadfast leadership. For many years, and continuously elevating the people of oregon and their Housing Needs collectively. Senator crapo, i also want to acknowledge and just uplift your support for Affordable Housing and your leadership. It does not go unnoticed. For years, our nation has not built enough rental housing. But the conditions and circumstances spurred by the pandemic have made our housing crisis particularly acute, to which individuals with low incomes, individuals and families with moderate incomes are bearing the brunt of that impact. With rising Interest Rates, escalating home prices, skyrocketing rents due to the mismatch between supply and demand, many wouldbe homeowners are often left stop renting. And more than 70 of extremely low income renters across the United States spend more than half of their income on housing in 2021. 70 . That 70 of individuals that have to make tough decisions every single month, throughout the year about what bills theyll be able to pay and how they are going to get by. The housing credit and housing bonds are by far the most essential production tools that we have at our disposal. Affordable housing simply relies on this. The housing credit is a highly successful both public and private partnership. And what we know is when we stabilize individuals and stabilize families, we also stabilize communities which has an economic benefit. In the state of oregon, nearly 70 of all rental homes financed in the last five years relied on bonds. Costs are increasing due to inflation, supply chain disruption, many things i know that represent this committee are fully aware of. Housing financing agencies and our partners across the nation are doing everything that we can to prevent deals from falling through. But the unfortunate reality is that sometimes, financing gaps are simply too large, and in some cases, there are no resources to pull from to help cure those financing gaps. The most impactful thing that congress can do is to pass senator cantwell and young Affordable Housing credit improvement act. It would both expand and strengthen the housing credit. It would significantly increase the housing credit authority, allowing us to build more properties. The Affordable Housing critic improvement act also provide states greater flexibility to spread in by reducing the bond financing test from 50 to 25 . I also urge congress to pass the bipartisan lifeline act, introduced by senators ling and collins. This bill would enable states and localities to most effectively he is federal fiscal recovery funds, to fill financing gaps and housing credit developments. I also quickly want to mention two pieces of legislation that the finance committee should take up on that means of homeownership. Senator cortez is Affordable Housing act would enact a simple and impactful improvement to the mortgage Revenue Bonds and mortgage credit Certificate Programs. These are essential to serving first time home buyers. This is, again, creating pathways to homeownership. This would establish a tax credit modeled after the highly successful housing credit. Now, simply put, the housing crisis simply will not get better if congress does not act. In my last few seconds, i would urge both and we need congress to act. The action is going to come post this committee and what decisions they will be able to make and service the american people. I appreciate. Time well said, misspelled. Thank you. Lets go next to mr. Conjure. Good morning and thank you for the opportunity to testify today. Every american deserves access to safe, decent, and Affordable Housing. Even after over 40 years in business, i still enjoy nothing more than handing over keys to the first time buyer. But delivering an entry level product is a difficult. 69 of american households cannot afford the median price of but a year ago, nearly one quarter of new homes were priced under 300,000. Today, it is 10 . We also face challenges with minority homeownership opportunities. Of households under the age of 35, which is your typical first time buyer. 46 of white households owned a home. But only 17 of African American households did so. And as a multi family developer, i understand how affordable rental housing creates stability for tenants. The Housing Affordability crisis is a result of failing to produce enough housing to match demand. If we are going to solve our housing for debility crisis, we must drive down the cost to build as well as the cost you own or wealth. Many of these incentives to serve the Public Interest and remain effective. Including the low Income Housing tax credit. However, others have failed to keep up with changes to the tax code, such as the mortgage Interest Deduction. For over 100 years, the m i. D. Made homeownership more accessible. But the m i. D. Remains rooted in increasingly outdated space the tax code. The changes brought by the tax cuts and jobs act, namely doubling the standard of production, significantly reduce the number of taxpayers. Prior to those reforms, typically 70 of homeowners had an mortgage claim to m. I. T. Today, that number has dropped below 27 . In 2017, 80 of the m idea was deducted by taxpayers earning less than 200,000. Today, in 2018, that fell to 58 . The m idea simply missing the mark. The most effective way to promote and enable homeownership is to eliminate the mortgage Interest Deduction and replace it with the tax credit. A 15 tax credit claimed against mortgage interest and real estate taxes paid would offer a more effective and progressive tax incentive. The credit should be phased out for single file hours with incomes above 3000 in your dollars. A structure along these lines could be enacted on a revenue neutral basis in 2026. In the next few years, many of the provisions enacted in 2017 will expire. This presents an opportunity to refocus the homeownership tax incentives, so that the benefits flow to those who need it. The middle class, lower income americans from all backgrounds. We also recommended enacting the Affordable Housing Credit Movement act to boost production of affordable rental housing. And we support chairman widens proposal for a middle Income Housing tax credit, which addresses a growing need for affordable workforce rental housing. Congress should also address the many housing incentives that are not indexed for inflation, such as the gains exclusion and we urge you to reconsider the current limits on the salt deduction. And h b greatly appreciates the but partisan support to school for Affordable Housing crisis. After all, shelter is a basic human need. And the headwinds we are facing our strong. The index Builder Sentiment had the second largest drop ever for july, and Single Family starts fell to a twoyear low. We have an opportunity to do something, to not only make good economic sense but uplift the lives of millions of americans. Thank you. Thank you very much for important points and i know that you are the president of your own Home Building farm, so were very glad you are here. The next witness will beat mr. Lee bohemian. Ranking member crepe o and members the finance committee, thank you for letting me testify today. Significantly increasing Housing Affordability requires progress on two fronts. One is expanding housing supply, the other is building new housing at much lower cost. Their policy reforms may be implemented using government incentives that would advance these goals. Today, i will focus on to reform areas. One is increasing the use of manufactured housing, which is much less expensive to build in traditional housing. The other is the process of using subsidized housing, which has become very expensive in some states, including my state, california. A Residential Construction cost is high because the cost of Home Building has not changed that much overtime compared to other sectors in the economy. It has benefited interestingly, this point is made within the federal government for at least the last 3 to 5 years. I noted that the bureau of labor statistics notes Residential Construction. It grew just 18 . This stands in sharp contrast to the productivity growth and durable manufacturing of the same period. This reflects continued innovations in our factories at lower cost. This is not on the cost of manufacturing homes is 60 lower than traditionally built homes. If you want it boomed after world war ii, accounting for 60 of construction in 1972. Since then, regulations have reduced and removing these burdens could substantially decrease the importance. One important requirement is that these homes sit on a permanent chassis. This they are labeled as mobile homes and trailers. The aesthetic of a homeplace on his chassis it produces cascade negative effects, excluding manufactured housing from a neighborhoods. This means these homes are often placed in mobile home parks, which interns mean they are financed with personal loans. Both of which tend to be more expensive and shorter duration than traditional mortgages, and neither of which provide the homeowner with interest deductibility. This dates back at least to president reagans 1982 commission report. More recently, limiting regulations caused the adoption of limited housing in 2011, commissioned by todd. Eliminated chassis requirement to create specific programs that incentive i state and local agencies to more properties and manufactured housing outside of mobile home parks. This could be a gamechanger, increasing affordability. It would be i will now discuss the importance of reducing the cost of subsidized housing. Construction costs of subsidized housing are important in the western United States. One San Francisco subsidized project cost one point 3 million per small apartment unit, just from renovation and refurbishment. The 2018 study found extremely large cost disparities and subsidized construction across knitted states, ranging from a minimum of 100,000 in one texas a location to a maximum of 750,000 per unit in california. The g. A. O. Founded only a few agencies have requirements to guard against misrepresentation of costs. This is not including the full cost of the directory. The g. A. O. Also found that there were financing inefficiencies. You see berkeleys Turner Center for housing innovation estimates that the traditional lender has and additional 60 400. Lawsuits also delay affordable developments. In california, lawsuits against Affordable Housing are also filed. This is recognized i recommend congress revisit the standardization agencies and analyze by a single entity. American Home Affordability can be increased substantially with techniques, increasing efficiency and helping local agencies create acceptable buildings. Thank you so much. Thank you very much, mister ohanian. Good morning, sheridan widen. And thank you very much for your leadership on Affordable Housing. We are an alliance of major banks with lenders and investors our member banks in 2020 created 100 billion dollars for Affordable Housing and other Community Development activities. The primary investors are so today, we have some good news. The bad news, of course, is there is tremendous cost in increasing the affordability problem. According to the National Association of realtors, prices and rents rose nearly 21 last year. Housing is not just a casualty of inflation, its a core of inflation. Even in 2020, home prices went up 11 when the cpi was rising only 1. 4 . So building housing is really essential if were going to have long term inflation challenges under control. Lets half of all americans said that Affordable Housing in their communities was a major problem, and that exceeded what they saw for other really important problems like drugs, crime, and the covid19 health and economic consequences. The good news, though, is we know what to do. The low Income Housing credit is widely considered the most effective and successful United States policy to reduce affordable rental housing. 3. 6 million units, so far, about 130,000 annually. That is virtually all the affordable production over the last 35 years, and it is equivalent to about one third of all rent priced multi Family Housing in United States. So its had a major impact and it could do much more. Its also performed exceedingly well. The cumulative foreclosure rate on housing credit properties is 0. 5 7 . Thats not an annual foreclosure rate, thats a cumulative foreclosure rate. As far as we know, thats the best performing class in all of real estate. Pretty amazing, for low Income Housing. Then proposed homes investment act would take many of the Lessons Learned from the housing credit and apply them to a different problem. Which is to revitalize communities and provide homeownership opportunities there by building starter homes and rehabilitating homes. Tha t sponsored by senators cardin, and 20 other senators. That would produce half 1 million homes for Home Ownership in struggling communities over the next ten years. The broad increases really face tremendous diversity across this country. The median price of a home in san jose is 1. 6 million. In toledo, ohio, its one tenth of that, less than 160,000. And every state has communities that are struggling. Those communities it isnt economic to construct those homes. The numbers just dont pencil out. We need to have a neighbor hood of homes to fix that. Our priorities for the housing credit would be to pass the cantwell young bill, the Affordable Housing credit improvement act. The key element to address and restore the temporary 12. 5 increase. That expired at the end of last year. So we are actually losing ground, rather than gaining ground today. Second, to increase the state allocation cap by 50 over two years. That would help every state in the country to produce more. Third, as misspell suggested, we reduce the bond of financing requirement from 50 to 25 . Finally, to reform the qualified contract for the refusal provisions in order to preserve affordability and extend control of the properties. We do know what to do, we just need to do more and we hope you will. Thank you. Thank you very much, mr. Roberts. Well have questions in a moment, but we have miss wade. Welcome. Thank you, good morning. And chairman wyden, Ranking Member crepe oh, thank you for your bipartisan leadership on this issue. My name is dana wade. I am a chief production officer at walker and dunlap. I am a former fha commissioner, im a former assistant secretary at the department of housing and development. Mister chairman, as you mentioned, im also a former senate staffer, so its an honor for me to be on the other side of the desk. Walker and dunlap, where i work, is one of the largest providers of capital to the multi family industry, and the fourth largest lender for all commercial real estate. We employ, and walker and dunlap, 1400 people in 40 offices across the country. As a top Affordable Housing lender and the six largest low Income Housing syndicator, we see both the need to this panel has already talked a lot about data, which is pretty clear. 10 million low income households spend more than half of their income on rent. And the list goes on. Add to that the everyday struggles, millions of americans spend more time getting to work in their cars. So there are definite hardships that are presented on Affordable Housing. The committee today so important. The Affordable Housing credit is a very important step forward, and i will go over very briefly. I know, mr. Roberts, you mentioned the benefits of that. But specifically, it will be very helpful to increase the already oversubscribed 9 tax credit. Lower the threshold for private activity from 50 to 25 . As well as making important reforms to allow a 4 credit to be more easily be used for rehab projects. Increasing the housing supply using these tax credits, as weve seen, has translated into better economic opportunities, a better quality of life, as one real world example, if you will allow me, of the difference these tax credits make peoples lives. Walker and dunlap recently financed in apartment complex in portland, oregon, called cant would. 100 percent of the units were income restricted to those making 60 or less of the area median income. Something made possible with vitac. They have access to highspeed internet and Energy Efficient appliances, and canton would is a walkable, transit oriented projects close to a light rail station. Thats just one example. We have many, many examples. From where we sit, there are other benefits, including, as mr. Robert mentioned, very low cumulative vacancies. As well as a strong compliance for affordability. While important, i think it will be a big topic today. As the Ranking Member alluded to, thats just one side of the equation. We must cut through regulatory barriers at the federal, state, and local level that are holding back housing supply. An estimated 40 of Development Cost can be attributed to regulation at all levels. Record high loss for labor and materials are only adding fuel to the fire. Federal obstacles include long timeframes for environmental and labor decisions, as well as some rules. One example is they noise restrictions. Local policies like zoning, density limits, lengthy permitting, and approval processes and other land use restrictions are all examples. While joining in other issues are the hands of local citizens and the governments, as they should be. Federal policy makers can provide a forum for best practices. Congress can and does leverage the supply of federal resources like light tech to recruit some solution. The government also Work Together to levels to standardize policies, practices, and timelines across different programs. In conclusion, i think everyone on this panel will agree that we need a combination of a lot of smaller, local ideas, as well as big ideas to solve the housing crisis. Thank you again for the opportunity to be here, and i look forward to answering your questions. Thank you very much. The next on the panel, mr. Compton, lets start with you. I have town Hall Meetings in each of my 36 counties. And overwhelmingly, what employers tell me their top issue is is they cant find enough workers. And invariably, that involves those folks who cant get housing. And my concern is particularly for the missing middle this morning. Middle class folks. Nurses and firefighters would be a pretty good example. And i want to ask you we always try to operate under the theory that youve got to build a Bipartisan Coalition and focus on what works. Weve all been talking about lie tack, the low Income Housing tax credit. So what i said is, its a quaint idea. Lets build what works and thats what what the middle Income Housing tax credit is all about. To get shelter for folks like nurses and firefighters and middle income people across the country. And when we talk about middle income people, we are talking about families with incomes between six t percent and 100 percent median income. Obviously, that depends on the area in which people live. But i would like your thoughts on how the Home Builders feel about the middle Income Housing tax credit. We will touch on it in a little bit, but i understand that yall as you know, in the pacific northwest, this relates to the wellbeing of the Wood Products industry. It creates more opportunities of Rural Communities for timber and forestry. So, your thoughts . First, id start with we strongly support the bill. We believe there is the missing metal is the hardest area to serve. Typically they buy entry level homes if theyre on the homeownership side. And if theyre on the multi family side they dont qualify for lihtc or other subsidies, or direct subsidies such as section eight voucher program. They have a disproportionate amount of their revenue or income spent towards shelter. And they dont have the ability to accumulate down payment for even the lowest priced housing that is available within the private sector. So this tax credit would solve part of that problem. And thats why we do strongly support it. But many people on the panel have already talked about the Regulatory Burden in producing housing. You know, name me isnt is a large part of that. In my community i experienced people that want school teachers, police officers, fire people to serve their community, but they put in restrictions that affect housing prices that force them not to live in that community. So i will tell you that my colleagues in the building industry want to build for every sector of america. We dont concentrate on one sector over another. We will be working with you, and appreciate your support with the middle Income Housing support. We need to have fresh approaches to an star all that red tape at the local level. All asked this question to you mr. Roberts. You heard me say im very concerned about the trend of some in the private equity industry. What some are doing in the industry is exploiting loopholes in the tax code to maximize their own recurrence while jeopardizing the low income purpose of Affordable Housing. I want to walk you through this. As far as i can tell were losing Something Like 10,000 affording will Housing Units per year with one of these loopholes called the qualified contract. Low Income Housing Tax Credit Properties are supposed to remain affordable for 30 years. However, this loophole allows lihtc operators to sell their properties after 15 years to private developers who are going to go out and rent the units at higher prices. As i said, thousands of units apparently are already lost per year. Projections are that it will go up. I have proposed legislation to close that loophole. Id like your thoughts on why thats important . Its critically important, chair wyden, because its hard to build and rebuild homes, to lose them through a loophole. Just taking his back in the wrong direction. The problem is that formula, under the qualified contract provision, was written in 1989 when the low Income Housing credit was very, amateur, and the Real Estate Market was very different. It no longer serves its purpose and now has become an unintended exit ramp. This is not something that the original investors have been involved in. But sometimes we see new investors come in, particularly after the 15 year compliance period for the my time is up, but mr. Roberts is highlighting a lot of these programs, essentially the infrastructure, the rules were written decades ago. You heard me mention algorithms being used to outbid americans who just want to own a home. When you were talking about 1989, nobody was thinking about algorithms. So i very much appreciate the input. Senator . Thank you mister chairman. Senator portman . Can i yield about 30 seconds of my time . In the parlance of my senate, you can yield. I apologize, i have to go to this meeting. Im just going to say i really appreciate all the comments made today about the need for us to rehabilitate existing housing, Single Family homes are left out of the process right now. Its a piece of the puzzle we need to fix. Thats why i think everybody is investing and is so important. Cleveland has 3000 homes that are vacant and not being used. If they could fit be fixed up would help towards this effort that everyone has acknowledged today. Increasingly, the dream of owning a home is becoming out of reach for so Many Americans. I want to acknowledge the work mr. Roberts youve done, we appreciate your help on this, and i thank for my colleague for allowing me to yield. Let me go to you first, mr. Contour. The net Investment Income tax serves as a search ax on Small Businesses. Under recent proposals that would subject active income to the search acts. I think you agree, that results in higher rental housing costs. Can you explain how expanding the i. T. To include active Investment Income would result in higher rent . Sure, the consensus is, the consequences are especially acute for renters because its just another cost associated with the operation of an apartment complex. So that previously, that active income was not taxed, now it will be. And that will be passed along as part of the cost, and it will put upward pressure on runs to cover it. Theres no magic wand in how much rents are charged. They are absolutely directly related to revenue versus expenses. Thank you. Miss wade, youve alluded to this already but what do you think the possibility of persistently high inflation means for Affordable Housing . And how would higher longterm inflation affect Housing Development and utilizing federal tax credits . Well, senator, that is a great question. Thank you, persistently high inflation will mean persistently high rent increases. Its no surprise that if you think of inflation as a tax on everyone and everything, it impacts rent prices as well. As mr. Roberts stated in his testimony, higher rent prices also factor into cpi calculations. Its in fact, inflation is important in considering it the efficacy of low income tax credits, persistently high inflation means these tax credits are less effective. And will decrease their value as well. Thank you very much. Youve discussed today the impact of regulatory and zoning policies, however well intentioned, on the ability for us to deal with the Affordable Housing needs in the country. Could you discuss any studies are aware of that have analyzed the effects of these state and local the regulatory efforts to determine which land use and supply promoting strategies are most effective . Yes, senator, great question. Regulatory burdens are expanding housing costs substantially. When we look at zoning regulations, what we find is that the states with the most severe zoning restrictions, such as my state of california, have the highest home prices. They have the highest Construction Costs. Construction costs rise as development is delayed due to lots of litigations and lawsuits that are often based on not of my backyard types of arguments. We look at states and locations with much lacks zoning regulations has texas, kansas, midwest states that have much lower construction and housing costs. So theres been a number of Peer Reviewed studies. They all come to the same conclusion, land use regulation substantially drives up home prices, Construction Costs and depress american welfare. Theres a lot of progress that could be made. Senate bill 14 16 is an important step in that direction, requiring agencies to compile data and report on how they are managing their land. And being held accountable for the how theyre dealing with the needs to build more housing and high demand areas. Thank you very much. Thank you, senator, next is senator carper. I want to back up a little bit. Every now and then we talk about the least of these in our society and what were doing when i was hungry, did you feed me . When i was naked, did you feed me . When i was imprisoned did you visit me . Matthew 25 says nothing about when i was living out of my car, or underaged, you do anything about it . We have an obligation, a moral obligation to do something about it. Its not all on the federal government. Its not all in this committee, its a shared responsibility with state, federal, local, nonprofits and businesses as well as a share of responsibility. We will come here with that spirit of mind. We thank you for joining us. Talking about housing affordable, its on the top mind about my constituents in. In recent decades, i come as a recovering governor, we worked on a whole lot when i was governor. When i step down as governor we have the highest homeownership rate of any statement country, so we were very proud about. In recent decades rapid growth and retail prices, lack of housing supplies made a difficult for a lot of people to find safe, Affordable Housing options as we all know. The problem is especially dire today as our constituents feel the effects of covid19 pandemic and as they face price increases in other parts of the economy. Id note that the price of gas, thank god is beginning to come down. We have a lot of Convenience Stores on the east coast, a bunch in delaware, the price of gas is down to 4. 36, about a half 1 drop in the last couple of weeks, we hope it goes lower. I was proud to work with senator coons, my wing man in delaware, securing 78 million to the American Rescue plan to help tackle the housing crisis. These funds will average support the development and rehabilitation of Affordable Housing in our state, in coordination with nonprofits including habitat for humanity, an outfit called and Many Organizations dedicated to addressing the same problem. One issue that deserves our focus is last Affordable Housing for senior citizens. Our as our population ages we must heed the specific needs of our seniors, those on a fixed income required tunnels aboard services. My question is for miss bell and mr. Roberts. The others get away scotfree with this question. How can we ensure that tax incentives and other resources meet that unique ongoing Housing Needs of our seniors . Thank you for that question, senator. I think youre raising a couple of important points that really elevate the unique situation that were in, related to supply and demand. And specifically how the issue of supply and demand is causing other issues around lack of access, lack of affordability. I think the reality right now in this moment, as we think about tack tax incentives and all the options in front of us, theres a couple of things that are worth elevating. One, being able to lower the threshold when we think about private activity bonds knowing that there is a really a restraint that a lot of communities are feeling around that. When we think about lowIncome Housing tax credit, we know what works, we have seen success with that. We also know when we think about the lack of Affordable Housing issue that so Many Americans are facing, particularly our aging population, we also know that we have to build Affordable Housing in all shapes and sizes that we have. And being able to have transit oriented housing as we think about the needs of our seniors. We have some very real policy options in front of us today that we think will both reduce red tape, both increase access to Affordable Housing in an informative way, and be able to build on what has worked and what we have seen the most progress across the country for diverse populations, including our aging population. Mr. Roberts, briefly, same question, thank you. Excuse me, thank you senator. I mention also that two of our members met and habitat is a big supporter of neighborhoods. Directly to your question, one of the beauties of the housing credit is that it gives states the authority to direct those resources to the greatest needs, including elderly housing. Weve seen tremendous low Income Housing Tax Credit Properties that provide a lot of services to the elderly, in conjunction with housing, including assisted living. Which is extremely hard for low Income Elderly people to find. Mr. , chairman can i take 15 seconds, i better ask a question for the record, i just want to take a minute, just to say what. Misspelled, this is my question, you dont have to answer now. What resources are most helpful in setting low income families up for success when buying a home for the first time . How can we expand access to these tools . I will ask you for the record. Were very proud that misspell, i think youll get a good answer, thank you. We. Let me answer the question in part by mentioning neighborhood home investment act, youd be disappointed if i didnt. I want to thank you for the comments he made, mister chairman. I was not in the committee room, the Senate Foreign relation is holding a meeting on food insecurity. We not only have housing, but also food insecurity. Around the world but also in the United States. We want to thank you very much for holding this hearing. I want to talk a little bit about the neighborhood a home investment act. Its bipartisan, i thank the senator for his comments and sponsorship, and senator for help, supported by the white house. We have not only bipartisan support, we have support from both branches of government. I want to acknowledge the work that mr. Roberts and his organization, National Association of Affordable Housing, in regards to this housing association. We developed this for Affordable Housing. Covid19 has underscored this need even greater. Inflation has made it even more urgent that we do something in this regard. Were talking about the appraisal gap. For communities that need investments, that need Affordable Housing, but the cost of building or renovating exceed the value. Therefore it cannot be done under regular commercial circumstances. This leads to the decline of neighborhoods as well as to making worse the wealth gap in america. Mr. Roberts, can you elaborate as to how the current market which is anything but predictable, investors willingness to go into communities, how the neighborhood home investment act would help us deal with with that shot. Thank you, so much for your leadership on this, senator. Neighborhood homes would provide states with unallocated amount of tax credits. They would set their own strategies and priorities, and run a Competition Among applicants to deploy those credits. Once an apple winds in a word, they raise private capital, and build or rehabilitate homes in distress communities. Once those homes are sold and owner occupied, the credits will flow and the developers are out of the picture. Theres also a provision to enable existing homeowners who need substantial rehabilitation to participate on a simplified basis. Thank you, miss bell, if you could respond how this particular credit would help as it relates to neighborhoods that have been traditionally neglected and try to deal with the wealth gap we have in america. Absolutely, i appreciate that question. As i know this committee is aware, and i appreciate your leadership in this particular area. As we think about pathways to homeownership, as we think about pathways to housing and the impacts of that across the country we have continued to see the racial wealth gap that has continued to persist a lot of communities. So as we think about mortgage Revenue Bonds, as we think about other resources, both on the tax credit side that we have to increase the pipeline of Affordable Housing, this both helps us reduce administrative red tape that exists. Theres also a, being able to further leverage the tax incentives that we have to make sure that the spur of Affordable Housing is happening and available and accessible to black, indigenous, and people of color communities. From a policy perspective, to be able to align those policies in a way that is bringing practical alignment in addition to the spurring of resources in this particular area. Thank you, mister chairman, i conclude by saying news today is that theres a decline in the Housing Markets were seeing concerns because of liesing Interest Rates and costs. The urgency of dealing with these issues even greater today than it was when these bills were introduced, thank you very much for holding this hearing. Thank you senator cardin, thank you for your years of work on these organizations. Senator cortez has been a strong advocate for Affordable Housing. We welcome her, i can tell my colleagues ive talked to her about these issues, she shares the idea that weve got the increased supply, we understand we dont increase supply. You know what happens in this kind of market . Its constructed, prices just go up. A big part of this is increasing supply. I welcome my colleague. Thank, you thank you, mister chairman. Thank you for holding this meeting. Every single one, of you thank you. This is exactly what ive been hearing in about. Around our challenges when it comes to Affordable Housing. In my state, from homelessness to low income, to Workforce Housing its all of the above. Ive been working with so many in my state to figure out what is it that we need to do to have dress Affordable Housing . Theres great legislation that i support here, and id cosponsor, that we need to get. Don im hopeful that this committee is able to actually do something. One piece of legislation that i introduced in this. Bill all start with, you i cant thank you enough for mentioning it in your opening. The Affordable Housing bonded hanzman act, 4445. Can you explain how the mortgage help them buy homes and sustain those homes . Absolutely, and thank you for your leadership on this, senator cortez masto. The Affordable Housing bond announcement act which allows state housing agencies to better utilize our bond resources to serve more home buyers. And using the mortgage Revenue Bonds, state Housing Finance agencies have been able to help over 3 million borrowers and, the mortgage credit Certificate Programs have been able to help more than 360,000 families become homeowners, that is significant. Within these particular bill, we would also be able to help us optimize programs that so that they even work better for low and moderate income families as well. At this particular time, and weve talked about it already at this committee, when we have rising Interest Rates and a lack of affordable ownership homes, the reality is that dream of homeownership is feeling further away. In my own family that has been a reality. One of the most, one of the other facets of the, bill sender, i think is really important to elevate and i was happy to see in, this is an increase of the mortgage read of a new bond improvement home limit. This increases it to 50, 000, as it currently sounds its at 15, 000, which i believe is not been updated since the early 1980. So were talking about Home Improvements necessary improvements, particularly we talked about, earlier, as we think about our aging community and thinking about improvements and modifications that need to make the home not only livable but the quality of life. I appreciate the support of the National Council of state housing agencies, the National Association of realtors, Mortgage Bankers association, National Association of Home Builders and other organizations for your support of this piece of legislation. I think its a how do we make it pencil up for the Home Builders, how do we help on meyers, how do we give them choices, manufacturing, homes believe me in the scenario and focus on as well, more choices for homeowners as we address all these issues . Let me touch on briefly, i know im gonna run out im, i do believe that the state and local Fiscal Relief funds provided in the American Rescue plan really provides the ability to make a historic investment in desperately needed Housing Communities across the country. Let me just say this. I would love to hear, maybe miss wade your thoughts on the lifeline act. Its an opportunity to take funds that are already there, leverage them to support low Income Housing. Absolutely, i think it would be a very important use of this funding. It would significantly increase the ability of states and local jurisdictions to produce more Affordable Housing. I believe congress has already stated that a lot of these covid relief funds at the state and local level should be used for Affordable Housing. So pairing that better with a program like the low Income Housing tax credit would certainly be a huge step forward in that direction. And i, listen, nevadas governor and housing leader supports the legislative fix to use 500 million that we set aside from our Home Means Nevada Initiative to do justice. We could use it to build more of a supply for low Income Housing in nevada and everybodys ready to. This is an opportunity for us to get a right. This is why i support the lifeline act. And for the reasons youve all been talking about it, the low income tax credit. This is the number one thing i hear, a fix that is a potential for increasing our housing supply and addressing our needs in nevada and across the country. Thank you all again. Thank you for the good work you. I thank my colleague. I dont want anyone to think i will ge as we wait for a few more colleagues. I appreciate my colleague from nevada making the point with respect to the lifeline legislation, which i talked on in my opening statement. This is a chance to squeeze more housing value out of existing dollars. And the fact that senator leahy, senator colleagues, my self, weve got plenty of bipartisan support for. It im pleased about it. And im just giving u. S. Home prices hit a new record of 14 16,000 in june, sales continue to slide. I dont think we need much of a wake up call. But that certainly drives it. When im struck by, id like to give other panelists a chance to talk about it. My question to mr. Roberts involved some examples of loopholes in laws that are particularly hurting our ability to offer Affordable Housing. Mr. Roberts said, hey, this stems from a law that was written in 1989. So were talking about laws in this area that, if not from the dark ages, are certainly pretty ancient. Id be interested in your thoughts about whether there are other examples of laws where you think that the bureaucratic barnacles are just getting so thick that its also hampering the ability to offer Affordable Housing. This relates to mr. Involves outdated rules at the local level. I appreciate miss bills leadership working with local leadership and communities. Shes given as a dissertation in the principles of supply and math, we thank you for. I want to make sure folks understand that, in our part of the country we have worked very hard to try, as you suggested, miss wade touchdown as well, to figure out how in the future we wont have people working over here and living over here, and going back and forth in outdated transportation systems. Are there other laws that we ought to be aware of . In fact, heres what were going to do. Since we have had the good fortune of having senator young come, i can give him a chance to catch his breath briefly, doing very good work, on conductor legislation, were glad to partner with. Tim he has been part of our bar Bipartisan Coalition on the finance committee for housing. While we contemplate whether there are other outdated laws along the lines of the loophole that i asked, mr. Roberts about, lets hear for a strong advocate for housing, senator young. I think every one of our witnesses, and i have to tell you, as i travel across the state of indiana i hear from every community about the importance of Affordable Housing and about the challenges theyre experiencing right now. This shortage is of course being exacerbated by the current inflation challenges. More broadly impacting the country. Throughout my time in congress have done my best to remain focused on efforts to address the housing shortage. Ive been proud to work in particular with my finance committee colleague senator cantwell on the Affordable Housing improvement credit act. This bill, as i think we know, will help strengthen the low Income Housing Tax Credit Program, also knows as lihtc, which remains the most successful Affordable Housing program in the u. S. Public and private partnership, supported in a bipartisan fashion. If we want to address our Nations Housing affordable crisis, its crucial that we passed legislation to approve the Affordable Housing program. The lihtc program by passing the Affordable Housing credit act as soon as possible. I ask our witnesses today, this should be an easy one, by a show of hands who supports this Affordable Housing credit approvement act . Thank you, let the record show all five witnesses support the Affordable Housing credit improvement act. The record will show it. I will dare anybody to say that they didnt. Its a very important piece of legislation that senator young and cantwell have led, i appreciate it, continue. Let the record show, none of the witnesses are under duress, or so forth. Thank you, so lets dive into why this bill for a moment, in the lihtc has such farreaching support. Mr. Roberts, can you kindly explain what it is that makes the lihtc so effective in addressing the Affordable Housing crisis . Thank, you senator. As well as the Neighborhood Homes investment act, they share a common dna. What makes these credits work so well is a combination of actors. First is, private market the credits only flow after the development is completed and Public Benefits are flowing. So were not giving money away and hoping for a good result. We are paying for only for success. Paying for success . Another thing ive been focused on during my time in congress. Frankly, my constituents insist upon it. Yes, by the way, thank you for your leadership on applying this pay for success principal throughout the federal system, thats tremendous promise. Its a very competitive market, credits are limited, the states allocate them only for the highest priority activities and then investors have to compete to invest in those properties. If for any reason compliance is not followed through, those credits are recaptured. Tremendous discipline, like a state administration, miss bell and colleagues, have done an amazing job in storing these resources. We have tremendous confidence in them as stewards. Thats why Neighborhood Homes would rely on them. And they are both targeted and flexible. So theyre targeted to the greatest communities, and flexible and how theyre applied, and the tremendous Economic Community benefit spinning off. Thanks so much for that. One thing i finally unifying about the Housing Affordability crisis, and i like to focus on unifying issues. The chairman was kind to issue the china competition bill were able to events last time before the u. S. Senate. One reason i was working on that, during this time, tribal politics, we can rally around solving difficult challenges to get across political owls, across political philosophies. This Housing Affordability crisis, its striking how it impacts various demographic groups, geographic areas. It doesnt really seem to discriminate a lot. The brunt of this crisis, and it falls on a diverse population, its so important we support programs and ideas that meet the needs of the communities. Miss way, can you talk about how the lihtc Program Helps a range of people in need . Senator, thank you for the question. Also, thank you for all youve done to support Affordable Housing. Youre absolutely right. The problem of the lack of supply of Affordable Housing hits everyone, unfortunately. One thing that we see is that the lihtc program has been very effective at bringing people directly off the streets into housing. Its one of the only programs that is done so with the support of the federal government. We see a range of types of individuals and families living in lihtc support housing, that includes veterans, 10 of our homeless populations is made up of veterans. That includes people recovering from opioid addictions. That includes seniors, people with disabilities, it really does run the gamut of some of our nations most vulnerable. Thank you so much. I see on that im out of time. I see a couple of other leaders as it relates to these issues have entered the committee room. So i look forward to continuing discussions about this bill and about other housing legislative priorities in my questions for the record, mister chairman. Senator young, before you have to take off and go back and prosecute our cause for the semi commander industry in the u. S. , id like to know that what you and senator cantwell have done in respect to the lihtc model has led people to say this is a solid approach for the housing policy future. And Home Builders, responded with the legislation that im propose, the middle Income Housing tax credit, the lihtc kind of approach. So that a firefighter and a nurse would have a star chance to start climbing the ladder of upward mobility good work to yourself on this. Youll continue to have my support in the days ahead. Thank you, mister chair, for the hearing and thank you witnesses for being here today, and the work that you do. In New Hampshire i hear from families and Small Businesses as a light about the burden of rising housing costs. And what that has done about their ability to live and work in the state. Also what its done for their ability to recruit people to come work in the state among other things. Im developing a package of housing legislation i plan to introduce soon to bring down these costs. My bill would incentivize investments and state Affordable Trust funds. Misspelled, can you please speak about what these trust funds are and why they are so important . Thank you for that, senator. And i want to acknowledge and uplift your leadership in this. Oregon is one of 39 states that has as date Housing Trust fund. These funds, not always, have a designated resite new source and can be particularly helpful in providing additional Housing Resources for state needs. In the state of oregon, trust fund is funded by a state general fund, and lottery funds. And certainly, as you continue to pursue and work on the, bill we are eager to work with you in the area. I appreciate that very much. My bill would also support the construction of new Workforce Housing and creating a new competitive grant program. Mr. Canter, can you expand on how building more housing will lower costs for home buyers, and how federal support can help build more houses . Absolutely, the crux of the problem is very simple. Were just not building enough houses. The more houses we build, the less pressure we have from home rising costs because we are supplying the market. I appreciate every. Much id also note that the more housing we have, the more people who are housed, the more other issues that we all work on together we can address. Mr. Roberts, as also previously introduced Bipartisan Legislation with senator blunt, to provide tax cuts for middle how does morgan sharons make ownership more accessible, and how can we continue to cut costs for families . Private mortgage insurance is very important so that home buyers who dont have 20 down payment funds cant get in. And we often see them come in at 5 , even 3 down payment. Thats much more attainable for first time buyers. Cutting the cost of that mortgage insurance is very important to make sure they can informal Monthly Payments as well. Thank you, to misspell, one more question. In response to the covid19 crisis, congress provided states with Financial Support to assist with their response to and recovery from the crisis. While New Hampshire and other states have committed to a portion of these funds for supporting housing, its difficult to pair these funds with another critical federal housing tool, the low Income Housing tax credit. Thats why cosponsored the bipartisan lifeline act to ensure states have the flexibility to utilize both covid19 response funds and the low income tax credit. How can increased flexibility for states to use these funds support housing efforts all across the country . Thank you for the question, senator. About 31 states are devoting over 9 million in coronavirus state and local fiscal recovery funds towards this total does not include what local jurisdictions invest in local housing over the state of oregon is using these funds for other Affordable Housing activities, about 24 states have indicated that they intend to use at least a portion of these resources as a gap filler, filling financing gaps. Which is absolutely the right thing to do. But it is not coming without difficulty. Within the American Rescue plan act statute, there is unintentionally, language in there that makes it difficult to use these funds for long term loans, which is exactly what you need for Affordable Housing. This is where the lifeline act comes in. It would essentially fix the problem by allowing state and local governments to utilize these resources for long term loans. Which of course supports what were talking about today, financing more Affordable Housing. Thank you for that. And i look forward to working with all of you as we continue to try to combat this challenge. Thank you, senator. Next, senator, cantwell who has been doing extraordinary work on these issues. Thank you, mister chairman, and welcome to all of our witnesses this morning. Mr. Contour, were here to talk about the role of tax incentives in affordable. Housing id like to start by asking you about tax related disincentives to Affordable Housing, specifically im talking about tariffs which are de facto taxes on softwood lumber imports from canada. Soft wood lumber is a critical input for Home Construction, and the 17 tariff. Harms Affordable Housing and fails to increase supply. Earlier this week, senator menendez and i sent a letter to congress and the u. S. Are urging the Biden Administration to prioritize lumber trade to reduce housing costs. Mr. Contoured, do you agree to reduce tariffs on softwood lumber would help make comb construction and ownership more affordable . Thank you for the question, senator. Thank you and senator menendez for your leadership on this issue. Yes, i do believe reducing tariffs on imports of canadian softwood lumber would make Home Construction and homeownership more for double. Lumber represents one of the most significance material inputs to the construction of home. Trade measures that act as a tax on these inputs are necessarily going to increase the cost of the final product. Conversely, anything you can do to remove these trade barriers is going to reduce the cost of the final product. If i could, also, senator wyden earlier said, what kind of regulations are outdated . Our trade policies go back to the new pauli act. If you think that maybe if youre not working and if you cant get agreement and were structurally, the structure is built into the review process of that trade program does not have the effect of us being able to act quickly on modifications to trade policies, maybe we need to look at the overall picture of how we create our trade policies. Thank, you i was gonna follow up with a question about what we can do in a more general sense. And how are renewed u. S. Canada softwood lumber agreement would address Affordable Housing. I think you address that in your last answer. I would say hopefully the Administration Takes timely action on these issues, these are practical bipartisan ways to help with Affordable Housing in the u. S. Housing community at. Large let me just speak for a minute. In the south dakota housing availability is a huge issue for south dakotas. I hear about these issues all the times from constituencies like rapid city, which is quickly expanding. And with the supply crisis inflating this makes it more difficult to start completing housing projects. According to the National Association of realtors, the average cost of housing in the western states in 2013 2021 is more than 80,000. So if i might, miss wade, you touched on this in your written testimony. But could you share your insights into the u. S. Housing deficit, both in terms of data and how its impacting families across the country . Senator, that is a great question. By one estimate, and i see it has doubled, we have a shortage of 3. 8 million homes in the u. S. Which is staggering. I think its almost hard to grasp. There are a lot of things that have to come together to address this burgeoning need. But at the federal level, the Legislation Committee is discussing things that you have worked on, senator, at the state and local level as well as the private sector. I think the low Income Housing tax credit brings together all of those various components, and is one way to effectively increase the supply of Affordable Housing. It often takes a lot of reform at the local level, when it comes to things like zoning, when it comes to things like permitting delays, and other policies at the local level. And all of this has to be viewed holistically, as part of the housing ecosystem, in order to truly solve this problem. Well, i would follow up. My time is expiring here, but i want to say, with respect to that, one of the things weve heard out of the south dakota Housing Development authority is just that those who participate in these multiple federal housing programs, like the low Income Housing Tax Credit Program at hud, the rules governing these programs are not uniform. And they can create challenges for state housing authorities, and also disincentivize Property Managers to participate in some of these programs. So i hope that that is one of the things, mister chairman, that we can contemplate trying to work with these programs to ensure that there are functional and workable, and dont impose these heavy burdens, compliance requirements that make it very difficult for those out there that are tasked with trying to create more Affordable Housing options. That they are not buried in a mountain of federal paperwork. So, thank, you mister chairman. We are definitely going to be following up with respect to the rules and regulations. Next to senator bennett. Thank you, mister chairman, i appreciate it. And thank you for having this hearing. In colorado, 14 years ago, i was the superintendent of the public schools. It was very on her common for people to live in denver. Today, its impossible for a teacher to afford to live not only in denver, but in suburban denver. I had a colorado teacher come visit me a month or so ago. She is from greenwood springs, which is a rural community. And in passing, she wasnt complaining, but she made the observation that 70 to 80 of her colleagues in the middle school in high school where she teaches after have two or three jobs just to live england would springs. These are this is a real failure on the part of our society. We need to create Workforce Housing in our state, and it is getting to the point where we are losing businesses and practices because people simply cannot afford to live in the state of colorado anymore. Housing costs are far outpacing income in every single colorado community. Metro denver, the increase was more than 14 last year. The median home price in denver, colorado, recently topped 400, 000, which is up 20 from the previous year. But in duran go, which is on the western slope of colorado, the southwestern rural part of our state, the median price for an in town home hit 650,000 last year. A 30 increase from the previous year. Employers across colorado especially in the rural areas tell me they cannot hire because of the shortage of housing. In 2021 last year, i met with a diverse Bipartisan Group with 30 members across the strait to develop solutions to the housing crisis. These are experts in housing who are looking at it from all different vantage points. Their top recommendation wont surprise anybody on this panel. It is to do everything in our power to increase housing supply. Including expanding existing programs that work. We need to do more to modernize our governments response at every level, give communities greater flexibility, and embrace innovation, promote housing stability as my eviction crisis act would do. The low Income Housing tax credit is our most effective existing program built for new Affordable Housing. I am going to come to a question for you, but that is my senator cantwell and a youngs Affordable Housing credit improvement act expands im also pushing for swift implementation of one to expand and develop housing for more families. Back in 2018, congress created the average income enabling lie tech to serve hows holds. We lit a Bicameral Group of colleagues to expedite the release of a final work rule on the averaging income test. How would finalizing the average income expand Affordable Housing and more families in this country . Thank you for the question, senator. And there is a collective solidarity alignment in the experiences of folks in the state that you serve around Affordable Housing. The average income test, which congress enacted for the housing credit in 2018, is actually an important new tool that will make housing credit properties more economically diverse. And this is done by allowing owners to serve households earning up to 80 of the area median income, while at the same time, still making sure that he units are going to be affordable for some of our individuals and families with the lowest income. And so the average income test does this by using rental income that is charged by the higher income, but still lower income households to essentially off set the lower rent charge to households. The proposed rule implementing the average income test was simply on workable. And i think some of the interest has there is some very meaningful positive steps forward within the average income test, and we are certainly grateful to you on the other senators that have signed on to urge treasury and irs to refocus on this particular area. And i hope this committee will keep pushing. Mister chairman, i had another question but i am conscious of my colleagues. I will submit a question on homelessness for the record and i will yield. I think my colleague. And we can Work Together on these issues for a long time. Senator brown is next, and i believe we can get in senator warner and senator cantwell. Senator brown, chairman of the Banking Committee which works very closely. Thank you for the witnesses for joining us. As chair of the committee to a witch chair widen referred, Housing Affordability is not only a priority, for everybody on this side of the aisle, perhaps beyond that. But a moral imperative to many people who are paying too much to keep a roof over their head. A quarter of renters, and i think most of you know the statistics, a quarter of renters pay more than half their income in rent. Home ownership is increasingly out of reach to far too many families. Im glad that what senator wyden and senator kramer are doing is scheduling this hearing. We can work on this. I partnered with senator wyden to introduce the tax credit act. This bill is intended to complement la q. C. And make sure extremely low income renters dont have to pay more than 30 of their income towards housing. What happens in families like that, everything is upside down on their addicted. My first question is for mr. Rogers. In cleveland, we have a group who have these homes, many of them need repairs. Some of you have heard me on this committee as i say that the zip code my wife and i live in had more foreclosures in 2007 than any zip code in america. That does include in cleveland. When homeowners can make these repairs themselves, the house is empty or they are snapped up out of state investors who exploit the tax code to turn a profit. And that problem is evident. So mr. Roberts, how can the Neighborhood Homes investment act i know he referred to it, help address the shortfall of affordable Single Family homes and keep homes in the hands of lower income and aspiring homeowners . Well, thank you so much, senator, for your leadership on homes and the low Income Housing credits. Its been really remarkable to see the comprehensiveness of your strategy. Neighborhood homes can fill the gap between what it costs to build or rehab home and what the local market there can support. Without that, its just not feasible for private developers or even existing homeowners to improve their homes and by extension, the neighborhood. The entire neighborhood suffers when these homes are deteriorating because most of the land use in these neighborhoods is Single Family homes. So we cant really fix up those neighborhoods without addressing this problem. And Neighborhood Homes would allow states to deploy credits in just the right amount to cover that gap. Thank you. I want to talk to you about the Home Builders. We heard from people around the country on zoning regulations and what they have done on impeding the ability to build new homes across the country. Comment on that and comments on what, if we were to provide funding to support the update of zoning regulations, with that increase the supply of housing . Thank you, senator. There is a great deal of nimbyism. In fact, some of your colleagues have supported the in the act, which is a yes and my neighborhood. Because of that, there tends to be zoning regulations that are put in place, whether intentional or disparate, the effect is that they raise the cost of housing and therefore we cant build Affordable Housing through those zoning requirements. So it is a great problem. Our members face it constantly, things such as Design Standards being added to the zoning, which has really nothing to do with zoning. But increases the cost of housing. So zoning is a tremendous problem. My question, though, is in understanding that. And i agree with you, i think its pretty much believed across the board, would funding support communities update they regulation have an impact . Is there a way of doing that . Are you proposing ways of making that happen . Yes. Funding to the local associations, to local municipalities that reform there is zoning regulations so that they will allow more Affordable Housing to be built and restrict, as long as the property is zoned for a Single Family or multi family, they will restrict any for the regulations. That would help add to the housing. Do you agree with that . Do i agree . No, mister ohanian, do you agree with that, sir . Yes, i do, senator. There is a massive body of Peer Reviewed research that has studied zoning regulations and how those increase the cost of housing and depress construction. My own research has looked at that, as well. And my coauthors and i find that affordability substantially increases and inflation is it would rise in the u. S. As a consequence of pulling back zoning regulations back to what they were in the 1990s or the early 2000s. Not a question, but, misspelling your senator has been important in the Housing Committee. Thank you for that. What an inflationary comment. I thank my colleague. We love working together. Okay, weve got a vote on, but were going to be able to get both of our senators with a long interest in housing. Senator warner, and then its appropriate, but senator cantwell will wrap it up, given her leadership all these years. Thank you mister chairman. I do think my friend and the member of the committee of which im on. I want to thank both you and senator cantwell. This is an area where we all have approaches and this hearing is so important. I am going to skip the part about the same kind of gaps that all of us have indicated. I know senator cantwell has been great on low Income Housing tax credit. I want you very quickly get to one, something that senator brown worked on. We thought more of the president ial agenda without it was very creative and we worked closely with the civil rights committee. That would have created for first iteration, firsttime homeowners. They could qualify for a traditional 30year mortgage, we would provide literally a 20year mortgage, so there would be a wealth accumulation at twice the rate. The racial wealth gap in this country is an extraordinarily challenging issue. Unfortunately, homeownership is a huge, huge component part of that. I do hope that that program, combined with my support for down payment assistance, is a good one to have in combination. What i want to take my time for mr. Roberts, i will start with you. Another area that i have been working on in the chairman has been very supportive of his, as well as the Ranking Member, is Additional Support for cdfis and 80 eyes. Financial institutions, we dont have nearly enough anymore. We were able to get 12 million, nine billion inequity into those institutions. That is a really interesting initiative. But its still not going to be enough. And a bipartisan way, we need to put together a cfi tax credit that would give a tax credit many of the companies who said in the aftermath of george floyd wanted to do something on racial equity. Theyve done a pretty crummy job of making sure they put their money where their promises were. But this would say, if you put in long term money we are going to give you a tax break. And a slightly larger one at i think this is not a single silver bullet, but a very effective tool to take this historically narrow nation of the financial sector, the cdfis, and expand capacity. Mr. Roberts, since you were kind enough to come to my office on the cdfi tax credit, i would love to get your comments and suggestions on why you think its a good idea. Were tremendously excited by this proposal. We want to thank you as well as vigor and when smith for your leadership on this. Senator van hollen, my senator and neighbor. This could make a huge difference. Cdfis do the hardest working Community Development finance. They are designed to fill the gaps that other private sector financial services, providers cannot do on their own. But they are great in partnership together, and what your tax credit proposal would do would be to build those partnerships between capitol providers and the cdfis that are there to do it. It is the cost that makes sense. To really, greatly expand the act. I appreciate the work. And hopefully we can move on this. Ill use my last 55 seconds for senator cantwell. Section 1 13, the one that is number 94. With a very small amount of money, literally in the millions, we could start experimenting with whether we could actually which would be another tool to make sure we spread this capacity more. In the spirit of senator bennett, i want to go back to when he was already in the red. How fitting to have senator cantwell wrap this up, after leading her committee and being out on the floor, leading america and making sure we have semiconductors and United States. Make sure you give credit for her. A huge win. Senator cantwell . Thank you, mister chairman. Thank you for holding this hearing on incentives for Affordable Housing. Thank you for your leadership on the legislation that you introduced on the middle housing. Clearly, the 2009 downturn pushed a whole lot of people into different categories. And the consequence of that are still being felt. So i definitely appreciate your past help and support. I always love that you have the part of the Veterans Community there. They showed Great Success at driving down the cost of housing. I certainly want to thank my colleague, senator young, for his leadership with us on trying to increase the low Income Housing tax credit by 50 . I guess people dont realize, we got a little bump a few years ago. That expired at the end of last year, so we are actually going to go down in the amount of money we are putting towards the tax credit. 90 of the Affordable Housing in the bill gets built with the tax credit. So it really is a governor, if you dont increase, it on solving the problem. I dont know why we cant get to this out there. I just dont understand why. I feel like we are painting a big supply message across. Maybe one of the avenues out here. It is just supply, or it is supply, stupid, or i dont know what you would get about it. It is really just about supply. And its so frustrating, because theres so many people of reports. I probably get a stack this high of reports saying, its a supply problem. So i would just like to hear from the witnesses, why . Why is it that we are not breaking through on the supply message . When you talk about it, its pretty easy on the demographics. You have elderly People Living longer and adding increased demand. You have returning veterans from the wars, that increases demand. You have workplace issues like insulin we had a bunch of people fall out of middle income into low income, that increased demand. I dont get why we cant just admit that we have a supply problem and do something about it. So anybody have an idea why we are not getting this across the goal line . Senator, i just want to note, and i think you bring up some excellent points. I sit on a board at the bipartisan policy center. Weve recently conducted a poll that had a very specific prop question about, do you support increasing the housing tax credit . And it was overwhelmingly bipartisan. It was somewhere like 70 of all americans supported, who are serving. 55 of republicans. Its a bipartisan issue, i think its one where you are right, the data overwhelmingly states that it is a problem with housing supply. Its directly tied to affordability. And its a variety of challenges. I think that the lihtc is an important step forward for increasing supply. Everything you have done in your leadership, that is a huge step forward. Anybody else want to talk about this . Senator, as an economist, what strikes me as so much tragic as weve had a housing crisis almost 400 years. The average price of a midtown manhattan home in 1929 in todays dollars is 1. 2 million. Our housing is expensive to build, there are some efficiency enhancing forms we can implement. We can also implement zoning reforms that will make it easier and less costly to build in areas of high demand. And one thing that we have seen over the years is the growing number of americans who are really focusing on a relatively small number of locations to move to. Including seattle, including the west coast, including some parts of the southwest. And sadly, some of those areas, for example in my home state of california, it makes building very expensive. In my testimony, i mentioned that in one project in San Francisco, it cost one point 3 million just to renovate an existing small apartment unit, per unit. And when you look at those types of costs, you scratch your head and say, there is going to be a better way. And i think, as technologies advance, and there are opportunities to increase the use of manufactured homes and change from regulatory requirements, i think that we can be reasonably optimistic we can make the right choices in your committee here. We are very much focused on that and im optimistic that you can do that. The future is very bright from that standpoint. I think we have an inflation problem. Part of it is housing, and if you think about, back to this, i like the details. But i think the details are almost irrelevant. Because they are not totally relevant, but if we dont get across the supply issue, if we dont get people to understand that it is a supply issue. Yes, if you make it more efficient and affordable, yes, lets do that. But somehow, all that discussion stops people from really understanding that it is a supply crisis. If 90 of the Affordable Homes are going to beat bill to the tax credit, unless we increase the tax credit, were not getting out of this and matter how many people in seattle pledged to spend millions of dollars on a project. Were not going to get out of this. So i do think its i dont know. I have a suspicion that the derivative market crash has more to do with this. I think it had a Chilling Effect for several years, when we should have realized what the crisis was going to do. My colleague, senator bennett and senator brown talked about it a little bit. The crisis might everybody freak out about how in general, people commoditized some way to make the housing supply, and it was a house of cards that collapsed. And people were blaming all sorts of people, and then we did nothing. But in that moment, we also pushed more people into that demand market. Because they literally fell out. They fell out of the economy, they literally fell out of the economy. And we did not do anything to meet demand. It used to be in this nation that in the 70s or 80s, or even 90s, you would hear housing lets go housing where did that she or go . And very much is a supply issue. And to get back to the idea of cost, the more we can reduce cost, just economically, the more we can expand supply. One study in california showed that if california lihtc Construction Costs are not even at the average of other evaluated locations, but were closer to that average, california couldve killed 12,000 more units under lihtc funding. Until we recognize that our Construction Costs are remarkably high, its going to be hard to expand supply, and last we are really going to push on the and push a lot more dollars into producing what is an expensive commodity, and in a commodity that listen, i know some people in seattle who are very charged with this mission. I asked them, and he said, i think is going to cost 15 billion dollars to get to this problem. I said, 15 billion dollars . Like, over ten years . He said no, probably over five. So quantifying how problematic this really is, im all for new ideas on how to drive down costs. But mr. Connor, im going to give you the last word. I saw you underhand up. Thank, you senator. I think your instincts are probably correct after the crash. We under built by about 400,000 houses a year, over a tenyear period. There was delayed entry level market interest, because we had household formations that were much later in life. They all hit at the same time, and if you look at the demographics between boomers and millennials, its significant. So that hit at the same time, when we were building up a deficit, just too meet what household formation be in the future. I think you are dead on with what youve said, and there was a change in the public sectors view of housing. I agree, we havent had a true housing policy in this Company Since the 19 80s. But the aspiration for never went away. That is where all of those things happen. We are not understanding the significance of the crisis. I know we have to run to a vote, mister chairman. But we shouldnt forget how important homeownership is, as economic stability for families. And i hope that we can rectify this. I appreciate this hearing and i appreciate the middle tax policy, to. And the chairman and i come from the port of the country, to the northwest, who is very plagued, not that some of you, the texans and the californian others have been to. But we have got to step up to this and get some solutions. Thank you. Senator cantwell, just one comment. As usual, you are spot on with respect to this being all about supply. Its always going to be about supply. Id also like everybody to note senator cantwells comment with respect to how some of the highfliers news the derivative market, back in 2009, and contributed to some of the market crash problems. I talked to a private equity and powerful interest. Apparently, using algorithms to outbid americans who just want to own a home. So weve got some equity issues to pursue, and were going to do that in. A way that is consistent to weve been talking about strengthening this Public Partnership in order to build more houses. Wants to do, a special thanks to miss bill for having such a and for giving us your expertise. With that, the Housing Committee is adjourned. 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