Good morning and welcome to the Committee's second hearing on Housing and Community Development Needs in the United States. I want to welcome the Secretary and extend to him the Committee's appreciation for appearing before us today.
Two weeks ago, we heard from a number of experts about the growing affordable housing crisis in America. Today, we want to get the Administration's perspective on this problem. As my colleagues know, the President is in the midst of putting together its budget proposal for fiscal year 2003. Because that process has not yet been completed, the Secretary cannot talk either about budget levels for specific programs at HUD, nor can he talk about new programs that might be proposed. However, we have asked him to discuss what he sees as the nation's pressing needs in the area of housing and community development, particularly as the country enters its first recession in about a decade.
First, I'd like to talk about some good news. After stagnating and even falling in the 1980s, the homeownership rate rose to historic levels in the 1990s, particularly after 1995. Improvements in minority homeownership drove much of this improvement. In fact 40% of all new homeowners from 1994 to 1999 were minorities, even though minorities make up only 24% of the population. African American and Hispanic homeownership rates grew twice as fast as the white homeownership rate.
In spite of this progress, there continues to be a significant gap in homeownership between white and minority Americans. Closing this gap is a priority of the Secretary, and I want to be as helpful as I can in that effort. To that end, I am particularly concerned about the so-called "clarification" on the issue of yield spread premiums put out by the Secretary in October. I plan to hold a hearing on this topic early next year, and I do not want to divert us to this issue this morning. Let me just say, however, that HUD's "clarification" will lead to increased costs to low income, minority, and middle class home buyers by opening the door to mortgage brokers to steer those borrowers into higher interest rate loans without their knowledge, and without any reasonable recourse.
I am particularly disturbed that Assistant Secretary Weicher recently said that HUD was compelled to issue the statement because of the decision in the Culpepper case. In that case, the Court found that brokers collected thousands of dollars in unnecessary out of pocket fees from FHA borrowers in addition to steering them to higher interest rate loans in exchange for a yield spread premium paid by the lender. FHA is designed to be a tool to increase homeownership, not a cover to strip owners' equity. As the Court recognized in Culpepper, yield spread premiums do have a legitimate role in the marketplace as a way of reducing closing costs, if the borrower chooses to pay certain costs and fees through a higher interest rate. The Committee will keep a close watch on the rulemaking that I understand HUD is undertaking, with the goal of ensuring that it really is helpful to homeowners and home buyers.
While there has been general progress on homeownership, the shortage of affordable rental housing is a serious problem that appears to be getting worse. HUD's own data show that nearly 5 million very low income American families pay over half of their income in rent, or live in severely substandard housing.
A study by the National Housing Conference that looks at a broader sample, found that nearly 14 million families, including working families, face this same, critical problem. In fact, while the number of worst case needs among poor families actually stabilized a bit, the number of working families carrying this severe burden has risen dramatically.
As the Chart of the United States shows, there are 33 states in which two full-time minimum wage earners in a family is not sufficient to rent a modest apartment paying 30% of a family's income -- the general measure of affordability. These trends are not surprising. Again, referring to the Chart on "Change In Affordable Rental Units," we see that in the past decade, the number of units available to extremely low-income renters has dropped by almost a million units, a loss of 14%. Nationally, apartment vacancy rates have declined by 1.7 percentage points, making it more difficult for all renters to find an affordable place to live. As the third Chart indicates, many metropolitan areas have significant percentages of families who live with the insecurity of knowing that one unexpected medical bill, one car repair, or one bout of unemployment can lead to a cycle of eviction and homelessness.
The children in these families will not be able to receive an adequate education. Their parents will not be able to take full advantage of job training offered to them, or other important services, until they have the kind of stability that affordable housing in a safe neighborhood can bring. In my view, housing is a first step to bringing many poor families and their children to economic self-sufficiency.
I very much look forward to getting the Secretary's views on these issues.