Toomey: Government is Not the Solution to Housing in America
Washington, D.C. – U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) today argued that when it comes to housing in America, government has historically been the problem, not the solution.
In
his opening statement during today’s Senate Banking Committee hearing, Sen.
Toomey highlighted how federal, state, and local government policies
contributed to past racial discrimination in housing. He also criticized the
Biden administration’s proposed welfare and “infrastructure” package, which
includes $213 billion in new housing spending that will only increase
government dependency and commit more Americans to a substandard living
arrangement.
Ranking
Member Toomey’s opening remarks, as prepared for delivery:
Mr.
Chairman, thank you.
Let
me say from the outset that racial discrimination in housing is a real and sad
part of our nation’s history. We can’t ignore that—it’s a fact. It’s also a
fact that government policies contributed to this discrimination. Some federal
government policies were designed to increase segregation.
We
all know the Federal Housing Administration—the FHA—engaged in redlining
practices. For decades, FHA insurance was often limited to newer developments
outside of inner city neighborhoods, exacerbating segregation. We also know
Davis-Bacon wage requirements were designed to protect white union labor and
prevent blacks from competing for federally funded construction jobs. Even today,
Davis-Bacon continues to impede lower-income and minority workers from
opportunities and to drive up the construction costs for government-assisted
housing.
Some
state and local government policies have also exacerbated segregation. Some
zoning practices—such as prohibitions on multifamily housing and minimum lots
sizes—can have legitimate purposes for many communities. However, they
sometimes do great harm by pricing low-income and minority families out of
neighborhoods, and reducing the support of affordable housing for such
families. These zoning practices and other regulatory barriers to housing
development are particularly prevalent in Democrat states and cities. For
example, California cities have long restricted multifamily construction,
driving up housing costs and reducing affordability.
In
my view, this history shows us that when it comes to housing in America,
including housing discrimination, government has been the problem, not the
solution. Unfortunately, the Biden administration does not seem to have learned
this lesson. Its multi-trillion dollar welfare plan, with a bit of
infrastructure sprinkled in, seems designed to repeat many of the mistakes of
the New Deal and Great Society. After Congress has just finished spending more
than $80 billion for housing in response to COVID—on top of the $50 billion we
annually spend on HUD programs alone, not to mention the billions we spend on
other housing programs and then tens of billions more we forgo in tax revenues
to subsidize—the Biden administration is now calling for $213 billion in new
spending for housing in this so-called “infrastructure” plan.
Amazingly,
the administration wants Congress to spend $40 billion to restore public
housing projects—places where people don’t want to live. Housing projects are
notorious concentrations of poverty, crime and other social ills. Research
shows that moving families out of housing projects and integrating them in
communities decreases violent crime. But rather than focusing on sensible
alternatives, the Biden administration wants to keep families in housing
projects. More public housing will only commit more Americans to a substandard
living arrangement and increase government dependency.
We
also shouldn’t rush to put families in homes they can’t afford. Relaxing
underwriting requirements or expanding down payment assistance programs for
low-income families, especially in an overheated housing market is a recipe of
disaster. If home values drop, these borrowers run the real risk of losing
their homes and any wealth they thought they had accumulated. We have seen this
happen before, most recently during the 2008 housing crisis when government
monetary and housing policy created a housing bubble, the bursting of which
caused the financial crisis and great recession.
The
administration’s infrastructure plan also calls for $20 billion in tax credits
for building and rehabilitating homes and making them more energy efficient.
These tax credits will predominantly benefit developers and investors largely
because they are not targeted to low-income families. In fact, homes built with
tax credits can be sold to purchasers with incomes up to 140% of area median
income.
The
Administration’s plan also prioritizes using union labor to upgrade homes. This
unfairly excludes lower-income, non-unionized laborers and increases
construction costs that will be passed onto homeowners.
Today,
we’ll hear from two witnesses who’ll discuss how government intervention, even
when well-meaning, has contributed to inequality. Howard Husock is a housing
researcher and scholar. As Mr. Husock will note, many “race-conscious” policies
haven’t actually increased homeownership opportunities or wealth in underserved
communities. Public housing has deprived many minority communities of the
opportunity to build wealth. The Community Reinvestment Act is out of date and
poorly designed to encourage lending in minority neighborhoods without tracking
whether investments help or hurt families. And overly prescriptive
Affirmatively Furthering Fair Housing requirements that put only a handful of
low-income families in subsidized rental homes in affluent areas does little to
support minority families or help them build wealth through homeownership.
We’ll
also hear from Tobias Peter, an expert in housing finance. He notes that
policies aggressively encouraging minorities to buy homes—especially during a
boom when houses are more expensive—expose borrowers to greater default risk
during dips in the market. He argues that risky lending harms low-income and
minority borrowers who purchase homes when home prices are inflated. And he
believes that local governments need to remove zoning restrictions and other
regulatory barriers to housing that artificially constrain the supply of
housing and drive costs up.
It’s
important to remember that the legacy of discrimination is a direct result of
government supported policies. As we consider how to address the housing
challenges we face, we must not repeat the mistakes of the past. Now is not the
time to double down on failed efforts. That means we should not keep American
families in dilapidated and segregated housing projects; we should not let
bureaucrats in Washington make local housing decisions that undermine
communities; and we should not inappropriately push families to purchase homes
they can’t afford in the long run.
The
lesson we need to learn and apply is: When it comes to housing in America,
government is the problem, not the solution.
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