[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                       BOOM AND BUST: INEQUALITY,
                         HOMEOWNERSHIP, AND THE
                          LONG-TERM IMPACTS OF
                         THE HOT HOUSING MARKET

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

                            VIRTUAL HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 29, 2022

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-91
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
48-335                    WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------  

                HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            ANN WAGNER, Missouri
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            ROGER WILLIAMS, Texas
BILL FOSTER, Illinois                FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio                   TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
CINDY AXNE, Iowa                     TREY HOLLINGSWORTH, Indiana
SEAN CASTEN, Illinois                ANTHONY GONZALEZ, Ohio
AYANNA PRESSLEY, Massachusetts       JOHN ROSE, Tennessee
RITCHIE TORRES, New York             BRYAN STEIL, Wisconsin
STEPHEN F. LYNCH, Massachusetts      LANCE GOODEN, Texas
ALMA ADAMS, North Carolina           WILLIAM TIMMONS, South Carolina
RASHIDA TLAIB, Michigan              VAN TAYLOR, Texas
MADELEINE DEAN, Pennsylvania         PETE SESSIONS, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   RALPH NORMAN, South Carolina
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 29, 2022................................................     1
Appendix:
    June 29, 2022................................................    51

                               WITNESSES
                        Wednesday, June 29, 2022

Calhoun, Michael D., President, the Center for Responsible 
  Lending........................................................     4
Chandan, Sameer, Director of the Center for Real Estate Finance 
  Research and Professor of Finance, NYU Stern School of Business     6
Choi, Jung Hyun, Senior Research Associate, the Urban Institute..     8
Michel, Norbert J., Vice President and Director of the Center for 
  Monetary and Financial Alternatives, the Cato Institute........    11
Pope, Lydia, President, National Association of Real Estate 
  Brokers (NAREB)................................................    10

                                APPENDIX

Prepared statements:
    Calhoun, Michael D...........................................    52
    Chandan, Sameer..............................................    62
    Choi, Jung Hyun..............................................    75
    Michel, Norbert J............................................    86
    Pope, Lydia..................................................   103

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Joint written statement of the Cedar Band of Paiute Indians, 
      the Lower Brule Sioux Tribe, and the Rosebud Sioux Tribe...   108
    Written statement of the National Association of REALTORS....   117
    Written statement of UnidosUS................................   119
    Written statment of Zillow...................................   126
Garcia, Hon. Sylvia:
    Written responses to questions submitted to Jung Hyun Choi...   133

 
                       BOOM AND BUST: INEQUALITY,
                         HOMEOWNERSHIP, AND THE.
                          LONG-TERM IMPACTS OF
                         THE HOT HOUSING MARKET

                              ----------                              


                        Wednesday, June 29, 2022

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 12:07 p.m., via 
Cisco Webex, Hon. Maxine Waters [chairwoman of the committee] 
presiding.
    Members present: Representatives Waters, Sherman, Scott, 
Cleaver, Perlmutter, Himes, Foster, Beatty, Gottheimer, Lawson, 
Axne, Pressley, Lynch, Adams, Tlaib, Dean, Garcia of Texas, 
Williams of Georgia; McHenry, Posey, Wagner, Williams of Texas, 
Hill, Zeldin, Davidson, Budd, Gonzalez of Ohio, Rose, Steil, 
Gooden, Timmons, and Norman.
    Chairwoman Waters. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``Boom and Bust: Inequality, 
Homeownership, and the Long-Term Impacts of the Hot Housing 
Market.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    As we celebrate National Homeownership Month, we must 
recognize that homeownership is the primary driver of wealth 
for most families in the United States. It is a source of 
stability and opportunity for families who can leverage their 
home equity to put their kids through college, to start a 
business, and to support them in retirement. However, not 
everyone has been able to realize the dream of homeownership, 
and the pandemic housing boom has made these disparities worse. 
In fact, while millions of people were able to take advantage 
of historically-low interest rates to purchase homes or 
refinance their mortgages, skyrocketing home prices and other 
ongoing challenges made it harder for Millennials, Gen X, Gen 
Z, people of color, and individuals without intergenerational 
wealth to compete and access homeownership.
    So while the Federal Reserve estimates that home equity 
reached a record $27.8 trillion by early 2022, many qualified, 
would-be homebuyers could not partake in this wealth-building 
event. These trends threaten to further widen the already-wide 
racial wealth and homeownership gaps. Nationwide, Black 
borrowers are the only group to experience a decline in home 
purchase lending among borrowers of color. For example, in my 
City of Los Angeles, the Black homeownership rate was 34 
percent in 2021, lower than it was in 1910.
    After experiencing a substantial loss of wealth during the 
post-2008 foreclosure crisis, households have continued to be 
locked out of opportunities to build wealth. It is 
unconscionable that despite historically-low interest rates, 
this nation was still unable to ensure that historically-
underserved and excluded borrowers could make homeownership 
gains. We have heard stories of Black homeowners being 
disproportionately denied refinance loans through appraisal 
bias and other kinds of discrimination, including reports that 
Wells Fargo denied nearly 50 percent of Black refinance 
applicants. We have heard stories of borrowers relying on 
mortgage financing being outcompeted by all-cash buyers, 
including Wall Street-backed investors and buyers.
    In a hearing chaired by Mr. Green yesterday, this committee 
heard about how the sales and conversions of homes into single-
family rentals have harmed tenants, would-be homebuyers, and 
neighborhoods. Rising home prices are directly contributing to 
inflation, accounting for 40 percent of the price hikes in the 
last CPI score inflation numbers. And with recent interest rate 
hikes, we can expect that for many, the dream of homeownership 
will remain just that: a dream.
    Congress must pass this committee's housing title of the 
Build Back Better Act, legislation I drafted that would create 
and preserve over one million homes. This $150-billion 
investment would ensure the long-term health of our economy by 
significantly increasing the supply of affordable housing, 
thereby reducing housing costs and corresponding inflationary 
pressures. Additionally, last week, committed Democrats passed 
my Downpayment Toward Equity Act, to provide down payment and 
lending assistance to first-time, first-generation homebuyers.
    I thank our witnesses, and I yield back.
    I now recognize the ranking member of the committee, the 
gentleman from North Carolina, Mr. McHenry, for 4 minutes.
    Mr. McHenry. Thank you, Madam Chairwoman. Just last week, 
this committee marked up the Chair's Downpayment Toward Equity 
Act, a massive $100-billion spending spree that would continue 
fueling skyrocketing housing costs. It is this kind of 
unchecked spending that is pushing the housing market from boom 
to bust for the average American family. That is on top of 40-
year high inflation and skyrocketing consumer prices across-
the-board, which are outpacing wage gains. In fact, this is 
clobbering household budgets. And if purchasing a home is still 
within the realm of possibility, it will cost you double what 
it did just last year, from 3 percent to 6 percent now for a 
30-year fixed-rate mortgage.
    So, let's break down that statistic. The median sales price 
for a house so far this year, in 2022, is $428,700. With an FHA 
minimum allowable down payment of 3.5 percent, excluding 
closing costs and other fees, that means a first-time homebuyer 
might have to finance as much as $413,700. At 6 percent 
interest, you are looking at a monthly payment of $2,480. That 
is up from $1,740 last year, which is a $740-a-month 
difference, or roughly a month's worth of groceries for a 
family of 4, and in addition, those groceries are more 
expensive this year.
    Potential homebuyers are being pushed out of the market 
today. Instead of taking responsibility for this economic 
wreckage, President Biden is blaming anyone and anything other 
than his own policies. Earlier this month, he claimed there 
was, ``zero evidence,'' that the $2.66 trillion in new spending 
from his first 500 days in office had anything to do with 
inflation, that his spending had nothing to do with inflation. 
He even called that notion, ``bizarre.'' And if you ask me what 
is bizarre here, it is the cognitive dissonance between the 
Democrats' bad policies and their lack of accountability for 
this economic dumpster fire they have unleashed.
    We have been down this road before, and we know where it 
inevitably leads. It starts with Democrats creating new 
programs or pressuring the Government-Sponsored Enterprises 
(GSEs) to make increasingly-risky loans for borrowers who can't 
keep up with the artificial price spikes they have created. And 
it ends with those families, many of them low-income and first-
time homebuyers, being hurt the most when the housing market 
has a downturn, and taxpayers are left on the hook for tens of 
billions of dollars.
    It doesn't have to be this way. We need to get serious 
about creating a sustainable housing finance system that can 
withstand the pressures of a market downturn. We should focus 
on ways to actually increase the supply of housing and create 
stable prices. And we should restore proper oversight of our 
housing finance regulators, like FHFA and FHA, both of which 
have somehow gone more than 2 years without appearing before 
this committee.
    In fact, today's hearing would have been the perfect venue 
to hear from FHFA Director Thompson. Ranking Member Hill and I 
sent a letter last week urging the Chair to invite Director 
Thompson to testify on growing threats to our housing finance 
system. It is those threats on which we should be focused. 
Instead, all we are getting today is more excuses, more pleas 
for new reckless government housing spending, and more empty 
promises, and promises that this time, it will be different.
    I yield back.
    Chairwoman Waters. Thank you very much. I now recognize the 
Chair of our Housing, Community Development, and Insurance 
Subcommittee, the gentleman from Missouri, Mr. Cleaver, for 1 
minute.
    Mr. Cleaver. Thank you, Madam Chairwoman. Homeownership is 
the single largest source of wealth for the American family. 
Homeownership promotes wealth-building by both acting as a 
forced saving mechanism and by allowing families to benefit 
from the appreciation of their home value. Americans who own 
their homes have gained more than $6 trillion in housing wealth 
over the past 2 years.
    There are some Americans and institutional investors who 
have a remarkably positive story to tell about the housing boom 
during the pandemic. For other Americans and American 
communities, we are witnessing a gargantuan loss of wealth, 
which will leave a permanent impact on this nation. These 
Americans have lost their homes. They have seen the rising cost 
of housing eat away at their incomes, and they have been 
delayed or they have been shut out of the opportunity to build 
meaningful wealth in this nation. The impact of this troubling 
landscape will be substantial, particularly in communities of 
color.
    I appreciate this hearing, Madam Chairwoman, and your 
razor-like focus on housing opportunities. Thank you, and I 
yield back.
    Chairwoman Waters. Thank you very much. I now recognize the 
ranking member of our Housing, Community Development, and 
Insurance Subcommittee, the gentleman from Arkansas, Mr. Hill, 
for 1 minute.
    Mr. Hill. Thank you, Madam Chairwoman. Thank you for 
holding today's hearing. I know every Member of Congress shares 
the common view that we face a serious housing affordability 
challenge across our country, even though we may disagree on 
the best ways to address it.
    Madam Chairwoman, do you remember the famous politician in 
New York, Jimmy McMillan? You might know him as the Rent Is Too 
Damn High Party guy from the governor of New York race back in 
2010. Back then, a lot of people thought that campaign was a 
joke, but when the average home being sold this year is over a 
half-million dollars, and last year, 146 cities in the United 
States hit the mark where a typical house cost a million 
dollars, people aren't laughing anymore. I look forward to 
hearing from today's witnesses about supply-side solutions to 
our nation's affordability challenges, their outlook for the 
housing market amid these turbulent economic conditions, and 
the Biden inflation.
    With that, Madam Chairwoman, I thank the Chair, and I yield 
back.
    Chairwoman Waters. Thank you very much, Mr. Hill.
    I want to welcome today's distinguished witnesses to the 
committee: Mr. Michael Calhoun, the president of the Center for 
Responsible Lending; Dr. Sameer Chandan, the director of the 
Center for Real Estate Finance Research and professor of 
finance at the NYU Stern School of Business; Dr. Jung Hyun 
Choi, a senior research associate at the Housing Finance Policy 
Center at the Urban Institute; Ms. Lydia Pope, the president of 
the National Association of Real Estate Brokers; and Dr. 
Norbert Michel, the vice president and director of the Center 
for Monetary and Financial Alternatives at the Cato Institute.
    You will each have 5 minutes to summarize your testimony. 
You should be able to summarize your testimony in that time. 
Also, you should be able to see a timer that will indicate how 
much time you have left. I would ask you to be mindful of the 
timer so that we can be respectful of everyone's time.
    And without objection, your written statements will be made 
a part of the record.
    Mr. Calhoun, you are now recognized for 5 minutes to 
present your oral testimony.

  STATEMENT OF MICHAEL D. CALHOUN, PRESIDENT, THE CENTER FOR 
                      RESPONSIBLE LENDING

    Mr. Calhoun. Thank you, Chairwoman Waters, Ranking Member 
McHenry, and members of the committee for the opportunity to 
testify on the critical housing issues impacting American 
families. In my testimony today, I will first summarize the 
impact and lessons of the COVID pandemic and its impact on 
housing. Next, I will set out the current affordability and 
supply challenges we face. And finally, I will discuss the 
steps needed to make sure our housing system provides 
affordable, sustainable housing in the upcoming years for 
American families.
    As we all remember, in 2020, COVID brought precipitous job 
losses and a grinding halt of much of our economy. There were 
prospects of double-digit foreclosures exceeding even those of 
the Great Recession, along with mass renter evictions and 
landlord insolvency. However, the comprehensive response of 
Congress and Federal agencies was extraordinarily effective in 
preventing those calamities. Mortgage forbearance, with 
payments deferred to the end of the loan, maintained a strong 
housing market with low foreclosure rates and homeowners with 
sustainable mortgages. Likewise, the threatened wave of 
evictions of families who rent was largely averted through 
rental assistance that also sustained landlords. The overall 
economy recovered quickly, with a return to low unemployment, 
due to these interventions.
    That said, we are all aware that today we face formidable 
challenges. Recent increases in house prices and interest rates 
combined to quickly produce a doubling of the monthly mortgage 
payment needed to buy a house. Rents have also escalated. As 
shown in the chart of my testimony setting out the history of 
housing booms and corrections in America, it will likely take a 
number of years for housing prices to normalize, usually 
through a flattening of house increases. Also, future 
stabilized interest rates will likely be higher than the record 
low rates of recent years. Combined, these will continue to 
reduce housing affordability. Housing production has also 
significantly trailed our needs for many years, and this 
shortage is a huge obstacle to families securing an affordable 
home.
    Another continuing challenge is that the growth of 
household wealth and home equity has been heavily skewed. 
Today, the top 1 percent hold 30 percent of the overall wealth, 
and the top 10 percent hold nearly 70 percent, while the lower 
half of American households have a total of only 2.6 percent of 
our nation's wealth. Housing gains have likewise been skewed, 
including a massive homeownership and wealth gap that is 
projected to continue to grow in the coming years. This gap is 
reflected in the fact that today, Black college graduates have 
less wealth and lower homeownership than White households that 
did not complete high school.
    In sum, there are pressing housing needs across the 
country, rural and urban. This calls for us to reform our 
housing policies and systems to better meet those needs with 
the families today facing more volatility financially in 
today's 21st Century economy, and many households not having 
the personal or family wealth and the opportunities that 
provides.
    In my testimony, I detail a number of these specific policy 
reforms. First, we have to finish the COVID work of helping 
remaining families preserve their mortgages and their existing 
rental housing. It is far more effective to maintain housing 
security than to try to rebuild it.
    Second, we must aggressively expand the housing supply, 
working at all levels of government and with multiple 
strategies. Next, with two 100-year crises hitting us in just a 
dozen years, we must harden our systems to withstand future 
systemic shocks. Equally important, the cost of addressing 
those shocks should be a collective burden and not placed on 
the most-vulnerable families.
    In addition, we need well-structured supports that help 
families sustain the more frequent financial volatility 
occurring now. This includes deferral mods like we saw in the 
pandemic crisis, along with new programs, like reserve funds 
and loss of income insurance programs. These efficient systems 
both help individual families, and they de-risk, lower the risk 
of our overall markets and institutions. .
    Finally, we must recognize the scope of historic and 
ongoing discrimination documented in our housing market and the 
massive wealth and homeownership gap it has produced. Our 
future must include a commitment to the necessary effort and 
resources required to rectify this and provide housing security 
across the country for American families.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Calhoun can be found on page 
52 of the appendix.]
    Chairwoman Waters. Thank you. Next, we will go to Dr. 
Chandan. You are now recognized for 5 minutes to present your 
oral testimony.

 STATEMENT OF SAMEER CHANDAN, DIRECTOR OF THE CENTER FOR REAL 
  ESTATE FINANCE RESEARCH AND PROFESSOR OF FINANCE, NYU STERN 
                       SCHOOL OF BUSINESS

    Mr. Chandan. Chairwoman Waters, Ranking Member McHenry, and 
distinguished members of the committee, thank you for the 
invitation to testify on the critically-important issues of 
current housing market trends, the current housing market's 
historic decline in affordability, and policy options for 
supporting equitable access to homeownership.
    My name is Sam Chandan. I am a professor of finance and 
director at the Center for Real Estate Finance Research at New 
York University's Stern School of Business.
    Home prices in the United States reached their last nadir 
in 2012 and have been rising rapidly in the decades since. 
Appreciation accelerated within months of the pandemic's taking 
hold, with home prices increasing at the fastest pace on record 
over the last 2 years. Today, the median price for existing 
homes stands above $400,000 for the first time. The 2020 
inflection owes in large part to a shift in the location 
preferences of relatively mobile and affluent households 
favoring larger homes and lower-density neighborhoods, and to 
other factors, including demographic trends, low-cost 
financing, pandemic supplements to household income, and house 
price expectations. On their own, these demand drivers would 
not generate extraordinary house price increases. Rather, 
demand has coincided with the national housing supply shortage, 
estimated at 3.8 million units by Freddie Mac, and as high as 
6.8 million units by the National Association of REALTORS.
    The supply shortage is especially severe for entry-level 
homes. This is a long-term trend, and not exclusively a feature 
of the current market. From approximately 40 percent in the 
early 1980s, the share of entry-level construction is now just 
7 percent of homes under construction in the United States. 
Confounding longer-term supply and demand fundamentals, 
mortgage rates have surged in recent months. The impact of 
these increases has been immediate, resulting in historic 
deterioration in measures of housing affordability. The 
combined impact of higher prices and mortgage rates and limited 
entry-level home construction is being felt disproportionately 
by families of color, younger families, and income-constrained 
families aspiring to homeownership. Today, these groups face 
even higher barriers to the nation's most reliable vehicle for 
generational wealth building, social and economic mobility, and 
housing-related health outcomes.
    Barriers to housing opportunity are wide-ranging and not 
only related to a family's financial circumstances. Prevailing 
models of credit scoring discrimination in the housing search 
process, higher financing costs unrelated to creditworthiness, 
and disparities in the labor market and health outcomes during 
the pandemic are among the myriad headwinds. There are no 
interventions that will immediately and completely close the 
housing gap. Nonetheless, it is encouraging that in recent 
months, major initiatives have been announced that ameliorate 
the medium- and long-term outlook, including elements of the 
Administration's Housing Supply Action Plan.
    Fannie Mae and Freddie Mac's recently-announced equitable 
housing finance plans seek to address many of the structural 
drivers of persistent disparities, including new approaches to 
the consideration of positive rental payment history. For the 
plans to take important steps to improve access to financing, 
the Enterprises are not tools to address supply shortfalls 
directly. Whatever the mechanism, if the supply of affordable 
and workforce housing is not expanded, initiatives that enhance 
demand, however well-intentioned, will likely have the 
unintended consequence of undermining affordability for the 
very populations they are intended to support.
    So even as construction numbers rise in response to market 
forces, a multi-level approach to enhancing housing supply for 
all will address building code and zoning issues at the local 
level, supply shortfalls for construction materials and skilled 
labor, which may well be exacerbated in the coming years by 
infrastructure programs, improved access to financing for a 
wider range of housing types, including modular housing and 
smaller multifamily rental properties, and recognizing that 
investment in housing equity is also an investment in public 
health, with clear implications for both chronic and infectious 
disease morbidity and mortality. Additional demand-side 
policies might reduce local taxes and transaction costs of 
buying and selling, removing a barrier to mobility as 
households grow their families, thereby freeing up entry-level 
homes.
    As issues of supply loom large, the role of institutional 
investment in the housing market and its influence on prices 
has garnered increasing attention. Institutional buyers 
repositioning homes for the rental market represent a 
relatively new component of housing demand, responsive to 
families seeking the benefits of residing in a single-family 
home without the obligations or the benefits of outright 
ownership. Following the financial crisis, institutional 
investors likely had a small, but favorable, impact supporting 
the stabilization of prices and housing occupancy in distressed 
neighborhoods. But the data also shows higher rent increases 
and rates of eviction facilitated by formal property 
management.
    The institutional investor share of the market has risen 
since just prior to the pandemic, but still only accounts for 
approximately 2.5 percent of home sales, according to Freddie 
Mac. On balance, the available data suggests that institutional 
investment and repositioning of homes for the rental market are 
not currently material contributors to national housing supply 
shortages.
    Thank you again for the opportunity to testify. I look 
forward to your questions.
    [The prepared statement of Dr. Chandan can be found on page 
62 of the appendix.]
    Chairwoman Waters. Thank you very much. Dr. Choi, you are 
now recognized for 5 minutes to present your oral testimony.

    STATEMENT OF JUNG HYUN CHOI, SENIOR RESEARCH, THE URBAN 
                           INSTITUTE

    Ms. Choi. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, thank you for the opportunity to 
testify today. I would like to start by mentioning that what I 
present today is based on my own views and should not be 
attributed to the Urban Institute, its trustees, or funders.
    Today, I will share some key data points that highlight the 
racial disparities in homeownership that persisted prior to the 
pandemic, how the pandemic has disproportionately impacted 
households of color, and how the changes in the housing market 
environment are now again making it more difficult for 
households of color to access homeownership. Then, I will 
mention two promising demand-side solutions that the Federal 
Government could consider that can benefit households of color 
in obtaining and sustaining homeownership.
    First, I would like to emphasize that large, persistent 
racial disparities in homeownership, one of the primary tools 
of building wealth, existed before the COVID-19 pandemic. Just 
before the pandemic, the Black homeownership rate was 30 
percentage points lower than the White homeownership rate, the 
Latino rate was about 24 percentage points lower, and the Asian 
rate was about 12 percentage points lower. The racial 
disparities exist even after controlling for income. Our 
research finds that unless well-designed, intentional policies 
and actions are developed and executed, the racial 
homeownership gap, especially the Black/White gap, will remain 
unchanged in the next 20 years.
    Thanks to various efforts by the government to help 
households stayed housed, including forbearance and emergency 
rental assistance, we have observed that both foreclosure and 
eviction rates fell below the pre-pandemic level. However, the 
data shows that both Black and Latino homeowners and renters 
were more likely to have missed their monthly housing payment 
amidst the pandemic. Additionally, following the Great 
Recession, and now again during the COVID-19 pandemic, 
financial markets have tightened credit, restricting lending 
and making it difficult for households with less than perfect 
credit to buy homes. Credit history is the most cited reason 
for mortgage denial, having a disproportionate impact on Black 
and Latino borrowers, who are more likely to have missing or 
low FICO scores. Tighter lending standards and disparities in 
credit scores mean that many Black and Latino renters who would 
have been able to obtain a mortgage under prior credit 
standards were more likely to face greater difficulties in 
accessing homeownership. As a result, these households missed 
an opportunity to build wealth from the rising home prices and 
to benefit from the historically-low interest rates in the past 
couple of years.
    Amidst the pandemic, both the home prices and rents have 
risen significantly. National home prices are now up more than 
15 percent from a year ago, and rents have increased by more 
than 11 percent. The 30-year fixed-rate mortgage rate is now 
around 6 percent, more than double the average rate last year. 
The limited housing supply has led to increased competition in 
the market. The share of cash buyers in recent months accounts 
for more than a third of all home purchases. Homebuyers of 
color are more likely to purchase through FHA loans, but it has 
become more difficult for those using the FHA channel to 
compete with those with greater financial resources. 
Additionally, because of the spike in rental prices, those who 
remain renters will face greater difficulty saving up for 
future down payments.
    While multiple strategies are needed to bridge the racial 
homeownership gap, including the increase in affordable housing 
supply, here I will mention two promising demand-side solutions 
that the Federal Government could consider. First, a better-
targeted down payment assistance program. Our research finds 
that prioritizing first-generation homebuyers can serve a 
greater share of households of color. For example, if we 
increase the income limits to 120 percent of area median 
income, and provide assistance to renters with parents who also 
rent, the share of potential Black and Latino households that 
the down payment assistance program could serve is about 60 
percent, compared to 46 percent of Black and Latino households 
under the 80-percent AMI criteria.
    The second is to incorporate rental payments into mortgage 
underwriting. Our research finds that past housing payment is a 
better predictor of future mortgage performance than credit 
scores. The GSEs have started to explore ways to include rental 
payment history in mortgage underwriting. While the GSEs are 
moving in the right direction, much more work is needed, such 
as incentivizing more landlords to report rental payment data 
to credit bureaus, standardizing the data, expanding the use of 
rental payments for underwriting at Fannie Mae and introducing 
it at Freddie Mac, FHA, and VA, and also providing guidelines 
to lenders on how to use this data in the mortgage underwriting 
process.
    Again, thank you for the opportunity to share my research 
with you today.
    [The prepared statement of Dr. Choi can be found on page 75 
of the appendix.]
    Chairwoman Waters. Thank you very much. Next, we will go to 
Ms. Pope. You are now recognized for 5 minutes to present your 
oral testimony.

  STATEMENT OF LYDIA POPE, PRESIDENT, NATIONAL ASSOCIATION OF 
                  REAL ESTATE BROKERS (NAREB)

    Ms. Pope. Thank you. Honorable Chairwoman Waters, Ranking 
Member McHenry, and members of the committee, thank you for the 
opportunity to speak to you today on the subject of 
homeownership, especially among Black Americans. My name is 
Lydia Pope. I am the president of the National Association of 
Real Estate Brokers, known as NAREB. We are the largest and the 
oldest Black real estate trade association in America, and we 
are referred to as ``REALTISTs.'' Founded in 1947, with the 
mission of democracy in housing, NAREB was founded during a 
time of discriminative housing and lending policies that made 
it difficult for Blacks to own homes, and many of these 
policies still exist today. NAREB members, through its 94 
chapters across America, are on the front lines of the Black 
communities, creating housing opportunities, advocating for 
fair practice, and promoting policies that remove barriers to 
wealth creation.
    Today, increasing interest rates in the home price market 
are widening the wealth gap, delaying more and more Blacks from 
participating in the American Dream. Today, Black homeownership 
is nearly 30 percent behind White America, and lower than 50 
years ago. COVID brought about some major shifts in the housing 
market. Today, we see investor cash buyers dominating the 
already-no-inventory market, who purchase these properties to 
rent, raising the rental prices nationally.
    Today, if you are a Black person in America and you want to 
sell your home, you have to go through the, ``un-Black 
process,'' in order to get a fair appraisal. Today, Blacks have 
been targeted by low-level pricing, down payment limitations, 
student loan qualifications, and outdated credit models 
accounting for race in credit scoring and underwriting. And 
today, there is a 1-percent increase in mortgage rates, 
decreasing the Black buying power by 11 percent.
    To this end, economic inequality has deepened, and the 
homeownership rate has plummeted once again. Because of the 
national crisis and the effects of Black homeownership, NAREB, 
since 2013, has published annually what we call our, ``State of 
Housing in Black America,'' (SHIBA) report, which has become 
one of the most referenced and cited housing documents when 
discussing Black homeownership, and it offers some sound 
practical solutions. And NAREB went a step further. In February 
2022, we wrote our first White Paper report on Women Investing 
in Real Estate (W.I.R.E.), which provides data that impacts the 
discriminatory practices against Black women.
    To close the wealth gap, NAREB is offering the final and 
following remedies that can impact and spur homeownership for 
Black Americans today, tomorrow, and for generations to come.
    First, we fully support and urge the passage of the Down 
Payment Assistance Program that is part of the Build Back 
Better bill. Many Blacks fall into this as first-generation 
buyers and will greatly benefit from this fund. Second, NAREB 
supports the standardization to student loan calculations. 
Although government policies encourage student loan deferment, 
they count it as a negative in the FICO scoring for mortgage 
credit determination. This creates a large barrier to 
homeownership for many Blacks who would otherwise qualify.
    Third, NAREB calls for the elimination of loan-level 
pricing adjustments in which lenders have been increasing the 
cost of financing to borrowers who are creditworthy and meet 
the program guidelines. Fourth, NAREB supports the Interagency 
Task Force on Property Appraisal and Valuation Equity (PAVE), 
and advocates for fair appraisals that understand diversity. 
Training must be broadened within the Appraisal Institute, and 
violations must be dealt with vigorously.
    Fifth, NAREB supports low-balance mortgages and a secondary 
market for Blacks to buy these affordable units in communities 
that are predominantly minority. Sixth, NAREB supports the 
Equitable Housing Finance Plan that includes a special purpose 
credit program to address these inequalities in the housing 
finance system and extend the wealth-building benefits of 
homeownership.
    And lastly, utilizing the services of a real estate 
professional is still needed in the home-buying process. People 
need consumer protection, experience, knowledge, and the human 
touch to walk them through this already-difficult process.
    And in closing, I would say that this is a tough time, and 
we, NAREB, applaud the committee's efforts in this area. I am a 
resident of Cleveland, Ohio, and my past experience as a single 
Black woman with two children is why my mission and passion on 
equality and equity is so important. I was a victim of 
predatory lending, and I was that woman taken advantage of in 
the real estate market because no one held my hand to buy a 
home. My solution: To get a real estate license and stand 
before you as a national president to make the difference.
    I implore the committees, the legislators, the 
administrative officials, the GSEs, the housing regulators, and 
the directors to join NAREB in promoting and assuring democracy 
in housing. Thank you.
    [The prepared statement of Ms. Pope can be found on page 
103 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Mr. Michel, you are now recognized for 5 minutes to present 
your oral testimony.

STATEMENT OF NORBERT J. MICHEL, VICE PRESIDENT AND DIRECTOR OF 
 THE CENTER FOR MONETARY AND FINANCIAL ALTERNATIVES, THE CATO 
                           INSTITUTE

    Mr. Michel. Good afternoon. Chairwoman Waters, Ranking 
Member McHenry, and members of the committee, thank you for the 
opportunity to testify today. My name is Norbert Michel, and I 
am the vice president and director of the Center for Monetary 
and Financial Alternatives at the Cato Institute. The views 
that I express today are my own and should not be construed as 
representing any official position of the Cato Institute.
    Today, I argue that the best way for the Federal Government 
to make housing more affordable is to reverse course on Federal 
policies that increase demand. It is true that home equity 
frequently represents a large portion of many Americans' 
wealth, but it does not follow that Federal policy should 
promote housing debt. In fact, home equity depends largely on 
home price appreciation, an attribute fundamentally in conflict 
with more affordable housing. Federal policies undoubtedly make 
housing as well as other goods and services less affordable, 
and they do so because they artificially boost demand in 
supply-constrained markets. And from 2012 to 2021, home price 
growth rate was nearly double the income growth rate.
    There are at least three glaring problems with these recent 
Federal policies. First, the level of Federal involvement in 
housing has been escalating for decades. Along with housing 
cost, that correlation is no accident. Combined, Fannie and 
Freddie have stood behind more than half of outstanding 
mortgage debt for decades, and in some years, were responsible 
for a share of close to 70 percent. From 2009 to 2020, Fannie 
and Freddie's annual share of the total mortgage-backed 
security (MBS) market averaged 70 percent. If we include Ginnie 
Mae securities, the Federal share of the MBS market averaged 92 
percent per year over this period.
    Virtually all Federal housing policies, even those outside 
the GSEs and FHA, are geared toward increasing demand. But 
because housing markets are almost always supply-constrained, 
these policies consistently put upward pressure on prices and 
rents. These policies include everything from supporting the 
GSEs to providing housing allowances to military and other 
government employees, as well as basic Section 8 vouchers. The 
economic principles are the same. They place upward pressure on 
prices because they increase the number of dollars chasing the 
same amount of housing, and there is surely some spillover to 
related markets.
    Second, wasteful spending since 2020 has only worsened the 
effects of these demand-inducing housing policies. Congress 
passed five massive spending bills starting in November of 
2021, totaling $7.5 trillion. This spending spree worsened 
inflation and exacerbated both labor market problems and 
pandemic-related supply chain problems, thus leading to the 
abnormally high increases in the CPI that Americans continue to 
experience.
    Total spending, the demand-side measures bounced back 
sharply starting in the second quarter of 2020 and kept rising 
through the third quarter of 2021. Starting with April of 2021, 
virtually every monthly CPI report has indicated some form of 
abnormally high inflation. In May, the year-over-year CPI rose 
at an annual rate of 8.6 percent. The largest 12-month increase 
since 1981 was a broad-based increase, with prices for shelter, 
gas, and food being the largest contributors. Yet, Congress and 
the Administration seemed content with that failed approach of 
increased Federal spending. The problem is that Federal 
spending, whether it is on a museum, Section 8, or 
infrastructure, boosts demand while doing nothing to address 
supply constraints. That leads to more inflation while doing 
nothing to address the underlying issues that created the 
inflation in the first place.
    Finally, the Federal Reserve has contributed to higher 
housing costs by continuing to support the MBS market and, 
therefore, fueling more leverage to buy homes in a low-
interest-rate environment. Prior to the 2008 crisis, the Fed 
rarely held any MBS on its balance sheet, but now it acts as 
though it can operate without holding massive quantities of 
GSE-issued mortgage-backed securities. Between 2010 and 2022, 
the lowest amount held was $827 billion, and the Fed went from 
holding $1.4 trillion in 2020 to $2.7 trillion in 2022. In the 
face of a rapidly-rising CPI and steadily rising home prices, 
this MBS purchase policy makes very little sense.
    Thank you for your consideration, and I will be happy to 
answer any questions you may have.
    [The prepared statement of Dr. Michel can be found on page 
86 of the appendix.]
    Chairwoman Waters. Thank you very much. I now recognize 
myself for 5 minutes for questions.
    Ms. Pope, first of all, I want to thank you for being here 
and the work that the REALTISTs have been doing ever since I 
have been elected to office to deal with discrimination and 
other issues dealing with homeownership. During the pandemic, 
increased competition for homes in a tight housing market 
pushed homeownership further out of reach for many prospective 
first-time buyers, people of color, and low-wealth individuals. 
A recent study by the National Association of Real Estate 
Brokers showed that in 2021, the ratio of the homeownership gap 
grew to over 30 percent, higher than it was in 1960.
    In my City of Los Angeles, the Black homeownership rate was 
34 percent in 2021, lower than it was in 1910. Last week, our 
Democratic committee passed my Downpayment Toward Equity Act. 
My bill would authorize $100 billion for a new grant program to 
provide assistance of up to 10 percent of the purchase price of 
a home to first-time, first-generation homebuyers to cover down 
payments, closing costs, and to help buy down interest rates. 
What do you see as the potential impacts of such a program?
    Ms. Pope. Thank you, Chairwoman Waters. This would have a 
great impact in the Black community, especially knowing that 
down payment is one of the largest factors of not just the 
systemic racism that we have encountered around the country 
over the years, but this will be a big help when it comes to 
generational wealth. That is a very good opportunity for Black 
Americans to take advantage of, and again, allow the creation 
of the generational wealth to continue. And it will help 
remediate the actions of the inequalities, the wealth gap, and 
the discriminatory practices. This will be a great help to 
Black American families.
    Chairwoman Waters. Thank you very much. Even though I had 
not planned on asking this question, I am very interested in 
knowing what is happening with the evaluation of homes in the 
Black community, and what is happening with the way that the 
discrimination appears to have been taking place for so many 
years.
    Ms. Pope. As you know, around the country, all of the 
values have diminished. They have lowered the values because of 
the appraisals, and at NAREB, we are working very closely with 
our affiliates as well, and we are supporting the PAVE Act in 
order to stop the discrimination of the appraisals and the 
biases. We are hoping that we will have more training of the 
appraisers and more licensed appraisers to be able to do what 
they need to do in order to bring the economy back and to allow 
our Black homeowners to be able to sell their properties and to 
buy properties not at those low values. We are taking the stand 
in supporting the PAVE.
    Chairwoman Waters. Thank you so very much. Professor 
Chandan, house prices have skyrocketed during the pandemic, 
appreciating nationally by nearly 20 percent between 2021 and 
2022, making homeownership that much more unaffordable. In 
fact, according to the California Association of REALTORS, only 
25 percent of Californians could afford to purchase a medium-
priced home in the first quarter of 2022, compared to 47 
percent of homebuyers nationally. One driver of this 
affordability crisis is the worsening housing supply shortage. 
Last year, the House passed the Build Back Better Act, which 
included over $150 billion in investments that would create and 
preserve over 1.3 million homes, including by offering 
incentives to local jurisdictions to ease burdens to buying and 
building new housing.
    Can you talk about the importance of making the types of 
transformative housing and community development investments 
included in the Build Back Better Act?
    Mr. Chandan. Thank you, Chairwoman Waters. I think what we 
do see, as you have alluded to, is that we have a significant 
challenge in terms of the supply and availability of new homes. 
That number has risen significantly over the course of the last 
year-and-a-half or so, and we have a substantial pipeline of 
homes under construction. But to your point, when we look at 
the mix of what is being built in the United States today, in 
part because of local zoning requirements, building codes, 
restrictions on the availability of land, and the cost of 
materials, only a very, very small share of those homes are 
within reach of income-constrained families and many 
aspirational homebuyers.
    And programs that not only encourage supply, but encourage 
supply that is specifically directed towards income-constrained 
families and those who are aspiring to homeownership will be 
most effective in alleviating some of the supply challenges and 
pricing issues that we face.
    Chairwoman Waters. Thank you very much. Mr. McHenry, the 
gentleman from North Carolina, who is the ranking member of the 
committee, is now recognized for 5 minutes.
    Mr. McHenry. Thank you, Madam Chairwoman. Mr. Michel, I 
want to drill a little bit deeper into today's hearing title. 
It is called, ``Boom and Bust,'' and, look, as I outlined in my 
opening statement, in President Biden's first 500 days in 
office, he increased Federal spending by more than $2.5 
trillion. Our national debt now surpasses $30 trillion. The 
massive spending spree includes nearly $2 trillion in the so-
called American Rescue Plan, the $256-billion Infrastructure 
Investment and Jobs Act enacted last year.
    It doesn't include the $1.7-trillion so-called Build Back 
Better Act--or whatever they are calling it right now; it keeps 
changing week every week--which passed the House in November, 
and it was then called Build Back Better. It also does include 
a trio of housing bills that the Chair has introduced but that 
have not passed the House. That includes $600 billion in 
housing infrastructure, or the unscored Ending Homelessness Act 
that is likely to cost nearly $200 billion a year, and her 
$100-billion Downpayment Toward Equity Act. Those are nearly a 
trillion dollars in new spending, all from borrowed money.
    If you would, please explain both the observed and 
projected effects that this massive spending is having on the 
economy, and the connection to the record inflation Americans 
are experiencing.
    Mr. Michel. Sure. The stimulus was more than triple--
depending on exactly how you cut it--the gap between actual 
output in the economy and what we estimate as the potential 
output of the economy. Even before March of 2022, the $1.5-
trillion spending package that we had back then, Federal 
spending, had increased people's quarterly disposable income, 
even on a per capita basis, by incredibly abnormal rates, 
things like 14 percent in the first quarter of 2021. That is 
well over the average quarterly increase, which is less than 1 
percent during the last decade.
    So, there is pretty much no way that sort of spending won't 
eventually lead to inflation. The result that we have now is 
really not all that surprising. It is just an enormous amount 
of money relative to what people are used to having on the 
whole. And this is worse, of course, for anyone on a fixed 
income or without a steady, secure, or indexed-to-inflation 
source of long-term income because they are not getting that 
money directly or indirectly at first. They are getting the 
price increases first, in many cases.
    And then, in many cases, when they have already gotten some 
of the income, they are still getting an even larger price 
increase. Again, that is due to the magnitude, so this is bad 
for millions of people. And I think it is probably obvious to 
most people that the lower your income and the more volatile 
your income, the worse your situation, the harder this is going 
to be to deal with. That is kind of where I would go with that.
    Mr. McHenry. We know that Federal spending comes in a lot 
of forms, but one of the worst is when we come up with new 
giveaway subsidies for people who probably don't need it and 
shouldn't get it. One good example is a provision in that Build 
Back Better bill that the House passed in November, and we 
marked up that same provision again last week. This provision 
would create a new first-generation down payment fund to give 
down payment grants up to $20,000, or 10 percent of the 
purchase price of a home. Individuals making up to 140 percent 
of the median income of the area would be eligible to get these 
grants if they didn't own a home in the last 3 years and the 
parents currently didn't own a home. This means an individual 
in Marin County in California making up to $232,000 could 
qualify for more than $97,000 in free government money on a 
$970,000 home, even if they had owned the same size home 1,000 
days earlier. As an economist, what does a subsidy like that do 
to the marketplace? How do you respond to such an irrational 
demand-side subsidy, when no subsidy is even required in the 
first place?
    Mr. Michel. Yes, this makes no sense at all. It is a 
terrible policy. The response will be even higher home prices. 
It is only a question of how long it will take and how much 
upward pressure you are going to get very soon. I would expect 
sellers to know that the first $100,000 or so is taken care of, 
so you can charge more. It is similar to the effect that 
dropping the interest rate has on a monthly payment. It is 
going to get capitalized into the price of the home, so if you 
do that, you are going to get price inflation in the home and/
or price increases in the homes. And if that $100 billion or 
that program doesn't get renewed, you would expect prices to 
flatten out and eventually drop. And then, anyone coming into 
the market late or with lower equity, who is already in, is at 
a very high risk for being underwater. So, it makes no sense at 
all in any way.
    Chairwoman Waters. Thank you very much. The gentleman from 
California, Mr. Sherman, who is also the Chair of our 
Subcommittee on Investor Protection, Entrepreneurship, and 
Capital Markets, is now recognized for 5 minutes.
    Mr. Sherman. Thank you. A few comments first. It is 
interesting. We are all in favor of appreciation. We are all in 
favor of affordability. Those are contradictory. There is an 
irony there, but there are reasons for us to support both. Our 
committee naturally focuses on financing of housing, but we 
have to look at other governmental entities and what they are 
doing to the affordability of housing. Our friends over at the 
House Ways and Means Committee have taken away the deduction 
for property taxes for an awful lot of taxpayers, and they have 
not indexed that provision for inflation. So whether it is 2-
percent inflation, or whether it is a much higher level of 
inflation, that provision hurts not only the upper-middle 
class, but will soon hit the middle-middle class. The same 
applies to their limitation on home mortgage deductions. While 
we are making housing more available, they are making housing 
more costly.
    But the biggest impact is local government. The, ``Not in 
My Backyard'' (NIMBYs) really control housing, and in so many 
areas, people want either open space or maybe open space dotted 
by a few rich houses. The effect is that the cost of providing 
a new structure--and we need at least 5 million more of them--
is double or triple what it would be. The physical cost of 
building the home isn't the cost. The cost is dealing with the 
zoning, the resulting increase in land prices, the fees, and 
all of the requirements that are often designed to make sure 
that communities are not economically integrated, and, of 
course, that means, in many cases, not racially integrated.
    I realize we are focused on homeownership. Not everyone 
should buy a home. If you are not going to live there, or you 
are not sure you are going to live there for at least 6 years, 
it is not in your interest usually to buy a home, and there 
ought to be single-family homes that are available for rent. I 
believe one witness said 2.5 percent of the homes are owned by 
institutions that rent them out, and that seems reasonable. We 
have a labor market where people are willing to move around far 
more than they are in Europe, and that gives us an economic 
advantage. Our witness from the Cato Institute points out that 
government spending increases demand and inflation. What he did 
not point out is that taxes reduce demand and reduce inflation, 
and that is why Build Back Better was fully paid for, and why, 
if we can tax the wealthy appropriately, we can reduce 
inflation.
    Mr. Calhoun, we often hear that FHA borrowers struggle to 
compete against those who are borrowing with a conventional 
mortgage. This is explained because sellers want to avoid the 
longer closing times, and the tougher appraisal requirements. 
Last year, the House passed my bill--unfortunately, we did not 
have a unicameral legislature, so it died in the Senate--the 
Homebuyer Assistance Act, which broadens the types of 
appraisers that can appraise for an FHA purchase to be the same 
as those that can do the appraisals for the GSEs. This is 
significant because FHA borrowers are overwhelmingly first-time 
homebuyers and disproportionately people of color. Are there 
other policies that we can take, whether it is the appraisal 
requirements or elsewhere, so that FHA borrowers are on equal 
footing when they go to buy a house?
    Mr. Calhoun. Yes, Congressman, if I can first add one 
comment to your last comment, I think it is important. Included 
in my testimony is a chart that I will just show you here on 
the history of housing prices. The colored parts are--
    Mr. Sherman. I will ask you to focus on the question. We 
have 40 seconds.
    Mr. Calhoun. Okay. Yes, sir. Thanks. The current 
requirements for certified appraisers makes it much harder to 
find an appraiser, and creates more delays. That is one of the 
most important things. FHA is doing a number of other things, 
such as increasing their technological services so they move 
faster. And right now, they have several proposals that provide 
more clarity for lenders to make it easier for borrowers to 
qualify and to encourage lenders to participate in the FHA 
program. As you know, FHA is the largest provider of new home 
purchases for borrowers currently.
    Mr. Sherman. I just want to point out how important it is 
to pass the chairwoman's Downpayment Assistance Program. Half 
of the Millennial homebuyers needed family to help them, and 
not everybody has a rich uncle or a helpful parent. I yield 
back.
    Chairwoman Waters. Thank you very much. The gentlewoman 
from Missouri, Mrs. Wagner, is now recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman. Today marks the 
20th housing hearing this committee has held in the 117th 
Congress, and yet it seems we are not any closer to bringing 
down the high cost of housing. Over the course of 20 hearings, 
instead of addressing the lack of production of new housing 
units, the Majority has spread blame on property owners, 
investors, appraisal firms, and the mortgage industry, more of 
the Biden blame game. Meanwhile, the Biden Administration, and 
Democrats, and Congress have recklessly spent trillions in 
taxpayer money that has worsened inflation, crippled supply 
chain and construction markets, and, ultimately, made housing 
even less affordable.
    Dr. Michel, I represent the 2nd Congressional District of 
Missouri, which continues to experience labor shortages and 
supply chain issues that affect almost every industry from 
construction to manufacturing. Collectively, do the policies 
offered today by the Majority and the Biden Administration 
address those issues?
    Mr. Michel. No, no, it would worsen it. This is the idea. I 
am sure it is well-intentioned. You want to help people. 
Everybody wants to help other people, and that is good, but the 
fact remains that if you go down this road of just giving out 
more money, it still takes a long time to build a house. You 
can't build a house in every single location where people want 
to live. There is not enough land. You don't have enough 
laborers to do everything that you want to do. You have an 
infrastructure package that is going to draw laborers to that. 
So, you are going to be throwing more money, allowing people to 
bid up the same amount of resources over a short period of 
time, and that is the opposite of what you want to do if you 
want to make things more affordable and easier to obtain.
    Mrs. Wagner. Could you describe how the supply chain issues 
we are facing will continue to drive up home prices and rental 
rates if left unaddressed?
    Mr. Michel. It would be the same sort of situation where 
you don't have enough of what you want, and you don't have a 
way to get everything quickly. If you talk about things like 
livestock or labor, you can't magically produce them, no matter 
how much you want to bid up the price. Letting these things go, 
letting these supply and demand forces sort of take hold 
without further subsidizing them is the only way to let those 
prices come back down, to let the market reallocate on its own 
pace rather than trying to just continue to increase the demand 
side.
    Mrs. Wagner. Yes. The Federal role in housing finance 
policies has expanded greatly over the last several decades, 
and yet the American homeownership rate remains at roughly the 
same level as the 1960s. Dr. Michel, is there evidence that 
would suggest the entrenched role of the Federal Government in 
the housing market has played a role in its current state?
    Mr. Michel. Yes, absolutely. It is kind of amazing to hear 
lots of the other people on the panel suggesting that we just 
continue doing the same things we have been doing that got us 
into this mess in the first place. The only appreciable 
increase in, for example, the Black or Latino homeownership 
rate was prior to the last crisis, and that was not sustainable 
by definition. We want to keep helping people. That is good. 
That doesn't mean that you help people by giving them low-
equity, long-term fixed loans that they can't afford. And if 
you have a volatile source of income, for example, you are not 
addressing the underlying economic issues. You are just 
throwing money at a problem, and you are putting somebody in a 
financially risky category. So the fact that you take some of 
that stimulus away or some of that subsidization away and then 
it is not sustainable, it ends in a bust.
    Mrs. Wagner. And, Dr. Michel, in my short time, I know your 
testimony outlines many harmful housing policies that the 
Democrats have been pushing in their Build Back Better growth 
plan, or whatever you want to call it, while the list is quite 
long. Could you briefly mention some of the most harmful 
policies?
    Mr. Michel. Outside of the GSEs, is that--
    Mrs. Wagner. Yes.
    Mr. Michel. I think if you look at the GSEs, that is the 
biggest chunk of it for me, the GSEs and the FHA. This is no 
longer a small program. This is the entire market, so it is 
essentially a Federal takeover. And with those expansions, we 
have seen this happen over and time again.
    Mrs. Wagner. Yes, thank you. I yield back the balance of--
    Chairwoman Waters. Thank you. And thank you so much, Mrs. 
Wagner, for recognizing that we have made housing a priority, 
with 20 hearings and no help from Republicans. Thank you very, 
very much.
    The gentleman from New York, Mr. Meeks, who is also the 
Chair of the House Committee on Foreign Affairs, is now 
recognized for 5 minutes.
    Mr. Meeks. Thank you, Madam Chairwoman, and I just have to 
adjust quickly, because I heard Representative Wagner and 
Representative McHenry--they keep talking about, it seems to 
me, that some of the housing crisis, particularly with regard 
to Black America, predates all of what they are talking about. 
But it also seems to me that when you help someone, give them a 
handout, it is okay, but when you have the huge Republican tax 
cuts that go to the wealthiest of Americans, that is much more 
money than you see going to regular folks, that is okay.
    And then to say that the President is not doing the right 
things when, in fact, we know that we are coming out of the 
greatest pandemic that this country has seen in over 100 years. 
And yes, the war in Ukraine is affecting the economies, which 
is why the President is at the G7 and at NATO now working 
together with our allies who are also suffering from inflation 
and suffering from Putin's war. There is no question about 
that. And I would hope that my Republican colleagues who say 
that they are supporting Ukraine, which we all should do, and 
make sure that they get the money that they need to defend 
themselves, but we should also support our people at home.
    We had a conversation with Fed Chairman Powell, who said 
that if we hadn't made the investments that we made during the 
pandemic, our economy would not be as strong as it is right 
now, which is stronger than many other places or most other 
places around the world. I just had to get that in because, to 
say that we are supporting Ukraine, but then say, oh, the 
President is making it up, you can see the comparison just does 
not make sense. So, if you are not going to support Ukraine, 
then say you are not supporting Ukraine because that does cause 
us to have higher gas prices and inflation in the United States 
of America.
    But my first question is to Ms. Pope. Ms. Pope, I know your 
great organization has put out a report, and I think that the 
chairwoman started talking about this earlier, about the state 
of housing in Black America, which discusses other challenges 
that are confronted by Black homeowners, including the home 
appraisal practices where the loans are already more costly for 
Black households, and on top of that, the Black homes tend to 
appreciate less or be valued at a lower value. This whole thing 
in regards to algorithms, can you explain what the role of 
Automated Valuation Models (AVMs) are and what more needs to be 
done to make sure that calculations and algorithms aren't 
having inadvertent negative consequences, or what should we be 
doing to make sure that we have equity there?
    Ms. Pope. Thank you, Congressman Meeks. When it comes to 
the Black neighborhoods and the appraisers, you are absolutely 
correct. The housing market is diminishing. The appraisal 
values are low, and then what are we doing not just as a 
national association, but as America. It is important that when 
we are dealing with the appraisers in the appraisal society, 
that number one, 1 percent of the appraisal society are Black. 
We don't have enough African Americans within the industry to 
understand the values of our neighborhoods where we grew up, 
that we know about, where we know the house across the street 
is worth more value than what the appraiser has stated.
    The importance of even the PAVE policy, the PAVE Act--to 
discuss a lot of the challenges on the training that needs to 
happen within the appraisal society, the licenses that needs to 
take place. In addition to that, we need to make sure that we 
hire and employ more Black appraisers so that they can have an 
opportunity to lessen some of the guidelines for the appraisers 
to be able to increase that community so that we are able to 
have the true, in fact, real appraisers. When it comes to 
systemic racism, the low access to capital, to healthcare, to 
quality of food, the inequality and the racial discrimination 
that has happened over 400 years, it hasn't changed. And as we 
are seeing now, it is just being bought out, so it is so 
important that we, as an organization and as America, need to 
make a difference in the appraisal society, and we have to hire 
and employ more Black appraisers.
    Mr. Meeks. Thank you for that. And in my little time 
remaining, I am going to go to Ms. Choi just to ask, what role 
does the student loan debt play in serving as a barrier to 
homeownership, and how can we address this issue here in 
Congress? I put a bill out called the Making FHA Work for 
Borrowers with Student Debt Act, and I know for me, coming out 
of college with student loans prohibited me from owning a home 
for a while. Can you address that, Ms. Choi?
    Ms. Choi. Yes. Thank you for that question. I think this is 
a very important topic. I think student loan debt has the same 
issues with access to homeownership, because a lot of young 
adults who have wealthy parents get access to education without 
student debt, but we are seeing from the data a lot of young 
Black adults having a higher student debt for the same level of 
education. They are more likely to drop out of college because 
they have multiple duties to serve, and even after they 
graduate, they run into problems of being delinquent in that 
home, and that is also having a negative impact on us, the 
access to homeownership. I would love to look more into your 
bill, but I think this is a very, very important issue to 
address.
    Mr. Meeks. Thank you very much. I am out of time. Thank 
you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Mr. Posey, you are now recognized for 5 
minutes.
    Mr. Posey. Thank you, Chairwoman Waters. Mr. Michel, the 
opening lines of the Majority policy paper for this hearing 
suggests homeownership should be a policy tool for closing a 
wealth gap in this country. Please tell us what economic 
research suggests about making reduced wealth gap an objective 
for homeownership policy?
    Mr. Michel. I don't agree that homeownership itself should 
be a policy. There are lots of reasons not to own a home. It is 
an individual decision. And if we are talking about something 
like sustainable homeownership, there are many economic 
conditions and reasons that will make that either difficult or 
easy. There is nothing wrong with renting. Federal policy 
should not distinguish between both or between either renting 
or owning.
    Even though there is a correlation between things like, 
say, good citizenship and homeownership, it doesn't mean that 
one causes the other. There is actually lots of research that 
shows negative spillover effects from owning, especially low-
equity, long-term low equity loans--negative spillovers like 
hesitancy to move in search of a better job opportunity, just 
to name one off the top of my head. Is that where you are 
going? I am not sure if I am answering exactly what you are--
    Mr. Posey. You are answering exactly--I just was looking 
for some balance, and you provided that balance, so thank you 
for being so straightforward.
    Mr. Michel. Okay.
    Mr. Posey. When Secretary Carson was at HUD, we had begun 
to appreciate that making housing affordable depends a lot on 
being able to expand new housing supply while holding the line 
in the best way possible of building new housing. What happens 
to housing prices and affordability when we expand housing 
demand subsidies without addressing the conditions of housing 
supply?
    Mr. Michel. Prices go up, and as the prices go up through 
either FHA or GSE loans that we have, we have more lower-equity 
loans. So, you have sort of pockets geographically throughout 
the United States that are either more or less constrained than 
others, and then you basically have one Federal policy that 
just says, give more loans, get more loans. So, it is not 
surprising to get exactly the result that we have had, which is 
more consumer debt and an incredibly rapid increase in home 
prices.
    Mr. Posey. What do you think Congress should do to help 
bring down the cost of building new housing so that we can 
expand supply to meet the growing demand without driving up 
prices?
    Mr. Michel. There is very little that Congress can do to 
increase the supply, so what it has to do is concern itself 
with demand relative to supply, and that, again, means paring 
back on the increase in demand. Supply is going to be more 
local-driven, and you have to back off, literally back off. You 
have to shrink the footprint of all of the things that are 
being done federally to increase demand. Otherwise, you are 
going to keep getting higher prices.
    Mr. Posey. One of the bills under consideration in this 
hearing is the ability to provide $25,000, or even more, in 
high-cost areas to provide qualifying assistance to certain 
first-time, first-generation homebuyers in purchasing their 
first home. Can you comment on the pros and cons of that 
approach?
    Mr. Michel. The pros of course are, if you are a recipient 
of that, you get the money for your down payment, and that is 
good for you, but the cons to that, again, are you are doing 
nothing to change the underlying conditions. So if you have an 
African American, for example, who doesn't have a rich uncle, 
you are assuming that simply giving them the money would be 
good for them. And again, while it might be good to be able to 
purchase that home, you are actually not purchasing a home. You 
are purchasing a mortgage.
    And the research shows that what we what we get from 
spillovers from homeownership, you could actually be picking up 
the behaviors that somebody has or builds over time when they 
do save money. You are taking the saving the money part out of 
the equation. You are saying that doesn't matter when, in fact, 
the research shows that part could matter more. And that is not 
to say that there shouldn't be something done to increase 
economic opportunity, but there is a difference between that 
and just giving somebody the check.
    Mr. Posey. Okay. Listen, for the record, Madam Chairwoman, 
I have been a REALTOR for well over 40 years, and I can assure 
you that during the entire time, since the very beginning, the 
first orientation class, every REALTOR is aware that there 
should not be any discrimination in housing whatsoever, and the 
only color any REALTOR should be concerned with is green, and 
that is putting the deal together. Thank you. I yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
Georgia, Mr. Scott, who is also the Chair of the House 
Committee on Agriculture, is now recognized for 5 minutes.
    Mr. Scott. Thank you, Madam Chairwoman. Ms. Pope, let me 
direct this question to you. A recent study pointed out that 33 
percent of home sales in my area were made by private 
investment groups. And my area in Atlanta led the nation as the 
number-one metropolitan area in the entire nation for investor 
purchases of single-family homes. Ms. Pope, can you explain how 
this investor activity in this subset of housing markets 
impacts individual buyers and hurts us?
    Ms. Pope. Thank you. Thank you, Congressman Scott. First of 
all, when lenders hesitate in a low-balance mortgage in an 
area, buyers can't purchase, so when they can't purchase, a lot 
of times it opens the doors for investors who pay cash. Also, 
these cash investors do them in bulk, so the more properties 
for less money, it is a wholesale. What happens in this case is 
it displaces the residents. It would create low inventory, and 
it definitely creates low inventory for the neighborhood. But 
what ends up happening is you have a high rental market that 
makes it not sustainable for the homeownership and it makes it 
difficult for anyone looking to buy a property, it is hard to 
buy because all of the properties have been taken up by these 
types of investors who are buying and paying in cash. Our 
typical homebuyer doesn't have the cash. They just don't have 
it. That is why financing is available. To strip that away from 
the American Dream is chasing them away from that 
homeownership.
    Mr. Scott. Yes. And to your point, the Atlanta Journal-
Constitution, our home newspaper, reported that this large 
investor buying activity was linked to a drastic decline in 
homeownership rates. And as is the case in so many situations, 
this connection disappeared when comparing predominantly White 
neighborhoods with predominantly Black neighborhoods. Ms. Pope, 
explain that for me?
    Ms. Pope. And I hope I am explaining this correctly. When 
an investor buys a single property and they are going rent it 
or fix it up to sell, then that market is increased. It makes 
the inventory low, first of all, because that borrower can't 
purchase it at prime price. Now, it has excelled because that 
investor fixed the property up, resold it, and flipped it. That 
makes it very difficult in a community because then it becomes 
unaffordable and possibly having challenges with the 
appraisals, and that is what we are finding across-the-board. I 
am from Ohio, and we have the same issues of having all of 
these investors buying in neighborhoods, increasing the sales 
price, or renting. Everything is escalated higher, and that 
makes it harder for a Black person or anyone to buy a home in 
that area because of the appraisal values or because they can't 
afford it now. It is not the typical, average, regular price.
    Mr. Scott. And let me get to the genesis of the issue from 
my standpoint. How are these firms able to track what 
neighborhoods and areas will see, future high-paying jobs and 
good-performing schools, which tend to increase home prices?
    Ms. Pope. When an investor buys a property, it strips away 
the homeownership. So you are right, the homebuyers--the school 
systems that they go to, the grocery stores they go to, the 
banks that are very little in the neighborhood becomes a 
challenge because now you are taking away that homeownership, 
that neighborhood that is created to have sustainability. So, 
they are stripped away when you are lessening the housing 
market and increasing the rental market.
    Mr. Scott. My time is running out, but here is the bottom 
line I want you to answer. Is it fair to say that these private 
equity firms would then target single-family homes in majority 
African-American neighborhoods more than in majority White 
neighborhoods?
    Ms. Pope. Yes.
    Mr. Scott. Thank you very much. I yield back, Madam 
Chairwoman.
    Chairwoman Waters. Thank you very much. The gentleman from 
Texas, Mr. Williams, is now recognized for 5 minutes.
    Mr. Williams of Texas. Thank you, Madam Chairwoman. And for 
full disclosure to everybody on the call today, I am a small 
business owner, and I am an investor. As we are having these 
conversations, some of these questions I hear coming out of the 
left field about the housing market, we should take a second to 
recognize where the Biden economy currently stands, and it 
stands with everybody, not just one group or two groups. 
Everybody is being affected by the bad decisions coming out of 
this Biden Administration. The American savings rate is at its 
lowest level since the Great Recession, and while credit card 
debt is hitting all-time highs, supply chains are broken, 
having visible impact when our constituents go to the grocery 
store with empty shelves, but also on inventories for other 
small businesses. I am in the car business. I just said that I 
am a small business owner, in the car business. And we usually 
carry around 800 units on the ground, and today, as I sit here, 
in one of my businesses, we only have 26 units on the lot for 
sale, so I can tell you about supply chain problems.
    The supply chain problems are making it particularly 
difficult for commercial and residential real estate 
industries. Projects are being delayed because they can't find 
the raw materials necessary to complete their builds. And when 
timelines get stretched out because of unforeseen circumstances 
and inflation, the overall cost goes up. Even if these builders 
are able to secure all of the necessary materials, they are 
having real problems in finding skilled workers to complete 
these new projects. And inflation is at a 40-year high as a 
result of out-of-control government spending by the Biden 
Administration and to accommodative monetary policy. This has 
forced the Federal Reserve to raise interest rates at an 
unprecedented pace to get these unprecedented price increases 
under control, and this has led to the 30-year fixed-rate 
mortgage rise into a 14-year high this week of almost 6 
percent.
    To give it perspective, a year ago this mortgage rate was 
sitting at 3 percent. This is a massive year-over-year increase 
coupled with home prices hitting all-time highs and are not 
making this a buyer-friendly environment for anyone. And as a 
result of all of these factors, consumer confidence is 
currently sitting at its lower level since the start of the 
COVID pandemic. The Biden economy just simply is not working, 
so needless to say, we have a long way to go before Americans 
are confident again in the direction our economy is heading.
    Mr. Michel, can you give us your opinion on how we got to 
this point, and then what steps we need to take to get our 
economy back on solid ground?
    Mr. Michel. Part of it again, I think on the inflation side 
is the fiscal spending. Part of the supply chain issues, or 
largely the supply chain issues are due to the COVID government 
shutdowns. You had an incredibly large drop in demand and then 
a snap back in demand, bigger than anything in the historical 
record, so we have to be a little bit patient. We also have to 
stop spending more at the Federal level. It is only 
exacerbating supply chain problems. We only have so many 
resources to go around. You don't want to keep bidding them up.
    And on the other side, I think the Fed is actually doing 
what they should be doing. The Fed has started tightening. At 
this point, monetary policy is probably the only tool that is 
going to help long term, and there are signs that it is 
starting to work. Credit markets are tightening, money growth 
is coming down, and there are signs of core inflation kind of 
turning back. So, I think we are on the right road as far as 
that goes.
    Mr. Williams of Texas. And we need to quit talking about 
tax increases. We need to keep taxes where they are and--
    Mr. Michel. Yes. I don't really understand the tax increase 
thing, but go ahead.
    Mr. Williams of Texas. Yes, I don't understand it either, 
but we will move on to that later. Excessive regulations are 
important. They could be a major drag, as you know, on the 
economy and private sector participants. And there have been 
studies that have shown that in President Biden's first year in 
office, businesses have spent over 131 million paperwork hours 
complying with these new regulations, and I can tell you about 
that. I am in a business that is all commission. In my 
business, we even had to hire a compliance officer and pay him 
a salary to comply with these regulations with which we are 
getting burdened. This takes valuable time away from productive 
activities that could be adding value to the economy and 
helping people buy houses. So, we must always be looking at 
ways to free up businesses' time so they are not consumed with 
unproductive activity.
    Quickly, you probably have done some extensive research on 
the Dodd-Frank Act, and can you discuss certain parts of the 
bill that would lead you to believe we are holding back the 
economy that we could re-examine in this committee?
    Mr. Michel. Sure. Definitely, Title I of Dodd-Frank, with 
systemic risk and financial stability regulation, giving the 
Fed and Treasury sort of a blank check to go out and just do 
anything in the name of guarding against potential systemic 
risk and failure, and that is showing up in crypto and fintech 
markets right now.
    Mr. Williams of Texas. Okay. My time is up, Madam 
Chairwoman. I yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
Missouri, Mr. Cleaver, who is also the Chair of our 
Subcommittee on Housing, Community Development, and Insurance, 
is now recognized for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman. Let me, first of 
all, just sort of deal with some of the issues that have been 
thrown out.
    Mr. Michel, first of all, I appreciate your appearance here 
before the committee and presenting information, but what I 
would like you to address is, if there is a $2 trillion dropout 
of the revenues of the United States, does that contribute to 
inflation?
    Mr. Michel. A drop in tax revenue contributed to inflation?
    Mr. Cleaver. Yes.
    Mr. Michel. No, I would not make that argument, and maybe 
there is another way you can make that argument, but I would 
not make that argument.
    Mr. Cleaver. So, dropping $2 trillion out of--
    Mr. Michel. In tax revenue.
    Mr. Cleaver. --in tax revenues is not as devastating on the 
economy as spending $1 trillion for infrastructure. Is it 
connected to who does it or what?
    Mr. Michel. If you are asking me if one is inflationary and 
one is not, then I am going to say that if you drop $2 trillion 
in tax revenue out, it is not inflationary. And if you put $1 
trillion of spending into the economy, that it is inflationary. 
And I guess if that is where this is going, where we have 
inflation, all we need to do is increase taxes, I don't know if 
that is actually equitable. I don't know that it actually works 
that way in practice--
    Mr. Cleaver. I didn't suggest that. I will play it back. I 
don't think I suggested that. If I did, I am--
    Mr. Michel. Fair enough.
    Mr. Cleaver. Yes, I misspoke, if I said that. What I am 
trying to deal with is we spent $1 trillion. We had a $2.3-
trillion hit on the economy with the tax cuts, and the revenue 
is falling substantially short of the $2 trillion to $2.3 
trillion. Hopefully, we will get to a point where something is 
right or wrong because it is right or wrong, and that is who 
did it. And so, the $2-trillion drop hurt us. Let me ask you 
one other thing, and then I will move on.
    My assumption is that you oppose the bipartisan 
infrastructure bill that some of us proudly voted for, both 
Republicans and Democrats. Is that true?
    Mr. Michel. Correct. I don't think that was a good bill.
    Mr. Cleaver. Okay. What would you say to the people who are 
concerned about the 45,000 bridges in poor condition in the 
United States? What would you say to the people in your 
community who need this statistic to realize we are in trouble? 
We rank 13th in the world in terms of our aging infrastructure, 
with 45,000 bridges in poor condition. What do you say to the 
people all around the country who believe we were in trouble? 
Every President since Bill Clinton has said they wanted to pass 
an infrastructure bill, we need an infrastructure week where 
the legislative process is going to begin. So, all of those 
people had to have been wrong that we desperately needed an 
infrastructure bill, is that what you are saying?
    Mr. Michel. Yes. I would say that is wrong, and I would say 
that they are politically very popular for every President, and 
most Members of Congress, and Senators, yes.
    Mr. Cleaver. But why is it popular? Is it because here in 
Kansas City, we are getting ready to put in new bridges where 
we were having flooding where 25 people died? Is that something 
I should be apologetic about? I voted for it very proudly, and 
I have not heard a single Republican or Democrat or anybody 
else complain about it.
    Mr. Michel. No. If I were you, I would want to get as much 
money as I could for my constituents from as many places I 
could get it from.
    Mr. Cleaver. Thank you, Madam Chairwoman. I appreciate the 
opportunity. And thank you, Mr. Michel, for your presence at 
our committee and your answers.
    Chairwoman Waters. Thank you so very much. You can add 
clean waterto that, Mr. Cleaver.
    The gentleman from Arkansas, Mr. Hill, is now recognized 
for 5 minutes.
    Mr. Hill. Thank you, Madam Chairwoman. I have certainly 
enjoyed this macroeconomic debate with our witnesses and our 
Members. It is always rewarding. I am sorry we are not in the 
committee room together today.
    I would say to my good friend, Greg Meeks, that I 
appreciate his work on building bipartisan support for targeted 
support in Ukraine with our European allies. I didn't quite 
take his messaging that somehow Republicans don't support that, 
so I wanted to thank him for his working to make sure we have 
bipartisan support there. But I do want to correct the record 
for my good friend, Brother Cleaver, in Kansas City, and Greg 
on this tax issue. The Tax Cuts and Jobs Act helped all 
American families--Brown, White, and Black--with lower tax 
rates, easier filing, and a better child tax credit. We need to 
make those tax cuts permanent. That should be a priority for 
Democrats and Republicans.
    On the revenue issue, corporate tax revenues, despite the 
large cut in the rate, are at their highest level in American 
history. We are earning more corporate tax revenue than we have 
in the history of the country, and a trillion dollars came back 
into the U.S. for U.S. investment there. So, I think that the 
gentleman's argument about revenue loss is quite exaggerated 
there. And the real challenge that we are talking about today 
is the impact on the supply chain, and Biden inflation, and the 
impact on housing affordability, and it is devastating, as I 
said in my opening comments.
    And I want to start with Dr. Chandan. In your testimony--
which was very interesting--you say the analysis shows that 
nationally, the institutional investor share of the market has 
risen since just prior to the pandemic, but only accounts for 
2.5 percent of home sales. By comparison, individual investors 
and mom-and-pop investors in our towns and cities and counties 
account for 24 percent of the market. So, Dr. Chandan, is there 
evidence that this is only in low-income neighborhoods, or is 
it across-the-board in these growing metro areas?
    Mr. Chandan. Thank you, Congressman Hill. I think the data 
that you cite and that I cite in my testimony is provided by 
Freddie Mac in a recently-completed study. While there is 
always opportunity, and here there is significant opportunity 
to improve data transparency and availability, what we do know 
is that nationally, 24 to 25 percent of investors in markets 
that are buying single-family homes without the intention of 
living in them, or reselling them but are repurposing them as 
single-family rental homes, does include a wide range of 
investors, and we should be careful not to conflate large 
institutions with that entire pool.
    Mr. Hill. Thank you. Let me reclaim my time because the 
marginal investor in your data you presented from Freddie is an 
individual mom-and-pop investor--
    Mr. Chandan. Correct.
    Mr. Hill. --not, per se, the institutional. Number two, I 
have never seen anything that it is disproportionately in low-
income neighborhoods either. Let me ask you this. A lot of 
families have kids, and the number of kids in the rental 
market--a lot of apartments don't have multi-bedroom units. 
Isn't the best place for a mom with kids, who has multiple 
kids, sometimes a single-family home? Isn't that a better 
choice for her rather than an apartment where they don't have 
as much choice and no yard?
    Mr. Chandan. One thing that we absolutely do observe is 
that as households age in their lifecycle, in particular, as 
you point out, as they have their first children, the set of 
amenities that they look for changes and expands, and, in many 
cases, will include things like parks, and good-quality public 
schools that you get better access to when you live in a home, 
in large part because of its location. For some families--
    Mr. Hill. Yes, I am going to get to that. Thank you for 
that. If you have other comments on that, please submit them 
for the record because I think this is a key element of what we 
are talking about today. I also looked at the affordability 
chart, looking at my favorite source. Of course, everybody 
loves the St. Louis Federal Reserve Bank. And it shows that 
minority homeownership skyrocketed under the Trump 
Administration from its post-crisis low of basically 2016-2017. 
And then, the pandemic knocked off that home affordability and 
ownership rates for Black, Brown, and White Americans, so we 
need to get back on that.
    I thank my chairwoman, and I yield back the balance of my 
time.
    Chairwoman Waters. Thank you. The gentleman from Colorado, 
Mr. Perlmutter, who is also the Chair of our Subcommittee on 
Consumer Protection and Financial Institutions, is now 
recognized for 5 minutes.
    Mr. Perlmutter. Thanks, Madam Chairwoman. My friend, Mr. 
Hill, I think started off on the right track. I am not sure he 
ended on the right track, but he started off on the right track 
by talking about this being a macroeconomic kind of question 
that we are asking. It is also microeconomic, and I would just 
say that we have had some questions about supply and demand. 
Listening to Dr. Michel, he doesn't really want to mess around 
with the supply. He wants to cut the demand, and he cuts the 
demand by making sure people don't have any cash. Okay. That 
will work. All of a sudden, there will be an oversupply.
    In Colorado, long before Joe Biden took office, we have 
seen house prices increasing because we have had our population 
increasing, and the supply hasn't kept up with the population. 
That is really what is happening in Colorado, and probably 
other places in the country as well. In Ohio, maybe Arkansas, 
maybe New York, there have been people leaving, and house 
prices have stayed stable or maybe even dropped.
    I guess a question to the entire panel, and, Ms. Pope, I 
really appreciated your economic analysis of things, probably 
the best, but just a bigger question. Demographically, in the 
United States of America, do we have enough housing for our 
population, and where do we see our population going over the 
next 10 years? Do we think that the supply will keep up with 
the demand, or do we see demand shrinking? I will start maybe 
with you, Ms. Pope, and see if you have considered sort of the 
demographic question, or if you have to look at it on a market-
by-market basis?
    Ms. Pope. Thank you so much for the question. In the 
future, I do not see the supply increasing. Demand is much 
higher than supply right now. And you have to remember that 
homebuyers in America, when they are purchasing a home or 
looking to buy, and the offers that are coming through the 
properties are at least 5 to 10 times more than it has been in 
the past, those same buyers are now in a renting capacity. Now, 
they are sitting ducks. When you look at all of those buyers 
who can't buy because of lack of inventory, that demand is 
strong, and the supply is going to take time unless we build 
and we do more housing within the cities, within the suburban 
areas, so that homeowners can be able to buy. So if the demand 
is very low, the supply has to increase. That is the only way 
that homebuyers can purchase property.
    When you are talking about the offers that are there, as I 
mentioned earlier, it just doesn't work with that. There are 
just not enough properties. And we need the help, to have 
Congress, or anyone that can help, especially with the NAREB 
group, so that we can increase the supply so our buyers can 
purchase, but I don't see the supply happening that fast. I do 
not.
    Mr. Perlmutter. Okay. Thank you.
    Mr. Calhoun, you had a chart that you wanted to show with 
ups and downs of the housing market over the last, I don't know 
how many years. But I am curious if you have taken a look at 
demographic trends nationally, because it seems to me that sort 
of the birth rate is down. I don't know about the immigration 
rate. It goes up and down. But talk to me a little bit about 
how you see supply and demand on a general basis, not the 
monetary supply, just people and housing stock?
    Mr. Calhoun. Yes, and there are a couple of factors that 
make it clear that we have an absolute housing shortage, and I 
note that our fellow panelists from the Urban Institute have 
done research on this. One factor to put in is we have an aging 
housing supply. It is not keeping up, and there is obsolescence 
with about 1 to 2 percent dropping out each year. So, even with 
steady state, you have to take that into account, but the big 
thing is that we are experiencing a huge shift. The new 
households are predominantly households of color, younger 
households who will be looking to buy homes. And, in addition, 
we have a factor with current older households, a trend towards 
families wanting to age in place for a longer period rather 
than sell that house and free it up for recycling. We have to 
remove barriers to the construction, particularly for the 
entry-level market, and that is an absolutely critical part to 
keep us where we are, but we also have to move forward.
    Mr. Perlmutter. Okay. Let me stop you for one second just 
to make kind of a final comment. I know in the Western United 
States, the interest rates have already had an effect on the 
housing market. Land development has slowed, new construction 
has slowed, and home sales have slowed. So, any comment on the 
interest rate increases before my time expires--which expires 
right now, so you are not going to get a chance to answer.
    I yield back to the Chair.
    Chairwoman Waters. Thank you very much. The gentleman from 
South Carolina, Mr. Norman, is now recognized for 5 minutes.
    Mr. Norman. Thank you, Chairwoman Waters. First of all, I 
have, probably for over 45 years, built houses. I have built 
apartments. We have developed property. Quite frankly, some of 
the responses have been laughable. And the Democrats can pick 
who they want on the 20-some hearings we have had--this is my 
second hearing--but you might want to get people who have been 
in the business and could give you some real-life experiences. 
The number-one issue that is causing housing prices to go up is 
very simple; it is the war this Administration has put on oil 
and in gas. Now, the trucks that delivered a load of lumber to 
our house today--
    Ms. Garcia of Texas. Excuse me, Madam Chairwoman. I cannot 
see Mr. Norman. Are you on, Mr. Norman?
    Mr. Norman. Oh, yes, I'm sorry. Yes, ma'am.
    Ms. Garcia of Texas. I don't see you on camera, sir.
    Mr. Norman. Okay. Hold on. Let me get some--
    Ms. Garcia of Texas. There you go.
    Mr. Norman. You got it? Can you see it now?
    Ms. Garcia of Texas. Yes, your friend in Texas.
    Mr. Norman. Okay. Can everybody see it? How about now?
    Ms. Garcia of Texas. You are good. No, we lost you again.
    Mr. Norman. Okay. Awesome. Can you come in and see if you 
can--
    Chairwoman Waters. Is this--
    Mr. Norman. Let me get this straightened out, and I will 
have my--what is going on here?
    Chairwoman Waters. Mr. Norman, I can't--
    Mr. Norman. Yes, ma'am.
    Chairwoman Waters. Yes, you are on. We can't see you. Is 
your video on? Mr. Norman?
    Mr. Norman. Video is on. Let us see. Yes, ma'am.
    Chairwoman Waters. We need to see you on. Okay.
    Mr. Norman. Okay. Can I--
    Chairwoman Waters. You are coming on?
    Mr. Norman. We can't get it. Can I come back again?
    Chairwoman Waters. Yes, we will come back to you. No 
problem.
    Mr. Norman. I'm sorry. Thank you.
    Chairwoman Waters. Okay. Thank you very much. Let us go to 
the next person. The gentleman from Illinois, Mr. Foster, who 
is also the Chair of our Task Force on Artificial Intelligence, 
is now recognized for 5 minutes.
    Mr. Foster. Thank you, Madam Chairwoman. Am I audible and 
visible here?
    Chairwoman Waters. Yes.
    Mr. Foster. Okay. Thank you. I am struck by the fact that 
very often, it seems like we put a lot of effort into house 
construction, but not necessarily the right houses. If you look 
around at the number of empty nesters sitting around in 
mansions with large numbers of empty rooms, I bet we could cure 
the problem with people who are homeless in this country if we 
could somehow snap our fingers and reallocate that effort. I am 
a fan of the free market in almost all circumstances, and I am 
a little bit distressed by everything that is put into place to 
interfere with the free market in ways that lower the ability 
of people without a lot of means to purchase houses that they 
might be able to afford.
    And I was wondering, what are the most cost-effective 
interventions in the free market or maybe just returns to the 
free market that would allow the supply and demand for low-end 
housing to line up, or removal of subsidies that we have in 
place, or rules that encourage people to build big houses on 
big lots instead of small multifamily? And I am interested in--
we will have to put some Federal money into this--what are the 
most effective subsidies and where can we put them, either on 
the supply side or the demand side?
    Mr. Calhoun. If I may respond, and I will note for the 
record that I have both run billion-dollar home lending 
programs to families of modest means, and I have also been a 
private real estate developer and have experience from that 
side as well.
    A couple of things that we can do, that we suggest and are 
being piloted now, is to help families, as I mentioned in my 
testimony, through the vulnerabilities of today's more volatile 
world. Gig economy workers shouldn't be precluded from having a 
chance at homeownership. And those are things like reserve 
funds, which our partner lending institution is piloting, as 
well as loss-of-income protection insurance that helps people 
make up for the deficiencies, quite frankly, in today's 
unemployment insurance programs.
    Again, one of the things that we missed in this hearing is, 
we are in a different world than we were in 2008, thanks to the 
Dodd-Frank Act. People have affordable mortgages right now. We 
are not facing a dramatic plunge in pricing because of 
foreclosures as we did in 2008. We have made lending more 
sustainable. We just need to make it more inclusive, like it 
was in the 1950s and 1960s when we brought tens of millions of 
White families into the middle class through very affordable 
FHA and VA loans that go up to 100-percent financing. If those 
are properly underwritten with responsible programs, such as 
reserve funds and loss of income insurance, you can do this in 
a way that is safer and more inclusive and relies on the free 
market to deliver the housing we need.
    Mr. Foster. Yes, thank you, but there is still the short-
term problem of the total amount of lumber. And it seems like 
part of the way out of that is to allocate the lumber toward 
building more smaller units. Dr. Chandan, it looks like you 
wanted to say something?
    Mr. Chandan. Yes, sir. When we look at sort of the 
deterioration in the share of units being built that are small 
or entry level, we are down to about 7 percent from something 
that was significantly higher. The average home under 
construction right now is 2,500 square feet. This is not an 
entry-level home. A lot of this is at the local level. The 
availability of materials and skilled labor is certainly an 
issue. Another is local zoning that limits the ability to use 
smaller parcels of land or to build smaller homes.
    Another is an allocation issue where in some parts of the 
country, local transfer taxes or the costs associated with 
buying and selling are high enough that at least on the margin, 
it will inhibit some families as they grow, from right-sizing 
into a larger home, opening up the supply of entry-level homes. 
You stay in that small space a little bit longer than you might 
otherwise because the transaction costs are high. Those are all 
things that, particularly at the local and State level, we can 
begin to address, that are largely in sort of the regulatory 
and zoning environment.
    Mr. Foster. Thank you, and it looks like my time is up.
    Chairwoman Waters. Thank you very much. The gentleman from 
Tennessee, Mr. Rose, is now recognized for 5 minutes.
    Mr. Rose. Thank you. Thank you, Chairwoman Waters and 
Ranking Member McHenry, for holding this hearing. And thank you 
to our witnesses. Before I get into my questions, I just wanted 
to make a few comments. Earlier in the hearing, the chairwoman 
referred to this committee as the, ``Democratic committee.'' I 
think that this is one of the problems with the committee as it 
is currently constructed. It should be the Financial Services 
Committee, of course, not the Democratic Financial Services 
Committee. That is why we get some of these hearing titles that 
show you, before the hearing even starts, that it will be 
biased and not a serious examination of the issues.
    Additionally, Mr. Sherman stated that the Democrats' Build 
Back Better Act is fully paid for. This was directly 
contradicted by the bipartisan Congressional Budget Office 
[inaudible]. And I would also like to echo some comments at the 
outset that have been made by my colleagues concerning the 
proposals that are attached to the list for this legislative 
hearing. We are over $30 trillion in debt. We are experiencing 
the highest inflation in over 40 years. Gas is $5 per gallon. 
And the Majority has chosen to attach proposals to this hearing 
that would spend money we don't have, build full palaces that 
people can't afford, and exacerbate the inflation that is 
hurting everyday Americans.
    On December 6, 2021, the Financial Crimes Enforcement 
Network (FinCEN) issued an advance notice of proposed 
rulemaking (ANPR) on anti-money laundering regulations for real 
estate transactions. The proposed rules would apply to non-
finance real estate transactions. FinCEN already applies its 
framework to financed real estate and commercial transactions 
as well as all-cash residential transactions. If this 
rulemaking is finalized, anti-money laundering requirements 
would be extended to virtually all real estate transactions. 
Dr. Michel, do you see any issues with expanding FinCEN's reach 
in this area?
    Mr. Michel. I'm sorry, the very last part, do I see--
    Mr. Rose. Do you see any issues with expanding FinCEN's 
regulatory reach in this area?
    Mr. Michel. Yes. It is kind of mind-boggling to me. I don't 
know why we would do that. I don't think there is a regulatory 
issue here. This is a supply/demand issue and not more than 
that. So, yes, I wouldn't be in support of that.
    Mr. Rose. And on a similar note, I have previously 
expressed concern that the Federal Government uses the Bank 
Secrecy Act to deputize the private sector to collect personal 
data from American citizens.
    Dr. Michel, you have previously recommended that Congress 
should simply require financial firms to keep customer records 
and then have law enforcement abide by the Fourth Amendment to 
access those records. Could you please elaborate on this 
approach?
    Mr. Michel. Yes. I think that would be a way of handling 
this. That is completely consistent with the constitutional 
protections that we are supposed to have. If you are accused of 
a crime, that is one thing. If you are not accused of a crime, 
then you shouldn't be subject to law enforcement actions. It 
seems to me the way to handle this with the Bank Secrecy Act is 
to say that the bank will keep records so that we can identify 
customer transactions. And if there is somebody who is 
legitimately suspected of a crime, then law enforcement will, 
just like in any other criminal investigation, go get a 
warrant, and then they can go and get that information. That is 
not a problem in any other criminal investigation, so it 
shouldn't be in this case.
    Mr. Rose. Thank you. I entirely agree with that assessment. 
Dr. Michel, kind of shifting gears, do the Fed's purchases of 
mortgage-backed securities put upward pressure on housing 
prices?
    Mr. Michel. I don't think it is the biggest component, but 
yes, the direction has to be upward price pressure because it 
is increasing liquidity to some extent in the MBS market, 
making it easier to get loans. So, it is magnifying that 
problem, yes.
    Mr. Rose. And, Dr. Michel, as you know, Democrats on this 
committee have been trying to expand the Fed's set of 
responsibilities to include things like racial inequality and 
climate change. Do you worry about proposals to expand the 
Fed's mandate, and what impact do you think they could have on 
housing possibly, and should the Fed's responsibilities be 
narrower?
    Mr. Michel. I am worried, and I do think it should be 
narrower, not broader.
    Mr. Rose. Thank you. I think my time has expired. Thank 
you, Chairwoman Waters, and I yield back.
    Chairwoman Waters. You are so welcome. And if it would make 
you happy, I wouldn't hesitate to call this a Republican-
Democratic committee, if you would give us a vote on housing, 
okay?
    Mr. Rose. Thank you.
    Chairwoman Waters. The gentleman from Florida, Mr. Lawson, 
is now recognized for 5 minutes.
    Mr. Lawson. Thank you, Madam Chairwoman, and I would like 
to again welcome everyone to the committee. One of the things 
that I was thinking about is back in, I think it was 1972, when 
I was trying to get a house for the very first time. I owned a 
house by 2015, and so, I became an FHA borrower. But I noticed 
today that FHA is disproportionately the way that people of 
color sometimes go out and borrow money for housing. I never 
had a competitive disadvantage in the housing market. The share 
of FHA insurance mortgages have failed now to around about 18 
percent, and it looks like here, basically in 2020 and to 2021, 
they continue to downward trend towards a lower level, I will 
say, up until about 2012.
    If the present trend of increased home purchases continue, 
as projected, how could sellers be encouraged to conduct 
business with the FHA barriers when the cash incentivize and 
offers above the asking price? And this is to the whole panel.
    Ms. Pope. Thank you so much for that question. You are 
right that sellers can take offers as cash buyers. We can't 
steer them. What we can do, as real estate practitioners, is at 
least educate your homeowners, and your sellers about the 
different type of financing. Sometimes, cash is not the right 
way to go. Sometimes, it is a better way to finance because you 
get more money. Sometimes, the cash borrowers are charging less 
than more because you think you can close in 7 or 10 days. A 
lot of times we find out that a couple of weeks later, you 
could have given that homeowner a better opportunity to buy a 
home. I would suggest that real estate agents begin educating 
and educating their sellers on the different options and why it 
is important for homeownership.
    Mr. Lawson. Okay. Would anyone else on the panel would like 
to respond?
    Mr. Calhoun. I will add, FHA can be more user-friendly. It 
has been constrained, as you know, in that it relies totally on 
appropriated funds for its operations, and it has historically 
been underfunded. It has played catch-up recently, thankfully, 
through appropriations over the last few years to upgrade its 
technology. But FHA needs to operate with the same resources 
that other lending options do so that they are equally 
competitive. And right now they are very much still resource-
constrained, which makes them less user-friendly for both 
borrowers and sellers.
    Ms. Choi. I would just like to add that one of the things 
that we do have to think about, and I think this also relates 
to the last question about why White households are more likely 
to have the rich uncle in the first place, is that this is an 
outcome of many, many of the prior policies that have been in 
place in this country. The only way to reverse that trend is 
actually to lift up those poor people who have been previously 
discriminated against in the market. And just leaving alone in 
the market would not solve the racial disparities, as we have 
seen multiple times in a year. We have seen that the racial 
disparities have increased over time, and then the Black 
households were disproportionately impacted during the Great 
Recession. They have lost a huge amount of wealth in the 
market.
    And one of the reasons is because they have been a target 
of predatory lending practices and subprime loans, which made a 
huge impact on their wealth. The data shows and a lot of 
academic research shows that these subprime loans and some 
predatory lending practices were more prevalent in the private 
sector. So, I don't think the argument of blaming the 
government on every issue actually makes sense, and I don't 
think it is actually the core reason that we are seeing the 
racial disparities that we are seeing in the housing market 
right now.
    Mr. Lawson. And I might not be able to get into the next 
question, but I had a townhouse, and recently, I got all these 
calls from outside people saying that they would like to buy my 
townhouse, and that they had the most competitive offer that 
they can give me. Those calls come in all the time, but I don't 
guess there is anything that we can do about that, because that 
really affects the market, whether it is a townhouse or another 
rental Since my time has run out, Madam Chairwoman, I will 
yield back.
    Chairwoman Waters. Thank you. The gentleman from South 
Carolina, Mr. Timmons, is now recognized for 5 minutes.
    Mr. Timmons. Thank you, Madam Chairwoman, and I want to 
thank all of our witnesses for being here today.
    Yesterday, during an Oversight Subcommittee hearing where 
Democrats attempted to create scapegoats for their left-wing 
policies ruining the housing market, one of the Democrat 
witnesses advocated for--this was great--a government takeover 
of all private property and housing. ``Yes,'' or ``no,'' please 
from the witnesses. Does anyone on this panel believe that the 
government should own and operate all housing and property 
within the United States?
    Mr. Chandan. No.
    Mr. Michel. No.
    Mr. Timmons. Let's just make it easy. Does anybody say yes? 
Is there one yes? Can anybody entertain me? Okay. There are no 
yeses. Okay. This same witness for the Democrats also advocated 
during the pandemic that renters and homeowners should 
participate in a, ``rent and mortgage strike,'' and withhold 
payments due to their landlords or lenders, whether they can 
afford to pay them or not. So, I am going to make this really 
specific. Do any of the panelists believe that during the 
pandemic if someone did not lose their job, if they were not 
under financial hardship, that it would be appropriate for them 
to go on a rent or a mortgage strike? Do you think you have to 
pay your bills if you can? You might want to say that--
    Mr. Michel. You should pay your bills if you can.
    Mr. Timmons. Okay. Great, thank you. It seems that the 
current Majority's plan to address rising mortgage and rent 
costs is just to throw more and more money at the problem 
rather than addressing the root causes driving these price 
increases. The Federal Government has been heavily subsidizing 
housing for decades, with very little to show for it. In fact, 
homeownership rates among Black families have actually 
decreased since the Fair Housing Act passed in 1968. Yet my 
colleagues across the aisle, their plan is just more of the 
same. Throwing money at the problem as if demand is the issue 
in the housing market, when we all know the lack of supply is 
what has long been driving increased costs and finding a home, 
whether that is to rent or to buy.
    Just last week, this committee marked up the Chair's 
Downpayment Toward Equity Act on a party line vote. This bill 
would give individuals making over $200,000, which is more than 
any of us make as Members of Congress, almost $100,000 grants 
for home purchases. Putting aside what a terrible idea that is, 
Mr. Michel, how would the housing market respond to this type 
of grant program were it to become law?
    Mr. Michel. Again, it is the same sort of phenomenon where 
you can look at a major drop in interest rates. What has 
happened over time is that decrease has been capitalized in 
home prices, so when the interest rate drops, the monthly 
payment drops. It is the same sort of effect. You would expect 
that to be capitalized in home prices in a relatively short 
period of time, maybe a little bit longer than the interest 
rate. Sellers would recognize that somebody is already coming 
to the table on a regular basis with that first, say, $50,000 
or $100,000 covered. Therefore, you know that you can increase 
the price. That is going to get capitalized in prices.
    Mr. Timmons. You kind of answered it, but what would the 
inflationary impact be? Would it go up?
    Mr. Michel. Up, yes, that would be the direction, up.
    Mr. Timmons. In short, the Chair's bill would make 
inflation even worse than it already is. Mr. Michel, could you 
explain to us how housing costs factor into the Core Price 
Index?
    Mr. Michel. Yes. It is a shelter-based service sort of 
price where you have rental prices incorporated into it, and 
then for homeowners, it is a rental equivalent. So, it is based 
on the value of homes, and those also affect rents. And then 
the service that you get out of that component of your shelter 
is calculated to save the statistic part with a lag. It goes 
into the CPI, and it becomes a part of the index, and it is 
done with a fairly substantial lag. So, we are probably going 
to see an elevated shelter component of the CPI for at least 
another year, no matter what.
    Mr. Timmons. Okay. Is it fair to say that this down payment 
grant program would directly counteract the actions being taken 
by the Fed to lower inflation?
    Mr. Michel. Yes, and that it would continue to put upward 
pressure on the CPI through that housing component, yes.
    Mr. Timmons. Thank you. It is obvious that we need to be 
focused on increasing the supply of housing rather than pushing 
supply-side subsidies when demand is already sky high. 
Especially throughout the Sunbelt, like in my State of South 
Carolina, we need more homes, not more subsidies. Thank you, 
Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you very much. The gentlewoman 
from Massachusetts, Ms. Pressley, who is also the Vice Chair of 
our Subcommittee on Consumer Protection and Financial 
Institutions, is now recognized for 5 minutes.
    Ms. Pressley. Thank you, Madam Chairwoman, first and 
foremost, for your leadership and for the class, decorum, and 
fairness that you exhibit every day in this role.
    Housing is a fundamental human right, yet across the 
country and in my district, the Massachusetts 7th, millions of 
people do not have access to a safe, decent, and affordable 
place to call home. For decades, Black families have been 
locked out of homeownership opportunities due to discriminatory 
lending. And now, private-equity-backed institutional landlords 
have pushed this dream even further out of reach by gobbling up 
single-family homes and worsening the housing crisis across 
this country.
    Ms. Pope, the 5 largest single-family rental companies own 
almost 300,000 homes. What are the consequences when 
institutional investors purchase these homes in bulk, often in 
cash, and how are they worsening housing affordability and 
forcing would-be homebuyers into the rental market?
    Ms. Pope. Thank you for the question. Let me say again, 
when lenders hesitate to lend to low-balance mortgages, that 
means lower properties in neighborhoods, buyers can't purchase 
when they are hesitating, and what that does is it opens up the 
doors, as I stated earlier, for investors who pay cash. They 
buy the properties in bulk, for less money, then there is 
wholesaling. It displaces the residents, and it creates low 
inventory for the neighborhood.
    When you have these cash buyers, the cash investors, and a 
homeowner can't have that American Dream because they are 
bought out of a cash deal, it makes it very difficult. Then, 
they have to go back and try to rebid on properties. That makes 
it harder because now it means there are many buyers who are 
pricing higher than is normal, which pushes them out of the 
market. It brings them into a mode where they have to rent, 
because many of them are in a situation where the rental market 
is getting ready or their rents are getting ready to either 
increase or is getting ready to ask, so they have to re-sign 
that lease for another year. So, it does stop a lot of 
prospective Black homeowners from buying homes.
    Ms. Pressley. Thank you. And, Ms. Pope, most of these homes 
that these institutional investors are buying up are in 
predominately Black neighborhoods. So, yes or no, based on what 
you were saying, is the influx of institutional investors in 
cash buyers driving up home prices in predominately Black 
communities?
    Ms. Pope. Yes.
    Ms. Pressley. And homebuyers, Ms. Pope, are not the only 
ones impacted. Are these communities seeing rents go up as 
well?
    Ms. Pope. Absolutely.
    Ms. Pressley. And, Ms. Pope, would you say that 
institutional investors are accelerating gentrification of 
communities of color and displacing low-income residents?
    Ms. Pope. Yes.
    Ms. Pressley. Thank you. That is exactly what I have been 
hearing from people in Cities across my district, like 
Cambridge and Boston, where rents have risen by 30 percent and 
27 percent higher than last year, respectively. This is 
unsustainable, and our most-vulnerable constituents are 
drowning financially because they cannot afford these rent 
increases. This hearing is about homeownership, but right now, 
homeownership isn't even feasible for many people in my 
district who are being squeezed by predatory rent hikes imposed 
by institutional investors.
    Mr. Calhoun, you mentioned in your testimony that broad 
student debt cancellation would help address the racial 
homeownership gap. I agree. What other policies will provide 
relief to tenants facing unsustainable rent increases?
    Mr. Calhoun. Again, a couple of things. We have to increase 
the supply of affordable rental housing as well, and then one 
of the provisions that expired in January, the Children's Tax 
Credit. One of the things we talked about is homeownership 
producing wealth, and it is also a manifestation of people's 
existing wealth and existing financial security. Another thing 
is, actually, there is recent Federal Reserve research which 
shows that expansion of Medicaid increases not just general 
financial security, but homeownership, again, what you have 
talked about, putting people in a stable financial position so 
that they can either securely rent or purchase a home.
    And if I may, I would like to give a shout out to two 
programs that we need to lift up, that have come out of 
Massachusetts. That is where one of the largest first-
generation targeting programs was implemented. That was the 
basis for Chairwoman Waters' provision. And it also has one of 
the largest Statewide income loss insurance programs, which, 
again, we need those kinds of new approaches to provide 
efficient ways to address these housing problems.
    Ms. Pressley. Thank you. I was trying not to be too 
boastful, but I appreciate your lifting up those successful 
models. And, again, I thank you, Madam Chairwoman, once again 
for your steadfast leadership.
    Chairwoman Waters. Thank you very much. The gentleman from 
Wisconsin, Mr. Steil, is now recognized for 5 minutes.
    Mr. Steil. Thank you, Madam Chairwoman. I appreciate you 
calling today's hearing. I have been listening along as we go 
today, and I continue to hear policies by those on the left 
that actually exacerbate inflation. People are getting 
clobbered. I was recently at a gas station in Beloit, 
Wisconsin, talking to a couple who were frustrated. They could 
barely afford to fill up their car with gas. They are 
frustrated with the grocery bills. Their rents are increasing. 
They are just getting clobbered, and they are getting clobbered 
because costs are going up.
    And what I continue to hear is all sorts of excuses as to 
why costs are going up rather than looking at the real problem, 
and the real problem is that we have runaway spending in 
Washington, D.C. We have an energy policy that is on its head. 
We have a contraction of supply, particularly in energy. We 
have to unleash American energy because people are getting hurt 
every day by Democratic policies.
    And so, I listened to what we are doing. I listened to 
where we were in the markup. We had this debate. We looked at 
billions of new dollars of spending, which would accelerate 
inflation. We just heard a proposal again. We saw it in the 
testimony about wiping away student debt, which of course, 
really isn't wiped away. It just shifts the burden to who pays 
for it, and it shifts it into more debt that all Americans will 
pay for, to the benefit of some of the wealthiest Americans, 
people who received graduate degrees, doctors, attorneys. That 
is who it helps. And what would it do? It would accelerate 
inflation.
    Dr. Michel, as we listen to this debate today and we are 
looking for real, substantive solutions, is the challenge on 
the demand side that Congress should be subsidizing the demand 
side, or is the problem on the supply side that we should be 
looking and focusing in on how do we sustainably increase the 
housing supply? And how do we consider that in this 
inflationary environment that the outgoing Majority has put us 
in?
    Mr. Michel. Sure. The mistake with the supply argument is, 
well, we just need more houses, and that is a mistake because 
it is looking at supply without talking about demand. You 
should be talking about supply relative to demand. We know 
supply is relatively inelastic and fixed in the always-
constrained housing supply markets. Therefore, the worst thing 
to possibly do is to constantly increase demand, which is 
exactly what Federal policy does. You are only going to get one 
result from doing that.
    And then, to go to the sort of underlying issue, I think 
this is a great example that we just heard. If it is true that 
private equity firms are predominantly buying up foreclosed 
properties in poor neighborhoods, then the problem to address 
is the poverty, not the demand-side loan and lending ability of 
all of these government agencies. That is the way to address 
that.
    Mr. Steil. Let's dive in on kind of what would happen if we 
accelerated dramatic new Federal Government spending programs 
as we think about the inflationary pressures that we are 
feeling here in the United States. We marked up a bill that 
would have spent about $100 billion or so. What would be the 
economic impact of pumping in another $100 billion into the 
U.S. economy that, at the start of the Biden Administration, 
Democrats on a party line vote passed $1.9 trillion in new 
government spending already, when we took the fire that has 
been started, and we threw on $5 gallon of gasoline onto it?
    Mr. Michel. You are going to get more inflation without 
clearing the supply problems. If you, for example said, okay, 
from now on, everybody gets whatever loan they want, well, they 
can go out and do whatever they want. That is fine. Everybody 
is going to be bidding on the same amount of stuff, the same 
amount of real resource constraints.
    Mr. Steil. If we pump in demand-side subsidies, to make it 
really clear, what happens to prices?
    Mr. Michel. They go up.
    Mr. Steil. So, prices go up. Does it make it more 
affordable or less affordable to a family in Wisconsin?
    Mr. Michel. It makes it less affordable.
    Mr. Steil. The Democratic policies are pumping a whole 
bunch more money which actually, at the end of the day, is 
going to hurt the people that we hear them claiming to assist. 
Is that accurate to you?
    Mr. Michel. That is accurate, yes.
    Mr. Steil. It is the same story we see on energy policy. It 
is an attempt to contract supply on the energy side so that we 
don't unleash American energy, so we jack up the prices. We 
have some sort of transformational change, and it is clobbering 
people every single day. Then, we come over to the housing side 
where people are getting pinched by higher rents and 
unaffordable mortgages, and we see the Federal Reserve having 
to raise interest rates because the Democrats are awash in 
runaway spending. As interest rates go up, it is even harder to 
get into a new home. It is harder to save for your down payment 
because of the inflationary pressure we are in. The hypocrisy 
is thick.
    Dr. Michel, I appreciate you being here. Cognizant of the 
time, Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much. The gentleman from 
Massachusetts, Mr. Lynch, who is also the Chair of our Task 
Force on Financial Technology, is now recognized for 5 minutes.
    Mr. Lynch. Thank you, Madam Chairwoman, and thank you for 
having this hearing. This is probably one of the most 
pernicious problems that I deal with in our district. I 
represent the other half of Boston that Ms. Pressley does not 
represent, and we are really struggling with housing costs all 
across my district.
    Dr. Chandan, I noticed, looking at the housing data, that 
the applications for mortgages have dropped off considerably, 
and that is understandable with the rise in interest rates. But 
I also noticed that the number of people applying for an 
adjustable mortgage has basically doubled. And I was here in 
2008 on this committee, and I saw what happened when adjustable 
mortgages reset and people got stuck. The valuation of their 
home was going down, and yet their payments were going up, and 
we ended up with a housing crisis. Are there any protections 
that are available now, under today's circumstances, that were 
not available then that might prevent us from going into a 
similar tailspin?
    Mr. Chandan. Thank you for the question, Congressman. I 
think, as compared to the housing boom and bust and financial 
crisis, there are a number of changes that have been made in 
the market. The adjustable rate mortgages of today do not have 
the same risk profile as those made during the housing boom. We 
don't see teaser rates. We don't see a rapid succession of 
resets. We don't see penalties on a refinancing into a 
permanent mortgage. That being said, adjustable rate mortgages 
ultimately do reset, so it is important that borrowers, 
particularly aspirational borrowers who may be income-
constrained, who are reaching for that housing opportunity, 
that when they are taking an adjustable rate mortgage, they are 
mindful of and are well-informed of the potential risks that 
those products present.
    Mr. Lynch. I appreciate that. I do see there are quite a 
few products out there that are 7-year resets, so the buyer has 
some lead time there. And I think there is an open question of 
where we will be at with interest rates in 7 years, and the 
value of their home could be exceedingly greater at that point, 
so they might have a lot more equity and they could deal with 
it.
    Mr. Calhoun, is there a concern out there? Is there a 
reason for me to be concerned about the increase in the number 
of adjustable mortgages? This has doubled pretty quickly. In a 
matter of weeks, it spiked. So, is there a concern out there? 
Is there a reason for concern out there?
    Mr. Calhoun. Thank you for the question. There is reason to 
watch it carefully. We are in a much different world than the 
mortgages in 2008, which actually had built-in increases even 
if market rates did not increase. But most borrowers have 
trouble with shocks to their mortgage payments. I think perhaps 
an even bigger risk that we face right now is there is heavy 
marketing of cash-out refinances today, and they come with the 
double whammy of not only are you doing that with a high 
interest rate, you are typically giving up a much lower fixed 
rate to get that. And the regulators in our housing agencies 
need to be very vigilant to protect consumers from that kind of 
predatory lender loan flipping. I think that is the big risk 
that we face out there. The Consumer Financial Protection 
Bureau (CFPB) has done a good job of keeping protections on 
adjustable rate mortgages, but, again, this is a place where 
consumers have a hard time understanding the impact of the 
increases and being able to absorb those shocks. Thank you for 
keeping an eye on this.
    Mr. Lynch. Thank you. Ms. Pope, do you have anything you 
want to add on that? I know you are keenly aware of this 
problem. I just would like to get your perspective.
    Ms. Pope. Yes, thank you. I would like to add that when the 
homebuyers or homeowners are looking to raise their higher 
price, our best advice, especially coming from the National 
Association of Real Estate Brokers, is to look to a housing 
counselor. It is a free service. It educates them. It provides 
the understanding of these mortgages so that they are not going 
into these default loans. We do have an affiliate, the Housing 
Counseling Agency, NID, that is a nonprofit, and we look to 
them to do these so that the homeowners can understand what 
they are getting. That is what I would add to Mr. Calhoun's 
statement. Thank you.
    Mr. Lynch. Thank you, Ms. Pope. Madam Chairwoman, I yield 
back. Thank you very much again for having this hearing.
    Chairwoman Waters. Thank you very much. The gentleman from 
South Carolina, Mr. Norman, is now recognized for 5 minutes.
    [No response.]
    Chairwoman Waters. I know that Mr. Norman had some problems 
early on and he could not be on the screen, and evidently those 
problems still exist. We will just keep going, and we will try 
and get him up before the end of the hearing.
    The gentlewoman from North Carolina, Ms. Adams, is now 
recognized for 5 minutes.
    Ms. Adams. Thank you. Thank you, Chairwoman Waters, and 
Ranking Member McHenry. This is a very important hearing, and I 
certainly appreciate you having it. And thank you to our 
witnesses for your testimony.
    Mr. Calhoun, in your testimony you cite the affordable 
housing shortage as contributing to the issues that renters and 
buyers are facing. And just yesterday, our committee held a 
hearing on the single-family rental industry and the role they 
played in snapping up starter-price homes, further constricting 
the already-tight market. The homes that these firms are 
purchasing are, not surprisingly, concentrated in predominantly 
Black and Brown neighborhoods. And the same is true here in my 
district in Charlotte-Mecklenburg, North Carolina, where 
investors are willing to pay well above market prices in cash 
for homes and are acting as a gentrifying force. Can you 
discuss why addressing the housing shortage is imperative to 
improving housing security and homeownership opportunities for 
all Americans?
    Mr. Calhoun. Thank you for the question, Representative. 
Absolutely, particularly, as others have mentioned, in the 
starter-home market is where we are feeling the most crunch for 
supply of available homes, and that is where we are seeing a 
lot of these houses being picked up. The first thing we should 
do is our Federal housing agencies as well as the GSEs should 
stop their auction sales of distressed loans in Real Estate 
Owned (REO) properties, and should instead put them back into 
individual homeownership, because when they auction them, even 
with some set-aside programs to nonprofits, overwhelmingly, 
these go to institutional investors, who are the ones who are 
able to afford to buy a whole pool of loans, and that is where 
a lot of them get snapped up. They also were buying individual 
homes, as you described, and that is a concern. And we need to 
both provide more affordable housing and not see it 
unnecessarily siphoned away out of the homeownership market in 
the affordable rental market.
    Ms. Adams. Okay. That is what we can do to ensure that we 
don't see this transfer of housing and wealth from America's 
families to Wall Street. That is your opinion?
    Mr. Calhoun. That would be a big step in at least slowing 
that down.
    Ms. Adams. Thank you, sir. I am proud to be the lead 
sponsor of H.R. 7078, the LIFELINE Act, along with 
Representative Rouzer, and Senators Leahy and Collins, a bill 
that would use already-appropriated dollars to support lots of 
funding housing development, and would free up over $8 billion 
in State and local Fiscal Recovery Fund dollars for affordable 
housing. We have over 100 national and local groups endorsing 
the bill, including the League of Cities, the Conference of 
Mayors, the National Association of Counties, and the National 
Association of Home Builders, so I do want to encourage all of 
my colleagues to sign on to this common-sense legislation.
    And, Dr. Chandan, in your testimony, you concluded that we 
need a multifaceted approach to enhancing the affordable 
housing supply. Can you briefly discuss how increasing the 
housing supply, be it through public housing investments, or 
more Low-Income Housing Tax Credits (LIHTC) Fund housing, could 
immediately blunt the negative impacts to rentals that we have 
observed?
    [No response.]
    Ms. Adams. I think there is some kind of problem, Madam 
Chairwoman, with the--
    Chairwoman Waters. Where is that sound coming from? Do we 
have Financial Services staff?
    Mr. Calhoun. If it is helpful, Representative Adams, I can 
address that while he is getting--
    Ms. Adams. Okay, Mr. Calhoun, would you?
    Mr. Calhoun. Yes.
    Chairwoman Waters. The sound is gone. Were you responding 
to Ms. Adams, Mr. Calhoun?
    Mr. Calhoun. Yes.
    Chairwoman Waters. Please, go right ahead.
    Mr. Calhoun. Your bill, H.R. 7078, is a great way to 
leverage and expand one of the most successful programs, the 
LIHTC, for adding to sustainable and affordable rental 
properties. And allowing it to use the Fiscal Recovery Funds 
(FSF) is a very efficient way to do that. And we certainly join 
the endorsement of that bill.
    Ms. Adams. Thank you. Dr. Chandan, we have 30 seconds. Did 
you want to respond?
    Mr. Chandan. Yes, if you are able to hear me, I think that 
Low-Income Housing Tax Credits is probably the most effective 
program we have in this country for addressing the housing 
needs of our most income-constrained families. And expansions 
of that program that would allow for increases in preservation 
of the low-income housing supply are going to be absolutely 
critical. It is not a surprise to me that there is broad 
support for this program.
    Ms. Adams. Great. Thank you, Madam Chairwoman. I yield 
back.
    Chairwoman Waters. Thank you very much. The gentleman from 
South Carolina, Mr. Norman, is now recognized for 5 minutes.
    [No response.]
    Chairwoman Waters. Is Mr. Norman back?
    Mr. Norman. Madam Chairwoman, can you hear me?
    Chairwoman Waters. Yes.
    Mr. Norman. Okay. How about see me?
    Chairwoman Waters. Okay. You are recognized for 5 minutes.
    Mr. Norman. Okay. Thank you so much. First of all, thank 
you for this hearing. And as goes housing, so goes our economy. 
I think most economists recognize that. I have been building 
houses, both commercially and residentially, for over 45 years, 
and, quite frankly, I have heard a lot of people with answers. 
The problem we are having is very simple: gas and oil prices. 
The truck that brought lumber to the house today was not 
powered by solar panels. It was not powered by wind. It was 
powered by natural gas. If this committee really wanted to get 
to the to the bottom of this, high gas prices affect over 137 
different subcontractors within the housing industry, like the 
sheetrock hangers, the people who dig the footings, the 
painters, and the architects. And to have a 106-percent 
increase in gas, is what is driving the prices up.
    The second issue is not being able to get workers. This 
Administration paying people not to work is a severe problem. 
Third, supplies. I tried to order windows today, a simple 
window. Guess what kind of time frame we are talking about? 
Seventeen months. Seventeen months for a simple window. For 
those of you who have an ear with this Administration, beg them 
to let us start producing our own oil and gas and let's get 
away from buying it from oil countries like OPEC.
    I have heard a lot of the blame game going around. I have 
heard the theory that algorithms are at fault. I don't 
understand that logic. I have heard the opinion that appraisers 
are a problem, and that they appraise minority homes less. For 
those of you who have never done this, the banks, the lenders 
determine who the appraisers are. The prices don't know if they 
go into a house of a White person, a Black person, the red 
person. They don't know that. They appraise for what they see, 
and the fact that I think Ms. Pope said, there needs to be more 
Black appraisers. Appraisers are needed everywhere, so it 
doesn't matter the color of your skin.
    I have heard the theory that institutional buyers reduce 
homeownership and that somehow they are to blame. Institutional 
buyers buy from that mom and dad who have owned the home for 
years, that young couple who have maybe owned a home for years 
and want to sell. Now, tell them that institutional investors 
are bad. They are just doing what they do best, which is invest 
in the capitalistic system, if they help the housing market. I 
have heard the question, why can't the government get involved 
to make developers build on bigger lots? The very simple answer 
is people don't want big lots. The reason people rent in a lot 
of cases is because they don't want the headaches of owning a 
home, of keeping it up, or paying the taxes.
    So, the blame game is directly the responsibility of this 
Administration. Under the Trump Administration, homeownership 
for everyone was at an all-time high. And, quite frankly, if 
you want to really get the job done, you really need to talk to 
whomever is running this country and tell them we have to get 
the oil and natural gas back, and the blame game has to stop. 
Putin didn't cause the gas prices to go up. Russia didn't cause 
it. Santa Claus didn't cause it. It is this Administration and 
their lame policies that are killing this country. Inflation is 
a 100-percent tax on every American regardless of the color of 
your skin.
    And let me just say this, and I appreciate this panel, but 
I would suggest having people who have actually been in the 
business. These armchair quarterbacks who have never done it, 
it is like going to a doctor who has never operated. He has 
read about it, but he has never operated. Or, would you get on 
a plane with a pilot who has never flown a plane? He has read 
about it. I would suggest if you don't really want to get to 
the bottom, get people who have experienced the housing at its 
basic level, and that will get the problem solved.
    And I would just ask that we have more hearings in person. 
I apologize for the technical difficulties. And Madam 
Chairwoman, I yield back the balance of my time. Thank you so 
much.
    Chairwoman Waters. Thank you very much. Yes, we do decide 
who our witnesses are, and it's the prerogative of the Chair 
and my staff. Thank you.
    The gentlewoman from Michigan, Ms. Tlaib, is now recognized 
for 5 minutes.
    Ms. Tlaib. Thank you so much. Ms. Pope, before the gas 
prices went up, did we have a housing crisis?
    Ms. Pope. Absolutely, yes.
    Ms. Tlaib. Yes. How about you, Mr. Calhoun? Did we have a 
housing crisis?
    Mr. Calhoun. We have had a housing crisis and a shortage of 
production of housing. The National Association of Home 
Builders has described the shortage as going back at least 6 to 
8 years.
    Ms. Tlaib. That is right. I think it is important to make 
sure we push up against some of the gaslighting that continues 
to happen, and understand this housing crisis is not going 
anywhere. It has nothing connected to the cost of living, if 
anything, corporate greed and price gouging by many of the 
political corporate donors that benefit from the high price 
even though the barrel of gas is going down, the prices 
continue to go up. Chairwoman Waters, I cannot thank you 
enough. You taught me that housing is infrastructure, and that 
housing is a human right. And I know during this pandemic, cash 
buyers, as we all know, have intensified bidding wars, driven 
up the housing prices and pushed many first-time cash-strapped 
homebuyers out of the running, out of being able to have their 
own homes.
    According to Redfin, cash buyers were 4 times more likely 
to win a bidding war against buyers with mortgage financing in 
2021, as many of you have already testified to. I know the 
Urban Institute also found that 3- and 4-bedroom homes priced 
at or below $100,000 are all purchased by all-cash buyers and 
investors. This is very important to communities like mine. 
This disproportionately affected communities that I 
represented. More than half of the homes in my district right 
now all are valued less than $100,000, and the Urban Institute 
has found that it is actually more difficult for borrowers to 
get an FHA mortgage for a home valued at less than $100,000 
than for a loan larger than $100,000. Why?
    We know this doesn't make any sense and that countless 
homebuyers, particularly first-time homebuyers, are being 
locked out of being able to get homeownership, which really is 
a connection to economic stability and pulling people out of 
poverty. This has impacted communities like mine, Detroit, 
which is an over 80-percent Black community. This has resulted 
in Michigan actually losing more Black homeownership than any 
other State in the country.
    This is so important. Mr. Calhoun, FHA borrowers are 
overwhelmingly first-time homebuyers, as you know, and it 
impacts people like in my community who, on average, have less 
financial flexibility and lower down payments. How can we get 
the FHA financing improved? How can we make competitive 
financing options?
    Mr. Calhoun. Thank you for the question. I would say, first 
of all, we have great leadership at HUD with Secretary Fudge, 
and great leadership with the Center for Responsible Lending, 
Julia Gordon at FHA, who was totally committed in her career to 
doing this. A bunch of it is just playing resources at FHA. 
Again, by statute, they don't get to use any of the FHA 
premiums for operations, that is, to insulate the reserve fund. 
But that means they are totally dependent on fund 
appropriations and are tremendously underfunded compared to 
comparable private enterprises. First of all, they need those 
resources, but they do have a number of initiatives underway. 
They were able, thanks to some special appropriations, to 
upgrade their technology, which saved them in the crisis.
    Ms. Tlaib. Yes. And I do have, H.R. 1532, which is in the 
Senate, that actually directs HUD to be able--and there is no 
financial impact on this--to look at best practices for FHA to 
be able to look at these small-dollar mortgages.
    Professor Chandan, should we expect this trend to continue, 
going upward? What can the Federal Government do, in your 
opinion, to ensure that homes get into the hands of individual 
homebuyers instead of these private equity firms, and LLCs, and 
others that have been swallowing them?
    Mr. Chandan. Sure. I think that the key issue emerging from 
the data that we have available is that while there is a pool 
of buyers that are positioning homes for the rental market that 
would otherwise be available for ownership, it is a very mixed 
group, and that we should not conflate the larger pool with 
that very large survey of private equity investors that, in 
fact, accounts for only about 2\1/2\ percent of the buyers.
    What I would suggest is that when we are thinking about the 
rental supply in this country, ensuring that we have a diverse 
supply of rental opportunities, whether it be urban apartments, 
whether it be single-family homes, where someone wants the 
benefit of being able to live in that home, but it is also 
making the tradeoff. They don't want the obligations of 
homeownership, but they are willing to trade off the benefits 
that come with ownership as well and making that in an informed 
way addressing the supply issues. When we look at what is being 
built, the average home under construction today is 2,500 
square feet. That is not within reach of many aspirational 
buyers. Addressing many of the challenges we face at the local 
level to ensure that we are able to build smaller homes that 
are within reach of some of those otherwise single-family 
renters is critical here.
    Ms. Tlaib. Thank you so much, and I yield back, Madam 
Chairwoman.
    Chairwoman Waters. Thank you very much. The gentlewoman 
from Pennsylvania, Ms. Dean, is now recognized for 5 minutes.
    Ms. Dean. Thank you, Madam Chairwoman. Are you able to hear 
me? I have had some technology problems.
    Chairwoman Waters. Yes. We can hear you.
    Ms. Dean. Wonderful. Thank you, and thank you for hosting 
this important hearing.
    Dr. Choi, I would like to start with you. I was struck by 
your testimony that unless we take action, you said the Black/
White homeownership gap will remain unchanged for 20 years. 
Obviously, we cannot sit back and do nothing as policymakers. 
We have an obligation to try to correct that and close the gap. 
My district is Montgomery in Berks County, suburban 
Philadelphia. In my district, White homeownership is at a 76-
percent rate, while Black homeownership is at 45, almost 46 
percent, according to the National Association of REALTORS, 
putting the Black/White homeownership gap at over 30 percent, 
which is simply unacceptable.
    We need to take action to address this tremendous 
disparity. We know how important homeownership is for families 
to build wealth. It is not just about having a place to live. 
It is about being able to help your kids pay for college, and 
to retire with dignity. One of the policy solutions you put 
forward to address the homeownership gap is targeted down 
payment assistance programs. So, I am proud to be a co-sponsor 
of H.R. 4495, the Downpayment Toward Equity Act, which 
authorizes a new HUD grant program to assist first-time, first-
generation homebuyers in purchasing a home. I would love to see 
people in my district taking advantage of it.
    Dr. Choi, can you talk about how targeted down payment 
assistance programs, such as the one proposed by H.R. 4495, 
would address the racial wealth gap?
    Ms. Choi. Yes. Thank you so much for the question. The 
existing programs--a lot of them have income-only criteria. And 
then, we do find that if we actually impose the first-
generation criteria on top of income, that actually expands the 
share of Black and Latino households who can take advantage of 
those kinds of programs.
    I do acknowledge that in this current market where the home 
prices are really heated up and the supply is restricted, a lot 
of people, even with down payment assistance programs, are 
really finding it difficult to become homeowners because they 
are not competitive enough. So, I do think this policy will 
have a longer-term impact because it is better targeted, but I 
don't think it will have an immediate outcome. But in the long 
term, it is one of the policies that can really, really kind of 
make a change in better targeting Black and Latino households 
who have been discriminated against in the housing market for a 
long time.
    And I don't think if we kind of do it a very clever way of 
not trying to distribute money all at the same time, it 
wouldn't really increase the inflation pressures. If we 
actually do it in a very clever way and think for the long 
term, then it can actually do a better job of targeting the 
people who do not have a rich uncle that can support them 
getting into the housing market and create a more equal 
society. I think this could also have an impact on improving 
the economic health and resilience of our vulnerable 
communities, because when the pandemic hits and when the 
inflation goes up, it is the renters who are hit harder because 
their rent prices go up very fast. But if you are a homeowner, 
you are actually secured in paying the amount of mortgage 
payments over a long period of time, so you are less volatile 
to the economic shocks.
    So, although there could be some preferences in accessing 
homeownership, if a person is disadvantaged just because they 
don't have wealthy parents, we do have to fix that issue. And I 
do believe that the target of a down payment assistance program 
is a long-term good policy. Thank you.
    Ms. Dean. Thank you, Dr. Choi. Ms. Pope, in the remaining 
time that I have, I was struck by your testimony on this issue. 
You stated that rising interest rates along with rising home 
prices and a limited housing inventory make a perfect storm to 
suffocate Blacks out of the housing market. I believe you are a 
practitioner, so please correct me if I am wrong there. Can you 
speak to this? What can we do to mitigate the effects of the 
current market conditions, particularly for minority 
households, and from your practice, from your work, what do you 
hear about preferences and the desire to be homeowners instead 
of renters?
    Ms. Pope. Thank you. I will be quick. The down payment 
programs are very important for Black Americans as we try to 
get into homeownership. Also, we are dealing with the 
elimination of low-level pricing adjustments. That has been a 
challenge with the credit scoring because the percentage points 
is pulling us out of that. Also, with the appraisals we 
mentioned earlier, we are on the front lines of appraisals. 
There have been biases and there has been documentation as it 
pertains to the appraisals and the biases that happen within 
the Black industry as well as what I like to say is the student 
loans. If we can bring that to a level where it is more 
affordable, Blacks would be able to buy a home.
    Ms. Dean. Thank you. I see my time is up, so I yield back.
    Chairwoman Waters. Thank you very much. The gentlewoman 
from Georgia, Ms. Williams, who is also the Vice Chair of our 
Subcommittee on Oversight and Investigations, is now recognized 
for 5 minutes.
    Ms. Williams of Georgia. Thank you, Chairwoman Waters, for 
first holding this very critical conversation as it means so 
much to me and my constituents in Atlanta and the rest of the 
nation, because my hometown, Atlanta, unfortunately leads the 
nation in the racial wealth gap, and, unsurprisingly, it also 
leads the nation in the percentage of homes bought by 
investors.
    Homeownership is tied directly to the ability to build 
generational wealth. When individual homeowners are locked out 
of the market by investor purchases, they have fewer 
opportunities to buy a home and build the type of generational 
wealth that will help close the racial wealth gap not only in 
Atlanta, but across the country.
    So, Dr. Choi, listening to your testimony and the 
conversation that you were just having with Representative 
Dean, I am wondering what specific investments can we make to 
put individual homebuyers on more equal footing with private 
equity investors?
    Ms. Choi. Yes. That is a really great question, and I think 
one of the things I would like to also point out about the 
impact of institutional investors is that there is various 
research, but then particularly in Atlanta, there has been 
recent research because institutional investors are so 
prevalent. So nationally, they might not have a large impact. 
But in Atlanta specifically, we do find that an increase in 
institutional investors has affected renters, and especially 
Black renters, to access homeownership.
    Ms. Williams of Georgia. Unfortunately, Atlanta is also at 
the top of that list, Dr. Choi.
    Ms. Choi. I guess so, yes. I think the data is really 
concerning. Further, I think we talked a lot about the down 
payment assistance program. I know that some lenders and also 
GSEs are considering special purpose credit programs (SPCPs) 
where they can direct access to some of the capital to the 
communities or people of color who have been previously 
discriminated. I think SPCPs are another good way to bridge the 
racial equity gap in this country.
    Another thing that I think is important is thinking about 
including rental payment data into mortgage underwriting. One 
of the things that we also see from the data is that a greater 
share of Black and Hispanic households do not have FICO scores, 
or they have lower FICO scores. And if you actually include 
rental payment history data into mortgage underwriting, our 
research does show evidence that this does disproportionately 
help households of color. I know that there is some movement in 
this space, but we also encourage more consideration of 
including rental payments in mortgage underwriting.
    Ms. Williams of Georgia. Thank you, Dr. Choi, and that is 
something that we are absolutely working on under the 
leadership of Chairwoman Waters in this committee. I just had 
an amendment last week that will do just that, allow consumers 
to opt into including their rental history in their credit 
scores. Also, during the pandemic, the percentage of home sales 
to first-time homebuyers has been much lower than the 5-year 
average percentage. So, Dr. Choi, what does this mean for long-
term homeownership trends and our ability going forward to 
address inequities in homeownership?
    Ms. Choi. Yes. I think homeownership is very unique because 
it is kind of like a way to build long-term wealth. And what 
our research shows is that if you delay purchasing your first 
home, you actually have lower wealth at the age of retirement, 
so the timing of buying your first home--the age is very 
important. And we know that Black households and Black people 
are less likely to buy homes earlier in their lives. That is 
one of the reasons that it is not just access to homeownership; 
it is the age of accessing homeownership and also sustaining 
homeownership. All of that factors into the wealth disparities. 
And as we mentioned again and again in this committee, 
homeownership and wealth transfers from parents to children, so 
this is not just one family issue. It actually is creating 
intergenerational wealth inequality, and that is a key reason 
that we have persistent racial disparities in this country.
    Ms. Williams of Georgia. Thank you so much, Dr. Choi. 
Increasing homeownership, especially among Black homebuyers, is 
not guaranteed without meaningful policy intervention. So, Dr. 
Choi, your organization estimates that homeownership could 
decline by 2040, especially for people who look like me, if 
action is not taken. Can you explain how this projection was 
reached, and what steps can be taken to expand government-
backed loans to first-time homebuyers, particularly Black 
borrows?
    Ms. Choi. Yes. One of the things that I also wanted to 
point out about this research is that this was done before the 
pandemic, so we didn't incorporate the impact of the pandemic, 
and if we actually do, there is a high likelihood that the 
numbers would look worse over time. So, we do see that every 
time there is an economic shock, it is actually the communities 
of colors that have been disproportionately harmed. The 
pandemic, and the Great Recession show some evidence that when 
their economic situation is negative, people of color are most 
impacted. We did our projections by looking at the past data. 
This is a projection of household formation and income, and all 
of those factored into access to homeownership. And then, we do 
find that also because, again, homeownership--oh, sorry.
    Ms. Williams of Georgia. Dr. Choi, unfortunately, I am out 
of time, but I was so intrigued by your research that I will be 
following up with additional questions.
    Thank you, Madam Chairwoman, for hosting this hearing, and 
I yield back the zero time that I have remaining.
    Chairwoman Waters. Thank you very much. And I would like to 
thank our distinguished witnesses for their testimony today.
    The Chair notes that some Members may have additional 
questions for these witnesses, 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, again, I thank you so very much, and this 
hearing is adjourned.
    [Whereupon, at 2:54 p.m., the hearing was adjourned.]

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                             June 29, 2022
                             
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