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73 73 INVESTMENT GOVERNMENT PROPERTY PRESERVATION Prior to joining the Center in January 2016, Bailey served as Director of Health Systems Integration for the Corporation for Supportive Housing, where she focused on finding sustainable funding sources for the services that people with histories of homelessness and chronic health conditions need to maintain their housing. In addition, she worked with health care partners to improve their understanding of the housing sector and to identify ways they could make appropriate investments in rental assistance and capital projects. is included working with states to expand Medicaid coverage for housing-related services for highly vulnerable populations and helping the housing sector strategically build partnerships with health-sector stakeholders. She also worked for the National Alliance to End Homelessness, the Association of Maternal and Child Health Programs, and the City of Rockwall, Texas. "Recent cost increases have priced an estimated four million families out of homeownership. ose are families who will now be renting, in a rental market that was already too tight," Sen. Brown cited. "In May, median rents topped $2,000 a month. And that's if you can find somewhere to live at all." e hearing was held as the nation confronts a six-million-unit housing shortfall. is decades-in-the-making phenomenon has helped sustain year-over-year price growth for a record 124 consecutive months, according to NAR. "When the Federal Reserve essentially went all-in in the early months of the pandemic … the decline in mortgage rates and the cautious reopening of the economy boosted housing demand," said Dr. Yun in his testimony. "e housing market always responds to changes in mortgage rates." Interest rates, which have been hovering in the 5.5% range, have been forcing more to the sidelines and reconsider their housing options, inevitably pricing many out of the market. "At the same time, interest rate increases, price increases, and lack of supply have created an affordability crunch," Dr. Yun added. "While inventory has grown nominally since the early part of 2022, interest rates have increased about 2.5 percentage points, adding about $800 per month to a median-priced house payment. Our research also indicates that a buyer would need an income of about $125,000 to afford most of the homes on the market. is affordability crunch is felt most acutely as we move down the income scale and by minority households given the current income distribution in America." And while intentions of the Federal Reserve are to cool the market, while curbing inflation, Dr. Holtz-Eakin noted the ripple effect that the Fed's actions have on the housing marketplace, thus pushing prospective homebuyers further away from their goal. "e Fed's plan cannot avoid affecting housing especially strongly. As the Fed raises the federal funds rate, all interest rates will rise," said Dr. Holtz-Eakin in his testimony. "Credit cards and auto loans will go up and so will mortgage interest rates. Indeed, mortgage rates have already risen sharply. But there is a second channel of impact. As noted above, the Fed purchased $30 billion monthly in MBS. As part of tightening financial conditions, this will no longer occur. at means to get the same total amount of funds into the mortgage market, rates will have to rise even further to attract the $30 billion in capital. But it doesn't end there. e Fed intends to draw down its holdings of MBS by $35 billion a month, essentially pulling $35 billion in capital out of the market. e upshot is that rates would need to rise even a bit more to completely offset the $65 billion (roughly 20% of mortgage funds at 2021 rates) net swing in mortgage funds." Bailey took the stand and discussed the ever-widening homeownership gap and wealth inequality. "People of color are also more likely to face housing hardship, instability, and homelessness," Bailey said. "More than 60% of people in low-income households that pay more than half their incomes for housing are people of color. ese renters are more likely than white renters to live in crowded conditions. Asian and Pacific Islander and Latino renters face the highest levels of doubling up and overcrowding, with one in 10 living in households that are both doubled up and overcrowded. And people of color are at much greater risk of experiencing homelessness. Nearly 40% of those who experienced homelessness in 2020 were Black, and 23% were Latino, far above these groups' shares of the U.S. population (13% and 18%, respectively). Native Hawaiians and Pacific Islanders have the highest rate of homelessness, followed by American Indians and Alaska Natives." In terms of solutions to combat the housing inequality issue, Bailey discussed the crucial role of rental assistance programs in closing the affordable housing gap to prevent housing instability, including homelessness, evictions, and overcrowding. "Rental assistance is by far the most direct, effective way to address the nation's most severe housing problems," Bailey added. "Research shows that vouchers sharply reduce homelessness, overcrowding, and housing instability. And because stable housing is crucial to many other aspects of a family's life, those same studies show numerous additional benefits to vouchers. Children in families with vouchers are less likely to be placed in foster care, switch schools less frequently, experience fewer sleep disruptions and behavioral problems, and are likelier to exhibit positive social behaviors, such as offering to help others or treating younger children kindly." Dr. Holtz-Eakin cited further Congressional measures to alleviate some of short-term stresses on the housing market, mostly actions that could boost builder confidence. e National Association of Home Builders (NAHB) recently reported that inflation combined with high rates is dampening market confidence for newly-built single-family homes, which posted a seventh consecutive month of declines in July 2022. "Congress could take steps to reduce tariffs that raise the prices of key construction materials, most obviously those on Canadian lumber," said Dr. Holtz-Eakin in his testimony. "Congress can investigate the labor market forces leading to an estimated shortfall of 650,000 skilled construction workers in 2022. Finally, Congress can work to reduce the red tape requirements of new construction, ranging from the building permit process to unwanted land-use restrictions." Also cited as a solution by Dr. Holtz-Eakin was GSE reform. "Outside of short-term fixes, the most effective action Congress can take to improve the overall health of the housing market is to continue the effort to reform the GSEs," Dr. Holtz-Eakin added. "e United States does not have a functioning private secondary mortgage market and has a distorted primary market thanks to Fannie and Freddie. If Congress seeks a healthy and functioning housing market that benefits all participants, including seniors, then it must continue its efforts to reform the GSEs." Journal

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