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HOUSEHOLD INCOMES AND HOUSING COSTS:

A NEW SQUEEZE FOR AMERICAN FAMILIES

FIELD HEARING

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

APRIL 4, 2007

Printed for the use of the Committee on Financial Services

Serial No. 110–20

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin, 

LINCOLN DAVIS, Tennessee 

ALBIO SIRES, New Jersey 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

TIM MAHONEY, Florida 

CHARLES WILSON, Ohio 

ED PERLMUTTER, Colorado 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

SPENCER BACHUS, Alabama 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III)

C O N T E N T S 

Page 

Hearing held on: 

April 4, 2007 ..................................................................................................... 1

Appendix: 

April 4, 2007 ..................................................................................................... 31

WITNESSES 

WEDNESDAY, APRIL 4, 2007

Anthony, Amy, President, Preservation of Affordable Housing, Inc. .................. 6

Baker, Charles D., President and CEO, Harvard Pilgrim Health Care ............. 26

Bluestone, Barry, Dean of Social Science, Urban Affairs, and Public Policy, 

and Director, Center for Urban and Regional Policy, Northeastern University ......................................................................................................................... 10

Brooks, Tina, Undersecretary, Department of Housing and Community Development, Commonwealth of Massachusetts ........................................................ 13

Dubuque, Stephen, Executive Director, South Shore Housing Development 

Corporation ........................................................................................................... 16

APPENDIX 

Prepared statements: 

Anthony, Amy ................................................................................................... 32

Baker, Charles D. ............................................................................................. 48

Bluestone, Barry ............................................................................................... 52

(1)

HOUSEHOLD INCOMES AND HOUSING COSTS: 

A NEW SQUEEZE FOR AMERICAN FAMILIES 

Wednesday, April 4, 2007

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The committee met, pursuant to notice, at 10 a.m., in the Brookline, Massachusetts, Town Hall, 333 Washington Street, Brookline, 

Massachusetts, Hon. Barney Frank [chairman of the committee] 

presiding. 

Present: Representatives Frank, Capuano, and Lynch. 

The CHAIRMAN. Good morning. This is a hearing of the House Financial Services Committee, which is the committee in the U.S. 

House that has jurisdiction over all housing programs, all the programs of the Department of Housing and Development, and I’m 

joined by my colleague who is a member of the committee, Michael 

Capuano. We will be joined shortly by our other Massachusetts colleague who sits on the committee, Stephen Lynch. 

The Republican side is represented by the staff director on the 

Republican side, who is the chief assistant to the ranking minority 

member, as we call them, and I’m pleased to say that this is a committee in which partisanship does not get in the way of cooperation. We have legitimate differences, which is why we have two 

parties, but we also have some common goals, and our differences 

have never gotten in the way of reasonable cooperation, so we’re 

glad to have them here. 

The purpose of this hearing is to focus on the full dimension of 

the housing crisis that faces the country and in particular those of 

us here in Massachusetts. The social dimensions of the housing crisis are, of course, well known—people unable to live the kind of 

lives they would like to be able to live because they cannot get decent housing at prices that they can afford. So you have some people paying so much for the housing that their ability to meet other 

needs is diminished, or you have people living in very inadequate 

housing, and so we are going to be discussing that national issue 

and its impact here in Massachusetts. 

Before we do, I want to express my appreciation to the Town of 

Brookline for hosting us and I’d like to ask the chairman of the 

board of selectmen, Robert Allen, at this point to come forward and 

accept our thanks and say a few words. 

Mr. ALLEN. Thank you, Congressman Frank. I’ll stand this way 

so I don’t have my back to everybody. Fortunately, my voice usually resonates and people don’t have trouble hearing me speak, but 

I’m just thrilled that the Congressmen, all three Congressmen 

2

came here today. We really appreciate seeing the committee come 

here. This is a very important issue to Massachusetts and certainly 

to the Town of Brookline and we’re very fortunate that they chose 

to come here today to speak about this issue. 

Since I don’t have the opportunity to have the ear of so many distinguished people that often, I would like to say a couple of words, 

if you don’t mind, Mr. Chairman. Just very briefly, because I assume people didn’t come here to hear me speak. But I want to talk 

a little bit about some of the changes I’ve seen, being on the board 

of selectmen for 7 years, the last 3 years as chairman. 

I grew up in Brookline; I remember growing up in town. My father was a police officer, and I would say about 90 percent of our 

town employees lived in Brookline. Now, probably only about 30 

percent of our town employees live in Brookline, and my guess is 

that most of that 30 percent are people who have been here for 

about 30 years and continue to have their homes. 

I also remember firsthand on the board being involved in some 

interviews for some staff or for directors. We had a ton of resumes 

come in. Brookline is a wonderful municipality to work. I like to 

believe we take good care of our employees and we also saw a large 

response from applicants. 

Lately, I’ve seen the number of interested resumes coming in for 

some very good jobs really reduced. I’m sure housing costs have a 

lot to do with it, but even more so than housing costs in the geographical circle around Brookline, commuting costs have increased 

so much that I believe it’s actually affecting the ability of municipalities to get the quality employees that they need. It also could 

be affecting the public sector because people have to live further 

and further away from their municipalities. 

Clearly, there’s an interest in every municipal town or city to 

have its employees live in town or the city. That’s unrealistic in the 

Town of Brookline, and that’s a shame. We have one area in town; 

we used to call it Button Village. It was called Button Village because every fireman and police officer lived in that particular 

neighborhood. I was informed recently that it’s now called Button 

Wood Village, and my guess is that a lot of lumberjacks didn’t 

move in there, but rather that it’s changed, and maybe there’s a 

certain stigma, but it’s really a shame. 

I just want to give some statistics so you understand and the 

housing director, Fran Price, was kind enough. During the past 15 

years, the median price of a condominium increased 242 percent, 

from $131,000 to $449,000. That’s 3 to 4 times the increase in the 

median income for the Boston area which increased by only 68 percent. I say only 68 percent. In 1991, a typical buyer, a family of 

three in the Boston area with a median income, could afford a condominium at 78 percent of the median price of last year. In 2006, 

that typical family could have bought a condominium which cost 48 

percent of the median sales price. The affordability gap for the typical family seeking to purchase a typical condo grew from $28,000 

to $232,000 during this 18-year period. That’s an incredible gap increase for this time period. We’re not talking about luxury houses 

here. We’re talking about median condo here in Brookline, so clearly this is a very important issue here for this community and Congressman Frank has been very great, as has the rest of the delegaVerDate 0ct 09 2002 16:33 Aug 01, 2007 Jkt 036816 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 K:\DOCS\36816.TXT HFIN PsN: TERRIE
3

tion, about working with us to try to find solutions, and to try to 

take the stigma away from creating new affordable housing. We appreciate all their help and Congressman, I really appreciate the 

time you allowed me to speak. 

Welcome to the Town of Brookline. 

The CHAIRMAN. Thank you, Mr. Chairman. Let me just note the 

presence of another very important official, Representative Kevin 

Honan, who is the chair of the—we have joint chairs for the committees in the legislature. He’s the house chair for housing. So Representative Honan, we’re delighted to have you join us and we look 

forward to working together with you. 

The social component to this problem is well known, but Selectman Allen talked about another aspect that we want to discuss and 

that’s the economic problem. We have a situation here in Massachusetts where the very high cost of housing is not just a problem 

for the quality of people’s lives; it’s a problem for our economy. One 

of the major sources of employment here are institutions—hospitals 

and universities. They have a problem because of high housing 

costs. 

Private businesses have a problem. If you have high housing 

costs, when you go to attract the kind of employees you want, you 

have to raise salaries to make up for those housing costs or you 

don’t get the employees you want. So when we talk about trying 

to alleviate the high cost of housing here in Massachusetts, we are 

talking about doing something that’s economic as well as social. 

And what we will be talking about today is: one, documenting 

that problem; and two, what we can do about it. Because the committee on which we serve is the committee that initiates housing 

law, we’ve already begun to address that. We just passed out of our 

committee the bill that would re-regulate Fannie Mae and Freddie 

Mac. Two pieces of that bill are directly relevant. One, we are trying to change the national policy which puts a dollar limit on the 

amount of a mortgage that can be bought in the secondary market 

by Fannie Mae or Freddie Mac or can be insured by the FHA. We 

now use a single dollar amount for the entire country. 

Housing prices vary by geographical region; it makes no sense to 

set the same dollar price for Nebraska and for Mississippi and for 

Massachusetts. That freezes us out, and we have dealt with that. 

We also have given Fannie Mae and Freddie Mac new goals for 

them to achieve when they buy secondary mortgages and we include in that rental housing. And one of the points that I keep 

stressing is that I believe part of the problem we have in this crisis 

of people having bought homes and not being able to keep them up 

is that we have denigrated rental housing and treated people as if 

only people who own their home were living decently or could live 

decently. And we have pushed people who are not economically 

able to do that in certain parts of the country, in particular, into 

homeownership. What we need to do is, yes, help people who are 

able to afford homeownership to do it, but to also have adequate 

rental housing. 

As people here know, one very important source of rental housing in Massachusetts, certainly very relevant in the districts of 

both of my colleagues here, are the three deckers, and owner-occupied three deckers are an important source of rental housing. ConVerDate 0ct 09 2002 16:33 Aug 01, 2007 Jkt 036816 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\36816.TXT HFIN PsN: TERRIE
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gressman Lynch sponsored an amendment to the bill last week 

which made it explicit that Fannie Mae and Freddie Mac would 

have the goal of trying to do financing for owner-occupied three 

deckers so that we would have a further source of income into this 

very important source of rental housing. 

Congressman Capuano, I know, has taken the lead on one of the 

issues that Selectman Allen talked about, namely trying to provide 

particular assistance for municipal employees so that they would 

be able to live in the towns in which they work. As a former Mayor, 

he’s very aware of that. So all three of us have worked on things 

specific to Massachusetts in the context of the important and general issue and we do want to say this is one. Sometimes we’re told 

well, you’re pursuing a social goal, but that would come at the cost 

of economic competitiveness. Reducing the excessive cost of housing 

here and in much of the rest of the country is a case of pursuing 

social benefit and enhancing economic competitiveness. It’s a situation where these goals reinforce each other. They do not conflict. 

I’ll now turn to my colleague, Mr. Capuano. 

Mr. CAPUANO. I don’t have much to add to what the chairman 

has already said. It’s nice to be back in another—I know it’s a 

town, but feels like a city to me, another town hall. I will also 

thank the people that I know in this room. Most of you, I think I 

already know, who have been working in this field for a long time. 

I just want to reiterate what the chairman said earlier. Just last 

week we had a bill where there was an amendment to strike a provision that would address some of the pricing disparities and when 

the author of that provision has his discussion, he was invited by 

many of us who live in expensive housing areas to try to come and 

live here on the basis of his numbers. Of course, he didn’t take us 

up on that and I actually wished he would. I hope he moves to 

Steve Lynch’s District so maybe if he wants to run as a Republican— 

[Laughter] 

Nothing personal, Steve, of course. 

Mr. LYNCH. I know. 

Mr. CAPUANO. But I’ll also say very clearly that when the vote 

on that amendment came, it was a bipartisan vote to defeat that 

amendment, so it is not a partisan issue. There are expensive housing markets in this country that don’t fit the mold, at least according to some. 

With that, I look forward to hearing the testimony by the people 

that I know who have been doing this for a long time and know 

more about the issue than I do. 

The CHAIRMAN. And now I’ll turn to the third Massachusetts 

member of the committee, a colleague from South Boston, Mr. 

Lynch. I should add, by the way, that we are here to draw up an 

agenda, one that will particularly focus on what we need in Massachusetts and we will be aided in this, not just by the fact that the 

three of us serve on this committee, but the chairman of the Appropriations Subcommittee that votes the funding for housing is our 

colleague from the west, John Oliver, so Massachusetts is very well 

represented in this area, not surprisingly given our needs. 

Mr. Lynch? 

5

Mr. LYNCH. Thank you, Mr. Chairman. I, too, want to thank the 

Town of Brookline, Representative Honan and Bob Allen for their 

kindness this morning. 

I guess I’ve had an opportunity to witness the whole spectrum 

of housing problems that we have in this country. I grew up in a 

public housing projects in South Boston. When I was a new attorney, one of the first things that the firm I was with required me 

to do was to volunteer my time pro bono in some area of interest 

that I had and so what I chose was to go back to the housing 

projects that I grew up in to represent families who couldn’t afford 

an attorney on issues from asbestos in the home, lead paint, people 

being underhoused, you know substandard housing, so did a lot of 

that. And now it’s just breathtaking the scope and breadth of the 

problems that we’re seeing in housing policy nationally. 

As a former tenant of public housing, someone who cares deeply 

about it, it was a good day when Congressman Barney Frank became chairman of the Financial Services Committee and is now the 

chairman over housing policy in the House. It was a good day. And 

it was then an even better day when he appointed me to this committee. 

[Laughter] 

So my thanks to him as well and he gets it. He gets it. The issue 

around three deckers, while some people saw that as a housing 

issue, I was that as an election issue because so many of my votes 

and so many of my families are in those three deckers and if there 

weren’t some type of recognition by national housing policy to help 

people in that situation to preserve the ever shrinking number of 

rental units in those three deckers, we would be hard pressed to 

preserve the quality of life for a lot of people, not only in Brookline, 

but across the country as well. 

I would differ with the chairman on one point. He stressed the 

bipartisanship of this committee. And I think that’s true. I think 

that’s true. But this Administration and previous Administrations 

from the other party have not, in my estimation, treated housing 

as a valid and credible priority for our national government. I 

would say what we are doing now, and what the chairman is doing, 

is because of a lack of funding and resources that have been given 

to the area of housing, affordable housing, what we are doing now, 

what Congressman Capuano joins us in doing, is what I would describe as triage. We’re trying to use our resources, marshall our resources to provide the best opportunities for as many families as 

we can help. 

The Republican approach to housing has been euthanasia. 

They’ve been trying to put everybody out of business and really, I 

think effective disinvestment in affordable housing around this 

country. So we’re struggling with that and it’s a great opportunity 

to work with Congressman Frank and I appreciate the intelligence 

and energy he brings to this issue and I think there will be a good 

result in the end for people whose communities rely so desperately 

on availability of affordable housing and I yield back, Mr. Chairman. Thank you. 

The CHAIRMAN. I thank my colleague. Let me just say, we do 

agree on this. In fact, one of the frustrations I had in previous Congresses, when we were the minority, was that we came to some 

6

semi-agreement with our Republican House colleagues on some 

issues and they were overruled by the Administration and the Republican congressional leadership. So that is true, there are ideological differences there. 

I did want to note that one of the things we want to do, and obviously we support homeownership in many ways, but we also believe that there’s been a serious lack of attention to the need for 

decent rental housing. I think it’s not an accident that we talk 

about South Boston or Brookline or Cambridge or Somerville; 

you’re talking about communities that have always had a significant rental housing population and I think that’s why all three of 

us are especially sensitive to that and why we are determined to 

reverse the policy. It’s really doing great harm, allowing great 

harm to be done to rental housing. 

We will now begin. We have our panel of witnesses. We’re going 

to be joined later by Charles Baker, the president of Harvard Pilgrim Health Care, who will obviously be talking from the standpoint of an employer who has encountered serious difficulties with 

housing costs. But we’ll begin Amy Anthony, a former secretary of 

community development of the Commonwealth of Massachusetts, 

and now president of the Preservation of Affordable Housing, Incorporated. 

STATEMENT OF AMY ANTHONY, PRESIDENT, PRESERVATION 

OF AFFORDABLE HOUSING, INCORPORATED 

Ms. ANTHONY. Thank you, Mr. Chairman. Good morning to you 

and the members of the committee, and thank you very much for 

the opportunity to appear before you to discuss the housing squeeze 

in our country. 

As you noted, I’m the president of Preservation of Affordable 

Housing, Inc., or POAH. Based in Boston, POAH is a national nonprofit which is focused exactly, as our name says, on the preservation of affordable housing. We have been in existence for just over 

5 years, and currently own and manage nearly 4,000 affordable 

rental homes in eight States and the District of Columbia. The 

more than 10,000 residents who live in POAH-owned homes generally are low-wage workers and their children, or seniors on fixed 

incomes, or the disabled; in short, among the most vulnerable of 

our citizens. 

My background includes more than 30 years in affordable housing. During my tenure as cabinet secretary, we produced more than 

25,000 homes, so I come to this discussion with a wide ranging perspective on the problems, the challenges, and the opportunities. 

You are hearing this morning from a number of highly skilled 

professionals in the housing industry. Each of them will reference 

both experience and research to confirm the premise of your hearing this morning, that American families at all income levels are 

being squeezed by the cost of housing. 

I would like to use this platform to direct your attention to the 

very specific and urgent reality of one facet of the affordable housing dilemma, which is the imperative need to protect and preserve 

the stock of already built affordable housing. I am specifically referring to existing, privately-owned rental housing, apartments which 

have deep public subsidy to make them affordable, even to renter 

7

households earning as little as $16,000 a year or less. This category 

of housing is disappearing in every State in the country. It is lost 

in strong markets to upscale conversion and condominiums. It’s 

lost in weak markets to neglect and deterioration. However we lose 

it, the pressures ripple across the housing spectrum and squeeze 

the entire system even tighter. 

I would like to talk with you this morning about the preservation 

opportunity, its human face, the policy arguments that buttress our 

call for preservation and the action steps which are available to us 

today. Between 1965 and 1990, $60 billion in Federal funding was invested across America to create affordable homes through the private sector. These homes were built in big cities, small towns, and 

rural areas. They were multi-story high-rises and single family 

bungalows. But all were built according to the same premise, that 

the government would provide funds to underwrite construction 

and operating costs and in return owners would promise that rents 

would be affordable to low-income families and seniors for the duration of the fixed financing period. 

Now the financial notes which built this housing are reaching 

‘‘paid in full’’ status. With the expiration of each financing agreement, the leverage for keeping rents affordable is lost. Our enormous national investment in affordable housing is maturing and, 

in many cases, vanishing. 

Even in Massachusetts, with one of the strongest traditions of 

support for preservation, 5,000 units have been lost. At the same 

time, new Federal resources providing deep rental subsidies and 

other financial support to this population are a shadow of our prior 

investment. This committee knows full well the year over year assault on the HUD budget. You, Mr. Chairman, have consistently 

cautioned your colleagues and the Administration on the long-term 

effects these budget decisions are having on the supply of affordable housing, the broader economics of our communities, and the 

daily realities of our most defenseless citizens. The HUD budget for 

the current fiscal year is only 9 percent larger than the Agency’s 

fiscal 2004 budget. During those same years, the rate of inflation 

was 9.3 percent. Obviously, HUD’s financial capacity is eroding significantly. 

When the discussion is workforce housing, it’s not only young engineers or scientists or physicians for whom finding housing in 

markets like Massachusetts is daunting. We should be mindful 

that without maintenance staff, data entry clerks, and nursing 

aides, neither our laboratories nor our financial institutions nor our 

hospitals will function. The reality of the housing squeeze for lowwage workers faced Mayor Clare Higgins of Northampton several 

years ago when she launched a determined campaign to preserve 

Meadowbrook Apartments. Mayor Higgins fought for 3 years to 

pressure the owner of Meadowbrook to abandon his plans for condo 

conversion. She knew full well that the 222 low-income families at 

the development would have few options available if their homes 

were lost. The residents, in fact, were her great allies, creating the 

‘‘Save Our Homes Tenants Association’’ and picketing, leafletting, 

and speaking out for their own cause. Our single transaction saved 

more than 20 times the number of new affordable homes built in 

8

the prior 10 years. POAH’s purchase was only possible with State 

funds allocated especially for preservation, and the outcome is a 

good one. Those homes have been preserved and the families who 

reside there have a more secure future as a result. 

Similarly in Salem, Massachusetts, POAH purchased the 235-

unit Salem Heights development in 2003 after the mayor intervened in court to delay a market conversion. That one property 

constituted 10 percent of the affordable housing stock of the city 

where there had been no new affordable housing produced at all 

over the prior decade. During those same 10 years, 495 previous 

rental units were converted to condominiums. 

Why preserve this housing? There’s no question of the need. But 

the calculus is far broader. Preservation is responsible. It is good 

stewardship. It is environmentally friendly. It wastes less and conserves more. Billions of taxpayer dollars were invested to create 

and sustain these homes and there is a fiduciary responsibility to 

their care. Losing these homes diminishes supply, drives up demand, raises prices and further divides the housed from the 

unhoused. Losing these homes to a lack of will or foresight is the 

worst kind of waste. 

Preservation is also realistic. In many communities here and 

around the country, housing that was built 20 or 30 years ago is 

unlikely to be duplicated. For both zoning and financial reasons, 

most new affordable housing production is on a significantly smaller scale and it’s sited in communities with very little economic opportunity. That is the tide of resource allocation that preservation 

seeks to stem. 

The other compelling reason is basic common sense: preservation 

costs less. POAH’s experience in high-cost markets like Massachusetts is that new construction can be as much as 3 to 5 times the 

cost of preservation. In Northampton, for example, we spent about 

$30,000 of public subsidy to upgrade each unit while similar perunit new construction was averaging $80,000 to $100,000. At Salem Heights, $6,000 per unit of soft funding was required 

to preserve and rehabilitate the project compared to an average of 

$120,000 per unit of soft funding for new affordable housing construction in the area. 

In the face of this urgent need, there are small pockets of exciting developments. More than 40 States have taken action in support of preservation, like the ‘‘donation tax credit’’ available in Missouri and Illinois. New York and other cities have negotiated agreements with HUD giving them right of first refusal before nonperforming properties are put up for sale at open auction. Other local 

governments like Northampton and Salem have also recognized the 

importance of saving housing which serves very low income families and the elderly. We have worked closely, for example, with 

town leaders in tiny Narragansett, Rhode Island, population 

16,361, to preserve 160 homes all located on parcels near the ocean 

which would have been exceptionally attractive to private developers for luxury apartments or condominiums. 

These are important, but modest, steps against a rapidly rising 

tide. There is so much more which all levels of government can do, 

but especially the Federal Government. And while all of us here 

today can identify where more Federal dollars would help, and cerVerDate 0ct 09 2002 16:33 Aug 01, 2007 Jkt 036816 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\36816.TXT HFIN PsN: TERRIE
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tainly, Mr. Chairman, the GSE legislation is a very important 

bright spot, money is not the single solution. First, there must be 

the will and the determination to act and to act quickly. We need 

visionary public policy which recognizes the vulnerability of this 

asset, and commits to its protection. We need investment incentives 

and regulatory improvements and we need predictable resources, 

both dollars and policies, to engage all parties in the outcome. 

Some specific examples for the committee’s consideration might 

include: first, predictable policies, in effect nationwide, to encourage preservation. The apartments that need to be preserved were 

created by a partnership between HUD and private developers in 

which HUD set clear rules and provided clear incentives. For that 

same housing to be preserved, HUD will again need clarity of message and committed partners with effective incentives. 

While there have been signs of a can do attitude from HUD, specifically from its Office of Assisted Housing Preservation, more 

often HUD is merely calling balls or strikes and even then from an 

unclear rule book. As a result, too many of our suggestions today 

seek to correct passive HUD behavior which fails to understand the 

urgency or to express the priority we feel preservation demands. 

Second, financial incentives and tax policies to encourage owners 

to preserve long-term affordability. There are many regulatory and 

policy impediments to transferring ownership of subsidized housing 

to owners like POAH which pledge long-term affordability. Exit tax 

relief would be a good incentive for the right disposition by existing 

owners. 

Third, recognition that the first priority is preserving affordable 

housing, not replenishment of the HUD treasury. HUD regulations 

should be lifted that restrict nonprofit owners from using proceeds 

of transactions or of operations for the improvement of the property 

or for the organization’s mission. Where a State has committed resources to a development’s preservation, HUD should not be standing at the table with its hand out, rather, it should be welcoming 

the States’ participation, not only for its economic assistance, but 

for its implicit confirmation that housing is an asset for the community and for the State. 

Fourth, a commitment to project-based rental subsidies. HUD 

and the current Administration have historically sought to phase 

out project-based subsidies in favor of vouchers for tenants. When 

rent vouchers are portable, tenants may have the opportunity to 

find alternative housing, although in tight markets voucher holders 

often simply cannot. Even where they do, however, the long-term 

affordability of their current home is lost. One generation of turnover in a building which converts from project-based subsidy to tenant voucher subsidy eliminates that entire building from the affordable stock, forever. 

In terms of legislation, I also want to support specifically the enactment of the Mark-to-Market program amendments which failed 

to pass with its renewal earlier this year, with specific ‘‘refresher’’ 

language empowering nonprofit preservation purchasers; the proposal that project-based Section 8 contracts remain in force on foreclosed properties; perfecting amendments to make workable Congress’ efforts to allow transfer of Section 8 project-based subsidies 

to other sides; re-establishing the right of owners to convert rent 

10

supplement and RAP subsidies to project-based Section 8 assistance; authorization to allow Section 8 moderate rehab properties to 

benefit from Low Income Housing Tax Credits; and allowing enhanced vouchers to be project-based when a refinancing is undertaken in order to preserve the property. 

Preserving affordable housing is what we at POAH do. It’s what 

we believe in. We believe in it because it’s necessary, it’s sensible, 

and it makes a difference in people’s lives. We are joined in this 

work by national, regional and local colleague organizations, by 

State and local governments, by foundations, and by private lenders. We look forward to a day when we will again have the Federal 

Government as an active partner and a supporter. We are grateful 

to this committee for your work in bringing that day closer, and we 

look forward to many opportunities to work with you to that end 

in the months and weeks ahead. 

Thank you for the opportunity, and Mr. Chairman, thank you for 

giving hope to many of us in this field. 

[The prepared statement of Ms. Anthony can be found on page 

32 of the appendix.] 

The CHAIRMAN. Thank you. We will be discussing a lot of these 

points as we get to questions. Our next witness is Professor Barry 

Bluestone, who is dean of social science, urban affairs, and public 

policy, and director of the Center for Urban and Regional Policy at 

Northeastern University, and a long-time advocate for fairness, so 

Dr. Bluestone. 

STATEMENT OF BARRY BLUESTONE, DEAN OF SOCIAL 

SCIENCE, URBAN AFFAIRS, AND PUBLIC POLICY, AND DIRECTOR, CENTER FOR URBAN AND REGIONAL POLICY, 

NORTHEASTERN UNIVERSITY 

Dr. BLUESTONE. Thank you, Mr. Chairman, and committee members. I very much appreciate the opportunity to testify before your 

committee on the question not only of housing, but of household incomes. I’d like to briefly address trends in household income in the 

United States and Greater Boston and their relationship to trends 

in rents and housing prices in the local region. But I think the 

major point I want to leave you with is that because of the combination of spiraling housing costs and stagnating household income, the housing affordability gap has skyrocketed. Housing affordability has now become a serious concern in many parts of 

America, not only for low income families, but for a growing proportion of working families and an increasing share of the middle 

class. In regions like Greater Boston, assuring the availability of 

affordable housing must now be seen not only as a moral obligation, as the chairman has said, but an economic necessity if we are 

to remain competitive in the new global economy. 

What we have found in Massachusetts we are also now finding 

in other parts of the country, particularly on the East and West 

Coast. So it is a national problem in many areas, not just here in 

Boston. 

Let’s begin our brief inquiry by looking at family incomes. If you 

look at the period between 1947 and 1973 when some of us were 

growing up, we experienced what my late colleague Bennett Harrison and I once described as ‘‘America’s Glory Days.’’ Inflation-adVerDate 0ct 09 2002 16:33 Aug 01, 2007 Jkt 036816 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 K:\DOCS\36816.TXT HFIN PsN: TERRIE
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justed median family income virtually doubled in a single generation, growing by 104 percent or 2.8 percent a year. As a result of 

this strong income growth, tens of millions of Americans were able 

to secure a home of their own. Between 1940 and 1970, the homeownership rate increased from 44 percent to 63 percent, much of 

this increase occurring between the end of World War II and 1960 

as a result of the GI Bill. 

The period after 1973 was nowhere near as prosperous. Between 

1973 and 1979, family income increased at only 1 percent a year, 

a third of the rate of the previous generation. In the following decade, during the 1980’s, income growth continued to slow to only 

six-tenths of one percent per year. And not until the second half 

of the 1990’s, in the second Clinton Administration, did we experience anywhere near the family income growth of those Glory Days. 

Yet since the year 2000, each year family income has stagnated 

or declined in America. Between 2000 and 2005, median family income actually declined at a half a percent a year. For younger and 

middle-aged families, the story was even worse. Median family income fell by 1.3 percent for families with householders under the 

age of 25; fell by 1.2 percent for families with a householders 25 

to 34 year olds; fell by 9/10ths of a percent for 35 to 44 year olds; 

and fell by 1.1 percent for those who are headed by householders 

of 45 to 54. In fact, only older families with householders over the 

age of 55, the Baby Boom generation, experienced an increase in 

inflation-adjusted income since 2000. 

What is most disconcerting, however, is that figures on median 

income fail to capture the income losses of those at the bottom of 

the income distribution. Real income for the poorest one-fifth of 

U.S. families fell by nearly 8 percent between 2000 and 2005, nearly double the rate of the second-lowest fifth and more than 8 times 

the rate of the top fifth. Today, the typical family in the top 5 percent of the income distribution makes nearly 21 times the income 

of the typical family in the lowest 20 percent. As late as 1979, that 

ratio was 11 to 1, not 21 to 1. 

If we look at Massachusetts, we find that median family increased by 2.4 percent between 1979 and 1989. It actually outperformed the rest of the country. But since 2000, that has not 

been the case. Median household income has fallen by 2.8 percent 

in the Commonwealth and by 1.9 percent here in Greater Boston. 

The story about rents and housing prices is somewhat different 

from these trends in income. Average rents in Greater Boston exploded between 1990 and 2000, rising from $825 per month to 

$1,500. This was in response to a substantial increase in population unmatched by an increase in new rental housing production. 

Single family housing prices in Greater Boston actually declined 

during this time, making housing more affordable between 1986 

and 1992, but then they began their enormous upward trend that 

continued all the way to 2005. In nominal terms, home prices more 

than doubled between 1998 and 2005 in Greater Boston. Only after 

this breathtaking run-up in home prices was there a minor correction of less than 5 percent since 2005. 

There’s another way to view this home price escalation and that 

is to ask the question, how many of the 161 communities in Greater Boston had a median single-family sales price under $300,000 

12

in 2005 and compare it with 1998. Back in 1998, not that long ago, 

85 percent of those 161 towns and cities had median selling prices 

below $300,000. In 2005, only 4.4 percent of them had median selling prices that low. The proportion with median selling prices of a 

$500,000 or more rose from 2.5 percent in 1998, to 27 percent, in 

more than one in four communities. 

According to Freddie Mac data, its home price index in Greater 

Boston based on data from conventional mortgage loans increased 

by 128 percent between 1998 and March of 2006. That’s more than 

a doubling. This far eclipsed the U.S. rate of 90 percent. The key 

point is that real median housing price in our region, after controlling for inflation, rose by 50 percent between 1989 and 2005 in the 

face of virtually no improvement in real household income. Real 

household income up zero percent, real housing prices up by 50 

percent. 

If we look at the 161 Greater Boston communities, we could ask 

the question, how many of these 161 communities have median 

home prices that would be affordable by the median income homebuyer in that community? Back in 1998, the median household 

could afford the median home in 148 of our 161 communities, 92 

percent of them. In 2005, this was true in only 19 communities, 12 

percent of them. And what about first-time homebuyers? Back in 

1998, a first-time homebuyer with an income of 80 percent of the 

community’s median income could afford to purchase a home valued at 80 percent of that community’s median home price in 116 

towns and cities in the region. In 2004, such affordability remained 

in only one town, the little town of Millville, and even that last 

town disappeared as ‘‘affordable’’ to the first-time homebuyer last 

year. 

What has made the affordability problem even harsher is that 

home prices have increased at a faster rate in lower income communities than in higher income communities. Those communities 

in Greater Boston with a median income under $50,000 experienced a 3-year price increase in excess of 30 percent. Those median 

communities with median household income of $75,000 saw their 

housing prices grow by 10 to 20 percent over 3 years. The most 

tony of our communities, those with median household incomes 

over $125,000, saw their prices rise by 10 percent. This was the 

natural outcome of households bidding for homes in communities 

that they thought they could afford. Unable to bid on homes in cities and towns where prices had reached the $400,000 range, homebuyers bid up prices in communities where the median home price 

had been between $150,000 and $250,000. Mr. Capuano knows this 

quite well, because Somerville is one of those. 

The problem, again, is that we are now at a stage, because of our 

national economic policies, where housing prices are soaring while 

family incomes are stagnating or falling. This is a cataclysmic combination of bad news. What remedies we have before us are being 

considered by your committee and here in the Commonwealth, both 

by our new Governor and his administration and by our leaders in 

the legislature. Here in Massachusetts, we passed Chapter 40R 

and 40S to try and help encourage communities across the State 

to rezone land where more affordable housing that is transit-oriented could be built. 

13

Soon we will be working with the legislature and the administration to try to develop an amendment to that law which will deal 

with starter homes for young families. But we also need help from 

the Federal Government. We need to make sure that on the labor 

side we are dealing with the question of raising the minimum 

wage. We need to deal with the question of trade. We need to deal 

with the question of increasing the ability of our workforce to compete internationally. And in housing, we need to make sure that we 

have a Federal Government that works closely with the State to 

help us deal with the housing affordability crisis that we now face. 

Thank you very much for the opportunity to testify before this 

committee, and I look forward to the work of this committee in the 

coming year. 

[The prepared statement of Dr. Bluestone can be found on page 

52 of the appendix.] 

The CHAIRMAN. Thank you very much, Professor Bluestone. And 

next, we are very pleased that the Governor, at our request, has 

sent Tina Brooks, the undersecretary for housing and community 

development for the Commonwealth, to represent his administration here. 

Ms. Brooks. 

STATEMENT OF TINA BROOKS, UNDERSECRETARY, DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT, COMMONWEALTH OF MASSACHUSETTS 

Ms. BROOKS. Chairman Frank, Congressman Capuano, and Congressman Lynch, thank you so much for permitting testimony from 

the Commonwealth of Massachusetts on these important issues. 

Thank you also for holding your hearing in Massachusetts’ Fourth 

Congressional District. 

I’m Tina Brooks and I serve Governor Deval Patrick as undersecretary for housing and community development in the executive office of housing and economic development. 

Years and years of an overheated housing market have taken 

their toll in Massachusetts, as we’ve just heard. While the rental 

and ownership markets have cooled in the past 12 months, the effects on rents and sales prices has been mainly at the high end. 

And the middle segment of the market and that is the segment 

that matters most to working families, sale prices have dropped, 

but the primary effect of the slow down is in the length of time 

that inventory stays on the market. Massachusetts homes are selling more slowly, but we have experienced no dramatic price reductions. 

Massachusetts is the third most expensive market in the Nation 

for renters. The full-time hourly wage needed to pay rent on a relatively modest two-bedroom apartment in our State is over $22 per 

hour; only Hawaii and California have a higher wage-to-rent calculation, and the average for all States is $14 per hour. 

Clearly, the disparity between income and rent places the greatest burden on very low-income households, who have far fewer 

housing choices than higher wage earners. The impact on very lowincome people is well understood and has received attention. 

Homelessness, after all, is a highly visible phenomenon, and certainly one that we are addressing. But what is not so well known 

14

is that the high cost of homeownership is significantly affecting the 

Massachusetts middle class, the heart of the workforce. The current median sales price for single family homes statewide is 

$325,000; the median sales price for condos is $276,000. But the 

prices in certain communities, especially in metropolitan Boston, 

are much more daunting, over $900,000 for single family homes in 

some of the most desirable western suburbs. 

The American dream is not renting a great apartment. The 

American dream is to own a home and the middle class believes 

that the American dream is its birthright. Some of you in the room 

today remember an old campaign slogan, ‘‘Making it in Massachusetts.’’ And in 2007, thousands of middle-class workers are no 

longer making it in Massachusetts. The outstanding colleges and 

universities of this State produce thousands of promising young 

professionals each spring and thousands of these graduates eager 

to enter the workplace are forced to leave the State because they 

literally can’t afford to live here. Older working families may manage to pay substantial monthly rents but, even with two incomes, 

can’t save enough for a downpayment on a condo or a house. Many 

of these households literally pull up stakes and move to other locations, to States with more jobs and housing affordable to the workforce. 

Two years ago, we were the only State that lost population. And 

last year, the population grew by a statistically insignificant 

amount, about 23,000 people. 

Massachusetts is at risk of losing its workforce. When the workforce is endangered, we can’t attract new businesses and new employers and the employers who are here won’t undertake costly expansions. Unless we realize both population growth and workforce 

expansion, we will not be competitive in the 21st century. The cost 

of our housing could be our ruin. 

The impact on employers and employment growth in Massachusetts cannot be overstated. Here’s a particularly disturbing fact: 

During the past 4 years, the Commonwealth of Massachusetts lost 

150,000 jobs. The job loss occurred despite Governor Romney’s declared interest in attracting new employers to the State and in 

helping current employers expand. The job loss occurred in large 

part because of housing costs. As the Deval Patrick administration 

begins, one of the Governor’s top priorities is replacing the 150,000 

lost jobs, and the Governor recognizes that success is tied to fixing 

our housing problem. 

We seek to produce thousands more units each year, both multifamily and homeownership at rents and prices affordable to Massachusetts wage earners. The goal is not easily in reach, but the Patrick Administration is hard at work. One step we must undertake 

immediately is deepening the public understanding of the issues 

and the potential long-term consequences to the State. It’s very 

clear that the public currently does not understand the connection 

between an adequate supply of workforce housing and the State’s 

long-term economic health. We need leadership in delivering the 

message. 

The broad transition in local leadership has disrupted public understanding and many smaller cities and towns, the social compact 

between major employers and the community has lost strength 

15

over time. Even 20 or 30 years ago, the main streets of our smaller 

towns featured locally-owned drug stores, hardware stores, and 

banks. These key employers often lived in town and were civic 

leaders, deeply involved in municipal issues. But the corner drugstore is now CVS; the local hardware store closed when Home 

Depot opened out on the highway; and banks in town are corporate 

giants headquartered thousands of miles away. When leadership is 

needed on issues such as housing the workforce, it’s much harder 

to find than in times gone by. 

This administration intends to rebuild a social compact between 

employers and communities. When local employers speak with 

community residents, the need for housing becomes an issue of economic survival and is less likely to be perceived as discretionary social engineering. We need to spread the truth about our economic 

survival. 

Excellent analysis in recent years demonstrates that the acceleration in housing costs in Massachusetts has far outpaced income 

growth, and thank you, Barry, for making that very clear to us. If 

we significantly increase the supply of housing, both multi-family 

rental and homeownership, the rapid acceleration of housing costs 

will slow down. As we take steps to increase production, we also 

recognize that even expedited production can be slow and costly 

which is why preservation of existing rental housing for low and 

moderate-income families is also of key strategic significance. 

And Amy, you covered some of this, so I’ll just very briefly state 

that in the Boston metropolitan area, the total cost of developing 

one new rental unit often exceeds $300,000. The total cost of preserving affordability in an existing unit, through acquisition, rehabilitation, and affordable use restrictions is typically in the 

$150,000 to $200,000 range, far less than the cost of producing a 

new unit. So while it is imperative that we produce new units, it’s 

also imperative that we prevent the loss of existing affordable 

units. 

Chairman Frank, we know you have deep familiarity with this 

issue and have championed the importance of housing preservation 

since the beginning of your career. Regrettably, not all public servants share your perspective. In Massachusetts, during the Romney 

administration, the importance of housing preservation was minimized. The Patrick administration brings a renewed commitment 

to housing preservation at the State level. In the first 90 days of 

their new administration, we have reversed the Romney administration’s policies which discouraged the preservation of expiring use 

and other assisted projects. We are lifting restrictions that made it 

difficult for private and nonprofit owners to use tax-exempt bonds 

and related tax credits in preservation transactions. And in order 

for these State efforts to succeed, we need a parallel commitment 

from our Federal partners to address the threat to our existing assisted multi-family inventory. 

We applaud the House Financial Services Committee for its recent approval of the bipartisan GSE reform bill that would create 

an affordable housing fund. This move is the latest indication that 

momentum is increasing for the creation of the fund. Both affordable housing preservation and production stand to benefit if Congress passes H.R. 1427, the ‘‘Federal Housing Finance Reform Act 

16

of 2007’’, which you, Mr. Chairman, have introduced. The bill directs the GSEs to contribute to a fund that will be used, among 

other purposes, ‘‘to increase and preserve the supply of renter and 

owner-occupied housing for extremely low- and very low-income 

families.’’ And the fund is expected to generate at least $500 million each year. 

Chairman Frank and members of the committee, it’s clear that 

the Federal Government and State governments will face huge 

housing challenges in the next few years. We need to produce and 

preserve thousands of units to serve working families as well as 

low-income households. In Massachusetts, Governor Patrick and 

his team are ready for the challenge and we welcome the opportunity to work closely with the committee, with HUD, and with 

other Federal agencies to reach our mutual goals. 

Thank you. 

The CHAIRMAN. Thank you very much. I appreciate all the witnesses being so direct and helpful to us. And the last witness on 

this panel now is someone I’ve worked with very closely in our efforts to actually get some housing up because his area covers much 

of the district that I represent, and also Mr. Lynch’s district—Steve 

Dubuque from South Shore Housing. 

STATEMENT OF STEPHEN DUBUQUE, EXECUTIVE DIRECTOR, 

SOUTH SHORE HOUSING DEVELOPMENT CORPORATION 

Mr. DUBUQUE. I’d like to thank the committee for the opportunity to testify. As executive director of South Shore Housing, a 

regional nonprofit agency working in southeastern Massachusetts, 

we administer over 2,600 units of rental assistance under contract 

to the Department of Housing and Community Development. We 

also manage 400 units that we have built and created in southeastern Massachusetts for a variety of people: the elderly, families, 

and special needs populations. 

Currently, we’re working on the development of a 52-unit subdivision in the Town of Dighton. Thirty percent of those units will 

be selling for $149,900 to qualified individuals. We’re also working 

in the City of New Bedford to create a Veterans housing project for 

Vietnam Vets. This is the first time a project dedicated to Vietnam 

Era Vets who have been cycling in and out of hospitals will be done 

with social services onsite. We feel strongly that the support of the 

City of New Bedford and the Congressmen has resulted in our 

being able to require the funds to, in fact, build that housing. I 

should add though, that currently the process of seeking funds to 

build affordable rental housing is fractured, not by the intent of the 

State, but by the existence of the Federal and State rules that limit 

certain pockets of funding. You can go to one source to build 19 

units of Veterans housing. 

In this project, which will close soon and start construction on, 

we need no fewer than five separate sources which include the cost 

of doing the project and delay the same project. I’d also like to 

point out that we’re doing in-fill housing in the City of Brockton 

in cooperation with the Brockton Interfaith Community. In that 

case, the City is selling us lots at a discounted price as most cities 

can do in order to reduce the cost of developing the housing for 

folks who are currently renters in their city. In the case of BrockVerDate 0ct 09 2002 16:33 Aug 01, 2007 Jkt 036816 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\36816.TXT HFIN PsN: TERRIE
17

ton, we’re going to produce eight condominiums that have been 

presold to people who are currently renters and people working in 

the City. Now the object is to continue that process with the cooperation of the city. 

The last thing I’d like to address, though, has to do with the rent 

subsidy program. As a major administrator in southeastern Massachusetts, the rent subsidy program I would offer is one of the 

strongest and most important devices to help very low-income people secure housing. An element of that program is called self-sufficiency. In that instance, we’re attempting to help folks become 

more economically independent. And we have seen people who have 

started out homeless become homeowners in as short as 5 years. 

I would argue that the rules that you’re changing now with SEVRA 

II are an important part of improving the administration of selfsufficiency and that we should use that and continue to use it as 

an engine, a way in which we can move people forward and along. 

I’d also say that the McKinney Program, which is now changing 

the way it focuses its efforts on the Housing First model, is moving 

in the right direction. Shelters are not the answer to homelessness. 

Permanent housing is. But if the Housing First model does not 

have with it some case management, those people who are placed 

will fail. Case management is essential as we’ve seen in something 

called Safe Step where we help domestic violence victims rebuild 

their lives, but we do it not only with housing, conventional apartments, but with case management. Ninety percent of the people 

we’ve worked with in that particular program have been successful. 

In a similar program that merely devotes time to helping homeless people find permanent housing with no follow-up case management, only 30 percent of those families succeeded. 

To give you an idea of the strength of case management and the 

strength of the self sufficiency program, I’ll relate a short story. At 

the end of a self sufficiency graduation, my then-president, Ray 

Morrison, and I were standing over to the side of the room. We 

were approached by a young woman who was enthusiastically telling us how much we had done for her mother who had shown a 

great deal more confidence in herself by setting goals and achieving 

them. And then her story ran right on to explain that she had recently married, after graduating from college, and was about to buy 

her first house. The fact that she was able to do that, she said, was 

because she was able to graduate from the same high school she 

started in, because her parents did not have to move from house 

to house every year forcing the children to move from school to 

school. And in the final analysis, the self sufficiency program and 

what we’re doing is about the children, setting an example that 

they can see and live by and further being able to live in a stable 

environment to allow them to become properly educated and move 

forward is critically important. We’ve seen dramatic changes in 

people by merely inviting them to imagine a future that’s different 

for themselves. 

I’d like to deal with a couple of specific items that the committee 

is now working on and begin by thanking the committee for its 

work on SEVRA II. It’s important that the Federal voucher program be improved so that it can be more effectively used throughout the country, not only in combination with the Federal tax credVerDate 0ct 09 2002 16:33 Aug 01, 2007 Jkt 036816 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\36816.TXT HFIN PsN: TERRIE
18

it program, but by housing authorities who are beginning to experience the same successes we’ve seen with the self-sufficiency program. Changing the payment standards for more flexibility, offering an opportunity for the rent subsidy program to be used in conjunction with a tax credit project, allowing units to be projectbased, which becomes an integral part of the financing of affordable 

housing going forward is critical for the success if we are to get to 

the point of making some impact on affordable housing. 

I’d argue that creating a separate fee for the administration of 

the self-sufficiency program would allow us to expand that effort to 

greater and greater numbers of people. I’d also say to you that 

we’re really a part of a network. I started 30 years ago, and 30 

years ago the rents were $210 a month for a two-bedroom; now 

they’re nearly $1,500 for the same unit. A house that sold for 

$35,000 then is now selling for $400,000. I don’t know how, if I lost 

the house I am in now, that I’d find a way of getting back into one. 

The nonprofit world is very different than what it was when I 

first started. We were four people, VISTA volunteers and good 

folks. Now, we’re a mature organization delivering much more 

housing and services than we’ve ever delivered before. The producers and managers of housing providers are now part of an industry preserving and creating housing across the country. We’re 

a collection of national, regional, and neighborhood-based organizations with volunteer, unpaid community boards. Our mission is to 

change people’s lives to create sustainable communities. And with 

your help, I have confidence we’re going to get that help. We’ll deliver on that promise. Thank you. 

The CHAIRMAN. Thank you. Let me begin the questioning and I 

do want to emphasize what my colleague, Mr. Lynch, made clear; 

there are differences. The biggest single difference you will see in 

the committee that we represent is in housing. Essentially, the policy for the last 12 years has been to provide some assistance in the 

form of vouchers, but virtually no family housing construction. The 

problem is that the vouchers have been offered, as you know, on 

a year-by-year basis, so that you literally could not make any commitment to build based on that. We used to have what we call, and 

you’ve referred to as, project-based vouchers, where a developer 

could be given a binding commitment for 20 years of vouchers, literally take it to the bank, borrow money, and build housing. When 

you reduce it to year by year, when you instead of preserving the 

units, give the individual tenants the voucher, you are adding to 

the demand for housing in a way that does not increase the supply. 

So that you get two things: you get some increased equity, but you 

have higher prices. And the fact is that Federal housing policy, as 

well-intentioned as it may be, is, in fact, driven up housing costs. 

And you get to the ludicrous extremes where in Louisiana after 

the hurricane, there was some talk about doing just by vouchers. 

Well, substantial destruction of rental housing just drives up the 

price. So much of what we will be doing will be to try and get new 

housing constructed. One of the things that we did in the hurricane 

bill that came out of our committee was to grant 4,500 units of 

project-based housing for the first time in a long time. I think 

3,000, at least, 1,500 for Mississippi, because it doesn’t do any good 

19

to give people a voucher to rent an apartment that isn’t there. So 

we do plan to get in this. 

Now there are a couple of other things that we’re working on. 

Several of you mentioned the frustration of trying to take various 

programs and put them together. One of the great advocates of affordable housing is Charlie Rangel, the chairman of the Ways and 

Means Committee. Our staffs are working together—the Ways and 

Means Committee and the Financial Services Committee—so that 

the tax supported forms of affordable housing and the HUD program will work seamlessly together. And that’s one of the things 

that I’ve read and that’s an example of where we can help without 

costing any money, without increasing the allocation. Saving transaction costs, we can guarantee you that will happen. 

Let me say a couple of things to Professor Bluestone. We went 

through a debate last week where the three of us were defending 

our amendment, where we succeeded with some help from some 

California friends to raise the level of housing prices at Fannie Mae 

and Freddie Mae. We didn’t do it. I noticed, according to Professor 

Bluestone’s figures, the dollar figure is significantly below half a 

million dollars, you mentioned at 30 percent of our communities 

are above that already. And we were told oh, that’s unnecessary because higher housing prices track higher wages. And your recitation will be very helpful to us because we will probably deal with 

that again on the Floor. So that was directly on point, that there 

is no automatic tracking of wages and prices. 

I also want to invite everybody and we’ve heard from all of you, 

and to the undersecretary and we in Massachusetts took better advantage of the Federal subsidized housing programs I think per 

capita than any place in the country. We are more at risk if we 

don’t do preservation. So we need from you everything that we 

should do and work with our friends on the Tax Committee and 

that includes some of the housing which is Federal, some done by 

Massacusetts Housing, formerly MA Cafe. Please give us a list of 

everything we need to do to maximize the preservation. Because—

and let me make one other point that Selectman Allen alluded to. 

There are a lot of problems in the construction of housing and the 

government often falls short, but you know, sometimes the citizens 

are no bargain either. 

[Laughter] 

And one of the major obstacles to the building of housing is an 

excessive fear on the part of residents that if we build something 

called affordable housing near them, their lives will be over. In 

fact, I wish we could do tours of the affordable housing that has 

been built. I will tell you this, I want to say to people, we’re here 

in Massachusetts. To this extent, affordable housing very much resembles same sex marriage. It scares a number of people before it 

happens and after the fact nobody notices it except the people directly involved. 

[Laughter] 

I invite people to go around your community and see if you can 

pick out the affordable housing; you often won’t be able to do it. 

And part of the problem, in fact, is that it’s been a cycle. It is true 

that we have sometimes inadequately funded affordable housing. 

Well, inadequately funded housing is not a good neighbor, but if 

20

we’re able to get the funding up, we’re okay. But you know, it’s 

been a long time since we’ve built in this country a Columbia Point, 

or a Cabrini Green, or anything like that—Pruitt. We know how to 

do it better. So I really do urge you, and we will work with you, 

but that is one other reason why preservation is so important because when you were talking about preserving existing units, not 

only is it cheaper, not only are you avoiding displacement for people who are living there, but you don’t have the zoning issues. You 

don’t have these other issues. And as a matter of fact, maybe we 

should do a tour, and I mean this. Representative Honan, Ms. 

Brooks, how about a tour of that terrible affordable housing we’re 

trying to—as a matter of fact, let me put it to you this way. Do 

you know what our problem with affordable housing is in many 

cases? Not that it is unattractive, but that it is so attractive, that 

if we don’t take legal steps, the market will take it away from the 

poor people. 

If affordable housing were so terrible, we wouldn’t have a problem of preservation because we are talking about housing that was 

built for lower-income people. And what we’re now told is is that 

when the time limit is up, 20 years or 40 years depending on what 

it is, that housing is now so attractive that wealthier people want 

to move in. Do people not realize how that doesn’t compute, that 

it cannot be simultaneously neighborhood destroying and irresistibly attractive to wealthier people? 

So we will do everything we can, but we will all have to work 

together. I just want to thank you all and we are working on—

many of these specifically were very helpful. 

Mr. Capuano. 

Mr. CAPUANO. Thank you, Mr. Chairman. I came today for a lot 

of different reasons, not the least of which is to prepare for the 

Floor debate that’s coming up on the bill we had. And I would ask 

each of you, I guess particularly you, Mr. Bluestone, one of the 

things I’m most interested in, and I know the numbers are there, 

but I’d like some statistical analysis of it. I’ve seen some of the 

things here today, I believe, from the undersecretary on how much 

it takes, how much money you have to earn on an hourly basis. 

The problem is, of course, that everybody in the country thinks 

everybody who lives here is rich. And they think it because yes, our 

wages probably are higher than the national average, but they 

don’t then make the connection between that and the higher cost 

of living. And I think it would be helpful and the debate, I believe 

will come, to have some statistics, some clear statistics comparing 

national, statewide, and actually I’m most interested in the Greater 

Boston because my guess is it probably is less expensive to live in 

Great Barrington than it is to live in Brookline. 

But I’d like to see some statistics relative to percentage of median income that it takes to pay the average or median mortgage. 

Nothing extraordinary, nothing—I’m not talking about the new 

houses on Brattle Street, but just averages. And again, maybe I’m 

wrong. My gut tells me that’s the direct link that gets rid of any 

arguments about income levels and housing costs and everything 

else. It’s how much of your income, whatever that is, is required 

for your housing and I have no idea what the numbers are, but I 

have no doubt that they are significantly higher now than they 

21

once were, and I have no doubt that they are higher for the Greater Boston and Massachusetts region than they are in many of the 

other areas. 

One of the tables that was here, I did happen to note that the 

person who made the amendment to get rid of this one provision 

relative to adjusting housing costs comes from Texas and the Texas 

numbers are not significantly lower, and there’s no doubt, and 

that’s why people move. The only State that I saw the people moving to that has a higher than average cost relationship to hourly 

wages is Nevada, and I don’t know what the reasons are, but my 

guess is that if you took Nevada, and distinguished Las Vegas from 

the rest of the State, you would see a significant difference. So I 

would appreciate any of those numbers that might be helpful and 

again, understanding that for my purposes, I’m not doing academic 

research, I’m preparing for a Floor debate, so keep it simple and 

keep it short, only because we don’t get as much time on the Floor 

as Barney is letting us have here. 

The other thing that I’d like to talk about—Barney talked about 

preservation. There are a couple of the things that I always take 

the opportunity to remind my friends of. When it comes to housing, 

too many of my friends talk about nothing but affordable housing 

and that term gets lost amongst a lot of people. A lot of people 

when they hear the term affordable housing, think only of housing 

projects, the old-fashioned housing projects. They don’t understand 

that affordable housing is also senior housing and now in today’s 

world, I’m not sure that I have met any sane person who wants to 

build anything other than mixed use housing. I think, no one has 

come to me and actually suggested that we didn’t learn our lessons 

from the old days and the mistakes made in the past that you can’t 

just put all the poor people in one area and walk away. It doesn’t 

work and I don’t think anybody still believes that. 

I think when you use the phrase, I really push people to understand that everybody who listens to it is not a friend. They’re not 

always already on the same side. They hear affordable housing, 

and they think nothing but the worst like the Cabrini Greens, and 

I won’t mention any of the ones in Massachusetts, because we 

know them all too well, and I don’t want to create any difficulties 

for any of my constituents or any people whom I have the greatest 

respect for. But I would also strongly encourage people to understand that there’s also a political component to this. And the political component that I hear all the time from people who are struggling particularly young people who have done all the things they 

were told to do: they went to college; they got an education; they’re 

working hard; they’re working 12 hours a day struggling to keep 

it together, but hey can’t afford a house either. And they don’t 

qualify for many of these programs that we have. 

I think those of us who advocate for affordable housing are missing a huge, I think it’s a social issue, but it’s also a political issue. 

A huge component of it, if we don’t talk to what most people would 

consider to be the middle class, many of them need help into the 

housing market as well. Not usually as much, well, actually not as 

much, but I need help with my down payment. I’m an attorney. My 

wife is a CPA and when I went to buy a house, we had the same 

loans, well, not the same, well, comparably the same and we needVerDate 0ct 09 2002 16:33 Aug 01, 2007 Jkt 036816 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 K:\DOCS\36816.TXT HFIN PsN: TERRIE
22

ed help from the family to get a down payment. And to miss that 

issue you’re walking away from a huge bunch of people who are the 

political people of this State and this country. We all know it; it’s 

no secret. It’s the middle class who votes; it’s the middle class who 

contributes donations to people who get elected; and it’s the middle 

class who creates, for the most part, the public dynamic that we 

deal with on a regular basis. 

And if we allow them to say there’s nothing in it for me, we lose 

the political capital we need to keep these programs going, and I 

think we do the wrong thing. We also create pressure on the economic and housing rungs of the ladder that are lower than that. 

Here is a very simple example. We talk about three deckers. 

Somerville is full of them, Cambridge is full of them, and Dorchester is full of them. Many of those three deckers are no longer 

available for the people they were built for. They were built for—

I live in a two-family home. I bought a two-family home for lots of 

different reasons, not the least of which is I needed the rent to pay 

the mortgage. That’s who those homes are built for. I challenge you 

to find many of them in Cambridge, Somerville, most of my District, and Dorchester and Roxbury that are now available that way. 

They’ve all been ‘‘condo-ized.’’ Good, bad, indifferent, leave that to 

other aspects. But the economic basis, the working middle class has 

lost one more entry into the housing market, the two and three 

family homes because they’re not available. You have to buy two 

condos now and put them back together to have that two-family 

house. I can show you all over the neighborhood; you know this. 

Please, as you look at these issues, as you help us look at these 

issues, don’t forget that part of it, because otherwise I’m talking to 

an empty wall, a blank stare from people who don’t know what this 

is all about or don’t see it from that perspective. They see it only 

from their own perspective of, ‘‘What do you mean? What’s the 

problem? I got mine.’’ And many of them don’t see it until their 

own children try to buy a home in their own community, when they 

realize that the house that I bought in 1908 for $75,000, which is 

way below any table I see, that same house today through no, well, 

no credit to myself, is now worth $700,000. I couldn’t afford the 

house I live in today if I had to buy it today with a better income 

than I once had. And that story is told over and over and over and 

over and over in Greater Boston. 

Unless people have children that they want to get into that housing market, they don’t see it. And to me, to miss that is to not talk 

about it, that’s why I do focus on police and fire fighters and teachers who are, no matter how you measure it, working middle class 

people in any community. They can’t afford to live here and they 

have to move to the Dightons of the world which is fine if you want 

to, I have no problem with that. My concern is that they have to. 

The CHAIRMAN. It’s a wonderful town. 

Mr. CAPUANO. It’s a wonderful town. 

[Laughter] 

Mr. CAPUANO. I only mention it because he did. I have areas— 

The CHAIRMAN. It’s mine. 

Mr. CAPUANO. I know. I know it is. I actually even know where 

it is. 

[Laughter] 

23

Mr. CAPUANO. I’m now going to get 14 calls. 

The CHAIRMAN. My staff in Dighton just solved the double crisis 

of the Dighton mail boxes. 

Mr. CAPUANO. But I say these things because to me I always 

have to remind particularly my friends from Massachusetts who 

have been—we’re almost always on the same chapter of the book, 

trying to move the ball forward, for me now, at least my arguments 

and the arguments of the people up here are no longer with my 

friends in Massachusetts. It is now my arguments with my friends 

across the country who don’t necessarily see the same problems we 

have. I need help doing it and I need to grow that political support 

for it, that helps us move this ball forward. I want to thank you 

for what you’ve done today and thanks for what you do on a regular basis. 

Mr. Bluestone wants to— 

Mr. CAPUANO. Yes, Barry? 

Dr. BLUESTONE. Mr. Chairman and Congressman Capuano, first 

of all, I promise you I will get you that data. You will see what we 

found here in Massachusetts is actually true in many parts of the 

country. Family incomes are nowhere near keeping up with housing prices. 

I hope that our delegation in Massachusetts will work hard, particularly with our colleagues in Connecticut, in New York, in New 

Jersey, and in California—all with very large congressional delegations, who have exactly the same problem we share with Stamford, 

Connecticut, and the metropolitan areas of Newark to New York 

City to San Jose to San Francisco. It’s all across the country. 

Second of all, we have been focusing particularly with our great 

new Governor and with our legislature on starter homes and putting together homes for working families and middle-income families because we need those and we hope we’ll get some Federal support for that. 

Third, I can’t help but remember from growing up in Detroit, 

Michigan, when we were trying to get integrated housing and 

many people were very worried about African Americans moving 

into our neighborhoods and lowering property values. I remember 

bringing Dick Gregory, the great comedian, to Detroit and maybe 

his greatest line that night was, ‘‘Where else in America can an African-American family move in, pay $85,000 for a $35,000 home, 

and be accused of lowering property values?’’ 

[Laughter] 

Well, we have the same problem today. We have housing now 

that’s affordable and people worry that it will lower their property 

values. 

Last point, we obviously can appeal to families who already are 

homeowners to support greater development of housing for working 

families, preserving affordable housing, and rezoning their communities. We can say that we need this for their children so they don’t 

have to leave the State. We can say it in terms of housing in our 

communities where our fire fighters and our teachers and our police officers can live. But what I found from my own research is 

that in fact there’s a pure self interest issue that we can also raise. 

Those communities that do not increase their supply of housing for 

working families see their housing prices go through the roof. That 

24

benefits me as a homeowner in the short run. In the long run, 

those are the communities that are now losing population like 

Greater Boston and Massachusetts. Those are the communities 

that are losing jobs. So in the long run, Detroit would be a good 

example for reasons having to do with the auto industry. Housing 

prices actually can cause such an economic calamity that ultimately in the longer run housing prices and housing values will 

plummet. And what does that mean? It says we can now talk to 

our neighbors and say the reason why we should build this new 

housing that’s affordable is that not only will it be good for your 

kids and for the public servants in our community, but it will be 

good for you and your economic self-interest, because the alternative is a plunge in housing values if we continue to lose jobs and 

we continue to lose population. Building that new housing inoculates you against such a calamity. 

The CHAIRMAN. Thank you. Mr. Lynch. 

Mr. LYNCH. Thank you, Mr. Chairman. First of all, I want to 

thank the panel for your testimony. It’s such a huge issue affecting 

a broad spectrum of our society. It was very helpful for you to focus 

the discussion. I do want to also note that in addition to the new 

chairman and the Democratic resurgence in Congress, we also now, 

in a refreshing change, have a Governor and an Administration 

who have made a 180 degree turn in terms of where we are on 

housing policy in this State. They have not only in the Governor’s 

office, but also the legislature has finally had the ability to work 

with the Governor who is really pro-affordable housing. It is such 

a wide and—just the scope of this problem—I have folks in my 

community, in my District, that they describe affordable housing as 

well, there’s affordable affordable housing and then there’s 

unaffordable affordable housing because right now, we have such 

a wide group of people who need a little bit of help. Some people 

need a lot of help, that the programs necessarily have to address 

all that need. So you can see how criticisms are valid, that we have 

such an overlay of all these programs as Mr. Dubuque mentioned, 

having the need for five or six different programs to get a project 

done. It speaks to the complexity that is out there and we have a 

great partnership. We have a lot of people here today who are longtime advocates on behalf of affordable housing in the Commonwealth of Massachusetts and have been terrific. And I think with 

these recent changes, we have reason for some hope in addressing 

the problem. 

I do appreciate the work that’s being done on the veterans’ issues 

for veterans’ housing. I think there has to be a better way to get 

our arms around that, but I want to note that Professor Bluestone, 

you mentioned this growing affordability gap. I haven’t heard it 

mentioned much today is that we have in recent 10 years seen the 

lowest interest rates in the history of this country and even that, 

even with interest rates at 5, 5.50, 5.75 percent, we didn’t see 

that—now that by definition should make housing more affordable. 

The financing costs are drastically reduced. Even with that help, 

even with the subprime market out there pushing the envelope inadvisably so in some cases, we couldn’t reduce that affordability 

gap. So there’s need for, I think, a reassessment of how we’re apVerDate 0ct 09 2002 16:33 Aug 01, 2007 Jkt 036816 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\36816.TXT HFIN PsN: TERRIE
25

proaching this problem. We certainly welcome all of your input and 

we look forward to working with you on this problem. 

Lastly, and it’s probably beyond the scope of this committee, we 

have to figure out a way to facilitate a greater savings rate for all 

of the folks out there who are struggling to meet their basic housing costs, and there has to be some way. I’ve seen it happen at the 

Federal level with the Federal Thrift Savings Plan where there’s 

a match by the employer. I think there has to be a widening of that 

availability for people because it’s showing to be successful, encouraging savings, if we somehow plug all workers into that match program, with a match from government for low-income workers and 

perhaps a match as well from their employers and then give them 

an opportunity to draw from that 401(k) program for the purpose 

of buying a home. That may use what even the lowest paid Americans have. They have a little bit of money and they have time. And 

by using the miracle of compound interest over their working lives, 

we should raise that homeownership rate from 68 percent to 80 

percent anyway, over the next 20 years. So thank you, Mr. Chairman, and I yield back. 

The CHAIRMAN. I just want to make one point. Clearly, you have 

to get more housing for everybody, and one of the big changes 

you’re going to see as we start to build housing is, after all, housing 

is a spectrum. You build more housing, right now, most of the programs we have to help low-income people compete with other people for a relatively fixed supply of housing. It is our intention to 

increase the supply. As you do that, as you give people more housing in general, then you are adding to that housing stock overall. 

Mr. Capuano was right and we think this is a part of it. 

I thank the witnesses and I just want to assure you that these 

are some very specific suggestions. We are already working on 

some of them and you’ve given us some reassurance that the national agenda that Mr. Lynch, Mr. Capuano, and I have is also very 

much a Massachusetts agenda. And everything that you’ve talked 

about we hope, by the end of this year, to have enacted into law 

early next year in a way that will help alleviate a housing crisis 

and promote the economic development of the Commonwealth and 

we’ll be working closely with the Governor in doing that. The hearing is adjourned. 

The CHAIRMAN. If people want to leave, you leave, but—all right, 

let’s have some quiet, please. If people want to leave, you’re free 

to leave, but if you stay, you’re not free to talk. 

We are very grateful to Charles Baker who obviously has extensive experience in State government and is president of Harvard 

Pilgrim Health Care. He’s very much attuned to the employment 

impact of housing costs in Massachusetts and I will tell you that 

it was on the Saturday before the election when I was listening to 

a talk show, because I was driving in, doing nothing useful, and 

Mr. Baker was being very nice and two hosts were talking to him 

and one asked him about the problems of the Commonwealth from 

an economic standpoint, and as I recall, he said that housing affordability costs were one of the major economic problems facing 

the Commonwealth and I was struck at that time with the importance of that and that’s one of the reasons why we have taken the 

26

line of approach that we’re taking. So Mr. Baker, thank you for 

joining us. 

STATEMENT OF CHARLES D. BAKER, PRESIDENT AND CEO, 

HARVARD PILGRIM HEALTH CARE 

Mr. BAKER. Thank you very much, Chairman Frank, Congressman Capuano, and Congressman Lynch. For the record, my name 

is Charles Baker, and I’m the President and CEO of Harvard Pilgrim Health Care, which is a Massachusetts-based nonprofit health 

insurance plan, licensed to offer and support health insurance solutions to employers and individuals in Massachusetts, Maine, and 

New Hampshire. Overall, we have approximately one million members and over 800,000 members in Massachusetts. We also employ 

approximately 1,000 people in Massachusetts and have two main 

offices here, one in Wellesley, and another in Quincy. 

While the plan has been around for about 40 years, it’s no 

stranger to Massachusetts. I thought it would be worth mentioning 

that Harvard Pilgrim was recently named by both U.S. News and 

World Report and J.D. Powers as the one number health plan in 

the country for customer satisfaction. 

I appreciate the chance to speak before the committee today on 

the high cost of housing, as the CEO of a locally based employer 

and as a local official. I also happen to serve on the board of selectmen in my home town of Swanscott. I wonder about whether our 

high cost of housing is driven by local and State issues and not national ones. There’s simply no doubt that it significantly and negatively affects the capacity of this State and this region to provide 

economic opportunity to its residents. 

As a CEO of a health insurance carrier, I’ve participated in several cost of doing business meetings between State officials and 

CEOs for many important employers in Massachusetts and listened, almost dumbfounded, as the high cost of healthcare has 

been eclipsed and forgotten by the high cost of housing. There I 

was prepared to take the heat from my fellow employers for playing some small role in creating the highest healthcare costs in the 

Nation, and I was completely ignored as business leaders pondered 

on the high cost of housing as their single biggest recruitment and 

retention issue. 

I came away from these sessions and others believing that while 

our high health care costs were a problem, our high housing costs 

are a catastrophe. In fact, Harvard Pilgrim’s decision to support 

Mass. Inc.’s recent research on the Massachusetts work force was 

based, in part, on my own experience at these meetings. The research bore out what I had been experiencing and hearing which 

is that our working age population is shrinking. We aren’t holding 

on to as many college and high school graduates as we used to and 

the high cost of housing has a lot to do with it. 

To put it another way, I participated in a panel on housing costs 

about a year ago that was sponsored by a local business organization and I put this question to the audience. If any of you had to 

do it all over again, and go out now and buy your first house, how 

many of you, with the money you made in your late 20’s and early 

30’s, could have forked over the $500,000 that represents the meVerDate 0ct 09 2002 16:33 Aug 01, 2007 Jkt 036816 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 K:\DOCS\36816.TXT HFIN PsN: TERRIE
27

dian price of a house inside Route 128? The answer, not surprisingly in a room full of 500 people or so, was nobody. 

As a local elected official, I also see the difficulties created by the 

high cost of housing in this region affecting every sector of the population: young single people, all married couples, older couples, 

people on fixed incomes, you name it. It is and has been for the 

past several years the primary issue people discuss with me, with 

the cost of healthcare, believe it or not, running a distant second. 

In fact, when I was asked last fall by a radio talk show host 

about what issue I thought would dominate the voters’ decisions in 

State and local elections this past November, I said the cost of 

housing, in general, and in particular, the high property taxes that 

came with it. At the time, this was considered odd since there were 

very few statewide campaigns that were focusing on this issue. But 

after the election, several polls of focus groups indicated that the 

high cost of housing and the property taxes that came with it, had, 

in fact, been a dominant issue in the minds of the voters, even if 

it wasn’t discussed much during the campaign. 

In closing, I want to thank the committee and the chairman for 

the opportunity as both a local employer and local official to testify 

before you today on the high cost of housing and to reiterate my 

deep concerns about how this issue is affecting the ability of Massachusetts residents and businesses to stay here and prosper. 

Thank you very much. 

[The prepared statement of Mr. Baker can be found on page 48 

of the appendix.] 

The CHAIRMAN. I appreciate it. We did talk about some of the 

State and local issues, including an excessively nervous attitude on 

the part of many of our fellow citizens who have an exaggerated 

idea of what affordable housing is going to do. I suggest that we 

might want to do a kind of magical mystery tour, take some people 

on a tour of existing affordable housing, and I think many of them 

would be pleasantly surprised. I think they would have a hard time 

sometimes telling which housing is the affordable housing. 

Mr. BAKER. The mythology is definitely not the reality. 

The CHAIRMAN. I think it is helpful and that’s why I appreciate 

your being here is that we do want to explain to people that there 

is a counter balance on the other side in terms of the economic factor. As far as the Federal Government is concerned and yes, obviously that’s a problem that’s hard for us to address. Actually, when 

Jack Kemp was sent to HUD he proposed that we deny community 

development block grants to communities that would not do affordable housing. This was back in the—during the first Bush Administration. He got exactly two votes on the committee for that, me and 

Steve Bartlett. 

[Laughter] 

Steve Bartlett had been the Mayor of Dallas; Steve and I were 

the only votes. We couldn’t even hold Henry B. Gonzales on that 

one so I’m afraid we’re not likely to be much help. 

I do think, though, that there is some role in the Federal Government in helping to construct affordable housing, particularly mixed 

use housing. The tax-supported housing has been very helpful and 

you know from your days in the state finances that Massachusetts 

housing can be a very flexible issue. So one of the things we plan 

28

to do is to sort of increase the tools that would be available not just 

for the very low-end stuff, but across the board. It is, after all, a 

kind of a spectrum. 

But let me just, because I think this is very important for people, 

and we have Democrats here, we have the senior staffer for the minority in attendance. How does it work? You try to get people to 

come here and they won’t come? Does it increase your cost for pay? 

What’s the actual mechanism by which the high housing costs hurt 

us economically? 

Mr. BAKER. It’s twofold. First of all, it’s hard to get people to 

come here and there’s actually—there are many employers now 

who started to consider a whole variety of sort of employer-assisted 

housing arrangements and programs, some of which involve leasing 

housing, some of which involve actually buying units and making 

them available to people, sort of the transition for people who come 

here from elsewhere. But there’s no question that it affects people’s 

ability to attract talent. And the other issue is that it makes it 

harder to hold onto people. In my own experience as an employer, 

I’ve lost a number of terrific people to other parts of the country 

who left primarily because they found a quote ‘‘better deal’’ somewhere else. 

And I think the other issue that plays into this is that we are 

for all intents and purposes competing nationally in many of the 

knowledge-based industries that Massachusetts sort of builds its 

foundation on, life sciences, being as good an example as any, biotechnology, pharma, education. We are in many ways part of a very 

nationally-distributed sector of the economy and whether it’s financial services, education, life sciences, academic medicine, the people 

that we’re seeking to bring here, to keep here, are very much in 

demand because they have terrific skill sets and they add tremendous vitality, both economically, culturally— 

The CHAIRMAN. I heard most of what you said. When you said 

leasing housing, buying housing, that’s not something you ordinarily choose to do, if you’re not in the housing business. 

Mr. BAKER. Correct. 

The CHAIRMAN. So to the extent that you do deal with that, is 

that part of the cost of doing business? 

Mr. BAKER. Yes, definitely. 

The CHAIRMAN. Let me say one of the things, we’ll get your comment on this, there are three entities that help bring down the cost 

of homeownership at the upper middle level, not at the very top, 

or the median level. One is FHA which insures mortgages. The others are Fannie Mae and Freddie Mac which buy mortgages. Now 

our problem has been that all three of those operate under a national uniform dollar limit and if you go above the price which I 

think is now about $400,000 you’re ineligible. The problem we have 

with that is that well, car prices are pretty much the same across 

the country. House prices, by the lack of mobility are not a uniform 

price. We don’t have a uniform price for Section 8 rents. We don’t 

give uniform costs of living allowances. So one of the things we’re 

trying to do, the Massachusetts delegation, is to raise the limit for 

the FHA, Fannie Mae, and Freddie Mac to a median house price, 

rather than a dollar limit. Is that something that would make 

sense? 

29

Mr. BAKER. Here that would be $500,000, as opposed to $400,000, which is the number that you mentioned. 

The CHAIRMAN. But it would be helpful with the level of people 

we’re talking about. 

Mr. BAKER. Absolutely. 

The CHAIRMAN. They said well, it’s too high and our answer is 

yes, well, we don’t want FHA and Fannie and Freddie financing 

luxury housing and we have a limit that keeps them from doing 

luxury housing in Nebraska and luxury housing in Mississippi and 

luxury housing in Massachusetts, but it also keeps us from doing 

median housing in Massachusetts. 

One other point which you—and we had some conversation. One 

of the arguments we had to counter that was well, but you live in 

a high wage area as well as a high housing cost area and one argument we had was that the high housing costs are somewhat neutralized by our higher wages. 

Mr. BAKER. I guess what I would say about that is that is sort 

of true, but as an employer who has watched what happens to the 

sort of the average income of the people who work for Harvard Pilgrim over the course of the past decade or so, and I look at what 

has happened to the cost of the housing that people have to live 

in and acquire, there’s no question the housing prices have gone 

up. Pick a number, two, three, four times faster than—maybe 

more. Actually, probably higher given the actual cash wages that 

people get paid than the cost of, than the increase in their income. 

There’s no question about that. 

The CHAIRMAN. Mr. Lynch? 

Mr. LYNCH. First of all, thank you for coming today. One thing 

I wanted to sort of hammer away at is that we’ve watched this—

the situation is quite different compared to Nebraska or Texas. We 

are asked to compete for the same talent and I’ve witnessed from 

afar the Governor’s struggle trying to attract good development 

people to his team, to deal with the housing issues and the development issues in Massachusetts and one of the people he was trying 

to attract also had a competing offer from Daytona Beach, Florida, 

and I watched as they were putting offers on the table to lure this 

person away from Governor Patrick onto their team and it’s astounding what they could give him for the same price and the same 

salary in comparison to what we could offer for the salaries that 

we’re offering. 

It was just a—I think it was a perfect example of what we’re 

dealing with, especially in industries that are so central to the economic health of our State, the high tech, bio tech, medical education institutions, financial services, all of that, we’re being disadvantaged by the current outlay in terms of what we can get to 

help the people who find themselves in a position where they can’t 

afford decent housing here to remain in Massachusetts. So I appreciate your weighing in with the credibility that you have as someone who attracts employees and keep them here in Massachusetts 

and I look forward to working with you on this issue as we move 

forward. 

Mr. BAKER. As I said, as a guy in the healthcare sector, I expect 

to take it on the chin pretty much every day of the week over the 

high cost of doing business with regard to that and I’ve been astonVerDate 0ct 09 2002 16:33 Aug 01, 2007 Jkt 036816 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\36816.TXT HFIN PsN: TERRIE
30

ished by how much more people on the employer’s side talk about 

the high cost of housing. 

The CHAIRMAN. Well, it’s our goal to return you to your rightful 

place as the number one problem in America, and the hearing is 

adjourned. Thank you. 

[Laughter] 

[Whereupon, at 11:44 a.m., the hearing was adjourned.] 

(31)

A P P E N D I X

April 4, 2007

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