The Role of Tax Incentives in Affordable Housing (U.S. Senate Committee on Finance)

Hearing	The Role of Tax Incentives in Affordable Housing
Committee	U.S. Senate Committee on Finance
Date	July 20, 2022

 

Hearing Takeaways:

• The U.S.’s Affordable Housing Challenges: The hearing focused on how the U.S. was experiencing increasing rents and home prices. They stated that these housing affordability challenges were particularly impacting workers, low-income renters, and senior citizens. They also stated that these challenges were driving homelessness and racial disparities in homeownership rates. There was broad agreement among Committee Members and the hearing’s witnesses that the root cause of the U.S.’s housing affordability challenges was a lack of housing supply. They expressed additional concerns that the current inflationary environment would only exacerbate the U.S.’s housing affordability challenges.
• Legislative Proposals to Bolster Affordable Housing: Committee Members contended that they were well-positioned to support the development of affordable housing given how the U.S. Tax Code (which the Committee had jurisdiction over) played a key role in housing policy. Committee Members and the hearing’s witnesses highlighted several legislative proposals to support the development of affordable housing.
  • The Decent, Affordable, Safe Housing for All (DASH) Act: Full Committee Chairman Ron Wyden (D-OR) mentioned how he had introduced the DASH Act to address children and families experiencing homelessness. He noted how this bill would create a tax credit for more affordable rental units, boost Low-Income Housing Tax Credit (LIHTC) low-income housing, and encourage the construction of more middle-income housing. He highlighted how this bill would develop a middle-income housing tax credit based on the LIHTC program. Mr. Konter expressed support for this proposed credit.
  • The Affordable Housing Credit Improvement Act of 2021: Committee Members and all of the hearing’s witnesses expressed support for the bipartisan Affordable Housing Credit Improvement Act of 2021. This legislation would restore the temporary 12.5 percent increase in LIHTC allocation authority, which expired at the end of 2021. This legislation would also increase the state LIHTC allocation caps by 50 percent over two years, reduce the bond financing requirement from 50 percent to 25 percent, and reform qualified contract and right of first refusal provisions.
  • The Neighborhood Homes Investment Act: Committee Members, Ms. Bell, and Mr. Roberts expressed support for the bipartisan Neighborhood Homes Investment Act, which would support the development of affordable housing in struggling communities. This legislation would provide states with tax credits and empower them to determine how to best allocate these tax credits to meet their housing needs. 
  • The LIHTC Financing Enabling Long-term Investment in Neighborhood Excellence (LIFELINE) Act: Committee Democrats, Ms. Bell, and Ms. Wade expressed support for the LIFELINE Act, which would create more flexibilities for states, local governments, and tribes to use existing funds to construct more affordable housing. This legislation would specifically enable states and localities to use the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program to most effectively fill financing gaps and housing credit developments.
  • The Affordable Housing Bond Enhancement Act: Sen. Catherine Cortez Masto (D-NV) and Ms. Bell expressed support for the Affordable Housing Bond Enhancement Act, which would make improvements to the Mortgage Revenue Bond (MRB) program and the Mortgage Credit Certificate (MCC) program. This legislation would allow for state housing finance agencies (HFAs) to better use their bond resources to serve more homebuyers.
  • The Middle Class Mortgage Insurance Premium Act: Sen. Maggie Hassan (D-NH) mentioned how she had introduced the Middle Class Mortgage Insurance Premium Act, which would provide tax cuts to middle class homebuyers that use private mortgage insurance (PMI). Mr. Roberts asserted that reducing the cost of PMI would make it easier for prospective homebuyers to afford their monthly housing payments.
  • The Renters Tax Credit Act of 2021: Sen. Sherrod Brown (D-OH) mentioned how he had introduced the Renters Tax Credit Act of 2021, which would help to ensure that very low-income renters would not have to pay more than 30 percent of their income towards housing.
  • The Low-Income First-Time (LIFT) Homebuyers Act of 2021: Sen. Mark Warner (D-VA) mentioned how he had proposed the LIFT Homebuyers Act of 2021, which would have established an expedited fixed rate mortgage product for first generation first-time homebuyers.
  • Proposal to Incentivize Investments in State Affordable Housing Trust Funds: Sen. Hassan also mentioned how she would soon propose housing legislation that would include incentives for investments in state affordable housing trust funds.
  • Proposal to Establish a U.S. Department of Housing and Urban Development (HUD) Competitive Grant Program for Workforce Housing: Sen. Hassan further noted how her upcoming housing legislation would establish a new HUD competitive grant program to support the construction of workforce housing.
  • Proposal to Replace the Mortgage Interest Deduction with a New Tax Credit: Mr. Konter argued that the U.S. should establish a 15 percent tax credit claimed against mortgage interest and paid real estate taxes to replace the mortgage interest tax deduction. He commented that a decreasing number of tax filers were itemizing their tax deductions because of the Tax Cuts and Jobs Act of 2017 (TCJA), which reduced the reach of the mortgage interest tax deduction. He commented that this suggested credit ought to be phased out for filers above a certain income threshold.
  • Proposal to Provide Federal Funding to States and Localities that Enact Zoning Reforms: Sen. Sherrod Brown (D-OH) suggested that Congress ought to consider providing funding support for communities that updated their zoning regulations to promote housing construction. Committee Members, Ms. Wade, Mr. Konter, and Dr. Ohanian all discussed how federal, state, and local zoning regulations were contributing to the U.S.’s high housing prices because they often impeded construction efforts.
  • Proposal to Require the Collection of State and Local Housing Data: Dr. Ohanian called for legislation to require state and local agencies to compile data and report on their land management operations. He commented that this legislation would hold these state and local agencies accountable for how they were dealing with the need to build more housing in very high demand areas He mentioned how a 2018 U.S. Government Accountability Office (GAO) study of LIHTC projects had found weaknesses in data quality, inconsistencies in cost-related variables, and a common tendency to not include the full extent of some indirect costs. 
  • Proposal to Provide Incentives for Community Development Financial Institutions (CDFIs): Sen. Warner (D-VA) and Mr. Roberts suggested the creation of a tax credit for companies that made long-term deposits in CDFIs. They noted how CDFIs played a key role in financing community development projects (including the affordable housing projects) and stated that such a tax credit could reduce the cost of capital for these investments. Sen. Warner also expressed interest in exploring reforms to Sec. 113 of the Riegle Community Development and Regulatory Improvement Act of 1994 that would enable the securitization of CDFI debt. He commented that the securitization of this debt could bolster the lending capacity of CDFIs.
• Impediments to and Policy Solutions for Addressing Affordable Housing Construction and Availability: Committee Members and the hearing’s witnesses also discussed various factors that were hampering the availability and construction of affordable housing. They proposed various policy solutions to these issues.
  • Manufactured Housing: Full Committee Ranking Member Mike Crapo (R-ID) and Dr. Ohanian suggested that manufactured housing could help to alleviate the U.S.’s current affordable housing shortage. Dr. Ohanian specifically noted how HUD required that manufactured housing sit on a permanent chassis, which imposed a negative aesthetic on the home and often led to local zoning ordinances that barred manufactured housing. He noted that these zoning ordinances in turn forced manufactured homes to be placed in mobile home parks, which led them to be financed by more expensive personal loans or chattel loans. He suggested that policymakers consider eliminating HUD’s chassis requirement for mobile homes and incentivizing state and local agencies to zone manufactured housing outside of mobile home parks.
  • Involvement of the Private Equity Industry within the Residential Housing Market: Chairman Ron Wyden (D-OR) raised concerns with how private equity firms and sophisticated companies were purchasing properties nationwide. He asserted that the private equity industry was exploiting “loopholes” in the U.S. Tax Code to maximize their own returns and reduce the availability of affordable housing. He discussed how private equity firms were using qualified contracts to enable LIHTC operators to sell their properties after 15 years to private developers. He noted that LIHTC properties were supposed to remain affordable for 30 years. Mr. Roberts stated that it was difficult to build and rehabilitate affordable homes and commented that the use of qualified contracts reduced the available supply of affordable homes. He asserted that qualified contracts had now become an “unintended exit ramp” that enabled new investors to prematurely profit off affordable homes. 
  • Opportunity Zone Program: Full Committee Ranking Member Crapo suggested that initiatives like the Opportunity Zone program could help to spur housing development in underserved areas. He highlighted how recent data from the Opportunity Zone Fund Directory showed that $49.18 billion had been committed to anticipated Opportunity Zone investments and that 60 percent of these funds target investments in affordable housing and community development.
  • Expansion of the Net Investment Income Tax (NIIT): Full Committee Ranking Member Crapo also stated that the NIIT served as a surtax on small businesses and noted that recent proposals would subject active business income to this surtax. He commented that these proposals would result in higher rental housing costs. Mr. Konter remarked that expanding the NIIT to include active business income would make it more expensive to operate apartment complexes, which would in turn lead the operators to charge higher rents to cover these new costs. 
  • Tariffs on Softwood Lumber Imports from Canada: Sen. John Thune (R-SD) contended that tariffs on imported softwood lumber from Canada served as a disincentive for domestic housing construction. He expressed hope that the Biden administration would take action to support softwood lumber imports from Canada.
  • Lack of Uniformity Among Federal Housing Programs: Sen. Thune also discussed how the rules governing different federal housing programs were not uniform. He stated that this lack of uniformity often created challenges for state housing managers and disincentivized property manager participation in the programs.
  • Implementation of the Average Income Test (AIT): Sen. Michael Bennet (D-CO) called on the U.S. Internal Revenue Service (IRS) and the U.S. Department of the Treasury to finalize their rule implementing the AIT, which would enable home developers to serve households earning up to 80 percent of the area median income while concurrently ensuring that units would be underwritten to be affordable for low-income individuals and families. The AIT would use rental income that was charged to higher income households (i.e., the households making up to 80 percent of the area median income) to offset the rents charged to the much lower income households.

Hearing Witnesses:

1. Ms. Andrea Bell, Executive Director, Oregon Housing & Community Services
2. Mr. Jerry Konter, Founder and President, Konter Quality Homes and Chairman of the Board, National Association of Homebuilders
3. Dr. Lee E. Ohanian, Ph.D., Hoover Institute Senior Fellow and Distinguished Professor of Economics, University of California, Los Angeles
4. Mr. Benson “Buzz” Roberts, President and CEO, National Association of Affordable Housing Lenders
5. Ms. Dana Wade, Chief Production Officer, Real Estate Finance, Walker & Dunlop

Member Opening Statements:

Full Committee Chairman Ron Wyden (D-OR):

• He discussed how the U.S. was experiencing increasing rents and home prices and commented that these increases were “key drivers” of inflation.
  • He also stated that many young people with modest incomes or large student loan debt burdens did not view homeownership as an achievable goal.
• He remarked that the root cause of the U.S.’s housing affordability challenges was the U.S.’s lack of homebuilding and commented that this lack of homebuilding had been a problem for decades.
• He stated that housing unaffordability challenges were persistent throughout his state of Oregon in both urban areas (such as Portland) and less urban areas (including central, southern, and eastern Oregon).
  • He commented that Oregon’s current challenges with affordable housing were likely not unique.
• He then raised concerns with how private equity firms and sophisticated companies were purchasing properties nationwide.
  • He noted how these private equity firms and sophisticated companies often possessed significant amounts of housing data and data processing capabilities, which enabled them to outbid Americans seeking to purchase homes.
• He stated that private equity firms and sophisticated companies were interested in the housing market because there existed huge demand for housing and limited supply.
• He also discussed how state and local zoning regulations were contributing to the U.S.’s high housing prices because they often impeded construction efforts.
  • He further stated that these zoning regulations were often perpetuating segregation.
• He commended his state for working to enact zoning regulation reforms and called on more states to pursue such reforms.
• He further noted how rising housing costs were correlated with increases in homelessness and asserted that the construction of more affordable housing would thus reduce homelessness.
• He stated that the Committee could support the development of affordable housing given how the U.S. Tax Code played a key role in housing policy.
• He mentioned how he had introduced the DASH Act to address children and families experiencing homelessness.
  • He noted how this bill would create a tax credit for more affordable rental units, boost LIHTC income housing, and encourage the construction of more middle-income housing.
  • He added that this bill would not take any money away from the existing LIHTC program.
• He also expressed support for the bipartisan Affordable Housing Credit Improvement Act of 2021 and stated that the legislation would support the construction of an additional 2 million housing units nationwide.
• He further discussed the bipartisan Neighborhood Homes Investment Act, which would support the development of affordable housing in struggling communities.
• He also mentioned his work to develop the bipartisan LIFELINE Act, which would create more flexibilities for states, local governments, and tribes to make use of existing funds to construct more affordable housing.
• He lastly remarked that the U.S. Department of the Treasury possessed its own authorities that could support the construction of affordable housing.
  • He expressed interest in working with the U.S. Department of the Treasury to enact more coordinated housing policies.

Full Committee Ranking Member Mike Crapo (R-ID):

• He mentioned how the consumer price index (CPI) had recently hit 9.1 percent, which is the highest rate in 40 years.
  • He indicated that the shelter component of the CPI had increased by 5.5 percent in June 2022 relative to one year prior and noted how rents were up by nearly 6 percent during this same period.
• He remarked that the U.S. Federal Reserve must “aggressively” raise interest rates to combat this recent inflation.
  • He stated that increased interest rates from the U.S. Federal Reserve would likely result in higher mortgage rates, which would make housing more expensive.
• He noted how the U.S. currently had a shortage of about 7 million affordable rental homes available for lower income Americans.
  • He added that the gap between demand and supply for this housing was increasing every year.
• He discussed how the U.S. Tax Code included incentives to encourage the construction of affordable housing and specifically highlighted how the LIHTC program was responsible for generating the majority of all of the U.S.’s affordable rental housing.
  • He noted how the LIHTC program had generally enjoyed bipartisan support in Congress.
• He mentioned how his state of Idaho contained 284 LIHTC projects that provided over 12,000 housing units.
  • He commented that these projects varied in size and were split “roughly” across urban and rural settings.
  • He further indicated that 72 percent of these projects were targeted toward families and 28 percent of these projects were targeted toward seniors and the elderly.
• He discussed how the Committee was working on a bipartisan basis to improve existing affordable housing tax credits and to establish new affordable housing tax credits.
  • He mentioned how these bipartisan proposals included the Affordable Housing Credit Improvement Act of 2021 and the Neighborhood Homes Investment Act.
• He stated that while the LIHTC program and other tax credits would help to support the development of affordable housing, he asserted that the Committee must address other factors that were driving up housing costs.
• He stated that the greatest driver of housing costs at the current time was inflation and reiterated that the U.S. Federal Reserve’s actions would likely increase housing costs.
  • He also noted how inflation was driving up the costs of building materials and commented that high fuel costs were further contributing to building costs.
• He suggested that manufactured housing could help to alleviate the U.S.’s current shortage of affordable housing.
• He also stated that zoning laws and regulatory barriers presented challenges to the development of affordable housing through imposing excessive costs on development.
  • He highlighted that many of the markets with the most severe shortages of affordable housing also impose the most restrictive state and local barriers to housing development.
• He further suggested that initiatives like the Opportunity Zone program could help to spur housing development in underserved areas.
  • He highlighted how recent data from the Opportunity Zone Fund Directory showed that $49.18 billion had been committed to anticipated Opportunity Zone investments and that 60 percent of these funds target investments in affordable housing and community development.

Witness Opening Statements:

Ms. Andrea Bell (Oregon Housing and Community Services):

• She remarked that the U.S. had long underbuilt rental housing and stated that the COVID-19 pandemic had particularly impacted access to housing for individuals and families with low and moderate incomes.
  • She commented that rising interest rates, escalating home prices, and “skyrocketing” rents resulting from the mismatch in housing supply and demand had led many would-be homeowners to remain renters.
• She noted how more than 70 percent of extremely low-income renters in 2021 had spent more than half of their incomes on housing.
• She stated that the LIHTC program and housing bonds were the most effective tools for her agency, Oregon Housing and Community Services, in terms of promoting the construction of affordable housing.
  • She called the LIHTC program a “highly successful” policy tool that leveraged public-private partnerships to promote affordable housing.
  • She also mentioned how nearly 70 percent of all of the rental homes financed within the previous five years in her state of Oregon relied upon housing bonds.
• She noted how housing costs were increasing due to numerous factors, including inflation and supply chain disruptions.
• She remarked that while state HFAs were working diligently to prevent housing deals from falling through, she asserted that housing financing gaps were sometimes too large to fill.
• She called on Congress to pass the Affordable Housing Credit Improvement Act of 2021 and indicated that this bill would both expand and increase the LIHTC program.
  • She commented that this bill’s increase of the LIHTC program would enable her agency to build more properties.
• She stated that the Affordable Housing Credit Improvement Act of 2021 would provide states with greater flexibility to spread existing bond resources to more developments through reducing the bond financing test from 50 percent to 25 percent.
• She also urged Congress to pass the LIFELINE Act and explained that this bill would enable states and localities to most effectively use the SLFRF program to fill financing gaps and housing credit developments.
• She further called on the Committee to consider the Affordable Housing Bond Enhancement Act and the Neighborhood Homes Investment Act.
  • She indicated that the Affordable Housing Bond Enhancement Act would make improvements to the MRB program and the MCC program.
  • She indicated that the Neighborhood Homes Investment Act would establish a new tax credit modeled after the LIHTC program.

Mr. Jerry Konter (Konter Quality Homes and National Association of Homebuilders):

• He remarked that it was currently difficult for homebuilders to provide entry-level homes to consumers and noted how 69 percent of U.S. households could not afford the median price of a new home.
  • He highlighted how nearly one quarter of new homes were priced at below $300,000 one year ago and indicated that this percentage had dropped to just 10 percent today.
• He also discussed how the U.S. faced challenges regarding minority homeownership opportunities.
  • He noted how 46 percent of White households under the age of 35 owned a home while only 17 percent of African American households under the age of 35 owned a home.
• He remarked that the U.S.’s current housing affordability challenges were the result of the U.S.’s failure to produce enough housing to match housing demand.
  • He asserted that the U.S. must reduce the costs associated with building new homes and the costs associated with owning or renting homes.
• He stated that well-structured tax incentives could help the U.S. to achieve its affordable housing goals.
• He commented that while the LIHTC program and other incentives were effective in terms of supporting the U.S.’s efforts to achieve these goals, he remarked that other incentives, such as the mortgage interest deduction, had failed to keep pace with changes in the U.S. Tax Code.
• He contended that the mortgage interest deduction remained based on itemized directions, which he referred to as an increasingly outdated space within the U.S. Tax Code.
  • He noted how the TCJA’s doubling of the standard deduction had “significantly” reduced the number of taxpayers that itemize their deductions.
• He argued that the U.S. ought to replace the mortgage interest deduction with a tax credit and specifically suggested that the U.S. should establish a 15 percent tax credit claimed against mortgage interest and paid real estate taxes.
  • He commented that this suggested credit ought to be phased out for single filers with annual incomes above $250,000 and joint filers with annual incomes above $500,000.
• He stated that his suggested tax credit could be enacted on a revenue neutral basis starting in the 2026 tax year.
• He then discussed how many of the TCJA’s provisions would expire over the next few years and asserted that this presented an opportunity to reform homeownership tax incentives.
• He expressed support for the Affordable Housing Credit Improvement Act of 2021 as a way to boost the production of affordable rental housing.
  • He further expressed support for Full Committee Chairman Ron Wyden’s (D-OR) proposal for a middle-income housing tax credit, which he commented would address the growing need for affordable workforce rental housing.
• He lastly remarked that Congress should address the current housing incentives that were not indexed for inflation, such as the gains exclusion, and called on Congress to reconsider the current limits on the state and local tax (SALT) deduction.

Dr. Lee Ohanian (Hoover Institute and University of California, Los Angeles):

• He remarked that significantly increasing housing affordability would require progress on two fronts: expanding housing supply and reducing the costs associated with constructing new housing.
  • He commented that government incentives could help the U.S. to achieve these two goals.
• He specifically called on the U.S. to increase the use of manufactured housing and support the development of subsidized housing.
• He attributed the high costs of residential construction to the fact that the homebuilding process had not significantly changed over time.
  • He commented that homebuilding had not significantly benefited from modern production methods.
• He noted how the U.S. Bureau of Labor Statistics (BLS) had found that labor productivity growth and residential construction had grown just 11 percent between 1987 and 2016.
  • He indicated that durable manufacturing had experienced a 150 percent growth in productivity over the same period.
• He stated that manufactured homes were a much cheaper alternatives to traditionally built homes and highlighted how manufactured homes were built using modern cost saving technologies.
  • He mentioned how U.S. Census Bureau data had indicated that the production costs associated with manufactured housing were about 60 percent lower than for traditionally built homes.
• He noted that while manufactured housing had accounted for about 60 percent of home construction in 1972, he stated that subsequent regulatory burdens had reduced the use of manufactured homes.
  • He remarked that reducing these regulatory burdens could bolster the construction of manufactured homes.
• He mentioned how HUD required that manufactured housing sit on a permanent chassis, which imposed a negative aesthetic on the home and often led to local zoning ordinances that barred manufactured housing.
• He noted that these zoning ordinances in turn forced manufactured homes to be placed in mobile home parks, which led them to be financed by personal loans or chattel loans.
  • He indicated that personal loans and chattel loans tended to be more expensive and of shorter duration relative to traditional mortgages.
  • He also indicated that these loans did not provide the homeowner with mortgage interest tax deductibility.
• He suggested that policymakers consider eliminating the HUD’s chassis requirement for mobile homes and incentivizing state and local agencies to zone manufactured housing outside of mobile home parks.
• He then discussed how construction costs for subsidized housing were growing and highlighted how these costs were particularly pronounced in the Western U.S.
• He mentioned how a 2018 GAO study of LIHTC projects had found extremely large cost disparities in subsidized construction across states.
  • He indicated that the GAO had found that only a few allocating agencies have requirements to guard against the misrepresentation of costs.
  • He also noted how the GAO had found weaknesses in data quality, inconsistencies in cost-related variables, and the practice of not including the full extent of some indirect costs.
• He further highlighted how the GAO had found financing inefficiencies within the LIHTC project space, which the GAO had attributed to the fact that there were many lenders involved in these projects.
  • He mentioned how the University of California, Berkeley’s Terner Center for Housing Innovation had estimated that each additional lender added $6,400 in costs per unit.
• He then discussed how lawsuits often delayed the development and increased the costs of affordable housing units.
  • He noted how these lawsuits were often filed under the auspices of environmental protection legislation within his state of California.
• He recommended that Congress revisit the GAO’s recommendations and specifically called for the standardization of collected cost data.

Mr. Benson “Buzz” Roberts (National Association of Affordable Housing Lenders):

• He testified that the member lenders of his organization, the National Association of Affordable Housing Lenders (NAAHL), had provided over $180 billion to finance low-income housing and other community development projects in 2020.
  • He indicated that his organization’s member lenders were the primary investors in LIHTC projects.
• He remarked that the U.S. had a significant problem concerning unaffordable housing and noted how the National Association of Realtors had found that home prices and rent had risen by nearly 20 percent in 2021.
• He asserted that housing was driving the U.S.’s current inflation challenges and was not merely a casualty of inflation.
  • He contended that it was therefore essential for the U.S. to build more housing in order to bring inflation under control.
• He mentioned how about half of all Americans in October 2021 had identified affordable housing as a major problem in their communities, which was a higher response rate than for drugs, crime, and the COVID-19 pandemic’s health and economic consequences.
• He remarked that the LIHTC program was the most effective and successful means for producing affordable rental housing.
  • He noted that the LIHTC program had been responsible for producing 3.6 million rental units thus far and had supported the production of 130,000 rental units annually.
• He also highlighted how the cumulative foreclosure rate on LIHTC properties was 0.57 percent and asserted that this was therefore the best performing asset class in all of real estate.
• He stated that the proposed Neighborhood Homes Investment Act would take lessons learned from the LIHTC program and support the building of starter homes and the rehabilitation of homes in struggling communities.
  • He expressed his organization’s support for this legislation and indicated that the legislation would result in the production of 500,000 new homes over the next decade.
• He noted that the broad increases in U.S. housing prices often masked the diversity across the housing markets in different regions.
  • He stated that it was not economic to rehabilitate existing homes or construct new homes in communities that were struggling economically.
• He also expressed his organization’s support for the bipartisan Affordable Housing Credit Improvement Act of 2021, which would restore the temporary 12.5 percent increase in LIHTC allocation authority, which had expired at the end of 2021.
• He also noted that the Affordable Housing Credit Improvement Act of 2021 would increase the state LIHTC allocation caps by 50 percent over two years, reduce the bond financing requirement from 50 percent to 25 percent, and reform qualified contract and right of first refusal provisions.
  • He commented that reforms to qualified contract and right of first refusal provisions could preserve housing affordability and extend non-profit control of properties.

Ms. Dana Wade (Walker & Dunlop):

• She noted how her company, Walker & Dunlop, was one of the largest providers of capital to the multifamily housing industry and the fourth largest lender for all commercial real estate.
• She contended that the U.S. needed to build more affordable housing and highlighted how the U.S. currently had a shortage of 3.8 million homes.
  • She further noted how 10 million low-income households spent more than half of their incomes on rent.
• She expressed support for the Affordable Housing Credit Improvement Act of 2021 and commented that this legislation would increase the already oversubscribed LIHTC program.
  • She also noted how this bill would reduce the threshold for private activity bonds from 50 percent to 25 percent and increase flexibilities for financing housing rehabilitation projects.
• She remarked that increasing the U.S.’s housing supply through tax credits had already translated into better economic opportunities and better quality of life.
  • She commented that the LIHTC program had many benefits, including a very low cumulative foreclosure rate, lower vacancies rates in LIHTC properties, and a strong compliance for affordability.
• She also stated that the U.S. must address regulatory barriers at the federal, state, and local levels that restricted the supply of housing.
  • She noted how an estimated 40 percent of housing development costs could be attributed to regulation at all levels.
  • She asserted that record high labor and housing material costs were further exacerbating the U.S.’s affordable housing challenges.
• She stated that federal obstacles to housing construction included long timeframes for environmental and labor decisions, as well as antiquated rules like HUD’s noise restrictions.
  • She also discussed how local obstacles to housing construction included zoning, density limits, lengthy permitting and approval processes, and other land use restrictions.
• She remarked that federal policymakers could provide a forum for best zoning practices and that different levels of government could work together to standardize policies, practices, and timelines across different programs.

Congressional Question Period:

Full Committee Chairman Ron Wyden (D-OR):

• Chairman Wyden remarked that his state’s employers were most concerned about their inability to find enough workers. He asserted that a lack of affordable housing was a key driver of his state’s workforce shortages. He mentioned how he had proposed a middle-income housing tax credit to address affordable housing shortages and commented that this proposal was based on the successful LIHTC program. He asked Mr. Konter to provide his organization’s views on this middle-income housing tax credit proposal. He also commented that the middle-income housing tax credit would support his state’s wood products industry through creating more demand for timber and forestry.
  • Mr. Konter first expressed the National Association of Homebuilders’s support for Chairman Wyden’s proposed middle-income housing tax credit. He stated that it was often the most difficult for the homebuilding industry to serve the middle-income market. He explained that middle-income consumers tended to purchase entry-level homes and did not qualify for subsidies for obtaining multifamily housing units. He noted how middle-income consumers spent a disproportionate amount of their income on shelter and lacked the ability to save for down payments on houses. He contended that the proposed middle-income housing tax credit would help to address the aforementioned problems. He stated however that there remained significant regulatory burdens associated with the production of housing. He specifically highlighted how local zoning restrictions will often prevent the construction of affordable housing.
• Chairman Wyden interjected to express appreciation for the National Association of Homebuilders’s support for his middle-income housing tax credit proposal. He then raised concerns over the private equity industry’s recent acquisitions of large numbers of homes. He asserted that the private equity industry was exploiting “loopholes” in the U.S. Tax Code to maximize their own returns and reduce the availability of affordable housing. He discussed how private equity firms were using qualified contracts to enable LIHTC operators to sell their properties after 15 years to private developers. He noted that LIHTC properties were supposed to remain affordable for 30 years. He mentioned how he had introduced legislation to address the use of qualified contracts as a means of evading affordable housing responsibilities. He asked Mr. Roberts to indicate why it was important for the U.S. to address qualified contracts.
  • Mr. Roberts stated that it was difficult to build and rehabilitate affordable homes and commented that the use of qualified contracts reduced the available supply of affordable homes. He noted how the formula for qualified contracts had been written in 1989. He commented that the LIHTC program was relatively new and the U.S.’s real estate market was very different during this period. He asserted that qualified contracts had now become an “unintended exit ramp” that enabled new investors to prematurely profit off affordable homes.
• Chairman Wyden interjected to indicate that his question period time had expired. He stated that no one could have imagined that private equity firms would employ algorithms to target certain homes for purchase when the formula for qualified contracts had been written in 1989.

Sen. Rob Portman (R-OH):

• Sen. Portman expressed appreciation for the comments during the hearing regarding the need to rehabilitate existing housing. He stated that single family homes were currently being left out of rehabilitation efforts. He expressed support for the Neighborhood Homes Investment Act. He indicated that this legislation would help to rehabilitate 3,000 homes in Cleveland, Ohio and make homeownership more accessible.

Full Committee Ranking Member Mike Crapo (R-OH):

• Ranking Member Crapo stated that the NIIT served as a surtax on small businesses and noted that recent proposals would subject active business income to this surtax. He commented that these proposals would result in higher rental housing costs. He asked Mr. Konter to explain why expanding the NIIT to include active business income would cause higher rents.
  • Mr. Konter remarked that expanding the NIIT to include active business income would make it more expensive to operate apartment complexes, which would in turn lead the operators to charge higher rents to cover these new costs. He commented that rents were simply a function of revenues and expenses, which meant that higher expenses would lead to higher rents.
• Ranking Member Crapo then asked Ms. Wade to address how the possibility of persistently high inflation would impact affordable housing. He further asked Ms. Wade to address how higher long-term inflation would impact housing development and the utilization of federal housing tax credits.
  • Ms. Wade asserted that persistently high inflation would lead to persistently high rent increases. She also noted that higher rent prices would factor into CPI calculations. She stated that inflation would be very important in considering the efficacy of the LIHTC program. She commented that persistently high inflation would reduce the effectiveness of these tax credits.
• Ranking Member Crapo then asked Dr. Ohanian to indicate whether there were any studies that have analyzed the effects of state and local deregulatory efforts to determine the most effective land use and housing supply promotion strategies.
  • Dr. Ohanian asserted that regulatory burdens were “substantially” increasing housing costs. He remarked that the states with the most “severe” zoning restrictions (such as California) tended to have the highest home prices and construction costs. He noted how construction costs tended to increase as development was delayed and indicated that lawsuits were a key cause of delays. He noted how multiple peer reviewed studies had all concluded that land use regulation substantially drives up home prices and construction costs and depresses American welfare. He expressed support for legislation to require state and local agencies to compile data and report on their land management operations. He commented that this legislation would hold these state and local agencies accountable for how they were dealing with the need to build more housing in very high demand areas.

Sen. Tom Carper (D-DE):

• Sen. Carper remarked that rapid growth in retail prices and a lack of housing supply have made it difficult for many Americans to find safe and affordable housing options. He commented that inflation and the COVID-19 pandemic were exacerbating these housing affordability challenges. He mentioned how he had worked with the Delaware Congressional delegation to secure funds from the American Rescue Plan Act of 2021 (ARPA) to support the development and rehabilitation of affordable housing throughout Delaware. He noted how these federal funds would be spent in coordination with various housing non-profit organizations. He then highlighted how there was a lack of affordable housing for senior citizens. He noted how senior citizens often relied on fixed incomes and required additional support services. He asked Ms. Bell and Ms. Roberts to address how the U.S. could ensure that tax incentives and other resources were meeting the unique and growing housing needs of senior citizens.
  • Ms. Bell first called on the U.S. to lower the thresholds for private activity bonds. She then discussed how the U.S. had significant experience with the LIHTC program. She stated that the U.S. needed to construct various forms of affordable housing and asserted that this housing ought to be “transit-oriented.” She remarked that the policy proposals under consideration at the hearing would reduce regulatory burdens, increase access to housing, and build upon housing policy successes.
  • Mr. Roberts remarked that one of the chief benefits of the LIHTC program was that it empowered states to direct housing resources to the areas with the greatest needs (which could include elderly housing). He noted how there were LIHTC properties that provide services to the elderly, including assisted living.
• Sen. Carper then asked Ms. Bell to identify the resources that were most helpful for supporting low-income families in their first-time home purchases. He also asked Ms. Bell to address how Congress could expand access to these resources. He requested that Ms. Bell submit her answer to the question for the hearing’s record.

Sen. Ben Cardin (D-MD):

• Sen. Cardin highlighted the bipartisan Neighborhood Homes Investment Act and stated that this legislation would support the development of affordable housing in struggling communities where the construction and renovation of housing might not be economical. He asserted that this legislation would help to address the U.S.’s wealth gap. He also thanked the NAAHL for its support of the legislation. He asked Mr. Roberts to discuss how the Neighborhood Homes Investment Act would provide home developers with confidence to pursue projects in underserved communities.
  • Mr. Roberts explained that the Neighborhood Homes Investment Act would provide states with a set allocation of tax credits and would empower states to determine how to best allocate these tax credits to meet their housing needs. He noted that successful applicants for these tax credits would raise private capital to build and/or rehabilitate homes in distressed communities. He indicated that the tax credits would flow once the homes were sold and owner-occupied. He also noted how the legislation would enable existing homeowners whose homes require “substantial” rehabilitation to participate in this tax credit program.
• Sen. Cardin asked Ms. Bell to address how the Neighborhood Homes Investment Act’s proposed tax credit would help traditionally neglected neighborhoods and reduce the U.S.’s wealth gap.
  • Ms. Bell noted how the U.S.’s racial wealth gap had continued to persist across many communities. She stated that various housing policies, including MRBs and housing tax credits, would support the development of affordable housing. She further remarked that the U.S. must work to ensure that newly developed affordable housing would be made available to African American communities, indigenous communities, and communities of color.
• Sen. Cardin contended that it was becoming increasingly important for Congress to pass legislation to promote affordable housing considering rising interest rates and rising housing costs.

Full Committee Chairman Ron Wyden (D-OR):

• Chairman Wyden remarked that the U.S. must increase its housing supply in order to make housing more affordable.

Sen. Catherine Cortez Masto (D-NV):

• Sen. Cortez Masto discussed how her state of Nevada faced numerous housing challenges, including homelessness, a lack of low-income housing, and a lack of workforce housing. She mentioned how she had introduced the Affordable Housing Bond Enhancement Act, which would make improvements to the MRB program and the MCC program. She asked Ms. Bell to explain how MRBs help low- and moderate-income families to purchase and sustain homes.
  • Ms. Bell noted how the Affordable Housing Bond Enhancement Act would allow for state HFAs to better use their bond resources to serve more homebuyers. She stated that MRBs had enabled state HFAs to help over 3 million borrowers. She also mentioned how the MCC program had helped more than 360,000 families become homeowners. She further stated that the Affordable Housing Bond Enhancement Act would optimize existing programs to support low- and moderate-income families. She specifically praised the legislation for increasing the MRB improvement loan limit to $50,000. She commented that this provision would be especially helpful to aging populations that wanted their homes to remain livable and provide sufficient quality of life.
• Sen. Cortez Masto highlighted how the Affordable Housing Bond Enhancement Act had received support from the National Council of State Housing Agencies, the National Association of Realtors, the Mortgage Bankers Association, the National Association of Home Builders, and other organizations. She then remarked that the SLFRF program would support housing investments in underserved communities across the U.S. She asked Ms. Wade to provide her thoughts on the LIFELINE Act. She commented that this legislation would leverage existing funds to support low-income housing development.
  • Ms. Wade remarked that the LIFELINE Act would “significantly” increase the ability of states and local jurisdictions to produce more affordable housing. She noted that Congress had previously stated that the SLFRF program ought to be used to support the development of affordable housing.
• Sen. Cortez Masto lastly remarked that the LIHTC program could play a key role in expanding the U.S.’s supply of affordable housing.

Full Committee Chairman Ron Wyden (D-OR):

• Chairman Wyden expressed support for the LIFELINE Act and commented that the legislation would leverage existing funds to support the development of affordable housing. He highlighted how this legislation had bipartisan support. He then asked the witnesses to identify outdated housing policies that were undermining the U.S.’s ability to provide affordable housing. He commented that many of these policies were likely local laws. He applauded the housing policy efforts currently underway to account for societal changes in work patterns and locations. He requested that the witnesses contemplate their responses to this question and provide their responses later in the hearing.

Sen. Todd Young (R-IN):

• Sen. Young remarked that the issue of affordable housing was a major concern throughout his state of Indiana. He stated that current inflation was exacerbating the U.S.’s affordable housing shortages. He mentioned how he had worked to develop the bipartisan Affordable Housing Credit Improvement Act of 2021, which he commented would help to strengthen the LIHTC program. He asked the witnesses to indicate whether they supported the Affordable Housing Credit Improvement Act of 2021, to which all of the witnesses responded affirmatively. He then asked Mr. Roberts to explain why the LIHTC program was so effective in terms of addressing the U.S.’s lack of affordable housing.
  • Mr. Roberts first thanked Sen. Young for his leadership on the Affordable Housing Credit Improvement Act of 2021 and the Neighborhood Homes Investment Act. He then largely attributed the effectiveness of the LIHTC program to the fact that the tax credits only flowed after a development was completed and there were actual public benefits. He commented that this approach resulted in payments only going to successful projects. He also remarked that the LIHTC market was very competitive given the limited nature of the tax credits. He noted that this dynamic resulted in states allocating the tax credits for their highest priority activities. He further noted that states could recapture these tax credits if a project did not comply with state or program requirements. He applauded the performance of states in administering the LIHTC program. He concluded that these credits were both targeted and flexible, which resulted in “tremendous” economic and community benefits.
• Sen. Young then discussed how the U.S.’s affordable housing issues were impacting Americans across demographic groups and geographies. He asked Ms. Wade to discuss how the LIHTC program aided a “range” of people in need.
  • Ms. Wade remarked that the LIHTC program has been “very effective” in terms of combating homelessness. She commented that this program had helped various groups, including veterans, people recovering from opioid addiction, seniors, and people with disabilities to find homes.

Full Committee Chairman Ron Wyden (D-OR):

• Chairman Wyden mentioned how he had proposed the middle-income housing tax credit, which was based off of the LIHTC program. He expressed hope that a middle-income housing tax credit would facilitate upward mobility for many middle-class Americans (such as firefighters and nurses).

Sen. Maggie Hassan (D-NH):

• Sen. Hassan remarked that many of her constituents had raised concerns over rising housing costs. She mentioned how she was currently developing legislation to address the high cost of housing and indicated that she would soon introduce this legislation. She noted that this legislation would incentivize investments in state affordable housing trust funds. She asked Ms. Bell to provide an overview of state affordable housing trust funds and to explain why these trust funds were important.
  • Ms. Bell mentioned how her state of Oregon was one of 39 states that maintained a state housing trust fund. She noted how these funds typically (but not always) had a designated revenue source and could provide additional housing resources for state needs. She indicated that Oregon’s state housing trust fund was funded through the state’s general fund and through lottery funds. She expressed her agency’s willingness to work with Sen. Hassan to develop her legislation on state housing trust funds.
• Sen. Hassan noted how her legislation would also support the construction of new workforce housing by establishing a new HUD competitive grant program. She asked Mr. Konter to address how building more housing would help to reduce costs for homebuyers. She also asked Mr. Konter to address how federal support could help to build more housing.
  • Mr. Konter remarked that the U.S. was not building enough homes and commented that the construction of additional houses would help to alleviate housing price challenges.
• Sen. Hassan then mentioned how she had introduced the Middle Class Mortgage Insurance Premium Act, which would provide tax cuts to middle class homebuyers that use PMI. She asked Mr. Roberts to explain how PMI made homeownership more accessible and to provide any additional recommendations for making housing more affordable.
  • Mr. Roberts stated that PMI was important to enable homeowners that could not make a 20 percent down payment on a home to still purchase the home. He commented that lower percentage down payments were often more attainable for first-time homebuyers. He asserted that reducing the cost of PMI would make it easier for prospective homebuyers to afford their monthly housing payments.
• Sen. Hassan then recounted how Congress had provided states with financial support to respond to the COVID-19 pandemic. She commented that it was difficult for states to pair this federal support with the LIHTC program. She expressed support for the LIFELINE Act, which would allow for states to more flexibly use both COVID-19 response funds and the LIHTC program. She asked Ms. Bell to discuss how such increased flexibility would support affordable housing efforts across the U.S.
  • Ms. Bell mentioned how 31 states were devoting over $9 billion in money from the SLFRF program to support affordable housing activities. She added that this total did not include expenditures from local jurisdictions on these activities. She noted how about 24 states had indicated that they intended to use a portion of the SLFRF program to fill financing gaps. She highlighted how ARPA contained language that made it difficult to use monies from the SLFRF program for long-term loans and commented that long-term loans were necessary for affordable housing. She remarked that the LIFELINE Act would address the aforementioned issues through enabling state and local governments to make use of the SLFRF program for long-term loans.

Sen. John Thune (R-SD):

• Sen. Thune contended that tariffs on imported softwood lumber from Canada discouraged domestic housing construction. He commented that the current 17.9 percent tariff rate on these imports led to higher homebuilding costs. He mentioned how he had recently sent a letter to the U.S. Department of Commerce with Sen. Robert Menendez (D-NJ) and the Office of the U.S. Trade Representative (USTR) that urged the Biden administration to prioritize lumber trade as a means for reducing housing costs. He asked Mr. Konter to indicate whether reducing tariffs on softwood lumber would help to make home construction and home ownership more affordable.
  • Mr. Konter answered affirmatively. He discussed how lumber represented one of the most significant material inputs for home construction. He asserted that trade policy measures that taxed such inputs would therefore increase the cost of homes. He then contended that the U.S.’s trade policies were outdated and called for comprehensive trade reforms that would enable swifter modifications.
• Sen. Thune expressed hope that the Biden administration would take action to support softwood lumber imports from Canada. He then discussed how housing affordability was a top concern for his constituents. He stated that inflation in construction costs and supply prices was making it even more difficult to construct affordable housing. He cited a National Association of Realtors study that found that the average cost of housing in Midwestern states had increased by more than $80,000 between 2013 and 2021. He asked Ms. Wade to provide data insights into the U.S.’s current housing deficits and to discuss the impact of these deficits on U.S. families.
  • Ms. Wade indicated that the U.S.’s housing shortage was an estimated 3.8 million homes, which she called “staggering.” She remarked that all levels of government and the private sector must work together to address this housing shortage. She stated that the LIHTC program would bring together governments and the private sector to increase the U.S.’s supply of affordable housing. She also suggested that local level reforms related to zoning and permitting would play a critical role in bolstering the U.S.’s housing supply.
• Sen. Thune also discussed how the rules governing different federal housing programs were not uniform. He stated that this lack of uniformity often created challenges for state housing managers and disincentivized property manager participation in the programs. He expressed interest in working to streamline these federal housing programs so as to not burden affordable housing developers.

Sen. Michael Bennet (D-CO):

• Sen. Bennet discussed the lack of affordable workforce housing in his state of Colorado and commented that this lack of affordable workforce housing was causing his state to lose businesses and medical practices. He indicated that housing costs were “far outpacing” incomes throughout the state’s urban and rural communities. He mentioned how he had convened a bipartisan group of 30 housing experts from across Colorado and noted that this group’s top recommendation was to enact policies to increase the housing. He then asserted that the LIHTC program was the U.S.’s most effective existing program in terms of supporting the construction of new affordable housing. He expressed support for the Affordable Housing Credit Improvement Act of 2021, which would expand the LIHTC program. He also called for the swift implementation of the AIT, which was created by Congress in 2018 and would enable the LIHTC program to serve up to 80 percent of median family income. He mentioned how he had recently led a bipartisan and bicameral group of Members of Congress in calling for the IRS and the U.S. Department of the Treasury to expedite the release of a final rule on the AIT. He asked Ms. Bell to discuss how finalizing the AIT rule would expand affordable housing to more families.
  • Ms. Bell remarked that the AIT is an important new tool that will make housing credit properties more economically diverse. She explained that the AIT would enable home developers to serve households earning up to 80 percent of the area median income while concurrently ensuring that units would be underwritten to be affordable for low-income individuals and families. She noted that the AIT would use rental income that was charged to higher income households (i.e., the households making up to 80 percent of the area median income) to offset the rents charged to the much lower income households. She commented that the proposed rule to implement the AIT had been “unworkable,” which had reduced interest in its finalization. She expressed appreciation for Sen. Bennet’s efforts to get the IRS and the U.S. Department of the Treasury to refocus on this rule.
• Sen. Bennet acknowledged that his question period time had expired and indicated that he would be submitting a question about homelessness for the hearing’s record.

Sen. Sherrod Brown (R-OH):

• Sen. Brown called housing affordability both a policy priority and a moral imperative. He noted how one-quarter of renters paid more than half of their income in rent and stated that homeownership was currently out-of-reach for many American families. He mentioned how he had introduced the Renters Tax Credit Act of 2021, which would help to ensure that very low-income renters would not have to pay more than 30 percent of their income towards housing. He then discussed how Cleveland, Ohio had many homes that could provide good and affordable first-generation homeownership opportunities. He noted how many of these homes were in need repairs, which led them to sit empty or be purchased by out-of-state investors. He asked Mr. Roberts to discuss how the Neighborhood Homes Investment Act could address the U.S.’s shortage of affordable single-family homes and ensure that lower income and aspiring homeowners could afford homes.
  • Mr. Roberts remarked that the Neighborhood Homes Investment Act could fill the financing gap between what it costs to build or rehabilitate a home in a struggling neighborhood and what the local market could support. He commented that the absence of the Neighborhood Homes Investment Act would render it economically unfeasible for private developers or existing homeowners to improve their homes (and by extension their neighborhoods). He also stated that the Neighborhood Homes Investment Act would enable states to target tax credits to cover the aforementioned financing gap.
• Sen. Brown asked Mr. Konter and Dr. Ohanian to comment on how zoning regulations had impeded home construction in the U.S. He also asked Mr. Konter and Dr. Ohanian to address whether Congressional funding support for communities that updated their zoning regulations would help to increase the U.S.’s supply of housing.
  • Mr. Konter remarked that the U.S. had many local zoning regulations that raised housing costs, which hampered efforts to construct affordable housing. He specifically mentioned how design standards were often added to zoning requirements, which contributed to these higher housing costs. He stated that the provision of funding to local municipalities that reform their zoning regulations to permit more affordable housing construction would help to increase the U.S.’s housing supply.
  • Dr. Ohanian remarked that there existed a “massive body” of peer-reviewed research that has studied how zoning regulations had increased the cost of housing and depressed construction. He stated that the U.S.’s inflation-adjusted gross domestic product (GDP) would increase if the U.S. were to roll back its zoning and land use regulations.

Sen. Mark Warner (D-VA):

• Sen. Warner mentioned how he had proposed the LIFT Homebuyers Act of 2021, which would have established an expedited fixed rate mortgage product for first generation first-time homebuyers. He stated that this legislation would enable these borrowers to accumulate wealth and asserted that the legislation would combat the U.S.’s racial wealth gap more quickly. He then discussed how he had worked to support CDFIs and minority depository institutions (MDIs). He mentioned how Congress had recently proposed a CDFI tax credit that would give a tax credit to companies that made long-term deposits in CDFIs. He asked Mr. Roberts to comment on this CDFI tax credit proposal.
  • Mr. Roberts expressed support and gratitude for Sen. Warner’s CDFI tax credit proposal. He remarked that CDFIs performed the most difficult work in terms of community development finance. He stated that CDFIs were designed to perform the work that traditional private sector financial institutions could not perform. He remarked that Sen. Warner’s CDFI tax credit proposal would support the building of partnerships between capital providers and CDFIs. He noted how CDFIs needed long-term capital in order to pursue community development work and commented that Sen. Warner’s CDFI tax credit would lower the cost of this long-term capital.
• Sen. Warner also expressed interest in exploring reforms to Sec. 113 of the Riegle Community Development and Regulatory Improvement Act of 1994 that would enable the securitization of CDFI debt. He commented that the securitization of this debt could help to bolster the lending capacity of CDFIs.

Sen. Maria Cantwell (D-WA):

• Sen. Cantwell noted how the LIHTC program had received increased funding several years ago and indicated that this increased funding had expired at the end of 2021. She highlighted how 90 percent of the U.S.’s affordable housing was built through the LIHTC program and stated that Congress’s failure to increase this tax credit would undermine the U.S.’s ability to address its current affordable housing challenges. She asserted that the U.S.’s affordable housing challenges were attributable to a shortage of housing. She asked the witnesses to address why there was no consensus on the role that the shortage of housing played in terms of driving the U.S.’s housing challenges.
  • Ms. Wade mentioned how the Bipartisan Policy Center had recently conducted a poll that found that around 70 percent of Americans (including 55 percent of Republicans) were in favor of increasing the LIHTC program. She expressed agreement with Sen. Cantwell’s assertion that the U.S.’s affordable housing challenges were attributable to a shortage of housing. She stated that the LIHTC program played a key role in terms of increasing the amount of housing. She commended Sen. Cantwell’s work on this tax credit.
  • Dr. Ohanian remarked that the U.S. had been experiencing a housing “crisis” for the previous 100 years. He stated that housing in the U.S. was expensive to build and that there existed certain efficiency enhancing reforms that could be implemented. He also suggested that zoning reforms could be implemented to reduce the costs associated with home construction in areas of high demand. He discussed how an increasing number of Americans were focusing on a small number of locations to move to and commented that many of these locations maintained strict zoning requirements. He reiterated his recommendations that the U.S. increase its use of manufactured housing and eliminate HUD’s chassis requirement.
• Sen. Cantwell remarked that housing was a major driver of the U.S.’s current inflation problem. She reiterated her assertion that the U.S.’s housing challenges were attributable to a shortage of housing supply. She contended that increasing the LIHTC program would be critical to addressing this housing supply shortage given how the vast majority of affordable housing was built using this tax credit. She posited that the 2008 Financial Crisis had likely contributed to the U.S.’s reduced home construction levels in recent years.
  • Dr. Ohanian expressed agreement with Sen. Cantwell that the U.S.’s affordable housing challenges were attributable to a shortage of housing supply. He stated that reducing housing construction costs would enable an expansion of housing. He asserted that addressing these construction costs would be key unless the U.S. wants to increase housing subsidies.
  • Mr. Konter commented that Sen. Cantwell’s views on the 2008 Financial Crisis’s impact on the U.S.’s housing market were likely correct. He stated that the U.S. had underbuilt new homes at a rate of 400,000 homes per year during the ten years following the 2008 Financial Crisis. He also commented that there has been delayed entry-level home market interest because millennials tended to form households at an older age. He noted that the aforementioned trends both came to a head at the same time.

Full Committee Chairman Ron Wyden (D-OR):

• Chairman Wyden expressed agreement with Sen. Cantwell’s assertion that the U.S.’s housing affordability challenges were attributable to a shortage of housing supply. He also reiterated his concerns over how private equity firms were driving up residential home prices.