[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]




                   THE FUTURE OF HOUSING IN AMERICA:
                     GOVERNMENT REGULATIONS AND THE
                          HIGH COST OF HOUSING

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         HOUSING AND INSURANCE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 22, 2016

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 114-81
                           
                           
                           
                           
                           
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
SCOTT GARRETT, New Jersey            GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas              MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico            RUBEN HINOJOSA, Texas
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK,              STEPHEN F. LYNCH, Massachusetts
    Pennsylvania                     DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia        AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri         EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan              GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin             KEITH ELLISON, Minnesota
ROBERT HURT, Virginia                ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio                  JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee       JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana          TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina        BILL FOSTER, Illinois
RANDY HULTGREN, Illinois             DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida              PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina     JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri                 KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky                  JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DENNY HECK, Washington
LUKE MESSER, Indiana                 JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
                 Subcommittee on Housing and Insurance

                 BLAINE LUETKEMEYER, Missouri, Chairman

LYNN A. WESTMORELAND, Georgia, Vice  EMANUEL CLEAVER, Missouri, Ranking 
    Chairman                             Member
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
SCOTT GARRETT, New Jersey            MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico            WM. LACY CLAY, Missouri
BILL POSEY, Florida                  AL GREEN, Texas
ROBERT HURT, Virginia                GWEN MOORE, Wisconsin
STEVE STIVERS, Ohio                  KEITH ELLISON, Minnesota
DENNIS A. ROSS, Florida              JOYCE BEATTY, Ohio
ANDY BARR, Kentucky                  DANIEL T. KILDEE, Michigan
KEITH J. ROTHFUS, Pennsylvania
ROGER WILLIAMS, Texas
















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 22, 2016...............................................     1
Appendix:
    March 22, 2016...............................................    33

                               WITNESSES
                        Tuesday, March 22, 2016

Been, Vicki, Commissioner, New York City Department of Housing 
  Preservation and Development...................................     7
Daily, F.R. Jayar, Chief Operations Officer, American Homestar 
  Corporation, on behalf of the Manufactured Housing Institute 
  (MHI)..........................................................     6
Dickerson, A. Mechele, Professor, The University of Texas at 
  Austin School of Law...........................................    11
Holland, Clyde, Chairman and Chief Executive Officer, Holland 
  Partner Group, on behalf of the National Multifamily Housing 
  Council (NMHC) and the National Apartment Association (NAA)....     4
MacDonald, Granger, President, MacDonald Companies, on behalf of 
  the National Association of Home Builders (NAHB)...............     9

                                APPENDIX

Prepared statements:
    Been, Vicki..................................................    34
    Daily, F.R. Jayar............................................    42
    Dickerson, A. Mechele........................................    55
    Holland, Clyde...............................................    68
    MacDonald, Granger...........................................    85

              Additional Material Submitted for the Record

Luetkemeyer, Hon. Blaine:
    Written statement of the Mortgage Bankers Association with 
      attachment, ``Affordable Rental Housing and Public Policy 
      Toward Greater Housing Security and Stability,'' MBA 
      Affordable Rental Housing Task Force, December 2015........    96
    Written statement of Steve PonTell, President and CEO, 
      National Community Renaissance (National CORE).............   118
Cleaver, Hon. Emanuel:
    Written statement of Enterprise Community Partners...........   127
Ellison, Hon. Keith:
    Letter to Hon. Richard Cordray, Director, CFPB, and Hon. 
      Loretta Lynch, Attorney General of the United States, dated 
      January 12, 2016...........................................   134
    Response letter from Hon. Richard Cordray, Director, CFPB, 
      dated February 9, 2016.....................................   137
    CFPB report entitled, ``Manufactured-housing consumer finance 
      in the United States,'' dated September 2014...............   140
    Representative Ellison's statement on H.R. 650, the 
      Preserving Access to Manufactured Housing Act..............   195
    Various newspaper articles alleging bad behavior.............   198
MacDonald, Granger:
    Written responses to questions for the record submitted by 
      Representative Royce.......................................   241

 
                   THE FUTURE OF HOUSING IN AMERICA:
                     GOVERNMENT REGULATIONS AND THE
                          HIGH COST OF HOUSING

                              ----------                              


                        Tuesday, March 22, 2016

             U.S. House of Representatives,
                            Subcommittee on Housing
                                     and Insurance,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:02 p.m., in 
room 2128, Rayburn House Office Building, Hon. Blaine 
Luetkemeyer [chairman of the subcommittee] presiding.
    Members present: Representatives Luetkemeyer, Westmoreland, 
Garrett, Pearce, Rothfus, Williams; Cleaver, Velazquez, and 
Clay.
    Chairman Luetkemeyer. The Subcommittee on Housing and 
Insurance will come to order. Without objection, the Chair is 
authorized to declare a recess of the subcommittee at any time.
    Today's hearing is entitled, ``The Future of Housing in 
America: Government Regulations and the High Cost of Housing.''
    Before we begin, I would like to thank the witnesses for 
appearing before the subcommittee today. We look forward to 
your testimony. I now recognize myself for 5 minutes to give an 
opening statement.
    Last year, I joined several of my colleagues in New Orleans 
to examine the state of housing 10 years after Hurricane 
Katrina. While in New Orleans, we visited public housing sites 
and met with residents. My colleagues will remember meeting a 
woman who had lived in public housing her entire life.
    Like so many people across the Nation, she told us her goal 
was to escape public housing and have her own home. This 
resident told the story of her son, who had achieved that dream 
and purchased his own home. He broke the cycle his mother aimed 
to shatter as well.
    He was able to do that because he had opportunity. He had 
options. He found a house to call a home. So today we ask 
ourselves, where do people go when they reach self-sufficiency?
    Is the stock of affordable market rate housing plentiful 
enough to support the people seeking it? The unfortunate answer 
is no. According to a recent study by NYU and Capital One, the 
renter population is growing while affordable housing options, 
those that consume less than 30 percent of household income, 
are shrinking.
    The study also found that in cities across America, the 
average renter can afford fewer than 25 percent of rental 
units. Imagine that daunting landscape through the eyes of a 
single mother looking to graduate from public housing.
    Today, we will examine some of the root causes behind 
rising housing costs in the Nation, with specific focus on the 
government's contribution to the price tag. Federal, State, and 
local rules and regulations, including Davis-Bacon wage rates 
and zoning laws, are proving to be barriers to the development 
of affordable housing.
    According to the New York City Independent Budget Office, 
the requirement to pay prevailing wages translates to a per-
unit cost increase of nearly $45,000. That is an additional 
$2.8 billion in labor cost to meet the mayor's affordable 
housing goal.
    Manufactured housing rules and regulations from the 
Department of Housing and Urban Development (HUD), the Federal 
Housing Administration (FHA), and the Consumer Financial 
Protection Bureau (CFPB) have stifled the availability of an 
affordable alternative to site-built homes.
    This subcommittee will continue to dedicate its time and 
energy to examining different methods to lift people from 
poverty and ensure that people don't have just a place to live, 
but a place to have a life.
    This is an important conversation. In the words of one of 
our witnesses, Professor Mechele Dickerson, ``For the first 
time since possibly the Great Depression, the lack of 
affordable housing is being viewed as a crisis that affects 
Americans of all ages, races, and income groups.''
    Government has inserted itself into the business of housing 
by mandating affordable housing and community reinvestment 
while simultaneously shifting creation of affordable housing 
and community reinvestment. It is time to promote the 
development and availability of housing for low- and middle-
income Americans, not restrict it.
    I want to thank our witnesses for appearing today. We look 
forward to your testimony.
    The Chair now recognizes the ranking member of the 
subcommittee, the gentleman from Missouri, Mr. Cleaver, for 5 
minutes for an opening statement.
    Mr. Cleaver. Chairman Luetkemeyer, members of the 
subcommittee, good afternoon. Thank you again for giving us 
your time to help us focus on this important issue.
    When you consider the fact that there are approximately 12 
million Americans who spend more than 50 percent of their 
income on housing, I don't think that it is a far-fetched 
notion to say that we are in the throes of a crisis in the 
future of housing in America, government regulations, and the 
high cost of housing.
    It has been about 8 years since the economic meltdown of 
2008. And as we all know, not only did the Great Recession 
devastate individual household wealth, but it also eviscerated 
our housing market.
    Recovery has been slow, and in the time our housing trends 
have shifted with more Americans renting than purchasing new 
homes. Today's hearing gives us an opportunity to learn from 
your ideas in which we can put in place to turn this 
unfortunate turn of events around.
    According to the Joint Center for Housing Studies at 
Harvard University, the number of U.S. households that rent 
their housing rose to a 20-year high of 35.5 percent in 2014. 
And at the same time, the national rental vacancy fill as rents 
soar.
    Wages have also stagnated leaving more Americans rent-
burdened. Simply put, many of our constituents are facing a 
housing crisis where need outweighs availability. And because 
of this, it is crucial that we provide robust funding for our 
Federal housing programs.
    For example, recently I joined with Ranking Member Waters 
and 69 other Members to request that our appropriations, or the 
appropriators, provide strong funding for Section 8 rental 
assistance as well as for housing programs that provide 
dedicated funding for the elderly and the disabled.
    I also urge our appropriators to fully fund the HOME 
Investment Partnership Program and the Community Development 
Block Grant program. Both programs effectively leverage private 
capital through Federal investment to encourage the development 
of housing, though both have been cut in recent years.
    We thank you for your participation. I look forward to 
hearing from you in your testimony.
    Chairman Luetkemeyer. The gentleman yields back.
    Today, we welcome the testimony of Mr. Clyde Holland, 
chairman and chief executive officer, Holland Partner Group, on 
behalf of the National Multifamily Housing Council and the 
National Apartment Association; Mr. F.R. Jayar Daily, chief 
operations officer, American Homestar Corporation, on behalf of 
the Manufactured Housing Institute; Ms. Vicki Been, 
commissioner, New York City Department of Housing Preservation 
and Development; Mr. Granger MacDonald, president, MacDonald 
Companies, on behalf of the National Association of Home 
Builders; and Professor Mechele Dickerson, professor at the 
University of Texas at Austin School of Law.
    Each of you will be recognized for 5 minutes to give an 
oral presentation of your testimony. And without objection, 
your written statements will be made a part of the record.
    Before we proceed, I want to seek unanimous consent to 
yield time to the gentleman from Texas, Mr. Williams, for the 
purpose of introducing not one but two of today's witnesses. So 
without objection, the gentleman is recognized.
    Mr. Williams. Thank you, Mr. Chairman. It is a great honor 
to introduce two great Texans. Of course, everybody in Texas is 
great, but we are proud of our State.
    First of all, is it is an honor and a privilege to 
introduce this morning Granger MacDonald, who is not only a 
fellow Texan but has been a dear friend of mine for many years. 
Granger is a second generation builder and developer from 
Kerrville, Texas, one of the most beautiful cities in America, 
with more than 40 years of experience in the home-building 
industry.
    He sits on the board of the National Association of Home 
Builders as first vice president and as chairman and CEO of the 
MacDonald Companies, as we have heard. As you will hear from 
him this afternoon, housing is one of the most regulated 
industries in the Nation.
    Mr. MacDonald is uniquely qualified to speak about the 
regulatory barriers to affordable housing, and we look forward 
to hearing his testimony today. And Granger, welcome. It is 
good to see you.
    Next, it is another great honor to introduce Mechele 
Dickerson. I am happy to introduce her this afternoon, another 
fellow Texan and a professor of law, who teaches at one of the 
finest universities in the country, one that I just happen to 
represent in the United States Congress.
    Ms. Dickerson is a nationally recognized bankruptcy law 
scholar in addition to being a professor at the University of 
Texas Law School. In addition to her teaching responsibilities, 
Professor Dickerson has published numerous books and articles 
that should be relevant to our hearing today.
    So I look forward to her testimony and that of Granger's.
    And Mr. Chairman, I yield back.
    Chairman Luetkemeyer. I thank the gentleman. Just a couple 
of quick notes--excuse me. I have a little allergy problem 
today, so forgive my voice here. You have a lighting systems in 
front of you: green means go; yellow means you have 1 minute 
left; and then when it hits red, you need to wrap it up.
    Also, we do have votes here shortly, and as I talked to all 
of you a while ago, we are going to try and get as far down the 
road as we can with testimony before we stop. We will take the 
time out then at that point, do our duty of going to vote on 
the different issues that are before us today, and then come 
back and complete the hearing. So let us see how far we can 
get.
    Mr. Holland, we now recognize you for the first 5 minutes.

   STATEMENT OF CLYDE HOLLAND, CHAIRMAN AND CHIEF EXECUTIVE 
   OFFICER, HOLLAND PARTNER GROUP, ON BEHALF OF THE NATIONAL 
 MULTIFAMILY HOUSING COUNCIL (NMHC) AND THE NATIONAL APARTMENT 
                       ASSOCIATION (NAA)

    Mr. Holland. Thank you, Chairman Luetkemeyer, Ranking 
Member Cleaver, and members of the subcommittee. It is my 
privilege to appear before you today on behalf of the National 
Multifamily Housing Council and the National Apartment 
Association to discuss the challenges of meeting the increasing 
demands for multifamily homes for millions of working 
Americans.
    I am the chairman and chief executive officer of the 
Holland Partner Group based in Vancouver, Washington. We are a 
fully integrated real estate investment firm in the western 
United States with experience developing approximately $7.5 
billion in assets representing 30,000 apartment homes.
    The lack of affordable workforce housing is placing 
increased financial pressure on middle-income Americans. 
According to a 2013 report by Harvard's Joint Center for 
Housing Studies, more than one in four renter households, or 
approximately 11.2 million individuals, paid more than half of 
their income for rental housing.
    Without your leadership and effective policy enactment, 
meeting the affordability challenge will become increasingly 
difficult. Changing demographics and housing preferences drive 
more people toward renting.
    Almost 75 million young adults are entering the housing 
market as renters. At the same time, Baby Boomers and empty 
nesters are trading single family houses for rental apartments. 
This combination of factors is forecast to lead to 4 million 
new renter households over the next decade.
    There are several reasons why Americans are facing high 
rents and finding too few affordable options. First, while the 
cost to develop and operate rental housing increases annually, 
the median renter household income is virtually unchanged since 
1981. In many markets, even if developers agree to take no 
profit, the cost to build still exceeds what people can afford 
to pay.
    Second, there is an enormous mismatch between the supply 
and demand for apartments. As my first slide illustrates the 
NMHC and the NAA estimate that between 300,000 and 400,000 
apartments must be constructed annually to simply keep pace 
with demand. Yet on average, just 208,000 were delivered 
annually in the 4-year period from 2011 to 2015.
    While completions of 310,000 units in 2015 was an 
improvement, the stock of available entitled land is 
diminishing. Future development will be constrained, making it 
more difficult to fulfill the housing needs.
    Lastly, development of new apartment homes is exceptionally 
difficult. In many markets, it is simply impossible. We have 
been developing and rehabilitating apartments for over 30 
years, and the current environment is by far the most 
challenging.
    There are many hurdles and regulations that can impede the 
process. Community resistance to renters or ``NIMBYism''--not 
in my backyard--is frequent, but rarely based on legitimate 
concerns. Before a project can break ground, the entitlement 
process can take 2 to 10 years and require an up-front 
investment of $1 million or more.
    Even in communities that want and desperately need new 
multifamily developments, the numerous hurdles that must be 
overcome include entitlement expenditures, zoning rules, 
environmental site assessments, impact fees, mandates like 
inclusionary zoning or rent control, and labor expenses and 
building code requirements.
    One thing I will point out on the slide that is before you 
is in 2007 when the financial meltdown happened, there were 
many individuals and firms involved with land entitlement. They 
lost everything, and today the funding for new entitlements is 
nearly nonexistent.
    And so the raw material necessary, particularly in high-
barrier entry markets, of zoned land that can be utilized is 
falling at a rapid clip.
    All of the costs add up. Point Loma Nazarene University 
studied the San Diego housing market and found that regulations 
increased the cost of housing by a staggering 40 percent.
    The White House Council of Economic Advisers Chairman Jason 
Furman recently noted that multifamily housing units are the 
form of housing supply that is most often a target of 
regulation. We could not agree more.
    The bottom line is that workforce housing development 
requires a partnership between the government and the private 
sector. Local governments can do this by bringing down barriers 
to development and incentivizing for-profit entities to build 
apartments at a price that is affordable for the community.
    When both the public and private sectors bring all their 
tools and assets to play, there is a greater likelihood of 
finding solutions to our housing challenges. Specific proposals 
to accomplish these objectives are included in our written 
testimony.
    Americans work hard and deserve quality housing at a price 
they can afford. As a Nation, we are falling far short of our 
goal. What is needed is a bold, fresh vision that sets aside 
historic approaches. We recommend a task force challenged with 
developing effective solutions to today's housing challenges. 
Thank you.
    [The prepared statement of Mr. Holland can be found on page 
68 of the appendix.]
    Chairman Luetkemeyer. I thank the gentleman for his 
testimony.
    Next, Mr. Daily is recognized for 5 minutes. You may begin.

   STATEMENT OF F.R. JAYAR DAILY, CHIEF OPERATIONS OFFICER, 
 AMERICAN HOMESTAR CORPORATION, ON BEHALF OF THE MANUFACTURED 
                    HOUSING INSTITUTE (MHI)

    Mr. Daily. Good afternoon, Chairman Luetkemeyer, Ranking 
Member Cleaver, and members of the subcommittee. My name is 
Jayar Daily. I am the chief operating officer of American 
Homestar Corporation, which designs and produces manufactured 
housing.
    Thank you for the invitation to serve as a witness at this 
important hearing about regulatory barriers to affordable 
housing. I am pleased to testify on behalf of the Manufactured 
Housing Institute, of which I serve on the board of directors, 
and I am the immediate past Chair of the Manufacturer's 
Division and the chairman of the National Modular Housing 
Council Division.
    Twenty-two million Americans call manufactured housing 
their home. It is simply the most affordable home ownership 
option for families who live in non-metropolitan and rural 
areas.
    Median income per manufactured homeowners is just over 
$26,000 each year. Last year, the industry produced over 70,000 
homes, roughly 9 percent of the new single family home starts.
    I am pleased to testify on the regulatory barriers facing 
manufactured housing, a critical source of available housing 
which in so many parts is in short supply.
    While much progress has been made in achieving economics of 
scale in delivering high-quality affordable homes under a 
robust Federal housing code, there are three strong headwinds 
that keep the industry from fully meeting the critical need for 
affordable housing in this country.
    First, we have a housing financing system that does not 
adequately meet the needs of borrowers looking to finance and 
purchase manufactured housing.
    CFPB regulations pertaining to the definition of loan 
originators as well as HOEPA provisions governing small balance 
loans have prompted a decline in smaller loans, shutting out 
many customers. We applaud this committee and the House for 
passing H.R. 650, the Preserving Access to Manufactured Housing 
Act, this past year.
    In addition, FHA's Title I program for title lending simply 
does not work as evidenced by the fact that there are only 80 
certified appraisers in the entire country, and the fact there 
was only $24 million of endorsements in 2014.
    Finally, despite the 2008 Housing and Economic Recovery 
Act's duty-to-serve requirements for manufactured housing, 
Freddie Mac and Fannie Mae have largely stayed away from 
participating in the chattel home-only market, which represents 
70 percent of the total homes that are sold. With the recently 
proposed Duty-to-Serve rule, we see the opportunity for 
development of a secondary mark for chattel loans.
    The second headwind is that manufactured housing production 
is regulated by the HUD code, a comprehensive set of guidelines 
that touches virtually everything in the assembly and site 
process.
    While the industry works well with HUD, there are several 
areas where improvements are needed: greater attention to 
economic impact concerns as HUD finances its regulations; 
exercising its pre-emption authority with States and localities 
as we are pre-empted out of zoning by some communities; and 
ensuring greater coordination among Federal agencies that 
impact housing, such as the Department of Energy's energy 
efficient standards.
    We support H.R. 3135, which would ensure that HUD remains 
as the prime regulator in the partnership with the DOE.
    Finally, the third strong headwind is the 1974 legislation 
that brought the industry into the modern era, the Manufactured 
Housing and Construction Safety Standards Act. It is 
antiquated.
    For example, the Act puts the industry under Federal lemon 
laws, even though we are not an automobile business, and if 
otherwise robust quality assurance and dispute resolution tools 
under the HUD code. And the Act requires that homes be built on 
a steel chassis, which stifles design innovation.
    We believe, in conclusion, through partnership with this 
committee and our work with HUD and other agencies, we will 
make progress in these critical areas and will continue to 
expand the supply of affordable housing. Thank you for the 
opportunity to testify.
    [The prepared statement of Mr. Daily can be found on page 
42 of the appendix.]
    Chairman Luetkemeyer. Thank you, Mr. Daily. You came in a 
minute under the bell there. Well done.
    Ms. Been, you may proceed. You are recognized for 5 
minutes.

STATEMENT OF VICKI BEEN, COMMISSIONER, NEW YORK CITY DEPARTMENT 
            OF HOUSING PRESERVATION AND DEVELOPMENT

    Ms. Been. Thank you. Chairman Luetkemeyer, Ranking Member 
Cleaver, and members of the subcommittee, thank you for the 
opportunity to testify today. I am Vicki Been, the commissioner 
of the New York City Department of Housing Preservation and 
Development (HPD).
    HPD is responsible for carrying out Mayor Bill de Blasio's 
initiative to build 80,000 new affordable homes and preserve 
the quality and affordability of another 120,000 homes over the 
next 10 years.
    Let me highlight a couple of key initiatives we have 
undertaken in the City to help address the critical need for 
affordable housing. And I will then explain why that need, 
despite the City's Herculean efforts, requires both greeter 
Federal commitment to fund the construction and preservation of 
affordable housing and more flexibility in Federal programs.
    First, the City has doubled the capital funding that the 
City is providing to create and preserve affordable housing to 
$8.2 billion over 10 years. Funding from the Federal Government 
is absolutely crucial to address the affordable housing crisis. 
But while we are asking Washington for support, we are 
committing a huge amount of our own resources to build new and 
preserve existing affordable housing.
    Second, our City Council is voting as we speak on two very 
significant changes to our local regulations to provide new 
tools to achieve affordable housing for a broad range of 
families and to remove inefficient regulations that raise the 
cost of housing.
    The first change will implement mandatory inclusionary 
housing. Our program will broaden the income levels that we 
serve so that we can provide homes to families who are at 
poverty level, far below the 50 percent to 60 percent AMI of 
tax credit properties, as well as all the way up to moderate-
income workers earning 80 percent of AMI, for example, who 
increasingly are being priced out of the city.
    We have also made major updates to our 1961 zoning text to 
encourage more senior affordable housing and remove unnecessary 
parking requirements and other regulatory barriers to the 
production of affordable housing.
    Much has been made of the burdens that regulation imposes 
on construction, and our update to the zoning text removed many 
inefficient regulations.
    But many of the regulations that folks claim are 
unnecessary or unduly burdensome are critical to making our 
neighborhoods safe and to ensuring that growth doesn't outpace 
the supply of essential infrastructure and services.
    Sadly, we saw this illustrated in the East Village last 
year where construction and gas connections that were not in 
compliance with the building code leveled multiple buildings, 
killed two people, and displaced dozens from their homes.
    Let me turn to a few areas where I believe Congress could 
be enormously helpful in addressing the housing needs of people 
all across the country.
    First, the low-income housing tax credit could be even more 
successful if the program were amended to allow-income 
averaging. The developer could offer units affordable to 
tenants earning between 40 percent and 80 percent of AMI.
    The higher-income units could then cross-subsidize the 
lower-income units and communities would be able to serve 
lower-income households without any additional cost to 
taxpayers or to the developer, and would be able to meet the 
needs of a far broader group of families.
    Next, day in and day out we hear from local elected 
officials and community organizations about the dire need for 
senior housing. Historically, the HUD Section 202 program 
spurred the production of affordable senior housing. But it has 
been completely defunded since 2011.
    We desperately need Congress to restore funding for the 
Section 202 program. In New York City, alone we have 200,000 
seniors on wait lists for affordable housing in the City. 
Without Section 202 funding, we are unable to meet those needs.
    Finally, there are many critical HUD programs that we use 
locally, including HOME, public housing capital and operating 
funds, RAD, but I must stress the paramount importance of the 
Section 8 voucher program. I know that Congress is very 
concerned about the growth of this program as a percentage of 
the overall HUD budget, but I can't emphasize enough how 
critical it is.
    We use those vouchers to allow us to rehab dilapidated 
housing, where residents could not afford the increased rent 
that would otherwise be necessary to support the rehab. We use 
vouchers to help prevent and to end homelessness. We project-
base Section 8 vouchers to develop new affordable housing, 
especially for seniors.
    I am hopeful that our sustained local commitment to 
preserve our existing affordable housing and build much-needed 
new affordable housing will stabilize our neighborhoods. But we 
can't do it alone. Our local efforts must be paired with a 
renewed Federal commitment to fund affordable housing and 
support local government's efforts to provide better homes and 
stronger neighborhoods for our low-income families.
    I am grateful for the subcommittee's attention to 
affordable housing and for calling today's hearing. And I am 
happy to answer any of your questions.
    [The prepared statement of Commissioner Been can be found 
on page 34 of the appendix.]
    Chairman Luetkemeyer. Thank you, Ms. Been.
    Mr. MacDonald, you are recognized for 5 minutes.

STATEMENT OF GRANGER MACDONALD, PRESIDENT, MACDONALD COMPANIES, 
 ON BEHALF OF THE NATIONAL ASSOCIATION OF HOME BUILDERS (NAHB)

    Mr. MacDonald. Chairman Luetkemeyer, Ranking Member 
Cleaver, and members of the subcommittee, thank you for the 
opportunity to testify today. My name is Granger MacDonald. I 
am the chief executive officer of the MacDonald Companies and a 
home builder and multifamily developer from Kerrville, Texas. I 
also serve as NAHB's first vice chairman.
    Mr. Chairman, we appreciate the opportunity to testify as 
the home-building business is the most regulated industry in 
America. Regulatory burdens impose costs on the development of 
land and construction of single family and multifamily homes. 
These added costs are passed along to homeowners and renters 
through higher prices and rents.
    On average, 25 percent of the price of a single family home 
is attributed to regulation. Regulation is pushing up the price 
of housing beyond the means of many middle-class working 
families.
    On a national basis, a 1,000 increase in home prices leads 
to pricing out slightly more than 206,000 individuals from home 
purchase. Over 110,000 renter households will become burdened 
by rising rates if he cost of producing rental housing units 
increases by .1000.
    The construction trade is constantly the focus of 
regulations from OSHA, EPA, DOE, FEMA, and other agencies. 
Specifically, regulations on energy codes, EPA's Waters of the 
United States, OSHA's crystalline silica, the Department of 
Labor's persuader rule and joint employer standards, and the 
ADA compliance are only a few of the myriad of regulatory 
issues that my industry faces on a daily basis.
    All of these regulations factor in the cost of housing as 
cost increases and access to capital remains tight. Home buyers 
and renters will have fewer safe, decent, affordable housing 
options.
    While regulatory reform will help us lower the development 
costs to reach lower-income households, it is financially 
infeasible to construct new, unsubsidized, affordable housing 
units without Federal assistance. It is important to remember 
that the regulatory reforms are not a substitute for programs 
like the low-income housing tax credit and housing choice 
vouchers.
    Let me expand on a number of barriers that directly affect 
housing affordability. NAHB has serious concerns regarding the 
decreased housing affordability that will result along the 
Nation's rivers and coast once HUD begins to implement the 
Administration's flood Executive Order.
    This order expands the floodplain management requirements 
far beyond the long-established 100-year floodplain. HUD has 
indicated it will apply the order to all Federal projects such 
as HOME, CDBG, and federally-insured multifamily projects, such 
as FHA-backed loans.
    The major concern is that HUD has not mapped the 
geographical limits of the expanded floodplain or analyzed the 
costs and benefits of implementing new standards.
    Additionally, the home-building industry is experiencing a 
major labor shortage, with 41 percent of the builders 
identifying this as their top concern. I have seen how labor 
shortages have delayed construction projects and made them more 
costly. Projects that should have taken 14 months and $100,000 
per unit to construct, now take 18 months and $115,000 per unit 
to construct.
    It is impossible to build rental units without reluctantly 
passing on the increased cost to the consumer. To address this 
labor shortage in our industry, we should work to encourage 
careers in construction. And the trades in the residential 
building and modeling are good, family-supporting jobs. 
Carpenters, for example, earn an average of $45,000 per year, 
while electricians and plumbers earn an average of $54,000 a 
year.
    The Davis-Bacon Act can substantially increase the cost of 
constructing affordable housing. Smaller builders and 
subcontractors are ill-equipped to deal with the compliance 
burdens and the reporting mandates that are required on a 
weekly basis.
    These burdens are disproportionately affecting small 
businesses who cannot afford to hire the compliance staff or 
consultants. This negatively impacts the goals of the 
government's housing program by unnecessarily creating 
additional layers of bureaucracy and cost.
    Lastly, the ability of the home-building industry to 
address affordable housing needs that can contribute 
significantly to the Nation's economic growth is dependent upon 
the housing finance system that provides adequate, reliable 
credit. At present, home buyers and builders continue to 
confront challenging credit conditions, weighed down with 
overzealous regulatory response to the Great Recession.
    Lingering doubts and uncertainty of the market participants 
has resulted in undue restrictions on availability of mortgage 
credit to many creditworthy homeowners. It is essential that 
all levels of government work together to remove the 
unnecessary red tape that delays and prevents development.
    I would like to thank the subcommittee for the opportunity 
to testify today. We look forward to working with you to 
achieve the necessary reforms and expand the availability of 
affordable housing.
    [The prepared statement of Mr. MacDonald can be found on 
page 85 of the appendix.]
    Chairman Luetkemeyer. Thank you, Mr. MacDonald, for your 
testimony.
    And Professor Dickerson, you are recognized for 5 minutes.

STATEMENT OF A. MECHELE DICKERSON, PROFESSOR, THE UNIVERSITY OF 
                 TEXAS AT AUSTIN SCHOOL OF LAW

    Ms. Dickerson. Good afternoon, Chairman Luetkemeyer, 
Ranking Member Cleaver, and members of the subcommittee. My 
name is Mechele Dickerson and I teach both law students and 
freshmen at the University of Texas at Austin.
    Thank you for giving me the opportunity to participate in 
this hearing on the housing unaffordability crisis and how it 
is affecting middle-class, middle-income families throughout 
our country. You have asked me to specifically address how 
overall housing trends and recent changes in the U.S. housing 
market should inform housing policies.
    Middle-class and working-class Americans who work hard, 
play by the rules, and are not leading extravagant lifestyles 
are struggling to find affordable housing to buy or to rent. 
And this has now become a national crisis.
    There are two things I will stress about the current 
housing unaffordability crisis. The first is that the crisis 
involves more than just sluggish home sales.
    It is certainly true that soaring single family home prices 
have now made it harder for middle-income Americans to become 
homeowners. The 2015 overall homeownership rate of 63.4 percent 
was the lowest rate in this country in almost 50 years.
    But the crisis is having a devastating effect on people who 
are and likely will always be renters. Since the recession, the 
number of renters in the United States increased by double 
digits and renter households are now the majority in 9 of the 
11 largest U.S. metropolitan areas.
    Unfortunately, affordable rental units are not being built 
at a rate that is keeping pace with the heightened demand for 
these units. The housing affordability crisis is not limited to 
the home buying market, so solutions to the crisis should not 
be narrowly focused on ways to make it easier for people to buy 
single family homes.
    We saw during the recent housing crash and recession that 
it is not enough to just relax regulations in lending standards 
to qualify borrowers for a mortgage loan. Homeowners won't 
remain in their homes if they don't have the financial means to 
do so.
    The second point I will make is that the housing 
unaffordability crisis involves more than just poor people, 
although certainly housing unaffordability is a problem for the 
poor. Even full-time workers are now struggling to find 
affordable housing.
    The harm to the middle-class is striking. Approximately 75 
percent of renters who earn between $30,000 and $45,000 each 
year, and almost 50 percent of rental households who earn 
between $45,000 and $75,000 each year, pay more than 30 percent 
of their income on housing. That is the core of our middle-
class and they are paying a disproportionate amount of their 
annual income on housing.
    Young adults in particular are struggling. Our Millennials, 
between the ages of 25 and 34, the ones who should be first 
renting and then buying homes, are unable to do so. Their 
homeownership rates are the lowest they have been in more than 
20 years.
    Young workers who have good-paying jobs are finding it hard 
to buy homes or even to pay rent. Many have returned home to 
live with their parents because they can't afford to both repay 
their student loans and also to pay rent or to save enough to 
buy a home.
    Housing policies should continue to support developers who 
want to build and Americans who have the means to purchase 
large single family homes. However, if we as a Nation are 
serious about solving the housing unaffordability problem, 
everything needs to be on the table and up for re-examination.
    All current land use laws and policies should be re-
examined to ensure that the policies reflect the new economic 
realities middle-class families are facing. Cities and states 
need to rethink their zoning laws and policies and consider 
whether things like inclusionary zoning can help ease the 
affordable housing crisis.
    As a Nation, we must reject the antiquated view that large 
single family homes are preferable to all other forms of 
housing. And finally, we need to consider whether one of the 
largest tax expenditures, the mortgage interest deduction, 
which disproportionately favors high-income taxpayers, needs to 
be reviewed or revised because there are so many middle-income 
households that are struggling to even find an affordable place 
to rent.
    Mr. Chairman, I commend you for convening this hearing, and 
I thank you. And I will be happy to answer any questions you 
might have.
    [The prepared statement of Professor Dickerson can be found 
on page 55 of the appendix.]
    Chairman Luetkemeyer. We thank the panel for their 
testimony. And I now recognize myself for 5 minutes to begin 
the questioning. Hopefully, we can get through a couple of 
groups before we have to go vote.
    Mr. Holland, you had some interesting testimony and you 
represent the multifamily housing group. What do you see as the 
biggest barrier or the most burdensome rule, the most 
burdensome regulation to being able to build affordable 
housing, multifamily housing?
    Mr. Holland. Mr. Chairman, thank you very much. That is a 
very good question. What I can say is the biggest concern for 
providing housing really differs. In the middle of America, you 
have a very different environment, if you will, than you have 
at the coasts.
    In your high-population areas, the biggest impact to 
providing affordable housing is the lack of zoned land or land 
that is entitled for high-density housing.
    The nature of the housing demand has shifted. You have 
Millennials that are about 75 million. They want to live 
downtown. They want to walk to work. They don't want to be 
involved in commuting. So the competition for urban infill 
housing is extreme in your rising Gen Y workforce markets.
    With respect to the open areas and areas essentially in the 
middle of America, you have a different set of elements. Mr. 
Granger and Mr. MacDonald talked about the regulation and 
aspects of that. And one of our studies showed that 40 percent 
of the cost of a rental apartment has to do with regulation.
    And so within the confines, if you will, of where we are 
at, that lack of entitled zoning and land and the increasing 
burdens of costs associated with that are really the center of 
that.
    Chairman Luetkemeyer. Okay. You said 40 percent of the cost 
of producing a rental unit is due to the rules and regulations?
    Mr. Holland. Yes, sir.
    Chairman Luetkemeyer. Holy smokes. Okay.
    Professor Dickerson, quick question for you. You made a 
comment a minute ago about the percentage of income people are 
able to pay. Would you give me a figure of what you think would 
be adequate for somebody to be able to pay a certain percentage 
of your income for rent and/or house payment?
    Ms. Dickerson. Historically, 20 to 25 percent was the 
number. The problem is that 30 percent is now seen as the floor 
and it goes as high as 50 percent.
    Chairman Luetkemeyer. Okay. And I assume that sometimes 
people can afford 30 percent more than they can afford 50 
percent because they have a higher income. So 30 percent of a 
high income is a lot less than 50 percent of a small income. So 
it depends on how much income you make I would assume, 
depending on what percentage you can pay. Is that right?
    Ms. Dickerson. I'm sorry. I misunderstood your question. I 
thought you were referring just to the middle-class.
    Chairman Luetkemeyer. Okay. Well, that is a good place to 
start. So I appreciate that. Very good.
    Mr. MacDonald, you had some interesting comments with 
regards to the different problems that you see with regards to 
building homes and providing adequate housing for folks. And 
you talked about floodplain problems. Can you explain that just 
a little bit?
    Mr. MacDonald. Yes, sir. The new rule, the Executive Order 
that is coming down that HUD is looking at, changes the 100-
year floodplain to a new undefined amount of floodplain. And 
the problem that we have with it, and we are not saying that we 
are opposed to the Executive Order at this point until it--but 
we are opposed until it is better defined.
    And HUD itself has done none of the modeling to determine 
what that floodplain would be. So we don't know for every foot 
you go up, how many feet you go out laterally, and so until 
there is modeling done to prove what that is, we can't even 
determine the cost or the real effect of it.
    And we would appreciate HUD suspending any action on the 
Executive Order until they actually know the full extent of it, 
and the unintended consequences.
    Chairman Luetkemeyer. Ms. Been, on the 80,000 new 
affordable housing units that the mayor is proposing, are those 
for seniors, disabled, other folks, mixed?
    Ms. Been. They are available--
    Chairman Luetkemeyer. Or is it mixed-use of everybody or is 
it just subsidized housing or can you explain what is in the 
80,000?
    Ms. Been. So the 80,000 is subsidized housing and it is 
available for a wide variety of people at a wide variety of 
incomes. We do provide housing that is only for seniors. So for 
example, in the last 2 years we have provided about 3,000 new 
units just for seniors, but seniors can enter the lottery for 
any of our new units as well.
    Chairman Luetkemeyer. Okay. These are all subsidized units.
    Ms. Been. Yes.
    Chairman Luetkemeyer. That is not a mixed-use structure 
where you have individual private pay and/or a commercial use 
within a building and then subsidizes rent. This is only for 
subsidized folks?
    Ms. Been. This is only for the subsidized units. Often, 
they are in mixed-income building and serve a range of incomes.
    Chairman Luetkemeyer. Okay. I thank you. My time has 
expired.
    With that, I will go to the gentleman from Missouri, the 
ranking member of the subcommittee, Mr. Cleaver, for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman. I want to focus on 
low-income housing tax credits. And since this is the largest 
driver of private sector investment, what can we do? Only about 
10 percent of those tax credits are used. What can we do to 
attract a greater number of corporations, individuals who are 
interested in some kind of a housing development?
    Ms. Been?
    Ms. Been. I am happy to jump in there. I am happy to say 
that we use every low-income housing tax credit available to us 
in the City. And the way that we do that is by using those tax 
credits to leverage other resources, both private resources and 
other subsidies from the City.
    We also work very hard to provide greater flexibility. As 
you know, one of the critical issues with the tax credit 
program is that because it targets 50 percent and 60 percent 
AMI then you are not serving many of the poorest families and 
you are not serving a lot of the working and middle-class that 
Professor Dickerson mentioned.
    By allowing averaging you provide a lot more flexibility 
and also, you give the developers a flexibility that makes the 
risk of the property less intense. If they have a family who 
earns income that is now at 65 percent that can be averaged out 
so that they don't have to evict that family in order to stay 
compliant with the low-income housing tax credit rules. So 
greater flexibility is the key.
    Mr. Cleaver. Is the dollar for dollar sufficient as a 
magnet?
    Ms. Been. Is it sufficient? Well, it is necessary. There 
are probably other things that are required as well. A great 
deal of flexibility about both the zoning entitlements, all 
kinds of flexibility is required in order to attract people to 
those developments.
    Mr. Cleaver. Mr. MacDonald?
    Mr. MacDonald. In the State of Texas, we are about five to 
one oversubscribed for the credits. In the allocation process 
there are five projects for every one that gets funded. So we 
could use more credits. Right now it is based on 2 per capita 
for every citizen in the State.
    Mr. Cleaver. You all would expect that from Texas.
    Mr. MacDonald. Yes.
    [laughter]
    And it is hard in Texas right now to get a deal obviously 
because there are so many people fighting for them. And part of 
the scoring process and the qualified allocation process is 
deeper skewing and you get more points for deeper skewing.
    For example in Texas, if you are going to be successful in 
getting a tax credit for your project now, you have to go to 30 
percent or 40 percent median income for a percentage of your 
tenants or you are not going to score high enough to win the 
deal.
    Mr. Cleaver. So do either of you, Ms. Been or Mr. 
MacDonald, believe that we are already operating at optimum 
level in order to attract private investment?
    Mr. MacDonald. I would love to see more funds put into tax 
credits. I'm sure that would be a hard fight. It is hard every 
time we try to get anything in the tax credit program done for 
increasing the amount of credits.
    But they are one of the finest investments for private 
sector governmental sector partnership that has ever been 
designed because you have a government hand in helping 
facilitate getting something done that is run in the private 
sector. So it is the best of both worlds.
    Mr. Cleaver. Ms. Been?
    Ms. Been. I would agree with that. Not only are our tax 
credits vastly oversubscribed, but we allocate our tax credit 
properties through a lottery. We are now getting 1,000 
applications for every single unit of affordable housing that 
we are putting on that lottery.
    So the need is vast and we need even more tax credit money. 
It leverages a huge amount of private investment. So it is well 
worth the expenditure.
    Mr. Cleaver. Mr. Holland?
    Mr. Holland. Yes, sir. One of the things that is overlooked 
many times is the 4 percent tax credits with 80/20 bonds. If 
you look at the success of the 80/20 bond program, it creates 
the single largest number of units both market rate and 
affordable housing that has been available.
    However, since the meltdown, and with Fannie and Freddie 
being put into conservatorship, the cost of credit enhancement 
of those bonds for many of the last 5 or 6 years, has not been 
available. And the cost of rollover credits is now up 300 
percent.
    And so with effective credit enhancement for the 80/20 bond 
program it will unlock the use of 4 percent tax credits, which 
have largely been wasted. And they are not being utilized. And 
so with the oversubscription of the 9 percent credits, if we 
had effective credit enhancement for the low floater bond 
program we would be there.
    We also support income averaging because it is a much more 
effective outcome.
    Mr. Cleaver. Right. Thank you.
    Chairman Luetkemeyer. The gentleman's time has expired.
    Votes have been called, so I think we are going to try and 
get one more Member in, and then we will move to recess.
    And with that, we go to the the vice chairman of the 
subcommittee, the gentleman from Georgia, Mr. Westmoreland, for 
5 minutes.
    Mr. Westmoreland. Thank you. I am a recovering builder, so 
I have some interest in this.
    Mr. MacDonald, on the flood insurance, this committee is 
very concerned about flood insurance and the cost of it. Is it 
true that you still, even though just a corner of your property 
would be in a flood plain and the elevation of your house could 
be 6 feet above that, could you still have to have flood 
insurance with an FHA loan?
    Mr. MacDonald. That is correct, sir.
    Mr. Westmoreland. We are going to hopefully try to get that 
to where there is some type of elevation that you would no 
longer have to have it, but I am assuming that the reason they 
are requiring them to have flood insurance is knowing they 
would never flood and help offset somebody else's.
    The other question I have for you is on OSHA. Since OSHA, 
if I understand it correctly, has gone to a policy much like 
the IRS where if somebody turns in a safety violation they get 
a certain amount of that fine, have you seen an increase in the 
OSHA violations in the last couple of years?
    Mr. MacDonald. We have. We have seen a large increase in 
OSHA inspections in all forms of the construction industry. And 
I wouldn't want to speculate as to what caused it, but I 
certainly wouldn't tell you you were wrong.
    Mr. Westmoreland. I think that is probably a big cause of 
it.
    Mr. Holland, did you do a project in Griffin, Georgia?
    Mr. Holland. No, sir.
    Mr. Westmoreland. Okay. The preowned homes--the sales were 
down about 8 percent.
    Mr. Holland. Yes, sir.
    Mr. Westmoreland. Have you seen a rise in the rental? I 
know you talked about how many units were going to be short. 
Have you seen an increase in your rental occupancy that would 
kind of counterbalance what the preowned homes have been?
    Mr. Holland. Yes. What we have seen, particularly in our 
urban environments, is that the demand for housing is far 
outstripping our ability to build supply. And that the cost, it 
is really there are three parts of the triangle.
    One part of the triangle is the cost of the actual housing. 
The second part which families have to deal with is the cost of 
transportation of where the housing is built compared to where 
their job is. And the third part of that deal is really how you 
handle the infrastructure costs and who gets essentially tagged 
with those infrastructure costs.
    And so yes, we have seen a significant increase in the 
demand for rental housing, which is pushing prices up very 
significantly.
    Mr. Westmoreland. Is the impact cost basically sewer, 
water, police protection, or do they just kind of make up some 
stuff?
    Mr. Holland. Well, how did you say it? I wouldn't want to 
dissuade that aspect of things, but it has been noted that many 
cities which are suffering financial burdens because of the 
meltdown have looked to new development and significantly 
increased their impact fees to try and make up for lack of 
funding in other areas, which has pushed up the cost of the new 
housing.
    And because of the Basel III regulations and the banking 
regulations an appraisal has to justify those rents. So the 
entire market has to bear that increase before you can qualify 
for your financing to move forward.
    Mr. Westmoreland. Thank you.
    Ms. Been, you mentioned 80,000 new affordable homes. Are 
those single family homes or--
    Ms. Been. Some are single family. Most are multifamily. New 
York is a multifamily--
    Mr. Westmoreland. And then another 120,000? You talk about 
how HPD is leading the mayor's charge in partnership with your 
sister agencies, developers, tenants, community organizers, 
elected officials, and financial institutions.
    You don't have time to go through and tell me what each one 
of those do, but being from a rural area of the south, we don't 
see much of this. What part would the elected officials have in 
this? Would it be zoning, waiving the fees, or what would it 
be?
    Ms. Been. The elected officials in New York, if there is a 
rezoning required, actually New York is mostly an as of right 
town. We don't do rezonings for every development. But if there 
is a rezoning required, the elected officials will weigh in as 
to what that rezoning should look like.
    They will weigh in with specific concerns. You need a 
school to offset the people who are coming into this building, 
those kinds of things. So they will express the concerns about, 
is the infrastructure there to support the development?
    Mr. Westmoreland. So does this organization have to pay the 
impact fees as well?
    Ms. Been. We don't have impact fees in New York City.
    Mr. Westmoreland. Wow. Well, I am sorry I am out of time, 
but thank you all.
    Chairman Luetkemeyer. The gentleman's time has expired. We 
are going to try and squeeze in one more Member quickly so we 
can--not too many people have voted yet, so I think we have 
enough time.
    The gentlelady from New York, Ms. Velazquez, is recognized 
for 5 minutes.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Ms. Been, welcome to the committee. In your experience with 
housing development, especially with high-cost cities like New 
York, is it possible to build affordable housing without 
Federal rental subsidies like project-based rental assistance 
or fair construction subsidies like the low-income housing tax 
credit? Would the mayor be able to fulfill his promise of 
building all these units of housing without a Federal 
involvement?
    Ms. Been. No. The Federal contribution is absolutely 
critical. It is critical in two ways. One is that to reach the 
very lowest-income families, the families who are at poverty 
level making 30 percent of AMI, we need a form of rental 
assistance.
    The rent that those families can pay won't even keep the 
lights on, truthfully. So we have to have a form of rental 
assistance and that is critical from the Federal Government.
    We do sometimes get cross-subsidies from the very high 
value neighborhoods, but the other place that Federal dollars 
are so critical is in the poorest neighborhoods where housing 
is not only providing affordable housing, but it is 
revitalizing the neighborhood. It is stabilizing it. It is 
providing jobs. And in those poorest neighborhoods, Federal 
dollars are absolutely essential.
    Ms. Velazquez. Thank you.
    Mr. Holland, in your testimony you stated that, ``Congress 
should play a key role in addressing housing affordability.'' I 
agree with you. Can you discuss the importance of Congress 
increasing funding for affordable housing programs like the 
Section 8 program?
    Mr. Holland. Yes, absolutely. From the National Multi-
Housing Council and the National Apartment Association's 
standpoint, we support full funding for these programs.
    And looking at, again, you have a 9 percent tax credit 
program which has been very successful, but on the tax-exempt 
bond side the 4 percent tax credits have largely gone unused 
because of the lack of credit enhancement given Fannie and 
Freddie's situation.
    And so effective separation of the rules, if you will, that 
are being put in place were being put in place because of 
issues in the single family mortgage lending areas.
    The multi-family did not contribute to the financial 
meltdown. In fact, the losses at Fannie and Freddie from the 
apartment credit enhancements or the apartment lending were 
less than 1 percent of their portfolio.
    So almost nothing. But yet the costs to credit enhance the 
80/20 bond program under the current conservatorship are up 300 
percent, which has limited our ability to use that tax credit 
program effectively.
    Ms. Velazquez. Sure. Thank you.
    Mr. MacDonald, almost 2 million households did not form 
during the recession. As the economy improves and hiring 
returns to normal, how will this pent-up demand affect 
affordability?
    Mr. MacDonald. The problem is the pent-up demand hasn't 
been met because of many reasons. A lot of folks have wanted to 
either move up to a nicer home, buy their own home, or even 
have their own apartment, and they just haven't been able to 
for many reasons.
    The new mortgage requirements that are being required now 
are so stringent that it is the credit scores have to be so 
high to qualify for a mortgage that it is very hard for the 
first-time homebuyer and the move-up homebuyer. They can't get 
to the next level.
    So consequently they are not moving up, and then that has 
created a backlog, so that when people can't get the move up 
homebuyer then they don't go to the next level or the next 
level. And you end up with people who are fairly stagnant in 
place, whether they want to be or not.
    And then we all have people in the renter market. There are 
a lot of us who still have our children, grown children living 
in the basement because they can't figure out how to get their 
own place. And that is not something they want or we want, 
but--
    Ms. Velazquez. Thank you. I yield back.
    Chairman Luetkemeyer. The gentlelady yields back. With 
that, we are going to recess. They tell me it will be somewhere 
around 30, 35 minutes, so we appreciate everybody's patience.
    [recess]
    Chairman Luetkemeyer. Okay. We will gavel ourselves back 
into session here. I know we have a number of Members who are 
either here or on the way, so we will begin our questioning 
again.
    And I thank the panel for their indulgence.
    With that, we will recognize the gentleman from Texas, Mr. 
Williams, who was also an introducer a while ago. Mr. Williams 
is recognized for 5 minutes.
    Mr. Williams. Thank you, Mr. Chairman.
    And Mr. MacDonald, thanks again for being here. I 
appreciate it. In your testimony you say that 25 percent of the 
cost of a new single family home is attributable to government 
regulation. Why is that so important or noteworthy?
    Mr. MacDonald. That cost has to be passed on to the 
consumer. As a result it directly affects the affordability of 
the housing. And nationally, as I said earlier, 1,000 increases 
the price of 206,000 households; 1,000 increases the burden to 
110,000 renters.
    And in Texas, with the most significant price out effect, 
more than 18,000 households are pushed out of the market with a 
1,000 increase.
    Mr. Williams. I have a couple of questions here, and we 
will just go through them quickly. Do you believe that certain 
building constructions regulations at the local level are 
required?
    Mr. MacDonald. Yes, sir.
    Mr. Williams. On page seven of your written testimony, you 
state that the collective force of the actions taken by these 
agencies, i.e., CFPB, HFA, regulators implementing the Dodd-
Frank Act, has also resulted in undue restrictions on the 
availability of mortgage credit to many creditworthy borrowers. 
That is true, isn't it?
    Mr. MacDonald. Yes, sir.
    Mr. Williams. Based on your written testimony, does the 
National Association of Home Builders believe that the Dodd-
Frank Act was a mistake?
    Mr. MacDonald. Yes, sir. There are parts of it that the 
problem is we don't even have all the parts of it--
    Mr. Williams. Right.
    Mr. MacDonald. --written yet.
    Mr. Williams. But it would be good if we could let 
competition work. That would be the best thing, wouldn't it? 
Let the consumers decide?
    Mr. MacDonald. Fair market.
    Mr. Williams. Mr. Daily, another great Texan I might add, 
right?
    Mr. Daily. Thank you for the recognition.
    Mr. Williams. There you go. What makes manufactured housing 
an attractive option for affordable home ownership for 
consumers?
    Mr. Daily. The basic availability of manufactured housing 
is that on a cost per foot, it is about half the cost of site-
built housing. It is built in a controlled environment. And it 
is primarily delivered to rural markets where production 
builders do not operate because they don't have scale.
    Mr. Williams. It is a good option for consumers. Describe 
today's manufactured housing. How does it compare to site-built 
housing or traditional apartments in terms of quality and 
value?
    Mr. Daily. The traditional manufactured housing is built to 
the HUD code. And that is a pre-emptive code in the country 
that has been in place since 1974. And it is primarily a 
performance code that works across the country. Modular houses 
are built basically to the same code of the site-built homes.
    Mr. Williams. You said that the CFPB regulations are 
harmful to consumers, as a lot of us believe. What evidence do 
you have of this harm?
    Mr. Daily. I think the primary piece of evidence that we 
have is that when we look at the home data, sales of homes less 
than $75,000 2014 to 2013 are down double-digits while other 
portions of the market are doing very well. So what it 
basically says is those people who are the first tranche of 
buyers really struggle to meet all the regulations.
    Mr. Williams. In other words, another case of those people 
wanting to help people, but they end up hurting those people.
    The House last year passed a bill that I believe will not 
only help the manufactured housing industry, but also 
consumers. How will the change in H.R. 650 help consumers?
    Mr. Daily. I think that if the bill ultimately passes, 
there are two components that will be very helpful. The first 
is the trigger rate being raised will allow more lenders to 
participate in the market because right now there are very few 
HOEPA loans that are being written simply because the lenders 
didn't don't want to touch them.
    And then the second is the loan origination, where a lot of 
our buyers are new buyers or older people who have not 
purchased homes in a very long period of time.
    Mr. Williams. I'm sorry?
    Mr. Daily. And by allowing our salespeople, who can operate 
under the Dodd-Frank regulations, be more helpful to these 
people I think it can help them to learn more about buying 
homes and the home-buying process.
    Mr. Williams. And finally, if H.R. 650 becomes law, will 
consumers lose protections and will they be vulnerable to 
predatory lending, do you think?
    Mr. Daily. No. I don't believe any of those things will 
happen. Basically what we are asking for is some slight 
modifications to the current law that we believe will open the 
market, especially to that first tranche of buyers.
    Mr. Williams. Thank you. And I might add too, Mr. Holland 
is also a Texan. You went to school in Texas, didn't you?
    Mr. Holland. No. I was born just outside of San Antonio.
    Mr. Williams. There you go.
    Mr. Chairman, I yield my time back.
    Chairman Luetkemeyer. The gentleman yields back.
    We now go to the gentleman from Pennsylvania, Mr. Rothfus, 
for 5 minutes.
    Mr. Rothfus. Thank you, Mr. Chairman. And again, I thank 
the panel for bearing with us during our break for the votes. I 
want to touch base, Mr. Holland, go back to what you were 
talking about earlier in response to some of the questions 
about the regulation.
    And I think you said that 40 percent of the cost of 
multifamily is attributable to rules and regulations? Do you 
recall that?
    Mr. Holland. Yes, sir.
    Mr. Rothfus. We are here looking at things from a Federal 
perspective. I am wondering if you can identify perhaps a 
Federal regulation that is responsible for driving up cost or 
alternatively what would be the single greatest Federal barrier 
to development?
    Mr. Holland. The greatest?
    Mr. Rothfus. Either a Federal regulation--again, I am 
trying to look at things that we can be addressing from a 
Federal perspective. A lot of it--you mentioned zoning as an 
issue for, I think, the coastal cities. That is pretty much a 
local.
    Mr. Holland. If you look at effective housing, there are 
three parts of the triangle. One part is actually the cost of 
the building of the housing unit. The second aspect is how far 
that housing unit is from someone's job and their activities, 
so that is transit. The third portion of that is 
infrastructure.
    And so we have to solve all three aspects in order to build 
because the local jurisdictions add the infrastructure costs in 
forms of impacts to our requirements. So we have to get active 
zoning. Then we have to pay for the infrastructure. And then we 
have to look at what the cost of transportation is for our 
consumer.
    And so one of the things we would love to have an 
opportunity to do is to have a task force to look at all three 
because the cost of building, for instance, another freeway to 
the next subdivision on the edge of town is dramatically more 
than the cost to increase the density, if you will, to build a 
high rise in an urban environment where people can walk to 
work, or around the light rail or transit node where they can 
use public transportation.
    And so we are looking for an effective voice, if you will, 
so that we can look at the whole part of the housing criteria.
    In the Federal question, one of the things that I cited 
earlier was the lack of credit enhancement for the tax exempt 
bond program and the tripling of that cost with Freddie and 
Fannie in conservatorship.
    The number of apartments that were built after the 80/20 
bond program was launched in the early 1980s, which was a very 
difficult time, took starts from 200,000 units to 600,000 units 
over 3 years.
    That is the kind of solution-based outcome that we feel 
like a task force that looked at all three of these components 
could help with and could make a very significant difference 
in.
    Mr. Rothfus. If I could go to Mr. Daily, you had talked a 
little bit about the HUD code that was enacted in 1974, last 
amended 15 years ago. It would seem that addressing these rules 
which apply to all manufactured homes nationwide would go a 
long way towards improving the affordability of manufactured 
homes.
    Which specific aspects of the HUD code are most harmful to 
your business as well as consumers?
    Mr. Daily. I think the first aspect is that we really need 
to get HUD to cooperatively work with our consensus committee 
before they issue governance because every time they issue 
governance and we really haven't had full discussion or 
conversation with them, it usually adversely impacts the cost 
of our homes. And in our business, every 100 makes a 
significant difference.
    I think that the next opportunity is to really work on the 
HUD code and modernize it and that in itself will allow us to 
change the way the elevations of our homes appear if we can 
take them off the chassis ultimately and will also help the 
perception of the homes.
    Mr. Rothfus. Mr. MacDonald, you list in your testimony some 
Federal agencies that have besieged the home-building industry, 
namely the Occupational Safety and Health Administration, the 
EPA, FEMA, and the Department of Labor.
    You also specifically mentioned the Waters of the U.S. rule 
as an especially damning regulation that could increase housing 
cost. Could you explain your concerns about the impact of the 
Waters of the U.S. on home builders and your customers?
    Mr. MacDonald. Surely. The way the Waters of the U.S. is 
described is it takes every mud puddle, creek, the soil out in 
front of your driveway, and makes it a tributary of the waters 
of the United States, which would require you every time you 
develop a lot or a single family house you will have to get a 
LOMR-CLOMR review, engineering review by the Corps of Engineers 
to build on every single individual lot. It would be simply 
devastating in both time and money.
    Mr. Rothfus. I yield back, Mr. Chairman.
    Chairman Luetkemeyer. Mr. Holland, would you like to answer 
that?
    Mr. Holland. I can speak to that. We had one project that 
was a great example of that in Hillsboro, Oregon, where we had 
water flowing out of a culvert and into a culvert across a two-
acre parcel. And the Corps took the position that it was a 
navigable waterway. And that entire 2\1/2\ acre parcel became 
unbuildable because of that.
    We would have put 250 apartments on that parcel had that 
regulation, coming out of a culvert and into a culvert. If they 
hadn't taken the position that those were waters of the USA and 
that was a navigable waterway. And it only had water in it 
during the 3 or 4 wettest months of the winter.
    Chairman Luetkemeyer. Could you not enclose that area?
    Mr. Holland. Excuse me, sir?
    Chairman Luetkemeyer. Could you have enclosed the area? Go 
from culvert to culvert and put a pipe in there that covered 
that entire area?
    Mr. Holland. Then we would have been locked up.
    Chairman Luetkemeyer. Okay.
    Mr. Holland. Because we would have been building in a--or 
we would have unauthorized deal of wetlands and devastating 
work in the Waters of the USA. I would be wearing stripes. I 
don't look good in stripes.
    Chairman Luetkemeyer. Okay. I thought maybe you could work 
with the EPA, but evidently you couldn't, no?
    Mr. Holland. The application process takes a year-and-a-
half.
    Chairman Luetkemeyer. Okay. Thank you.
    The gentleman from Kentucky, Mr. Barr, is recognized for 5 
minutes.
    Mr. Barr. Thank you, Mr. Chairman.
    Mr. Holland, I will start with you. I appreciated your 
testimony about Section 8 reform, and I am particularly 
interested in how we can effectively deliver Section 8 vouchers 
in a more cost-effective way based on the existing allocations 
that we have.
    And you talked about three-way leases and repetitive unit 
inspections, resident eligibility certification and other 
regulatory paperwork.
    Can you amplify with specificity on the reforms that you 
would suggest to us on how to stretch those Section 8 dollars 
so that we don't have the waiting list that we have?
    Mr. Holland. Yes, absolutely. One is clearly streamlining 
the process, but another key aspect is confidence in the 
process. From a private sector standpoint, if you are going to 
count on a revenue stream, you need to know it is funded.
    And notwithstanding the financial challenges that happened 
in 2008 to 2012 but sequestration and whether they were going 
to be extended or not extended, all of that uncertainty for 
owners who have to rely on making their payment on the first is 
really challenging.
    And so one is confidence that the program you are going to 
sign up for is going to be there so that you can allow those 
units to be rented. Because if you don't have that confidence 
and that revenue stream gets interrupted, you will lose your 
property.
    Mr. Barr. Yes, and I think that goes without saying, but I 
am particularly interested in the regulatory issues. So what 
are the--because we all know that the reliability and certainty 
is--
    Mr. Holland. Yes, sir.
    Mr. Barr. --an impediment, but what about the, for example, 
the streamlining of the inspection process, the paperwork, the 
three-way lease?
    Mr. Holland. We support all of that, but for instance one 
is if you had a HUD inspection over the last 24 months, we 
think that you should allow somebody to move in right away 
without having to wait and re-inspect every unit every time, et 
cetera.
    And so, a very thoughtful business-like approach to if it 
has been inspected, if there is a record of compliance, et 
cetera, allowing those to move forward without having very 
significant delays in those processes, which just reduces the 
income for everybody in the process.
    Mr. Barr. Again, we do have limited resources so that makes 
sense.
    And let me move now to Mr. Daily. I am a proud co-sponsor 
and supporter of H.R. 650, and I think it makes a lot of sense, 
particularly for my constituents in rural Kentucky and access 
to credit for an excellent affordable housing option for them, 
manufactured housing.
    Can you describe for those colleagues of mine who couldn't 
bring themselves to support this effort, explain to them and on 
the record why it is inappropriate to classify manufactured 
housing small loans as high cost under HOEPA?
    Mr. Daily. The fact of the matter is that a lot of the 
people who want to buy a manufactured house, number one, they 
live in a rural area. Number two, their incomes are modest.
    Their incomes can fluctuate based on what they do for a 
living. They work in agriculture. They work in a plant. So it 
is very difficult for them to check all the boxes to get a 
loan.
    Mr. Barr. So when the Bureau says that your industry is 
predatory, what is your response?
    Mr. Daily. I would say we are not predatory at all. 
Basically, what we are trying to do is match people up with 
houses that make sense for them that they can afford.
    Mr. Barr. Yes. And one of the things I have said is that 
they are going to protect people right out of their homes. This 
is an affordable housing option, and as you noted that the 
decline in manufactured home loan origination--
    Mr. Daily. Right.
    Mr. Barr. --is evident as a result of these one-size-fits-
all regulations. So I think that the mission of consumer 
protection is being turned around on its head here.
    Mr. Daily. I think there is an opportunity to be more 
flexible and for us to follow the rules with some more 
flexibility. And I think that the consumer will ultimately 
benefit if we can do that.
    Mr. Barr. And if manufactured housing sellers are deemed 
loan originators, even though they are not receiving any 
compensation for the sale, other than just for selling the home 
and not for financing the loan, explain the appropriateness of 
that?
    Mr. Daily. The concern that we have with regards to 
origination is that the industry is committed to follow the 
law, number one. And by being committed to follow the law it is 
most appropriate that we really understand what our customers 
need in terms of size of house and what they can afford.
    And the way that the law reads today, we basically can show 
them the home and then what we have to do is give them a list 
of possible lenders. And they are not experienced homebuyers so 
what happens is we lose customers that become disenfranchised. 
The process is just too difficult for them.
    We believe that we can follow the law that will not be 
steering and it is up to the government to regulate to make 
sure that people aren't steering.
    Mr. Barr. And these are fixed-rate, fully amortized, no 
balloons? These are pretty standard--
    Mr. Daily. Yes, these are typically chattel loans, right.
    Mr. Barr. Right. Exactly. Well, I encourage you to stick 
with it and hopefully our friends in the Senate are listening 
to your testimony.
    Mr. Daily. Thank you.
    Mr. Barr. I yield back.
    Chairman Luetkemeyer. The gentleman's time has expired. 
With that, we will go to round two.
    And the ranking member, Mr. Cleaver, has some additional 
questions, so he is recognized for 5 minutes.
    Mr. Cleaver. Thank you. Mr. Barr, the Senate does not 
listen to anybody.
    [laughter]
    I move that we close the Senate and give--
    [laughter]
    Professor Dickerson, one of the concerns--this is somewhat 
personal--with children, young adults aged 24 to 35 are not 
buying homes at the same level they did when I was in that same 
age bracket. Actually, I owned a home when I was 26.
    And I know there are a lot of factors in probably the 
student loan payments and so forth. I am interested in any 
other factors that you believe are inhibiting the purchase of 
homes by the Millennials. And the second part of it, maybe for 
everyone, is what can we do to remedy this?
    Ms. Dickerson. Another thing that inhibits it are stagnant 
wages. I don't know that there is necessarily any regulation 
that you all have in place or could pass that would deal with 
the issue of stagnant wages, but this is a problem that has 
been going on for 30 years where the income for the, whether 
you want to say top 1 percent or top 5 percent has been going 
up and income for pretty much everybody else has remained 
stagnant or has declined.
    The other thing that has happened with Millennials is they 
are not forming households at the same rate that Boomers did. 
They are delaying marriage. They are delaying having children.
    And the primary trigger for a young couple to decide they 
want to become a homeowner is, well, first they move out of the 
parents' basement. They marry. They have children and then they 
want to buy a home. And in many instances it is because of the 
school, the schooling issue.
    Mr. Cleaver. How do you get them out of the basement?
    [laughter]
    I'm sorry. I won't go there. But that is troublesome. There 
probably isn't one legislative thing we could probably do and 
drop the interest rates. I think it is almost a sin that we are 
making money, the Federal Government is making money off of our 
college students after graduation.
    The rental housing that is being created, or much of it, is 
luxury units. And I am assuming that there is some kind of 
trickle-down theory that would take care of the luxury 
apartments and eventually will take care of the low to 
moderate-income.
    Mr. Daily, do you have any--
    Mr. Daily. Specifically on rental?
    Mr. Cleaver. Yes.
    Mr. Daily. There is some rental activity that takes place 
in manufactured housing communities today. And it is just 
perking along. There have been some increases that I think 
seniors feel some pressure on, but generally speaking, I think 
it is operating quite well.
    Mr. Cleaver. Is it easier to do low- to moderate-income or 
luxury?
    Mr. Daily. As an industry, we typically do not build rental 
properties, luxury rental properties. We are primarily single 
family homes.
    Mr. Cleaver. Mr. MacDonald?
    Mr. MacDonald. My company typically builds workforce 
housing in smaller communities. We utilize the low-income 
housing tax credit program for a good amount of that. And then 
we also build conventional apartments, but we just do a very 
good job of trying to keep our costs in line so that we can 
function in those markets.
    But I will tell you it is increasingly hard to do. And many 
of the problems that we encounter are the problems with Fannie 
and Freddie being basically out of the business, being slow to 
be able to react.
    So we end up having to go to getting HUD-insured mortgages 
in the Section 221(b)(4) program and try to work through that. 
Then we encounter other issues with HUD that layer on more 
expenses on top of that.
    So it is kind of a Catch-22 that we keep running into. We 
think we get one place fixed and then another one pops up. It 
is like whack-a-mole. It is just you can't quite get your arms 
around all of it at the same time.
    But I think there is probably a trend to do more workforce-
type housing than luxury housing. I am seeing that in the 
marketplaces now. It is not happening in the big cities. I am 
talking about in the smaller communities, mid-sized cities and 
the smaller cities.
    Mr. Cleaver. Ms. Been?
    Ms. Been. Can I weigh in on that? We see actually a lot of 
the opposite. We see the trickle up that homes are built for 
really workforce, middle-income folks and then because the 
demand for housing, especially in urban areas is so great, we 
see that housing actually being rented by wealthier renters 
rather than the renters that it was intended for.
    So and the trickle-down theory, at least in New York City, 
really hasn't panned out because the homes that are built for--
on the luxury market have all kinds of restrictions in terms of 
how much income you have to have in order even to rent that 
apartment that it becomes very difficult for it to sift down in 
any way except over decades.
    Mr. Cleaver. Yes, my time has expired. My assumption was 
just that if we are leaving low-income tax credits--if we are 
leaving money on the table, if builders are leaving money on 
the table instead of going through low-income tax credits, the 
assumption is that they would automatically try to--they are 
moving towards luxury.
    I yield back, Mr. Chairman.
    Chairman Luetkemeyer. The gentleman yields back.
    Mr. Barr from Kentucky is recognized for 5 minutes.
    Mr. Barr. Thank you, Mr. Chairman.
    And back to Mr. Holland really quickly. You spent a good 
bit of time in your testimony talking about ``not in my 
backyard'' the ``NIMBY'' issue and local zoning and land use 
laws. And Mr. Rothfus was touching on this a little bit, but if 
you could expand on what Federal role there is, if any, to 
encourage reforms to local zoning laws that would help 
facilitate the construction or rehab of affordable housing?
    Mr. Holland. Let me just touch on the NIMBY question, which 
is if you imprint--in the West Coast cities, for instance, I am 
going to--let me just take a step back.
    We have 10 gateway cities in the United States where 
particularly in the areas--Austin, Texas, would be one, 
Portland, Oregon, Southlake Union in Seattle where you have 
very significant increases in technology-related jobs.
    And what is happening is the kickback to it building more 
density is that people are using the zoning land use deal to 
tie up sites from 5 to 10 years. We are building one site in 
downtown Los Angeles where it took 5 years to get the zoning. 
They were sued because it was too dense. That took 2 years to 
resolve.
    Then they were sued because it wasn't dense enough. That 
took another 2 years to resolve. And the gentleman who was a 
30-year land developer said, ``I am done.'' And we are 
finished. We just got that project finished. So from a Federal 
standpoint this is I-73, and the question is, will 23 be 
enough?
    Now, if you took a small fraction of those transportation 
dollars and you said we are going to build a light rail or we 
are going to build transit hubs or we are going to provide 
access to the urban core, but it came with a requirement that 
said if you are going to take these transportation dollars you 
need to be able to have as of right zoning so you can put 
residential density around the transportation nodes and in the 
urban core.
    That triangle between infrastructure, transportation, and 
housing has to be all three. And many cities want to do the 
right thing, but the local politicians are concerned about 
getting kickback from their constituents.
    But in order to get transportation dollars, if you had to 
have as of right zoning around 5 percent of the land, the urban 
core and around the transit corridor, we could build 
significant amounts of housing that would then provide an 
adequate supply so you are not creating economic dislocation.
    Because in those job centers in those gateway cities, those 
new jobs pay a hundred grand or thereabouts, very top, and they 
economically dislocate everybody else within that sphere. And 
that ripple down happens because we are not building the 
density of housing and a quantity of housing in those key 
submarkets.
    Mr. Barr. Thank you.
    And Mr. MacDonald, I didn't get a chance to talk to you, 
but I always enjoy talking to Bob Weiss in Kentucky and the 
Home Builders--
    Mr. MacDonald. Good man.
    Mr. Barr. --Association in Kentucky and in Lexington, the 
largest City in my district, Todd Johnson. They do a great job 
representing our home builders. They talk about that labor 
shortage a lot.
    In fact, the Home Builders Association of Lexington had to 
start their own privately funded building institute for 
workforce development. And so we know that is a big issue. So 
if you want to amplify that testimony a little bit, and tell us 
if there is anything that Congress can do to help there?
    And secondly, talk a little bit more about Davis-Bacon and 
also Waters of the United States and any other regulations and 
the added cost to the home purchaser as a result of those 
regulations?
    Mr. MacDonald. Yes. So we have a huge problem with labor 
right now. In Texas, for example, the average age of an 
electrician is 61 years old. The average age of a plumber is 59 
years old. A framing carpenter is 57 years old. So what we are 
doing is we are aging out of all the trades.
    We have made a mistake in the country in that we have 
somehow told everybody that you are a failure if you don't go 
to college. And you are a failure if you don't end up with 
large student debt.
    Mr. Barr. And these can be really good jobs. These can be--
    Mr. MacDonald. And--
    Mr. Barr. --well-paying jobs.
    Mr. MacDonald. And what ends up--
    Mr. Barr. And the demand is there.
    Mr. MacDonald. And we are talking about $50, $60 an hour 
jobs. We are not talking about jobs that--and that is not what 
happened. And that is not accounting for the guy who may start 
his own company and even do better than that. We are talking 
about someone who just works the trades.
    And that is an extreme issue in the country that we need to 
figure out how to overcome. The Home Builders Institute, we are 
the largest trainer of people in trades. We work in prisons, 
everywhere else trying to get people to understand better about 
the trades issue.
    Back over to Davis-Bacon for just a second. The problems of 
Davis-Bacon there, for example, are like the new electronic 
reporting program that Davis-Bacon uses. It is new and it is 
very difficult.
    I have a subcontractor who has been working with me. He is 
a stone mason, Jose Guerrero. He is from Lytle, Texas. He has 
been with me for 12 years. He did the masonry work on my 
personal residence, and does all of our projects all over the 
State of Texas.
    He travels great lengths sometimes to get to these 
projects. It is him, his brothers, and some of their sons. They 
do beautiful work. They are craftsmen in the first order.
    I am building a project 30 miles away from his home in 
Seguin, Texas, and I can't use him because we are doing a 
(d)(4) Davis-Bacon property there.
    And Jose is a wonderful guy, but he doesn't understand 
computers well enough to get online and follow the Davis-Bacon 
reporting systems required by HUD. And so he has been pushed 
out of the market. It is a gigantic unintended consequence for 
a minority contractor to lose business.
    Mr. Barr. And my time has expired, but lead paint is also 
something that I hear about from my remodelers.
    Mr. MacDonald. Yes, sir.
    Mr. Barr. I yield back. Thanks for your indulgence, Mr. 
Chairman.
    Chairman Luetkemeyer. Great questions. The gentleman yields 
back.
    Let me just wrap up with a couple of questions for 
everybody. One of the questions I started out with a while ago 
was what is the most burdensome rule or regulation? Our hearing 
today is on future housing, government regulations and the high 
cost of housing.
    Can each one of you give me the one rule or regulation that 
is most burdensome to you that you think could help alleviate 
or help improve or streamline or whatever it might be, housing 
general?
    Professor Dickerson, do you want to--we were busy on the 
other end over here. That may not be your area of expertise, 
but I am sure you have a lot of background on that as well.
    Ms. Dickerson. Well, I guess I would. And it is not a 
Federal rule--
    Chairman Luetkemeyer. Yes, Federal. Yes.
    Ms. Dickerson. --or regulation but it does relate to the 
zoning issue. And I will respond to your question by mentioning 
that in 1926 the Supreme Court said that it is okay to 
segregate single family housing and apartments and keep them 
completely apart.
    In that opinion, and I think that opinion now controls a 
lot of both State and local zoning theories, apartments and 
renters were referred to as ``parasites.''
    And I think that as a country we have to get to the point 
that we recognize that if we are going to resolve the 
affordable housing crisis it is going to be a mixture of high 
end, mid-end, housing for the poor, and that we have to be 
willing to accept that in some instances people aren't going to 
be happy that certain types of affordable housing may be in 
their areas.
    Chairman Luetkemeyer. I think it is important, and I asked 
the question I think of Ms. Been a while ago when I was talking 
also, but I viewed the Hurricane Katrina rebuild, and a lot of 
their rebuilding is done in mixed-use.
    You have a lot of folks who are renting who are able to pay 
it. You have commercial users in the building. You have 
subsidized renters. So by using that sort of a model it enables 
builders to do a better job of building and you can actually 
build communities around that versus just apartment after 
apartment after apartment.
    And it seems like it works better. I don't know what your 
thought process is. You see in a little bit different spectrum 
perhaps what is going on.
    Ms. Dickerson. It not only works better but it is sort of 
consistent with the point I have been making that we have to 
think outside the box.
    So simply because it is not a form of affordable housing 
that we have always used, simply because it may require us to 
think differently about what the Millennials want for housing? 
What do we need for working families? What do we need for 
people who live in a rural community?
    One example that I will use is the City of Memphis, and I 
am only familiar with it because first, I am from Memphis, and 
second, I was there last week for a conference on urban blight. 
Most of the affordable housing units that have been created in 
the City of Memphis have been mixed-use and mixed-income.
    And so I think that is a great way for a lot of cities to 
sort of deal with the issue of affordable housing and also to 
respond to some of the needs of Millennials who want to have 
everything around them. They don't want to have to get in the 
car to drive to get everything.
    Chairman Luetkemeyer. Very good.
    Mr. MacDonald, would you like to answer the question that I 
originally posed here? We kind of got off--
    Mr. MacDonald. Certainly.
    Chairman Luetkemeyer. --but I appreciate that, Professor 
Dickerson.
    What is the one rule that--whatever the spectrum that could 
help you be able to better provide housing for especially low- 
and middle-income folks?
    Mr. MacDonald. The problem is it is a bundle of sticks. It 
is the straw that broke the camel's back.
    Chairman Luetkemeyer. Okay.
    Mr. MacDonald. And it is just one on top of another on top 
of another on top of another. And yes, we could go and we could 
pull off one. We could say we could fix the Waters of the U.S. 
issue. We could fix the 100-year floodplain issue with HUD. I 
could go through the crystal silicon sand issue with the EPA.
    All of those are wonderful things for us to be able to 
unload, but if you take one and all the rest of them stay, you 
haven't fixed the problem, sir. We have to address all of them.
    I would love to be able to give you a silver bullet and say 
get that one, and I can't do it because it is the whole bundle 
of sticks.
    Chairman Luetkemeyer. What we are looking at doing is 
trying to find that bundle of sticks. We did H.R. 3700, which 
was a good step.
    And I think it addressed--somebody had a question a while 
ago, I think Mr. Holland. You made a comment. We actually fixed 
your problem with regards to--
    Mr. Holland. Fix the dwelling re-inspections.
    Chairman Luetkemeyer. Dwelling inspections, yes, that is 
what it was. And then we actually fixed that problem with H.R. 
3700. So we are listening and that is why we are having the 
hearings here today.
    Ms. Been?
    Ms. Been. I really appreciate what you did in H.R. 3700, 
which is a huge step forward for those of us in cities. But I 
would say that, again, one of the major barriers that we have 
to provide affordable housing is the rigidity of the tax credit 
rules. Having income averaging, which would allow us--it would 
reduce costs because we go through a lot of tenants to find the 
ones in the haystack who exactly fit to the income level.
    We limit the ability of the City to use the tax credit 
program for preservation because you have existing tenants. And 
if one of them is at 65 percent of AMI, then you have problems 
in using the tax credit for preservation.
    So that alone could make a huge difference in the way in 
which we could leverage the tax credit program to really 
provide exactly the mixed-income housing that we want.
    We don't want everything at 50 to 60. We want that range 
because it is better for the neighborhood. It is better for the 
families. So having that flexibility would make a huge 
difference.
    Chairman Luetkemeyer. Great suggestion. Thank you very 
much.
    Mr. Daily?
    Mr. Daily. I mentioned to Representative Barr about Dodd-
Frank, HOEPA and the origination. Those are two of the primary 
obstacles we have today. But I think the bigger obstacle is 
secondary funding so that more people can enter the market, 
because we are the form of housing that is not subsidized.
    And so we are truly trying to serve working Americans who 
need a new home. And if we had availability of more funds, I 
think we could do a much better job.
    And the other fact is that we primarily serve rural 
markets. And when you go through rural America today, you see 
the state of housing, and it has deteriorated significantly. 
And I happen to go across the country on a regular basis on 
rural roads and so it is real. And those people deserve better.
    Chairman Luetkemeyer. When I left home and went off to 
college, my first housing rental was a mobile home. Then after 
I got out of school, my first home was a mobile home. And once 
I got married, my first home was a mobile home.
    And my wife decided we needed to go someplace else, to do 
something else. So we moved again. But I have had interesting 
experiences with it, so thank you.
    Mr. Holland?
    Mr. Holland. Yes, sir. Thank you.
    Chairman Luetkemeyer. How would you address that question?
    Mr. Holland. Yes, sir. Thank you very much. I would address 
that much like Mr. MacDonald did. We look at Davis-Bacon wages. 
In wood frame construction, they add about 25 percent of the 
cost of the buildable cost from that standpoint.
    You look at some of the new energy regulations and the 
energy regulations don't have a payback for 30 years. It is 
hard to say that you shouldn't have an energy-efficient house.
    But if it is a 30-year payback, and it raises the effective 
cost to the consumer, is it really something that is going to 
add to from that standpoint?
    The question of Waters of the USA, et cetera, all of those, 
the regulations under Dodd-Frank for apartments, we weren't 
part of the problem. And so you didn't have the losses that 
Freddie and Fannie in the apartment sector, but because of the 
regulations of Dodd-Frank and the requirements in the risk-
based capital, it is significantly increasing the cost of our 
construction loans. And also Freddie and Fannie spreads are 
increasing because of Dodd-Frank and Basel III from that 
standpoint.
    The one thing I would throw out to you is in the western 
United States, particularly in California, the discrimination 
of many cities against apartments is one of the things that is 
significantly increasing the cost.
    Cities want office buildings because they have the jobs and 
they get the property taxes they want; retail because they 
collect the sales tax. But they play a game of beggar thy 
neighbor where we don't want those people living in our town.
    And it is really a problem because you have to add the 
transportation and getting approvals in those cities to be able 
to build apartments and to be able to allow the workforce who 
is working in that town to be able to live in that town at all. 
Just getting permission to build would be a dramatic 
improvement.
    And so one of the things we would love to see is some type 
of guidelines where cities needed to have as of right zoning or 
zoning availability for their workforce so this game of pushing 
the apartments in some other place wouldn't be able to do that.
    Chairman Luetkemeyer. So are you advocating, say, would a 
mixed-use--
    Mr. Holland. Absolutely.
    Chairman Luetkemeyer. --structure work there? You are 
looking to try and appease the city fathers so you come in and 
say, we will build a mixed-use building where we can have some 
apartments as well as commercial use stuff in there?
    Mr. Holland. If we were to have a regime where we could 
build mixed-use around transit, because then families with 
limited means wouldn't need a second car. That would save them 
on average $9,000 a year to be able to use public 
transportation.
    We would produce the housing. We would allow them to use 
effective use of the infrastructure or the transit. And the 
only reason most people need a second car is so that the second 
spouse can get to work.
    So if you can have the density around the transit or in the 
urban core, it is going to significantly improve the choices 
and the cost from a development standpoint.
    Chairman Luetkemeyer. Very good. Well, I think we have 
exhausted all of the questions that we have for you. And I 
certainly appreciate everything that you have presented to us 
today. You have been fantastic witnesses. We certainly 
appreciate your patience with us.
    Mr. Cleaver. Mr. Chairman?
    Chairman Luetkemeyer. Do you have another one?
    Mr. Cleaver. No. I would like to enter into the record this 
document entitled, ``Enterprise Community Partners Statement 
for the Future of Housing in America.''
    Chairman Luetkemeyer. Without objection, it is so ordered. 
Anything else?
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    And with that, this hearing is adjourned.
    [Whereupon, at 4:27 p.m., the hearing was adjourned.]

 
 
 
 
 
 
 
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                             March 22, 2016




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