It is appropriate that we are holding this hearing at the beginning of June, which has been declared National Homeownership Month. Homeownership is a cornerstone of the American Dream. It is the chance to set down roots, build equity, and get involved in a community. I want to commend Secretary Martinez for continuing the focus we saw under the Clinton Administration on increasing homeownership opportunities, particularly for minorities.
However, programs like the proposed American Dream Downpayment Fund cannot solve our nation's affordable housing crisis on their own. Housing is becoming less and less affordable around the country. According to the latest Housing Price Index (HPI) Report from the Office of Federal Housing Enterprise (OFHEO), the average price of a home in the U.S. during the first quarter of 2003 was 6.48% higher than a year ago, almost triple the rate of inflation.
In my own state of Rhode Island, homes appreciated 15.7% this past year-the nation's fastest rate and more than twice that national median of 6.89%. Only 216 of the single-family homes currently for sale in the entire State of Rhode Island are considered affordable by our State Housing Finance Agency, meaning a family earning $47,280 or 80% of our State's Median Family Income can afford them. This represents only 9% of the homes on the market. Rhode Island's homeownership rate fell for the second year in a row to just 59.6% in 2002. This is 8.3% below the national homeownership rate of 67.9%.
As a result, I have several overarching concerns about some of the homeownership initiatives we will be discussing today.
First, downpayment assistance for low-income families is of "little assistance" if they can't find an affordable home to buy with it.
Second, downpayment assistance is only one rung of achieving homeownership. If some of the lower rungs on the ladder to homeownership are ripped out-such as public housing, Section 8 vouchers, preserving existing affordable housing, stabilizing and revitalizing distressed neighborhoods, and creating new units of affordable housing-very few working families are going to be able to climb up the ladder and achieve the American Dream.
Finally, I am concerned about the vagueness of the Administration's proposal-in particular, the lack of a transparent formula for distributing the downpayment assistance and the lack of local flexibility in determining how the money can be used to expand homeownership.
Of course, that begs the question of why the $200 million in downpayment assistance is not just added to the existing HOME formula. This would allow State and local governments to determine how best to provide homeownership assistance in their communities.
Needless to say, I look forward to today's testimony and hope it can clarify some of my concerns.