Millennial 2 for interface 7/17/02 11:40 AM Page 2 Contents The Millennial Housing Commission ii Commissioners iii Letter from the Co-Chairs iv Executive Summary 1 Why Housing Matters 10 America’s Housing Challenges 14 The Federal Role in Housing 22 Principal Recommendations to Congress 27 Supporting Recommendations 71 Endnotes 84 Supplementary Material 92 1. Supporting Data 92 2. Assumptions Used in Analyzing 104 the American Housing Survey 3. Description of Housing Programs 106 4. Acronyms Used in Report 121 Acknowledgments 122 Millennial 2 for interface 7/17/02 11:40 AM Page 3 Millennial 2 for interface 7/17/02 11:40 AM Page 4 Millennial 2 for interface 7/17/02 11:40 AM Page 5 Meeting Our Nation’s Housing Challenges Report of the Bipartisan Millennial Housing Commission Appointed by the Congress of the United States Submitted to the Committee on Appropriations and Subcommittee for VA, HUD and Independent Agencies Committee on Financial Services and Subcommittee on Housing and Community Opportunity United States House of Representatives Committee on Appropriations and Subcommittee for VA, HUD and Independent Agencies Committee on Banking, Housing and Urban Affairs and Subcommittee on Housing and Transportation United States Senate Pursuant to Section 206(b) of Public Law 106-74, as Amended Washington, D.C.: May 30, 2002 Millennial 2 for interface 7/17/02 11:40 AM Page 6 The Millennial Housing Commission In December of 2000, the Congress of the United States, pursuant to legislation introduced by Representative James Walsh, established the bipartisan Millennial Housing Commission (MHC). Commission members were appointed by the chairs and ranking minority members of the House and Senate Appropriations Committees and Subcommittees for VA, HUD and Independent Agencies; the Senate Banking, Housing and Urban Affairs Committee and its Housing and Transportation Subcommittee; and the House Financial Services Committee and its Housing and Community Opportunity Subcommittee. The Commission was charged with examining, analyzing, and exploring: “(1) the importance of housing, particularly affordable housing which includes housing for the elderly, to the infra- structure of the United States; “(2) the various possible methods for increasing the role of the private sector in providing affordable housing in the United States, including the effectiveness and efficiency of such methods; and “(3) whether the existing programs of the Department of Housing and Urban Development work in conjunction with one another to provide better housing opportunities for families, neighborhoods, and communities, and how such programs can be improved with respect to such purpose.” (P.L. 106-74, Sec. 206(b)) Note: At the same time that it established the Millennial Housing Commission, Congress created the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21st Century. The Seniors Commission was established to report on the housing and health needs for the next generation of seniors, and to offer policy and legislative recommendations for enhancing services and increasing the available housing for this rapidly growing segment of our society. It is scheduled to deliver its report by June 30, 2002. The Millennial Housing Commission deferred senior housing issues to the Seniors Commission. Millennial 2 for interface 7/17/02 11:40 AM Page 7 Co-Chairs The Honorable Susan Molinari President & CEO, The Washington Group Richard Ravitch Principal, Ravitch Rice & Co. LLC Commissioners Milroy A. Alexander Renée Lewis Glover Executive Director, Colorado Housing Chief Executive Officer, The Housing and Finance Authority Authority of the City of Atlanta, Georgia Ophelia B. Basgal Bart Harvey Executive Director, Housing Authorities Chairman and Chief Executive Officer, of Alameda County & Dublin, California The Enterprise Foundation Catherine P. Bessant Feather O. Houstoun Chief Marketing Officer and President, Secretary, Department of Public Welfare, North Carolina, Bank of America Corporation Commonwealth of Pennsylvania Thomas S. Bozzuto William H. Hudnut III President and Chief Executive Officer, Senior Resident Fellow, The Bozzuto Group Urban Land Institute Jeffrey S. Burum H. Lewis Kellom Executive Director and CEO, National Executive Director, Housing Development Corporation Homes In Partnership, Inc. David Carley Joseph B. Lynch Former President, Carley Capital Group Senior Vice President, Conifer Realty, LLC; and the Medical College of Wisconsin former Commissioner, New York State Division of Housing and Community Renewal Herbert F. Collins Chairman, Collins & Company, LLC Sam R. Moseley Attorney at Law Kent W. Colton Senior Scholar, Joint Center for Dennis M. Penman Housing Studies of Harvard University; Executive Vice President, President, K. Colton LLC M.J. Peterson Real Estate, LLC Cushing N. Dolbeare Robert Rector Housing Policy Consultant; Founder, Senior Research Fellow For Welfare and National Low Income Housing Coalition; Family Issues, The Heritage Foundation Senior Scholar, Joint Center for Housing Studies of Harvard University David Stanley Chairman, Preservation Daniel R. Fauske of Affordable Housing, Inc. CEO and Executive Director, Alaska Housing Finance Corporation Millennial 2 for interface 7/17/02 11:40 AM Page 8 Letter from We have been honored to lead the Millennial Housing Commission during the past 17 months the Commission as we performed a thorough re-examination of the federal role in meeting the nation’s housing Co-Chairs challenges at Congress’ request. The 22 commissioners appointed to this task were drawn from across the country and from across the spectrum of housing ideologies and experience. We are particularly pleased, therefore, to have achieved concurrence among all but one of the appointed members. The Commission included former elected officials; participants on previous national commissions; housing researchers, builders, managers, and owners; planners and public administrators; and leaders of community development organizations. Our findings and recommendations obviously reflect the great diversi- ty of philosophy and experience represented, but on one thing we all agree—we unequivocally care about housing and some fundamental precepts. First, housing matters. It represents the single largest expenditure for most American families and the single largest source of wealth for most homeowners. The development of housing has a major impact on the national economy and the economic growth and health of regions and com- munities. Housing is inextricably linked to access to jobs and healthy communities and the social behavior of the families who occupy it. The failure to achieve adequate housing leads to signifi- cant societal costs. Second, there is simply not enough affordable housing. The inadequacy of supply increas- es dramatically as one moves down the ladder of family earnings. The challenge is most acute for rental housing in high-cost areas, and the most egregious problem is for the very poor. We recognize that our country is engaged in a war that affects our vital interests, and that we have experienced a serious economic downturn from which we are entering a tentative recovery. There is a serious public debate as to which tax and spending policies will best support the sound fiscal management that our nation requires. Even within this context, resources for affordable housing provide important economic, social, and societal benefits. The inexorable growth in the numbers of families, of those working in service sectors, and of immigrants seeking to take part in the American Dream—coupled with community opposition to high-density development, the gentrification or abandonment and deterioration of an increasing percentage of our housing stock, and the growing affordability gap between haves and have- nots—require that the government of the United States seriously address the question of how our society can produce and preserve more housing for more American families in a more rational, thoughtful, and efficient way in the decade ahead. As affordable housing production is increased within the context of healthy, inclusive communities, the economy is strengthened, more families share common American values, and economic opportunity is increased for many. We are pleased to present the Millennial Housing Commission’s recommendations, which we hope will engage the elected officials of our democracy to meet these challenges. May 30, 2002 Millennial 2 for interface 7/17/02 11:40 AM Page 1 Executive Summary Housing is most Americans’ largest In short, housing matters. This is why the expense. Decent and affordable housing federal government has long sought to has a demonstrable impact on family sta- expand the country’s housing supply. bility and the life outcomes of children. Federal support for housing has taken Decent housing is an indispensable build- many forms over the years: grants; subsi- ing block of healthy neighborhoods, and dies on mortgage debt; direct payments thus shapes the quality of community life. to landlords on behalf of low-income citi- In addition, the housing sector provides a zens; the provision of liquidity and stabili- major stimulus to the nation’s economy, ty to the housing finance system through consistently generating more than one- Federal Housing Administration mort- fifth of gross domestic product. Better gage insurance; the creation of the housing can lead to better outcomes for Federal Home Loan Banks, Fannie Mae, individuals, communities, and American and Freddie Mac;