>> housing and economic policy [inaudible conversations]

spent the senate committee will come to order welcome to our witnesses it is in the hybrid formant at least one committee colleagues may attend from their offices and we have continued that the headlines tell the stories the housing shortages and why high housing cost cost more for

baby boomers to find roommates what's up with a crazy housing market those are headlines of the past month it is not a new problem wages have not kept up with the cost of housing for years and years the country is not done enough to produce the housing we need from 2000 through 22015 about half the country fell seven.3 million home short with housing production the shortage makes moreg expensive congress has not done its job four years just last year that we hosted the first hearing on the state of housing in america in nearly a decade. one of the first things we did after i took the chairmanship to talk about housing so much the foundation of everything in our lives where you live or you work for your children go

to school or do your grocery shopping eating up the biggest chunk of people's paycheck rent eats first one housing cost goes up less money left over for school supplies and prescription drugs and a lot of families crippling stress at the end of each month how do i pay my rent then do i pay my electric bill or intranet or daycare or make a payment on the credit card for years the market has not produced enough housing that working people can afford home health aides and nursing assistants working full-time have long been paid to not afford the one-bedroom apartment let alone fulfill the dream of owning their own home and young aspiring homebuyers have faced insurmountable barriers tont home ownership black and brown families parents were deniedho and it was ripped out from under them with predatory lending and cannot help them with the down payment over the

past two years with low rates making mortgage monthly cost affordable some families thought maybe now is the chance to buy a home. often not losing out to family with more family that outbid from wall street investors that paid cash. and those resorting to on the side of the road asking anyone to sell them there home. and now with home prices rising to record levels homeownership is increasingly out of reach to lock in a steadily on —- a steady monthly payment cost increases with 4 million families out of homeownershipin families who are

renting any rental market already too tight the median rent tops $2000 a month bidding wars used to be limited to hot housing markets breaking out between communities from chicago to port a orange florida were trying to find a place we can afford this exacerbates the wealth gap we already have for first-time home ownership especially for families of color because millions of existing homeowners already have four times the wealth of the average renter renters disproportionately people of color fell further behind me have under invested in housing and communitieses for decades now we see the consequences a recent report found three.8 million homes nationwide double the shortfall ten years ago. not a single state has

enough's housing to meet needs unless we act we don't know if renters will ever catch up. we need more housing available for those that are just starting out and for renters especially those with the lowest income. as a bipartisan proposal for those with the lowest income because we know the market doesn't build housing they can afford senators reid and collins also a member of the committee as a proposal and then to produce more housing lower income families including those in the rural areas that they can afford and

as a member of this committee from nevada has a proposal to fund repairs and housing communities to take them a key part of the housing in this country to keepp them affordable for the residents and cosponsoring a proposal to help communities invest in local projects and preserve the housing we have we can do this while ensuring we are not displacing families and seniors from the neighborhood they love the look forward to hearing from the three witnesses today about the challenges you see and recommendations and is a problem across the country it's not a republican or democratic problem congress must do better. >> thank you mr. chairman today we are discussing the recent rapid rise of home prices with affordability and home price appreciation is not occurring in a vacuum inflation is broad-based and a

severe despite promises to the contrary and those field by reckless spending and lax monetary policy is an enduring phenomenon adjusted for inflation, wages have fallen almostll every month since president biden took office the average american real wages have fallen by 5 percent even worse for blue-collar workers it should come as no surprise homeownership and most goodsme and services have become increasingly unaffordable and with respect to housing specifically demand far out place outpaces supply why is this happening and where they correcting theseus imbalances i point to bad policy decisions made by the administration in my democratic colleagues a federal government made a number of mistakesum during covid. $80billion went to rental assistance vouchers and that that is beyond those that we

spend every year that significant amount remains unspent the administration and democrats in congress dropon hundreds of billions of dollars of helicopter many to stimulate a strong economy and expanded the foreclosure and eviction moratorium outside of the covid emergency the number and cost of housing subsidies boggles the mind we provide tax breaks pmi deductions capital gains exclusions local property taxes low income housing tax credit subsidize mortgages fha and and with the down payment assistance programsda with had in usda programs with project -based rental assistance public

housing funding section two oh two for housing persons with cdbg home block grants and homelessness assistance it is unbelievable and it is a fact and then to subsidize and even more amazingly all of the spending doesn't change homeownership rates or to narrow that gap in 197052 years ago the homeownership rate in america was 64 percent. today hundreds or trillions of dollars later it is 65 percent. black homeownership levels are almost the same as when the fair housing act was passed in

1968. these government policies have run up a lot of debt that mostly made housing more expensive if the administration were serious about immediately lowering housing cost it can start b by driving up the cost of home construction and those that are universally used across the country and have cost consumers billions last three years americans consumers paid at least $14 billion more just non- steel and aluminum imports because of the tariffs unfortunately the administration is continuing to promote a reckless spending agenda making soaring howling on —- housing cost worse white house released a plan to boost housing supply but instead use the opportunity to add pressure on pricing by endorsing the house passed proposal to increase spending by $75 billion on housing vouchers and 80 billion of public housing additional spending it will only further fuel inflation it proposes

pushing fannie and freddie into activities the prior administration created too much risk for taxpayers and then to reform the gst that is now embracing the gsc conservatorship for social engineering of the housing and racial equity policies recently restricting acquisitions of second home loans to reduce the guarantee fees and require to develop equitablee housing finance stunningly the pilot programs limit eligibility based on borrowers race to give taxpayer money to certain borrowers based on the color of their skin to make downpayments yesterday all banking republicans sent a letter organized by senator tillis expressing grave concerns about the legality in the discriminatory nature of the programs i hope the f hfa

director will reconsider on the basis of race and act to protect taxpayers from excessive risk racial discrimination is always wrong and this ispt no exception further relaxing under work writing requirements risks exposing low income families or minority families it only affirms the agency of gsc reforms to improve housing affordability we should favor policies to leverage the power of free enterprise and have down payment assistance on a narrow subset and the conservatorship to ensure that this and future administrations cannot used to influence the mortgage credit for decades we spent countless sums we got virtually nothing to show for it is time for meaningful reform that doesn't have the same tax and spend strategies of the past.

>> the chief economist senior vice president of research for the realtors are more than 20 years, welcome the president and founder serving as the financial crisis inquiry t commission and the cbo and the presidents council of economic advisers. and recently returned to cbp after serving as a senior advisor and rental assistance at the department of housing and public development and welcome. >> chairman brown and members of the committee thank you for

inviting me to testify at this hearing i am the chief economist and senior vice president of research at the national associationon of realtors i lead the research team as we gather housing data to oversee research act to be pertaining to the real estate industry most of our one.5 million members are small business owners 87 percent are independentsm contractors the most pressing concernex expressed over the years has been consistently with thear impact on the housing market and since the onset of the pandemic has the next radiate —- exciting and extraordinary home sales man meet multiyear highs.

that market conditions have shifted dramatically home sales activity show the decline through june. and on an annualized basis five.12 million home sales below the 2019 annual portal. and buttr now at the lowest point since the lockdown months of 2020. and the median home price continue to set a new record and in june reaching $416,000

which is a rise from one year ago. and other measurement shows the appreciation rate closer to 20 percent oddly home prices are set to decelerate some markets may pull back somewhat but any short-term price adjustment that are less consequential and with those challenges facing the country lack of supply in the housing market is not a new phenomenon. while it is more noticeable now even before the pandemic our organization estimated between five and 6 million deficit and those in home

prices are a direct consequence that persisted even before the onset of the pandemic. andre then those from hothouse growth. and then of a different place and that as of 2019 so my estimate for the typical homeowner wrote conservatively with the median net worth homeowner by contrast in

between the five and 10000-dollar range. and with the recent market development to have fewer financial worries than non- owners and that is the crux of the current affordability crisis. printers are paying high on —- higher rent without realizing the american dream which many associate with ownership or owning part of america. that onlyy is it more difficult to obtain due to the shortage but the same shortage pressures are causing rents to accelerate in the currentir environment and carving out savings unless we can address the supply issue housing affordability will continue to be anhe ongoing issue for many americans for many years to come.

>> thank you and welcome again. >> members of the committee. and with thend rising prices and this has occurred despite the fact of 2021 we saw a record increases of supply the largest number of single-family units and 13 years or three decades. all of that should lead you to suspect the problem lies on the demand side ofin the market and there is a lot of evidence that is the problem recently we have seen additional demand subsidies the fiscal policies that senator toomey mentioned but in particular those monetary policies of the federal reserve in addition to keeping interest rates very low with low mortgage rates

with a quantitative easing the $30 billion of mortgage-backed securities with $30 billion of capital i don't know but the unmistakable impact of feeling demand in the housing sector. looking forward that is about to reverse some enormously stressedss housing market over the next yearr or two the fed is reversing course and rates will be higher and then unloading $35 billion a month but switching by $65 billion with the net impact on the mortgage market but the fed needs to do this if you look

at the cpi shelter is one third inflation is up five.6 percent and rising through january 2021 hitting a target and shelter inflation at 6 percent everything else has to be at zero. so the fed needs to bring down shelter price inflation and increasingly raise rates until it does. there's also a traditional channel from monetary policy toow lower demand and lower the construction of housing and the production of furnaces and water heaters and has brought impacts on the economy ironically they are in a position to do this a policy errors that recorden of inventory i express a very stressed housing market the next coupleve of years.

longer-term there is this array of demand subsidies that exist have done very little to change that rate of ownership word highlight especiallyed the venting conservatorship they are undercapitalized and relaxing those capital standards and now undertaken this initiative for equitable financeou plans and these are demand subsidies by another name and the wrong direction at the wrong time in the form of social engineering and racial discrimination i would very much fear this is a return to the mission creep exposing taxpayers to enormous risk with generational wealth losses.

i think it would be wise to finalize a rule on products that the taxpayer is protected. >> if there will be policy changes focusing on the supply-side in the production of housing i would second the recommendation making construction more expensive i think it's wise to think hard and that would mean returning to those apprenticeship programs that are in place under the previous administration and a great way to improve on the table and it would be wise to pair back any permit constructions at the local level thank you for the

chance to be here and i look forward to your questions. >> chair brown ranking member to me and members of the committee thank you for the opportunity to testify before you today myte name is peggy bailey a nonpartisan policy research institute the nation'sg most pressing centers on those witho extremely low incomes were not able to afford stable housing several factors contribute first obviously be lack sufficient supply of affordable rental housing data shows over the last 18in months with the housing boom that may have plateaued it is not enough to overcome the existing rental housing deficit without federal and state intervention the new units with those of

extremely low incomes and shortages of single-family homes and ready for home ownership reducing vacancy rates also losing affordable renting housing stock often missing from the housing supply discussion is importance of housing vouchers which help low income families better afford housing thoseaf of thees lowest income it is too simplistic to call vouchers or subsidies those do not have incomes to see the inequality housing unit they must set rent at high enough levels to cover their own cost to operate the building to

properly maintain the building and maintain any debt that they always he what happens to rental housing when operating costs are not adequately funded that is what happened to project -based rental assistance and other federal programs with no ongoing operating support vouchers correct this mistake by helping families afford rent giving landlords and owners t the resources they need to pay their bills and maintain properties which bolster supply to make this clear the average extreme low income household has an average income of $11000.201930 percent that benchmark was about $280 per month. but in 20199 the average market rental units were $520 a month and over 580 per month with

landlord paid utilities. in the past to build public housing now the housing vouchers i allow people more choice of where to live of color in neighborhoods that have story not been invested in. housing agencies can process these batches to guarantee the developments that includes units available with lower incomes. investing in the housing voucher program and mitigate the need for new, affordable units by allowing people who live in high all the units and their -- in their desired neighborhood to stay in place. we are confident housing agencies if they have money for their vouchers and administrative costs would be able to use many additional vouchers, particularly if resources are targeted to agencies that already have high utilization rates. the emergency housing voucher program funded through the american rescue plan demonstrates how the agency can

utilize new vouchers. even under difficult rental markets. so far, they've been able to have improve the lives of 26,000 people. to effectively address these issues, congress should support major increases to the housing voucher per, the senate transportation hud sub committee should fund 140,000 new vouchers passed by the house appropriations committee along with adequate ending for voucher administration, increase capital funding -- house -- funding for capital housing and defend existing affordable housing, remove their ears to homeownership and as noted, we cannot forget the unique housing challenges for people living in tribal lands coming using resources from native american alaskan natives and native hawaiians are essential. thank you for the opportunity to

testify and i look forward to answering your questions. >> we will begin from -- with the senator from georgia. >> thank you. since 2019, rent in georgia has increased 13.7%. it's one of the highest increases in the country as far as income growth over the same time. for the first time since it began tracking data, the federal reserve of atlanta has deemed the atlanta housing market is unaffordable. that forces more and more prospective homeowners, as you pointed to keep paying too much. this is not just the city of atlanta step everywhere in georgia, people are feeling the pinch. dauphin county has a population of 25,000 has a lower homeownership of nobility index than fulton county.

the best way we can lower prices to increase supply and i've supported several bills that do just that but georgians don't have the luxury to wait several years for home prices to fall. what are some immediate solutions we can offer renters especially those who spend a significant portion of their income on rent to help them provide the relief they so desperately need to? >> thank you for that question. the most immediate thing we can do to help renters is to provide rental assistance, mainly through the housing choice voucher program which can immediately give renters the resources they need to afford other things that senator brown mentioned in his opening statement, who, transportation and school supplies, giving some a housing voucher will allow them to pay only 30% of their income toward rent so it frees up more income for other needs.

>> do you think offering tax cuts would be helpful? >> it would be helpful but to give them more cash to pay their basic bills can be more helpful. >> ok, when we passed the american rescue plan, one of the provisions in that bill was the single largest tax cut for middle and low income families in history. i regret that we could not get it done. do you think that kind of tax cut could have been helpful? >> absolutely, those provisions in the american rescue plan help reduce significantly poverty for children so extending those in doing more of those can only help low in middle income families. >> george is in the middle of a housing crisis as i pointed out.

understanding how large institutional investors and wall street private equity firms from outside georgia is an important part of this puzzle. institutional buyers made up 13% of the residential sales in 2021. institutional landlords do not look to acquire properties uniformly. institutional buyers made up 19% of all sales. the second highest in the nation and according to a survey, mostly out-of-state investors made almost 43% of all purchases in the atlanta area in late 2021. dr. yeung, what effect is that

having on housing markets in cities like atlanta and surrounding areas? >> we hear that from our members in georgia that institutional buyers are coming in and they are pushing away first-time buyers especially those requiring first generation buyers. they have very little chance and furthermore, it changes the dynamic of the neighborhood where you have a landlord overseeing homeowners rooted in the community. >> what data do we need to fully understand how institutional investors are influencing our housing market? >> the data collection is an fortin so the 13% of

institutional buyers, they may be up grading it but there is also people who are permanent corporate landlords and i think that's where the concern is where it's essentially leading to more of a renter nation rather than giving an opportunity to buy a home. i think we need research to effectively understand how private equity is impacting marcus in atlanta and across the country and i look forward to introducing legislation soon to address that issue. thank you so much. thank you for letting the most junior member of the senate go first. >> thank you, senator warnock, senator toomey is recognized. >> i'm going to follow up on the point you made and i think ms. bailey touched on this point which is that in recent years,

we have seen a big surgeon supply. the data suggest that's true about most single-family and multifamily housing most it seems to me, given an light of that fact and when you look at the prices across the economy, a lot of the price escalation is probably a reflection of the general inflationary environment. does that make sense? as you point out, the fed made it particularly egregious in my mind by choosing to allocate credit in the mortgage space where there was no problem. it's not as if credit wasn't functioning. for months and months after we were well past the crisis, they kept pumping money into subsidizing origins which lowered the rate of mortgages relative to where they would

other wise be at a time when the housing market was clearly overheating as the economy was generally. it certainly seems as though we need more supply. you touched on a few of the factors that seemed to be contributing to higher costs and material costs, the great permitting and land use which restricts the ability to build new homes, the labor shortage. can you elaborate on what's holding back the supply that the market seems to be looking for? >> i don't think any single one of those issues stands out as the key. it's a combination stop there are too many impediments to finding suitable land, building the density necessary. if you have an urban area, you need to produce affordable rental units and finding the workers to do it.

those problems are across the economy. >> and they don't go away with the wave of a one so we have an idea of why but it's unrealistic to think -- >> people love to solve this problem weekly but that read buyers and an arm's residential construction boom which is the wrong thing for the economy now. we have to put in place a long-term strategy. >> i'm concerned about further demand-side subsidies making the pricing problem worse. i think of the analogy of what we've seen in higher education for years. with all good intentions, there's all kinds of federal grams that have subsidized higher education and we have seen skyrocketing costs and higher education long before inflation occurred generally in the economy. it was happening there because the federal money -- government

kept throwing money at it but we see these proposals are further demand-side subsidies stop your fellow witness was quoted as saying a proposal for down payment assistance featured in the build back better plan would add demand on top of already strong demand so it will push up housing prices further. he also stated that a game for current homeowners -- that's a gain for current homeowners but not homebuyers. is that a big part of the net effect of these further demand-side subsidies? >> i completely agree on this is a common strategy federal policy that rather than dealing with the supply problem, you subsidize the demand further. >> with respect to the f hfa, we've seen this new requirement that's the equity finance plan.

the plan proposes subsidizing down payments and other mortgage costs like appraisals and title insurance. this seems to be a mechanism that is likely to contribute to inflation but it's also a very disturbing exercise of social engineering on the part of unelected folks at fhm. do you see that home mechanism as consistent fhfa to return the gse's to solve it condition and conserve their assets? is this part of their mission? >> it is not and after 14 years, they are still not adequately capitalized and they are now expanding the credit locks. as a result, they will be at greater risk of losses and that's exactly the wrong

direction to take. >> thank you you, mr. chairman. . >> senator tester from montana is recognized. >> i don't think montana is an outlier here, just about everywhere in the country there is housing shortages. in the faster growing areas it's come to the point where we have teachers in montana that don't take the job or live in a camp ground because housing is to unaffordable. we've got a lot of folks from texas or the coast moving into montana. that would make me think that there would be houses for sale in texas and in san francisco and l.a. in those kind of places but i'm not hearing about housing surpluses there. could you give me an insight as to what's going on and why one

month we have housing surplus and then six months later, not near enough houses? >> any economic data physically on housing, there could be some volatility month to month.

>> we have simply not built enough. with people moving into your state, there was a housing shortage in texas or maybe moving to montana creating the demand and causing a housing shortage in your area but that's a drop in the could compared to the housing shortage they are currently experiencing. >> every once in a while senator toomey and i agree. one of the things that's obvious is the fact that we've got a problem. it is having some major impact on economic growth in the small town because there is no -- no place for a workforce to live for renters to live and doing the right thing is in horton. we don't want to exacerbate the problem.

it's been said we need a long-term plan. could you give me an insight, this problem will fix itself but it may take 30 years. i don't think 30 years is particularly good for businesses that have a hard time on the best of circumstances. could you give me some insight as to what would be in the long-term plan that would result in more houses on the market? >> probably you want to take the dollars that are currently devoted to demand subsidies that senator toomey mentioned and channeled those toward things which would generally expand the duction of housing including providing the land necessary. the federal government owns 40% of the land in california.

land is scarce in the california housing market so they might supply some land. >> you are talking about is investing in workforce training? >> i don't think we need a big new workforce training program, we have those. we need to think hard about ever immigration strategy and have it work as a tool of economic policy. i think we had some promising apprenticeship programs that were started under the previous administration but have been abandoned. those would be promising ways to go. >> ms. bailey, from a rural perspective, what would you view the state of housing in rural america as an is a markedly different than urban america? >> it's important have a focus on rural america.

i think the issues are related but need to be addressed in a different way. it's not necessarily the case that we should build 200 unit building in rural america. when he things like manufactured housing and tools to finance smaller projects to exist throughout a community so that it lends with the rest of the community and we can address the housing need in rural america . the low income tax credit is not designed to do that stuff we need tools like what president biden included in his fy 23 budget, the $50 million of supply that would allow for smaller projects to be able to be financed so they don't rely on the low income tax credit and don't need as many pieces of the capital to be created. >> thanks to all three of you, appreciate you being here.

>> ms. bailey, thank you and i appreciate what you said about manufactured housing. on-demand generally, we've seen reports that housing starts are up but a $3000 per month rental in washington's is not help a homeowner in idaho. is the housing we are building matching up with incomes? if not, talk through that and what we need to do to make sure we have enough housing to support families? >> you are hitting the nail on the head on the challenge. as i said in my testimony, we been in a development boom over the past 18 months. as the joint center for housing studies shows, the average rent those multifamily properties is about $1800 per month where the

median renter can only afford about $1000 per month. that shows you that the market is targeting units to the upper end of the market and not making units affordable. we need strategies that enhance supply and add capital dollars to supply. but then add subsidies to make those units affordable so we can properly operate those oldies and owners can pay their bills and programs like the housing choice voucher program do that. they allow for renters, especially low income renters to afford market housing. >> expand on what ms. bailey said about making housing more affordable for families. . >> it's not a one-year solution but we have to combine a subsidy with the long-term supply solution. when you look back in history,

there were times when we encountered recession and came out of the recession and often when we came out of it, it was housing reduction, building more apartments and single-family home. the recent great recession was different because the housing market came slowly with small mom and pop builders. if we look at it in the past, we had a tremendous amount of economic boom whether it's an apartment or single-family. it would lessen the pressure on the housing costs something to address is that we need to boost supply and address the short term needs for people in difficult situations. >> we know the feds raised

interest rates three times so far this year and they may do it again. discuss with rising interest rates means for home owners in terms of their monthly costs. how many people do you estimate this would push out of the homeownership market? >> you combine the impact of the higher prices along with higher mortgage rates versus one year ago or even december of last year, we estimate that monthly mortgage payments on a typical home in america have risen by close to 50%. consider what people find very dear, it has risen by 48% in our estimation from the changing prices. >> so the monthly payment goes up? >> now for existing homeowners

were locked in, they are fine. what effect does that have on the rental market? >> you see homebuying demands often which people who thought they had a chance to buy a home, they have to renew their lease and now we are seeing rental demand rising and that we are seeing rent acceleration. the rent is rising about 5% private-sector information says prices are rising faster than that. we have very low vacancy rates for apartments. >> ms. bailey, any additional thoughts? >> this is extremely important for low income families.

they feel the pressures the most which leads to housing instability for them. >> so pushing someone maybe was on the verge of buying a home back into the rental market and the pressure that puts all the way down to lower income renters? >> exactly. senator hagerty of tennessee is recognized. >> thank you very much. you and i have met before. you attended the at vanderbilt university so good to see you. and your testimony, you did a convincing job of relaying how

prices have been moving up dramatically in the united states. one of the issues i wanted to discuss with you is the artificial increase for affordable housing. you seem to describe a supply problem very well. how would this incentivize builders to go on a different direction? >> and artificially inflated wage is included in the price of the unit. it doesn't make sense to have a law that does that stop you should pay prevailing wages set by market conditions.

it leads to higher costs and it changes the builders calculation of what kind of units to build. it is on that list of things that's causing the cost of building to be related in taking those costs out would be a good idea. >> $830 per square foot impact, that could be -- a $30 per square foot impact could be a significant increase. your point is well taken that it would have a negative impact on price. i want to stay with you for a few more minutes. there is now a voucher program being negotiated, about 140,000 vouchers, roughly $30 billion of

more demand coming into a market place that is constrained on the supply side. what would you predict the impact of this? >> a permanent expansion in subsidies will raise the price, that's an unmistakable implication of this. at the moment, you could spend that money next year. the fed is trying to cool the market to put taxpayer dollars to no particular good effect. >> i'd like to talk about what's happening right now with the fed. i think their job is and honestly difficult because of the policies that have been implemented whether they are waging war in the oil and gas industry, the policies that

drove the stimulus package that was passed in a partisan basis in march of last year. the fed has been required to put mortgage-backed securities on their balance sheet and they are letting those run off right now stop chair powell said he would not rule out selling these mortgage-backed securities. i can imagine what impact that might have in the marketplace and raising rates. you think about this in the context of the federal wired actions how does that impact these inflationary policies and the effect they're having on the housing market? >> the spread between the 10 year treasury this morning was at 3%.

under normal circumstances, mortgage rates should be about 4.8%. now we have a 5.8% rate because of the undoing of want to take a easing. -- because of quantitative easing. we have a larger spread which is leading to home sales declines. we have 1.5 million members a ross the country stop -- members across the country. we hope it is peaking and it will decelerate so anything to constrain the inflation, then we can say we topped out on inflation and maybe the rates will decline somewhat. >> it seemed inflation is seeming to go in one direction and that is up. i am concerned about the direction it's going.

the policy decisions being made by this administration seem to be in favor of more inflation. i'm concerned about the impact on the housing market and in my home state, we are hearing where mortgage rates are up which makes house -- home owning less attractive. thank you all for your testimony. >> senator menendez of new jersey is record. >> home ownership has been a corner ship of the american dream and countless american families have purchased homes as a pathway to the middle class but the homeownership rate for black and hispanic households is significantly less then it is for white households. what do you believe are the top

three reasons that the black and hispanic homeownership rates have consistently lagged behind white households. >> america's a great country but we have to recognize some past stakes stop legal discrimination was taking place prior to the fair housing act. we are seeing the down payment as the major barrier for first-time buyers so they try to save and sometimes it requires getting help from family members and sometimes you have the members of a minority household were less able to get assistance from family members which places others at a disadvantage over the other stuff one has to look at the proper reddit underwriting standards. there is something that is preventing minority households from adding a mortgage even

though their circumstances involve changing credit scoring models. the financial responsibility of paying rent on time and utility bills on time, they will be in a better position to take on responsibility of homeownership stop the lack of supply means home prices zoom up. the prices rising faster for home equity value so that will be a major difference. >> i appreciate that and i would say federal policies create a racial segregation, a dual credit market, institutionalized redlining and other structural narratives, some of which you have mentioned that contribute to the differences between the rates of ownership stop what is not mentioned is how property taxes have contributed to lower black and hispanic homeownership rates and this is worsened the racial gap.

well-established by historians that black and hispanic households have been subject to higher property tax assessment than their white counterparts, higher property tax writs reflect a double penalty on home owners. i'm sorry, i can't hear myself -- higher property taxes lead to higher values. being taxed more for less limits the ability to build wealth through homeownership. when their neighborhoods become gentrified, there property values increase, leaving them vulnerable to dish vulnerable to foreclosures of the are unable to pay their increase in property tax bills. the state and local property taxes which is commonly returned -- referred to as salt allows

homeowners to deduct their property taxes. it's essential for preserving homeownership especially for black and latino homeownership's. that's one of the many reasons why on tuesday, the naacp passed a resolution to support lifting the trump 10,000 salt cap. this has been a favorite target of my republican colleagues. republicans want to get rid of this deduction because they want to create an environment where states and local governments are forced to cut taxes, defund public education, privatize public services and adopt fee for services. it's how state municipalities would basically pay for education, health care, public

author programs, transportation and public safety and even though students may not claim the salt -- action themselves, they benefit salt step these factors can be captured in a distributional analysis. that's what makes salsa different and an entire coalition of states and counties in governors came together to push back against this elimination by president reagan in the same group came together in 2017 for the unified support of all demo rats. this is not about -- democrats. it's about who gets to benefit from the american dream. this is about who's entitled to hold onto that wealth and pass it to the next generation. this it is about attending school and i went to use that hearing to drive that point.

>> the senator from virginia is recognized. >> thank you for holding this hearing. a lot of us are interested in that issue and it is kind of a one-two punch with this area. i want to repeat something. one of the things we discovered in covid drove home -- and drove it -- and calling drove home and norm is racial wealth gaps -- enormous racial wealth grabs --g aps. the biggest driver is not necessarily job opportunities or educational background. increasingly, it is about

homeownership and we saw disproportionate leave during covid. -- relief during covid under the tpp --ppp program. community banks work with their traditional customers and i was proud of the fact that chairman and other senators and groups, we worked with the trump administration and got $12 billion to have access to capital. one of the things i worked with was a proposal. it is the lift act, which addresses the racial wealth cap.

one approach is to look at first-time buyers, that defion definition would drive about 60% people of color because they don't have the same level of home ownership as other communities do. there are lots of white families that don't have any homeownership and anything -- it's as if you qualify with a traditional 30 year mortgage -- we don't want to put people into homes that they cannot afford, if you qualify for that traditional 30 year mortgage, and meeting certain criteria's, we would provide a 20 year mortgage rather than a 30 year mortgage and we call this the lift act and it will directly address the racial wealth gap issue and put points on the

board for a lot of families to give them that equity they need to make sure they have the line on getting a college education are having that equity -- for having the equity. in your testimony, you talk about the widening homeownership gap between whites and nonwhites families? and you talk about how the lift app might apply -- can you talk about how the lift act might apply? >> i am a numbers guy. one of the requirement for all high school students is that we run the mortgage will be calculated -- numbers to the mortgage cap later -- calculator. given the wide homeownership rates cap between various racial groups to address some of the

past. -- past mistakes. we have to understand we have to combine it with increased supply because if we are simply raising the demand opportunity but with limited supply, most of the game would go through the current owners and given the current disparity in homeownership, the current owners are likely to be white american so we have to address the issue. we have to assure that supply comes along so that demand can access those increased supply. >> i agree that his wife i did not focus on the question -- this lift program would only be applicable to first-time first-generation homebuyers because we know that the second game third generation, you

should build the equity. you have immediately -- immediate available -- eligibility. when following the recommendations, that would help alleviate some of the project -- pressure at the upper end of the market that would alleviate the fact that we don't have the tenants vacancies we need to control costs and it will allow the upper income individuals to move into the homeownership space so that we can -- we would have the units available for renters. anything that helps first-time, first-generation owners -- homeowners helps renters as well. >> thanks, senator cortez from

nevada is recognized. >> an important issue across the country but including in nevada. the issue of afforded -- affordable housing. dr. yun, in nevada, 28 percent of homes persons in the last biggest area were bought by investors. they bought $1.5 million worth of homes in nevada isn't the only place where corporations are snapping up single-family homes stuff my question is what trends are you seeing in home purchases by investors and what impact this is having on home prices like the las vegas metro area? >> that is an extra demand especially if the funding -- money is backed by wall street funding.

the home prices will naturally be higher. as they are purchasing single-family homes and turning it into rentals, that is making less chance for first-time buyers and first-generation buyers to have a chance because often the down payment comes from a cell by previous home. first-generation or first-time buyer will have that and consequently it makes it difficult for the first-time buyers. >> is my biggest concern -- that is my biggest concern. i saw a lot of investor and equity owned homes being bought and purchased and this is my concern. they are turning it into rentals and the rental prices are increasing exorbitantly. for so many, this is the

challenge in trying to understand it and make sure we can help renters and homeowners have access to homes. let me talk about vouchers. when i talk to developers, they tell me they cannot build an apartment building that is affordable to people and -- earning other $50,000 a year without a subsidy. how are vouchers important without a subsidy? >> landowners and renters -- and for a wide array of renters, there is no more than 30% of their income so doctors pretty -- plate -- vouchers play the role -- what the laminate loner needs to maintain the property. >> it not only gives the tenants

the stability but it is also for the property managers. >> exactly. >> thank you. >> senator warren is recognized. >> our nation has faced a affordable housing crisis predicted. -- for decades. everyone needs housing. there is not enough to go around. it is a classic case of the man outstrips supply. we will and up with higher prices and is severe lack of supply has relentlessly pushed out the cost of rent for families taking bigger and bigger bite budgets that are now doubly strained by rising prices from everything from gasoline to groceries. rents are up 6% more than they

were a year ago and higher help and costs are limited -- are one of the biggest drivers of inflation so to tackle rising costs, the federal reserve is raising interest rates but we should be clear of the impact of the hikes on the market. the fed claims the hikes will bring down prices for families by obtaining inflation. do you expect the feds interest rate hikes will meaningfully bring down rental costs for families? >> the rental component in the price impact -- index, is about 30%. given that there will be fewer by activities, rents will be rising so one can say the rental correspondent -- compliant will be rising faster -- components will be rising faster. >> the actions will likely

increase rent. it will not bring down rental costs or the costs of food or gas or other necessities. that have spiked because of hutus were in ukraine and he will not so click -- fix the supply chain and it won't stop corporate price gouging but by increasing borrowing costs, the rate hikes will do two things. it is more expensive to build housing and second, making more expensive for families to take out a revision by a home -- a mortgage and buy a home. people renting and buying homes are worse off when the fed just up the rates but are there any participants in the housing market who are relatively better off under these conditions, like

investors and private equity firms? >> the multiple offers were prevalent through last year and the multiple offers are less occurrence which means people are still -- that are still in the market are able to grab path -- probably easier and corporate investors will be that kind. cash buyers, which makes it difficult for the first-time buyer to pick up a mortgage. >> private equity are buying in an school of housing and rent it out to families at a premium. in the first quarter of this year, investors for just one out of every five homes that were sold, which is a national record. ms. bailey, if private bailey -- equity and other big investors by more of the housing stock,

what will be the impact of rent prices? >> i think we can expect that rents will increase, putting more pressure on families incomes and having them stretch their then budgets -- then budgets --thin budgets. can lead to gentrification of neighborhoods and displacement. that is a challenge when equities firms -- equity firms purchase policies. >> the solution to bring down housing -- costs is clear. build more housing and loosen big investor's grip on the market to make sure it is families that have an opportunity to buy a home. there is a third step that the federal reserve chairman should take.

thank twice -- think twice before tearing through aggressive rate hikes that will only make the housing crisis worse. thank you for being with us. >> the war -- senator warren. that concludes the questioning. thank you to the west -- what is this. for -- tuesday, july 28 -- ari, thursday, july 28. -- sorry, thursday, july 28. the hearing is adjourned.

[laughter] [scattered conversation]