Senate Committee Holds Hearing on Need for Housing Finance Reform

The Senate Banking Committee held a hearing on May 23 on “Ten Years of Conservatorship: The Status of the Housing Finance System” with Federal Housing Finance Agency (FHFA) Director Mel Watt as the sole witness. During the hearing, Mr. Watt focused on the nation’s housing challenges, including issues of affordability for homeowners and renters, because of Congress’s inaction on housing finance reform. The Committee’s efforts on housing finance reform have largely stalled over the last several months, but Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH) stated the issue remains a top priority.

In his opening statement, Mr. Watt said, “[A] serious challenge we must all confront is the affordability of homeownership and rental housing. This challenge is not unique to [the] conservatorship [of Fannie Mae and Freddie Mac], and unfortunately, is a significant challenge facing the market as a whole.” He said the nation is not building sufficient housing to meet the demand, causing rents and home prices to increase. He added that when housing is built, it is targeted to the very top of the housing market. Mr. Watt also discussed FHFA’s “Duty to Serve” rule, which requires Fannie Mae and Freddie Mac (the enterprises) to serve specific underserved markets: manufactured housing, affordable housing preservation, and rural markets. While the rule is designed to address the lack of affordable housing in each of those sectors, he said, widespread affordability challenges remain.

Mr. Brown spoke about the importance of safe and affordable homes for all Americans, including renters. He expressed concerns about high rents, and noted that more than one quarter of renters pay more than half of their incomes on rent. Senator Catherine Cortez Masto (D-NV) spoke to the lack of affordable housing in Nevada, citing NLIHC’s The Gap: A Shortage of Affordable Homes report showing the state ranking last in affordability for extremely low income (ELI) families, those with income at or below the poverty guideline or 30% of their area median income. For every 100 ELI families in Nevada, there are only 15 affordable homes available to them. Senator Heidi Heitkamp (D-ND) spoke specifically about the lack of affordable housing in rural communities.

Senator Van Hollen (D-MD) commended Mr. Watt for his decision to continue the enterprises’ contributions to the national Housing Trust Fund, especially after they required a draw from the Treasury due to the impact of the recently enacted tax legislation. Mr. Watt said that, while FHFA does not administer the program, the Housing Trust Fund is critical to expanding affordable housing throughout the country. Both Mr. Watt and Mr. Van Hollen acknowledged that more resources are needed to address the nation’s affordable housing crisis.

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