Segment 1 Of 3     Next Hearing Segment(2)

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House of Representatives,
Subcommittee on Housing and Community Opportunity,
Committee on Banking and Financial Services,
Washington, DC.
  The subcommittee met, pursuant to call, at 3:00 p.m., in room 2128, Rayburn House Office Building, Hon. Rick Lazio [chairman of the subcommittee] presiding.
  Present: Chairman Lazio, Representatives Bereuter, Castle, Ney, Kelly, Cook, Sessions, LaFalce, Frank, and Jackson.
  Chairman LAZIO. The hearing shall come to order. I want to welcome everyone to the first subcommittee hearing of the term and the year. We have a very active agenda that we are looking forward to, including revisiting some of the policy initiatives that were brought forth last year. I want to say at the outset that I am very pleased with the Members who have asked or chosen to join the subcommittee and in particular I want to acknowledge two of the Members who are here today, my Vice Chairman from last year and someone who was extraordinarily helpful on a number of issues, particularly issues involving rural housing, as well as Native American housing, Congressman Bereuter. Thank you very much for agreeing to serve on the subcommittee. Congressman Jackson, it is a great honor and pleasure to have you on the subcommittee as well. I am looking forward to working closely with you.
  We have had the great pleasure of being able to move one of the most important pieces of legislation from this subcommittee to the House Floor, and winning approval on a bipartisan basis. I am hopeful that we can work together again and build on some of the other things that we were able to do last session, including the first major funding for Habitat for Humanity and the Home Equity Conversion Mortgage Program.
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  On January 7, 1997, I introduced H.R. 2, the Housing Opportunity and Responsibility Act of 1997. H.R. 2 is a bill designed to reform our public housing system so that we can begin to create and foster communities of opportunity instead of maintaining isolated communities of despair.
  House Resolution 2 continues a process that began in the 104th Congress with the introduction of H.R. 2406, the United States Housing Act of 1996. H.R. 2406, would have reformed this Nation's public housing system and begun the process of renewing America's neighborhoods. While it passed the House with overwhelming bipartisan support we ran out of time while the Senate and House staff tried to iron out many of the technical issues between the various versions in conference. That was unfortunate.
  Today's hearing is intended to be a discussion of general principles of personal responsibility, accountability, mutuality of obligation and the importance of recognizing the unique nature and dynamics of individual neighborhoods and communities. Recognition of these principles and their importance should govern how we in Washington design Federal housing and community development programs. It is these principles I believe that are at the heart of H.R. 2.
  Let there be no doubt, the current system is obsolete and in many ways irrational. Public housing residents remain locked in poverty by ineffective policies designed for a different America. We must realize that the problem of our communities goes beyond housing and the answer is not to spend more money on these same programs, although money is of some importance. What we face is greater than just a real estate problem and what we must change is the policies that have led to the current situation.
  Our public housing communities are too often wracked by crime, drugs, unemployment and overall lack of social structure that is commonly referred to nowadays by the phrase ''breakdown of civil society.'' Others have deemed this the undermining of social capital, and while I believe that irrational Federal policies have contributed to many of the problems we face today, I do not believe that simply eradicating programs ends these problems.
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  The Federal Government may play an important role in addressing these issues. I believe that our efforts should be concentrated on helping to create, foster and encourage the formation of social capital in our neighborhoods; the people who fight hard to maintain a community, the small non-profit groups involved at the local level to better people's lives; the individuals who go to work to keep their families together and serve as role models for the neighborhood's children. This is the social capital that is at the foundation and is an indispensable aspect of healthy neighborhoods.
  I believe we should allow local communities to fashion the solutions to the problems they face and have the Federal Government support these efforts instead of impeding them. I also believe that well performing public housing authorities, and the vast majority of housing authorities are performing well, should be given greater latitude in how they administer their programs. And I firmly believe that where the system has failed, as it has in too many of our chronically troubled housing authorities, we are wrong when we do not move aggressively to end the status quo and tolerate the failure.
  There are a number of Members on the subcommittee on both sides of the aisle who wish to take strong action on these matters and I look forward to their input in shaping this legislation. I also would like to take the opportunity to let the subcommittee Members know that we will have two more hearings on H.R. 2 on March 6 and March 11. At these hearings we will hear the Administration's views as well as the views of various groups with interest in this legislation.
  I want to thank everyone for being here today. I think we have an outstanding panel that will give us some broad perspective on the issues that we are facing, and be able to relate their thoughts and writings to H.R. 2. I want to finally recognize that we have been joined by several other Members, all of whom have been, and I am sure will continue to be, instrumental in moving housing policies forward.
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  That being said, Mr. Jackson.

  [The prepared statement of Hon. Rick Lazio can be found on page 144 in the appendix.]

  Mr. JACKSON. Thank you, Mr. Chairman. Chairman Lazio, I want to thank you for the opportunity to join you today and welcome our distinguished panel as we address the critical state of affordable housing and the crisis that entails therein in our Nation. As a relatively new Member of this subcommittee, I thank you for your leadership in scheduling this forum so early in the legislative session.
  This issue presents challenging questions which must be addressed in an honest and serious fashion as we seek to revitalize neighborhoods and communities.
  Mr. Lazio, I commend you for highlighting the successful work of non-profit organizations in the area of community development and community revitalization. I am interested to hear the proposals and insights of the panelists who are experienced in their fields.
  In Chicago, in the Second Congressional District, I have had the pleasure of working with a number of non-profit organizations and financial institutions who play an integral role in public/private partnerships that are so successful enabling renters to become homeowners and landlords themselves. I am convinced that the non-profit victories alone do not negate the need for strong Federal housing policy to coordinate these successful, yet unique, efforts taking place across the country. I am of the opinion that the magnitude of the affordable and adequate housing crisis in our Nation calls for a solution of the same magnitude.
  As of 1993, 5.3 million American households were characterized as worst case housing needs. That is to say that 5.3 million households pay over 50 percent of their income for rent or live in severely inadequate housing. Three-fourths of these are concentrated at the lowest rungs of the economic ladder. One million are headed by the elderly and people with disabilities and close to two million are working poor families, many working poor with children.
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  In my hometown of Chicago, 20 percent of all renters live under this worst case scenario. Over one-half house people of color and one-third are families with children. The Chicago Housing Authority is the Nation's third largest housing agency in the Nation behind New York and Puerto Rico.
  Mr. Chairman, as you know, these have been on the troubled housing list since 1979. Of the poorest 15 communities in the Nation, 11 are in Chicago's Housing Authority, their public housing communities. One-half of all CHA residents are children. Seventy percent of CHA residents currently rely on public assistance as compared to New York's approximately 30 percent.
  We can see the handwriting on the wall. With the impending effects of the Welfare Reform Bill, and calls for transitions from welfare to work in areas devoid of jobs, we must ensure Federal housing policy is directed at safe, secure, adequate and affordable housing as its sole objective.
  Mr. Chairman, I would like to include in the record a report to Congress on the ''Worst Case Housing Needs: Rental Housing Assistance at a Crossroads,'' which was published in March 1996 by HUD.
  The Nation is in the midst of a housing crisis. It is a crisis often hidden behind doors or hidden in urban centers, but that does not give us license to ignore the crisis. 5.3 million people, many of whom have children or elderly, or are disabled, live in severe housing needs. They pay over 50 percent of their monthly income to rent. They live in deplorable conditions. HUD's report lays out these needs in greater detail and I truly believe that before the subcommittee approves any policy directions, we have a duty to understand the housing needs of this Nation.
  Once again, Mr. Chairman, for the opportunity, thank you for the opportunity to speak. I look forward to hearing from our panel today as we seek to address the issue of critical importance to American families.
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  [The material referred to can be found on page 176 in the appendix.]

  Chairman LAZIO. I thank the gentleman. The gentleman has made a motion to include the statement for the record and without objection, so ordered.
  Just for the record, I just wanted to clarify that the New York City Housing Authority is not on the troubled list. I may not have heard you correctly. Thank you very much.
  Mr. Bereuter.
  Mr. BEREUTER. Thank you, Mr. Chairman. It is a pleasure to see you chairing this subcommittee once again, and thank you for the kind words.
  I look forward to working with you on a whole range of housing issues, and I do think that perhaps the political winds are right so that the effort of the Chairman and this subcommittee on public housing reform might come to fruition and the passing of legislation presented to the President for signature. And that will be my commitment to you, and I think the Members will work cooperatively in trying to put together the best possible effort to send to the Senate. Thank you.
  Chairman LAZIO. My friend, Mr. LaFalce. It is a pleasure to have you on the subcommittee.
  Mr. LAFALCE. Thank you very much, Mr. Chairman. It is a pleasure for me to return to the housing subcommittee. I enjoyed my deliberations on the subcommittee over the past several decades, but it has been a few years since I served on the subcommittee that had to deal with these issues before the full committee. And I look forward to working with you, Mr. Chairman and Mr. Kennedy, our Ranking Member, on these issues.
  I reviewed the proposed legislation that is the focus of today's hearing and it includes a number of proposals to deregulate public housing and provide incentives for improved management that public housing agencies support and have sought for many years. However, the bill includes some proposals about which I have some serious questions and concerns.
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  For example, proposals that target public housing assistance that provide a choice in rent payments could have the opposite effect, leading to a decrease in assistance to very low-income families and segregating the very poor in the least desirable housing projects. So we need to be careful about issues such as that.
  The repeal of the 1937 Housing Act strikes me as an unnecessary complication and a requirement that public housing residents sign self-sufficiency agreements appears to impose a tremendous administrative and social welfare burden on local housing agencies, and I am wondering what the prospect of the tangible benefits are.
  But I will keep an open mind on these questions. I say ''keep an open mind'' on other questions as we proceed with the hearings. And I look forward to the testimony of our witnesses and I think you have some excellent witnesses before us today, Mr. Chairman. But I think we could have had an even better hearing if perhaps we had just a bit more balance. Therefore, at the very least, I would like to include in the hearing record an article included in a NARO and American Public Welfare Association compendium of papers from a conference on family self-sufficiency. The article is authored by Robert Greenstein, Director of the Center on Budget and Policy Priorities. It is entitled: ''We Need Safety Nets and Ladders Both: Issues Raised by the Conference.''
  This article says in part that self-sufficiency, and I would imply personal responsibility and accountability, is a very complicated subject. It doesn't lend itself to simple solutions. And more resources and involvement, not less, must be provided Federally, as well as by States, localities and community organizations to meet the affordable housing crisis and to further self-sufficiency. They are inseparable. So I would ask that this article be included in the record.

  [The material referred to can be found on page 247 in the appendix.]

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  Chairman LAZIO. Without objection, so ordered.
  Before I move on, Ms. Kelly and the gentleman from New York prompted my attention to the fact that Dr. Etzioni, who was going to testify, was not able to attend today because of a conflict in his teaching schedule and has asked that his statement be submitted for the record. I move that his statement be included in the record, without objection. So ordered.
  I ask also unanimous consent to submit an editorial written by William Raspberry from The Washington Post, February 14th, ''Off Welfare: The Mental Migration,'' which I think states the point perfectly. Without objection, so ordered.
  I turn to the gentlewoman from New York who has been a great assistance to this subcommittee in helping to form housing policy. Ms. Kelly.

  [The material referred to can be found on page 175 in the appendix.]

  Mrs. KELLY. Thank you, Mr. Chairman. In the interest of time I have no opening statement.
  Chairman LAZIO. Thank you. One of our new Members, but not at all the least of our Members, Mr. Cook, we are so happy to have you on board. Do you wish to make a statement?
  Mr. COOK. I thank you very much, Mr. Chairman. I am delighted to be here, and particularly to be on this subcommittee and finding out ways, and certainly the things that you are proposing look like ways, to reform housing. Also that we can do more for the people of this country in a responsible manner. And I am delighted to take part in this.
  Chairman LAZIO. Thank you very much. Mr. Ney, the Vice Chairman of the subcommittee.
  Mr. NEY. Thank you, Mr. Chairman. I appreciate it. I don't have an opening statement, but I would say it is an important subject and I thank you for your position in the past and the fairness and evenhandedness you have always shown all the subjects that you have worked on.
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  Chairman LAZIO. Another gentleman who has graced the subcommittee agreeing to serve, Mr. Sessions, we welcome you to the subcommittee.
  Mr. SESSIONS. Thank you very much. I have no opening statement. I would like to state that I am in support of what you are doing in this committee to make sure that we look at current Federal housing policy. I believe that it creates disincentives to work and encourages the breakup of families. And results in the undue concentration of poverty in certain areas. And I am very hopeful that this subcommittee will come up with good recommendations to address those problems before we simply agree with the President to increase the amount of funding that he is requesting for the fiscal year 1998 budget. So I am very delighted to be here, and appreciate you allowing me to come in and out. I have a bunch of people in my office. I am trying to get my work done today.
  Chairman LAZIO. I understand. Thank you for being here. Finally the gentleman from Delaware. It is wonderful to have my friend back on the panel. Thank you for agreeing to serve on this subcommittee.
  Mr. CASTLE. I have no opening statement at all, Mr. Lazio, but I am truly interested in the work that you are trying to do with this legislation and look forward to the witnesses.
  Chairman LAZIO. Thank you very much, Mr. Castle.
  I also want to acknowledge that Ranking Member, Mr. Kennedy, was not able to be here today because of a conflict, but we have had a wonderful working relationship and I look forward to that in the future. I am sure his support will be indispensable in moving some of these initiatives along.
  We will begin with Dr. Ira Harkavy. I think the Members should have the biographical background for each of the panelists.
  Dr. Harkavy is Director of the University of Pennsylvania's Center for Community Partnerships, which collaborates with community development groups on various initiatives. The center, which was established in 1992, was founded to improve coordination and collaboration of all university community service programs and encourage new and creative initiatives linking the university and the community.
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  Dr. Harkavy is a nationally recognized proponent of urban universities' commitments to grass roots change in surrounding neighborhoods. He has been arguing for years that, ''Universities cannot afford to remain shores of affluence, self-importance and horticultural beauty at the edge of inland seas of squalor, violence and despair.''
  Dr. Harkavy.


  Dr. HARKAVY. Thank you very much. I deeply appreciate your invitation to appear before you to discuss the issue of personal responsibility and accountability in building and sustaining communities. There is, in my judgment, no more pressing issue for this Nation's future than creating and sustaining hard working, cohesive and caring communities.
  The great American pragmatic philosopher John Dewey noted in 1917 that the existence of ''neighborly community'' is indispensable for a well functioning democratic society. In that same book, ''The Public and Its Problems,'' he noted that creating genuinely democratic community is, and I quote him, '' the first instance an intellectual problem.''
  Now, 70 years later, we still really do not know how to create and sustain the face to face, caring and responsible community that Dewey described. And the fact that we do not know how to do that indicates why the work of this subcommittee is so significant.
  Given a world of intense and intensifying global competition, and of continuous and increasingly rapid change, and given the human suffering found in our deteriorating urban communities, the need to solve the Dewey problem has never been more pressing.
  It has been raised often that the development of cyberspace means that we do not need face to face community. In today's New York Times, there is a piece that I recommend to Members of the subcommittee on ''Real Space Meetings Fill in the Cyberspace Gaps.'' Cyberspace has made it even more significant that face to face communies exist. At the meeting of the American Association for the Advancement of Science, described in this article, the leading scientists emphasize the necessity for face to face meetings for a good society.
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  What I would like to do is to provide some general ideas that might be useful to the subcommittee's very important work. I will focus particularly on the need for an effective, compassionate, ''democratic devolution revolution.'' Or as my colleague, Lee Benson and I wrote in 1991, ''We need to progress beyond the welfare state to democratic, caring, cohesive communities.''
  As both political parties recognize, there has been a broad rejection of big, impersonal, distant government. And simultaneously there are strong movements throughout the United States of corporations, unions, schools, to shift from big bureaucracy toward flexibile, democratic, human sized structures that foster individual initiative and action. A similar shift to small scale, participatory, effective structures is needed at every level of government.
  New and creative thinking and doing is required so that government can serve as a catalyst that sparks creative innovation throughout society. Both tired welfare state models and abdication to market forces will hinder, rather than spark, innovations, leading to further disenchantment, disillusion and despair among large sectors of American society.
  Now, it is certainly easier to call for an effective ''democratic devolution revolution'' than to put it in practice. Not to be critical of my colleagues in academia, we are very good at must-isms and should-isms. We say this ''must'' happen and ''should'' happen. So let me at least try to suggest some approaches for the subcommittee to consider.
  First, new and creative thinking necessarily means practicing new forms of interaction among Federal, State, and local government, as well as among agencies at each level of government. The vertical and horizontal integration of government is particularly crucial if we are to solve the multi-sided problems besetting our cities. The Chairman noted that, in fact, these problems are not just housing problems. They require coordinated action among all Federal agencies, among all State agencies and local agencies, and an integration from the Federal through the local level.
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  Second, government integration, however, is insufficient to produce substantive change. For a democratic devolution revolution to succeed, new forms of interaction are also needed among the public, profit, and not for profit sectors. Government needs to function as a collaborating partner, facilitating cooperation among all sectors of society by supporting and strengthening individuals, families, and communities.
  And I want to talk about that for a moment, to present the above in slightly different fashion. In this approach, government serves as a catalyst providing funds to create stable, ongoing partnerships. Government, however, is a second tier service deliverer, with universities, local community organizations, unions, churches, and other voluntary organizations, community members, school children and their parents, functioning as the core partners that help enable society to go beyond the debilitating clientism of the welfare state.
  Government guarantees aid and significantly finances welfare services, but local, personalized, caring delivery of services occurs through the third sector: private, not for profit voluntary organizations, and the fourth sector: personal, family, kinship and neighborhoods and friends. These are the sectors of society to deliver services.
  Primary delivery, then, is not a government responsibility, but government does have macro-level fiscal responsibilities, including the provision of funds. I think that is absolutely crucial to make my position clear in this testimony. The government as a second tier deliverer, but with a fundamental fiscal responsibility, a macro-level fiscal responsibility, including providing of funds.
  Third, a democratic devolution revolution would also involve a strategy that emphasizes the development of neighborly communities. Building on Dewey's work, it conceptualizes neighborly community as crucial to a genuinely democratic society. As such, it emphasizes adapting local institutions, universities, hospitals, churches, public schools, community centers, civic organizations, to the needs of local communities. Institutions are the vehicles for enabling people to have real power through powerful local communities.
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  We need to counterpose a Deweyan, true American pragmatist vision of democratic local communities comprised of caring, compassionate, hard working, self-reliant and able individuals, and we need to counterpose it to both a statist vision and a vision of atomistic, egoistic individuals engaged in a battle of each against all.
  Vehicles and agencies are needed to enable the government to function effectively as a catalyst for realizing the Deweyan vision I have sketched above. And by way of illustration, I would like to note that HUD's Office of University Partnerships represents one such vehicle. It is a harbinger of how government in general can, and should, and must work in the future. The office serves as a catalyst for tapping the resources of a key institution, the university, that, in turn, can serve as an anchor, catalyst, and partner for local change and improvement in the quality of life in our cities and communities. Indeed, there may well be no other institution that can play so central a role in moving the democratic devolution revolution forward as the American university.
  And I want to make something clear here. That is not generally how the universities have functioned since the 1920's. But they can, should, and must do so now for their own intellectual interests and their own institutional interests.
  Higher eds., quite simply have both the interest and ability to make a profound difference. Universities have compelling reasons, including enlightening self-interest, to help improve America's communities. They are among the only institutions rooted in the American city. They have huge physical plants. They cannot move, indeed the community's fate is their fate.
  Moreover, working to solve the problems of the university's locality provides students and faculty members with an outstanding opportunity for learning, service, and advancing knowledge. In other words, faculty and students will do better intellectual work. One could sketch the work at Columbia University at the turn of the century under Seth Lowe, the work of John Dewey and his colleagues at the University of Chicago, the work of the Wharton School at the turn of the century with W.E.B. DuBois and Simon Patton, the work at the University of Wisconsin during Robert La Folliette's governorship, to illustrate the positive results when intellectual work is linked to improving our society and its communities.
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  To go further, universities also have enormous resources, human, economic, and other kinds, which can be utilized, creatively, to overcome economic and community disintegration. I would like to merely note that universities are often the largest employers in many of our cities.
  In the City of Philadelphia, the largest private employer is the University of Pennsylvania. The next largest is Temple University, and the next largest is Jefferson University. Other than the Federal Government in this City of Washington, DC., the largest employers are higher eds. and
medical centers. This pattern tends to be the case in many of the largest cities in this society.
  To illustrate this point, just think of the possible impacts of university-assisted, comprehensive, integrated, educationally-based service. What I mean by that is service provided in an educational way through local schools. The work we do in West Philadelphia, which is the community of which the University of Pennsylvania is a part, is to work through local schools. With the community, we work to create university-assisted community schools in which service is provided and delivered in the locality. Young people in these communities learn by providing service and doing, as do university, faculty and students. Penn faculty and students connect their academic, as well as volunteer work, to improving and working with the community. They learn with and from the community.
  Just think of that model and what could happen. It wouldn't be co-location of services one on top of another, but an integration of services through the educational process.
  Dental, medical, social work, education and nursing students would learn as they serve. And learn as they do. Public school students in a similar fashion would have their education connected to real world problem solving activities that provide service to other students and community members. I could describe in detail projects in which major nutrition efforts are being undertaken by linking Penn's anthropology department to the nutritional education of young people. The school students teach adults nutrition and middle school students run a school store that provides healthy fruits and vegetables to the community. Through these activities, the school children's academic performance has improved.
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  And through university-assisted community schools, adults in the community would have locally-based opportunity for job training, skills enhancement and ongoing education.
  The enormous untapped resources of the community would be tapped as individual members of the community would be able to function as both the recipients and local deliverers of service. And I think that is the crucial point. Members of the community not just receiving services, but members of communities being deliverers of service. This community connected approach would truly allow us to effectively and compassionately end welfare as we know it.
  And let me go further. It would allow us, I think, to effectively, and compassionately end the welfare state as we know it. This does not, however, remotely mean that government abdicates its Constitutional responsibility ''To to provide for the general welfare.'' Again, it changes the nature of service delivery and how it is done. It does not mean that government abdicates, the Federal Government in particular, its responsibility to provide for the general welfare.
  The above ideas, the ideas I just presented, are designed to illustrate how government might function as a compassionate catalyst, stimulating effective local partnerships, helping America to fulfill its promise as a fair, decent, and just society for all of its citizens.
  I want to thank you all for the opportunity to be here and appear before the subcommittee, and I would be pleased to answer any questions that any of the Members might have. Thank you very much.

  [The prepared statement of Dr. Harkavy can be found on page 153 in the appendix.]

  Chairman LAZIO. Thank you very much, Doctor. We will reserve questions until the panel has made their statements. I just note for the record that all of the witnesses' statements will be submitted for the record in their complete form so if you choose to summarize them, that will allow more time for questions.
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  Chairman LAZIO. The next panelist is Mr. David Kuo, who is the Executive Director of The American Compass, a Washington, DC. area group promoting small, faith-based social service organizations. In his words, Mr. Kuo, ''. . . stepped out of the policy world and into the realm of social service delivery.'' He is the author of a recent Washington Post opinion article, ''No More Excuses Now, Conservatives Like Me Need To Do Something for the Poor.'' Thank you for being here.


  Mr. KUO. Thank you, Mr. Chairman. There are two things that I want to say. First, I am anything but an expert on housing matters. I am barely conversant on the technicalities of it. The totality of my experience in public housing has been tours of public housing where I have seen things that I have also seen in Third World countries. Things that are across the river here in Anacostia have shocked me and were one of the catalysts for a small vocational change on my part.
  The second thing I would like to say is that in reading through the bill's summary I have been impressed by the thoughtfulness and ingenuity within it. What excites me most about the bill is its unique amalgamation of diverse principles of what people have come to call ''effective compassion.'' That idea is that history and experience both suggest that efforts that are at once challenging, that make moral demands, physical demands, occasionally, of both givers and recipients, work. Efforts that are personal, in which people are involved in people's lives and people are given the opportunity to prove their worth and the opportunity to move beyond even their own horizons, work. And organizations that have a spiritual basis in some sort or another that empower people, those are principles that work. And this bill seems to embody those principles.
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  That is basically the extent of my policy analysis of the bill. What I would like to spend a few minutes talking about are some of the observations that I have been able to make in the past year or so as I have moved, sort of, from a policy work world to more of a charitable social sector world.
  One of the reasons I did it is because in working in the policy and political worlds, I spent a lot of time writing about, talking about, and working on, legislation to come up with ways to change the welfare state. To privatize. To move it out of the hands of government and into the hands of the private sector.
  I had a fairly stark world view in it. I thought everything having to do with government was probably bad and everything having to do with the private sector was probably good. I overstate here a little bit, but I think you get the point.
  One of the things I realized in looking at communities from a different perspective is the degree to which American social policy has already been privatized. It is, in fact, almost impossible to find a major social problem since World War II that isn't about 25 percent privatized, and this is true across the board whether you think in terms of welfare or job training or things along those lines.
  This is at once good news and bad news. It is good news because it shows that the private sector has been involved in what has been created. It is bad news because it shows that the private sector has been involved in what has been created.
  And for me the reality hit home, that what we need to do and I speak here as a conservative who has advocated changing from government to the private sector, is apply the same sort of rigor and analysis and criticism to the private sector that we have to the government sector, because a question of community renewal is not simply a question of changing the government's role, it is a question of changing the private sector's role as well.
  I am convinced that one of the main obstacles to community restoration, to responsibility, to building civil renewal is the private sector itself. For today within the private sector there exists a ''poverty elite'' for the lack of a better term, which is as entrenched as any government program ever was. We as conservatives need to be at the leading edge of providing alternatives to that.
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  When I speak of the ''elite,'' I don't speak in any grand or conspiratorial terms. I am talking about people who have wonderful motivation and have been successful in raising large sums of money. We know many of the organizations by name. They advertise and they get a lot of government money. Their lobbyists are frequently here on Capitol Hill. But the problem is that their approach to vexing social problems like homelessness and poverty and government dependency are no different from the governmental mentality of the past several generations. They tend to be bureaucratic. They tend to be centralized and hierarchal. They tend to lack the challenging spiritual principles that history and experience have proven to be defining characteristics of programs and groups that really do work.
  They stand in sharp contrast to some of the best of civil society. While my experience with housing related private organizations is small, there are thousands of groups, and tens of thousands of individuals, who are literally transforming lives across America in miraculous ways. Their names are not as familiar to us as things like Red Cross, United Way or Catholic Charities, but what they are doing is nothing short of miraculous.
  The question in my mind that we need to address is: ''How do we highlight, how do we find, how do we encourage those small organizations that we haven't heard of to grow, to expand, to replicate?'' How do we take the principles that I talked about earlier and apply those principles to programs and organizations that are already in place? How do we change the course of giving in some ways?
  A couple of thoughts on how that might occur. First, a few words on government. Again, this doesn't directly apply to housing necessarily, but is it possible to put in place standards or programs or requirements that demand results? If it is a drug and alcohol program, is it possible to have the requirement be that it have a 50- or 60-percent success rate? Same thing for job training? Perhaps in public housing as you have put in there, a standard to say to have a target date, ''. . . by this time the hope is that you will be on a different path.'' That, to me, is sort of the new horizon in government policy.
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  The final thought is that we need to find some way to figure out how government, how government can do best, how what government does best can be used to help these organizations. Government does a great job of raising money. Government does a fairly good job of distributing money. Is there some way to use those resources to be able to help these small charitable organizations and in turn foster a new sense of community renewal?
  What I like so much about your housing proposal, or this housing proposal, to fundamentally change the way housing is delivered is not that it seeks to create a perfect world. But instead it asks the question: What can be done to improve the current system? And the answers that you give are good ones. Give people some say. Give communities some say. Encourage a new way of life and these are great steps and steps that will probably make a lasting difference for generations to come. Thank you.

  [The prepared statement of Mr. Kuo can be found on page 146 in the appendix.]

  Chairman LAZIO. Thank you very much.
  I am delighted to introduce our next panelist. I had the opportunity to tour some facilities and see his neighborhood in Brooklyn and I appreciate him traveling to Washington to visit with us. Mr. Abdur Rahman Farrakhan is the Executive Director of Oceanhill Brownsville Tenants Association in Brooklyn, New York.
  The association is a non-profit group, with more than 20 years experience in tenant organizing, education counseling, renovating and managing low-income housing and helping low-income people own and operate cooperative and
mutual housing. If I recall correctly, you have an impressive number of units under your control. He is also publisher of the Oceanhill Brownsville Tenants Association Newsletter. I welcome you here today.
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  Mr. FARRAKHAN. Thank you, Mr. Chairman and Members of the subcommittee. You must forgive me if I appear to be a bit nervous, but being with this great august body, I am used to being in the field. I am a community activist, and most of the time we are out there acting in the community, rather than sitting here in hearings. But I thank you for this opportunity.
  The speech is pretty much there for everyone to read. I would like to just take a few minutes to kind of give a brief overview on how the Oceanhill Brownsville Tenants Association came into existence. Oceanhill Brownsville Tenants Association was born out of the school decentralization fight that we had in New York where we would have a say in our own destiny. When that fight was over and apparently won, and I beg to differ today based on the state of education, we have turned our attention to the wholesale abandonment, the fires, people burning down the buildings for profit, and we had to organize ourselves in order to preserve what we could of our own community.
  We did such a good job of organizing ourselves against the unscrupulous landlords of that day, that they all left and there was no one there to manage the buildings but us. So through default, we got into management of housing to try to preserve our own homes.
  In 1980, we had several different government backed programs, particularly the Comprehensive Employment Training Act, where millions of dollars were coming into Oceanhill Brownsville through the various government programs. And one day I saw a young man with his head on the desk sleeping and the phone was ringing, and I asked him, I shook him and I asked him: ''Why don't you answer the phone?'' And he said to me, ''That is the CETA(2)(b) phone, I get paid off CETA(4), and that is CETA(6) over there. We don't answer each other's telephones.'' And I vowed that day that we would not take another penny from government, that we would never take any grants, that we would get off welfare and not be beggars.
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  And for 18 years we didn't take a penny from any foundation, any government agency or any individual. We did it by ourselves and that is the thing that I am most proud of that we built. We rolled up our sleeves and everything we did was fee for services. We started out with a meager budget of less than $200,000, and today in rental income and other income, construction, we do approximately $25 million to $30 million a year and we employ over 300 people with a payroll of $7.5 million. And these are not just people that were wine drinkers or drug addicts or derelicts.
  Many of these people come from Harvard with master's in architecture, from the banking industry, from the school systems with master's degrees, MBAs, and so forth. They came from the community and we give them an opportunity to come back to the community and work.
  We also have schools that we ourselves developed with our own money. We get not a dime from the Department of Education, local, State, or Federal. We use monies that are derived from fees for development and management of properties. We use that money to build our own schools. We have our own computer labs that we bought our own computers. We have our own afterschool tutorial programs. We have schools from the university, young people, interns that come and help us. But we get not a dime of funding from anyone for what we do.
  We are developing local commercial businesses, a restaurant that will soon be open, fruit and vegetable market, meat market, dairy store. We are looking at clothing stores. We are looking at manufacturing our own goods in our own neighborhoods for our own selves. We are looking at developing a Montessori daycare center where we will take 14 young ladies who are currently on welfare, get them GEDs, as well as other degrees in Montessori certified training through St. John's University, so that they will become teachers of our children and be responsible to us and our community.
  We manage over 2,000 units of housing. Most of it we own ourselves, and that money that is derived from the rental income or management fees goes back into the community in order to help the community become self-sufficient. We have no desire to be on welfare as a community or as individuals. We have no desire for our children to think that all that life has to offer them is welfare. We define freedom as people who take charge of their own destiny and we have elected to do just that for ourselves.
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  Any help, and we have had a lot of help from many of the private people, the private corporations. We work well with LISC/Enterprise Foundation. We work as equal partners and not as self-subservient slaves. We did not come out of slavery, we are not standing on the shoulders of our ancestors begging for handouts. We are standing up as men who are former slaves who appreciate America, appreciate living in America and we want what America has to offer all of its citizens, inalienable rights to life, liberty and pursuit of happiness. That is what we want as a people.
  We want to be a vanguard and a model for other people to come study us. They have come from as far as France, Spain, England, Switzerland, Germany. They have given us accolades and plaudits in Le Monde, the European newspaper, and radio and television outlets.
  We want people to come and see what can happen. We invite you to come and see what can happen for your own self. We get not one dime of government money and we do all right for ourselves. Thank you very much.

  [The prepared statement of Mr. Farrakhan can be found on page 171 in the appendix.]

  Chairman LAZIO. Thank you very much. You are doing wonderful work. Very impressive. Very impressive.
  Our next panelist is Mr. Howard Husock, who is the Director of the Case Program at the John F. Kennedy School of Government, Harvard University. The program is the world's largest producer and distributor of public sector case studies.
  Mr. Husock has edited more than 300 case studies since 1987 and has written ''Repairing the Ladder Toward a New Housing Policy Program,'' a book length critique of current Federal housing policy combined with new proposals for a market-based approach that will improve the social structure of low-income neighborhoods. I thank you for taking time out to be with us today and spending time in analysis of the bill. I look forward to your testimony.
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  Mr. HUSOCK. Thank you very much, Mr. Chairman. I thank the committee for inviting me to appear and my special respects to Representative Frank in whose district I am fortunate enough to reside.
  For most of my professional life, over the past 25 years, I have been involved in one way or another with the issues of the condition of our cities and the direction of our housing policy, first as a newspaper reporter covering conditions in minority ghettos, later as a public television documentary filmmaker working in particularly city neighborhoods, and for the past 10 years as an academic studying the history of housing policy and writing about what direction it might take next. My interest has always been primarily with the lives and neighborhoods of those of modest means.
  In my view, many of the changes proposed in H.R. 2 are long overdue. Let me begin with the idea of repealing the National Housing Act of 1937, long the basis of our subsidized housing programs. Just as the Congress last year recognized that much has changed since the Social Security Act first authorized creation of the Aid to Families with Dependent Children public assistance program, so should it now recognize the times have changed since the passage of the National Housing Act just 2 years later. At that time, when the Nation was still in Depression and long term mortgage financing was in its infancy, proponents of that legislation to launch the public housing program were convinced that the private housing market could serve almost no one but the very wealthy. They believed that two-thirds of the population would be failed by the private housing market.
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  The explosion of housing construction that began after World War II, the growth of American suburbs, has belied that point of view. But those who first pushed for public housing never even appreciated the way in which our cities had offered low cost housing forms which had helped the poor make their way into the middle class. Some of our most distinctive American housing forms, the row houses of Philadelphia and I might add, Wilmington, Delaware, the three decker frame houses of Boston, the duplexes and fourplexes of Chicago, not only provided shelter, but formed the basis of successful tight knit communities in which owners often lived in the same house as tenants, single people found shelter as boarders. Residents moved up what I like to call the ''housing ladder'' from tenements to houses of their own.
  Many of these neighborhoods were not fancy, but they did offer inexpensive housing. A Federal investigation in 1909 found that in poor neighborhoods of Washington, DC., residents paid less than 20 percent of their income in rent. No one can deny that there were difficult conditions in our cities as they developed. But the fundamental premise of the National Housing Act of 1937 that government must step into the housing market and replace private ownership must now be seen as largely suspect.
  But where does that leave us? We have more than a million families living in public housing today, several million more in various forms of subsidized housing. It is clear now that public housing built to rid us of slums has led to conditions every bit as dangerous, if not more so. Our housing subsidy programs are a kind of a lottery. Less than a third of those eligible by income receive such help.
  My own primary housing policy interest lies in using public policy to do what I call ''repairing the housing ladder''; to find ways to encourage the construction of low cost housing which can form the basis of good, albeit modest, neighborhoods. We need to make sure that government is not so restrictive, in building codes and zoning laws, for instance, that even in our cities, the traditional starting points for poor families, the poor are priced out of the housing market.
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  The proposal in H.R. 2 to give city governments discretion in the way they allocate their Federal housing funds is a welcome change. Rather than subsidizing only housing authorities and those individuals lucky enough to get cheap subsidized units, we need to give our local governments the chance to work creatively to help catalyze the construction of new neighborhoods of inexpensive housing within the reach of poor families. Such help might include clearance and preparation of construction sites, for instance, to lay the groundwork for new buildings. When families have an ownership stake, even in a modest home, they have the incentive to work with their neighbors to keep neighborhoods safe and well maintained. It is this shared incentive which lies at heart of community building efforts.
  The Chairman referred earlier to Habitat for Humanity, which has laid the groundwork in emphasizing the need for new low cost housing. That is how Habitat is affordable. They are building inexpensive homes. When we strangle the supply of inexpensive housing, then we push the poor into expensive housing, paying more than 50 percent of their income in rent, as the gentleman said before.
  At the same time, however, we must deal with the reality of our existing public housing and subsidy programs. I believe it is our task, and it is a complex and very difficult one, to think about how to integrate public housing with the larger private housing market rather than letting it continue to exist as a world apart. This task involves both the rules governing who lives in public housing and the rules we set for how we manage it. In some ways, the management issue is the more straightforward of those two.
  There is increasing recognition at all levels of government that public support for an activity does not mean that public employees are the best or only ones to perform that activity. The fact that eight of the 40 largest public housing authorities have been classified by HUD as troubled helps make the case for H.R. 2's provision for allowing cities to allow private bidders to manage public housing. As is happening with a wide range of other public activities, we can insist on performance requirements that help ensure that maintenance and capital monies are actually spent and indeed spent effectively.
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  But we must also think about who public housing is for. Here we face two distinct choices. We can seek to upgrade public housing and attract better off tenants, or we can try to upgrade public housing notwithstanding the fact that it is home currently, and is likely to be for the foreseeable future, to the poorest of the poor. In keeping with my view that our neighborhoods are, as I said before, best thought of as part of a ladder with different types of homes there to help families climb, I would not rule out the possibility that select public housing developments with commercial appeal might be sold to private owners who could convert them to use for unsubsidized working families. The proceeds of such sales could support the maintenance of a smaller base of public housing which offers shelter to those in greatest need for a period, as suggested in H.R. 2, which would be fixed at the outset of a new tenant's tenure.
  I am suggesting then that we might have a smaller public housing system, one not necessarily managed by public authority, which offers a first step up for the poorest families, but does not promise a subsidized apartment in perpetuity. To the extent that we retain our housing voucher system, and I am not convinced that we should, time limits would make sense for it as well.
  In summary, there is much in this legislation which I believe merits the support of this subcommittee: repeal or replacement of the National Housing Act of 1937, discretion for local governments in spending housing funds, time limits for public housing tenants, new public housing tenants, and the possible sale of some public housing developments. The Congress has shown it is willing to think creatively about our social policy. The time has come for imagination to be brought to bear on housing policy, and in many ways that is exactly what this legislation does. Thank you very much.

  [The prepared statement of Mr. Husock can be found on page 162 in the appendix.]

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  Chairman LAZIO. I reserve my time and will take all the subcommittee Members in the order in which they came and turn first to Mr. Bereuter.
  Mr. BEREUTER. Thank you, Mr. Chairman. I unfortunately need to go visit with constituents. I want to thank the panel for the creative thinking that they have done in making presentations to us, and I yield my time.
  Chairman LAZIO. Thank you.
  Mr. Jackson.
  Mr. JACKSON. Thank you, Mr. Chairman.
  My first question is for Mr. Husock. I hope I am pronouncing your name correctly. My question is: you call, in your testimony, for increased homeownership. In a high cost housing market like Chicago, I am interested in how the Federal Government during this era of downsizing, doing more with less, balance the budget, how do we establish a large homeownership program for low- and moderate-income families?
  Mr. HUSOCK. I think that the key is to find ways to create new lower cost housing. We know that there are a great number of new technologies which permit the construction of lower cost housing. In New York City the Nehemiah Homes project has pioneered in using low cost techniques. Habitat for Humanity specializes in working with local authorities to revisit their building codes to find ways to lower their costs. There are large open areas in the City of Chicago, expanses of underutilized land, so called ''brown fields.'' I believe that this can be the venue for new lower cost housing which can then offer low-income people the chance for homeownership. I am not proposing a new Federal subsidy program. I agree with the Representative that we are not in a position to offer that at this time.
  Mr. JACKSON. Do you have any data that will help alleviate some of my fears in targeting the homeownership program to those people who have neither saved the money for down payment or closing costs nor have established a career path? Because it becomes difficult for many of us to support a program that places the most vulnerable people in our society at risk of losing a home they were not prepared to buy, or have not established a positive credit rating for the purposes of purchases.
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  Mr. HUSOCK. I agree with the gentleman as far as I understand the question. I know that Habitat for Humanity and the Nehemiah Homes, which are two programs that I wrote about in the book that I did on this subject, both insist on down payments and on screening standards for credit history. So, we are not talking about a homeownership program that is going to be a giveaway to people.
  We are offering people who are working families a chance to climb up, knowing that that will free up housing at lower levels, that will help to decrease those rent levels you are concerned about, as well as setting a model for people at lower income levels saying, ''Wait a minute, I don't have to move to Park Forest or Wilmette or Highland Park, out in the Chicago suburbs. I can move just around the corner to that new little house that they are building if I save my money.'' Those examples are ways that we can inspire people and give them something to shoot for.
  Mr. JACKSON. Is there any evidence that a renter cannot contribute to a community as long as there are job opportunities available for that renter? In other words, are homeowners the only ones who can contribute to a community?
  Mr. HUSOCK. I think that we have to look at a number of forms of housing, and two- and three-family houses. I believe that I point out some of the historical forms. The presence of landlords and tenants within the same building offers kind of a social fabric. First because landlords are picky about the tenants that they choose, and that helps to make sure that those renters who are in neighborhoods are the aspiring renters. Renters per se, of course not. There is no prohibition on renters contributing to their communities. At the same time I think we have to be cautious about locating large subsidized rental complexes in working class communities, because there has historically been tension in those areas.
  Mr. JACKSON. Just a few more questions, Mr. Chairman.
  In your article, ''Up from Public Housing'', published in the New York Democrat, you concluded that future public housing must be directed at creating a ladder of housing opportunity, which includes placing a 2 year time limit on residents of public and assisted housing.
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  I think most of us agree that low-income families need greater housing options. I think we are clearly ignoring the report that I have already entered into the record, and of which I will make a copy available, that 70 percent of those in severe need are at or below 30 percent of the area median income and receive no Federal housing assistance at all. And my fear is if we enforce time limits on housing assistance, that formerly assisted renters who have employment will be unable to find safe, decent and affordable rental housing. I am interested in your concerns.
  Mr. HUSOCK. Well, again, I think that the gentleman has made a terrific point that 70 percent of those who qualify for this housing assistance are not getting it right now. To me that is the equity argument for some sort of time limit. We know the Federal budget realities. There is not going to be an explosion of Section 8 monies or voucher monies. We need to take what limited subsidies are out there. Give people a hand up for a limited period of time, and let them share that benefit with those who are behind.
  We know that the residents of subsidized, private low-income owned housing, that is the one-third of Federal housing that falls into that category, those people are more affluent on average than those who qualify generally for housing assistance, and it seems wrong to give them that benefit in perpetuity, and I hope that the committee will consider that.
  Mr. JACKSON. I will ask a followup in just a moment. Can I ask your name, David?
  Mr. KUO. Kuo.
  Mr. JACKSON. I apologize.
  My question for Mr. Kuo is: with many American families juggling jobs with children, and children with aging parents, and aging parents with personal needs, I am interested in how we then ask them to take on the needs of their community? Does the average American have the expertise to construct or rehabilitate hosing, or construct job training programs, or carry out dependency programs? And if all of these community-based organizations, if all they need is labor, why are we not talking about funding a Federal jobs program?
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  Mr. KUO. Let me first agree with, sort of, part of the assumption behind the question. I think the question has to be reshaped though. How can we not have that occur? In my mind, when you look at where we are today as a Nation, the question is not, ''how can people have more time to volunteer?'' The question is, ''how can we get more people to volunteer?'' And it is also not volunteering, like giving money, is value neutral. It isn't necessarily a positive good unless it is aimed at a positive end. I do not think, for instance, that volunteering alone is going to answer any of, or solve any of, our social problems.
  But the question that I think needs to be answered is how do we get people to give both time, money, or to give all, time, money and materials, to these small organizations that are really doing the best job at the margins of transforming people's lives?
  Mr. JACKSON. Let me just raise a quick concluding question, to which any of the panelists can respond. I didn't hear any of the panelists refer to the goal of the Federal Government to be that of full employment. That is, if assuming that we want to create renters and turn renters into homeowners, there is also a step before that. That assumes that they are working and earning some revenue so that they can, indeed, make a down payment on a home. And I am of the opinion that full employment ought to be one of the goals of this government.
  Every time unemployment dips below 5 percent, the Chairman of the Federal Reserve uses employment growth to say that the economy is overheating and as a rationale to raise interest rates, slow the economy, and slow unemployment. Welfare reform promised to move many of the recipients who are on public-assisted housing to work, but if the Fed maintains its present policy, not only will the unemployed increase and the underemployed remain, but the rejected workers will have no government assistance.
  How do we impose time limits on assistance in a society that permits Chairman Greenspan to slow growth and sanction a rate of unemployment at over 5 percent, which is roughly 15-, 20-, maybe as high as 30-million Americans? Any one of you are more than welcome.
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  Mr. HUSOCK. I am not a macro-economist, and that is a very large question. In my own very limited area of expertise, there are a number of ways which I think local jurisdictions, as well as increasing housing supply through looking at their regulations, can also increase employment opportunities. There are numerous licensing, permitting and occupational requirements that make it very difficult for the poorest people to begin modest employment. And whether it is driving a van around instead of having to wait in line for a public bus, or whether it is opening up a hair braiding salon or other very modest kinds of employment, this is not going to create all the jobs that the Representative has referred to, but I do think it is a contribution that cities can make.
  Mr. JACKSON. Someone else want to respond?
  Dr. HARKAVY. If I might note, I agree fully that it would be of paramount importance to have a full employment society. The question is, ''how do we get from here to there?'' And my own, again, limited knowledge of the area would be precisely the notion of a comprehensive place-based approach. Full employment will not come only from creating jobs; it will also require creating better schools and neighborhoods.
  There needs to be a Federal policy that looks at these issues in a holistic way and attempts to link up, as much as possible, issues of housing, employment, education as an approach that would make a difference. And I would note that to do that, it cannot just be a relationship of the Federal Government, or any level of government, to a locality. It means that you need core local institutions such as universities, hospitals, churches, unions, to make this a possibility.
  And I think that this relates to an important issue: the inability to sustain successful programs. These programs have been to often solely dependent upon outside funding. As my colleague from Oceanhill Brownsville indicated, local core institutions need to continuously sustain and support local efforts. And I think in that way we can develop full employment as part of the strategy that seeks to improve schooling, housing, and other fundamental areas throughout society, particularly in America's cities.
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  So again, I agree very strongly with the Congressman, and I think we have to think very hard about ways that full employment be accomplished.
  Mr. JACKSON. Thank you, Mr. Chairman.
  Chairman LAZIO. Thank you very much.
  Mr. Cook.
  Mr. COOK. Well, thank you. I have certainly enjoyed listening to the statements of each of you. And I just want to get a sense from you of how H.R. 2 might affect those that are currently in either public housing or some form of subsidized housing.
  First of all, with the rent questions, where either/or, either 30 percent versus a fixed, I guess based on market rent that is nothing that won't be just a good deal for whoever is living in housing. Am I right about that? That couldn't be an increase in rent for any person paying those rents. Am I right in understanding that?
  Mr. HUSOCK. Could you run that by one more time?
  Mr. COOK. Yes. The provisions that would create options where a market rent would be paid versus 30 percent of income----
  Mr. HUSOCK. Could market rent be lower, is what you are saying?
  Mr. COOK. Yes. This isn't anything anybody would have to be concerned about, is it? That is, maybe living in subsidized housing or public housing?
  Mr. HUSOCK. My understanding of the bill, it is an attempt to create a greater revenue stream for public housing authorities. So I infer that that is not the case.
  Chairman LAZIO. Will the gentleman yield?
  Mr. COOK. Yes.
  Chairman LAZIO. I think perhaps the inquiry is if the tenant had the option to choose, either the lowest of a flat rent or a rent-based on no more than 30 percent of their income, would any tenant face higher rents than exist right now?
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  Mr. COOK. Yes, basically I am asking that.
  Chairman LAZIO. If the gentleman would yield again, that is both the intent and the effect of the bill as proposed, that you would actually have more protections than have you right now.
  Mr. COOK. Right. That is what I would think. So I was just wondering if that was correct. I take it it is. Everybody agrees that is correct.
  If I could just ask this, as you look around the country, some housing authorities do a good job. Others do not. What concerns and I imagine if H.R. 2 becomes law, that some local governments will do a good job and some will not, do we need to be concerned about in terms of the--isn't all of this great? How can anybody oppose any of this? I guess I am looking for something that isn't wonderful and great about H.R. 2, and if there is anything you are worried about in terms of having more control at the local level. It all sounds very sensible and important and useful to people.
  Mr. HUSOCK. I am not sure that is why I was asked here, but as I tried to indicate in my testimony, I am not entirely sure that it is the best idea to seek. I know there is lots of concern about concentration of poverty as a defined deal. I am not sure it is going to work to try to retain working families in public housing. I tried to intimate in my testimony that I thought it might be a better idea to try to make public housing work for the people who are the neediest and build other forms of housing for the working poor so that the poorest would have a place to aspire. In a sense there is a tradeoff between trying to save public housing as an apartment complex that works, and trying to help the poorest tenants who happen to live in public housing. So there is that tension in the bill, and I think people of good feeling can disagree about that and puzzle about it a little bit.
  Mr. COOK. But I take it you feel that there are things within H.R. 2 that would aid what you would like to see in terms of the lower cost housing to come forward?
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  Mr. HUSOCK. Particularly the discretion that is being given to local governments to use housing funds in new ways, yes.
  Mr. COOK. Mr. Farrakhan.
  Mr. FARRAKHAN. I was just thinking about the question, and from a hands-on situation we have many people who I think have bastardized the program, Section 8 and other subsidy programs by the government.
  I think that what we have done in this country, and let's be clear, it is not always the tenants who benefit from the program. With the kind of oversight that has been given to many of these Section 8 contracts, many of the people who signed that FHQS voucher every month to say that they are providing the services in these projects, they made out like a bandit. And so that is because there was no oversight.
  I think that with local government involved, that there would be greater oversight. But then I am afraid, it sounds paradoxical, but I am afraid on the other hand, because a government like we have in New York now with Mayor Giuliani, we have done more in housing in his 3 years than we did in 15 or 16 years of the other folks. I think that, you know, with that kind of oversight, that vigilance there, that H.R. 2 and some of its component parts is excellent in order to get the maximum out of the dollars that are being spent.
  We now have a finite amount of resources and an infinite amount of ways to spend it. We constantly talk about housing as though housing is a separate entity from the people that are in the housing. I remember when public housing was for the upwardly mobile. People went into the housing because it was low rent and they could save, and then they bought a house and they moved on, and other people took their place. What we have done now is institutionalized poverty, and we have poverty heaped on top of poverty.
  There is a project that I just bought with 385 units, and 260 of the tenancy, they are on welfare, so they are being doubly subsidized. First by the Welfare Department and then second by the Federal Government with Section 8, and then they still don't pay rent, and I have to go to court and use the legal system. So we are having some serious problems.
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  I think that we look at housing just in a vacuum. I have a problem with that. I think we need to look at the total situation with the antisocial problems that we are dealing with in the inner cities. I know I have a problem. And unless we give people self-worth and give people the tools to work with in order to get to the point of self-worth, we are talking about pull yourself up by the bootstraps. You first have to get some boots, and we are not giving people any boots. And I think that what we need to do is to say to people, my grandfather had a very simple solution to all of our problems. He had a sign, ''He that worketh not, eateth not.'' And everybody worked if you wanted to eat.
  We are putting in H.R. 2 this other kind of language. I am not an academic. I do not profess to be one, or profess to be the smartest person in the world. But I have common sense, and what we are trying to do is fill up empty vessels that are walking around in human form and make them into human beings. I don't know. I leave it up to this august body.
  Mr. JACKSON. Mr. Chairman, the gentleman is making my point about full employment.
  Mr. COOK. I enjoyed your statement about people have to feel, I can't remember the words that you used, but people have to feel that they are paying for something. What was that? The people have to feel----
  Mr. JACKSON. That they have a job.
  Mr. COOK. Well, whatever it was. But I take it that you all pretty much see H.R. 2 as restoring just a sense of whatever, the ''human incentive'', whatever it takes to make these programs work a lot better than they have worked over the last 30 or 40 years.
  Mr. KUO. I think that is right.
  Mr. COOK. Thank you.
  Chairman LAZIO. Professor.
  Mr. FRANK. First, Mr. Husock, you studied Brookline. It is a wonderful town with a very high tenant ratio.
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  Mr. HUSOCK. I am a landlord. That shows I am interested in tenants.
  Mr. FRANK. Dr. Harkavy, I was interested in what you talked about, the importance of what the university does. I think that is a great idea, that the University of Pennsylvania in Philadelphia helps its local community. Why do you need HUD to get you to do it? You said HUD's Office of Partnership presents one such vehicle. Why don't you guys just do it? Why do you need the Federal Government to send you money to get you involved in your own government?
  Dr. HARKAVY. In a variety of ways. The last thing I am asking for is significant handouts from the Federal Government.
  Mr. FRANK. You wouldn't mind if we did away with the grant program?
  Dr. HARKAVY. Yes, I would. One has to look at the relationship the universities have had to the government over a long period of time. It is absolutely the case that academia received money from the Federal Government, leading to the vast development, for good and ill, of America's research infrastructure, its defense infrastructure and its medical infrastructure. Federal monies have very often helped universities direct their priorities. Universities received large amount of funds precisely to be part of America's Cold War struggle with the Soviet Union. The Cold War is now over.
  We face enormous, pressing problems in our cities. Funds from programs like the Office of University Partnerships, leverage university support in the millions. This results from very relatively small grants. Let me go one step further.
  Mr. FRANK. But you say it is the catalyst. Why don't you just do it? I am in favor of taking money from the military budget and putting it into domestic purposes, but I don't understand why the university needs to be told by the Federal Government to do this?
  Dr. HARKAVY. Because in a variety of ways, universities are very closely aligned with the functioning of our government. As you know, the government provides enormous support to a variety of university activities. The question is, Where will this support go?
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  The issue here is not asking why universities won't be involved. They should and will, in some way. But I think that appropriate positive pressures should be provided in terms of incentive grants to move universities in this direction. I fear that if this does not happen, in fact, universities will remain distant resources, and they will not be engaged in ways that they should.
  One of the biggest motivations for universities around the country, from those great institutions in Boston to those on the West Coast, is precisely government support to engage faculty members and the university to solve society's problems, and there are very strong----
  Mr. FRANK. I have limited time. I gather what you are saying is somewhat discordant with your testimony. You say here you ''. . . Want to counterpose the Deweyan version of democratic local communities comprised of caring, compassionate, hard working, self-reliant, able individuals to a statist vision.'' You talked earlier about big, impersonal, distant government. But it sounds like you, down there in the democratic local communities of caring, compassionate, hard working, self-reliant individuals, need that statist, big, impersonal government to get you off the stick. That seems to be somewhat inconsistent.
  Dr. HARKAVY. Let me say, Congressman Frank, that, in fact, I also indicated in my testimony, as I believe you strongly believe, that the Federal Government has a very powerful role in providing for the general welfare. And I think that is a crucial issue. And I am not arguing that universities get fat and rich from this. In fact, I am indicating that people, universities, should receive support if they do it,work in their communities. They should not get funds by just saying, ''I need your funds, give us more money.'' But those that are engaged should be encouraged.
  Mr. FRANK. No, I think you are rephrasing your testimony because you talk about the Federal Government as the catalyst. And I am all in favor of this, but I think there is a disconnect between your anti-government rhetoric here and the reality that you are just describing. I think your ability and our ability to support the kind of programs you are talking about is undercut when you denounce the ''statist vision'' and the ''impersonal government.'' You keep denouncing the Federal Government in that way, and people are then going to say, ''Why should the Federal Government get involved if the University of Pennsylvania wants to go across the street and help its own neighborhood? Why do we need this big statist government getting involved?''
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  Dr. HARKAVY. I guess my testimony was unclear, and for that I apologize. I did note very distinctly strong opposition to merely market driven approaches. I did cite that I am opposed to egoistic approaches, approaches of each against all, that dismantle government.
  What I was trying to indicate is that the current arrangements, and, in fact, the arrangements that have existed in terms of the delivery of service, could be better and more democratically done locally. I do not mean to be at all critical, and I want to make this clear, of the Federal Government's preeminent role, which I stated in my verbal testimony, to provide for the general welfare and to assure a decent quality of life, so I apologize for my lack of clarity.
  Mr. FRANK. We have a climate of people thinking that the government is a big, bad, terrible thing, and if you feed that too much with the rhetoric, then the other things don't survive. Not that the rhetoric always governs, because Mr. Husock mentioned Habitat for Humanity, and one of the things that has happened to affordable housing is that millions of dollars subsidy that we voted for them, and I was all for that. The fact that they happened to be from Georgia, where the Speaker was, is a happy accident. But this subcommittee initiated a Federal handout to Habitat for Humanity, which I supported because I think they will use that handout very well. We give them $25 million and another $25 million they can bid on.
  Mr. Husock, I remembered the pronunciation the late John Carradine used to give, which I won't mention here.
  Mr. HUSOCK. Which I appreciate.
  Mr. FRANK. He was a contentious member of the Boston City Council, not a fan of Mr. Husock.
  Two concerns I have, Mr. Chairman. One, you say what I agree with on page 2, ''We should find ways to encourage the construction of low cost housing; we need to make sure that government is not so restrictive with building codes and zoning laws.'' I agree. My problem is that you seem to suggest that one way to deal with that is to make Federal funding more flexible, but those restrictions are overwhelmingly locally generated.
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  Jack Kemp tried to change that and use Federal leverage to get those changed, and Steve Bartlett, later the mayor of Dallas, and I were his only votes on this subcommittee 10 years ago. But I do want to make it explicit. In the examples that you give, those are local restrictions, and Federal funding has nothing to do with those restrictions.
  Mr. HUSOCK. I didn't mean to imply that they were. Federal Government has limited leverage in this area. There is, as you know, the housing affordability strategy, comprehensive housing affordability strategy, which each municipality has to submit each year. There is a tension there for municipalities to show progress in easing barriers. I would suggest that that has not been much----
  Mr. FRANK. But you have it backwards, and I submit if you reread your page 2, ''People would think that the Federal Government bears this responsibility.'' You wrote: ''We need to make sure that government is not so restrictive, in building codes and zoning laws, for instance, that even in our cities the poor are priced out of the market. The proposal in H.R. 2 to give city governments discretion in the way they allocate Federal housing funds is a welcomed change.''
  Most people not familiar with the specifics would infer some connection between those two consecutive sentences, and the unfortunate fact is that nothing the Federal Government does in the funding grants would change that because those are all locally imposed, as you say, against Federal policy, and your criticism of Federal policy apparently is that it is not tough enough in opposing those things.
  Nothing in H.R. 2 unfortunately, because I would like to change this, because I would like to change it, is going to change it. The only way to change that is to start withholding Federal funds from local communities that are too restrictive in this area, and we don't get a lot of votes for that.
  Mr. HUSOCK. This is a vehicle that at least offers some chance for exerting leverage. And we have to be realistic about how much leverage we want the Federal Government to exert on local communities. But I think particularly in older cities, it is ridiculous that you have the DFAS zoning, that is the zoning of last resort in a city like Boston, to single family housing. We have to allow greater density. I understand the point about the----
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  Mr. FRANK. You are arguing exactly in reverse. In the first place, because those are local problems, not Federally controlled. And you are simply wrong to say that the proposal in H.R. 2 is a welcomed change in that area. Nothing in H.R. 2 makes that any better.
  As a matter of fact, let me put it this way, we have this strategy, which you quoted approvingly, ''. . . to try to put pressure on them. The more you relax any Federal strings, the more the cities get that money with no restrictions and no discretion, the less likely you are to ever have any leverage.'' You may not want to have any, but you can't argue both of those points. If you want the Federal Government to do something about those, then the Federal Government has to have some capacity to put strings on. And giving them more freedom means they are freer to maintain the locally-based restrictions that you are talking about.
  Mr. HUSOCK. But if they have more discretion in using those funds, then they also have incentive to revisit their----
  Mr. FRANK. You don't believe that. That could not be less true, because the restrictions we are talking about, in fact, apply to purely privately built housing. As a matter of fact, in many communities these restrictions are used to keep Federally-subsidized housing out. You are free to argue those things, but you cannot argue that the way to improve affordability at the local level is somehow aided by H.R. 2. The more discretion the local communities have had, the more restrictive they have been.
  Mr. HUSOCK. What if they get money, H.R. 2, and they say, ''There is an area that is contaminated, it is a brown field, and we are going to clear it and allow private developers, Habitat for Humanity with its $25 million in Federal funds or whoever, to build over there.'' It is one thing to talk about regulation. Yeah, that is a local matter. But if there is discretion at the local level to help groups like that, that still helps them.
  Mr. FRANK. There is such discretion now. There may be lack of funds. They have the discretion, and what they will do is clean it up and use their old restricting zoning and restrictive building codes so that it cannot be affordable.
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  Chairman LAZIO. I wanted to address a question for that purpose. I ask unanimous consent to yield the gentleman 30 seconds if he will yield to the gentleman.
  With respect to the remarks involving Professor Harkavy, it is interesting to note that tuition payments do not cover the cost of education, and at least it is this Member's perspective that the first purpose and goal of a university is to educate their students. They also have, I would like to think, a responsibility to the surrounding communities, but their first responsibility is to educating their students, and their current cost is now not sufficient to cover tuition without some type of other incentive.
  Mr. FRANK. What is the relevance? If that is an argument that they then have to get Federal money to do other things, I agree with that. I am not against using Federal money. I am against asking for the Federal money, and then beating up rhetorically the entity that you expect the money from as a ''statist, impersonal, remote institution.'' In my experience, that is not the best way I get money. I generally don't call my campaign contributors ''remote statists.'' But maybe that will work better next time.
  Chairman LAZIO. The gentlewoman.
  Mrs. KELLY. I don't know about this, but I will give it an attempt. I am very happy to see Mr. Kuo here today, I have followed his career a little bit for some time, and I am very pleased to think, Mr. Kuo, that you are putting your fine mind to work on this problem. I hope that you can help us solve some of this situation that we are faced with here.
  Mr. Farrakhan, you brought up something. You were talking about people. I would like to know how many of you on this panel are actually landlords. Mr. Farrakhan, you said you were?
  Mrs. KELLY. Are you all landlords?
  Dr. HARKAVY. No.
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  Mrs. KELLY. No, you are not?
  Mr. HUSOCK. He has a lot more units than I do.
  Mrs. KELLY. There is only one of you who is not a landlord, so have you all had experience with the way the Federal law is currently working?
  Mr. HUSOCK. Not on a personal basis. I just own a two family house. That is all.
  Mrs. KELLY. What I am concerned about is that in housing, people are people, and they fight. They get into trouble. They have problems with each other, and they don't like the people who manage their units sometimes. And if the Federal Government or the local government is given total responsibility for working with a housing unit, sometimes the local government can get into trouble with the people who are the representatives of Federally supported housing, and it becomes a tremendous problem. In this bill there are some things that I think will help resolve some of those issues. But I have not heard any of you speak today to that particular issue, and I would like to hear you talk about this. What you see here, and if you see anything in this bill that you think will be helpful.
  Mr. Farrakhan, I think maybe we will let you start with that one.
  Mr. FARRAKHAN. It is inevitable when you are in the position of many times determining whether a person has domicile or not that there--those are just natural conflicts. In the bill it talks about contracts and other things. I would like to think that I have a contract, which is called a ''lease.'' Many times we don't adhere, and both sides are many times negligent in adhering to the terms and the condition of the lease.
  The government has just come out with the rules and regulations that if someone in your family commits a crime, vandalism, and so forth, on the property, that that family is responsible, and I hear great hue and cry about that. But shouldn't the parent, or the person that rents the unit, be responsible for his neighbors or for his guests or other people that live with them?
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  And I think that this bill gives some teeth, if you will look at the housing projects, and in New York City we have so many projects, and many of them are in close proximity to buildings, multiple dwellings that we own and manage. And what is happening in public housing today is impacting greatly on our ability to maintain our housing within the budget. And what I see happening in the public housing today is that it has become a breeding ground for us to continue to perpetuate the madness that has gone on for the last two generations that I have seen in public housing.
  So I believe that we need to have rules and regulations. I believe that there need to be individual contracts, but I think that they need to be two sided. We need to use it as a negotiating tool, rather than as a hammer to hammer people out. I think it can be very productive and very useful in coming to ancillary agreements.
  Mrs. KELLY. So you think that the idea of using individual contracts is a good one; is that correct?
  Mr. FARRAKHAN. It can be. Let's just say for the sake of argument that you have a person that has a drug problem, which we have many people in our developments that have serious drug problems. And many times we go to them now and say, ''Listen, you have to go and get some help. We will get you some help. We will get you into a program. We will do something, but you have to participate with us.''
  This cannot be a one sided, as I said earlier, freedom means to take charge of your own destiny. We try to encourage freedom. We talk about ''empowerment,'' and this becomes very rhetorical because they talk about ''independent living skills,'' which actually becomes ''dependent living skills,'' because they make all the decisions for the people. I think if they learn the art of negotiation, we are going to have a better society because we are going to have people who are better informed and better able to take care of themselves and be productive. I don't think we should just have something to beat people down with. We should have tools so that we can encourage them to take charge of their lives and begin to negotiate things. And when they understand the art of negotiation, they are in a better position to negotiate.
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  Mrs. KELLY. So you would not be averse to the government putting something in this piece of legislation, for instance, that would ask for, or allow, the local governments, or the people who are in control of Federally-subsidized housing, to use contracts with the individuals occupying the units?
  Mr. FARRAKHAN. I think we need contracts.
  Mrs. KELLY. Thank you.
  Mr. NEY. [presiding]. The Chair recognizes Mr. Jackson for a question.
  Mr. JACKSON. Thank you, Mr. Chairman.
  I guess I am addressing my question to Dr. Harkavy. One of the roles that the Federal Government performs which I did not hear you address in your testimony is the role of enforcement. Just weeks ago a Fair Housing Council released their empirical evidence findings of a study in the metropolitan DC. housing market that showed that 44 percent of African-Americans and Latino applicants were turned away from rental properties or as home buyers, while white applicants applying for the same properties were treated favorably by either offers of one month of free rent or other such inducements.
  In light of the Fair Housing Council in the District of Columbia, which is a municipality and a metropolitan area, and the reality that we have thousands of them across the country, do you believe that the Federal Government should play a stronger role in the enforcement of fair housing laws and practices, either with banks who lend money to home buyers, or enforcing existing housing laws?
  Dr. HARKAVY. Let me note I am not a housing expert, but I think that the Federal Government needs to pay the greatest attention and play the strongest role possible to ensure fairness, equity and equality in terms of the housing market. I believe that in my deepest fiber.
  And let me make very clear that in no way, shape or form should my testimony be misconstrued to indicate that the Federal Government does not have a major and, in many cases, a preeminent role, to assure fairness and equity in housing and other areas. The emphasis is on who are the providers and who are the deliverers of services? And I want to make this very, very clear to correct any misunderstanding. Yes, I agree strongly with your assumption, Congressman.
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  Mr. JACKSON. And quickly, thank you for your indulgence, Mr. Chairman. How many of you have ever lived in public housing? Just one out of the four?
  And let me close on this quick question. Is it your sense, having lived in public housing, that people in public housing would prefer to live in better housing if, in fact, they could afford a better house or live in a better community or better environment?
  Let me let the gentleman respond who lived in public housing.
  Mr. FARRAKHAN. As I said, the goal, when I lived in public housing, the goal was to own a house. The goal that was our goal was to get out of public housing and move up. And it was infinitely better when I lived in public housing than they are today.
  Mr. JACKSON. What was the barrier, Mr. Farrakhan, to the goal that is your reality of living in public housing and actually moving out of public housing to better living conditions?
  Mr. FARRAKHAN. The goal, I think----
  Mr. JACKSON. The barrier. What was the barrier?
  Mr. FARRAKHAN. The barrier? For me there were no barriers. There were economics that dictated when I could do it, but there were really no impediments that I could find to me to do it, meaning that we had to save. We had to sacrifice a little more. I couldn't afford Jordache. I couldn't afford Air Jordans. I couldn't buy CDs or do a lot of things that I would like to have done, but I saved to make the down payment for a house because that was my goal to do it. So I don't know that there was a great barrier, or impediment, other than economics, and it took a longer time to do it.
  Mr. JACKSON. I guess what I am getting at Mr. Chairman, and I will conclude on this, I am trying to find what it is in H.R. 2 that moving people from public housing to rental properties, or to single family homeownership and that would help me in some way in my understanding of the people----
  Chairman LAZIO. [presiding]. Will the gentleman yield?
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  Mr. JACKSON. Gladly yield to the distinguished Chairman.
  Chairman LAZIO. We can speak privately, but the bill allows for more entrepreneurial opportunity in public housing to give people the ability to learn skills, and so there are incentives there.
  House Resolution 2 allows people to have incentives to work, to have overtime, to get their spousal income. It builds capacity, I would like to think, for people to have higher income, for people to have a plan for a transition back to the marketplace without forcing them to do that.
  This is not a punitive bill, it is a positive incentive type of bill. It allows people to use vouchers. For example, if it is cheaper for them to buy a home, for them to use a voucher to service a debt, they will be able to do that. It permits people to have shopping incentives so if they have a voucher and they find a unit that is worth less than the value of the voucher, that can use half of that money as equity to build up their own equity stakes so they can pursue whatever they need to do in terms of education or training or helping their children or whatever the basic needs that they have.
  There are several other things that we can discuss, and the bill can always be improved. I look forward to the gentleman working with me in this.
  Mr. JACKSON. I thank you for the time, Mr. Chairman.
  Chairman LAZIO. Thank you.
  The gentleman from Ohio.
  Mr. NEY. Thank you, Mr. Chairman.
  I want to thank the witnesses for coming today. I think there is some interesting and challenging testimony. And just to make one statement on the line Mr. Jackson was following, and I don't have the answer to it, but I will tell you that sometimes as far as moving people, and this happened personally back in the district where I come from, there are personal fears, personal barriers. People who have lived in one place for 12 years and feel they don't have any mobility, or they are afraid to have mobility, there are political barriers. Sometimes politicians, when you talk about making a change in our area, come forth and say, ''What are you doing to these individuals?'' before we even have a chance to have a discussion about what the individuals thought about it. And sometimes there are bureaucratic barriers.
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  Which comes to my question that I would like to ask Mr. Farrakhan, because I find it fascinating that the recent purchase, which is what I wanted to focus on. When you purchased the two projects from HUD, was there any resistance from HUD to the purchase of the projects? Was it a large bureaucratic difficulty? And what about the immediate tenant reaction to the talk of purchasing by the organization?
  Mr. FARRAKHAN. Very interesting. I never dealt with HUD before. If you will notice, this is my first time ever doing business with HUD as such. All my business has been done primarily with the New York City Housing Authority and the State Housing Authority of New York.
  The reason why I had never done it is because I saw HUD as this great big monolith, that everything got bogged down and you couldn't make any progress. In this negotiation, it was concluded for both of these projects in about 45 days. Everyone that had anything to do with it began to try to work to make it happen.
  I didn't go to purchase either of these properties. I was the tenant organizer trying to get the tenants to purchase the property. But the tenants elected not to purchase the property. They were not organized; we couldn't get them together enough for them to purchase the property. It was then offered to me as a local non-profit organization. And in about 45 days they made it happen; from the beginning of negotiations to closing, we were able to conclude the sale.
  It has taken a bit more time to get to the next steps, but, you know, we are well underway. We have constant meetings, and we work to try to accomplish that. It has been a pleasant surprise working with the bureaucrats. I don't work real well with them.
  Mr. NEY. Sometimes we don't either.
  The second question I wanted to ask you is----
  Mr. FARRAKHAN. Excuse me. The second part was how the tenants perceived it.
  I had more problems with the tenants after they declined the opportunity to purchase, and we having been the organizers for them, I thought that it would be a smooth transition, that they would like to see us in the neighborhood, that they knew of us and what we were trying to accomplish in the neighborhood. But it hasn't worked out that way.
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  We are working feverishly to try to bring about a kind of reconciliation between us and the tenants, and if that doesn't work, we are hoping to give them certificates so that they can move. I think there are too many poor people stacked up on each other. You have 260 people out of 385 units that are on public assistance, with 80 percent of them female headed households, and people that go nowhere to work all day long, at home, and they are stacked up on top of each other.
  I think that what they did was reprehensible and that we don't try to develop economic integration. There is not enough money in the Federal Reserve to replace the housing that is going to be destroyed, because there is just no way that you can continuously not improve the lot of the people and try to improve the lot of the property. You are just constantly spending money on vandalism and other things that are happening.
  So what we are looking to do, and I have been speaking with LISC, is to try to use part of the money that was given to us as an up front grant designed to fix up part of the property. I am trying to put the property in greater repair so that it will be attractive to people who can pay the fair market rent, leaving more in the way of certificates that I can give to the people who really need the certificate but who will have an integrated economic mix, and hopefully we can subsume that mentality that has gone totally out of whack.
  Mr. NEY. Would the chairman yield me 30 seconds?
  Chairman LAZIO. Without objection.
  Mr. NEY. I will probably take a minute, but I will try 30.
  The one other thing that I wanted to ask was about the look at the situation of what you have been able to do. And I say that because, with good intentions years ago when people said to their Government that they help, the Government effectively, through a physical structure, built projects and they also effectively made it easier for drug dealers and thieves to terrorize families because they were all in one place. We have those structures intact, and we have to do something to try to make those structures better.
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  It seems you are on target, and I commend you for your work. Knowing that cooperatives like what you have can make a better way for a lot of people, has anybody within our Government, within the structure of HUD, seriously sat down with your organization and gone over the fine details of how you did it and your steps to the progress and the sliding back that you might have had, roller coaster ride that this type of thing involves? Has anybody sat down to take a good intensive look at how you have progressed on this?
  Mr. FARRAKHAN. The only thing that they have ever asked me from HUD was, ''Was I related to Louis Farrakhan?''
  Chairman LAZIO. I thank the gentleman.
  I have had the occasion to visit with you and see the creative work that you have done, Mr. Farrakhan. When one starts adding the numbers up, the size of the portfolio that you manage is truly impressive.
  I want to ask, how do you do it? How do you have enough management capacity to deal with the size of your portfolio? How do the people in neighborhoods like Brownsville or East New York have enough income to pay unsubsidized rents? Are you employing some of the tenants so that money is recycled, and how much of an effect does that have?
  Mr. FARRAKHAN. It has a great effect and great impact.
  You know, everyone asks me, how do we do it? When your sleeves are rolled up and you have a hard hat and pair of boots on and your head is down in the ditch, you just don't know how you are doing it. You never see the light of day until you look up one day and someone tells you that you are running a $130 million housing portfolio. You don't know. You are so busy doing it. And you know, my background is not academic. I am a practical, hands-on person, pretty much so. So I have just been doing it. But you get a lot of help.
  You know, we tend to think that people in our neighborhoods don't have anything to offer. But you go in a building and you will find an old lady who is an economic genius who can balance the Federal budget because she has been living on $2 a day for 40 years and has never missed a meal and her children have never suffered for anything. So you use her as a resource on economics.
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  You will find the guy over there that says, ''If you will let me have this apartment for $250 a month, I will fix it up and take care of it myself.'' So he is handy with his hands, he fixes it up, and he takes care of it. So you begin to build a participatory democracy.
  McDonald's will offer a person a job, but what we offer them is a worker ownership, an opportunity to have a say in your destiny. The unions cannot give you job security because there are economic considerations that will cause you to get laid off, but you working and understanding economics, you can have a say in your destiny and you can assure yourself of a job.
  The greatest resource that we have in the community is the people, and we are not paying attention to the people. That is the greatest resource that we will ever have, and if we pull these people together and we are willing to sacrifice and I am talking about the leadership. What I have found in most of our situations, or in many of our situations, is that the leadership, the head of them, was so egotistical, and so vain, and so full of themselves, that they couldn't understand it that if they got up under the people, that the people would lift them up. They wanted to be on top of the people, riding herd on them, wearing Perry Ellis and Cassini suits and disrespecting the people that they are making their living on.
  So what has happened is that what we have created is a fiefdom that is subsidized by the Federal, city, and State Government for people to take charge and ride herd in communities and not allow the communities the freedom to grow and develop their human latent potential. And in order to do that, you have to be secure in yourself, have enough respect in yourself, enough confidence in people.
  I always tell people that the three ingredients that I found for success are: First of all: I believe in God. You have to believe in the higher power and that you don't have the answer to all things. Number two: you have to believe in yourself, that you have self-worth and can do the job. And number three: you have to believe that God has given you all of the senses that he has distributed to other people, and you have to use them and allow them to develop their potential and have input into what you are trying to accomplish, and keep the ship righted and the vision going while they do the work, and after a while you get better people to come work for.
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  We had a young man who just graduated from Harvard with a master's in architecture who also came with the Cooper Union. He wanted to come back, so he is running our construction program.
  We have another person that graduated from New York School Tech School of Design and Architecture. He is working on the construction program. We have developed people with construction skills over the years that they have now become independent entrepreneurs who are the subcontractors for many of our projects.
  And we are building on the security side. We have built a security company with over 200 employees. So these people, they live in the buildings, they have a say in them. These buildings are cooperatives, they are mutual housing. The people that comprise the board of directors are people that live in the building, whom we deliver the services to, who have a vested interest in the community, who want to stay in the community.
  If they make $40-, $50-thousand dollars a year, they still want to live in this community because they are comfortable living in this community. They don't want to live in the suburbs or rural housing or tract housing, they want a home where they were born and bred. So they stay there, and we make it easy for them to stay there by giving opportunities.
  Most of our people, I am telling you seriously, straight up, most of the people, if they had the opportunity in their neighborhood, they may never go downtown for a job. But if you produced a job in the community, they would go to the job, they would be productive.
  We have people that were in jail, who were on drugs, that are working for us today, and those people have gone back and married the mothers of their children, put their babies' names, put their names on the birth certificate, took their children off of welfare, paying back child support and working every day as productive citizens. And they have now become mentors for other young men that are coming out of jail, out of drug addiction, out of these homes in poverty.
  I can take you today right now and show you what I am talking about. It is not a farce.
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  Mr. JACKSON. Amen for full employment, Mr. Chairman.
  Chairman LAZIO. Let me ask you. You talk about, which I think is an important part, what the academics called ''social capital'', the leaders in the community, the people that have the ability to move up the economic ladder and then stay in the community to help others.
  In the Federal system the public has, and we tie rent to income, so the more money you make, the more your rent goes up. So your incentive is either work off the books or not work at all. What do you do about--you have flat rents?
  Mr. FARRAKHAN. Flat rents.
  Chairman LAZIO. So if you work more, you get the fruits of your labor?
  Mr. FARRAKHAN. That is correct. In fact, in some of our tax credit situations where we have to use a scale in order to make the rents affordable for the people that make the least amount of money, we look for people that can't afford to pay the market rent. You can make $700- or $800-dollars a month for a two bedroom apartment. That means that I can rent to the little old lady who is in SSI for $215 a month so the people who can afford to pay should pay. The people that can't afford, we should not put all poor people in subsidized housing on top of each other either.
  I know in the projects, in the Public Housing Authority projects in New York, there are many people in there who pay the maximum rent because they choose to stay in the projects, because they have lived there all their lives, they have grown up in there, and they choose to live there. And there are two people working as civil servants. One may be a teacher, the other one working in a transit, and they are making $70-, $80-thousand dollars and declaring their income, and they know that they can pay the maximum amount of rent and still live in there because they don't have the desire, not everybody wants to buy a house.
  Chairman LAZIO. Let me ask a final question to the panel for whoever would like to answer. I have had many discussions with HUD, particularly the past Secretary, who is a friend of mine, about the lack of capacity of HUD to run housing authorities; they can't get these things to work. They don't want to take over housing authorities that chronically fail every year. New Orleans scores 27 out of 100 every year, but they can't take it over. They don't want to take it over because of a combination, sometimes of local resistance at the political level but more importantly, they say lack of capacity. They don't have people that can run it.
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  Why can a community organization like you do such a phenomenal job while we don't have the same ability to recruit people to manage complexes across the country to turn other communities around?
  Mr. FARRAKHAN. I will just say: because we care. We are there, and we care.
  You find many times public housing authorities, they don't try to embrace the community as much as they try to show how much they are above the community, and the community resents it.
  And you know, the human being is such a wonderful, wonderful instrument. You know, when human nature tells that person, I don't care what his situation is, that he is somebody, his nature is speaking to him. And when society keeps beating him down and saying, ''Because you live in the project, you are nobody,'' that sets up a tension automatically. And I think too many people in the Public Housing Authority do it. A manager that came from outside that manages a property, he is viewed as a manager, and he can be someone who helps the people to move along.
  People who work in bureaucracies, what they try to do is maintain the status quo, and they fight change, and they don't see the evolution of the people and the ideas and the concept. So people are lashing out, they are constantly lashing out.
  This is a fight that is really, really, terrible and reprehensible and can be cured by people sitting down and talking and negotiating and people not thinking that they have to be the lord over other people's lives. But give people an opportunity to participate with them in bettering their lives and their conditions. I think they will be fine.
  But most of the people, and we have many, many public housing authority projects in close proximity to ours. You look at our project and how it is kept, and you look at theirs and see how it is kept, and you will see that it looks like an effort by people to just destroy it because they feel as though they are being totally disrespected, rather than being a part of the solution.
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  Chairman LAZIO. Thank you.
  Dr. HARKAVY. I would just like to note, to build a bit on what Mr. Farrakhan has said, I think the key issue is that delivery of service really does need to be by local people in their communities, in their neighborhoods, in their institutions. It is not a critique of government to note that distant structures are indeed distant, that the goal is to have structures that engage individuals and community organizations.
  Again, I worked with Secretary Cisneros also, and he believed very strongly that HUD had a positive and important role to play, but the role was precisely as a catalyst to engage not just individuals in community groups, I want to make this clear, but core local institutions: Churches, schools, hospitals, universities.
  I don't believe that communities can change public housing alone. Of course, people in public housing are talented. There are wonderful examples of change. But what is going to sustain the change over time? It has to be a partnership. Government has to be a partner. However, the delivery of service has to be local with the people who know the neighborhood, know the community, and with the institutions that are part of their environment.
  And it seems to me that no government and no locality can do it alone, it is a question of government providing the means, but the delivery has to be in the neighborhood, in the locality, and with the institutions that make this country great. I think any other approach is doomed to failure. It means all of us working with each other to find solutions is democracy at its best.
  The solutions in Brownsville we can learn from, but they can't be transmitted directly to Harlem or to North Philadelphia. And it means that the Government has to encourage activity in the locality and say that the institutions of Oceanhill Brownsville and its people will be the core deliverers.
  Mothers and children and family members care more about each other than do government employees. Friends and people in the neighborhood know and help each other better. And the way to encourage this isn't for government to abdicate responsibility, but to provide support to tap local energy.
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  Chairman LAZIO. Thank you very much, Doctor. I want to thank the panel for a remarkable hearing.
  Before we recess, Congressman Watt wanted to ask that we submit for the record an article that recently appeared in New York Times Magazine. So
a unanimous consent request. Without objection, so ordered.

  [The information referred to can be found on page 261 in the appendix.]

  Let's also include, if we can, Mr. Kuo's recent article that appeared in The Washington Post for the record. Without objection, so ordered.

  [The information referred to can be found on page 152 in the appendix.]

  Chairman LAZIO. I want to thank the panel again. We appreciate your time and look forward to working with you more. Great insight.
  Without further ado, this hearing is adjourned.
  [Whereupon, at 5:10 p.m., the hearing was adjourned.]

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