Boom and Bust: The Need for Bold Investments in Fair and Affordable Housing to... (EventID=115206)

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Connect with the House Financial Services Committee Get the latest news: https://democrats-financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Thursday, December 1, 2022, at 10:00 a.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a hybrid hearing entitled, “Boom and Bust: The Need for Bold Investments in Fair and Affordable Housing to Combat Inflation." ___________________________________ Witnesses for this one-panel hearing will be: • Nikitra Bailey, Executive Vice President, National Fair Housing Alliance • Margaret Eaddy, Activist and Housing Seeker • Michael Mitchell, Director of Policy & Research, Groundwork Collaborative • Mark Zandi, Chief Economist, Moody’s Analytics • Douglas Holtz-Eakin, President, American Action Forum ___________________________________ Overview A persistent shortfall in the supply of housing units in recent years, along with corresponding increases in the costs to access available housing, have contributed to a nationwide housing affordability crisis that has only been exacerbated by the pandemic and corresponding economic trends. For decades, housing supply has not kept up with demand, with one estimate showing an average of 150,000 fewer homes being built compared to the demand for single-family homes and rental units over the past decade. The underproduction of homes that are affordable to the lowest income households in particular, has led to an absolute shortage of 3.6 million homes for extremely low-income renters—the only subset of households experiencing an absolute shortage of housing. This chronic and growing lack of supply to meet demand has contributed to inflation in the housing market, with real average new home prices rising by approximately 88% from 1981 to 2021, after controlling for inflation, and real median new home prices rose by 93% over the same period. Between 2019 and June 2022 alone, house prices increased by 48% nationally and the national median asking rents increased by 31% during that same time. Further, wage growth, which has grown by 23%, has not kept up over the past five years with the 36.9% increase in rents. As described in greater detail below, research shows that increasing housing costs are a primary driver of core inflation in the U.S. economy. According to the latest consumer price index (CPI) report, housing inflation contributed to more than half of the monthly increase in core inflation observed in October 2022. The Federal Reserve (Fed) has rapidly raised interest rates to combat inflation; this makes the cost of housing finance more expensive, which can reduce housing prices, but it also increases the cost of lending to build new housing, which can constrict the supply chain of new units under construction and make the sale or rental price of new units more expensive. The Fed’s interest rate hikes also do nothing to address the fundamental shortage of housing. This hearing will explore these interactions and policy options to fully combat inflation and promote fair and affordable housing. High Housing Costs Housing costs make up the single largest budget item for most U.S. households. As of 2020, 29.9% of all households were moderately or severely burdened by housing costs. However, cost burden trends are starkest among renters, 46.2% of whom are moderately or severely cost burdened compared to 21.3% for homeowners, and even starker for 84% of extremely low-income renters who make at or below 30% of the area median income. According to the latest Census Bureau data, over 4 million households reported that they are at risk of eviction or foreclosure in the next two months, and over 13 million reported that they are behind on their rent or mortgage payments. This is not just a problem for lower wage workers—data show that “the average minimum-wage worker must work 96 hours per week (nearly two and a half full-time jobs) to afford a two-bedroom rental home, or 79 hours per week (two full-time jobs) to afford a one-bedroom rental home at the fair market rent.” In early 2022, rents grew in all markets, with rents increasing 10% or more in 77% of housing markets.13 The income needed for a household to purchase a median-priced single-family home has increased by nearly 90% from $68,035.67 in 2019 to $129,049.55 today, and is even higher for new homes. While home purchase demand has cooled, with 4.43 million existing homes sold in October 2022, which is down 5.9% from September 2022 and down 28.4% from October of last year, housing inventory is also down 0.8% from September and also 0.8% from October of last year. Inflation in the Economy and in Housing There are various measures used by economists to gauge inflation in the economy. Two widely used measures are the personal consumption... https://financialservices.house.gov/events/eventsingle.aspx?EventID=409942