February 15, 2023

Britt questioning focused on the attainability of the American Dream, consequences of Biden Administration’s policies

WASHINGTON, D.C., February 9, 2023 – Senator Katie Britt (R-Ala.) today participated in her first hearing as a member of the Senate Committee on Banking, Housing, and Urban Affairs. She also announced her subcommittee assignments for the panel.

“The Banking Committee tackles key issues that impact the lives of everyday Americans, from access to capital and financial services to housing and more,” said Senator Tim Scott (R-S.C.), ranking member of the Committee on Banking, Housing, and Urban Affairs. “I’m honored to welcome Sen. Britt to the Committee and look forward to working alongside her to engage on critical issues and expand economic opportunity for all Americans.”

Senator Britt has been selected to serve on the Subcommittees on Financial Institutions and Consumer Protection; National Security and International Trade and Finance; and Housing, Transportation, and Community Development.

This morning, she attended a committee hearing on the state of housing in America, where she questioned Dr. Robert Dietz, Chief Economist and Senior Vice President for Economics and Housing Policy for the National Association of Home Builders. Senator Britt focused her line of questioning on ensuring the American Dream is achievable for hardworking families across our nation. She drew attention to the burdensome regulatory regime and inflationary policies that have impacted housing during the Biden Administration. Forbes reacted to the questioning by writing, “Katie Britt Shreds Biden’s Economic Record in First Hearing in Senate.”

A video of the questioning is available here.

Transcript as follows:

Committee Chairman Sherrod Brown: The lady from Alabama, Senator Britt, for her first hearing, is recognized.

Senator Britt: Absolutely. Mr. Chairman, I want to thank you and the ranking member for your warm welcome today at my very first hearing. It is certainly an honor to be on this committee, and I look forward to being a very productive and active part of it. So, thank you. My first question is for Dr. Dietz. We know the Biden Administration has actually put in more rules and regulations in the first two years of their administration than Obama did in eight. When we look at that, it undoubtedly contributes to inflation and to stifled economic growth across the board. And I believe the housing sector is no exception to that. I understand that regulations add costs to building homes: 25% of the cost of constructing a single-family home and 40% of a multi-family home are due to regulations. I know that you also face regulations both at a state and a local level, and I wanted to know if you could share some of the existing regulations that are really driving up costs for homebuyers.

Dr. Dietz: Yeah, I think a good example at the federal level is, is the Waters of the U.S. rule, which is both confusing but adds costs and makes it difficult to bring land to market, takes longer, provides a lot of money for consultants to do studies, but provides that uncertainty during the land development process that can take two, three, four or five years. At the local level, we already talked about zoning rules, but you also have rising impact fees, delay requirements, just the delay itself of getting land approved, construction projects approved. All of that results in higher rents and higher home prices. So, if we’re if we’re really serious about tackling housing affordability, we need to find ways to reduce the red tape and bring homes to market faster.

Senator Britt: Absolutely. Well, given those hurdles, can you tell me, is it harder for single family homes, multi-family homes? Who have been impacted more by this ultimately?

Dr. Dietz: Well, if you listen to builders enough, which I do, I travel across the country a lot, they will say all of us. Right. It’s not necessarily a competition. They’re all sort of challenging in their own ways. Multifamily, it’s more density issues. With single family, it’s concerns about land supply and lot development. With remodeling, it’s the skilled labor shortage. But, you know, if we’re looking at low hanging fruit to improve the availability of housing in the country, reducing housing regulatory costs is a big way to get there.

Senator Britt: And you’re saying home buyers across the board are impacted?

Dr. Dietz: Probably disproportionately affects first time buyers, first generation buyers, because, again, that entry level construction, that townhouse construction, is difficult, too. That sort of light touch density, but generally speaking it is driving up the cost of all forms of housing.

Senator Britt: So, it’s people that want to start the American Dream that are being stifled by this.

Dr. Dietz: Correct.

Senator Britt: So, the past two years, inflationary policies of the Biden Administration have compounded the naive belief that inflation would be transitory. We’ve seen it hit us– everything from groceries to gas, and obviously home buying is no exception to that. The past year alone, the Federal Reserve has raised the Federal Reserve fund rates nearly five percentage points, and that’s materially impacted the price of housing, driving up borrowing costs and monthly mortgage costs to the average American homebuyer. What is your outlook of the housing demand and how does that impact the expected housing construction in the next, I’d say, two years, maybe five years, ten years?

Dr. Dietz: Yeah, right now we’re in a bit of a downturn, as Dr. Herbert talked about. Our expectation is that single family construction and multi-family construction are likely to decline this year. But we see a turning point ahead for single family home building. In fact, after 12 straight months of decline for builder sentiment that we measure each month, we actually got an uptick in January. So, I think in the short run we’re going to see some stabilization and then 2025 through 2030, if we can just get the regulatory burdens out of the way, 2025 through 2030 will be a pretty good runway for homebuilding growth, because we’ve got to reduce that structural housing deficit that’s in place, that shortage.

Senator Britt: Absolutely. And as we talk obviously about homebuilding, I think it’s important to make sure that people can get access to capital, that they can be financed. Is there anything you can tell us about the status of the loan market or anything that the committee needs to consider to make sure that capital is available for these people who want to achieve the American Dream?

Dr. Dietz: Yeah, this is where we don’t see enough focus. I think when we talk about lending and loans in housing, we’re typically thinking about mortgages on the demand side. But, you know, keep in mind, about two-thirds of home construction is undertaken by smaller builders, and they get their capital by going to community banks and borrowing funds. So, we call that acquisition development or construction lending. And one of the things we know about the business cycle is that particular market tightens when we go into a downturn. So, the concern is we see mortgage interest rates begin to settle back. A turning point comes in view, but builders and land developers can’t get access to credit. So, a lot of different ideas in terms of how to address some of those challenges. One would be extending the secondary market that currently exists for purchase mortgages over to building and construction loans, and that would help reduce some of the cost of credit and make sure that capital is available, particularly in, I would say, like rural markets where it’s more difficult to obtain that kind of lending for builders.

Senator Britt: Absolutely. Thank you so much, Dr. Dietz.