House equity

Lawmakers and experts bicker over what’s driving up U.S. housing costs

On Wednesday, members of the House Ways and Means Committee agreed that America faces a housing crisis, but found little consensus on why or what to do next.

Republicans blamed inflation, which they said was fueled by pandemic government spending, while Democrats put the blame on business owners and experts at the hearing pointed to the severe lack of ‘supply.

House prices for Americans climbed 5.6% from a year ago, the largest percentage increase since 1991, according to government data. The average price for an urban shelter in June was over $350,000, up from around $318,000 in June 2019, before the pandemic began.

Republicans repeatedly pounced on eye-popping inflation numbers released by the Labor Department on Wednesday, showing the consumer price index rose 9.1% since June of last year, the most steep rise since 1981.

“American families and workers are finding out that Joe Biden’s economy is a very cruel economy,” Rep. Kevin Brady (R-Texas) said during the hearing. “Washington Democrats blame everyone under the sun for the cruel rise in housing prices.”

Inflation is a global phenomenon as countries recover from an unprecedented pandemic that has caused long-lasting supply disruptions and labor shortages. Russia’s war on Ukraine has added upward pressure on gas and food prices in particular.

On Wednesday, Democrats refused to accept that their spending policies were partly to blame, arguing instead that rising house prices were due to a host of pandemic-related factors — and corporate greed.

“Just when our homes have become more important than ever, a series of forces have converged to drive prices up faster than in recent memory,” said Rep. Richard Neal (D-Mass.), House Chairman Ways and Means Committee.

Democrats have lambasted the role corporate investors have played in driving up house prices. Private equity landlords, lawmakers argued, are outbidding potential buyers and raising prices on rents and fees for tenants.

In the last quarter of 2021, corporate investors bought a record 18.4% of homes sold in the United States, according to data from real estate brokerage Redfin.

“With ordinary Americans shut out of the market, the big cats in private equity are outbidding families and driving up prices,” Rep. Bill Pascrell (DN.J.) said.

Last month, Democrats at a House Financial Services Subcommittee hearing also denounced the buying practices of private companies.

Expert witnesses at Wednesday’s hearing focused on the shortage of affordable housing available to buyers and renters, saying government investment is needed to facilitate the construction of low- and middle-income housing.

The Low-Income Housing Tax Credit (LIHTC), a tax incentive to help fund investments in affordable housing projects in rural and urban areas, hailed as a success story of federal intervention .

“Affordable housing is affordable through financing,” said Audra Hamernik, president and CEO of Nevada HAND, an affordable housing developer. “The LIHTC is the nation’s primary tool for creating and preserving affordable rental housing.

Witnesses also agreed that the company’s purchases were a problem.

“Institutional investors are a big part of the growing demand over the past couple of years,” said Elora Lee Raymond, urban planner and assistant professor at Georgia Tech’s School of City and Regional Planning.

“These investors have a strong incentive to extract rents very efficiently through hidden fees, late fees and increased rents.”

While Democrats joined in the call for increased federal support for housing programs, Republicans warned of increased government spending.

“We’ve printed so much money in the past two years, I think it’s amazing that we have ink or paper left over,” said Rep. Mike Kelly (R-Pa.) . “It’s amazing to me that we can still add fuel to the fire by doing this.”