Archive Press Releases

My name is Antone Giordano, the 1999 Vice-Chairman of the Federal Government Affairs Committee of the National Association of Home Builders (NAHB). Thank you, Chairman Lazio, for the opportunity to testify this morning before the House Subcommittee on Housing and Community Opportunity on H.R.1776, The American Homeownership and Economic Opportunity Act of 1999. NAHB has made passage of a bill to remove barriers to housing affordability one of it’s top priorities for 1999. Your bill, Mr. Chairman, will accomplish a significant portion of this 1999 NAHB objective.

On behalf of the 200,000 member firms of the National Association of Home Builders, I am pleased to participate in the exchange of ideas on the important issue of homeownership for Americans. Homeownership plays a critical role in a family's success and financial well being and we applaud the Chairman’s effort to enhance the federal government’s commitment to increasing the access to homeownership for more Americans.

Homeownership and Barriers to Housing Affordability

Home building is a highly regulated activity. Perhaps in no other industry must the producer obtain a permit or undergo inspection for each individual unit of the entire production. For example, builders must comply with site-development standards, while applying for building permits and undergoing building code inspections. The effect of regulation on the affordability of housing is undoubtedly negative. Layers of excessive and unnecessary regulation imposed by all levels of government – federal, state, and local – can add 20 to 35 percent to the cost of a home, which translates into thousands of dollars, making it difficult, or even impossible, for families to own their own home.

When American families are denied the opportunity to purchase a home, the whole nation suffers. Homeownership is the cornerstone of family security, stability, and prosperity. It strengthens the nation by encouraging civic participation and involvement in schools and communities. It provides a firm foundation from which Americans can work to provide for their families and enhance their communities.

It is important to understand why the National Association of Home Builders has placed such a strong emphasis on homeownership and removing the unnecessary barriers that prevent some families from becoming homeowners. The national homeownership rate, the percentage of households who own their own home, reached an all-time peak of 66.8 percent in the third quarter of 1998, and an all-time annual peak of 66.3 percent in 1998. That means that nearly 70 million households own their home, one-third more than the 53 million who owned homes in 1980 when the homeownership rate was last at a peak. All of the growth in the rate of homeownership and much of the growth in the number of homeowners has occurred since 1994.

Certainly low interest rates and a thriving economy have contributed to the growth in homeownership. The Congress deserves credit for doing its part in raising homeownership by holding the line on spending, delivering a balanced budget, and maintaining and enhancing the tax treatment of owner-occupied homes.

However, the recent growth in homeownership still leaves many age groups below their peak homeownership rates of the late 1970s and early 1980s. For instance, households headed by an individual between ages 30 and 34 had a homeownership rate of 62.6 percent in 1978, which was only 2.6 percentage points below the rate for all households. In 1998, this same age group had a homeownership rate of 53.6, a full 9 percentage points below the rate in 1978 and 12.7 percentage points below the overall rate in 1998. Both their absolute and relative positions are much worse than they were in 1978. Other examples are shown in Appendix I.

Much of the gain in homeownership is due solely to the aging baby boomers whose sheer numbers and age have pushed the average homeownership rate to new highs while the homeownership rates for individual age groups have not returned to their former peaks. In 1998, the only age groups to establish new records for homeownership were the ones headed by individuals aged 60 and above.

However, even with all the gains in homeownership, affordability has diminished over the last 25 years. Some of the deterioration must be laid at the feet of burdensome regulations and their unnecessary costs, which end up being paid by home buyers. Young families trying to purchase their first home are confronted with unnecessarily high home prices brought about by government-imposed regulations and restrictions.

In 1972, the median new home price was $27,600. Mortgage interest rates were similar to today’s rates. With a 10 percent downpayment, nearly two-thirds of the young households could afford to purchase a new home. Twenty-seven years later, in 1999, the median new home price is $157,000 and with a 10 percent downpayment, less than 40 percent of young households can afford to purchase a new home. The salient figures for this comparison are contained in Appendix II.

Excessive regulation of the residential development process and of home building has contributed to the fall in affordability for young people and raised a barrier that many cannot surmount. In a 1994 survey, NAHB found that development costs and fees added an average of $21,000 to the cost of a $200,000 home in highly-regulated markets. Even in markets where regulation is deemed only moderate, the costs amounted to over $10,000 per home. These added costs push many potential home buyers out of the market or force home buyers to purchase homes farther from their jobs and commute longer distances. NAHB estimates that one-half million households fail to qualify for a mortgage on a typical new home for every $1,000 increase in sales price. Clearly, regulatory barriers have been a leading cause for young families’ slow return to their peak homeownership days of the late 1970s.

Enactment of any regulation carries a cost. The housing industry supports laws that clearly safeguard the health and safety of the homebuyer and general public, and allow a reasonable use of natural resources. However, reform is needed to remove barriers that add to the cost of residential development without providing any related benefit.

It is for these reasons, that NAHB is delighted to work with Chairman Lazio on legislation addressing these barriers to housing affordability. NAHB is very pleased that H.R.1776, The American Homeownership and Economic Opportunity Act of 1999, contains many of the provisions on removal of barriers to housing affordability that were included in two housing bills from the 105^th Congress, H.R. 3899, "The American Homeownership Act," sponsored by Chairman Lazio and Congressman Tom Campbell’s "Affordable Housing Barrier Removal Act of 1998," H.R. 3435.

"The American Homeownership and Economic Opportunity Act of 1999," H.R. 1776, requires all federal agencies to include a housing impact analysis, when a new rule has a significant impact on the cost of housing. The housing impact statement is intended to focus the attention of federal agencies on the question, "how does this policy affect home prices" every time it tries to solve a problem by instituting a new rule or regulation.

Each housing impact analysis will include:

1) a description of the reasons why action by the agency is being considered;

2) a succinct statement of the objectives of, and legal basis for the rule or regulation;

3) a description of , and where feasible, an estimate of the extent to which the rule or regulation would impact the cost or supply of housing or land; and,

4) an identification, to the extent possible, of all relevant federal rules which may duplicate, overlap, or conflict with the proposed rule or regulation.

This provision raises the awareness of proposed actions by the federal government by demonstrating that oftentimes well-intentioned regulations have unintended, yet negative consequences for consumers, private industry, and housing. This is a procedure whereby the federal government must disclose any possible impact on housing affordability and may consider less costly alternatives.

H.R. 1776 would reauthorize grants, originally included in the Housing and Community Development Act of 1992, which were developed to serve as incentives for states and localities to plan for and to develop barrier removal strategies. Reauthorization is important as it serves as a means for the federal government to encourage states and localities to identify ways to eliminate barriers to home ownership at the local level.

The bill also requires communities to demonstrate a "good faith effort" in removing barriers when they submit their Consolidated Plan to HUD for HOME and CDBG funding. This will allow states and localities to examine more comprehensive efforts to remove barriers to affordable housing. The purpose of the barrier removal grants, coupled with the requirement that states and localities demonstrate a "good faith effort" in removing barriers when they submit their Consolidated Plan to HUD are intended to bring together all the parties involved in the production of housing and those who regulate them to discuss the barriers and how to remove them. The demonstration of a "good faith effort" at barrier removal in the Consolidated Plan can be bolstered by the assistance provided in the grant and can be part of a long-term strategy to cut unnecessary regulations and make housing more affordable.

The bill would also establish a clearinghouse within HUD to collect and disseminate information on regulatory barriers and the effects on the availability of affordable housing. This is important as it provides an additional tool for states and localities to use to evaluate successful barrier removal strategies from all parts of the country and in communities of similar population and economy for their own planning and development.

Building Better Places to Live, Work, and Play

Home builders have always worked hard to make the communities they build the very best places for America’s citizens to start their lives, raise their children, and fulfill their dreams. The National Association of Home Builders’ supports meeting the housing demand in smarter ways by planning for and building to higher densities, revitalizing our nation’s cities and older suburbs, and preserving meaningful open space and protecting environmentally sensitive areas.

Understanding where people want to live and the homes they want to live in is the first step in mapping the patterns of growth for America in the decade ahead. The federal government’s role should be to encourage local communities to adopt long-term comprehensive plans that will meet the demand for new housing, public infrastructure, and other services.

The people who live in them will shape the fate of cities – large and small. The federal government can help by making strategic investments in people and communities and by creating incentives for others to do the same. Municipal employees and teachers contribute to the health, safety, and vitality of the communities they serve. However, many of these teachers, fire fighters, and policemen cannot afford to purchase homes in the communities in which they work.

H.R. 1776, "The American Homeownership and Economic Opportunity Act" contains several programs to assist hard-working, dedicated public servants, especially young entry-level workers, purchase a home. NAHB strongly supports provisions in the bill to allow communities the option under the Community Development Block Grant (CDBG) and the HOME Investment Partnerships Program to provide downpayment assistance, closing cost assistance, reduced mortgage rates, or homeownership counseling for uniformed municipal employees and teachers. NAHB is pleased the homeownership option extends to uniformed municipal employees and teachers whose family incomes do not exceed 115 percent of the area median. However, NAHB would like to see the option extended to those employees whose family incomes do not exceed 150 percent of area median in high cost areas. This would assure that even two-wage earner families could participate in this important program and make a greater investment in their community. NAHB also supports the Neighborhood Teacher program, which will allow for the sale of FHA single family properties at reduced prices to teachers.

The Manufactured Housing Improvement Act

The Manufactured Housing Improvement Act, as Title VII of H.R.1776, proposes to modernize the requirements for manufactured housing under existing law, while seeking to achieve a balanced and more responsible consensus process for the development and interpretation of the federal construction and safety standards for manufactured homes. NAHB acknowledges the role that manufactured housing plays in providing needed shelter to families with a variety of incomes and supports this concept.

New housing can be "site-built" (constructed on site) and must conform to state and local building codes, it can be "factory-built" (modular, or panelized) and must conform to state and local building codes, or it can be "factory-built" (manufactured) and conform to the pre-emptive federal HUD code. While NAHB members are involved in all three aspects of new housing as well as remodeling, we primarily represent site builders, both single-family and multifamily.

Title VII focuses only on manufactured housing. It would maintain the federally preemptive standard for manufactured housing, while solidifying the state and local responsibility of regulating the physical positioning of this housing. It would modify the process for updating standards by creating a consensus committee from the private and public sector to replace the HUD Advisory Council in making recommendations to the Secretary. The Secretary would have one year to take action on recommended changes, and the Secretary would be required to publish proposed changes for comment in the Federal Register prior to their adoption, or rejection. Under the legislation, the private sector, including homebuilders, would have a stronger role in the adoption of new or modified standards, and the HUD Secretary would be required to be responsive to proposed modifications.

NAHB is pleased the manufactured housing industry addressed our concerns with the legislation last year. Specifically, NAHB is satisfied that the consensus committee will include two homebuilders to be balanced and include all sectors of the industry. Also, the manufactured housing industry agreed to delete the word "promote" in the purposes section of the bill, as it was not intended that the word "promote" would represent advertising to promote the product to the general public over other forms of housing. In general, NAHB has no policy that is specific to manufactured housing and the provisions in H.R. 1776. However, NAHB will closely monitor the federally preemptive standard for manufactured housing and the state and local responsibility of regulating the physical positioning of this housing.

Mr. Chairman, we are anxious to work with you to make housing a national priority. We believe it is important to strongly support legislation designed to help eliminate many of the regulatory barriers currently preventing individuals of all income levels from becoming homeowners by recognizing the implementation of sound housing policy. By acknowledging the existence of these barriers and developing a specific legislative plan of action to alleviate them, more families will be able to achieve the American dream of home ownership. The National Association of Home Builders stands ready to be your partner in developing a common sense approach to relief from excessive regulatory burdens.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix I

 

The Affordability Gap
	1972	1999
Median New Home Price	$27,600	$157,000
Downpayment	$2,760	$15,700
Mortgage	$24,840	$141,300
Interest Rate	7.60%	7.60%
Mortgage Payment	$175.39	$997.68
Taxes & Insurance	$31.85	$181.18
Total Monthly Payment	$207.24	$1,178.86
Minimum Income Needed	$8,882	$50,523
% of Households Headed by 25- 34 year old
who can afford new home	64.0%	38.1%

 

Appendix II

 

	Relative Changes in Homeownership Rates by Age Group
	Peak	Year	Overall	Difference	1998	Difference	Difference	Change
Age	Rate	of Peak	H.O. Rate	from	Rate	1998 &	from 1998	in Relative
			in Yr of Peak	Overall		Peak	Overall	Position
<25	22.6	1974	64.6	-42.0	18.2	-4.4	-48.1	(6.1)
25-29	44.0	1979	65.5	-21.5	36.2	-7.8	-30.1	(8.6)
30-34	62.6	1978	65.2	-2.6	53.6	-9.0	-12.7	(10.1)
35-39	70.9	1980	65.6	5.2	63.7	-7.2	-2.6	(7.8)
40-44	74.9	1979	65.5	9.4	70.0	-4.9	3.7	(5.7)
45-49	77.1	1976	64.8	12.3	73.9	-3.2	7.6	(4.7)
50-54	78.6	1982	64.7	13.9	77.8	-0.8	11.5	(2.4)
55-59	79.9	1981	65.3	14.7	79.8	-0.1	13.5	(1.2)
60-64	82.1	1998	66.3	15.8	82.1	0.0	15.8	0.0
65-69	82.4	1996	65.4	17.0	81.9	-0.5	15.6	(1.4)
70-74	82.2	1998	66.3	15.9	82.2	0.0	15.9	0.0
75+	76.2	1998	66.3	9.9	76.2	0.0	9.9	0.0
All	66.3	1998	66.3	0.0	66.3	0.0	0.0	0.0
Source : NAHB calculations of Census Bureau H-111 reports