Building the Future: How Small Home Builders are Closing America’s Housing Gap.

Good morning to everyone. Uh, I now call the committee on small business to order without objection. The chair is authorized to declare a recess of the committee at any time, and I now recognize myself for my opening statement. Uh, good morning and welcome to today's hearing, uh, titled " Building the Future: How Small Home Builders are closing America's house uh housing gap. I wanna thank our witnesses for joining us today and for lending their time and exp- expertise uh so uh to this important co- conversation and home ownership uh remains a cornerstone of the American dream home ownership represents more than just a roof over your head it's the foundation of personal stability and freedom and a place where families are formed children are raised, and memories are made. It's uh where much of America's small business activity begins, millions of entrepreneurs launching and operating businesses from their homes, roughly half of all new businesses start in the home. But that dream for too many Americans feels increasingly out of reach. Our nation is facing a serious supply and affordability challenge. Today more than half, one half of the American households cannot afford a three hundred thousand dollar home. And when housing construction slows and housing becomes unattainable, uh, communities stagnate, the growth slows, and young families are placed out, priced out. uh, Main Street across the country feel that, uh, the consequences is fewer people are able to, uh, plant roots, start businesses and invest in their neighborhoods. Amid these challenges, small home builders have become essential. They have often the most agile, responsive and innovative builders willing to meet that moment. Across the country, small business, uh, and small home builders are pushing the boundaries of what is possible in housing delivery whether through modular or manufactured housing, for emerging uh methods like three D printed construction, small home builders are re- re-imagining how homes are built from the concept to completion. These innovations offer real promise. By reshaping our uh approach to housing construction, these innovations can deliver faster construction timelines, lower material costs, reduce waste, and offer greater efficiency in bringing homes to the market. Yet despite this momentum, significant barriers remain for the small home builders' Key challenges such as over-regulation in access to capital, continued drive up home costs and constrained supply. In some cases, as much as forty percent of the cost of multifamily home development is tied to, is not tied to brick and mortar but uh navigating layers of compliance costs locally and uh state and federal requirements. At a time when many uh families are struggling to find an affordable place to live, we must uh ask hard questions about whether our current system is helping meet those moments because often uh the solutions already exist in the ingenuity of builders and entrepreneurs across this country. What they need is the space to build, the clarity, the plan and the freedom to innovate as they can deliver their homes to Americans, uh that we need urgently. Local officials across the country are beginning to realize this, and needless to say whatever local regulations have been loosened, like in Austin, Texas, the housing market has boomed. And you also will hear from our witnesses today, small uh business home builders are continuing to press forward despite their barriers but it is time to stop hamstringing our best and our brightest. When small home builders are constrained, uh, it affects people far it it affects people far beyond the housing market and other industries feel the pressure, local economies lose momentum and worker mobility becomes uh restricted. Housing is a driver of economic growth and when workers cannot find uh affordable homes, near job cer- n- near their jobs, uh certain employers struggle to recruit and maintain talent, productivity suffers and economic expansion slows. A shortage of housing does not just limit where people live, it also limits where people can grow, where workers can move and uh how strongly local economies can compete. So as a committee it's a respo- our responsibility to look at the challenges that facing small home builders and bring their their uh obstacles to light uh with clarity and with purpose.

Yeah.

It is also our d- uh imp- uh our duty to empower the people who build America to do what they do best, and our role is to ensure that the Commerce uh the committee is a is a partner in progress, not a roadblock to it. Just yesterday the ranking member and I along with our colleagues voted uh to pass the House-led bipartisan housing bill that we passed out of this chamber yesterday. We need to work together to ensure that small home builders can compete, innovate and deliver the housing this country is counting on. I want to thank all of you again for being here, coming, it's a big deal that you will come. I look forward to the conversation ahead today. With that in mind, I now yield to our ranking member and my friend from New York, Miss Velasquez.

Thank you, Mister Chairman, for calling this timely hearing on one of the most important issues facing our economy. And let me take this opportunity to welcome all the witnesses and to thank you for being here. Nowhere is our affordability crisis more evident than in housing, where half renters are rent burdened and a quarter pay more than half of their income. In New York City, our rental market is out of control. On average, New Yorkers who rent are paying forty-one percent of their income. But this isn't a red or blue state. issue either. Cities and states like Texas and Florida also face rental affordability issues. Similarly, home ownership is drifting further out of reach. According to the Atlanta Fed, the salary needed to afford the median home is roughly a hundred sixteen thousand, thirty-six percent higher than the actual median income of eighty-five thousand dollars. Over just the past six years, The median home price has surged over thirty percent and elevated interest rates are keeping many locked into their low int- uh low rate pandemic era mortgages. As a result, an entire generation has been priced out of home ownership. According to the National Association of Realtors, the first time home buyer share is now at a record low and the typical age of a first time homebuyer is an all-time high of forty years old. We are not building enough housing to meet demand. Experts estimate we lack between three and five million units nationwide. Tackling this issue will mean addressing shortages of both single-family and multifamily housing developments. And I hope this hearing can identify causes and address solutions to including by leveraging the power of small firms across the nation. Yesterday the House began addressing some of those issues by passing the twenty-first century Road to Housing Act which makes important reforms federal housing programs and includes language I offer on cooperative housing developments and oversight of monitors and receivers of public housing authorities. This bill is an important first step, but it's not the complete answer. I urge the Senate to act quickly and pass this bill. Yet, we must all recognize that we still need substantial investment in housing programs to tackle this issue. While the issue of slow housing construction is caused by many structural problems, from labor and materials to financing to land regulations, it is clear that the administration who campaigned on affordability is making the problem worse. For instance, this administration's cruel and racist immigration policies has specifically targeted a large portion of the construction workforce. As a result, threats of high rates have deterred even documented workers and legal resident from showing up to job sites, extending timelines and growing costs. Tariffs enacted solely by the President are adding costs to building materials, including Canadian soft wood, lumber, steel, aluminum and copper, and even kitchen cabinets and furniture. These tariffs are inflating prices from foundation to finish. And to make matters worse, the war in Iran has caused diesel to surge to over six dollars per gallon in many states, causing builders to face additional fuels surcharges in transporting building materials. High prices and growing influ- inflation threaten to keep interest rates high, while further straining the budgets of renters, homebuyers, builders and sellers. Just last week, we received inflation data that confirmed Price hikes are once again outpacing incomes, driven primarily by the present signature policies, tariffs and the unworth. The Crash Science CEO said this plainly to The Wall Street Journal last week, consumers are literally running out of money at the end of the month. Meanwhile, the administration is proposing to gut the very programs rental assistant, community development programs and home investment partnerships that help fill the gap between what the market can deliver and what families can afford. Taking together these policies and economic conditions aren't alleviating the housing shortage. They are making it worse. Rather than focusing on the issue he was elected to solve, the president's focus is on securing a billion dollars in taxpayer fund for the ballroom and even spending thirteen million dollars on a not-bit contract to paint the reflecting pool. Not to mention spending one point seven billion dollars on a sludge fund for his insiders and cronies some of whom ransacked the capital on January sixth. A billion dollars could build a lot of houses and go a long way toward helping small businesses fill this gap. I look forward to hearing from witnesses about how we could better allocate our resources to address this crisis and make life more affordable for everyday Americans. Thank you. I yield back.

General Lady yields back. We'll now move to the witness introductions. Uh, our first witness today is Mr. Bill Owens. Mr. Owens is, uh, Chairman, uh, of the Board of the National Association of Home Builders. Mr. Owens is also the Principal of Owens Construction an Ohio-based residential construction firm he established in nineteen eighty-two that is recognized for award-winning, energy efficient home designs. Mister Owens has also held numerous leadership roles uh across the home building industry including chairman in positions with the NA HB, Remodelers uh Council, Home Builders Institute and the New American Home and Remodel Task Force. Mister Owens is a longtime industry leader at the local, state and national level. He has served on the NA HB Board of Directors for more than twenty years, has previously served as President of the Ohio Home Builders Association. Mister Owens is also a member of the Harvard uh Joint Center for Housing Studies, Remodeling Futures steering committee, and remains active in professional education, workforce development, and community uh service, along with his wife, Betsy. I wanna thank you again for being here today. It's a pleasure. Uh, our next witness is Doctor Ivan Rupnik. Uh, Dr. Rupnik is founding partner of Mod-X, a, uh, research-based advisory group focused on accelerating the underutilized housing industry. Dr. Rupnik is also a professor of architecture at Northeastern University. His research focuses on industrialized housing delivery, particularly the regulatory and institutional barriers in, uh, in, uh, off-site construction in the United States. Dr. Rupnik's work has been featured in the New York Times and he has presented at HUD the Harvard Kennedy School, and the National Association uh National Housing Summit. The uh through multiple uh HUD funded projects, ModX has produced major policy reports. Their work has uh identified regulatory reform as the top priority for uh scaling s- in uh i- industrialized housing. Doctor Rubnick holds a PHD in architecture from Harvard University, where his doctoral research examined the relationship between building design Industrial Management and Housing Policy, and he's also holds a Master of Architecture with Distinction from the Harvard Graduate School of Design, and a Bachelor of Architecture, Summa Cum Laude, from Louisiana State University. I look forward to our discussion. Our next witness today is Mister Eric, uh, Schaefer. Uh, Mister Schaefer is the Chief Business, uh, Development Officer at Falling West Development, or Fading, sorry. Uh, Fading West Development, a Colorado-based modular home builder focused on providing affordable high quality homes and he also helps uh lead fading west innovating uh modular housing projects focused on meeting the needs of uh communities. Mister Schaefer also is a uh plays a key role in uh building partnerships with developers non-profits and municipalities across Colorado, Hawaii and the broader western region. Since the company's manufacturing facility opened in twenty twenty two, He has helped advance twenty-five projects, resulting in the creation of more than five hundred homes across the western United States. Mister Schaffer has testified before the Senate Banking and Soil Committee on Housing Transportation and Community Development, in twenty twenty four, and the House Financial Services Committee on Housing and Insurance, in twenty twenty five. He holds a Bachelor of Science in Communication from Florida State University and a Master of Divinity from Columbia Theological uh Seminary. So I look forward to your testimony. I now recognize the ranking member, Velazquez, uh, to briefly introduce our last witness appearing before us today.

Thank you, Mr. Chairman. Our final witness today is Emily DeVito, Senior Advisor for Economic Policy at GrantWork Collaborat- Collaborative, where she manages the work on the housing crisis. Prior to groundwork, she was the Director of Finance, Corporate Regulation and Consumer Protection at Roosevelt Institute and a Policy Advisor at the US Treasury Department. Her research has been featured in the Washington Post, The Guardian and Bloomberg. She holds a bachelor's degree from Wesley College and an MPA from Columbia University. Thank you for joining us today, Emily, we look forward to your testimony.

Channel eight eels back, and I wanna also say thank you to our witnesses and we appreciate all of you being here today. Now before recognizing the witnesses, I'd like to remind them that their oral testimony is restricted to five minutes in length. That's an important number here, five minutes. Uh, if you see the light turn red in front of you, it means your five minutes has has concluded and you should wrap up your testimony. And if you continue on, you'll hear this. That means you gotta stop what you're saying, OK? Yeah, I know you'll do fine. So with that in mind, uh, I now recognize Mister Owens for his five minute opening remarks.

Chairman Williams, Ranking Member Velazquez, and members of committee, thank you for the opportunity to testify on America's housing supply crisis. I'm here today representing NHB's members, most of whom are small businesses who build ten or fewer homes per year, yet collectively they construct roughly eighty percent of all new housing in the United States. At its core, today's affordability challenge is driven by a simple imbalance. The nation is not producing enough housing to meet demand. NHB estimates a structural shortage of roughly one point two million homes. Vacancy rates remain historically low, and the resulting supply-demand mismatch has pushed both home prices and rents beyond the reach of too many households. To explain why this is so difficult to build enough attainable housing, NIHB often points to the five L's, lending, lots, labor, lumber, and laws. These interrelated constraints make clear that the crisis is structural and cannot be solved by addressing a single factor alone. First, lending. Housing production depends on access to capital, and for many small builders, That means financing from community banks. Credit conditions remain tight with borrowing costs elevated, limiting the ability of builders to move projects forward. We are encouraged by recent efforts to highlight project-based working capital options for home builders and look forward to working with the committee and the SBA to ensure these programs are available to all builders. Second, lots. The shortage of buildable lots remains a major obstacle as land development costs continue to rise. Restrictive zoning, infrastructure limitations, impact fees, local opposition, and federal permitting delays all constrain the ability to bring land to market. These challenges are especially acute for small builders who cannot spend or who cannot spread high fixed development cost across large scale projects. Third, labor. The skilled labor working workforce shortage continues to significantly limit housing production. At any given time, there are more than two hundred thousand open positions in residential construction. In twenty twenty-four alone, labor shortages prevented the constructions of roughly nineteen thousand homes and added nearly two months to project timelines. Congress can help by strengthening workforce development programs, expanding training and career pathways in the skilled trades, and ensuring legal and efficient workforce access, where domestic labor supply is insufficient. Fourth, labor and materials. Construction input costs remain elevated with pr- continued price increases in twenty twenty-six, compounding the challenges posed by financing costs, labor shortages, and delays. Even modest increases in material prices can determine whether a project is viable or not. Finally, laws, meaning regulation. Regulatory costs act as a hidden tax on housing production. NHP research shows that regulation accounts for nearly twenty-five percent of the cost of a new, single-family home, and over forty percent of multifamily development costs. These burdens increase carrying costs and financing risk. Permitting challenges are particularly burdensome for small builders. For example, under the Clean Water Act, the difference between a streamlined nationwide nationwide permit and an individual permit can add hundreds of thousands of dollars and more than a year in delays, directly reducing the number of homes that can be built. The bottom line is clear. There is a supply problem. Small builders are ready to help meet the challenge by delivering housing in local markets and underserved communities. But progress will remain limited if costs and delays continue to escalate across financing land labor materials and regulation. Congress can play a role by advancing supply focus reforms at

Thank you. Gentleman Neal is back. I now recognize Doctor Rupnik for his five minute opening remarks.

Thank

Uh Chairman Williams, uh Ranking Member of the West Coast. Thank you. Um thank you for the opportunity to testify. Um this year I co-authored or published a co- uh report from HUD uh that examined why the United States has persistently struggled to industrialize housing delivery, while our peer economies have not. What we found was that much of what uh the work that has been uh that was that was been done abroad was first proposed in the United States but never fully implemented. Industrialization of housing delivery is the integration of design, off-site production, and on-site assembly into a coordinated system. Most American industries operate within this regulatory framework that supports this kind of integration including automotive. Housing does not. In nineteen sixty-eight, HUD documented exactly this issue and concluded that the federal role is to in-create uh to create and enabling conditions within which companies can innovate, to address housing affordability. In response, Congress authorized HUD to pilot, a form of regulatory streamlining called housing system certification. That pilot, operation Breakthrough, validated this approach through work in eight different states and twenty different companies. Six years later, Congress concluded that the lack of uniform housing in building regulatory provisions, increases the cost of construction and thereby reduces the amount of housing in other community facilities which can be provided. The seventy-four Housing and Community Development Act then produced two performance-based regulatory reform actions. The first was the HUD Code, which has been discussed extensively. The second is the more exciting part for me, uh, was the establishment of the National Institute of Building Science, or NIBS, mandated by Congress to continue the work HUD had piloted, developing a performance-based fast track for small innovative companies to deliver housing. That problem, the problem had been identified and measured, a solution had been demonstrated, an institution had been established, but uh, the what was never completed was implementation. Um, our recent report renewed a call for housing system certification for three concrete reasons. It is, it was proven out at a pilot level uh, in United States through Operation Breakthrough. It has been operating successfully in Japan for more than fifty years. Uh, today, uh, more than twenty-eight percent of Japanese housing goes through this fast-track route. and uh has serious benefits um and it is also the same framework that we already use to govern every other consequen- uh consequential american manufactured product, automobiles, air aircraft, medical devices, our food, our pharmaceuticals. Uh a housing system is essentially a product definition, the design logic, the structural and material systems, the offsite manufacturing and onsite assembly processes, quality insurance and quality control of a defined repeatable housing offering. Treat it as a unified whole rather than a collection of discrete decisions made project by project. What defines it as a system is the integration, the design for manufacturing assembly, coordinated supply chain, serial production, and continuous improvement, in other words, industrialized housing delivery. Permitting through this would be streamlined, lenders and insurers could rely on the certification as a basis for underwriting, Code officials would retain their authority, but exercise it against a known and tested baseline. Federal programs could utilize a certification for awards and subsidies. This is what's done in Japan. Uh, this is not a proposal to preempt local code officials. It is a proposal to give them a tested performance baseline against which to exercise their authority. The savings would come not from redoing the same approvals in every project. The quality gains would come from concentrating expert review at the systems level. rather than fusing it across thousands of individual project reviews. In US, the strongest endorsement endorsement for housing system certification has come from small vertically integrated companies, like my friend Eric Schaefer here, who is also serving on a technical committee to support our work. Um, fading west, uh, will will be discussed today, certification benefits factory, site, and hybrid delivery equally, because what it certifies is the integrated system, not to technology. uh itself it also certifies the technology some innovative site builders have also endorsed this regulatory form for exactly the same reason including texas-based jpi uh um a major multifamily uh builder um uh we are working uh so modex is working with nibs and a steering and technical committee of twenty one people uh uh to develop the standard uh we hope to be completed by december of uh twenty twenty six and we're actually happy to say that the state of Washington is already working to pilot this at a state level. Uh, Todd Bayreuther, who is a industry expert and also the chair of the building council, is developing this. Uh, I wanted to make this committee aware of this important work, um, more than half a century in the making, and look forward to your questions and your thoughts about how federal action can support state, lo- local and government and NIBS in, uh, in helping to scale. Thank you.

Uh, thank you, I now recognize Mister Schaffer for his five minute opening remarks.

Thank you, Chairman Williams, Ranking Member Velazquez, and members of the committee, for the opportunity to testify today. My name is Eric Schaefer and I am Chief Business Development Officer for Fading West in Buena Vista, Colorado. We are a fully integrated design, construction, modular manufacturing company focused on the lean process. The US faces a crushing housing deficit, and this burden falls on both national builders and smaller home builders like Fading West. With little or no innovation the past fifty years in how houses are built, Fading West and the modular manufacturing industry firmly believe that this committee has a vital role to play in helping small home builders innovate, scale and actively participate in resolving our national housing shortage. To understand the challenges small home builders face, we must look at how far the US lags in the manufacturing adoption. In our country modular construction represents less than five percent of all housing. For comparison, in Scandinavia modular makes up over forty-five percent. We are failing to address the root systemic causes holding back our construction sector. First, it's uh because of a fractured labor pipeline. Forty-one percent of current construction workforce will retire by the year twenty thirty one with fewer skilled trade professionals available labor costs will rise and slow project timelines second the price of residential construction goods is up over forty percent since twenty twenty and third the regulatory burden regulations account for twenty five percent of the average's sale price of a new home and fourth there are forty three thousand individual building code jurisdictions across the United States, and this makes it difficult for modular factories to standardize. Fading West has shown that building homes using lean manufacturing principles in our hundred and ten thousand square foot factory has helped us reduce waste from thirty percent down to three percent we have over a hundred employees who can build a house in less than ten days in the factory and then complete the onsite work in less than thirty days, for a total of forty days, far less than traditional construction. We build homes twenty percent cheaper and fifty percent faster. We recently built our one thousandth unit in our four and a half years since opening. To see this in action, I'd like to highlight a partnership that we have with Rural Homes, a non-profit, developer in Telluride. In high cost mountain and rural towns in Colorado, traditional site building, it the cost is prohibitive for workforce housing. Together with Rural Homes we have scaled a unique public-private philanthropic partnership blueprint. Under Governor Polis, Colorado has become a modular, friendly state. Through initiatives like Proposition one two three, um equity funding and Senate Bill twenty four O nine, the state is streamlining factory certifications and a slashed red tape. By pairing uh donated municipal land, low-cost philanthropic capital and fading west factory speed delivery, we are building workforce housing at prices well below regional and market pricing. We are currently building projects um all around Colorado, in Wyoming, in Texas, in Montana and have signed first contracts in the Pacific palisades for families that lost homes in the fire. We built eighty-five homes in our Colorado factory and shipped them to Lahaina for the FEMA disaster relief project in Maui. We are currently building twenty-four homes for the Department of Hawaii Homelands uh for a pilot pro project in um Honolulu for the beneficiaries and partnering with DHHL to build a factory in Hawaii, which will speed Building and reduced cost. To empower small business, I offer three recommendations. Provide direct capital incentives for facilities through federal grants at zero percent interest loans. To create regional building codes for different climate zones. This will unlock standardization and allow factories to flourish. And to prioritize and reward vertically integrated public-private partnerships. Housing policy is education policy. It's economic policy, it's environmental policy, it's transportation policy, it's community policy. The committee can empower small businesses to be the master key that unlocks a new era of attainable housing vibrant communities and thriving local economies across America. Thank you and I look forward to questions.

Thank you, and gentlemen, Nils Beck. I now recognize Mr. Vito for her five minute opening remarks.

Chairman Williams. Ranking member Velazquez and members of the committee, thank you for the opportunity to testify. My name is Emily DeVito. I am the Senior Advisor for Economic Policy at Groundwork Collaborative an economic policy think tank in Washington DC. We face a housing affordability crisis, worsened by existing housing shortages and a failure to build more homes of all types. Congress is already taking on barriers to buildings such as restrictive zoning through the twenty-first century Road to Housing Act. Such efforts are important, But zoning reform alone will be insufficient to fix the housing affordability crisis. Home builders and home buyers face economic headwinds that Congress must tackle head-on. As this committee knows, small and medium-sized home builders play a hugely important role in the US housing system. I would like to highlight two particular cost challenges for builders that ultimately put housing out of reach for many families, the rising cost of construction and the high cost of capital. The Trump administration is driving up the cost of construction through its mismanagement of the economy, specifically tariffs on core building materials as well as higher transportation costs and higher interest rates due to the Iran conflict. In the latest producer price index, the price of goods used in residential construction was up one point two percent over the last month, and up six point one percent from last year. Higher prices place a particular strain on small builders who do not have the resources or scale to mitigate tariff costs or to pass rising transportation costs through to consumers. The Center for American Progress recently estimated that higher building costs due to the tariffs will lead to four hundred and fifty thousand fewer homes built over the next five years. At the same time, a lethargic labor market and the Trump administration's immigration crackdown make it more difficult for firms to find and retain construction workers. Adding further time delays and additional costs to the home building process. These higher construction costs get passed on to homebuyers in the form of higher prices. Meanwhile, just months after Doge cut staffing at Heder- at federal housing agencies, the Trump administration is pulling back on federal housing funding by proposing the elimination of programs like home investment partnerships and community development block grants. These programs have channeled millions of dollars to local businesses and community partners. helping meet the needs of over two million people and resulting in the construction or rehabilitation of more than one point three million units of affordable housing. Let's be clear, these challenges didn't come out of nowhere. The higher prices we see today are the result of specific policy choices by this administration that Congress can rein in. But even before the price hikes, cost of capital had already been a major constraint to new construction. Building the capital stack, the specific de- The specific blend of debt and equity required for a given project can be costly for firms, raising capital from investors seeking returns. Small and emerging developers, without the same resources or established track records of large firms, have more challenges securing construction loans and recruiting investors in the first place. And even when small developers secure financing, investors often impose strict repayment schedules and high return expectations, which ultimately result in higher costs for consumers. Congress should target interventions that lower the cost of capital and make it easier for home builders to build to affordability. First, Congress should allow entities like Fannie Mae and Freddie Mac to buy and sell construction loans especially the tranches of debt costlier for developers. Existing programs within the federal home loan bank system should also be expanded. Second, governments should leverage their borrowing power to help cities and states establish revolving loan funds that can extend financing with low interest rates at long maturities to facilitate new construction. Third, Congress should play a bigger role in ensuring mortgages are affordable to homebuyers. This can be achieved through popular policies such as providing low rate direct federal mortgages reducing mortgage insurance premiums, and allowing families to utilize portable mortgages. Ultimately, policies such as these will make it

General Leidio's back. General Leidio's back. We will now move to the member questions under the five minute rule. We will now move to the member questions under the five minute rule. I recognize myself for five minutes. Uh, Mr. Owens, uh, as the Chairman of the National Association of Home Builders, you, uh, spent more than four decades in the residential construction industry and have seen firsthand how the regulatory landscape has evolved in the local, state, and federal levels, and small home builders play a, play a critical role in meeting housing demand, but many say increasingly complex and costly requirements have made it harder to build homes efficiently, and affordably. So my question would be to give a small home builder fair chance to succeed. How important is it to uh reduce unnecessary regulations? And over the years have uh these regulations been easier to navigate or increasingly burdensome for some home builders?

Thank you for the question, Chairman. That uh that that definitely strikes home. I mean, we deal with this every day. The um you know, what we've done with uh what we've dealt with over four decades of increased regulation just isn't from a code or um uh a land use point of view it has nothing to do with any one particular item but when we when we talk about a combination of factors uh at the land development phase we talk about um issues with restrictive zoning uh with impact fees and again we understand this isn't all federal mandated this can be state as well as local regulation as well when we look at infrastructure constraints um even the the uh the nimbyism the local opposition can can add in uh you know uh an interesting kind of twist into our ability to build and i think what we're trying to do right now is to just recognize that um and and as we bring this to congress and i knew at some point i probably would be able to um uh share this with you all is there's not one particular item uh as far as regulation goes there's not one thing in particular that if we did away with today that we would be in a much better place tomorrow to provide attainable and affordable housing it's uh i i call death by a thousand cuts but every one of these adds uh another layer of cost that we simply just cannot absorb and that ultimately is gonna be passed on to the consumer much like everything else when our costs go up But that is a direct impact then on on the um the eventual home buyer.

All right. Thank you. Uh, Doctor Rubnick, uh, as a Professor of Architecture and a leading uh Technical Expert in offsite construction and building innovation, you've spent years studying how design, manufacturing, regulation interact in the housing industry. And through your work with Mod- Mod-X and your collaboration with the National Institution of Building Sciences, you've exploring ways to modernizing housing construction and reduce regulatory barriers that slow the uh development. So, uh offsite and modular construction are often uh viewed as promising solutions to improve efficiency lower cost and expand housing supply but they also face significant challenges because of codes permitting uh and inspections et cetera standardization so my question is quickly uh could you walk through uh walk us through some of the innovations technologies and regulatory reforms you are exploring to make the process more uh scalable and more manageable.

thank you jim for that question um i think the there's a lot of interesting technologies out there but in reality as we look globally uh light wood frame construction an american form of construction is actually seen in many countries as an innovative form of construction so i i say that that there are lot of innovative technologies the innovations that we're excited about are in the code compliance space uh and that's what we're really advocating for because uh as as mister pointed out there are lot of regulations we can't point to one of them but what we can what we can point to is the structure of code compliance so we have a single model we have a we have now a smaller number of model codes that are then adopted by states and then modified adopted by counties and modified and then actually interpreted project by project the multiplication of what actually a company has to deal with small or large are infinitesimal uh the investment in streamlining code compliance uh is the is the single tool that we think would benefit both conventional builders and offsite builders um and that is something that we've seen ai uh other digital tools used in this space and every industrialized economy has had the difficult process of saying our code compliance system is fragment it doesn't work doesn't work for a conventional, doesn't work for new technologies and we need to reform it.

Uh thank you, I now uh recognize the ranking member

Thank you, Mr. Chairman. Mr. Vito, uh housing costs uh are at the root of the affordability crisis, um putting significant pressure on family budgets and limiting the ability of people to save money or even meet their basic uh needs. Can you outline some of the root causes of the housing shortage?

Thank you for the question. For decades the US has underinvested in housing. Construction never really recovered after the great financial crisis, and since then we've only had persistent labor and construction shortages. Um, at the same time, as my testimony mentioned, acute price hikes are making it worse as builders and contractors contend with high prices on core construction materials from tariffs. Um, and one of the biggest underlying challenges we face today is the high cost of

Thank you. Um, Mister Owens, the National Association of Builders testify uh before the financial services that uncertainty from tariffs was constraining investment. What impact do section two thirty-two tariffs on lumber, steel, and aluminum, and kitchen cabinets, and finished wood products, as well as potential future three O three zero one tariffs have on small builders?

Thank you very much for the question. Um, our research through our Econ team has shown a fairly insignificant um burden when it comes to tariffs uh uh somewhere around when we look at a at total building cost everything that goes into the home we we're estimating that about seven percent of building materials that go into that home are actually imported so we're somewhere under ten percent of our net cost there so you know currently with the administration working toward the american first environment that's influencing some of our work but it's it's it's fairly minimal, at least from our houses.

And you disagree with the uh the member of the National Association of Home Builders that tariffs is constraining investment?

I don't think there's any question that they're having some impact.

OK. Wouldn't you agree that these tariffs have increased the cost of housing? You're saying no?

Slightly.

OK. And the president has proposed significant cuts to programs at heart. Mister Vito, what are some of these quotes and how do they impact housing affordability?

That's right. The President has, um, been trying to eliminate some of the nation's most flexible housing programs, including, um, the Home Investment Partnerships program and community development block grants. In the President's proposed budget for fiscal year twenty twenty-seven, uh, that would cut funding for the Department of Housing and Urban Development by roughly eleven billion dollars, or thirteen percent. Um, cutting this funding means that these communities and businesses that are counting on these programs um for the flow of capital won't get it and may not be able to build as many homes or at rates that families can afford.

So do you agree that if the president and members in Congress are serious about addressing the housing production that they will be increasing, not decreasing, how its housing production programs?

Yes, ma'am.

Uh, on both sides of the aisle, mister Vito, many of us recognize that NIMBYs have abused land use regulation to slow the construction of new housing starts. But solving that issue is only part of the problem. Why is expanding government options for access to capital so important for new construction and particularly for small builders?

Thank you. Um, yeah, I mean, I think everybody on the panel agrees that there is uh there's no doubt that zoning restrictions and complex uh permitting processes have worsened our housing affordability crisis um unfortunately though I feel strongly that fixing zoning alone will not dissipate the underlying cost of securing financing, which is one of the major drivers um of the affordability crisis we see today.

Thank you. Thank you. Mister Owens, um to that end your testimony mentioned s b a financing to help get more access to capital for small developers i'm working on a bill to modernize the five O four c d c program to support renovation of mixed use developments for commercial and residential units would this be a provision you will support

i think we'd wanna look into that a little bit more but i think that we're we're we're absolutely in alignment and very hopeful that the small business administration grants for us, you know, the the lending process will help us out. We represent the small builders and anything that we can do, capital is always an issue for us, not just in w- mainly with the carrying cost of of the business more so than just actually financing the land.

Thank you. Um. Oh yeah, my time expired.

Well, j- lady's time is up. She forgets that sometimes. Uh, I now recognize Mister Remuser from the great state of Pennsylvania for five minutes.

Thank you, Chairman. Um, thank you all. Um, very interesting and important, um, discussion and and hearing here. We all agree construction costs, regulatory delays, outdated zoning constraints, uh, fuel decades of underbuilding, uh, perhaps as many as three to four million, uh, single family homes. Um, uh, we need to build and make available small home builders, uh, play. a very vital role, Mister Owens, as you are are clearly bringing out, as you did in your testimony. Earlier this week, as has been mentioned, we did pass a very bipartisan amendment to the twenty-first century Road to Housing Act that will address many of these shortage, uh, issues by reducing unnecessary barriers to new home construction, modernizing HUD programs, allowing banks to f- more freely deploy deploy capital, and have some restrictions on instri- institutional purchases of single form family homes, not the building of single family homes but the purchasing of them. So, Mister Rollins, very intrigued by your testimony, had some real good ideas in there. I like this lending lots, labor, lumber, laws, I mean that's that's good, that really sums sums things up and uh helps us focus I think. Um the um uh the banking uh as the ranking member was just just talking about uh, the, you know, our Housing Act allows banks to lend more to finance home construction. Um, this should make a difference. Uh, it should double it. It could actually double it according to the intent of the, of the law anyway. Uh, and I'm intrigued, intrigued about the idea of expanding seven A loans for home construction. Uh, maybe double it. Right now it's at five million. We're bringing up to ten million. I mean, one builder alone, perhaps that could equate to well you do the math thirteen maybe fourteen fifteen new homes your thoughts on that

thanks sir for the question um you know for us access to capital is a must we absolutely cannot build without that so when we talk about um this the the possibility where as i said uh with the the earlier we're encouraged by the s. v. a. seven a. or seven b. program as a way to finance direct costs I think there are limits though to that, what we had seen um. For example, phase development is would be excluded from that and actual project based working capital would would be something that I I think I understand would have been excluded um I think when we're looking at the overall

Yeah.

landscape of uh construction financing of you know larger builders I think have more varied access. to different capital pathways. We represent the small volume builders, you know, our average builder is building ten or less homes a year.

They're the ones I know, yeah, sure.

Yeah. Yeah. So that that's the that's the one thing right now that we're looking at is what what are some means that these smaller builders would have access to capital and that's why we sort of are are we're encouraged by some of your discussions with the SBA on this.

Yeah. It could. And the SBA would be, I think, more effective, maybe faster, uh, than the HUD. programs uh that exist

it may be

ok so um doctor rupnik well first of all um yeah doctor rupnik the um uh the uh twenty first century road to housing uh uh bill the regulation from a regulation stand point or any aspect of that bill could you give me your feedback on that some of your thoughts

uh i haven't studied the specifics of it But I think the issue is that we have not yet really understood, um, based on the conversation today where the cost is, because we're talking about the cost of regulations. We're not talking about the structural cost of our code compliance. So that I think, uh, from what I've seen in the bill and I haven't spent as much time as I'd like to, because it's been changing,