Housing Solutions: Cutting Through Government Red Tape (U.S. House Committee on Financial Services, Subcommittee on Housing and Insurance)

Hearing	Housing Solutions: Cutting Through Government Red Tape
Committee	U.S. House Committee on Financial Services, Subcommittee on Housing and Insurance
Date	July 24, 2024

 

Hearing Takeaways:

• The U.S. Housing Landscape: The hearing focused on the various challenges currently facing the U.S. housing sector. Subcommittee Members and the hearing’s witnesses discussed how housing supply shortages and rising housing prices are reducing housing availability, affordability, and accessibility. They stated that these challenges are harming both homebuyers and renters. Subcommittee Republicans, Mr. Compton, Mr. Harris, and Mr. Schloemer contended that regulatory burdens imposed on housing at the federal, state, and local levels are primarily responsible for these challenges. They asserted that these rules do little to improve the quality of housing stock while increasing housing costs, delaying construction, and raising barriers to housing. Rep. Sylvia Garcia (D-TX) emphasized however that localities (rather than the federal government) are responsible for most housing regulations. She also highlighted how Congressional Democrats have passed funding that has kept over 12.4 million people housed and how the U.S. Federal Housing Administration (FHA) has helped nearly 1.8 million individuals become homeowners since 2021.
  • Housing Insurance Market Challenges: Subcommittee Democrats, Mr. Harris, Mr. Schloemer, and Ms. Couch expressed concerns that rising insurance costs are exacerbating the U.S.’s housing affordability challenges and stated that policymakers must address these rising costs. Mr. Schloemer highlighted how many casualty insurance companies currently have losses that exceed their collected premiums. Ms. Couch further raised concerns that insurance carriers are engaging in discriminatory practices through increasing their rates based on the type of housing that their policyholders provide, the individuals that their policyholders serve, and the programs that their policyholders receive subsidies from. She asserted that insurance carriers are using these factors as proxies for race and poverty.
  • Mortgage Rate Challenges: Rep. Mike Lawler (R-NY), Mr. Harris, and Mr. Schloemer raised concerns over the impact of high mortgage rates on housing prices and the housing supply. Rep. Lawler and Mr. Harris discussed how many homeowners that had previously obtained low mortgage interest rates are reluctant to sell their homes because they would lose these rates. They stated that this situation is reducing the supply of homes available for sale, which is driving up housing prices. Rep. Lawler and Mr. Schloemer further stated that high mortgage interest rates make it more expensive to purchase and develop housing.
  • Institutional Landlords: Subcommittee Democrats raised concerns that intuitional landlords are aggressively purchasing homes to rent out, which is contributing to higher housing prices. Rep. Steven Horsford (D-NV) noted how institutional buyers are making all cash offers for homes, which traditional buyers cannot compete with.
  • Impact on Older Americans: Subcommittee Democrats and Ms. Couch expressed particular concerns regarding the impacts of rising housing costs and housing supply shortages on older Americans. Ms. Couch noted how the number of older adult households with chronic patterns of homelessness had increased by 73 percent between 2019 and 2021. Full Committee Ranking Member Maxine Waters (D-CA) and Ms. Couch further expressed concerns over the U.S.’s dearth of housing that can accommodate older Americans. They elaborated that less than 1 percent of the U.S.’s housing stock is wheelchair accessible and that less than 4 percent of the U.S.’s housing stock has wide hallways and doors, single floor living, and no step entries.
• Housing Policy Issues and Proposals: Subcommittee Members and the hearing’s witnesses used the hearing to discuss various housing policy issues and to consider federal housing policy proposals.
  • Policies to Promote Less Restrictive State and Local Housing Regulations: Rep. Sylvia Garcia (D-TX) and the hearing’s witnesses expressed support for federal policy proposals that would reward communities that decrease local housing regulations. Mr. Schloemer specifically recommended that this could be accomplished through providing the communities with higher scores in federal grant making policies. Ms. Couch also expressed support for the U.S. Department of Housing and Urban Development’s (HUD) Pathways to Removing Obstacles to Housing (PRO Housing) Program. She mentioned how this Program had recently provided its first grants to state and local governments to create higher density zoning laws and to reduce land use restrictions.
  • Rent Control Policies: Subcommittee Republicans, Mr. Harris, and Mr. Schloemer raised concerns over the adoption of rent control policies. They argued that these policies would result in higher housing costs through decreasing incentives for expanding the housing supply. They expressed particular concerns over the Biden administration’s proposal for a nationwide cap on rent increases of 5 percent per year for landlords that own more than 50 units. Such landlords that raise rents by more than 5 percent per year would lose access to tax benefits under the Biden administration’s proposal. Mr. Schloemer indicated that this 5 percent amount is “far below” the 8 percent increase in per unit operating costs in 2023. Mr. Harris and Mr. Schloemer also warned that rent control policies would deter investments in multifamily housing and lead to deferred maintenance and deteriorating housing conditions. Rep. Garcia stated however that the Biden administration’s proposed 5 percent cap on rent increases would ensure that corporate and private equity lobbyists cannot force working families out of their homes to make money. Rep. Andrew Garbarino (R-NY) and Mr. Schloemer further expressed concerns over how the Federal Housing Finance Agency’s (FHFA) had recently announced tenant protections to address “egregious” rent increases in its government-sponsored enterprise (GSE) multifamily programs.
  • Environmental Regulations: Rep. Mike Flood (R-NE), Mr. Compton, and Mr. Harris raised concerns that many existing federal environmental regulations are adding to front-end building costs and making it challenging to construct affordable housing units. They specifically listed U.S. Environmental Protection Agency (EPA) rules, Waters of the U.S. (WOTUS) rules, and Endangered Species Act of 1973 rules as examples of burdensome environmental regulations. Mr. Compton also discussed how time limited nature of Phase I environmental site assessments (ESAs) can delay the construction of new housing. Mr. Compton further recommended the elimination of the inclusion of FHA loans under the coverage of the National Environmental Protection Act (NEPA), the abolition of mixed wage decisions with respect to the application of the Davis-Bacon Act of 1931 to residential development, and the elimination of the regulatory doctrine of “choice-limiting activity” in the context of environmental reviews. Rep. Garcia and Ms. Couch argued however that many of these environmental regulations are key to protecting residents from health and safety hazards
  • Pre-Disaster Mitigation and Rental Housing Operational Expenses: Rep. Nydia Velázquez (D-NY) and Mr. Schloemer expressed support for providing additional federal resources for pre-disaster mitigation and increased appropriations for rental housing operating expenses. Rep. Velázquez urged the National Multifamily Housing Council (NMHC) to lobby Congressional Republicans to support these policies.
  • HUD’s Housing Choice Voucher (HCV) Program: Rep. Seven Horsford (D-NV) and Ms. Couch called on Congress to provided increased funding for HUD’s HCV Program and asserted that this Program has been proven effective in terms of bolstering housing access. However, Subcommittee Chairman Warren Davidson (R-OH), Mr. Compton, and Mr. Schloemer raised concerns regarding the complexity of the HCV Program’s requirements. They argued that the complexity of these requirements can discourage housing developers from participating in the Program, which reduces access to housing for vulnerable populations.
  • Adoption of 2021 International Electricity Conservation Code (IECC) Standards: Subcommittee Republicans, Rep. Horsford, and Mr. Harris raised concerns over the federal government’s policies to promote the adoption of 2021 IECC standards and asserted that these policies would add between $7,000 and $31,000 to the cost of new house. They criticized the recently adopted federal rule that requires all newly constructed HUD and U.S. Department of Agriculture (USDA) financed homes to comply with the 2021 IECC standards. They further raised concerns that the FHFA is considering requiring Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) financed homes to adhere to the 2021 IECC standards. Several Subcommittee Democrats and Ms. Couch argued however that the adoption of 2021 IECC standards would make homes more energy efficient, resilient to adverse weather events, and safer. They also stated that the energy savings associated with these updated building codes would save homeowners money over the long-term.
  • HUD’s Section 202 Supportive Housing for the Elderly Program:  Rep. Ritchie Torres (D-NY) and Ms. Couch expressed support for increasing funding for HUD’s Section 202 Supportive Housing for the Elderly Program and lamented how Congress had eliminated new funding for this Program. This Program provides subsidized homes that exclusively serve very low-income households. Ms. Couch remarked that increased federal support for the Program would result in more housing stability for older adults and more affordable senior housing units.
  • HUD Loan Guarentes: Rep. Blaine Luetkemeyer (R-MO) expressed support for efforts to shift HUD loan guarantee risks to the private sector. Mr. Compton stated however that the FHA’s program has historically maintained “solid” underwriting practices and financed itself. He commented that while he would not want to alter a policy that is functioning well, he suggested that the U.S. could explore increased risk sharing of HUD loans with the private sector through a pilot program.
  • Policies to Promote Accessible Housing for Older Americans: Ms. Couch remarked that the current federal programs to support home modification and accessibility features are piecemeal in nature and underfunded. She mentioned how there is a relatively new HUD program to support these modifications and features and noted how many state and local governments use housing and Community Development Block Grant (CDBG) funds for home modification efforts. She asserted that these home modification and accessibility efforts are needed given how many aging Americans cannot move out of their current residences. She also mentioned how her organization, LeadingAge, had worked to change HUD’s Older Adult Homes Modification Grant Program so that eligible grant recipients could be renter households.
  • Policies to Promote Accessible Housing to Americans with Disabilities: Rep. Rashida Tlaib (D-MI) and Ms. Couch noted how Sec. 504 of the Rehabilitation Act of 1973 ensures that people with disabilities cannot be excluded from programs that receive federal assistance. They expressed support for HUD’s Affirmatively Furthering Fair Housing proposed rule. This proposed rule would require communities, housing authorities, and multifamily housing providers to demonstrate their compliance with federal fair housing laws and to address housing gaps within their communities
  • Policies to Establish Housing Insurance Products for Older Americans: Ms. Couch remarked that the U.S. needs insurance products that are tailored to affordable senior housing. She discussed how many senior housing providers are reducing their wellness programs in order to afford rising insurance costs and to ensure that their housing units are not classified as having wellness programs. She suggested that Congress could authorize HUD to establish its own property and liability insurance product in order to provide relief to affordable housing programs. 
  • Insurance Data Collection: Ms. Couch also remarked that the U.S. requires more insurance data. She acknowledged however that such data is difficult to collect given how insurance is regulated at the state level. She stated that this data should indicate the extent to which insurance rates are tied to various factors, such as storms, climate change resiliency, wellness services, and neighborhoods. She also stated that this data should indicate the extent to which discrimination is occurring within the insurance market.
  • Housing on Public Lands: Rep. Horsford applauded the Biden administration’s recent announcement that identified nearly 600 acres of public lands in southern Nevada for development. He called on the Biden administration to reduce federal regulations to expedite permitting and to ease constraints for housing that can be built affordably on public lands.
  • Housing Construction Innovations: Rep. Torres and Ms. Couch expressed interest in exploring construction innovations, including modular construction, vertically-integrated construction, and 3D printing construction technologies. They asserted that these innovations could reduce housing construction costs.
  • Manufactured Housing: Rep. Flood and Mr. Compton expressed interest in exploring how manufactured housing could help to address the U.S.’s current housing supply shortages. They expressed concerns however that the U.S. Department of Energy is infringing on HUD’s jurisdiction in proposing energy conservation standards for manufactured houses. They warned that this regulatory conflict is impeding the construction of manufactured houses.
  • HUD’s Lack of Cost-Benefit Analyses: Subcommittee Vice Chairwoman Monica De La Cruz (R-TX) raised concerns that HUD’s failure to conduct cost-benefit analyses for its proposed policies is resulting in further barriers for home construction. Mr. Compton noted that while the Administrative Procedure Act contains provisions that require cost-benefit analyses for federal rulemakings, he stated however that many current policies burdening the U.S. housing market are subregulatory in nature. He indicated that there have been no cost-benefit analyses conducted on these policies. He also asserted that HUD’s cost-benefit analyses often underestimate the true costs of rulemakings. He elaborated that while cost-benefit analyses will measure a proposed rulemaking’s out-of-pocket costs, he stated that these analyses fail to properly measure the cost of time and the risk of time associated with regulatory compliance.
  • The Portal for Appraisal Licensing Act of 2023: Rep. Scott Fitzgerald (R-WI) expressed support for the Portal for Appraisal Licensing Act of 2023 and commented that this legislation would reduce regulatory barriers to homebuilding. He explained that this legislation would provide consistent license application, license renewal, and background check procedures for housing appraisers.
  • The Heirs Estate Inheritance Resolution and Succession (HEIRS) Act of 2024: Rep. Nikema Williams (D-GA) mentioned how she had proposed the HEIRS Act of 2024 to address the issue of heirs’ property. Heirs’ property is real estate that official government records indicate is owned by a deceased individual. Rep. Williams noted how many families lack formal documentation for property that has been inherited informally and that this lack of documentation prevents these families from building generational wealth. She explained that the HEIRS Act of 2024 would establish a two-prong grant program to provide legal assistance for heirs’ property owners to clear titles and would incentivize states to adopt the Uniform Partition of Heirs Property Act. Ms. Couch stated that providing people with clear titles and ownership of their properties will improve financial security.
  • Passive Activity Loss Limitations: Mr. Compton criticized the current passive activity loss limitation in Sec. 469 of the U.S. Internal Revenue Code. He commented that this tax provision provides only widely held C-corporations with an economic incentive to invest in real estate. He recommended that Congress restore the ability of individual investors and closely held businesses to invest in local real estate. He commented that this policy change would provide more accountability to local political processes (which adopt and implement local housing regulations). He also suggested that Congress could target this policy change in a manner that requires investors to live within proximity to their real estate investments to qualify for these tax benefits.
  • The U.S. Supreme Court’s Recent City of Grants Pass v. Johnson Decision: Rep. Garcia mentioned how the U.S. Supreme Court’s recent City of Grants Pass v. Johnson decision permits localities to criminalize and punish homelessness. She stated that this decision would allow for localities to engage in mass incarceration to address their homelessness problems. She warned that a mass incarceration approach to addressing homelessness would be expensive and ineffective.
  • HUD’s Voting-Related Initiatives: Subcommittee Chairman Davidson further criticized the Biden administration’s policies directing federal housing programs to focus on voter registration and to set up ballot drop boxes at HUD properties. He argued that the Biden administration should instead focus on expanding housing access. He also noted how Congress had not appropriated any funds to support these voting initiatives.

Hearing Witnesses:

1. Mr. Carl Harris, Co-Founder and President, Carl Harris Co., Managing Partner, Harris Homes, and Chairman, National Association of Home Builders
2. Mr. James H. Schloemer, Chief Executive Officer, Continental Properties Company, and Chair, National Multifamily Housing Council (NMHC), on behalf of NMHC and the National Apartment Association
3. The Hon. Paul Compton, Managing Partner, Compton Jones and Dresher LLP
4. Ms. Linda Couch, Senior Vice President, Policy and Advocacy, LeadingAge

Member Opening Statements:

Subcommittee Chairman Warren Davidson (R-OH):

• He remarked that the hearing would identify actions that the U.S. can take to facilitate the creation of new housing units.
  • He commented that there exists broad interest in this topic given how housing has become unaffordable for many Americans.
• He stated that various federal, state, and local bureaucratic rules do little to improve the quality of housing stock while increasing housing costs, delaying construction, and raising barriers to housing.
• He recounted a January 2024 New York Times story profiling how local rules have impeded San Francisco’s construction of a $1.7 million bathroom (which was never ultimately completed).
  • He commented that this $1.7 million figure is about eight times the median price of a home in his Congressional District.
  • He further noted how the New York Times story had indicated that it takes an average of 523 days in San Francisco for a developer to obtain initial approval to construct housing and an additional 605 days to obtain building permits.
• He also displayed a chart demonstrating how HUD’s HCV Program’s leasing process is significantly more complex than the standard leasing process.
  • He noted how developers are supposed to offer HCV Program participants the same prices for housing as non-HCV Program participants and commented that developers have much greater administrative costs when participating in the HCV Program.
• He remarked that federal bureaucrats are working to add more cost, complexity, and uncertainty to the housing market.
• He specifically criticized HUD and the USDA for their work to adopt IECC rules and the Biden administration for its recent rent control proposals.
  • He warned that these policy proposals would increase housing costs and decrease housing supplies.
• He further criticized the Biden administration’s policies directing federal housing programs to focus on voter registration and to set up ballot drop boxes at HUD properties.
  • He argued that the Biden administration should instead focus on expanding housing access and noted how Congress had not appropriated any funds to support these voting initiatives.
• He stated that rent control policies and other housing restrictions limit investments in housing and asserted that the U.S. should instead focus on expanding its housing supply.

Rep. Sylvia Garcia (D-TX):

• She expressed frustration that the Subcommittee has not held enough hearings on housing issues given the U.S.’s current housing “crisis.”
• She remarked that the Biden administration has focused on addressing the U.S.’s housing challenges and commented that Committee Democrats have supported these efforts.
  • She highlighted how Congressional Democrats have passed funding that has kept over 12.4 million people housed.
• She also mentioned the FHA has helped nearly 1.8 million individuals become homeowners since 2021.
  • She indicated that this figure includes 1.5 million first-time homebuyers (which is the highest amount in 23 years).
  • She added that there have been 2.2 million total first-time homebuyers across the Government National Mortgage Association (Ginnie Mae) portfolio since 2021.
• She further highlighted how the Biden administration had recently announced a plan (subject to Congressional approval) to withhold tax benefits from corporate landlords who raise rents by more than 5 percent per year.
  • She commented that this plan ensures that corporate and private equity lobbyists cannot force working families out of their homes to make money.
• She disputed the arguments from Committee Republicans that federal housing regulations and energy standards are responsible for the U.S.’s current housing challenges.
• She emphasized however that many of the regulatory barriers impeding new housing construction are at the state and local levels and expressed support for efforts to address these barriers where appropriate.
  • She noted how Full Committee Ranking Member Maxine Waters’s (D-CA) housing legislative proposal includes funding to help communities reduce these regulatory barriers.
  • She expressed frustration that Full Committee Chairman Patrick McHenry (R-NC) is refusing to have the Committee vote on this legislative proposal.
• She asserted that Committee Republicans are failing to propose legislative solutions to address the U.S.’s current housing challenges and are instead expecting the private market to address these challenges.
  • She criticized this approach and stated that these challenges would already be solved if the private sector could solve them.
• She called it “virtually impossible” for real estate developers to build homes that are affordable for low-income families without “necessary” federal subsidies.
  • She commented that real estate developers tend to focus on building luxury homes because these homes are more profitable.
• She then mentioned how three U.S. Department of Energy National Laboratories have found that modern energy codes can reduce deaths caused by extreme heat by 80 percent and reduce deaths caused by extreme cold by 30 percent during prolonged weather-induced power outages.
  • She noted how her Congressional District is still recovering from Hurricane Beryl and asserted that many of her constituents could have survived this hurricane if they had lived in homes built in compliance with better energy codes.
• She lastly remarked that if the federal government is going to back mortgages, then the mortgages should be for safer homes.

Witness Opening Statements:

The Hon. Paul Compton (Compton Jones and Dresher LLP):

• He remarked that there exist “hundreds” of federal regulatory impediments and “tens of thousands” of state and local regulatory impediments that impact access to affordable housing.
  • He commented that federal requirements are responsible for some of these state and local regulatory impediments.
• He stated that while no single housing regulation is solely responsible for the U.S.’s current housing challenges, he asserted that the cumulative burden of these various federal, state, and local housing regulations is driving housing unaffordability.
• He remarked that these current housing regulation costs fall into three main categories.
  • He indicated that the first category of costs involves the costs directly imposed for professionals and for reviewing and coordinating their regulatory compliance.
  • He indicated that the second category of costs involves the time value of money and the costs associated with beginning development, allocating investments, and the risks of these investments.
  • He indicated that the third category of costs involves the growth in required investment returns as projects take longer to complete.
• He discussed how housing construction delays can have negative consequences, such as increased costs, higher interest rates, withdrawals of market participants (including land sellers and investors), and greater likelihoods for projects to experience economic downturns.
• He stated that while the U.S. can address many of the regulatory barriers harming affordable housing, he contended that the U.S. should focus on developing a system of checks and balances to address growing local housing regulations.
  • He noted how studies have found that local housing regulations have more than tripled over the previous 40 years.
• He remarked that the Tax Reform Act of 1986 had caused housing regulations to grow through economically pushing individuals and small businesses out of the housing market.
  • He noted how this law had established the Low-Income Housing Tax Credit (LIHTC), which he explained was supposed to be a temporary provision to offset the impact of passive activity loss limits would create on the housing market.
• He asserted that the passive activity loss limitation in Sec. 469 of the U.S. Internal Revenue Code is the U.S.’s most problematic tax provision.
  • He commented that this tax provision exclusively provides widely held C-corporations with an economic incentive to invest in real estate.
• He recommended that Congress restore the ability of individual investors and closely held businesses to invest in local real estate.
  • He commented that this policy change would provide more accountability to local political processes (which adopt and implement local housing regulations).
  • He also suggested that Congress could target this policy change in a manner that requires investors to live within proximity to their real estate investments to qualify for the tax benefits.
• He then provided several additional recommendations to Congress for addressing the U.S.’s current housing challenges.
  • He first recommended the elimination of the inclusion of FHA loans under the coverage of NEPA.
  • He secondly recommended the abolition of mixed wage decisions with respect to the application of the Davis-Bacon Act of 1931 to residential development.
  • He lastly recommended the elimination of the regulatory doctrine of “choice-limiting activity” in the context of environmental reviews.

Mr. Carl Harris (Carl Harris Co., Harris Homes, National Association of Home Builders):

• He remarked that homebuilders face “substantial” regulatory challenges that impact housing production and affordability.
  • He commented that these regulations impede the efforts of homebuilders to meet their goals and warned that additional mandates will further hinder the U.S.’s ability to provide affordable housing.
• He discussed how U.S. housing prices are growing at an unsustainable rate and noted how the U.S. is experiencing a shortfall of 1.5 million housing units (that is continuing to grow each year).
  • He further stated that rising construction costs, regulatory burdens, and limited availability of buildable land are exacerbating the U.S.’s housing challenges.
• He highlighted how homebuilders face challenges balancing the rising material costs, labor shortages, and regulatory complexity and commented that these factors contribute to higher home prices and rents.
  • He asserted that the U.S. must ensure that workforce families, including members of the armed forces, teachers, and first responders, have access to affordable homes within the communities that they serve and live.
• He discussed how rent increases have garnered significant media attention and have spurred calls for rent control.
• He argued however that rent control policies are fundamentally flawed and fail to address the root cause of the U.S.’s housing crisis: an insufficient housing supply.
  • He commented that rent control policies will not support the construction of new housing units and that new housing construction is needed to alleviate housing shortages.
  • He warned that rent control policies would instead deter investments in multifamily housing and lead to deferred maintenance and deteriorating housing conditions.
• He lamented how the Biden administration has proposed a nationwide cap on rent increases of 5 percent per year for landlords that own more than 50 units.
  • He asserted that these proposed rent caps will harm existing tenants because owners and developers will be unable to cover the rising costs of rents if rent levels are fixed.
• He warned that the Biden administration’s proposed rent cap will discourage real estate developers from building new rental housing units, which will result in lower housing supplies and higher rents.
• He then criticized the recently adopted federal rule that requires all newly constructed HUD and USDA-financed homes to comply with 2021 IECC standards.
  • He indicated that 2021 IECC standards can add as much as $31,000 in costs to the average single family home.
• He asserted that this recently adopted rule offers minimal utility savings while significantly increasing housing costs (especially in the entry level market).
  • He warned that this policy would deter new construction at a time when increasing the housing supply is crucial to lowering shelter inflation costs.
• He thanked Subcommittee Chairman Warren Davidson (R-OH) for introducing a resolution that would overturn this rule.
• He then raised concerns that the FHFA is considering requiring Fannie Mae and Freddie Mac-financed homes to adhere to 2021 IECC standards.
  • He noted how Fannie Mae and Freddie Mac provide 72 percent of the financing of new home purchases.
• He stated that the application of 2021 IECC standards to Fannie Mae and Freddie Mac-financed homes would set a de facto nationwide energy code, which would “severely” disrupt new home construction, intensify the U.S.’s housing supply shortage, and harm housing affordability.
  • He also asserted that this policy would reduce affordable financing options for low- and moderate-income homebuyers seeking newly constructed homes, which would cause these potential homebuyers to buy or remain in less energy efficient properties.
• He noted how the U.S. National Renewable Energy Laboratory (NREL) has found that upgrades to existing housing stock can reduce total U.S. electricity consumption by 5.7 percent by 2030.
• He contended that the U.S. should focus on address the energy efficiency of older housing if it seeks to maximize improvements to energy efficiency.
  • He commented that newer housing is already energy efficient.

Mr. James H. Schloemer (Continental Properties Company, National Multifamily Housing Council, National Apartment Association):

• He discussed how his firm, Continental Properties Company, is a national developer and operator of multifamily properties that are meant to serve households earning between 80 percent and 120 percent of area median income.
  • He testified that his firm has developed over 129 apartment communities over the previous 23 years and indicated that these communities encompass more than 34,000 apartment homes in 19 states.
• He remarked that multifamily housing providers are committed to working with Congress and the Executive Branch to address the U.S.’s housing supply “crisis.”
• He attributed the U.S.’s current housing affordability challenges to a lack of available housing and asserted that the only way to address this shortage is for the U.S. to construct more housing.
  • He noted how estimates indicate that the U.S. will require 4.3 million new apartment homes by 2035.
• He stated that while the U.S. is at “historic” levels of apartment completions in the current calendar year, he noted that U.S. Census Bureau data shows that new housing starts are down nearly 35 percent this year.
  • He warned that this reduction in new housing starts could lead to greater housing shortages moving forward.
• He lamented that the U.S.’s current political, economic, and regulatory environment makes building new homes “incredibly difficult.”
  • He commented that increased material, labor, insurance, and state and local tax expenses have increased housing costs “dramatically.”
• He discussed how research has found that many regulations can go “far beyond” ensuring the health and well-being of the public and noted that regulations being imposed by all levels of the government account for an average of 40.6 percent multifamily housing development costs.
• He lamented how policymakers are considering several policy proposals that would reduce housing supply.
  • He indicated that these policy proposals would target artificial intelligence (AI), broadband internet service, rent control, evictions, financial and criminal screening, service fees, energy efficiency standards, and building codes.
  • He asserted that none of these policy proposals would increase the U.S.’s housing supply and that some of these policy proposals (including the Biden administration’s plan to ban internet bulk billing) will instead raise costs for multifamily housing residents.
• He specifically raised concerns over proposed rent control proposals and criticized the Biden administration’s plan to cap rent increases at 5 percent annually (which he described as misguided and counterproductive).
  • He indicated that this 5 percent amount is “far below” the 8 percent increase in per unit operating costs that had occurred in 2023.
• He remarked that rent regulation “devastates” rental housing quality and harms rental housing affordability.
  • He highlighted how research from independent economists has consistently shown that rent regulation does not add new housing and instead worsens housing availability and quality.
• He contended that Congress must increase the U.S.’s housing supply and support policies that will ensure greater housing stability and affordability at a variety of income levels.
  • He called on Congress to work with the Biden administration to implement initiatives like the Biden administration’s Housing Supply Action Plan.
  • He also recommended that the Biden administration reward jurisdictions that have reformed zoning and land use policies with higher scores in federal grant making policies.
• Note: Mr. Schloemer’s opening statement time expired here.

Ms. Linda Couch (LeadingAge):

• She discussed how her organization, LeadingAge, is a national association of more than 5,400 mission-driven non-profit aging services providers.
  • She indicated that her organization’s members include affordable housing providers, nursing homes, home health agencies, hospices, Program of All-Inclusive Care for the Elderly (PACE) service providers, and other types of senior living communities and providers.
  • She further indicated that her organization has 197 members in the Congressional Districts of the Subcommittee’s Members.
• She noted how LeadingAge’s non-profit affordable housing provider members offer quality housing and rely upon federal programs to serve older adults.
• She indicated that the average annual income of a HUD-assisted older adult household is $16,262 and stated that affordable housing for these households necessitates that rent and utilities do not exceed $375 per month.
  • She asserted that both for-profit and non-profit real estate developers cannot afford to provide housing for these households without public subsidies.
• She remarked that while the U.S. maintains strong housing support programs, she asserted that these programs are insufficient for addressing the U.S.’s existing and growing housing needs.
  • She noted how HUD’s three largest programs serve almost 300,000 fewer households today than they had served in 2004 and that these programs meet the needs of only one-third of eligible older adult households.
• She mentioned how HUD’s most recent Worst Case Housing Needs report had indicated that 2.35 million older adult renter households with very low incomes spend more than half of their incomes on housing.
  • She indicated that this figure amounts to a 60 percent increase since 2011 and a 130 percent increase since 1999.
• She lamented how Congress had eliminated new funding to build and operate HUD’s Section 202 Supportive Housing for the Elderly Program and explained that this Program provides subsidized homes that exclusively serve very low-income households.
• She remarked that the U.S. is currently experiencing a rise in housing needs without a commensurate increase in resources and action.
  • She noted how the number of older adult households with chronic patterns of homelessness had increased by 73 percent between 2019 and 2021.
  • She indicated that older adults are currently the fastest growing population of people experiencing homelessness.
• She stated that the U.S. currently does not provide sufficient resources to federal housing programs as demonstrated by the long waiting lists for affordable senior housing.
  • She called it “unconscionable” that many older Americans cannot obtain housing during their times of greatest need.
• She remarked that the U.S. must eliminate exclusionary and racist zoning and permitting laws and expressed LeadingAge’s support for HUD’s PRO Housing Program.
  • She mentioned how this Program had recently provided its first grants to state and local governments to create higher density zoning laws and to reduce land use restrictions.
• She stated that while addressing housing regulatory barriers is important, she asserted that these actions do not absolve the federal government from committing the resources necessary to restore and ensure the U.S.’s housing “safety net.”

Congressional Question Period:

 Subcommittee Chairman Warren Davidson (R-OH):

• Chairman Davidson mentioned how many housing industry stakeholders have asserted that they are facing significant challenges in terms of complying with federal, state, and local regulatory regimes. He asked the witnesses to identify the top policy changes that Congress should consider to address the U.S.’s housing challenges. He mentioned how Mr. Compton’s testimony had recommended that Congress reform certain tax policies to improve the U.S.’s housing landscape. He commented that Congress would need to work across multiple Committees to address the U.S.’s housing challenges, which would be difficult.
  • Mr. Compton recommended that Congress eliminate the current limitation on passive activity losses generated by real estate depreciation. He acknowledged that while this potential tax policy change is outside of the Committee’s jurisdiction, he stated that Congress’s upcoming reconsideration of the Tax Cuts and Jobs Act of 2017 (TCJA) provides an opportunity to make this policy change.
  • Mr. Harris contended that the U.S. should stop adopting new housing regulations. He noted how 24 percent of the cost of a new house is directly related to government regulations and indicated that most of these regulations are local. He also warned that requiring new houses to comply with 2021 IECC standards would add between $7,000 and $31,000 to the cost of new houses.
  • Mr. Schloemer remarked that there exists broad consensus regarding the need to provide more and better quality housing at all price points. He then discussed how the process that a landlord must undergo to lease an apartment to a person under the HCV Program is very onerous. He commented that the time associated with this process results in apartments remaining vacant for longer. He stated that expediting the HCV Program’s leasing process would enable the U.S. to provide better quality housing sooner to low-income housing residents.
• Chairman Davidson noted how local jurisdictions often impose additional inspection requirements on housing units participating in the HCV Program.
  • Ms. Couch recommended that the U.S. expand existing housing programs that have proven effective including the Section 202 Supportive Housing for the Elderly Program and the HCV Program. She asserted that these programs have long been underfunded. She also stated that housing authorities require expertise and resources to administer the HCV Program and to expedite their inspections so that people can make use of vacant apartment units. She further recommended that Congress make housing assistance an entitlement program for the lowest income households.
• Chairman Davidson then asked Mr. Harris to indicate whether HUD is required to publish updated energy efficiency standards in 2024.
  • Mr. Harris indicated that HUD was required to review energy codes and to consider whether the introduction of an energy code into their programs would impact both housing affordability and housing availability. He asserted that the introduction of energy codes into HUD programs would impact housing affordability and housing availability (despite HUD’s contentions otherwise).
• Chairman Davidson noted how the application of 2021 IECC standards to new houses would add between $7,200 and $31,000 in costs. He commented that these increased housing costs would harm housing affordability. He also expressed skepticism toward claims that increased housing subsidies would address the U.S.’s housing affordability challenges. He asserted that housing subsidies would not fundamentally change the market and would not provide incentives for investments in new housing units.

Rep. Sylvia Garcia (D-TX):

• Rep. Garcia remarked that the U.S. currently faces a significant affordable housing and homelessness crisis. She mentioned how the U.S. Supreme Court had recently ruled that localities can criminalize and punish homelessness. She stated that this decision would allow for localities to engage in mass incarceration to address homelessness. She warned that a mass incarceration approach to addressing homelessness would be expensive and ineffective. She contended that the U.S. should instead focus on building more safe and affordable homes to address homelessness. She asked Mr. Harris to discuss why housing developers are not building more homes that are affordable to lower income households.
  • Mr. Harris remarked that regulatory costs and uncertainty are impeding the development of multifamily housing. He noted how 41 percent of the costs of a multifamily housing property is directly related to government regulations.
• Rep. Garcia interjected to ask Mr. Harris to clarify whether these government regulations impeding multifamily housing development stem mainly from the local level.
  • Mr. Harris stated that the government regulations impeding multifamily housing development stem mainly from the local level.
• Rep. Garcia interjected to ask Mr. Harris to indicate whether there are actions that Congress could take to address these local housing regulations.
  • Mr. Harris suggested that the federal government could recognize and reward communities that decrease local housing regulations. He commented that this approach could spur housing investments (and particularly investments in low-income housing units).
• Rep. Garcia interjected to mention how the mayor of Houston, Texas had recently halted a plan to move residents across public housing developments based on environmental concerns. He asked Mr. Harris to respond to this situation.
  • Mr. Harris argued that the U.S. should stop pursuing new housing regulations.
• Rep. Garcia interjected to ask Mr. Harris to indicate whether the Houston mayor should stop the movement of residents to a new public housing development with environmental concerns.
  • Mr. Harris indicated that he is unaware of the Houston mayor’s process for rejecting public housing developments.
• Rep. Garcia interjected to ask Mr. Harris to indicate whether he is opposed to allowing mayors to stop public housing developments with environmental concerns.
  • Mr. Harris stated that housing projects should not be stopped if the projects have already received the proper permits. He reiterated that he is unaware of the specific details underlying the Houston mayor’s recent decision to halt the relocation of public housing residents across developments. He remarked that housing developers want to pursue projects in areas with policy certainty and that policy uncertainty increases the cost of housing projects.
• Rep. Garcia called it important for local governments to have the ability to halt public housing projects based on environmental concerns. She mentioned how multiple housing projects in her city of Houston had been found to be uninhabitable after Hurricane Harvey. She asked Ms. Couch to discuss the importance of environmental regulations for ensuring the safety of residents.
  • Ms. Couch remarked that environmental regulations are key to protecting people from health and safety hazards. She called it important to address potential health and safety hazards before a person moves into a property. She discussed how older adults (and particularly lower-income older adults) tend to have more chronic health conditions. She noted how environmental air quality issues and soil contaminants can exacerbate these conditions. She acknowledged that while environmental regulations may delay when people can move into housing units and when housing developments are completed, she asserted that these regulations are critical to protecting residents.
• Rep. Garcia indicated that she would submit additional questions for the hearing’s record.

Rep. Blaine Luetkemeyer (R-MO):

• Rep. Luetkemeyer noted how the current edition of the Wall Street Journal indicates that the median U.S. home price is $427,000. He highlighted how U.S. median home price has more than doubled over the previous nine years and has increased by over 50 percent over the previous four years. He further noted how a 30-year loan on a $427,000 house with a 7 percent mortgage rate and 10 percent down payment would result in a monthly payment of around $2,800. He indicated that the average annual wage in his Congressional District is $56,000 and stated that the average American cannot afford to purchase a home anymore. He also mentioned how the Washington Times indicates that housing costs are increasing at a 5.2 percent annual rate while the U.S.’s inflation rate is around 3 percent. He further noted how the Washington Times indicates that wages in residential housing construction have increased by 9.2 percent. He remarked that these facts demonstrate that the U.S. is facing a  housing “crisis.” He also noted how Mr. Harris had indicated that government regulations are responsible for 24 percent of current housing costs. He asked the witnesses to address how the U.S. could make housing more affordable. He commented that non-regulatory factors (such as inflation) are contributing to higher housing prices.
  • Mr. Harris mentioned how the National Association of Home Builders (NAHB) has partnered with the American Planning Association, the National League of Cities, and the National Association of Realtors to publish the Housing Supply Accelerator Playbook. He explained that this document provides recommendations for local municipalities and planning groups to address current barriers to housing construction. He recommended that the U.S. not adopt additional housing regulations. He mentioned how he serves on his local planning and zoning board and testified that this board had implemented the Playbook’s recommendations to eliminate arbitrary requirements that add to housing costs. He noted how his local planning and zoning board had successfully permitted a triplex on a lot originally intended for a duplex. He testified that this action will lower the rent $200 per month for each of the families living in the development.
• Rep. Luetkemeyer noted how the Biden administration’s own data indicates that the U.S. has added $1.6 trillion in new regulatory costs over the previous three and a half years. He highlighted how $1.2 trillion of these new regulatory costs had been added within the previous five months. He also commented that the U.S.’s current inflation acts as a “hidden tax” on Americans. He then discussed how HUD guarantees certain loans and expressed support for shifting these risks to the private sector. He asked Mr. Compton to indicate whether shifting HUD’s guaranteed risks to the private sector would make HUD’s loans more accessible and affordable and improve HUD’s administration.
  • Mr. Compton stated that the FHA’s program has historically maintained “solid” underwriting practices and financed itself. He commented that while he would not want to alter a policy that is functioning well, he suggested that the U.S. could explore increased risk sharing of HUD loans with the private sector through a pilot program.
• Note: Rep. Luetkemeyer’s question period time expired here.

Full Committee Ranking Member Maxine Waters (D-CA):

• Ranking Member Waters noted how the share of older adults in the U.S. population is expected to reach 23 percent by 2050. She highlighted how this population typically has greater disability needs and fixed incomes. She stated that the U.S.’s “chronic” undersupply of accessible and affordable housing for these older adults has caused them to experience greater cost burdens and a greater propensity for homelessness. She highlighted how less than 1 percent of the U.S.’s housing stock is estimated to be wheelchair accessible. She asked Ms. Couch to identify the greatest barriers to integrated, accessible, and affordable housing for older adults.
  • Ms. Couch remarked that the greatest barrier to integrated, accessible, and affordable housing for older adults is a lack of funding. She commented that sufficient housing for older adults will remain unaffordable if it remains unsubsidized. She also stated that it is important for there to exist building codes and regulations that require housing units to have minimum accessibility standards (particularly when public dollars are used to develop or rehabilitate housing units). She highlighted how less than 1 percent of the U.S.’s housing stock is wheelchair accessible. She added that less than 4 percent of the U.S.’s housing stock has wide hallways and doors, single floor living, and no step entries. She asserted that the U.S. has “virtually” no accessible housing for older adults. She stated that HUD and the federal government could support the construction of “disability-forward housing.” She commented that the U.S. must make its housing stock more realistic and less aspirational.
• Ranking Member Waters interjected to discuss how she is an older adult with a fixed income that has lived in the same house for over a quarter century. She also mentioned how her home is not wheelchair accessible. She asked Ms. Couch to address how an older adult in a similar situation would make their home more accessible.
  • Ms. Couch remarked that the current federal programs to support home modification and accessibility features are piecemeal in nature and underfunded. She mentioned how there is a relatively new HUD program to support these modifications and features. She also noted how many state and local governments use housing and CDBG funds for home modification programs. She asserted that these home modification and accessibility efforts are needed given how many aging Americans cannot move out of their current residences. She noted how most older adults reside in homes that they own (or almost own) and want to remain in these homes. She commented that the U.S. must provide older adults with resources to install wheelchair access and to have single floor living for their homes.
• Ranking Member Waters posited a scenario in which an older adult is renting their housing unit and the housing unit’s landlord cannot afford to improve the unit’s accessibility. She asked Ms. Couch to comment on this scenario.
  • Ms. Couch noted how landlords are required to take certain actions to provide reasonable accommodations to their tenants. She also mentioned how LeadingAge had worked to change HUD’s Older Adult Homes Modification Grant Program so that eligible grant recipients could be renter households.
• Ranking Member Waters concluded that the Committee must work to ensure that older adults have accessible housing.

Rep. Scott Fitzgerald (R-WI):

• Rep. Fitzgerald remarked that U.S. builders currently lack sufficient incentives to build “starter homes” for younger generations. He identified the proposed Portal for Appraisal Licensing Act of 2023 as an example of legislation to reduce regulatory barriers for homebuilding. He explained that this legislation would provide consistent license application, license renewal, and background check procedures for housing appraisers. He asked Mr. Harris to identify additional federal regulatory burdens that could be removed to reduce the cost of housing.
  • Mr. Harris remarked that federal regulations, including EPA rules, WOTUS rules, and Endangered Species Act of 1973 rules, add to front-end building costs and make it challenging to construct affordable housing units. He recommended that policymakers review these federal regulations. He noted how builders often must retain expensive consultants to comply with these regulations.
• Rep. Fitzgerald then noted how the Biden administration had recently announced a policy proposal that would prohibit landlords with 50 or more housing units from taking depreciation deductions if these landlords raise their rents by more than 5 percent annually. He commented that rent control policies have a “poor track record” of providing housing affordability. He asked Mr. Schloemer to discuss the harms that would result from this Biden administration policy proposal. He specifically expressed interest in exploring how this policy proposal would exacerbate the U.S.’s current housing supply challenges.
  • Mr. Schloemer remarked that there exists a plethora of research on the detrimental impacts that rent control policies have on new housing supply. He recounted how St. Paul, Minnesota had adopted rent control policies while neighboring Minneapolis, Minnesota had not adopted rent control policies. He stated that the construction of new apartments and new rental housing in St. Paul has almost stopped while such construction has continued to increase in Minneapolis and the surrounding suburbs without rent control policies. He then testified that the cost for his company to develop a new apartment home had grown by 42 percent between January 2022 and June 2023. He indicated that rent had not increased by the same amount during this period. He remarked that rent control policies would prevent his company from charging sufficient rents to cover its construction costs. He also stated that rent control policies deter housing providers from entering certain markets. He further stated that rent control policies reduce housing quality because these policies limit the revenues that can be obtained from making housing improvements. He remarked that the solution to the U.S.’s housing challenges is to increase the U.S.’s housing supply. He acknowledged that many regulatory burdens that increase housing construction costs are at the state and local level. He stated however that the federal government can provide incentives to prevent further housing regulations and to promote greater housing density. He commented that these policies would increase the U.S.’s housing supply.

Rep. Ritchie Torres (D-NY):

• Rep. Torres stated the most common complaint he receives regarding housing costs relates to the high cost of insurance. He commented that property and liability insurance have been increasing at a rapid rate and these increases impact access to affordable housing. He asked the witnesses to address how the U.S. could combat these rising insurance costs.
  • Mr. Schloemer discussed how insurance costs have risen “far in excess” of many of his company’s operating costs and revenues in recent years. He stated that his company must address the inflation on construction costs to reduce its casualty insurance costs. He also discussed how growing liability costs are resulting in higher liability insurance costs and attributed these growing costs to the “inflationary” nature of current settlements. He stated that the U.S. must work to address the root problems of these insurance cost increases. He highlighted how many casualty insurance companies currently have losses that exceed their collected premiums.
  • Ms. Couch described rising insurance costs as a “gigantic” issue for affordable senior housing providers (as well as all HUD-assisted housing providers). She remarked that the U.S. needs insurance products that are tailored to affordable senior housing. She stated that insurance providers will often incorrectly treat senior housing as a health care setting and asserted that these insurance providers should instead treat senior housing as an independent living setting. She discussed how many senior housing providers are reducing their wellness programs in order to afford rising insurance costs and to ensure that their housing units are not classified as having wellness programs. She commented that this reduction in wellness programs undermines the abilities of these senior housing providers to help residents age in place. She mentioned how HUD is working to address this situation (which she acknowledged is largely a state-regulated matter). She suggested that Congress could authorize HUD to establish its own property and liability insurance product in order to provide relief to affordable housing programs.
• Rep. Torres then remarked that the U.S.’s current supply of senior housing is “catastrophically” failing to keep pace with the U.S.’s demand for senior housing. He noted how the U.S.’s aging population is growing and asserted that the U.S. must bolster its senior housing supply. He mentioned how a June 2024 LiveOnNY report had indicated that there are more than 300,000 applications on the waiting list for HUD’s Section 202 Supportive Housing for the Elderly Program. He disputed the arguments that the government’s involvement in the housing market has been harmful. He asked Ms. Couch to indicate whether greater federal support for HUD’s Section 202 Supportive Housing for the Elderly Program would result in more senior housing.
  • Ms. Couch remarked that increased federal support for HUD’s Section 202 Supportive Housing for the Elderly Program would result in more housing stability for older adults and more affordable senior housing units. She asserted that the Program has been “grossly underfunded” and indicated that the Program’s funding for new housing is set to be eliminated. She noted that this Program had previously provided the “vast majority” of the capital subsidies needed to construct affordable senior housing units. She also discussed how this Program provides 40 years of ongoing operating subsidies to ensure that older Americans can afford to live in these units over the long-term. She expressed her support for the Program.
• Rep. Torres further remarked that there exists a strong need for innovations in housing construction. He elaborated that these innovations include modular construction, vertically-integrated construction, and 3D printing construction technologies. He stated that these innovations could reduce housing construction costs and expressed interest in having the U.S. pursue these innovations.
  • Ms. Couch expressed support for these housing construction innovations.
• Rep. Torres then indicated that his question period time had expired.

Subcommittee Vice Chairwoman Monica De La Cruz (R-TX):

• Vice Chairwoman De La Cruz remarked that reducing housing regulatory burdens is needed to increase private sector investment in the U.S.’s housing supply. She called this increased investment a “vital step” for addressing the housing affordability challenges facing working families. She lamented how the gap between median incomes and median home prices is continuing to widen. She stated that the U.S. must remove unnecessary government-imposed costs on the housing market. She asked Mr. Compton to discuss how HUD conducts cost-benefit analyses in its rulemakings.
  • Mr. Compton noted how the Administrative Procedure Act contains provisions that require cost-benefit analyses for federal rulemakings. He stated however that many current policies burdening the U.S. housing market (such as choice limiting activity, mixed wage decisions, and tenant criminal background check requirements) are subregulatory in nature. He indicated that there have been no cost-benefit analyses conducted on these policies. He remarked that the cumulative impact of all of these policies is posing challenges to the U.S. housing market. He also asserted that HUD’s cost-benefit analyses often underestimate the true costs of rulemakings. He elaborated that while cost-benefit analyses will measure a proposed rulemaking’s out-of-pocket costs, he stated that these analyses fail to properly measure the cost of time and the risk of time associated with regulatory compliance.
• Vice Chairwoman De La Cruz also asked Mr. Compton to identify any examples of waste at HUD that Congress could address.
  • Mr. Compton stated that while there does exist waste at HUD, he cautioned that the cost of many efforts to address this waste can exceed the benefits realized from eliminating the waste. He asserted that program integrity requirements regarding the HCV Program can impose significant costs on participants (including out-of-pocket costs and costs related to delays). He stated that many HUD programs will inevitably contain inefficiencies. He contended that enforcement can serve as a better tool for addressing these inefficiencies than the imposition of stricter program requirements.

Rep. Nikema Williams (D-GA):

• Rep. Williams discussed how heirs’ property is real estate that official government records indicate is owned by a deceased individual. She added that this individual may have been deceased for multiple generations. She mentioned how this issue of heirs’ property has impacted her family personally and many of her constituents. She remarked that heirs’ property represents a significant asset for many families (especially Southern Black families). She stated that properly managing and formalizing ownership of heirs’ property can help address the U.S.’s racial wealth gap through securing and leveraging these assets for economic growth. She discussed how many Black families face challenges with estate planning, which can result in property being inherited informally (and thus recorded as heirs’ property). She stated that this situation can complicate the transfer of wealth and hinder long-term generational wealth building. She mentioned how a 2020 American Bar Association study had found that approximately 70 percent of Black Americans do not have a will (as compared to 45 percent of White Americans). She noted that the minimum estimate of assessed value of identified heirs’ properties is $32 billion across 44 states and the District of Columbia. She referenced a Brownstoner article that had described how a Brooklyn property had been subjected to a partition sale because an heir had sold an unspecified fractional share of the property to a limited liability corporation (LLC). She indicated that this LLC subsequently had been able to purchase the entire property through litigation. She remarked that partition sales can undermine wealth accumulation for Black families through forcing the sale of historic and valuable properties. She stated that heirs’ property often involves complicated legal and financial issues that can be “overwhelming” for families. She contended that the provision of clear solutions and legal support to families can help simplify these challenges and enable more effective management of properties. She mentioned how she had introduced the bipartisan HEIRS Act of 2024 to address the issue of heirs’ property. She explained that this legislation would establish a two-prong grant program to provide legal assistance for heirs’ property owners to clear titles and would incentivize states to adopt the Uniform Partition of Heirs Property Act. She asked Ms. Couch to discuss how the transformation of heirs’ property into formal ownership can contribute to long-term wealth accumulation and financial security for marginalized communities.
  • Ms. Couch mentioned how many families impacted by Hurricane Katrina had faced significant heirs’ property challenges. She discussed how most U.S. households derive much of their wealth from homeownership. She noted how the median net wealth of a homeowner at retirement age is $499,000 while the median net wealth of a renter at retirement age is $11,000. She stated that retirees can rely upon the value of their homes to cover long-term services and supports (LTSS) expenses. She asserted that providing people with clear titles for and ownership of their properties will improve financial security. She commented that this financial security would enable people to both cover their own expenses and pass along their wealth to their posterity.
• Rep. Williams indicated that her question period time had expired. She expressed her interest in working to advance the HEIRS Act of 2024.

Rep. Andrew Garbarino (R-NY):

• Rep. Garbarino mentioned how the NAHB had recently released a study that sought to quantify the costs of government regulations for new single-family homes. He stated that onerous regulations make housing development more expensive and can delay housing construction (which imposes additional costs on the building process). He asked Mr. Harris to indicate whether regulatory costs in the construction industry have increased in recent years.
  • Mr. Harris answered affirmatively. He also stated that greater regulation of labor and housing suppliers has caused labor and housing supply costs to increase. He identified WOTUS rules, EPA rules, and Endangered Species Act of 1973 rules as examples of federal regulations that are driving up U.S. housing costs. He also stated that local municipalities are imposing their own onerous building requirements.
• Rep. Garbarino asked Mr. Harris to confirm that housing regulations impact homebuilders during their development phases (in addition to during their construction phases).
  • Mr. Harris answered affirmatively. He remarked that housing development cost increases have likely been rising at a greater rate than housing construction cost increases. He noted how many areas have moved from by-right zoning to committee zoning, which has prolonged the development process. He elaborated that committee zoning better enables protesting groups to object to planned construction projects. He stated that the federal government should take actions to encourage communities to support quality development projects.
• Rep. Garbarino then asked Mr. Harris to address how the adoption of 2021 IECC standards would impact the costs of new houses.
  • Mr. Harris mentioned how HUD and the USDA now require that their financed homes comply with 2021 IECC standards. He also noted how the FHFA is currently considering whether to require homes financed by Fannie Mae and Freddie Mac to comply with these standards. He estimated that 2021 IECC standards would add $31,000 to the cost of new houses with a payback period lasting between 70 and 90 years. He stated that each $1,000 increase in home prices results in 100,000 families no longer being able to afford houses. He asserted that HUD’s adoption and the FHFA’s potential adoption of the 2021 IECC standards for new houses would undermine the missions of HUD and the FHFA.
• Rep. Garbarino expressed agreement with Mr. Harris’s response. He then discussed how the FHFA has announced a set of tenant protections to address “egregious” rent increases in its GSE multifamily programs. He asked Mr. Schloemer to indicate whether the FHFA’s actions and similar rent control policies would result in more or less housing construction.
  • Mr. Schloemer remarked that rent control policies have a “well documented” history of reducing the housing supply. He stated that the multifamily housing industry has already adopted tenant resident well-being measures to enhance the resident experience. He commented that the enhancement of the resident experience constitutes “good business.” He warned that the imposition of rent control policies would prevent the construction of new housing within the U.S.
• Rep. Garbarino commented that rent control policies have harmed the New York City housing market. He then indicated that his question period time had expired.

Rep. Nydia Velázquez (D-NY):

• Rep. Velázquez asked Mr. Harris, Mr. Schloemer, and Ms. Couch to provide recommendations for how the Committee can address rising insurance costs and rising insurance coverage losses.
  • Ms. Couch suggested that the Committee consider providing HUD with authorization to establish an insurance product exclusively for its affordable senior housing programs. She also remarked that the U.S. requires more insurance data. She acknowledged however that such data is difficult to collect given how insurance is regulated at the state level. She stated that this data should indicate the extent to which insurance rates are tied to various factors, such as storms, climate change resiliency, wellness services, and neighborhoods. She also stated that this data should indicate the extent to which discrimination is occurring within the insurance market.
• Rep. Velázquez asked Ms. Couch to indicate whether she has concerns regarding the presence of discrimination within the insurance market.
  • Ms. Couch testified that LeadingAge’s members have been told by their insurance carriers that their insurance rates would increase based on the type of housing that they provide, the individuals that they serve, and the programs that they receive subsidies from. She asserted that these reasons for insurance rate increases are euphemisms for race and poverty.
  • Mr. Harris remarked that both the NAHB’s members and its end customers are having challenges with their insurance products. He stated that high insurance costs are driving people out of the U.S. housing market and indicated that insurance costs now comprise a significant portion of housing costs. He mentioned how the NAHB has established a task group to work with insurers to identify potential solutions to high insurance costs.
• Rep. Velázquez then asked Mr. Schloemer to indicate whether the NMHC and the National Apartment Association’s (NAA) letter to President Biden had called for providing additional federal resources for pre-disaster mitigation and increased appropriations for rental housing operating expenses.
  • Mr. Schloemer answered affirmatively.
• Rep. Velázquez expressed support for providing additional federal resources for pre-disaster mitigation and increased appropriations for rental housing operating expenses. She asked Mr. Schloemer to address how his organizations are working to garner Republican support for these policies. She expressed strong doubts that Republicans would support these policies.
  • Mr. Schloemer remarked that there exists broad interest in making housing affordable for all income levels. He expressed interest in ensuring that any legislation to provide additional federal resources for pre-disaster mitigation and increased appropriations for rental housing operating expenses is bipartisan in nature.
• Rep. Velázquez interjected to comment that Mr. Schloemer’s desired policies will not be legislatively viable without Republican support.
• Note: Rep. Velázquez’s question period time expired here.

Rep. Mike Flood (R-NE):

• Rep. Flood called it important for the Committee to consider housing policy issues given how housing constitutes the single largest expense and the single largest asset for most U.S. families. He added that housing plays a significant role in inflation and rising consumer debt levels. He remarked that the main solution for addressing the U.S.’s current housing challenges is to build more housing and to increase housing density. He stated that manufactured housing could enable the quick production of affordable houses. He asked Mr. Compton to discuss the current regulatory challenges facing manufactured housing. He also asked Mr. Compton to address the U.S. Department of Energy’s Energy Conservation Standards for Manufactured Housing and how these standards attempt to preempt HUD’s activities.
  • Mr. Compton remarked that innovation within the manufactured housing space often moves at a faster pace than the regulatory process can. He stated that conflicts between HUD and the U.S. Department of Energy can further slowdown the regulatory process. He recommended that the U.S. review its regulatory processes for manufactured housing at both Departments to better enable advanced techniques to lower construction costs for manufactured housing.
• Rep. Flood mentioned how there exist various funds and state programs to build affordable homes within his Congressional District. He noted however that the stick-built homes that come out of these funds and state programs will often cost $400,000, which are unaffordable for the intended recipients. He expressed interest in building cheaper and smaller houses so that people can afford the houses earlier. He asserted that the U.S. should have one federal department overseeing manufactured housing and that this department should be HUD. He then asked Mr. Compton to provide an example of how environmental review requirements can delay the construction of new housing.
  • Mr. Compton discussed how all U.S. real estate developments (whether publicly or privately funded) will conduct a Phase I ESA. He noted how EPA guidance dictates that home lenders and homebuyers can only reasonably rely upon Phase I ESAs for six months. He indicated however that cities may have their own application requirements and that these applications may take more than six months to process. He commented that this dynamic can result in real estate developers having to conduct additional Phase I ESAs in order to obtain financing. He further stated that other elements of the development process (such as market studies and appraisals) may also be time limited in nature, which can create additional complications for the development process.
• Rep. Flood then asked Mr. Compton to identify the single greatest action that Congress could take to increase the U.S.’s housing development and supply.
  • Mr. Compton recommended that Congress remove passive activity loss limits from the U.S. Internal Revenue Code to enable private investors and small businesses to invest in residential real estate in their home markets. He stated that this policy change would provide private investors and small businesses with a financial incentive to lobby for the removal of “unreasonable” local regulatory burdens on housing construction.
• Rep. Flood indicated that his question period time had expired.

Rep. Rashida Tlaib (D-MI):

• Rep. Tlaib remarked that while eliminating unnecessary regulatory burdens to housing is a worthy goal, she asserted that the U.S. must also maintain fair and effective regulations to properly steward public funds. She discussed how Sec. 504 of the Rehabilitation Act of 1973 ensures that people with disabilities cannot be excluded from programs that receive federal assistance. She noted however that it had taken numerous years for this provision to be implemented via regulation. She mentioned how there is currently opposition to HUD’s Affirmatively Furthering Fair Housing proposed rule. She asked Ms. Couch to discuss the importance of this proposed rule for people with disabilities.
  • Ms. Couch noted how the Biden administration had issued its Affirmatively Furthering Fair Housing proposed rule in January 2023 and indicated that LeadingAge had submitted supportive comments regarding this proposed rule. She explained that this proposed rule would require communities, housing authorities, and multifamily housing providers to demonstrate their compliance with federal fair housing laws and to address housing gaps within their communities. She indicated that entities that fail to adhere to this proposed rule’s requirements would lose funding from HUD.
• Rep. Tlaib commented that many disabled Americans throughout the U.S. face challenges accessing housing. She then indicated that while new energy efficiency standards for houses may cause mortgage payments to increase, she stated that the energy savings associated with these standards would significantly exceed any mortgage payment increases. She noted how the average annual income of an older household served by HUD’s Section 202 Supportive Housing for the Elderly Program is slightly over $16,000. She asked Ms. Couch to address how better building standards would impact the physical and financial health of this Program’s participants.
  • Ms. Couch remarked that new energy efficiency standards would benefit the physical and financial health of Section 202 Supportive Housing for the Elderly Program participants. She highlighted how these standards would improve air quality, which will result in better resident health. She further stated that these standards would make buildings more resilient to climate change and weather events, which will reduce repair and rebuilding costs for the federal government. She lastly remarked that these standards would combat climate change, which will benefit the broader population.
• Rep. Tlaib remarked that federal financing and support for housing ought to contain conditions (including protections for the residents of this housing).

Rep. Mike Lawler (R-NY):

• Rep. Lawler noted how the U.S.’s housing stock is currently “well over” 6.5 million units underbuilt. He stated that many Americans are facing challenges purchasing homes given how mortgage interest rates are at multi-decade highs, the U.S. has limited housing supplies, and the U.S. faces continued supply chain and construction issues. He further noted how many homeowners are refusing to sell their homes for fear of losing their low fixed rate mortgages, which is exacerbating the U.S.’s housing market challenges. He remarked that the aforementioned factors have driven many potential homebuyers into the rental housing market, which has driven up rental housing prices. He noted how the monthly cost of a mortgage in Rockland and Westchester Counties in New York (which are in his Congressional District) is $1,000 more in 2024 as compared to 2023. He added that the monthly cost of a mortgage in Putnam and Dutchess Counties (which are also in his Congressional District) is at least $800 more in 2024 as compared to 2023. He described these higher housing costs as “unsustainable” for many families. He remarked that the U.S. government, non-profit organizations, local stakeholders, and industry stakeholders must work together to address these housing challenges. He stated that the U.S.’s higher interest rate environment poses a significant challenge for potential homebuyers and home sellers in the current market. He reiterated that many current homeowners had previously been able to obtain very low mortgage interest rates for their houses and would need to obtain much higher mortgage interest rates if they were to purchase new houses. He asked Mr. Harris and Ms. Schloemer to address how this mortgage interest rate situation is impacting homebuyers and home sellers.
  • Mr. Harris noted how higher mortgage interest rates have resulted in a “rapid increase” in homebuyers using cash for homes. He commented however that these high mortgage interest rates are harming first-time homebuyers and homebuyers interested in affordable housing. He remarked that the desire of current homeowners to maintain their mortgage interest rates is stymying the U.S. housing market. He noted how the share of new houses being sold as a percentage of the total housing market is at a record high because homeowners are not putting existing houses up for sale. He stated however that mortgage interest rates will eventually decrease.
  • Mr. Schloemer remarked that the U.S.’s current mortgage interest rate situation is impacting housing affordability and availability within the U.S. rental housing market. He noted how the U.S. Census Bureau estimates that new apartment construction starts in 2024 will have declined by at least 35 percent. He added that industry estimates put this decline at a much higher level. He stated that this reduction in new apartment construction starts will result in lower rental inventory in future years. He remarked that the increase in mortgage interest rates had driven up the cost of capital, which has contributed to the decline in new apartment construction starts. He further noted how this higher cost of capital has driven down the value of investment properties, which is exacerbating the U.S.’s current housing supply challenges.
• Rep. Lawler reiterated that the U.S. has not built enough housing units to satisfy current housing demand. He asked the witnesses to address how the U.S.’s increased housing demand and stable housing supply impacts U.S. housing costs (especially within the entry-level housing market).
  • Mr. Harris remarked that the U.S.’s increased housing demand and stable housing supply results in higher housing costs. He warned that the U.S.’s failure to boost its housing supply will result in additional housing market problems.

Rep. Steven Horsford (D-NV):

• Rep. Horsford discussed how his constituents have household expenses that are 13 percent higher than the national average. He commented that growing housing costs are driving these increased household expenses. He noted how current single family housing rents in southern Nevada are estimated to be 40 percent higher than the region’s 2019 single family housing rents. He also noted how the median sale price of a single family home in southern Nevada has increased to $445,000. He remarked that his state of Nevada has an acute issue with out-of-state corporate landlords. He stated that these corporate landlords had purchased homes in southern Nevada at the second fastest growing rate of all major communities in the U.S. during the first quarter of 2024. He noted how these institutional buyers are making all cash offers and commented that his constituents cannot compete with these offers. He remarked that the artificial contraction of Nevada’s housing supply is exacerbating the impacts of the U.S.’s “woeful” lack of housing construction. He further noted how Nevada faces unique challenges related to the “vast swath” of federally managed land within the state that cannot currently be used for housing development. He applauded the Biden administration’s recent announcement that identified nearly 600 acres of public land in southern Nevada for development. He commented that while this announcement constitutes a “great start,” he asserted that Nevada’s challenges with federally managed land are a state-wide issue. He called on the Biden administration to reduce federal regulations to expedite permitting and to ease constraints for housing that can be built affordably on public lands. He stated however that there remain an insufficient number of homes to meet current housing demands. He asserted that the Subcommittee must make incentivizing new housing construction its top priority. He then mentioned how he had spoken with homebuilders in his Congressional District regarding the upfront costs related to compliance with 2021 IECC standards. He asked Mr. Harris to address how the U.S. could better balance its climate change policy goals with the need to increase the availability of new homes.
  • Mr. Harris first expressed agreement with Rep. Horsford’s comments. He remarked that the houses currently being produced in the U.S. are the most efficient and sustainable houses that have ever been built in the U.S. He testified that his local utility company in Wichita, Kansas had indicated that the construction of new homes in their community had not resulted in an incremental increase in the use of electricity from the residential market.
• Rep. Horsford then called for additional resources to be provided to local housing authorities, such as increased allocations of Housing Choice Vouchers and greater HCV Program flexibility. He asserted that the U.S. must improve its investments in its housing stock and expressed interest in working to encourage new housing construction. He also stated that the efficiency of existing housing programs must be improved and that the selection processes for these programs must be expanded.