On Wednesday, December 6, 2023, at 10:00 a.m. (ET) Housing and Insurance Subcommittee Chairman Congressman Davidson and Ranking Member Congressman Cleaver will host a hearing entitled, “Housing Affordability: Governmental Barriers and Market-Based Solutions."
___________________________________ Witnesses for this one-panel hearing will be:
• Mr. Seth Appleton, President, U.S. Mortgage Insurers (USMI)
• Mr. Norbert Michel, Vice President and Director, Center for Monetary and Financial Alternatives, CATO Institute
• Dr. Emily Hamilton, Senior Research Fellow and Director of the Urbanity Project, the Mercatus Center at George Mason University
• Ms. Arianna Royster, President, Borger Residential, on behalf of the National Apartment Association (NAA)
• Ms. Diane Yentel, President and CEO, National Low Income Housing Coalition
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This hearing will focus on the continuing affordability challenges that many currently face in both the single family housing and rental markets. The witnesses will discuss the factors that have contributed to those challenges, particularly government-created barriers such as restrictive land-use and zoning policies, and various market-based solutions to address them.
Summary
Housing accounts for roughly 15 to18 percent of the U.S. economy and is the single-largest expense for many American families. Despite a housing market with unprecedented federal support, including the government-managed conservatorships of Fannie Mae and Freddie Mac, as well as more than $1 trillion dollars spent on programs run by the U.S. Department of Housing and Urban Development since 2000, housing continues to be unaffordable for millions of Americans. Housing affordability for single family homes has hit historic lows, with record numbers of Americans paying more than 25 percent of their monthly income on a mortgage payment. At the same time inventory remains limited and mortgage interest rates sit at multi-decade highs. Meanwhile, in the rental market, many growing areas of the country are already oversubscribed, and costs remain high following a peak in annual average rent growth of over 15 percent between 2020 and 2022.
While there are many factors influencing the lack of affordability in housing, some of the largest drivers include the following:
• A widespread lack of inventory in growing and high-demand areas, resulting in home price and rent growth that have outpaced household income; • The high cost of inflation experienced during the Biden Administration, including higher interest rates, lingering supply chain issues, and a tight labor market stemming from the pandemic; • Government housing finance policies that crowd-out private sector capital and hamper innovation; and • Outdated local-level regulatory obstacles that restrict supply and distort markets, including restrictive land-use/zoning policies and misguided rent control.
Addressing these issues will result in greater availability of and more affordable housing. However, there is no panacea that can solve these problems. Possible solutions involve stakeholders coming together at multiple levels. These efforts must include both a focus on removing government barriers that restrict growth as well as embracing private market solutions to increase affordable housing opportunities.
Lack of Inventory and Restrictive Regulations
The primary driver of housing unaffordability remains a lack of supply of homes to meet growing demand. While our national housing stock grew at an annual rate of nearly 2 percent around the 1970s, that rate was cut in half during the last 20 years, with just 0.7 percent growth in the last decade. By some estimates this has led to an undersupply of between 4 to7 million homes nationally to meet the demand of consumers seeking homes they can afford. This trend has existed for decades as the U.S. has failed to keep up with the housing demands. Housing production has taken a particularly strong hit since the Great Financial Crisis of 2008. In fact, monthly, new single-family homes for sale remain roughly 25 percent below their pre-recession peak of 572,000 in July 2006.
These higher costs make housing less attainable for first-time and middle- and lower-income borrowers, creating barriers to entry. According to a recent report by Rocket Homes, median household income was $68,710, while the nationwide median U.S. home price was $416,100 in the second quarter of 2023. This means that average home prices are now six times higher than the median household income. Similar work...
