[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]





                   THE CHARACTERISTICS AND CHALLENGES  
                         OF TODAY'S HOMEBUYERS

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

                                HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON HOUSING
                             AND INSURANCE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 20, 2024

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 118-83






    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]







                                   _______
                                   
                 U.S. GOVERNMENT PUBLISHING OFFICE 
                 
56-393 PDF               WASHINGTON : 2024 
































                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas, Vice          EMANUEL CLEAVER, Missouri
    Chairman                         JIM A. HIMES, Connecticut
TOM EMMER, Minnesota                 BILL FOSTER, Illinois
BARRY LOUDERMILK, Georgia            JOYCE BEATTY, Ohio
ALEXANDER X. MOONEY, West Virginia   JUAN VARGAS, California
WARREN DAVIDSON, Ohio                JOSH GOTTHEIMER, New Jersey
JOHN ROSE, Tennessee                 VICENTE GONZALEZ, Texas
BRYAN STEIL, Wisconsin               SEAN CASTEN, Illinois
WILLIAM TIMMONS, South Carolina      AYANNA PRESSLEY, Massachusetts
RALPH NORMAN, South Carolina         STEVEN HORSFORD, Nevada
DAN MEUSER, Pennsylvania             RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
ANDREW GARBARINO, New York           SYLVIA GARCIA, Texas
YOUNG KIM, California                NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida               WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska                 BRITTANY PETTERSEN, Colorado
MIKE LAWLER, New York
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director
                 Subcommittee on Housing and Insurance

                    WARREN DAVIDSON, Ohio, Chairman

BILL POSEY, Florida                  EMANUEL CLEAVER, Missouri, Ranking 
BLAINE LUETKEMEYER, Missouri             Member
RALPH NORMAN, South Carolina         NYDIA M. VELAZQUEZ, New York
SCOTT FITZGERALD, Wisconsin          RASHIDA TLAIB, Michigan
ANDREW GARBARINO, New York           RITCHIE TORRES, New York
MIKE FLOOD, Nebraska                 AYANNA PRESSLEY, Massachusetts
MIKE LAWLER, New York                SYLVIA GARCIA, Texas
MONICA DE LA CRUZ, Texas, Vice       NIKEMA WILLIAMS, Georgia
    Chairwoman                       STEVEN HORSFORD, Nevada
ERIN HOUCHIN, Indiana                BRITTANY PETTERSEN, Colorado

































                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 20, 2024...............................................     1
Appendix:
    March 20, 2024...............................................    35

                               WITNESSES
                       Wednesday, March 20, 2024

Bailey, Nikitra, Executive Vice President, National Fair Housing 
  Alliance (NFHA)................................................     8
Fratantoni, Michael, Chief Economist and Senior Vice President, 
  Research and Industry Technology, Mortgage Bankers Association 
  (MBA)..........................................................     4
Lautz, Jessica, Deputy Chief Economist and Vice President of 
  Research, National Association of REALTORS (NAR)...............     6

                                APPENDIX

Prepared statements:
    Bailey, Nikitra..............................................    36
    Fratantoni, Michael..........................................    58
    Lautz, Jessica...............................................    80

              Additional Material Submitted for the Record

Gonzalez, Hon. Vicente:
    Written statement for the record.............................   107
Horsford, Hon. Steven:
    Las Vegas Review-Journal article dated March 12, 2024, 
      entitled, ``Most homes sold in Las Vegas are 
      `unaffordable'''...........................................   108
Waters, Hon. Maxine:
    Written statement of UnidosUS................................   111
Bailey, Nikitra:
    Written responses to questions for the record from 
      Representative Waters......................................   119
Fratantoni, Michael:
    Written responses to questions for the record from 
      Representative Waters......................................   120
Lautz, Jessica:
    Written responses to questions for the record from 
      Representative Waters......................................   122

 
                          THE CHARACTERISTICS 
                           AND CHALLENGES OF 
                           TODAY'S HOMEBUYERS 

                              ----------                              


                       Wednesday, March 20, 2024

             U.S. House of Representatives,
                            Subcommittee on Housing
                                     and Insurance,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:30 p.m., in 
room 2128, Rayburn House Office Building, Hon. Warren Davidson 
[chairman of the subcommittee] presiding.
    Members present: Representatives Davidson, Posey, 
Luetkemeyer, Norman, Fitzgerald, Garbarino, Flood, Lawler, De 
La Cruz; Cleaver, Tlaib, Torres, Garcia, Williams of Georgia, 
Horsford, and Pettersen.
    Ex officio present: Representative Waters.
    Also present: Representative Gonzalez.
    Chairman Davidson. The Subcommittee on Housing and 
Insurance will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time.
    Today's hearing is entitled, ``The Characteristics and 
Challenges of Today's Homebuyers.''
    I now recognize myself for 5 minutes to give an opening 
statement.
    Today, we bring together a panel of our nation's housing 
experts to delve into housing challenges in purchase markets 
across the country. Namely, we have asked our witnesses the 
question, who is buying housing today and how are they paying 
for it?
    These may seem like simple questions, but underlying them 
are more complicated factors that have been driving 
unaffordability for millions of American families. Let's break 
this down. The 30-year fixed-rate mortgage has increased over 
100 percent, doubled since 2020, doubling the average monthly 
payment. That alone is twice the amount of payment for everyone 
wanting to buy a home.
    But wait, there's more. Because of the lack of housing 
inventory, the median home price has gone up too by 27 percent, 
just since 2020.
    How many of us have engaged in America's new pastime of 
looking up homes for sale on an app like Zillow or similar? You 
won't find nearly as many homes available as you did just a 
couple of years ago, and some have shockingly high price tags. 
These high prices are great for the current owners, but they 
are difficult for anyone looking to move any time in the near 
future as their equity is now worth more.
    This is extremely disheartening for anyone who is in the 
market for a new home, including repeat and first-time 
homebuyers. Many families are putting their dream of owning a 
home back on the shelf, needing to save more for that down 
payment and finding it harder to do so because everything else 
is expensive, too. The cost of groceries, the cost of gas, the 
cost of healthcare, the cost of a family vacation, you name it, 
you're probably paying much more to live in the United States 
than you were in 2020.
    Inflation is a tax paid by everyone, and it is 
unfortunately part of a vicious circle that puts even more 
pressure on the housing market as interest rates go up and stay 
up, construction costs go up and stay up, and, frankly, 
insurance costs for the home go up and stay up.
    Many would say that we are living in a, ``new normal,'' 
where higher costs are here to stay. If so, this could have 
serious implications for economic mobility and prosperity. 
Owning a home should not be only for the well-off; it is the 
hallmark of a thriving middle class and is an essential part of 
the American Dream.
    I think all of us on both sides of the aisle would agree 
that the shrinking pool of eligible homeowners is a cause for 
concern. The solution is not simply to increase Federal 
spending on housing, however, which will only drive inflation 
and increase demand for housing, adding more price pressure. 
Our economists here today know very well that inflation is what 
has gotten us into this mess in the first place.
    I also have a hard time agreeing that more government 
interference in single-family housing is the answer, when over 
80 percent of the market is federally-backed and the Federal 
Reserve holds a shocking $2.4 trillion in mortgage-backed 
securities.
    President Biden recently called for a new tax credit of 
$5,000-a-year, for 2 years. for first-time homebuyers, and 
$10,000 for some who agree to sell their homes, among other 
costly proposals. These ideas are not enough to counter the 
high costs for homebuyers, and they are too much for taxpayers, 
who would be forced to subsidize another $260 billion in new 
spending on Federal housing programs. That makes me think these 
are not really serious proposals.
    With the demand for housing we see today, and the lack of 
inventory, the answer is not to increase demand further with 
artificial stimuli; it is to work together to increase the 
supply. That will take the will of policymakers at all levels 
of government, as well as the private sector, responding to 
market forces.
    I hope today's hearing will provide a forum to discuss 
credible solutions to our housing challenges as well as what is 
driving them. I look forward to the testimony of our witnesses.
    And I would just share a story. Recently, in western Ohio, 
we had a mobile home park with about 1,700 homes in it. The 
average rent was less than $1,000 a month, some as low as $500 
a month, and there is no ready supply where these people are 
going to find homes that are in that affordability range.
    So, when you have a massive increase in demand, especially 
in a localized area, you can't immediately respond to the 
supply. We have challenges like that all over our country, so I 
look forward to the discussion today.
    Thank you. And I yield back the balance of my time.
    The Chair now recognizes the ranking member of the 
subcommittee, the gentleman from Missouri, Mr. Emanual Cleaver, 
for 4 minutes for an opening statement.
    Mr. Cleaver. Thank you, Mr. Chairman. Mr. Chairman, thank 
you also for holding this hearing on, ``The Characteristics and 
Challenges of Today's Homebuyers,'' which has been described as 
an effort to better understand the current profile of the 
single-family rental market.
    I want to thank the witnesses for presenting data on an 
ongoing basis, including today, about the housing market and 
the challenges facing borrowers.
    I also appreciate that all of your organizations have 
identified, worked on, and endorsed legislation that would help 
solve the affordable and fair housing crisis and bring the 
American Dream of homeownership within reach for millions of 
Americans.
    It is an election year, and the American public needs this 
committee to immediately mark up these critically-important 
proposals, which becomes increasingly challenging the closer we 
get to November. I am particularly eager for our subcommittee 
to act on rural housing legislation that I have joined my 
friend and colleague, Congressman Luetkemeyer, in introducing. 
The legislation would improve USDA-supported housing in rural 
America.
    Every community in America, whether urban, suburban, or 
rural, is united in the desire to have a real opportunity to 
live in a decent, affordable house. Having reasonable access to 
shelter is a core human need of our constituents, along with 
food and water. It is not a luxury. Americans in every 
community are also united in the desire to own a piece of 
American land and to be able to pass this generational wealth 
down to their children. It is an American Dream, but it has 
become an American fantasy for way too many families.
    Several factors influence the price of housing. At the core 
of the housing affordability crisis is the crisis of supply and 
demand that is driving costs. The United States has a shortfall 
of 6.5 million single-family homes due to underbuilding.
    I welcome the committee moving to a bipartisan, bicameral, 
Yes In My Backyard (YIMBY) Act to link up, among other 
proposals.
    The Joint Center for Housing Studies at Harvard University 
found that in 2022, the median sale price for a single-family 
home in the U.S. was 5.6 times higher than the median household 
income, and higher than at any point on record, dating back to 
the early 1970s.
    Many would-be first-time homebuyers, particularly young 
families, are eager and sometimes furious over the prospects of 
trying to get a home. In 2019, the racial homeownership gap was 
the widest it has been since the Census began recording rates.
    And I think my time is running out, so I yield back.
    Chairman Davidson. The Chair now recognizes the ranking 
member of the full Financial Services Committee, the gentlelady 
from California, Ms. Waters, for 1 minute for an opening 
statement.
    Ms. Waters. Thank you very much.
    The American Dream of homeownership symbolizes financial 
security, economic mobility, and a sense of belonging. But for 
too many in today's market, this is a dream deferred, a dream 
reserved only for the wealthy. Our constituents are confronting 
aging homes at historically-high prices, rising interest rates 
and insurance costs, hidden fees from industry, and ongoing 
discrimination. People are working more jobs, for longer hours, 
and still can't seem to make it.
    These are not new issues, but they are made much worse as 
the affordable housing crisis grows, something that Committee 
Republicans have shown absolutely no interest in solving.
    So, I welcome today's witnesses and our discussion. The 
Congress must come together to create real pathways to 
affordable housing and homeownership for all.
    I yield back.
    Chairman Davidson. I thank the ranking member.
    Today, we welcome the testimony of: Dr. Michael Fratantoni, 
chief economist and senior vice president of research and 
industry technology at the Mortgage Bankers Association; Dr. 
Jessica Lautz, chief economist and vice president of research 
at the National Association of REALTORS; and Ms. Nikitra 
Bailey, executive vice president of the National Fair Housing 
Alliance.
    You will each be recognized for 5 minutes to give an oral 
presentation of your testimony. And without objection, your 
written statements will be made a part of the record.
    Dr. Fratantoni, you are now recognized for 5 minutes for 
your oral remarks.

  STATEMENT OF MICHAEL FRATANTONI, CHIEF ECONOMIST AND SENIOR 
  VICE PRESIDENT, RESEARCH AND INDUSTRY TECHNOLOGY, MORTGAGE 
                   BANKERS ASSOCIATION (MBA)

    Mr. Fratantoni. Chairman Davidson, Ranking Member Cleaver, 
and members of the subcommittee, thank you for the opportunity 
to testify today. My name is Mike Fratantoni, and I am MBA's 
chief economist and senior vice president of research and 
industry technology.
    My testimony today reviews current trends in the mortgage 
market, focusing on the buyers, products, sources of financing, 
and obstacles that homebuyers and lenders face.
    In my written statement, I also examined some of the 
current trends in the rental housing market, including that for 
single-family rentals. How large is the single-family 
residential mortgage market? Well, $45 trillion in real estate 
is owned by households, with $32 trillion in home equity and 
$13 trillion in mortgage debt outstanding.
    In 2021, lenders originated a record amount, almost $4.5 
trillion in mortgages. To contrast with that, MBA is 
forecasting about $2 trillion in originations for 2024, up from 
$1.6 trillion in 2023.
    These mortgages fund both the purchase of homes and the 
refinancing of existing loans, supporting a U.S. homeownership 
rate that in recent years has hovered around 65 percent. 
Regrettably, there remains a wide homeownership gap across 
different racial and ethnic groups.
    Of the $13 trillion in mortgage debt outstanding, roughly 
$9 trillion is securitized to Ginnie Mae and the Government-
Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac. Most 
of the remaining $4 trillion of mortgage debt is held on bank 
portfolios as whole loans, with some held by other types of 
investors.
    Before the Great Financial Crisis, as much as half of 
securitized mortgage volume was private label. The PLS sector 
is much smaller in today's market, comprising about $80 billion 
or so of the $1.6 trillion originations in 2023. About $30 
billion of this volume in 2023 was nonqualified mortgages known 
as non-QM, with some more flexible underwriting standards 
intended for self-employed borrowers or others with more 
complex financial or employment patterns.
    Typically, more than 80 percent of mortgages used to 
purchase a home are 30-year fixed-rate mortgages. While many 
refinance borrowers opt for shorter term, 10-, 15-, or 20-year 
mortgages, most of the remaining loans, which are a small 
percentage of overall volume, are high-rate adjustable-rate 
mortgages with initial fixed rate periods of 5, 7, or 10 years, 
and then, more frequent rate adjustments.
    HUD home data from 2022 showed us that 70 percent of 
homebuyers who used mortgage financing took out conventional 
conforming loans securitized through the GSEs, 14 percent used 
FHA loans, 9 percent used VA, 1 percent used RHS, and 6 percent 
used conventional jumbo loans.
    MBA's mortgage applications data typically show that about 
90 percent of applications are for buyers who intend to occupy 
their homes as primary residences, while the remaining 10 
percent are for second homes or investor properties.
    Roughly half of all purchase mortgages are for first-time 
homebuyers who rely mainly on government housing programs for 
their loans. In particular, the FHA supported affordable 
mortgage financing for more than 478,000 first-time homebuyers 
in Fiscal Year 2023, representing more than 82 percent of its 
forward mortgage business.
    Of course, not all homebuyers utilize mortgage financing. 
Some purchase properties with cash. For existing homes, roughly 
28 percent of buyers purchased with cash in 2023. For new 
homes, more than 8 percent were cash buyers.
    Lenders with different business models tend to focus on 
distinct types of lending. For example, independent mortgage 
banks (IMBs) tend to focus primarily on their growing share of 
government and conventional loans to first-time homebuyers and 
low- and moderate-income buyers, while depositories have 
concentrated more on ARMs and jumbo loans for their retail 
banking clients that they hold in their portfolios.
    MBA's members believe the single biggest challenge in 
today's housing market is the lack of adequate inventory. 
Housing supply is millions of units short of what is needed to 
support the corresponding demographic demand.
    Given the lack of housing supply, and brisk demand, home 
prices increased 39 percent over the 2020-2022 timeframe. 
Mortgage rates reached record lows, below 3 percent, during the 
pandemic. In 2022, to combat inflation, the Federal Reserve 
briefly raised short-term rates, and 30-year mortgage rates 
more than doubled in response. The net impact of the higher 
rates and home prices was a dramatic reduction in 
affordability.
    My written statement outlines certain regulatory challenges 
facing the mortgage market, including the Basel III Endgame 
proposal's likely impact on mortgage credit, as well as the 
current cost and lack of availability of homeowners insurance. 
MBA appreciates the focus on these two issues by the members of 
this subcommittee.
    Thank you again for the opportunity to walk through these 
latest market trends with you, and I look forward to your 
questions.
    [The prepared statement of Dr. Fratantoni can be found on 
page 58 of the appendix.]
    Chairman Davidson. Thank you.
    Dr. Lautz, you are now recognized for 5 minutes to give 
your oral remarks.

  STATEMENT OF JESSICA LAUTZ, DEPUTY CHIEF ECONOMIST AND VICE 
  PRESIDENT OF RESEARCH, THE NATIONAL ASSOCIATION OF REALTORS 
                             (NAR)

    Ms. Lautz. Thank you.
    Chairman Davidson, Ranking Member Cleaver, and members of 
the subcommittee, thank you for inviting me to testify today. I 
am Jessica Lautz, deputy chief economist and vice president of 
research at the National Association of REALTORS (NAR).
    Real estate is nearly 20 percent of the U.S. economy. 
REALTORS who serve residential and commercial property 
consumers are vital to homeownership, which is the bridge to 
financial security. With the current housing market challenges, 
consumers know it is critical to have a REALTOR aid in the 
transaction given their enhanced training and subscription to 
NAR's code of ethics.
    There have been significant legal developments in real 
estate in the last week that could potentially shift how buyer 
representatives are compensated. REALTORS play a pivotal role 
in a real estate transaction, especially for first-time and 
low- to moderate-income buyers. These shifts in the market 
could push homebuyers without the cash to pay for professional 
representation out of the market. NAR is seeking to clarify the 
existing mortgage finance rules which assumes seller-paid 
commissions will continue. If not, limits on seller 
contributions may need to be adjusted.
    Veterans using VA loans are also currently prohibited from 
paying for buyer representation under the Department's 
guidelines. Should the market shift in a way that buyers are 
expected to pay for representation, veterans could be left out 
of the market, forced to forego professional representation, or 
forced to use a different, less favorable loan product.
    All of this said, I am an economist here to discuss housing 
inventory, the erosion of affordability, and who is entering 
the real estate market and, importantly, who has been left out. 
For further information on legal developments impacting the 
real estate industry, please visit competition.REALTOR.
    In 2023, at just 4 million, the annual number of existing 
home sales was the lowest recorded since 1995. The housing 
market continues to have a deficit in inventory compared to 
demand. In January, there were 1.1 million existing homes 
available in the market. In comparison, in March of 2020, there 
were 1.49 million existing homes available. Bidding wars are 
more frequent. In January, the typical home seller received 2.7 
offers, and 16 percent of homes went over the list price.
    Home prices continue to rise. From March 2020 to January of 
2024, existing home prices have climbed nearly 36 percent, 
while household family income has climbed just 23 percent. In 
the fourth quarter of 2023, 15 percent of metro areas had 
double-digit home price gains.
    In conjunction with the underbuilding of new inventory, the 
lock-in effect due to the rise in mortgage interest rates has 
compounded the problem. Homebuyers who purchased a $350,000 
home at a 3.5-percent interest rate, compared to a 7-percent 
interest rate, are looking at a mortgage payment that has 
increased by $683 per month. Even with a new job or a family 
change, an owner may be financially unable to move.
    Not all buyers are affected by mortgage interest rates. In 
January, 32 percent of buyers did not use a mortgage to finance 
their purchase. This is the highest share since June of 2014.
    First-time homebuyers struggle to enter into the housing 
market as they lack housing equity. First-time homebuyers 
accounted for 32 percent of primary residence buyers last year, 
while the historical norm is 40 percent. First-time homebuyers 
are older, with higher incomes, and are more apt to use 
financial assets for their down payment today. In the 1980s, 
the typical first-time homebuyer was in their late twenties. 
They are now in their mid-thirties.
    First-time homebuyers who bought in the last year had 
household incomes that were $25,000 more than the past year. 
Teachers and firefighters are being priced out of buying homes 
in their local communities. While it is hard to obtain 
homeownership, the typical homeowner has benefitted from the 
rise in prices. The typical net worth of a homeowner in 2022 is 
nearly $400,000, compared to that of a renter of just over 
$10,000. Thus, the wealth held by homeowners is 40 times that 
of a renter. Housing wealth can be used to help children to 
attend college, or to buy a home for their own retirement. The 
homeownership rate has risen for each racial and ethnic group 
in the last decade, with Asian and Hispanic households reaching 
all-time highs.
    However, despite these gains, there remains a 28-percent 
gap between White and Black households. For many, the financial 
benefits of and potential pathway into homeownership are 
unknown. Since 2009, the share of successful homebuyers who 
used FHA financing has dropped by half. For prospective 
homebuyers, many are unaware of low-down-payment products that 
could bring homeownership closer within reach.
    Thank you for the opportunity to share my views today.
    [The prepared statement of Dr. Lautz can be found on page 
80 of the appendix.]
    Chairman Davidson. Thank you, Dr. Lautz.
    Ms. Bailey, you're now recognized for 5 minutes to give 
your oral remarks.

STATEMENT OF NIKITRA BAILEY, EXECUTIVE VICE PRESIDENT, NATIONAL 
                  FAIR HOUSING ALLIANCE (NFHA)

    Ms. Bailey. Chairman Davidson, Ranking Member Cleaver, 
Ranking Member Waters, and members of the subcommittee, thank 
you for the opportunity to testify today. I am Nikitra Bailey, 
executive vice president of the National Fair Housing Alliance. 
NFHA leads the fair housing movement throughout the United 
States, representing over 170 local fair housing enforcement 
agencies. NFHA's members serve on the frontlines combating 
millions of incidents of housing discrimination.
    The nation is faced with a fair and affordable housing 
crisis that is squeezing the budgets of everyday people, 
particularly consumers of color. Low housing inventory, record 
competition from corporate investors, exclusionary zoning 
ordinances, high interest rates, and more are all driving up 
prices.
    The Federal Reserve Board does have not the tools to 
address these housing challenges. While the Federal Reserve 
attempted several deflationary efforts, housing costs continue 
to skyrocket. And Federal Reserve Chair Powell recently stated 
that, ``Progress on lowering interest rates is not assured.''
    Further data shows housing will continue to be a major 
driver of inflation and its impact will not subside until the 
end of 2024 and beyond. Thus, Congress and the Biden 
Administration must act quickly to make equitable housing 
investments that promote financial inclusion and stimulate 
economic growth for everyone.
    Homeownership has long been the primary way that most 
families build wealth and achieve economic stability. However, 
thousands of race-conscious housing, banking, and other 
policies created systems and structures that were highly 
inequitable and mostly to the benefit of White Americans.
    Even after passage of the Fair Housing Act in 1968, and the 
Equal Credit Opportunity Act in 1974, policies of the Federal 
Government and private actors continue to perpetuate 
segregation and discrimination. Explicitly race-based policies 
were replaced with subtler race-neutral methods of excluding 
people of color. These policies and practices created today's 
persistent and growing racial homeownership and wealth gaps, 
where the White homeownership rate is nearly 67 percent higher 
than the Black homeownership rate, 45 percent higher than the 
Latino homeownership rate, and 20 percent higher than the rate 
for Asian-American communities.
    Mortgage discrimination is not a relic of the past. The 
Department of Justice's recent record settlements totalling 
more than $100 million in redlining cases in Black and Latino 
neighborhoods nationwide is a stark reminder that redlining 
persists and underscores the importance of using all of the 
tools that are at our disposal to root it out.
    Even technological homeownership decisions perpetuate bias. 
Researchers at UC Berkeley found that algorithmic systems 
overcharged Black and Latino mortgage borrowers $765 million 
annually, and automated valuation models perpetuate 
discrimination against homeowners of color.
    People of color continue to share stories of having to, 
``whitewash,'' their homes to receive fair and accurate 
appraisals. Can you imagine having to remove your personhood 
from your home, which is also the family's largest asset? In 
2021, homes in White neighborhoods were appraised at values 
nearly 250 percent higher than homes in similar Black 
neighborhoods, and values nearly 278 percent higher than 
similar homes in similar Latino neighborhoods within the same 
metropolitan areas, depriving households of color of 
opportunities to build wealth.
    Overall, White communities have access to over $15 trillion 
more in capital because of racial bias appraisal practices. 
There are solutions that are already working in forward-
thinking States like Minnesota, Maine, Vermont, and others. 
Congress can follow their lead and remove barriers that stymie 
progress and center housing as the path to restorative justice 
and inclusive growth.
    The Homeowner Assistance Fund (HAF) is an example of 
Congress doing just that, by helping over 400,000 hardest-hit 
homeowners remain housed during the COVID pandemic. HAF, along 
with sensible mortgage service and reforms supported broadly by 
the housing sector, were instrumental in thwarting another 
foreclosure crisis like the one that occurred in 2008.
    Further, inclusive policies like the Equal Credit 
Opportunity Act, Special Purpose Credit Programs helped to 
increase Black homeownership by 13 percent and Latino 
homeownership rates by 7 percent between 2019 and 2023. We 
actually partnered with our colleagues at MBA to create a 
Special Purpose Credit Program toolkit to assist lenders with 
properly developing programs. All future net household growth 
will be from households of color, and White homeownership is 
set to decline.
    With housing accounting for nearly 20 percent of the United 
States GDP, Congress must advance inclusive policies so that 
the housing market and economy are not jeopardized.
    My written testimony details other solutions, and I look 
forward to discussing them with you.
    Thank you.
    [The prepared statement of Ms. Bailey can be found on page 
36 of the appendix.]
    Chairman Davidson. We will now turn to Member questions, 
and I recognize myself for 5 minutes.
    This weekend, in a story about the lingering impact COVID 
has had on our economy, the Washington Post reported, ``A new 
normal has settled into the U.S. economy, one that nobody could 
have predicted. The pandemic's impact on housing set off a 
homebuying frenzy that resulted in a stunning 48 percent surge 
in home prices that lifted the average U.S. sales price to over 
$552,000.'' As these prices have gone up, wages have not kept 
pace, and people don't believe it is going to be transitory.
    Nationwide, median home prices are now nearly 6 times the 
median household income, despite historic levels of government 
intervention in housing markets.
    Dr. Lautz, what do these shifts mean for the American 
middle-class family looking to buy or sell a home? What does 
the data tell us about how they are reacting to this 
increasingly-expensive new normal?
    Ms. Lautz. Thank you so much for the question.
    Traditionally, when we look at our data dating back to 
1981, the typical homebuyer who is placing 20 percent down 
would be putting 20 percent of their household income toward 
housing. Unfortunately, we know that has been pushed up more 
than 23 percent in recent months, or even 28 percent. It is 
coming down, and that is a good thing. And the reason it has 
come down slightly is because interest rates have come down by 
a full percentage point since October.
    That being said, the price of housing is due to the demand 
outpacing the supply. So, when we look at multiple-offer 
situations, especially as we go into the spring months, we 
suspect that they will heat up again because consumers are 
interested in purchasing a home. The demand for housing is 
there. We also know that we are at a really critical time point 
as we have a lot of young millennials who are trying to enter 
into the housing market at the same time that retirees are 
looking for retirement property, and that is putting a lot of 
demand for housing into the market.
    Chairman Davidson. Thank you.
    As borrowers attempt to grapple with the economic realities 
of this housing market, it seems clear that some are resorting 
to alternative ways to manage their higher housing costs. For 
some, that might mean resorting to co-buying arrangements or 
supplementing their incomes with something known as accessory 
dwelling units, again, multiple properties on one lot. For 
others, they might pursue other less traditional pathways to 
finance a mortgage beyond the government-backed channels like 
the GSEs or FHA.
    Dr. Fratantoni, can you speak to what we are seeing in the 
marketplace on some of the nontraditional ways that borrowers 
and lenders finance homes?
    Mr. Fratantoni. Yes. I think it would make sense first to 
highlight that borrowers are using the traditional methods as 
well. We are seeing that for many lenders, the FHA share of 
their business has increased, and then, within that FHA share, 
you see debt-to-income ratios increase because of the strains 
that you're talking about.
    Outside of that, I mentioned in my testimony some growth in 
the non-QM market, which does provide some additional 
underwriting flexibility, but I would still characterize it as 
a very small portion of the market, and the flexibility is 
limited.
    I think with the structure we are operating today, the 
entire market is much safer, certainly than we were 15 years 
ago as a result of the safeguards that have been put in place, 
and I think those are holding even in this tough environment.
    Chairman Davidson. Thank you for that.
    And you talked about one of the dynamics of the market 
years ago in the Great Financial Crisis is structured credit 
and the role that plays in our market.
    One of the most pressing issues impacting housing 
affordability right now is the lack of supply in single-family 
rentals. Data from the Federal Reserve Bank of St. Louis shows 
that the average 30-year fixed mortgage rate has increased from 
3.3 percent in 2020, to roughly 7 percent today. That is a 110-
percent increase just in that span. As a result, something like 
80 percent of homeowners currently have mortgage rates below 5 
percent and a huge number below 4 percent.
    Americans have difficulty deciding to sell a home if they 
have a mortgage rate that is low, locked into, and they are not 
putting it on the market. And someone said, what if it was 
transferrable or assumable? Somebody could assume your 
mortgage. Of course, in the structured credit market in our 
country, these risks have already been sold off, so it makes it 
hard to price that risk.
    So, Dr. Fratantoni, how could a secondary market develop? 
How could we maybe get a way to price that risk in a secondary 
market? Do you have any thoughts?
    Mr. Fratantoni. Yes. As you know, FHA and VA mortgages are 
assumable, but today, for a buyer to take that loan, oftentimes 
they will need an additional amount to meet the purchase price 
given the home price gains that we have seen, and that would 
have to either come from cash or a second loan.
    If we remove the conventional market back to where it was 
prior to the late 1980s of having an assumable feature, again, 
we would have to do that on a prospective basis. We couldn't 
address the loans that have 3 percent rates today.
    Chairman Davidson. Thank you.
    My time has expired. And I now recognize the ranking member 
of the subcommittee, the gentleman from Missouri, Mr. Cleaver, 
for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Dr. Lautz, thank you for being here.
    Last week, there was an agreement by the National 
Association of REALTORS to settle home seller claims regarding 
commissions. You mentioned in your testimony the term, ``legal 
developments,'' and you note that NAR is seeking to clarify 
that the existing mortgage finance rule, which assumes that 
sellers would pay commissions, will continue. If not, limits on 
sellers' contributions may need to be adjusted.
    Now, the American Banker, from my perspective predictably, 
had an article today entitled, ``NAR changes could hurt 
homebuyers.'' So, the sky is falling, and Chicken Little comes 
out to talk.
    Could you clarify the remarks you included in your witness 
testimony and how any changes may impact the homebuying market?
    Ms. Lautz. Absolutely. The first thing I will say is this 
is, obviously, currently in action right now in settlement, so 
there will be progress on this. And I am not the general 
counsel, but I will also say that when we think about first-
time homebuyers, they need the ability to have representation 
and to move forward with that transaction, and they need the 
ability to have this representation in a very competitive 
housing market.
    And as they think about the person who is going to 
represent them, their commission is always negotiable in that 
transaction, but they need the ability to move forward so that 
they can even have their offer seen when there continue to be 
multiple-offer situations, and get them to that closing table.
    But we are concerned about first-time homebuyers, low-
income buyers, moderate-income buyers, and VA buyers, 
especially.
    Mr. Cleaver. Yes. And I am always concerned about the 
fuzziness when these kinds of decisions are made. Because after 
you read it three times, maybe the decision wasn't made. 
Anyway, it is giving me a headache.
    Ms. Bailey, your testimony notes that appraisal bias 
continues to undercut wealth-building opportunities for 
families of color. And as you note, White communities have 
access to over $15 trillion, with a, ``T,'' more in capital 
because of racial bias appraisal practices.
    How are the regulators doing in terms of meeting the goals 
of the Action Plan to Advance Property Appraisal and Valuation 
Equity (PAVE) plan?
    Ms. Bailey. Thank you so much for the question. We are 
encouraging them to finish the race. PAVE is a very important 
initiative that was designed to help us address and end 
appraisal bias. And we absolutely need to make sure that the 
regulators follow through with the work that they started.
    Some of the things that we want to make sure of is that we 
get HUD to resolve the backlog of appraisal discrimination 
complaints and the feasibility of releasing to the public the 
Uniform Appraisal Dataset from the Federal Housing Finance 
Agency (FHFA), the Federal Housing Administration (FHA), the 
U.S. Department of Veterans Affairs (VA), and the U.S. 
Department of Agriculture.
    This data really lets us know what is going on. We are in a 
situation where appraisals are not fair and they are not 
accurate. And because families have to, ``whitewash,'' and 
remove themselves, because that is the only way they believe 
they can actually get a fair and accurate appraisal. So, we 
need these important actions to take place so we can finish the 
process and make sure we are actually doing the things that 
PAVE was designed to do, which is really to end appraisal bias.
    And we want to commend the Administration for being very 
bold. This wasn't an easy thing to arrive at; it took a lot of 
courage. So, we are really hopeful that they will continue to 
run this race and complete the task.
    Mr. Cleaver. Yes, I share the same optimism.
    Now, let me just stay with you for a minute, and I hate my 
time is running down low, but because this is so important, 
that there is $82 trillion currently invested in private equity 
and venture capital, and of that $82 trillion, less than 1 
percent of that money is invested in firms that are owned by 
minorities. That means 99 percent of all private equity and 
venture capital goes to firms that are not owned by people of 
color.
    Given that disturbing reality, what more can we do to--we 
have passed laws, and the problem just seems to hang on and 
hang on and hang on.
    Ms. Bailey. It is misguided to not understand that 
diversity actually benefits all of us. Diverse companies that 
have psychological safety outperform nondiverse entities. We 
want to make sure America remains on the leading edge. 
Diversity and inclusion is our way forward.
    Mr. Cleaver. Thank you very much.
    Chairman Davidson. I thank the ranking member.
    The gentleman from Florida, Mr. Posey, is now recognized 
for 5 minutes.
    Mr. Posey. Thank you very much, Mr. Chairman. And I want to 
thank you and your staff for doing the research necessary to 
bring some expert witnesses in here who believe there are ways 
to solve the challenges of today's homebuyers without the 
Federal Government simply throwing more money that it doesn't 
have, that it would have to borrow, to solve some of the 
issues.
    Dr. Fratantoni and Dr. Lautz, please summarize, each of 
you, the impact of inflationary finance on housing 
affordability over the past 3 years?
    Mr. Fratantoni. As I mentioned in my testimony, to counter 
that inflation, the Fed rapidly raised short-term rates, and we 
saw mortgage rates more than double in response. When you 
couple that with the rapid increase in home prices, we have 
seen a median principal and interest on a mortgage payment go 
up more than $900 on a mortgage. So, again, it's really eating 
into affordability because, obviously, wages have not grown 
nearly as fast.
    Mr. Posey. Dr. Lautz?
    Ms. Lautz. Thank you. And the only thing that I would add 
to Dr. Fratantoni is that when we look at the component of rent 
to CPI, it is 7 to 8 percent. So as individuals are seeing 
their rents go up, they are hit by that financially and they 
are having a harder time secondarily saving for their own down 
payment for a mortgage. So, it is a double hit for renters 
currently.
    Mr. Posey. For sure.
    Do you think that when inflation is tamed, we will go back 
to more reasonable rates, and what effect will it have on the 
market at that time?
    Mr. Fratantoni. We do expect that inflation is going to 
continue to decrease per the Fed's goal of getting it back to 2 
percent over the next couple of years and, as that happens, we 
expect that longer-term interest rates will edge down over 
time, not quickly, but over time. But given the structural 
undersupply in the market, we certainly don't expect that home 
prices are going to decline. If we get some additional supply 
from builders, maybe the rate of home price growth will flow. 
But I think this level of home prices is baked in across most 
of the country now.
    Mr. Posey. Dr. Lautz?
    Ms. Lautz. Yes, I agree. Looking at mortgage interest 
rates, we do expect that, hopefully in the second half of the 
year, we will see them come down. But unfortunately, they have 
been stuck in the 6-percent range for the last 14 weeks, so 
that is hitting affordability.
    If we look at interest rates historically, we do know that 
we are a full percentage point under the historical norm since 
1971. So, we are at a lower point. But I think we also have to 
remember that when we think about the lock-in effect of those 
2- and 3-percent interest rates, it is very difficult to have 
someone be financially able to move.
    Mr. Posey. Okay. And you both alluded to it, but would you 
care to further comment on how the long-term interest rates 
determine the course of the housing market going forward?
    Mr. Fratantoni. The answer to that--Dr. Lautz mentioned the 
lock-in effect. A homeowner who was able to refinance into a 
low 3 or high 2 mortgage rate is just much less likely to list 
their property. It doesn't mean they are never going to list. 
Life keeps happening. People still keep getting married, having 
children, getting new jobs, and they might have to leave that 
low rate behind. But it is a friction in the system, so it is 
going to keep existing inventory much lower than it otherwise 
would be. And that has been a support to home prices, but for 
someone trying to get into the market, it really is an 
obstacle.
    Mr. Posey. Very good.
    Dr. Lautz?
    Ms. Lautz. Yes. And the lock-in effect is absolutely 
happening, but life changes do happen as well, and generally, 
the number-one reason why someone does move is because a life 
change has happened.
    I will also say that it is likely to impact first-time 
buyers more than repeat buyers, because repeat buyers continue 
to gain housing equity, where first-time buyers do not have 
that housing equity to rely upon.
    Mr. Posey. Thank you.
    Dr. Lautz, in an effort to mitigate increasing prices, what 
do you think Congress and local governments can do to help 
remove the obstacles for achieving the benefits of building 
modular home construction?
    Ms. Lautz. Certainly, I think that there are a lot of new 
home products that could come onto the market. And I think it 
is really important to note, too, that while there are a lot of 
new homes that have been built over the course of the last 
year, I believe more ramped-up building than we have seen in 
the decade prior, that we need all sorts of home products, 
because we do know right now that there is a larger share of 
single households.
    There is a larger share of first-time homebuyers trying to 
enter into the market, young adults, but also seniors who may 
need a smaller property as well, so not the traditional, large 
single-family home on the market.
    Mr. Posey. Thank you. Thank you very much.
    Mr. Chairman, my time is about to expire, so I yield back.
    Chairman Davidson. I thank Mr. Posey.
    The ranking member of the Full Committee, the gentlelady 
from California, Ms. Waters, is now recognized for 5 minutes.
    Ms. Waters. Thank you so very much, Mr. Chairman, for this 
hearing, and I would like to thank Mr. Cleaver for all of the 
hard work that he is putting into dealing with these housing 
issues and this housing crisis.
    Let me ask each of our witnesses here today, do you support 
the Downpayment Toward Equity Act? Do you think it is important 
to have assistance for down payments?
    Ms. Bailey?
    Ms. Bailey. Yes.
    Ms. Waters. Thank you.
    Ms. Lautz. Yes, but we also do need more supply.
    Ms. Waters. Okay. Dr. Fratantoni?
    Mr. Fratantoni. Yes. Similarly, we support down payment 
assistance, but agree that supply is the bigger challenge right 
now.
    Ms. Waters. Okay. Very good.
    Let me ask another question. I am going to direct this to 
you, Dr. Fratantoni. Do you know or understand that banks do 
not give mortgages for low-cost homes? For example, I 
discovered that in Ferguson, right outside of St. Louis, there 
were homes for $80,000 or $90,000 after they had the big 
incident there. These people could not get mortgages for the 
most part, and so private equity and others came in, and they 
bought them up, and then, they rented them back. And people 
were paying more in rent than they would have paid in 
mortgages.
    Do you know why banks do not provide mortgages for low-cost 
homes?
    Mr. Fratantoni. Yes. I wrote about this to some extent in 
our written testimony, and we did a research study last year 
looking really at, what are the drivers of that. You think 
there are a lot of fixed costs to making a mortgage, and it 
makes it much more difficult for a lender to make that loan 
economically if the loan balance is very small. And, 
unfortunately, it works exactly to the detriment that you're 
talking about.
    It makes it much more difficult to finance properties in 
these more affordable parts of the country. Some of that you 
can directly tie to some of the regulatory changes that have 
been made, that have added to some of the fixed costs in the 
business.
    Ms. Waters. Thank you.
    I do believe that based on what we understand about the 
profit margins of the banks, they could really afford to do it. 
They may not get as much return on their investment if they 
were doing a jumbo, but I think that in the interests of 
affordable housing and secure housing for the people of this 
country, they should be able to do it. And I think we should 
pay more attention to that.
    Let me just say that I have three bills, and the 
Downpayment Toward Equity Act is but one of them. Another is 
the Housing Crisis Response Act. Are you familiar with that?
    Ms. Bailey. I am, and I wish the Build Back Better Act had 
actually passed in the prior time it was offered. Because had 
we passed the Build Back Better Act, we would have had $150 
billion to address the nation's fair and affordable housing 
crisis, and we would have the gotten the kind of relief that 
consumers need.
    Ms. Waters. Thank you so much. I am still mourning about 
the loss of that at the hands of two Democrats on the Senate 
side.
    Let me ask our real estate representative here today, are 
you familiar with all three of these bills?
    Ms. Lautz. I am personally not, no.
    Ms. Waters. Are you familiar with the Housing Crisis 
Response Act?
    Ms. Lautz. I am not. I am an economist.
    Ms. Waters. Okay. The Ending Homelessness Act?
    Ms. Lautz. Yes, I am familiar with that.
    Ms. Waters. Okay. And you already said you knew about the 
Downpayment Toward Equity Act, so I am very pleased about that.
    And let me ask Dr. Fratantoni, are you familiar with all of 
these bills?
    Mr. Fratantoni. I am not familiar with the bills.
    Ms. Waters. First of all, I want to thank you all for being 
here. I really do appreciate the knowledge that you have, but I 
would like you to take a look at my three bills. You already 
know about them. You just talked about the Build Back Better 
Act with the $150 billion that we had in that. In getting to 
know them better, I would hope that you could also become 
activists in terms of advocating if we want to really deal with 
doing something about housing.
    Now, it should be a bipartisan bill. What can you do to 
help the Republicans understand that their constituents are 
also in a crisis in many parts of this country and they should 
be supporting them? Can you think of anything else we can do 
that would convince them that they should support us on these 
bills or any that they could come up with in order to produce 
more housing in this crisis?
    Yes, ma'am?
    Ms. Bailey. I think if we passed the $10 billion in the 
Housing Crisis Response Act, it should be noted that 96,000 
Blacks, 83,000 Whites, 75,000 Latinos, and 29,000 Asian-
Americans in rural and urban communities would benefit from the 
overall passage of that legislation.
    Ms. Waters. So, this is not for any one ethnic group. This 
is for everybody. Because we have a crisis in this country. And 
we know a lot about what it takes--money, support, and getting 
it done.
    I yield back the balance of my time.
    Chairman Davidson. I thank the gentlelady.
    The gentleman from Wisconsin, Mr. Fitzgerald, is now 
recognized for 5 minutes.
    Mr. Fitzgerald. Thank you, Mr. Chairman.
    I guess I would start by asking the witness panel to raise 
their hand if they agree that all else being equal, boosting 
demand while doing nothing to increase supply leads to higher 
prices. Is that right? Does everybody agree with that 
statement?
    We have a situation where the supply of homes on the market 
is out of reach for many young adults. I talk to builders in my 
district all the time, and they have a similar story. A 
municipality or a village approaches them about building a new 
subdivision. By the time the in-ground costs are added to any 
of the additional infrastructure that they would either have to 
pass through or be responsible for, they end up with an average 
cost of about a half million dollars per home. So what happens 
is, a lot of times, everybody just walks away and nothing 
happens. There are no new homes built.
    So, we have a situation where the supply of homes on the 
market is out of reach for many young adults certainly as 
builders are just not incentivized to build the homes. And so 
far, the Administration's solution to the problem is kind of--
and I know this has been discussed today--to boost demand. It 
is like we are trying to make sure that there are more 
consumers, which doesn't make any sense to me when we have this 
supply issue, right?
    Dr. Fratantoni, President Biden's proposal of a $10,000 tax 
credit for those who sell their home below the median price in 
the country--so if these sellers become buyers, is this likely 
to have any effect at all on the supply of homes?
    Mr. Fratantoni. I would say this first. We do appreciate 
the bipartisan focus on the housing market and really welcome 
the attention it is getting, because we have seen this issue 
bubbling up for multiple years now, but we agree that the lack 
of supply is the problem right now and don't think that this 
one particular approach is going to solve that problem. We are 
millions of units behind.
    Mr. Fitzgerald. And then, what about the proposed $5,000 
tax credit for first-time homebuyers? I have three sons, they 
are in their thirties, and they all have different situations, 
obviously. But a $5,000 tax credit is not going to be the game 
changer that is going to allow them or any other adults between 
25 and 35 to jump into the homebuyer market right now.
    Mr. Fratantoni. Yes, many of our members tell me that they 
have a long list of potential buyers who are prequalified or 
credit qualified to get a loan but just can't find a property. 
That is the problem in today's market.
    Mr. Fitzgerald. Yes. And the proposed $25,000 down payment 
assistance for first-generation homebuyers is not going to do 
anything either. It is not going to have an impact on the 
market. We have to get more supply.
    Would the Consumer Financial Protection Bureau (CFPB) 
prohibiting certain closing costs set by lenders only serve to 
increase the compliance burden on landlords, leading to 
increased costs, more consolidation, fewer choices, and higher 
rents? I think the answer to that is, yes.
    Mr. Fratantoni. Yes. And I mentioned the challenges that 
lenders already have in originating small-balance loans. Adding 
to the costs of lending would just make that more challenging.
    Mr. Fitzgerald. Yes. And I think some of the things that 
the President and the Administration are proposing right now 
will make that worse.
    Last month, at the direction of FHFA, Fannie Mae, and 
Freddie Mac, they released a bulletin clarifying requirements 
for lenders or mortgage servicers with respect to verification 
of homeowners insurance. Generally, the bulletin requires 
servicers each year to verify the replacement cost value of all 
properties secured by loans sold to Fannie and to Freddie. 
Servicers have expressed concerns that this new policy is not 
operationally feasible, it is not a good way to verify the 
replacement value cost, and it could actually significantly 
increase the cost of insurance.
    Dr. Fratantoni, does MBA also share these concerns?
    Mr. Fratantoni. We absolutely do. And we have been working 
with folks at FHFA to try to address our concerns. At a 
minimum, we need a delay in the implementation time to make 
sure lenders can become compliant with this new requirement.
    Mr. Fitzgerald. Thank you very much.
    I yield back, Mr. Chairman.
    Chairman Davidson. I thank the gentleman.
    The gentleman from New York, Mr. Torres, is now recognized 
for 5 minutes.
    Mr. Torres. Thank you.
    Ms. Bailey, do you believe that exclusionary zoning has a 
disparate impact on communities of color?
    Ms. Bailey. Yes.
    Mr. Torres. Does the Fair Housing Act prohibit disparate 
impact discrimination?
    Ms. Bailey. Yes.
    Mr. Torres. Do you believe that exclusionary zoning, in as 
much as it produces a disparate impact, violates the Fair 
Housing Act?
    Ms. Bailey. Yes.
    Mr. Torres. Do you believe that HUD should enforce the Fair 
Housing Act against exclusionary zoning?
    Ms. Bailey. Yes. And I need to clarify that a lot of the 
challenges at the local level are based on local laws and lot 
sizes. And if we were able to actually have localities be 
incentivized with the $85 million that HUD is using to try to 
incentivize the localities to change those laws, we could 
actually increase opportunities to address the fair and 
affordable housing crisis.
    Mr. Torres. But even though zoning is a State and local 
issue, if it violates the Fair Housing Act, it becomes a 
Federal constitutional concern, right?
    Ms. Bailey. Yes.
    Mr. Torres. Okay. I think we all agree that there is an 
urgent need to expand the housing supply. An expanded housing 
supply will require greater housing subsidies from the Federal 
Government and greater land use reform from State and local 
governments, but there is a third variable that affects housing 
supply: cost. If we can figure out how to cut the actual cost 
of housing development in half, then in theory, we could cut 
rent, maintenance, and mortgage payments in half.
    So a question for each of you, what is the most promising 
strategy that you have seen for fundamentally reducing the cost 
of housing development and housing construction in America?
    And we will start with the Mortgage Bankers Association.
    Mr. Fratantoni. I think it has been interesting to see in 
Massachusetts, California, and other parts of the country, the 
State level of government really sort of leaning into local 
government to try to increase density. And I think that is 
probably the most effective way this is going to be done at the 
State and local level is just, where it makes sense, increase 
density.
    Ms. Lautz. Increasing density is certainly important, but I 
also think that when we look at building more homes, we have to 
look at the other problems that are holding back building. 
Certainly, there are local laws that are restricting building 
and holding that back that go beyond density.
    So looking at those laws, I think is quite important, like 
the number of shrubs and trees that need to be planted on a lot 
to have a single-family home go in, things that really could 
expand the number of homes.
    Ms. Bailey. Fully enforcing our nation's civil rights laws. 
There is a provision, the Affirmatively Furthering Fair Housing 
provision, under the Fair Housing Act, that requires two 
things: for localities in States that are receiving Federal 
dollars for housing and community development to stop 
discriminating; and then, to create inclusive communities going 
forward.
    We have yet to have full enforcement, quite frankly, 
because HUD has been underresourced by the prior 
Administration, and HUD during this Administration had to do 
yeoman's work to really build up the staffing at the Office of 
Fair Housing and Equal Opportunity to approach this work with 
the rigor that is required.
    And if I may just speak to one issue about where we are in 
terms of building and costs, we didn't arrive here by accident. 
We actually underbuilt following the Great Recession. Builders 
actually built homes at the higher end of the marketplace, 
excluding building opportunities at the lower end of the 
marketplace.
    So, we didn't just come here from an accident where we need 
to now focus on supply size strategies. By selling to focus on 
demand size strategies, we have exacerbated and actually grown 
the crisis.
    If the House had passed the Build Back Better Act, which is 
now the legislation that the ranking member mentioned, the 
Housing Crisis Response Act--if we had passed that legislation, 
millions of consumers would have gotten the housing relief that 
they need and the overall market would be stronger.
    Mr. Torres. I have a question about the relationship 
between median home prices and median household incomes. Median 
home prices have been rising astronomically, whereas median 
household incomes have been stagnating, and the gap between 
prices and incomes have been widening.
    At what point did that gap become unsustainable? What is a 
healthy ratio of home price to household income?
    Dr. Lautz, if you want to----
    Ms. Lautz. I think when we are looking at this, we have to 
keep in mind that while first-time homebuyers are really 
struggling to enter into the market, homeowners have had 
incredible wealth gains. And 32 percent of the market paid all 
cash.
    A quarter of repeat homebuyers who are primary residence 
buyers are paying all cash. They are not going to be wedded as 
much to what their income is versus the gain in home prices 
because of the ability to gain equity over time and make this 
all-cash purchase. And right now, we are seeing a lot of Baby 
Boomers do this.
    Ms. Bailey. And many of these people have the ability to 
pay all cash because the Fed's policies to rescue the market 
during COVID did not land equally in every community. Wealthier 
borrowers were able to take advantage of refinances at 
historically-low rates, whereas borrowers of color were not 
able to do so. So, we saw the Black/White wealth gap grow by 
$20 trillion because of those inequitable policies.
    Mr. Torres. Thank you.
    Chairman Davidson. The gentleman from New York, Mr. 
Garbarino, is now recognized for 5 minutes.
    Mr. Garbarino. Thank you, Mr. Chairman.
    And thank you to the witnesses for being here today.
    Dr. Fratantoni, the purpose of this hearing is to examine 
the challenges facing today's homebuyers. So, I want to talk to 
you about title insurance.
    FHFA recently announced a pilot program that would allow 
Fannie Mae to effectively self-insure the title on mortgages it 
backs. Curiously, FHFA's announcement said the pilot would 
reduce costs for lower-income households, but then went on to 
say it would be limited to low-risk refinances, in other words, 
borrowers who already own a home and have substantial equity.
    Can you make heads or tails of this apparent contradiction 
in the Biden Administration's new government-run title 
insurance program? Put another way, do you believe that 
eliminating insurance for refinances will help first-time 
homebuyers purchase their first home?
    Mr. Fratantoni. The short answer is, no. Title insurance, 
as you know, provides critical protections for the real estate 
finance system--borrowers, lenders, investors--by 
authenticating to the parties at closing, confirming the 
authenticity of the transaction documents and ensuring that the 
property being mortgaged is free of other debts. Title insurers 
provide insurance against future legal actions against the 
property ownership and mortgage priority.
    For decades, MBA has had a policy that there should be a 
bright line between the secondary market activities that Fannie 
Mae and Freddie Mac are rightly involved in, providing 
liquidity to the market, and primary market activities that 
lenders, title insurers, and others using private capital, and 
taking risk are involved in.
    And we think this is another example of the GSEs 
potentially extending beyond the secondary market activities 
where they really are intended to be focused in their efforts 
under their congressional charters.
    Mr. Garbarino. Absolutely. And I can't speak enough about 
how important title insurance is. I was a real estate attorney 
before I came to Congress. I did hundreds of closings, probably 
thousands of closings. And I have seen at the closing table, 
the title closer there. They are not just making sure all the 
bank paper--they make sure the deed is filed. They make sure 
everything is written up properly. You go through. You make 
sure there is no missing--there are no liens on the property. 
They check the COs. They do a lot. And I think waiving this--
and this pilot program starts just with refinances, but they 
have said, they don't know where it could go. Replacing title 
insurance or getting rid of it just for Fannie or Freddie could 
really hurt the consumer, because Fannie and Freddie are only 
interested as long as they back the loan. But title problems 
could come up much later down the line.
    So, I think this could be a real issue for homeowners and 
actually could work against them. You could save a couple 
pennies at a closing, but in the grand scheme of things, it 
could cost a homeowner a lot of money in the long run.
    I would like to submit for the record, Mr. Chairman, a 
letter written by former Obama-era FHFA Director, Ed DeMarco, 
expressing caution on this very subject.
    Chairman Davidson. Without objection, it is so ordered.
    Mr. Garbarino. Thank you.
    Next, I want to move over to how we can encourage 
innovation in the mortgage interest market. We have heard a lot 
today about the challenges that first-time homebuyers face when 
attempting to get into the market. My constituents face the 
same thing. Actually, in New York, the latest stats have that 
New York has the lowest percentage of homeowners in the nation, 
under 55 percent. Given this, the goal should be to lower costs 
for New Yorkers, especially when it involves bringing in new 
private capital to create more options for consumers.
    One way to reduce prices in the housing space could be 
through a new model providing mortgage insurance designed to 
create more flexibility and pricing for borrowers. By utilizing 
a new streamlined, highly-capitalized approach, direct mortgage 
insurance is estimated to save homebuyers $6,000, and reduce 
taxpayer exposure for the GSEs.
    Dr. Lautz, or Dr. Fratantoni, or both of you, as 
homeownership has become increasingly unaffordable due to 
elevated prices and persistently-high interest rates, do either 
of you believe that we should not be looking at new, innovative 
mortgage products to make add-on costs as competitive as 
possible?
    Ms. Lautz. I can take this first. We absolutely need to be 
looking at innovation. We have to be looking at innovation in 
every aspect to be bringing in new homebuyers, and not just 
first-time homebuyers. We also need to be thinking about 
retirees who want to downsize as well.
    Mr. Fratantoni. I guess I would be more cautious. I think 
the mortgage industry has learned the lessons from 15 years ago 
very well, and I think there is a genuine caution there to make 
sure we are not overextending ourselves once again.
    Mr. Garbarino. Thank you very much. My time has expired. I 
yield back.
    Chairman Davidson. I thank the gentleman from New York.
    The gentlewoman from Texas, Ms. Garcia, is now recognized 
for 5 minutes.
    Ms. Garcia. Thank you, Mr. Chairman. And thank you to all 
of the witnesses for being here today. As we have heard, 
housing is the number-one driver of inflation and continues to 
outpace wage gains. Our nation is facing a housing crisis. And 
this committee did constant work on the issue under the 
leadership of then-Chair Waters. Yet, the Republican Majority 
has chosen to delay working toward legislative solutions to 
address the housing affordability crisis. In the greater 
Houston area where my district is, there are only 33,000 
affordable homes or places to rent for more than 217,000 
extremely low-income renters; 83 percent of these extremely 
low-income households spend more than 30 percent of their 
income on housing.
    Ms. Bailey, given the high demand for affordable housing 
options in many communities across our districts, including my 
own, what types of housing are needed to close the housing 
supply gap?
    Ms. Bailey. Thank you for the question. We need to make 
sure we are thinking about the missing middle. Right now, there 
is an opportunity for us to bring in things like accessory 
dwelling units. And while those are important opportunities in 
communities to help lower overall housing costs, financing 
still becomes a major challenge for consumers of color. And 
that is why we keep saying it is a fair and affordable housing 
crisis. We need to make sure consumers of color are not locked 
out of accessing credit on a fair basis, which they currently 
are. The recent record settlements by the Department of Justice 
show that we continue to see discrimination in the marketplace.
    So, we need to make sure we are focusing on the missing 
middle, and then, we need to utilize programs like first-
generation programs. These are programs designed for people 
whose prior generations were locked out of homeownership 
opportunity and who don't come with the kind of background to 
the housing sector that others might have when they arrive.
    First-generation down payment assistance in the Housing 
Crisis Response Act would help rural and urban borrowers access 
homeownership. And if we pass it at the level of the 
Downpayment Toward Equity Act, we would actually grow 
homeownership by 5 million new homebuyers: 1.7 million of them 
would be Black; 1.4 million of them would be White; and 1.32 
million of them would be Latino. We need inclusive policies 
like that to give people a chance to run up against investors 
who are really making it very difficult for first-generation 
homebuyers to enter into the marketplace.
    Ms. Garcia. And to follow up, can you speak to whether the 
private market can solve the housing crisis on its own or, as 
one of my colleagues from the other side referenced, without 
the government getting involved? Can the private industry solve 
the housing crisis on their own?
    Ms. Bailey. Do you remember the Great Recession of 2008? 
That is the only time our housing market was clearly private, 
and that led to the United States housing market crashing and a 
global collapse.
    We need an all-out everything-in approach. There is $150 
billion in the Housing Crisis Response Act, $150 billion that 
we have all negotiated. We have done all the backdoor 
conversations. That is a compromise. That is a solution that 
would help millions of consumers all over the nation, and it 
would help jump-start the economy.
    We keep saying housing is 20 percent of the U.S. GDP, so if 
housing tanks, the economy tanks. And we don't want to return 
to that.
    Ms. Garcia. Are there any other considerations that need to 
be made by Congress, for example, to help address an 
increasingly-limited supply of affordable housing?
    Ms. Bailey. Yes. passing comprehensive legislation. There 
was not any bipartisan support for the Build Back Better Act, 
sadly. We are asking today for there to be bipartisan support 
for the Housing Crisis Response Act, the Downpayment Toward 
Equity Act, and all of those very sensible provisions. They are 
not outlandish. They are not tons of money thrown at a problem. 
They are very practical things that would keep the housing 
sector safe.
    Again, we are looking at a housing sector where, in terms 
of homeownership, White homeownership is set to decline. So if 
borrowers of color are locked out of fairly accessing credit, 
that means seniors won't have anyone to sell their homes to, to 
reach a successful retirement. That means overall instability, 
and we don't want an outcome like that.
    Ms. Garcia. Right. Are there any other considerations that 
we should take when it comes to housing for seniors or for 
veterans?
    Ms. Bailey. We want to make sure we are supporting things 
like housing choice vouchers. Seniors and veterans often rely 
on those programs.
    And we have been calling on the GSEs to really make sure in 
their contracts with multifamily unit developers that they are 
making sure that there will be no discrimination against 
housing choice voucher holders.
    Ms. Garcia. Okay. Thank you. I see I am down to less than 
10 seconds, so I might as well yield back, because I won't even 
get a question out in that time.
    I yield back, Mr. Chairman.
    Chairman Davidson. I thank the gentlelady.
    The gentleman from South Carolina, Mr. Norman, is now 
recognized for 5 minutes.
    Mr. Norman. I thank each one of you for being here today.
    As someone who has been in the business for a long time, 
and built hundreds of houses, I don't know what affordable is. 
I absolutely don't know what affordable is.
    I will tell you this: If you want to solve the housing 
crisis--and it is not affecting one segment more than the 
other: White, Black, Red, it doesn't matter.
    I am from South Carolina. We have people moving in. I have 
building lots that are paid for that I can't afford to build on 
at cost. Whether it is 1,000 square feet or whether it is 5,000 
square feet, it doesn't matter.
    Now, if you really want to solve it, it is not the 
government. It is not a subsidize the down payment. It is not 
doing away with title insurance. It is not accusing banks of 
discrimination. Banks, when they make loans, they sub this out 
to other groups. They don't know who it is. When I build 
houses, I don't know who looked at the house.
    But if you really want to get to the root of it, first, 
it's gas prices. Everything that goes into a house is powered 
by gas. This Administration has killed us on that.
    Second, if you really want to help people afford a house, 
give them more money to spend. Name me one person in this 
country who is not paying more for eggs, or for gas, as I 
mentioned, across the board. And that is a determination on 
what they can afford.
    I will tell you the demand is there, but until this--and it 
is directly the result of this Administration's stupid rules 
and regulations. I can't get copper pipe because most States 
have ruled, Arizona being one of them--they have made it so 
hard to mine copper. And it goes down the line.
    We have canceled, I don't know how many projects, because 
of supply chain shortages. If I can't get a meter base, does it 
make sense for me to build a house for which I can't get an 
electrical meter base? Time is money, and that is what--the 
government is the last thing you want. And I would ask anybody 
who wants the government involved, where are we going to get 
the money? This country is bankrupt as it is.
    So the housing crisis, if you get the gas prices, let us 
get our own gas and oil here in the U.S., and get supply chain 
shortages out of the way, you will see housing, maybe not boom, 
but you will see it come back. It is not more government 
spending. Government gets in the way.
    The National Association of Home Builders (NAHB) says that 
regulations imposed by government at all levels account for 
$93,870 of the final price for a new single-family house. That 
is a fact. Of the $93,870, $41,330 is due to higher prices for 
the finished lot.
    That is our fault for not getting with the planning 
commissions that are saying no on a lot that is perfectly flat. 
You don't have to have all of these things that go into just 
bureaucratic red tape.
    Anyway, any other regulations you all would say from your 
end of it? I am running out of time.
    Mr. Fratantoni. Again, I did mention that one of the real 
obstacles to getting more small-balance loans originated in 
this country is the cost of the regulations that are just added 
to the fixed cost that a lender has to hurdle over in order to 
get that loan done.
    So, I agree with your thoughts of land, labor, lumber, all 
the challenges to a builder that then just ultimately get 
brought out in the price of the home.
    Ms. Lautz. We have heard from the home builders as well 
that one of the big hurdles that they are having is that their 
skilled labor--the median age is well into their fifties. So, 
we really need to be educating that perhaps this is a pathway 
to a career choice for young adults, to bring them into skilled 
labor, to bring more homes into the market.
    Mr. Norman. Ms. Bailey?
    Ms. Bailey. I think, again, fully enforcing our nation's 
fair housing and lending laws are the solution to solving our 
nation's fair and affordable housing crisis. When we fully 
enforce those laws, we actually make sure people have the 
ability to have housing choice, and they can live in all 
communities and thrive.
    And currently, we don't well-resource HUD in a way that 
they can actually do its job. And our local fair housing 
enforcement agencies are fighting over 4 million incidents of 
housing discrimination every year. We need to get more support 
to them so that they can help people with disabilities, women, 
families with children, people of color, LGBTQ+, and others 
avoid discrimination.
    Mr. Norman. Thank you all.
    Chairman Davidson. I thank the gentleman.
    The gentlewoman from Georgia, Ms. Williams, is now 
recognized for 5 minutes.
    Ms. Williams of Georgia. Thank you, Chairman Davidson, and 
Ranking Member Cleaver, for this hearing today. And thank you 
to our witnesses for joining us.
    I represent Georgia's Fighting Fifth Congressional 
District, which is home to Atlanta. The Census Bureau just 
announced last week that Atlanta continues to grow rapidly, and 
we are now the 6th largest metropolitan area in the country. 
You might have seen the signs that say that Atlanta is full, 
but I welcome everyone who wants to come and call this magical 
city home, and allow Atlanta to change their lives like it 
changed mine.
    But there is one big, glaring problem. We don't have enough 
quality affordable housing for everyone, and that has 
generational effects way beyond ensuring that people have a 
place to lay their heads at night. For decades, homeownership 
has been how Americans build generational wealth, making it an 
essential tool for closing the racial wealth gap.
    Atlanta has many accolades, which I am sure you will hear 
me talk about many times throughout this Congress, but there is 
one that we don't quite want to be proud of, and that is having 
one of the widest racial wealth gaps in the country, a gap that 
could be closed with the opportunity that comes from 
accessible, affordable homeownership to build that generational 
wealth.
    One of the biggest challenges homebuyers in Atlanta face is 
having to compete with large institutional investors purchasing 
homes in bulk and turning them into rental housing, eliminating 
the wealth-building potential of each house that they buy.
    In the third quarter of 2021 alone, institutional investors 
bought 42.8 percent of all single-family homes for sale in the 
Atlanta metro area. This lost opportunity adds up. According to 
research published by Georgia Tech, Black communities in 
Atlanta lost $4 billion, with a, ``B,'' in home equity over 10 
years due to large investors buying properties in Black 
neighborhoods.
    And that is why I have co-led the End Hedge Fund Control of 
American Homes Act, bicameral legislation that would end hedge 
fund ownership of single-family homes over 10 years.
    We desperately need this legislation in Atlanta, where 
Georgia State University has found that 19,000 single-family 
rental homes are owned by just three companies--just three--
none of which are headquartered in Atlanta.
    Ms. Bailey, how does the heavy involvement of institutional 
investors in the housing market contribute to the housing 
inventory shortage, which we have agreed on a bipartisan level 
that inventory is a huge problem? How does that impact what we 
are already experiencing?
    Ms. Bailey. It is actually driving up all the affordable 
housing stock in communities that have been hardest hit by the 
Great Recession. That is the part of this conversation that we 
are not really talking about.
    They are buying homes for people who would actually be able 
to afford homes if the market hadn't been overcorrected. We 
know that following the Great Recession, there could have been 
an additional 700,000 Black homeowners, but we overcorrected. 
We overextended. Those buyers now need first-generation down 
payment assistance to be able to compete.
    Ms. Williams of Georgia. Thank you, Ms. Bailey.
    These investors tend to concentrate their purchasing in 
low-income communities and communities of color, in other 
words, areas where buying a home and building equity is the 
most direct path towards closing the racial wealth gap.
    Ms. Bailey, how does the presence of institutional 
investors harm first-time homebuyers, especially in 
marginalized communities, as they are already struggling with 
the lack of affordable housing?
    Ms. Bailey. They make it really difficult for housing costs 
to come down. If you are even a renter in those communities, 
your rents are going up, because they are, again, taking 
advantage of all the available affordable housing stock. So, 
people are paying more money in their rental payments, making 
it less likely that they will be able to save for a down 
payment.
    Again, we have a solution. The Downpayment Toward Equity 
Act is one of the solutions, as well as the Housing Crisis 
Response Act.
    States like Minnesota, Vermont, Rhode Island, and New 
Jersey are all instituting support for first-generation down 
payment assistance. Even States in the South, like North 
Carolina, are instituting the support, because we understand 
that people just show up to this equation differently.
    We have never corrected for our nation's history of 
discrimination. So while it is uncomfortable talking about 
Black and White when it comes to housing, the reality is we 
can't escape it. These provisions are restorative, and they are 
race-neutral, and they will help to bring economic activity in 
communities that have long been denied.
    Ms. Williams of Georgia. Thank you, Ms. Bailey.
    We talked about the down payment assistance for first-time 
homebuyers, but what other strategies should Congress examine 
to help reduce the harm caused by institutional investors' 
control of so much of the housing market?
    Ms. Bailey. I think we need to look at the legislation that 
you just discussed to make sure we are monitoring who is being 
able to purchase in bulk those homes. Again, we need to make 
sure we are fully enforcing our nation's fair housing and 
lending laws.
    The Affirmatively Furthering Fair Housing Law, a provision 
under the Fair Housing Act, is something that we need to make 
sure HUD is well-equipped to enforce. So, that is something.
    We also need to make sure we are well-funding housing 
choice vouchers so that renters can actually have the ability 
to get access to quality housing. And we have to talk about 
things like the Low-Income Housing Tax Credit. We need to make 
sure it gives people a choice in terms of where they can 
actually live.
    Ms. Williams of Georgia. Thank you, and I am out of time.
    Chairman Davidson. I thank the gentlewoman.
    The gentleman from Nebraska, Mr. Flood, is now recognized 
for 5 minutes.
    Mr. Flood. Thank you, Mr. Chairman.
    Before a workforce housing event in Columbus, Nebraska, in 
January, I had the Joint Economic Committee pull some housing 
data regarding my district before the event. I would like to 
use this data to demonstrate the unique environment we are 
currently in for people who are looking for homes.
    Using the data provided from a couple of months back, I 
would like to take a look at a theoretical example of the 
problem. Madison, Nebraska, is in my home county. The average 
value of a single unit permitted in this county is $262,238. I 
was curious, given the current environment, how much someone 
would need to make in order to be able to afford the monthly 
payments on that home.
    If you start with a base assumption that the borrower has a 
10-percent down payment, using the programs and the loan 
products that are out there, you can get a mortgage rate of 
maybe around 6.805 percent, if you are lucky, from a local 
bank. You add in property taxes, homeowner's insurance, and 
mortgage insurance, and you are looking at roughly $2,081 
monthly in housing payments.
    There is a rule of thumb in personal finance that your 
monthly housing expenses should not be greater than 30 percent 
of your monthly gross income. In order to remain within the 
scope of the 30-percent gross income rule of thumb, the 
borrower's income would need to be $6,938 a month. Annualized, 
that salary would be $83,257.20 a year. The problem is that the 
median monthly household income in my county is $5,095 or 
$61,140 a year.
    Now, it is worth mentioning that there are ways to get that 
monthly payment down. If the borrower were able to put 20 
percent down, they would get a better rate and not have to pay 
monthly for mortgage insurance.
    But the general problem remains the same. The cost 
associated with owning a home remains significantly higher than 
the median household income of the people in this county. That 
is the problem we are seeing just in Madison County, Nebraska, 
and across America.
    People who work hard should have the chance to live in a 
home and experience the American Dream. One significant part of 
the problem is that the effect of the Federal Funds Rate in 
February was the highest since 2001, an environment with higher 
interest rates than we have had in a long time. The question 
is, how can we make homeownership possible for people trying to 
climb the economic ladder?
    Dr. Lautz, do you frequently see a misalignment between the 
incomes in an area and the same area's housing prices, 
particularly in a high-interest rate environment? Is that 
something that is becoming more common?
    Ms. Lautz. Yes, absolutely. You are from Nebraska, and I 
think it is really important to note that we have been seeing 
this in coastal areas across the nation for years, but now we 
are starting to see this move inwards.
    And part of that is because of migration flows that 
happened during the pandemic. Some of it is because of 
population growth of young adults. And it is putting a lot of 
pressure on the underbuilding, which is continuing across the 
nation.
    Mr. Flood. Second question: How big a role do interest 
rates play in this environment relative to other factors such 
as the cost of raw materials, the cost of labor, and general 
housing shortages?
    Since 2009, we have seen 16-percent inflation on building 
homes in Nebraska. What are interest rates doing to the 
problems that have been impacting coastal areas, and now, 
inland areas like mine?
    Ms. Lautz. What we consistently hear is that home builders 
have to borrow to build. They have to finance that project. And 
so, as interest rates went up, it become even more expensive, 
and they became reluctant to actually build more new homes.
    They are now coming back into the market, but I think it is 
really important to note that as interest rates are higher than 
what they have been, they are probably going to be tiptoeing 
into the market, and we really do need that inventory.
    Eighty-five percent of homes that are purchased are 
existing homes, and those homes are getting older because of 
the lack of new building.
    Mr. Flood. What I am really focused on are homes that cost 
between $200,000 and $250,000. That is really the sweet spot, 
when you look at what our workforce needs.
    Are you seeing enough building activity for those homes to 
meet demand? And please talk about manufactured housing.
    Ms. Lautz. I think the very quick answer is, no, we are not 
seeing enough homes at that very affordable price point. When 
we are seeing new builds, the typical home price that is being 
sold is over $400,000. That is not affordable to many 
communities and to many Americans.
    As far as manufactured housing, that is one solution in 
looking at the housing crisis.
    Mr. Flood. Now, I know about Hagerstown, Maryland. I have 
heard that there is some effort going on there. Is there any 
other place in America that is putting together a development 
for manufactured housing, that people in Nebraska could be 
looking at for guidance?
    Ms. Lautz. I think that is a great case study. I don't know 
of any others off the top of my head.
    Mr. Flood. I would just say this to the rest of America: If 
you are a city leader, if you are running a city, if you are 
working on solving this problem and you are effectively using 
manufactured housing in a development, please reach out to my 
office. Let us know. We need to know about it. We need to 
investigate it.
    With that, Mr. Chairman, I yield back.
    Chairman Davidson. I thank the gentleman.
    The gentlewoman from Colorado, Ms. Pettersen, is now 
recognized for 5 minutes.
    Ms. Pettersen. Thank you, Mr. Chairman, and Ranking Member 
Cleaver, for hosting this committee hearing, and I thank all of 
you for being here on such an important issue.
    I am from Colorado, as you heard. And, like so many States, 
we are facing a housing crisis. Our secret is out. It is the 
best place to live. And we have had tens of thousands of people 
moving there every single month for years.
    It has finally tapered off, because it has become so 
unaffordable, but it really has impacted us, especially our 
rural communities. Now that remote work is an opportunity for 
people, they are moving to the mountains. And people who have 
lived there their entire lives have seen home values increase 
sometimes threefold in just a couple of years, and they are 
being pushed out of their communities.
    Workers are unable to live in a lot of these communities. 
It really impacts our small businesses and their ability to 
attract and retain workers. And this is something that, in the 
legislature when I was there for 10 years, wasn't a big 
priority of mine. I focused on other issues. But I asked to be 
on this committee because this really intersects in everything 
that we are facing in Colorado and so many issues that we are 
facing.
    So, I appreciate the opportunity to chat about solutions. 
When I think about the urgent needs that our country needs to 
be addressing and how complicated these issues are, that is 
definitely the case for housing.
    We know that it is the financing piece, and with increased 
interest rates, as you know, we need homes more than ever, but 
home builders have started to slow down because of the cost of 
building. We need to bring the Federal incentives that were 
actually building the types of homes that we need.
    In Colorado, we don't have access to places for seniors to 
go. So, they are staying in the homes that they raised their 
families in, even though it is really difficult for them to 
make ends meet and stay in that house. They have nowhere else 
to go. So, it doesn't bring room for new families to come into 
those homes as well.
    So, I am proud that we finally got something done in a 
bipartisan way for the Low-Income Housing Tax Credit (LIHTC). 
That is really big for Colorado: 4,100 affordable units will 
either be preserved or built. That is a big step forward and an 
example of how critical those public-private partnerships are 
and what we need to do to incentivize.
    I would love to hear from all of you on what additional 
things we should be thinking about there, and then, how we can 
address the zoning policies, the restrictive policies at the 
local level that significantly increase cost? What can we do to 
bring a carrot and a stick, as we can at the Federal level?
    And I just want to thank you, Dr. Lautz, for talking about 
what the workforce needs, because we have people who are 
begging to work here, and we don't provide legal pathways for 
people to do that. And we have employers who say that this is 
the number-one thing that we could do to address rising costs. 
And we can't even come together in a bipartisan way to get that 
done in a time where it is needed most, which is incredibly 
frustrating. So, thank you for addressing that, because it 
really impacts construction.
    I would love to hear from all of you what should we be 
thinking about broadly on all of these different issues?
    And then, also something that I want to highlight is a 
staggering statistic that I heard from the HUD Director, which 
was, if we don't act and we don't change policy and we continue 
down the same path, in just under a decade, over 60 percent of 
the housing supply will be owned by corporations.
    Do we need to think about taking away the opportunity for 
private equity firms and corporations to buy single-family 
homes? Is that something that we should be considering?
    Who wants to start?
    Mr. Fratantoni. I am happy to. Congresswoman, I was just 
talking with a number of lenders in Colorado in January. And I 
would say something that I know you are aware of, that they 
really focus on as the biggest concern, was the lack of 
availability and cost of homeowners' insurance, particularly 
with the increased wildfire risk in Colorado.
    So, anything you can do to address that problem--it is not 
only impacting the ability of borrowers to qualify for a loan, 
but it is increasing payments for existing homeowners to such 
an extent it really puts them on an unstable path. So, it 
really is front and center for us right now.
    Ms. Pettersen. And also a thing that we should think about.
    Ms. Bailey. We would really encourage Treasury to ensure 
that those Low-Income Housing Tax Credit investments are really 
done in a way that they are built also in communities that are 
well-resourced to really give consumers the chance to have fair 
housing. Without that, people can't really choose to live in 
places with the amenities that are necessary to thrive.
    Ms. Lautz. I would add adaptive reuse. We have been talking 
a lot about new build construction, but I think also 
repurposing existing buildings.
    Ms. Pettersen. Sorry it is a short time. Thank you so much. 
I yield back.
    Chairman Davidson. Thank you to the gentlelady.
    The gentleman from Nevada, Mr. Horsford, is now recognized 
for 5 minutes.
    Mr. Horsford. Thank you to the chairman and the ranking 
member for holding this hearing.
    Yesterday I was with the President in my district talking 
about housing and the importance of addressing housing 
affordability and lowering the cost, both for rent as well as 
the ability towards pursuing homeownership. So, this is a very 
timely hearing.
    Dr. Lautz, in the National Association of REALTORS' most-
recent 2023 profile of homebuyers and sellers, I noticed that 
there was an alarming increase in all-cash buyers outbidding 
everyday folks who are barely able to scrape together a down 
payment.
    According to your more-recent research, 32 percent of 
buyers purchased their homes in cash. Would you be able to 
provide any insights into the characteristics of these cash-
rich purchasers, the kinds of homes that they are more likely 
to purchase or the likelihood that they would even occupy their 
newly-bought homes?
    Ms. Lautz. Yes. Thank you so much. In the last month, 32 
percent of homebuyers did buy their home with cash. When we 
look at who these buyers are, what we can see is that among 
primary residence homebuyers, it is more than half of baby 
boomers who are making all-cash purchases.
    They have earned housing equity over time, and when they 
are able to make their next trade, they are able to do so with 
an all-cash purchase. We also know they are more likely to be 
long-distance primary residence movers, so perhaps moving to a 
more affordable area in the country, perhaps with migration 
flows because of remote work trends.
    When we look at other buyers, what we have seen in the last 
6 months is more than half of vacation homebuyers are paying 
all cash for their purchase, and a little over 40 percent of 
mom-and-pop investors. So, we are not capturing institutional 
investors in that measure. They have worked with a REALTOR.
    Mr. Horsford. Why aren't institutional investors included?
    Ms. Lautz. Because it is based on a survey that we do on a 
monthly basis, based on our REALTORS----
    Mr. Horsford. It is not available?
    Ms. Lautz. Correct. It is not available.
    Mr. Horsford. Right. Okay. That is the point I really 
wanted to get on the record. It is information that we do not 
know about these institutional investors. It is why I think it 
is important that HUD be able to collect the necessary data on 
the housing market to get a more accurate picture.
    That is why I introduced, last year, the bipartisan and 
bicameral Housing Oversight and Mitigating Exploitation (HOME) 
Act, to actually empower HUD to gather this data needed to 
understand the severity of our housing shortage and to protect 
everyday Nevadans from being exploited by potential market 
manipulators.
    Again, I just addressed this with the President yesterday. 
I was glad to see some of this included, but we need Congress 
to act. And to the chairman of this subcommittee, I would urge 
us to schedule a hearing on my bill, the HOME Act, so that we 
can move that issue forward.
    I would also like to submit for the record an article from 
the Las Vegas Review-Journal entitled, ``Most homes sold in Las 
Vegas are `unaffordable.'''
    Chairman Davidson. Without objection, it is so ordered.
    Mr. Horsford. Ms. Bailey, as they have learned from the 
pilot on this issue, the Federal Home Loan Bank of San 
Francisco estimated that a race-neutral program targeting 
first-time homebuyers could reach more than five million 
households, nearly all of them Black or Hispanic.
    Would you please discuss the equity implications of a race-
blind down payment assistance program?
    Ms. Bailey. Yes. By targeting down payment assistance by 
first generation, we are able to bring resources to the 
communities that were locked out of historic homeownership 
opportunities and who still face barriers in the marketplace.
    A lack of down payment is the primary reason consumers of 
color report having an issue with entering into homeownership. 
So, if we actually give them that fair opportunity through the 
use of first generation, again, we could grow homeownership for 
5 million new homebuyers: 1.7 million would be Black; 1.32 
million Latino; and 1.4 million White. And these----
    Mr. Horsford. And that would help close the racial wealth 
gap.
    Ms. Bailey. ----policies will help, yes.
    Mr. Horsford. Because we would build equity, which helps 
build wealth, for those individuals.
    Ms. Bailey. And give them an opportunity to compete against 
those institutional investors who are buying up all the 
affordable housing stock in their communities.
    Mr. Horsford. Would any of you like to discuss the growing 
incidence of rent-burdened households in this country with the 
remaining time left?
    Ms. Bailey. I would just like to say that consumers of 
color are the most cost-burdened, Latinos and African Americans 
especially with rents. And, again, institutional investors are 
playing a role there, because they are buying up all of the 
affordable housing stock.
    So, we need to make sure we are really supporting our 
Housing Choice Voucher Program so that we can make sure 
borrowers with the lowest incomes get the ability to safely 
live in decent----
    Mr. Horsford. Thank you. I appreciate the gentleman's time. 
And I would just urge us to not just talk about this issue but 
to schedule bills so that we can act on it.
    With that, I yield back.
    Chairman Davidson. I thank the gentleman.
    I think we noticed three bills for this hearing. I am happy 
to talk to you about your bill.
    The gentlewoman from Michigan, Ms. Tlaib, is now recognized 
for 5 minutes.
    Ms. Tlaib. Thank you so much, Mr. Chairman.
    I would like to start by noting that the difference in 
homeownership rates between Black and White households is 
larger today than it was before the passage of the Fair Housing 
Act of 1968, when housing discrimination was legal. Let that 
just sink in.
    I know in Michigan, we lost more Black homeownership during 
the foreclosure crisis than any State in the country. 
Nationwide, we know that the White homeownership rate is about 
74 percent, 28 percentage points higher than the Black 
homeownership rate.
    In my district alone, the gap is even wider. It is 81 
percent for my White neighbors or homeowners, while only 47 
percent of my Black neighbors own their homes. Even when 
comparing households, even when we compare households with 
similar education levels or incomes, homeownership gaps persist 
across racial groups.
    So, Ms. Bailey, what explains the fact that the Urban 
Institute reports that Black applicants with incomes above 150 
percent of the area's median income (AMI) have a higher denial 
rate than White applicants with lower incomes between 50 to 80 
percent AMI?
    Ms. Bailey. Thank you so much for the question. I lifted up 
in my testimony the recent record settlements that the 
Department of Justice had. Discrimination is not a relic of the 
past. It remains a problem in our housing sector.
    And, in fact, we know that White Americans with lower 
incomes actually have a higher homeownership rate than 
wealthier African Americans. This history of discrimination 
continues to manifest itself in our marketplace.
    Ms. Tlaib. And it is really just shocking, because many of 
these settlements are not really--it is almost Band-Aids, 
because for me and many of my colleagues, we talk about the 
Community Reinvestment Act. We talk about fair housing.
    We need to truly enforce them in a way that, again, pushes 
back against what we know is very much systemic racism within 
the banking industry. I see it even with small-dollar 
mortgages. Many of my residents want to be able to afford their 
homes that are less than $100,000. They can afford it, but they 
are not actually being approved for loans less than $100,000.
    Ms. Bailey, I have been trying to get HUD--and I have 
talked to Secretary Fudge about this over the years. This is so 
incredibly important. How can we get our banking institutions--
what can we do as the Federal Government to promote small-
dollar mortgages?
    Ms. Bailey. I think the GSEs could provide more liquidity 
for small-dollar loans. I think that is a really important 
start.
    And the thing we want to really be careful with, with the 
lack of small-dollar lending, is that those consumers are then 
only left with exploitive credit options.
    And we want to make sure that our nation's consumer 
protection laws are also fully enforced. So, we need to enforce 
our nation's fair lending and housing laws, but we also need to 
make sure the Consumer Financial Protection Bureau can enforce 
our nation's consumer protection laws.
    Ms. Tlaib. I know roughly 50 million consumers out there, 
Ms. Bailey, were disproportionately people of color, who lacked 
the credit history necessary to produce a reliable credit 
score, not because of the different stereotypes that might go 
through people's head. It is that they don't have the same 
access.
    Historically, my Black neighbors have enjoyed less access 
to varied programs like FDIC-insured bank accounts and 
revolving credit that have allowed many of our White neighbors 
to build their credit profiles. Research actually has pointed 
to the possibility of using other measures to assess 
creditworthiness. For example, cash flow and rental payment 
data can be used in mortgage underwriting, and both Fannie Mae 
and Freddie Mac have begun initiatives in that.
    Ms. Bailey, can you talk about the use of alternative types 
of data in mortgage underwriting and the impact their use would 
likely have on our neighbors?
    Ms. Bailey. Yes, it actually works. Things like positive 
rental payment data is really most analogous to homeownership 
payments. And what we have seen is that the Black and Latino 
homeownership rate has been able to grow between 2019 and 2023, 
because we have been looking at these more-inclusive methods of 
underwriting, comparing it to things that are most analogues to 
homeownership.
    And we have to remind ourselves that cash flow data is data 
that we always looked at historically, and we moved away from 
some of those traditional underwriting criteria with things 
like desktop underwriting. So, we need to go back to those 
traditional things that work.
    Ms. Tlaib. Yes. I know a home is often a family's most 
valuable asset, providing wealth that unlocks opportunities 
both today and for future generations. And again, I think we 
really need to realize the crisis that we have, especially when 
we see these numbers, again, that are larger than before the 
passage of the Fair Housing Act.
    With that, I yield back.
    Chairman Davidson. I thank the gentlewoman.
    The gentlewoman from Texas, Ms. De La Cruz, is now 
recognized for 5 minutes.
    Ms. De La Cruz. Thank you, Mr. Chairman, for holding this 
hearing today, and thank you to the witnesses for appearing 
before us. I am glad to see our committee's continued focus on 
housing affordability and availability.
    As I have shared before, south Texans and Americans across 
the country understand the very real impacts and challenges of 
today's housing market.
    As homeowners and homebuyers continue to see decade-high 
interest rates and inflation impact nearly every area of their 
monthly budgets, it is clear that working-class and middle-
class Americans face increasing challenges trying to achieve 
the American Dream today.
    That being said, Dr. Lautz, this committee has also 
rightfully highlighted housing concerns for our veterans and 
disabled veterans recently. In your analysis, what are some of 
the unique challenges our veteran populations face in accessing 
affordable housing?
    Ms. Lautz. Thank you for the question.
    When we look at recent homebuyers, what we have seen in the 
last year, repeat buyers are telling us, 13 percent of them, 
that when they took out a loan product, they did use a VA loan, 
and about one in ten first-time homebuyers are accessing that 
as well.
    It helps them in saving for a down payment. And what we see 
over time is that they successfully pay their loan and they 
have the lowest default rates among all borrowers.
    Ms. De La Cruz. That is great information. Thank you for 
sharing that.
    To me, the American Dream and homeownership, as I said, 
they go hand in hand, especially for our nation's veterans. I 
am proud to have introduced the bipartisan VA Home Loan 
Awareness Act for this reason: We can and should provide our 
heroes with the opportunity to achieve homeownership and the 
American Dream they fought to protect.
    We also, unfortunately, know that some of our most-
vulnerable heroes, disabled veterans, who have earned dignity 
and respect through their service, oftentimes need additional 
support. That is why I have introduced this bipartisan 
legislation.
    We must ensure that disabled veterans are treated 
consistently and fairly by HUD's housing support programs, and 
I look forward to continuing to work in a bipartisan manner to 
make this happen.
    Dr. Fratantoni, with that in mind, we see that the changing 
characteristics of the average homebuyer indicate that working-
class and middle-class homebuyers face increasing challenges in 
today's market. Do you know, off the top of your head, for a 
State like mine, Texas, what does the average homebuyer look 
like today?
    Mr. Fratantoni. That is a great question. We know that 
Texas homebuyers rely on government housing programs like FHA 
and VA to a greater extent than borrowers across the country, 
with 31 percent using those FHA, VA, and RHS loans, compared to 
25 percent for the nation as a whole.
    And even with that, we know that the homeownership rate in 
Texas is about 2\1/2\ percentage points below the national rate 
as of the fourth quarter. We often think of Texas as a more 
affordable portion of the country compared to the coast, and 
yet, many of your constituents, again, are really struggling, 
given the challenges.
    We know that it goes beyond housing, right? We are seeing 
delinquency rates on consumer debt increase for credit cards, 
for auto loans. A lot of households are stressed well before 
they get into the housing portion of their portfolio. And right 
now, mortgage delinquency rates are extremely low, but I think 
with any softening in the job market, we are watching closely 
to see whether those delinquency rates might increase.
    Ms. De La Cruz. Thank you. I yield back.
    Chairman Davidson. I thank the gentlelady.
    I would like to thank our witnesses for your testimony 
today.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    I ask our witnesses to please respond as promptly as 
possible.
    And this hearing is now adjourned.
    [Whereupon, at 4:14 p.m., the hearing was adjourned.]




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                             March 20, 2024





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