WASHINGTON - U.S. Senators Amy Klobuchar (D-MN) and Mike Lee (R-UT), Chairwoman and Ranking Member of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, held a hearing titled, “Examining Competition and Consumer Rights in Housing Markets.”
“More and more of the cost of renting is hidden from view through the proliferation of junk fees. As a result, renters struggle to take advantage of price competition because the true costs of housing are not transparent,” said Klobuchar.
“We now need to examine whether antitrust and consumer protection laws need to be updated to eliminate predatory junk fees from rental markets and [to] root out anti-competitive tools that facilitate price fixing instead of competition, and ensure the market is more responsive to the increased demand for housing,” Klobuchar continued.
A rough transcript of Klobuchar’s full opening statement is available below.
This is a very important hearing, and I'm actually really excited to hear from our witnesses. I would like to thank Ranking Member Lee and his staff for working with us to plan this hearing.
So, everyone looks back fondly, maybe, at the first place they ever lived. For me, in 1960, my parents wallpapered the last room in their house on a dirt road. 1315 Oakview Lane in Plymouth, Minnesota. I still remember that my whole time growing up, we lived in the same house. I had no dishwasher to the end, but it had exposed wood ceilings, and my grandma, who grew up on the Iron Range of Minnesota, would come down to the cities to see the house, and she would, every single time, say to my mom and dad, when are you going to finish the ceiling? And the brightly colored appliances, butter yellow colored oven, that was all part of our lives.
My dad paid for that house with a GI loan. And today, I think we all know that houses are not available to many young families in the same way that my parents could afford them on a teacher's salary and a starting newspaper reporter's salary.
In 1960, the median home value was $11,900. That is about $123,000 in today's dollars, and this was, of course, in the midst of the post-war housing boom. Today, the median single-family home costs more than $400,000. If you look at it across America, this is an increase of more than 500% since 1980 and more than 40% since 2020. I think we know why this is, affordable options are too few. Freddie Mac estimates that we need to build 3.8 million new homes to make up for the housing deficit. And according to the National Low Income Housing Coalition, the affordable housing gap for those with low incomes is more than 7.3 million rental units.
We know rents have always gone up, jumping more than 12% since August of 22 alone. And in some 20 million households, they spend more than half of their income on housing.
So what do we do? The affordable housing crisis is a result of complex, long-standing issues, many of which are the focus of our colleagues over in the Banking, Housing, and Urban Affairs Committee chaired by Senator Sherrod Brown and Tina Smith, who chairs the Subcommittee on Housing.. We know there's issues of workforce to build housing, there's issues of the costs of building housing and the component parts. But today, we're going to focus on the role that competition policy changes to help address these market failures.
So some of the issues I'll put on the table that are relevant to our committee.
First, renters face real challenges to compare and contrast prices. More and more of the cost of renting is hidden from view through the proliferation of junk fees. As a result, renters struggle to take advantage of price competition because the true costs of housing are not transparent.
Second, housing is an area in which we have seen the widespread use of algorithmic pricing tools designed to raise prices even at the expense of higher vacancy rates. A growing number of companies like RealPage and Yardi offer services that collect competitively sensitive pricing information from competing property management committees, feed that data through sophisticated algorithms, and recommend unit-by-unit prices so landlords can charge a certain rent. Landlords have figured out that it is better for them and their bottom lines to use these products to price units high so that some of them actually sit empty, but it is easier to have them priced high for them in the long term. And so, I believe landlords should be competing on price. And I don't think you see that happening when you have these algorithm-based games going on.
Third, families are being boxed out of the market for single-family homes by institutional investors. There've been wide ranging news reports about this, where institutional investors will just buy up homes in a neighborhood, making them out of reach, especially for first-time homebuyers. The institutional buyers are often backed by large private equity funds, seeking reliable revenues through rental income instead of allowing families to achieve the dream of home ownership. The presence of these institutional actors drives up home prices because they can make all cash offers and wave inspections to outbid everyday people. And unlike Mom and Pop landlords, these absentee owners are more likely to charge junk fees, evict families, and increase instability in our communities.
Finally, this is all made worse by the fact that we are not building enough affordable housing. The number of starter homes being built has plummeted since the 2008 financial crisis, which put hundreds of thousands of small builders out of business. This has left us reliant on fewer and fewer large corporate home builders that dominate home building in major metropolitan areas. The builders tend to focus on high-end homes rather than starter homes. The consolidation in the homebuilding market has been shown to reduce the number of new homes built by more than 100,000 houses every single year.
So while we recognize that competition policy is no silver bullet, and I will emphasize that as we talk about some of the other issues at hand, while it is no silver bullet for solving our affordable housing crisis, we shouldn't dismiss its importance. We should at least explore it and look at what possible solutions we can agree on. The antitrust laws were actually used in the 1960s to make sure that there was fairness in the sales of homes. And we now need to examine whether antitrust and consumer protection laws need to be updated to eliminate predatory junk fees from rental markets, root out anti-competitive tools that facilitate price fixing instead of competition, and ensure the market is more responsive to the increased demand for housing.
I look forward to exploring these issues with my colleagues and our esteemed witnesses today and now I turn it over to Senator Lee.