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U.S. House of Representatives,
Subcommittee on Housing and Community Opportunity,
Committee on Banking and Financial Services,
Washington, DC.

    The subcommittee met, pursuant to notice, at 3:06 p.m., in room 2128, Rayburn House Office Building, Hon. Rick Lazio, [chairman of the subcommittee], presiding.

    Present: Chairman Lazio; Representatives Green, Barr, Terry, Metcalf, Frank, Velazquez, J. Maloney of Connecticut, Hooley, Carson, Vento, Lee, Schakowsky, Jones, and Capuano.

    Chairman LAZIO. This hearing will come to order.

    Thank you very much and good afternoon. I want to welcome you, Mr. Secretary and other members of the audience for attending our first Washington DC. subcommittee meeting of the year. I want to welcome the Ranking Member, Mr. Frank, and thank him for the constructive work that we were able to perform together last Congress. I look forward to the next year.

    Today, the subcommittee meets to hear testimony on the United States Department of Housing and Urban Development budget for Fiscal Year 2000. Again, I want to acknowledge the new Ranking Member, Mr. Frank. You and I, as well as our respective staffs, have worked well together in the past, share similar policy beliefs on a number of housing and community development areas, and I look forward to working with you with continued comity and bipartisanship.
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    I would also like to welcome some of our new Members to the subcommittee, particularly Mr. Lee Terry, of Nebraska, I want to welcome you here, and I know Mr. Frank will want to also provide some introductions. I yield to you briefly to introduce the new Members on your side of the aisle, Mr. Frank.

    Mr. FRANK. I am glad to do that. Two are here. We have a number of freshmen. First, Congresswoman Stephanie Jones, who comes with a certain Housing cachet since she succeeds the former Chairman and Ranking Member of the Appropriations Subcommittee, Mr. Stokes. So, if he left any money laying around, he probably told her where it was.

    Ms. JONES. I am looking for it.

    Mr. FRANK. OK, we are delighted to have her, and she comes from Cleveland with a great deal of interest and experience.

    And next, Michael Capuano, who comes to us most recently as Mayor of a good-sized city, the City of Somerville, Massachusetts, and he has for me an even more important connection than Stephanie Jones in that he represents my mother in Congress. So, Michael brings his experience as a mayor, and we are delighted to have him.

    Chairman LAZIO. I thank you. I welcome the new Members. I look forward to working together.

    The Department of Housing and Urban Development has proposed a budget of more than $28 billion for Fiscal Year 2000, an apparent increase of about $2.5 billion over last year's level. And in its budget, the Department is proposing approximately eighteen new spending proposals, of which at least eleven, according to the Administration, would require additional authorization and approval of this subcommittee.
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    It is in this area that the subcommittee is primarily focused. I understand that no final legislative language is available for any of these proposals. So, accordingly, if the Department wishes to submit some answers to some of the questions we may have, I would ask that those answers be returned to the subcommittee within 30 days.

    While this subcommittee's primary focus will not be on program funding levels, it is important to clearly understand what the Department is requesting in comparison to current levels. In this regard, the subcommittee hopes that the Department will be able to clarify today how much that HUD is proposing to spend in Fiscal Year 2000.

    The Department asserts that it is requesting a $2.5 billion in appropriations from last year. And yet, has identified in its Fiscal Year 1999 operating plan and its Fiscal Year 2000 budget justifications what appear to be several billions of dollars in recaptures and carryovers from previous years that would seem to be available from Fiscal Year 2000.

    HUD's elaboration on these levels will be helpful as Congress begins the annual appropriations cycle.

    At the onset I would like to note that while the General Accounting Office is continuing to designate HUD as high risk to waste, fraud and abuse, there has been some progress. And we should recognize that progress. But we should also be cautious against declaring complete success at this stage. As recently as last month, the HUD Inspector General testified before the House Committee on Government Reform that ''many of these management process reforms are still not operational.'' The IG noted that while delays are understandable given the magnitude and complexity of the changes, these delays are causing serious overloads, and critical tasks are being deferred.
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    Together, Congress and the Administration still have much to work to do. This subcommittee will continue to be supportive of efforts to build a new HUD, more focused in its mission and more dedicated to empowering families and communities.

    In its budget, the Department has asserted that HUD has regained the trust of the American people by getting back to basics. I am concerned, however, that proposing eighteen new initiatives might not necessarily be getting back to basics.

    Just a few examples of these initiatives include $5 million for its Citizen Volunteer Housing Corps, and $10 million for Metro Jobs Link. While it is quite possible that a number of these proposals have some merit, as a general observation they are ideas that perhaps local communities themselves should have the flexibility to pursue, or not pursue, depending on where the greatest needs lie.

    I question whether we should be creating new boutique items that dilute the resources HUD must allocate for more pressing needs. And unfortunately, in our review of these initiatives, in addition to evaluating the value of any particular proposal, we must also be cognizant of the Department's ability to adequately manage and oversee additional programs.

    Looking back, it is the proliferation of programs that has undermined HUD's efforts to manage their existing obligations. Instead, we should reflect on our successful efforts last Congress to reform public and assisted housing and the lesson that simplification and appropriate devolvement to the communities ensures a focused mission and efficient management. At a time when in several areas of the country low-income families and seniors are being faced with eviction, finite taxpayer resources need to be focused on existing serious needs. Contracts for Section 8 project-based subsidies are beginning to expire. In cases where the inventory is not in the prepayment preservation mode, the so-called ''enhanced'' or ''sticky'' vouchers that allow vulnerable residents to remain in place appear not to be available.
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    In this area, I would note that I intend to work with the Ranking Member, Mr. Frank, to look for an appropriate targeted Federal solution. I would also note that the Committee Chairman, Mr. Leach, is especially interested in protecting vulnerable residents affected by these circumstances and will be engaged in our efforts.

    The subcommittee further will be interested in areas where the Federal Government can partner with the private sector, efficiently using Government resources to leverage significant private capital and creativity. We look forward to working with the Department on these proposals, particularly on ideas to bring private capital into distressed revitalization areas for economic renewal.

    Also, a particular focus of this subcommittee will be on our continuing efforts to provide peace of mind and security for America's senior citizens. Just last year, this Administration attempted to reduce the Section 202 program, which is the senior housing program, by about $300 million, or 75 percent from previous levels. That direction was resoundingly rejected by Congress last year for many reasons, not the least of which is the demographic shift that is occurring in America. This year, HUD is requesting a reduction of $100 million for new senior housing construction. Nevertheless, the subcommittee is hopeful that, with bipartisan efforts here in Congress and in partnership with the Administration, we can take the first steps to preserve the existing housing inventory for seniors now and provide opportunities for the ever growing senior population into the next century.

    In this area, where HUD is looking for flexibility to serve seniors in certain circumstances, including the use of vouchers in assisted living environments, that the subcommittee would be interested in pursing.
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    Correspondingly, I would expect the Department to be fully engaged in our work to preserve existing senior housing inventory through legislation before this subcommittee proposed by Chairman Leach and myself.

    At $28 billion in budget authority and almost $33 billion in spending outlays, HUD is proposing one of the highest non-defense discretionary spending budgets in our Government. Just a few years ago, some in the Administration and some in Congress were considering the outright elimination of HUD as a cabinet-level agency. Members of this subcommittee, however, Republicans and Democrats alike, rejected that strategy and instead chose to pursue fundamental reform of the agency and its programs. I still believe in a strong Federal commitment to housing and community renewal opportunities, and I look forward to working with the Department and Members of the subcommittee to continue the fundamental program reforming effort to rebuild the agency with the tools, competence, and credibility that American families and communities need.

    I want to thank you, Mr. Secretary, for your appearance before the subcommittee. I would like to turn now to the Ranking Member, Mr. Frank.

    Mr. FRANK. Thank you, Mr. Chairman.

    Let me continue with the introduction of new Members. Two of our other new Members have joined us, both former State legislators—former State Senator Barbara Lee, from California, who has previously worked on the staff of her predecessor, whom we all remember with great respect and affection, Ron Dellums. Barbara is an active participant in urban affairs and will be on this subcommittee.
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    Also another former State legislator who has joined us as a freshman, Jan Schakowsky. Jan comes here again with a distinguished political lineage. By the end of this term, she and her predecessor will have averaged 25 years apiece in the Congress. She replaces Sidney Yates, who got here shortly after the Civil War.


    Jan is another urban legislator who has had a great deal of experience in working with housing in Chicago, and we welcome her.

    And now, I just have a few words, Mr. Chairman, and I look forward to working with you. I have a kind of mixed opinion on the HUD budget. I lament its inadequacy in some areas, but I think it is important that we put the blame where the blame belongs, squarely on the 1997 misnamed Balanced Budget Act. It is impossible to have a whole that is larger than the sum of the parts. HUD is one of the parts, and I think it is a part that is too small. As you correctly noted, we have some, I think, absolute obligations not to lose housing that currently is home for lower-income people, who move there because their Federal Government told them they could live there with some security. It is our absolute obligation not to have those people be unhoused, and the preservation of these existing housing units and these tenancies is essential, particularly with older people, people with some handicaps, people who cannot easily be set out into the market.

    There is a special problem for many of us, Mr. Capuano, Ms. Schakowsky, Ms. Lee, myself, maybe some others—we represent some areas where the cost of living is quite high. And while vouchers are a useful device in many places, you can give people vouchers in the districts that many of us represent and in two weeks you can expect to have them come back and return the voucher, because there are areas in my district—Mr. Capuano's, Ms. Schakowsky's, Ms. Lee's, certainly Ms. Velazquez' areas—where the voucher will not do you much good. So we do believe that losing units, which have been built with Federal funds dedicated to subsidized housing, losing those because of a failure to provide, I think, a fairly small amount of dollars is bad housing policy and bad fiscal policy.
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    In general, though, the problem is, as I said, the 1997 Budget Act, which puts severe caps on spending. And I would like to see HUD spending more. But I also recognize that in the current climate, and in the current legal situation, that cannot necessarily be done. So one of the things I think we should be doing in this hearing, as I hope is being done throughout these hearings in other committees, is to raise the issue as to whether or not there is a need to reexamine those caps and provide some additional spending.

    We have a terrible housing crisis in this country. There has been an increasing extent to which lower income people are being forced to pay more and more of their income for housing to the detriment of other things. Maybe I am showing my age, but I remember, when I was in college, that the rule of thumb was that you would spend 25 percent of your income on housing. I am showing my age and the deterioration of the housing market when I cite that, because I do not think anybody thinks anymore that it is a realistic aspiration for many people. Thirty percent, thirty-five percent, well that may be regrettable. But when you start going above 50 percent in what people of limited incomes have to pay for housing, you are inflicting serious social distress on them.

    So I look to talk about the specifics of the HUD budget, but I want to set that in the context of an overall level of Federal spending, which may be too low and, in many ways, badly allocated. The notion that we should increase military spending by a very substantial amount, while we are going to be losing affordable housing units for lack of budgetary authority is somewhat distressing to me. So I look forward to this hearing and to the work as we go forward, not just to deal with HUD in the specific, but to use this as a way to examine the broader question of Government spending, which is going to control what happens at HUD. Thank you.
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    Chairman LAZIO. I thank the gentleman.

    I also want to take this opportunity to introduce another new Member of the subcommittee, a new Member of the House, the gentleman from Wisconsin, Mr. Green. Welcome to the subcommittee.

    Welcome, Mr. Secretary.

    Mr. FRANK. I would just note, Mr. Chairman, that if you want to put anything to a vote today, we would certainly waive any notice requirements. We are ready to vote on any legislation you want to bring up.
    Chairman LAZIO. Duly noted.


    Chairman LAZIO. Mr. Secretary, thank you very much for your written submission. We look forward to it, and look forward to being able to ask you questions as well.


    Mr. RAMIREZ. Thank you very much and good afternoon, Chairman Lazio and Ranking Member Frank, and other Members of the subcommittee.
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    On behalf of Secretary Cuomo, I appreciate the opportunity to discuss our HUD Fiscal Year 2000 budget. If it pleases the subcommittee, I would like to enter into the record both today's remarks and my previously submitted written testimony.

    Chairman LAZIO. Without objection, that is so ordered.

    Mr. RAMIREZ. Thank you. This $28 billion budget represents a $2.5 billion increase over last year and offers opportunity and security for millions of Americans. Mr. Chairman, the budget addresses five major challenges. And let me briefly describe them.

    First, competing in the new high-tech global economy. HUD's economic development mission is more important than ever in this rapidly changing environment. In addition to the CDBG program, Youthbuild, and the Community Empowerment Fund, we are proposing to implement the American Private Investment Companies initiative, or APIC, which will create much needed equity capital for large-scale business investments in underserved communities.

    Second, the continuing crisis of affordable housing and homelessness. The record economic expansion has brought home ownership and home sales to an all-time high, but still too many Americans are left out. In addition to funding for public and Indian housing, HOPE VI, the HOME program, and homeless programs, you are asking Congress to renew all existing Section 8 vouchers and add 100,000 new vouchers.

    Third, moving closer to One America. Discrimination in housing still exists, and we must renew our commitment to ending it. In this area, we are requesting an increase of 18 percent for our Fair Housing programs. This will provide additional funding for both the Fair Housing Assistance program and the Fair Housing Initiative.
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    The fourth challenge is to find regional solutions which will foster sustainable communities. Here, we are requesting support for several key efforts: cleaning up and redeveloping Brownfields, an Abandoned Buildings Initiative, and Regional Connections. Regional Connections will help suburbs and cities work together on issues that transcend traditional municipal boundaries.

    The final challenge is the aging of America. Just as we are committed as a Nation to saving Social Security, we must also ensure housing security for older Americans. HUD is proposing a total of $747 million in Fiscal Year 2000 as well as changes in existing programs. These are aimed at both increasing the supply of housing for America's elderly and improving the housing of those already receiving assistance. We propose a comprehensive approach, a continuum of care, that will enable our seniors to both obtain decent housing and access to supportive services they need. Last year's solid bipartisan budget was truly a milestone for HUD: the first new vouchers in five years, expanded FHA loan limits, increase in key HUD programs, and a historic public housing bill. The budget that we are proposing continues that momentum.

    With this backdrop, Mr. Chairman, with HUD stronger than it has been in years, I would like to say a few words about some of the criticism I have heard about this budget.

    There are those who argue that HUD should not take on any new programs or receive any funding increases. With all due respect, I strongly disagree with that position. I have heard three arguments advanced to limit HUD's programs and funds.

    First, some say that new programs would cut deeply into the Department's existing programs. Well, that simply is inaccurate. Even the highest estimate that I have heard, which is factually wrong, pegs funds for new programs at a mere 2.5 percent of HUD's overall budget. I believe that that figure is actually .03 percent for only three new programs. New programs simply do not detract from HUD's core initiatives.
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    The second argument is that HUD cannot effectively manage its current programs, let alone new ones for funding increases. Nothing could be further from the truth, Mr. Chairman. HUD's 20/20 Reform Plan has dramatically changed the Department. The fact is that some of the Department's critics are issuing reports that lag significantly behind the changes and reforms that we are implementing at HUD. Many experts have validated the work we have done under 20/20, including David Osborne, Price Waterhouse, and Booze-Allen. And I would like to submit those quotes for the record as well.

    And even though GAO retained HUD's high risk label, which I will discuss in a moment, they also recognized HUD's management reform progress.

    From their written testimony, I expect that GAO in the next panel will argue that HUD does not have the capacity to administer new programs or receive funding increases. I must admit that I am at a loss to understand the foundation for this GAO criticism of HUD's budget. Such criticism is flatly inconsistent with GAO's silence regarding special purpose grants. To my knowledge, neither the GAO nor other HUD critics have ever opposed, let alone questioned, the creation of new programs through Congress' special purpose grants.

    As the subcommittee knows, over the past two years, Congress has funded close to $300 million for about 450 special purpose grants. Each of these grants requires a tremendous amount of work and time for the agency to handle them. Each is, in essence, a boutique program. Currently, Congress has HUD setting up and monitoring developments of a research and development medical lab, an art gallery, a bridge, a maritime vessel simulator, a soccer activities center, an agricultural biotech lab bike path, a zoo, a proton radiation institute, restoration of a U–505 submarine, a national wildlife and fish refuge, and hundreds of other specialized projects.
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    Clearly, 450 of these projects create a workload comparable to at least dozens of new programs, programs as large or larger than those being proposed in this year's budget. Yet, not one word from GAO or other critics. This inconsistency on this issue is striking and inexplicable.

    The third argument used in this budget is that of GAO's designation of HUD as a ''high risk'' agency. Some say that because HUD is labeled ''high risk,'' the Department should not receive additional funding. I believe strongly that this designation cannot be justified and was improperly and unfairly applied to HUD.

    For close to a year, we have asked the GAO for the objective, standardized criteria it uses to determine whether an agency is high risk. To date, we have received none.

    The Comptroller General, in fact, just testified last month that five Executive Branch agencies failed to provide financial statement audit opinions. He noted six agencies that were failing in their efforts to make necessary Year 2000 system changes. In both cases, HUD was in compliance and was even given top grades on our Y2K effort.

    According to the GAO, the Department of Defense mismanaged $22 billion in disbursements. The IRS failed to collect $214 billion in taxes. And the Department of Health and Human Services inadequately monitored more than $20 billion worth of Medicare payments. These figures approximate or greatly exceed HUD's entire budget. Yet, none of these agencies appear on the GAO high risk list.

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    I urge Congress to ask the GAO, what is the quantifiable definition of high risk? Is it percentage of the budget at risk, absolute taxpayer dollars wasted, a lack of qualified audit opinion, an inability to balance the books, appearance in two or more of GAO's risk areas at risk that compromise national security? We just want a definition that is consistent and standardized.

    No one claims that HUD does not have problems. Even with the 20/20 effort, we are far from perfect. And we must continue to fight waste, fraud, and abuse and strengthen our systems to prevent them. But the application of the high risk label becomes hard to defend when it is applied only to HUD, and not to other agencies with equal or greater identified risk in their operations.

    We believe that this is a reasonable, strong, and responsible budget request that will serve America's communities well as they take on the challenges of the next century.

    Mr. Chairman, Secretary Cuomo and I look forward to working with you and the rest of the Members of your subcommittee to truly make this budget, along with our management reform, a success. Thank you very much, and I would like to take this opportunity to introduce the gentleman to my right, your left, our Chief Financial Officer, Rich Keevey.

    Chairman LAZIO. I welcome you, too, sir. Thank you very much.

    Mr. Secretary, thank you very much, and your submissions will be included in the record. I also wanted to make comment on behalf of the subcommittee how pleased we are that you are part of the Federal Government, being the former Mayor of Laredo, Texas, where you were recognized by Newsweek Magazine as one of the Nation's 25 most dynamic mayors in 1996.
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    Mr. RAMIREZ. Thank you, sir. I appreciate that.

    Chairman LAZIO. It is good to have some dynamism around here.

    Mr. RAMIREZ. Thank you, sir.

    Chairman LAZIO. Let me just, if I can, question you about a few areas, because there are some areas in which there appears to be a disconnect between what is going on and what the Department is proposing.

    One of those areas is in senior housing. While the country is graying, demographics show that our fastest growing population is that over 85 years of age. We are living longer. But we are not preparing for the needs that exist and the inevitable needs, and I am at a loss to understand why the Department has this apparent hostility to the Section 202 program, which provides not just housing, but the basic services, the on-site supportive services that help seniors have a quality of life and enable them to stay out of a more expensive alternative, liked a skilled nursing facility. It seems to me extraordinarily short-sighted, that together with the proposed reductions in the Section 811 program, the program for the disabled, if we cannot take care of the elderly and the disabled, we should not be in the housing program. These are the most vulnerable people among us. They do not have the capacity to go into the workforce for the most part and earn more money and to be in the private sector. So my question is why such a position has been taken by the Department?

    Mr. RAMIREZ. Well, thank you for your question, Mr. Chairman, and certainly, we, as I mentioned in my statement, one of the concerns that we have—and objectives—is to address the aging of America. And actually, our budget submitted includes $747 million worth of initiatives, including the Section 202 program. The only variation is that we have also asked within that number $100 million to be set aside to be able to retrofit existing elderly housing so that it can accommodate their needs as they age. We are continuing to support the services that are out there, and are wanting to build additional housing that will make for the senior Americans, their service accessibility that much easier, and we are in wholehearted agreement in that regard, Mr. Chairman.
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    Chairman LAZIO. It seems as though there is support for some additional vouchers and some additional units for seniors, which is wonderful. But many seniors have increasing needs in terms of mobility needs or other assistance. And by undercutting the Section 202 program again, and with a $2.5 billion spending increase, not a dime extra as far as I can see on the Section 811 program for the disabled, again, it creates a question in my mind about HUD's basic mission. And that is why you have me and others raise this issue about new programs, not because we do not favor the intent of the programs—it is not that we do not think there is some need—but if we cannot take care of these basic mission issues, there is considerable concern about whether the Department has a good sense of mission. And some of the problems that you have had from a labor standpoint with HUD staff in particular, I cannot help but think that some of the personnel reductions in HUD came prior to developing their mission. Usually, you establish a mission first and then you decide what your personnel are. And by doing just the opposite, it seems to me you have also undermined your ability to continue to make the kind of progress that I think, in good faith, you are trying to make.

    These are some of my concerns. The OIG report of two years ago noted that HUD was administering about 340 different programs and program-related activities. They indicated at the time that many could be terminated or consolidated. And it is one of your primary missions in the 2020 Management Reform initiative. But again, I see a sort of anomaly going on between consolidation, providing more efficiency, protecting the basic mission of helping the disabled and the seniors, and simultaneously trying to create new programs which are, as you suggested, at relatively low funding levels.

    Mr. RAMIREZ. Right. Well, we agree with your thoughts, Mr. Chairman that we do need to make sure that we address the needs of the elderly. Again, our budget has $747 million set aside for seniors to assist in the Section 202 program. The only variation is that we think that it is prudent business on our part to incorporate into it a component that allows for the seniors to retrofit their existing residences to accommodate their needs as they get older. That's the $100 million variation. And we also have 15,000 new vouchers that we are proposing in this budget specifically for the elderly, and this is above the $747 million. And we are looking forward to working with you to address your specific concerns in those two areas, but could not agree with you more that we do need to make sure that the focus is there and that the effort is well mounted to have a—what I called again in my opening statement—a continuum of care in helping seniors deal with their housing needs as well as assisted services.
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    Chairman LAZIO. I want to make sure that you are clear on this; that while vouchers are welcomed, the kind of housing needs that persons with disabilities have, especially the non-senior disabled, cannot be met through vouchers. Many of the advocacy groups are adamant in their presentation that there is extraordinary need among the non-senior, non-elderly disabled population;

    Mr. RAMIREZ. Yes.

    Chairman LAZIO. Those housing models that have on-site supportive services are exceptionally important; they are essential. Giving somebody a voucher who is disabled, who is elderly, is not without any merit. But it is not as favored as helping somebody who would otherwise be in a nursing facility, costing many times more and eroding the quality of life. So, I look at these program levels year after year, and every year Congress has got to go back and restore money. It is an ongoing battle. It looks like the Administration is hostile to these programs, and I do not understand why that exists, especially in light of these proposals for some new programs, which may have some merit. But it gets back to a sense of mission. Do we have a sense of mission about protecting the disabled and the elderly in a way that affords them the ability to have a quality of life without relying on charity care or being isolated from the rest of the community?

    What Mr. Frank was referring to in his opening comments is the idea that vouchers are a useful tool and one that we probably both support strongly, but in many parts of the country you can only use vouchers in certain areas, because of the availability of low-cost housing. And so that provides for a ''ghettoization'' at times in certain urban areas. I ask that the Department keeps this mind and works with this Congress to deal with both the oncoming crisis in shifting demographics and the need to provide for the elderly and the disabled, especially given the graying of America.
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    Mr. RAMIREZ. Yes, sir. And our budget reflects that initiative, and we have, as I have mentioned to you, what was a fractionalized message has been shaped through the discussions within the Department to create a posture of developing a continuum of care with the capital needs and the services as well. The vouchers are over and above that. Again, we would use them where they are best used and available for elderly to find safe and decent housing. But we look forward to pushing this forward, and it is a focused message that we bring to you with this budget. And it is our wish, as well as the Administration, to make sure that we do look beyond this year and look further on down and recognize what we need to do now to prevent the crisis in the future, sir. So thank you very much.

    Chairman LAZIO. Thank you.

    Mr. Frank.

    Mr. FRANK. The Chairman said that there would be areas of agreement, and I just want to start out by stressing a couple. I am delighted to join him in noting that while vouchers can be—are, in fact, a useful way to help people in need, they are not a complete substitute for a housing production program. The Chairman is absolutely right to stress that we need to stay in the business of producing housing through Section 202, through Section 811, through—we do not have jurisdiction over this, but through the various tax credit programs, the Low Income Housing Tax Credit, which have proven to be very good and very flexible in producing housing that is diversified and not segregated according to income or any other way.

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    So I very much agree with him; that we need to be in the production business. I was also pleased to hear him note, because it goes contrary to what is sometimes a prevailing philosophy around here, that people can get what they need from charity and not Government. I endorse this view that we have an obligation toward our fellow citizens who are not able to take care of themselves because of age or disability or some other reason, not simply to say, ''Well, private charity will take care of them.'' This is an obligation of a compassionate society.

    I would note explicitly, though, that the production program is a great example of Government spending. And I really want to stress again, one of the difficulties that we create for ourselves is that we have an atmosphere in which people can get up and denounce Government spending and talk about the need to reduce Government spending and talk about how they would rather cut taxes than have Government spending, and how we had better cut taxes because if we do not, some Government people will spend it. And that is all very popular.

    But then when we talk about housing for the elderly or the disabled, then that is popular, too. And so, of course, is environmental clean-up, and cops on the street. And I am a great believer in the First Amendment. I would let more people say things than most people would. About once a year around here, I vote against some stupid bill to censor the internet, which we pass and gets thrown out as unconstitutional, and then we do it again.

    So I do not really want to censor free speech. But if I was going to get into the free speech censoring business, I would not make it illegal to put pictures of nude people in various places. I would make it illegal to denounce Government spending. I would say that under this Constitution and the law, you have to denounce the kind of Government spending you are mad at, because what happens is people denounce this entity called ''Government spending'', and then they support specific examples of Government spending. But the trouble is when you have cut Government spending, there is not anything left to spend when you want to get into specific Government spending.
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    So I fully endorse this notion that we should be spending money on the production program, spending money so that people are not confined solely to private charity. But I recognize that you cannot do that if there are no Government revenues.

    Now, I have two specific areas here that I want to talk about. One has to do with the Preservation program. And I think this is a clear case for many of us where vouchers are simply inadequate. We have, many of us, subsidized housing, assisted housing, built-in areas where the vouchers will simply not allow people to stay anywhere near where they are. I must say there is a great deal to be said when you are talking about particularly the populations that Jim was talking about, letting them stay where they are. Telling an 82-year-old that she now has a voucher, and she can now move out of the place she has lived for twenty years, and she can go off into the housing market is really not something I think any of us want to be associated with. But that is the consequence of saying that we are going to give them vouchers without absolutely guaranteeing that we are going to do the prepayment. My understanding is that HUD asked for enough money so that we would be able to preserve every unit where the owner was amenable. Obviously, in some cases, we had these legal problems. It was a dumb law that was passed thirty years ago, but there is nothing we can do about that.

    If we were to keep a unit in the affordable housing program, we would in effect have to buy it back—that is, buy it twice. I wish we did not have to, but that is the way the law works. Over a ten- or twenty-year period that is likely to be cheaper than having to renew vouchers year after year at full levels. That is, having already subsidized these units and helped them be constructed, I think on a per unit basis we can buy them more cheaply than we can buy anything comparable. So what is the status of that?
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    Mr. RAMIREZ. Well, we are in agreement with you, Congressman, in making sure that we have the adequate funding to preserve this housing. We are asking for full funding on this, but we are working with OMB to solve the future in regards to this. But we are asking in our budget for full funding to preserve this housing.

    Mr. FRANK. Well, it is my understanding that OMB has not yet got the message, and I have talked to OMB myself about this. I do not mean to suggest to OMB that you would be arguing against them, but I want OMB to understand that many of us are going to continue to insist that there be adequate funding so that we can stop losing units.

    We are not talking about huge amounts of money—we are talking about $100 million or less, as I assume you know—in a budget of tens of billions. We are talking about a very small percentage of that, is that correct?

    Mr. RAMIREZ. That is correct, sir. And let me have our CFO address the specific amounts.

    Mr. FRANK. Sure.

    Mr. KEEVEY. Just a couple of points, Mr. Congressman. I think you may also be referring to what we call the ''opt-out'' provisions, where some owners are opting out of continuing their facilities in the assistance program, and what happens to the tenents.

    Mr. FRANK. No, I am talking. Yes, all the possible, but——
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    Mr. KEEVEY. Right. We have sufficient dollars in the budget to make sure that anybody who is affected by the opting-out process legislation, there are sufficient dollars in the budget to pay for tenants to move. We have had some other ideas——

    Mr. FRANK. To pay for preserving those units?

    Mr. KEEVEY. Yes, sir.

    Mr. FRANK. When you say ''pay for that,'' what is ''that''?

    Mr. KEEVEY. You pay for the tenant to make sure that that tenant is properly housed elsewhere.

    Mr. FRANK. What does that mean? You give them a voucher?

    Mr. KEEVEY. Yes, give them a voucher.

    Mr. FRANK. All right. Well, I know my diction is poor, sir, but it must have been unusually poor in my most recent comments, because my point was that vouchers do not work in a lot of places; that vouchers are not good enough; and that we need to do everything we can to prevent losing the unit. The vouchers, I believe, are inadequate in some high-cost areas.

    Mr. RAMIREZ. Yes, and Congressman, you are correct in that regard. We are considering requesting for full funding to be able to preserve that housing.
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    Mr. FRANK. To preserve the units, not issue the vouchers?

    Mr. RAMIREZ. Yes.

    Mr. FRANK. One last point I just want to make. In one of the areas in the budget where I was disappointed, and I understand, by the way, I do not say this to be critical of HUD. I think more of the blame goes with that 1997 Balanced Budget Act, which I think unduly constrains us, but I am disturbed that there is not what I would consider to be full funding for public housing, maintenance, modernization, and operation. The poorest people in this country live in public housing. They have been very badly treated. All of us at the Federal, State, and local level have joined together to screw the people who live in public housing. And we just have to remember when we denounce public housing, it is rarely the fault of the people who live there. They are the victims, not the authors, of this. There are some people who misbehave, but the great majority of people who do not misbehave become the victims of the few who do.

    So if we are going to skimp anywhere it seems to me it should not be in provision of adequate funding to run, fix up, modernize public housing, and I would urge you to relook at that, and that is one of the things I want to look at in the appropriations process. Thank you, Mr. Chairman.

    Mr. RAMIREZ. Yes, thank you very much, Congressman.

    Chairman LAZIO. I thank the gentleman. The gentleman from Georgia is recognized.
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    Mr. BARR. Thank you, Mr. Chairman.

    Good afternoon, Mr. Ramirez. I am sorry I was late getting here. I was enjoying both listening to the questions and answers and also reviewing your remarks.

    I do have one question that I do not think has been covered that may be somewhat unique to the Atlanta area. But before I do that, on page two of your testimony, there are two bullet items that—toward the bottom there. One is the first two HUD storefront offices being opened. Where are those?

    Mr. RAMIREZ. Excuse me, I am sorry.

    Mr. BARR. The two HUD storefront offices that have opened?

    Mr. RAMIREZ. We have one here in the District and one that has opened up in Albuquerque recently, where I was joined by the Ranking Senator and the Secretary opening it up. We have got eight more that are projected to be opened during the course of this year and are looking forward to using this the model to be able to better serve communities.

    Mr. BARR. Will Atlanta be among those? This year?

    Mr. RAMIREZ. We—I—yes, sir.

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    Mr. BARR. OK. Thank you.

    Mr. RAMIREZ. I was thinking through the list, but, yes, sir. And they are, in fact, going to be located under our entire operation. We have consolidated all our Atlanta offices into one downtown building, because we are committed to making sure that we keep downtowns vibrant where we have got activities as a Department and included in there is our storefront at the ground floor of this building.

    Mr. BARR. Good. Let me say, by the way, you all have very good people in Atlanta. I have known a lot of them a long time, when I was U.S. Attorney down there, and we would have programs to assist with some of the crime problems. And I have worked with them a great deal since then. You have very good people out of the Atlanta regional office.

    Mr. RAMIREZ. Thank you, Congressman.

    Mr. BARR. The second item on your list after that is the new Section 8 Financial Management Center in Kansas City. Will that be replicated elsewhere? Do you have any specific plans to do that?

    Mr. RAMIREZ. No, sir. What we have done here is we have centralized our Section 8 financial management operation. We have worked our——

    Mr. BARR. So that is a national?

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    Mr. RAMIREZ. Yes, sir.

    Mr. BARR. OK.

    Mr. RAMIREZ. And it is a centralized office for both public and Indian housing Section 8, as well as FHA Section 8, which is now coming on board, sir.

    Mr. BARR. OK. The one question I had was with regard to homeless block grant programs, and I do not know whether some other parts of the country may have the same problem, but when those monies come down and they are then disbursed through a local task force sometimes I am aware of problems. Maybe the central task force, the coordinating task force, does not have the manpower, the expertise, the resources to get those block grants out to the individual recipient agency in the surrounding metropolitan area, and that can create some very serious shortfalls, particularly with some of the smaller social service agencies that rely on timely receipt of those block grant monies.

    When, and if, you have a problem where you have that sort of central task force providing that service, and there are problems, what mechanism is there other than trying to just go through the political route or finding somebody that knows somebody to complain so that those funds can be broke free and received and gotten by the local agencies on a timely basis, because it is creating some problems in Atlanta.

    Mr. RAMIREZ. Yes, sir, and what we have done are really two things. One is that under the program itself we do provide technical assistance to these smaller organizations within the larger structure to be able to make sure that they are adequately doing the work that they need to do and are doing it in a fashion that is effective and efficient for them as well, and actually protects our interests and the resources that we provide as the Federal Government.
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    The other is that we have now also set up a dual track of operation. We have got our public trust officers that do program administration and compliance. And we have our community builders that facilitate the different activities and products or services that we provide. In combination between the community builder and our public trust officers, we will be visiting the different organizations during the scope of our business and operating period or plan, as we have it right now. And so what we have done is we have set up, in effect, a very efficient way of creating an outreach network that is at the local level that allows an organization to not just focus on their specific program, but also be able to see what other programs are available that may help them leverage or augment what ever services they are providing with the resources they receive, Congressman.

    Mr. BARR. If there is a problem that remains. For example—could I just follow up real quick, Mr. Chairman—for example, between, say, one county in particular, Cobb County, which is one of the northwest suburbs of Atlanta, can those funds be separated out so that they can get directly to the agencies in Cobb County, because they are running into a real backlog with the agency in Atlanta?

    Mr. RAMIREZ. Yes, they can.

    Mr. BARR. OK, and would you look into that, please, and could you do that?

    Mr. RAMIREZ. I will be more than glad—if you would like when I am done——
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    Mr. BARR. OK.

    Mr. RAMIREZ. If you would just like to direct me to the staff member that will be working this for you, we will be glad to address it for you, sir.

    Mr. BARR. Ms. Sarah Dumont.

    Mr. RAMIREZ. Thank you, sir.

    Mr. BARR. OK. Thank you very much, Mr. Ramirez.

    Mr. RAMIREZ. Thank you, Congressman.

    Chairman LAZIO. Ms. Velazquez, and then we will recognize Ms. Carson. Thank you.

    Ms. VELAZQUEZ. Thank you, Mr. Chairman.

    Mr. Secretary, based on the Department's projections, does the requested amount of public housing operating subsidies for Fiscal Year 2000 provide 100 percent of the current performing funding system?

    Mr. RAMIREZ. That is our proposal, yes.

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    Ms. VELAZQUEZ. The Fiscal Year 2000 House budget proposes a new $87 million mandatory spending initiative to provide incremental vouchers to 15,000 very poor senior citizens to be administered in conjunction with the Low-Income Housing Tax Credit. How would this program be implemented? And why have you structured this as a mandatory rather than a discretionary budget item?

    Mr. RAMIREZ. Well, the mandatory side of it is one where we felt that, after working the budget through with OMB, that it would be the most practical way to provide a set source of or receiving these resources instead of making them discretionary.

    The other point to your question of why are we setting it up to structure it to allow them to create greater flexibility is that, as you know, the conditions in most of the country are such that housing demands are outstripping housing supply. And so we want to create as much flexibility and leveraging with the resources that we have, as well as tax credits to create the kind of synergism that is necessary to attract developments that are of a quality and a standard that will provide decent living conditions, Congresswoman.

    Ms. VELAZQUEZ. Your budget includes a new initiative to provide $100 million for the conversion of Section 202 elderly housing units to assisted living facilities. How will this initiative work? And how is it designed to address the challenges our aging elderly population faces with respect to rising housing and health care costs?

    Mr. RAMIREZ. Well, that is a very good question, Congresswoman. What this does is, in fact, we have put it out to expand the debate on developing what we propose in our budget, which is a continuum of care for our aging population in America.
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    These $100 million would, in essence, be used for facilities where we have residents that may have moved in in their early 60's and are now hitting their 80's, and their living conditions require that there be modifications made to their units in order to better create adequate living conditions for them to remain in those units. And we want to use these resources to facilitate that, to again get to that end that Congressman Frank mentioned earlier, which was to preserve the current stock that we have.

    Ms. VELAZQUEZ. Can you explain to me why the President's Youth Initiative is going to be funded out of the Drug Elimination Program, knowing that this is such an important tool for the public housing developments?

    Mr. RAMIREZ. Well, what we have—what the President has done is he has, in essence, put his money where his mouth is. He has said that all departments need to work together to deal with how we address the different problems that our youth throughout America encounter. Our contribution to this is not just in the drug elimination traditional focus of those resources, which is building up security systems, providing additional security guards, and other security modifications. We felt that we needed to set aside a pot of money within that drug elimination program to create programs that would better facilitate youth involvement and steering them away from drugs and living productive lives as Americans.

    Ms. VELAZQUEZ. Will the Department request an authorization for the youth program?

    Mr. RAMIREZ. Yes, ma'am.
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    Ms. VELAZQUEZ. Thank you, Mr. Chairman.

    Chairman LAZIO. I thank the gentlelady.

    Ms. Carson, you are recognized.

    Ms. CARSON. Thank you, Mr. Chairman. I have three questions.

    Number one, you awarded $181,000 to Indianapolis for a coordinated services individual for low, pardon me, for elderly citizens. That is the coordinator would essentially connect senior citizens with available supportive services for their particular needs. And my question is whether or not you intend to continue that process while you develop additional Section 202, or was that just a one-time—it lasts for one year.

    Mr. RAMIREZ. It is a continuing program for supportive services, Congresswoman. And we intend to meet our obligations in that regard as they currently exist.

    Ms. CARSON. Then I have another question in terms of your policy. We have a major unit in my district, Y Baker Terrace, that has a mix——

    Mr. RAMIREZ. I am sorry, what terrace?

    Ms. CARSON. Y Baker Terrace in Indianapolis. It has a mix of senior citizens, and it has people who are deinstitutionalized, that is, people that are coming out of prison, people that were homeless, people that are coming out of mental institutions. And it has caused extreme havoc for the senior citizens. The police runs over there—we checked last week—there have been a hundred in the last couple of months, and a lot of them have been battery cases, forced entry on the senior citizens. What is HUD's policy in terms of integrating senior citizens into the mix?
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    Mr. RAMIREZ. Well, first off, what we would like to do is address this particular issue separately with you and your staff, Congresswoman, to get a better understanding of the conditions. Many of the policies that we put out are national policies, but we have included in those policies additional flexibility for local housing authorities, if they are involved, to also set additional policies in dealing with them.

    What I would like to be able to do to better address this specific question is to meet with you and your staff at a later time, that is, at your convenience, to better address this specific issue and see what we can do to help build into it a constructive way of resolving this particular dilemma that you encounter at this particular complex.

    Ms. CARSON. OK, we have several questions, and I will just wait.

    Mr. RAMIREZ. OK.

    Chairman LAZIO. I thank the gentlelady.

    Mr. RAMIREZ. Thank you, Congresswoman.

    Chairman LAZIO. I am not sure who came in. OK, Congresswoman Lee is recognized.

    Ms. LEE. Thank you, Mr. Chairman.
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    Chairman LAZIO. You are welcome.

    Ms. LEE. OK. I want to raise a couple of issues with regard to the opting-out issue that Congressman Frank referred to earlier. It is my understanding that the mark-to-market program was developed in anticipation of this. However, the formula evidently which was put forth in this was designed to help areas where the housing assistance is higher than the market. So, really the object of the mark-to-market effort was to lower the rates.

    Now, in areas such as the San Francisco Bay area, which is one of the highest cost areas in the country, what we are finding is the reverse problem—that it is too low. People are really going to be forced to move because the rents have far exceeded what HUD has allowed to pay.

    So let me just ask you, have you made an assessment of the high rent areas and how this formula is impacting those areas?

    Mr. RAMIREZ. Yes, Congresswoman, we are currently assessing all our portfolio of multi-family units that HUD has an interest in, both public housing and what we do with FHA. We are going to submit to OMAR those properties that meet a certain threshold. The others will be handled in the traditional method of handling it, which would be in essence that our public trust officers, or our program administrators that service that particular area would work with the property owners who, in fact, it is their responsibility to submit appraisals on comparable rents—actual rents, not fair market value rents—but what is actually being paid and going through the assessment process.
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    And so what we have done is that as we receive these assessments from our Real Estate Assessment Center, we can better get a handle on those pockets around the country where this kind of a condition exists, and I am sure that Commissioner Abcar and his staff will be addressing them most expeditiously.

    Ms. LEE. Do you have a strategy, then, based on your assessments? I mean, will you have a strategy?

    Mr. RAMIREZ. Yes, we have a plan, and the plan is that we will coordinate our work with the multi-family hub operations to make sure that as these assessments are brought into the multi-family operation that they will be addressed depending on the kind of economic condition that has existed in that area, whether it be both financial or physical, because we are also going out there and assessing, most importantly I think, the physical condition of many of these properties to make sure that folks are out there living in safe and decent housing.

    Ms. LEE. Thank you very much. I have another question with regard to the homeless assistance. As you know—all of us know, the homeless really do not have a voice here in Washington, DC., and really they do not have a voice in many places in the country. I chaired the Senate Committee on Housing and Land Use in the State of California, and the homeless had no lobby in operation there. Consequently, they were completely left out of any budget, any formulas to develop adequate housing for the population.

    Now, what I am looking at here is whether you proposed in this budget enough money, and correct me if I am wrong, but it allocates 18,000 incremental vouchers for the homeless. Is that what we are talking about nationwide?
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    Mr. RAMIREZ. That is part of it. We have also got our homeless grants that we put out on a competitive basis to also assist in—excuse me? A billion dollars. I am sorry. A billion, a million, sometimes you get confused at this late hour, Congresswoman.

    Ms. LEE. Well, what is your estimate of the number of homeless in this country? Because I know we have 18,000 in the San Francisco Bay Area.

    Mr. RAMIREZ. Well, quite frankly, the homeless conditions of any given part of our country are a moving target. There are on average 600,000 Americans that go homeless on any given night. We have also shown through independent studies that have been made, in particular Columbia University, that our homeless programs as they have been configured with this continuum of care that deals with emergency shelter, housing, transitional housing and permanent housing, and impacting folks that have been homeless, but because of local economic conditions, it is very difficult to gauge in any one city the actual number of homeless that are out there on any given night. But I can tell you that the most recent estimates that we have based on what we have seen is that there are about 600,000 that go homeless on any given night.

    Ms. LEE. Right. And many of these are veterans who are the homeless, so do you coordinate with the VA?

    Mr. RAMIREZ. Yes, ma'am, we certainly do.

    Ms. LEE. OK, I would like to talk to you further about the homeless program. Thank you very much.
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    Mr. RAMIREZ. I would be glad to. Yes, ma'am. Thank you very much.

    Ms. LEE. Thank you, Mr. Chairman.

    Chairman LAZIO. The gentlelady from Illinois, I welcome you to the subcommittee as well, Ms. Schakowsky.

    Ms. SCHAKOWSKY. Thank you, Mr. Chairman.

    Mr. Ramirez.

    Mr. RAMIREZ. Yes, Congresswoman.

    Ms. SCHAKOWSKY. I represent part of the City of Chicago. I am the only person on this Housing Subcommittee that does so, so I feel a particular responsibility to represent the very intense and complicated issues around the City of Chicago. So rather than go into a whole list of those, what I would like to ask you is if we can have the opportunity very soon to sit down and meet and perhaps with some people from the city and my staff and start addressing the problems that we are going to be facing as the CHA retakes control of the housing in Chicago.

    Mr. RAMIREZ. Of the housing stock. Yes.

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    Ms. SCHAKOWSKY. Thank you very much. I wanted to, on a broader level, address once again this issue of the conversion of apartments. Approximately 100,000 previously affordable apartments have been converted to market rate over the past three years, according to your data. And the National Housing Trust maintains that the Nation is losing about 3,000 affordable, federally-subsidized apartments every single month; and that when HUD-assisted apartments are converted to market rates that the average increase in rent is about 50 percent. So this clearly impacts heavily on—well, in my district—mostly on elderly tenants. And I have a breakdown of the nearly 1,000 apartments—units—in the next two years that will—that are threatened now. I mean, I am looking at Highway Terrace at 920 West Lawrence, which is 200 units, primarily elderly Korean people. And, as I look at this list, and I can picture every single building within my district and the people that I have been talking to, this is a crisis in the making here.

    There simply are not the units in this district if they are handed a voucher and told to go find an apartment that are going to be available to them. And while I heard you saying that yes, you have a strategy, I need to know pretty soon what that strategy is, and maybe you could elaborate a little bit on that?

    Mr. RAMIREZ. Well, I can tell you right now. Our strategy is quite frankly, Congresswoman, to do early intervention in those different complexes that are soon to come up for expiration, and work with the property owners to make sure that as we look at the current voucher that is in that building and how it relates to the street market rents that are out there, to be able to stay comparable to those rents.

    Again, what has driven a lot of this is pure and simple economics. There is a great demand for housing throughout this country, and as a result, many of these owners are looking to opt-out of our current subsidized program and go into the open market for their complexes. We are and have developed a strategy to get to these owners early-on to be able to make everything that we have got available to them to keep them in our program and show them the value of staying with our program.
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    Ms. SCHAKOWSKY. Well, I know at least one owner of one of these buildings that would like to stay there if we could accommodate to some extent the financial needs, which it seems to me would be a bargain for taxpayers to do that. It just does not make any sense to figure out how we are going to put these people somewhere else if we can make an arrangement.

    One other question and that is regarding persons with—no, let me ask this. I have so many questions. I met this weekend with people who are concerned with FHA inspections and the high rate of foreclosure. I met with Gail Cincotta and Company, who is interested in the issue of mandatory inspections, and I recently purchased a house and would not think about, even ponder, purchasing a home without an inspection. Why should the Government not—why should not the Government require an inspection before we guarantee loans for any housing? It did not make sense to me.

    Mr. RAMIREZ. Well, we do have a series of requirements that we make sure that the financial institution that is using our product to ensure that mortgage meets.

    And let me just address the high foreclosure rate. Actually, we average about 60,000 foreclosures a year, and that is with a book of business of about 7,000,000 loans that we have got around the country. And we are improving on our ability to get those properties back out in the market and occupied by owners and not third-party ownership into the mix of this process.

    We are working with the industry to modernize and to revamp the inspections and appraisals that go into these properties before we actually put our mortgage on the line. And I can certainly have Commissioner Abcar's staff contact you specifically on that. I will say, though, that Chicago is a bit unusual in its number of foreclosures in comparison to other parts of the country, and there is a higher concentration of foreclosures in Chicago, and we are doing everything to make sure that under our market and management contracts that have just been let to be able to address those properties expeditiously, ma'am. Thank you.
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    Mr. KEEVEY. Congresswoman, I would like to also add that the Department does have what we call ''sticky vouchers'' that allow us to pay higher than the normal amount for a voucher in certain circumstances to allow someone to stay in a facility of the type that you are discussing. So there are some other activities, or other programs we have that would, at least, help address some parts of it.

    Chairman LAZIO. Thank you.

    The gentleman from Washington, Mr. Metcalf.

    Mr. METCALF. Thank you, Mr. Chairman.

    Studies by the National Conference of Mayors and the International Union of Gospel Missions have shown that veterans constitute approximately one-third of the homeless adults in the United States. It is estimated that 275,000 veterans are homeless on any given night, and that twice that number experience homelessness over the course of a year. What type of verification does HUD use to identify the veterans?

    Mr. RAMIREZ. Well, we are quite careful in how we extrapolate that kind of information, because of the population that we are trying to attract and serve and meet their homeless needs, because it does tend to be a situation that makes them leery of coming in and getting the services as a result of that. We work with the local continuums that we fund to make sure to better document the population itself, but more importantly what we do is we make sure that they take a comprehensive approach in dealing with the homelessness problem and dealing not just with the emergency shelter needs, but moving them into transitional housing, as well as permanent housing; and including in there programs that they bring into the mix in this continuum that include counseling services, drug treatment services, job retraining services that are leveraged as a result of us going in there and effectively funding part of that continuum of care initiative.
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    Again, a point specific to your question, Congressman, we are very careful about how we gather that data because, again, and in particular, within that veteran population, there tends to be a great deal of misgivings on the part of these individuals to return to services because of us asking a great deal of background information, questions, that kind of thing.

    Mr. METCALF. Well, thank you very much for that.

    Mr. RAMIREZ. Thank you, sir.

    Mr. METCALF. Do you keep the numbers so that you can answer this: what percentage of HUD's Homeless Assistance Programs have gone specifically to homeless veterans?

    Mr. RAMIREZ. We have an estimate. Again, because these continuum of cares are developed, these grants that we put out for competition are driven locally, what happens is that we allow within our program in this effort to create devolution of dollars for a community to better use to solve their problems that we are able to deal with the populations they need to serve. And they set their own priorities depending on the homeless population. But what we do have is that we have established under Secretary Cuomo and back then Assistant Secretary Cuomo for Community Planning and Development, an office specifically to deal with coordinating veterans' services through the services that we provide and it is called HUD VET, and we use that office quite regularly to make sure that the veteran population is being looked after with the resources that we have, Congressman.
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    Mr. METCALF. OK. Thank you.

    Mr. RAMIREZ. Thank you very much.

    Mr. METCALF. How much money has HUD earmarked for homeless veterans for Fiscal Year 2000?

    Mr. RAMIREZ. We have earmarked a total of $1 billion in homeless grants that are, again, as I mentioned, put out on a competitive basis. These are built on our continuum of care, which allows for local communities to prioritize the different needs that they have and the homeless populations that they want to serve. And so what we do is we encourage the communities to make sure that we hit the veterans populations within those services and ask them to make sure and bring those as a highlight of their continuum to be able to see where we are targeting our services for veterans, and then use our HUD VETS office to better coordinate and make sure that other agencies that can assist are there, and in particular the Veterans Administration.

    Chairman LAZIO. I thank the gentleman.

    The gentlelady from Ohio, Ms. Jones, welcome to the subcommittee.

    Ms. JONES. Thanks, Mr. Chairman.

    Deputy Secretary I want to focus in on the senior area. There are lot of areas I want to ask about, but of particular interest is the senior area to me, because when I was trying to get this job, or position, that I currently have, a number of the people in my district complained about the unavailability of assisted living and the fact that they would be forced into nursing homes versus being able to survive in assisted living.
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    Do you have—how do you get that information out to seniors who may be interested? I am looking at the last page where you talk about integrating housing and health care funding?

    Mr. RAMIREZ. Well, we work with local organizations that are out there helping to provide the different services for the seniors in a community. We work with the States in our Section 202 programs to be able to provide the resources to build additional living capacity for these seniors and also to be able to provide some supportive services. And under our continuum of care concept for the seniors, what we are looking to achieve is to be able to have these facilities built in areas that are accommodating to their needs and are accessible to the kind of services that the elderly need up front.

    We work quite closely also with HHS and what programs they have to be able to make sure that whatever we are doing is also being looked at and coordinated with whatever local activities HHS is carrying out to serve the seniors, Congresswoman.

    Ms. JONES. OK. Now, on the last page, it also says that you are proposing a change in the law to allow the vouchers to be used. Currently, vouchers cannot be used for assisted living, is that correct?

    Mr. RAMIREZ. Correct.

    Ms. JONES. Where are you—is that proposal?

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    Mr. RAMIREZ. It is within our overall request for the vouchers. It is before this subcommittee for consideration, and looking forward to your input as to how to better proceed in making sure that we have these available.

    Ms. JONES. Let me move along a little more quickly. I have several more questions I would like to ask. I am looking at the section on helping seniors stay in their homes, and the proposal about the reverse mortgage—or not the proposal, this reverse mortgage program. Have you a study or anything that would explain to us or tell us what is happening with that program? I am concerned about what level of income does it attract. Are we putting seniors who are in economic straits already into greater economic straits by allowing this program? I am not saying I do not think it is a good idea, but I would like to know what is going on with those seniors?

    Mr. RAMIREZ. Well, we will make sure that this program is one that is just an additional avenue that a senior that may have the resources can tap into to better help them deal with their needs for their homes. We will make sure that it is one that is conducive to making sure that there is sound oversight and that it meets the borrowers satisfaction inasmuch as that there will be several focus groups that we will be bringing in to make sure that we include in it the necessary safeguards so that we do not create a vehicle for perhaps some unscrupulous folks to go out there and take advantage of these elderlies.

    Ms. JONES. Let me stay in the senior area for a moment, and we are talking about the Family First policy, the long term credit for health care and the possibility that Section 8 could be used to allow families who own apartments to rent to their family members under the Section 8 proposal. Let me ask you in exploring the long-term piece, there are a lot of people in my community who do not have apartments, but who are spending lots of dollars and lots of money in their own homes to take care of families. And a thousand dollars is just a drop in the bucket for them in the amount, what they are doing. And so I am asking, is there a possibility that you are going to explore this Section 8 and maybe allow it to include in-home versus solely an individual apartment? Maybe it is a room and bath or whatever. And I know it sounds kind of strange, but if you meet people who are spending so many dollars to take care of their loved ones, anything might help them in that process. And since we are—you still are allowing their IRS in-home offices, even though it is a struggle to do so, why not have in-home nursing care if we are going to do a tax credit in that area?
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    Mr. RAMIREZ. We will certainly look at that Congresswoman.

    Ms. JONES. Thank you very, very much. And I should say I do come behind an icon in the HUD area. I am going to do my best to step up to the plate. Any good things you know that he was doing that I do not know about already, please send them to me.

    Mr. RAMIREZ. Yes.

    Ms. VELAZQUEZ. Would the gentlelady yield the remainder of her time?

    Ms. JONES. I absolutely will.

    Ms. VELAZQUEZ. One second?

    Chairman LAZIO. Yes, let me yield an additional 30 seconds to the gentlelady from Ohio.

    Ms. VELAZQUEZ. Thank you. I just have one question, Mr. Secretary. I understand that the Department requested $3.2 billion in operating subsidies in its budget submission to HUD. According to public housing advocates, $3.3 billion will fund operating subsidies at 100 percent of the formula-established level.

    You stated earlier that the budget request of $3 billion fully funds the operating account. What budget justifications were used that caused HUD to reduce the formula-established level by $2 million since your budget submission to OMB in late 1998? And are those the same erroneous justifications used in Fiscal Year 1999 that have caused the operating accounts for housing authorities to be around $4 million short in Fiscal Year 1999?
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    Mr. RAMIREZ. Let me have our Chief Financial Officer, who handles the books, answer the question.

    Mr. KEEVEY. A couple of observations: we have had over the years some disagreements on what are the best components to be in a formula, current requirements versus what some of the groups believe should be other costs that should be built in. We believe that we have funded 100 percent of the formula at the amount calculated. But we also are going to go into a review and sessions in negotiating rulemaking to establish a new formula and a new basis for allocating dollars for the public housing entity. So that process is due to begin soon. It may increase the dollar amounts that are presently in our budget or it may reduce it. But it is a process that we are going to be entering into shortly—a negotiated rulemaking to determine the formula to fund these institutions.

    Mr. FRANK. If the gentleman would just for a second let me follow up? Would you submit to us in writing those elements which the housing authorities think are included in the formula and that you think are not?

    Mr. KEEVEY. OK.

    Mr. FRANK. And how much of the differential would be attributed to that?

    Mr. KEEVEY. We can do that.

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    Chairman LAZIO. I thank the gentlelady. I thank the gentleman.

    Mr. Capuano.

    Mr. CAPUANO. Thank you, Mr. Chairman.

    Mr. Secretary I guess a lot of the problems that I have with HUD are not self-imposed. And I understand that they are budgetary limitations, and I respect that; and I will be on your side when it comes to increasing appropriations. But I want to do things. Number one is I do want to reemphasize what you have heard from several people today. I come from Boston, probably the most expensive housing market in the country, if not certainly in the northeast. And the vouchers just do not do it. They are great. We will take what we can get. We will take every one of them that we can find, but they are just not sufficient. They do not keep people in the neighborhoods they want to be in because they can no longer afford to be in those neighborhoods.

    I just want to take a minute to talk about a couple of items that I do think are within your purview to address. First of all is prioritization. I am little concerned when I see $700-some-odd-million of new programs, when my concerns are with—we call them ''expiring'' uses. My assumption is that it is the same term as you are using for opting-out. It is all the same program. My hope is that I am right.

    I have people who have already been tossed out of their homes. I have people who are being tossed out of their homes within the next several months. I have people who are going to be tossed out of their homes within the next several years. And until those people are satisfied, because they already have something. It is one thing not getting something. It is another thing altogether to lose what you already had. And I understand the programs. I understand the law. Nobody made any promises. I know all about that. But not one of these people knew that. They moved into these apartments thinking that they were going to be there for a while. And it bothers me a little bit that you are adding new programs without at least advocating for addressing every one of those items first and foremost. That is an item that I think is within your purview.
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    Another item that is listed here—and it is kind of interesting—in your written remarks, I see it going both ways. But it concerns me—I am starting to get concerned a little bit about this big, all of a sudden this year's neat key word is we are all concerned about ''urban sprawl.'' Oh, my God, urban sprawl. The last I knew that was called a ''suburb.'' But we are all concerned about it. I would hope that of all the agencies out there, that HUD will be the agency that will make sure that that term, that programs that might be adopted under those terms, are not the same thing as bigotry, are not the same thing as racism, are not the same thing as socio-economic bigotry, because I am concerned that that is all it is. We want to keep our community the way it is, and we do not want you there. You are one of them. I am one of them. There is lots of us. But they do not want. I want to participate in it, and it will bother me to no end if HUD is silent if that becomes apparent. And I will tell you that it concerns me that on one end you have a request for funding to address sprawl, and on the other end you say that you want to move people away from high concentrations of poverty into places with better education and better opportunities. That is sprawl in some other people's mind.

    So, though I do not expect you to deal with that at the moment, I will tell you unequivocally that I am getting more concerned daily with the term ''anti-sprawl''—or whatever it is going to be—is nothing more than just hidden bigotry or a new term for it.

    And the last item I want to talk about is set-asides. As a former mayor, I've got to tell you that I am a little shocked at your four set-asides, especially in the block grant and the HOME program. I will tell you that my most recent job was mayor, and I will fight to the death any attempt to do set-asides on block grants or the HOME program, though I do not necessarily disagree with the new additions you are trying to do, they are additions. They are new programs. Let us fight for them. Let us see what we can get. But to take away money from a good program, I think I will tell you that as mayor, the block grant to me was probably the best Federal program there was, bar none. And HOME came very close. So I am a little bit surprised that there are requests for additional set-asides, and I would hope that, though you may advocate them today, that you might reconsider your position, remembering your former life and those of us——
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    Mr. RAMIREZ. Well, just for the record, before I became Deputy Secretary, I followed on as Assistant Secretary for Community Planning and Development, where I took Secretary Cuomo's place as Assistant Secretary for Community Planning and Development. He had already put on the path to turn the tide on set-asides, and if you would look at last year's—or this current budget, you would see that actually the set-asides went down, and there were additional monies that went to entitlement communities. We are trying to balance that with the special project grants that are attached as well to our block grant program and what those mean to the overall set aside effort. And I alluded to those as well. But we in this year's budget have $105 million less in set-asides than, in fact, last year, when we had already turned that tide. And we are working to make it even better, Congressman.

    Mr. CAPUANO. Thank you, because, no disrespect intended, it is still too much.

    Mr. RAMIREZ. I, OK. You are not going to get an argument from me on that one.

    Mr. CAPUANO. Then we can just cut that right out right now?

    Mr. RAMIREZ. Well, no, you've got to talk to the Secretary about that, Congressman.

    Chairman LAZIO. I thank the gentleman.

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    The gentleman from Minnesota, Mr. Vento.

    Mr. VENTO. Thank you, Mr. Chairman.

    Mr. Ramirez, I listened to you talk about the ''sticky vouchers'' for the 236, the FHA 236 and the Section 8. I guess you apply them to both when you have an opt-out provision exercised. But is it not true that those sticky vouchers, or those vouchers that are provided in that instance, actually they leave when the resident no longer qualifies for the voucher? How many have been lost in that vein?

    Mr. RAMIREZ. I do not know the number, but you are correct. Once they leave, they dissolve.

    Mr. VENTO. So that actually is a—in terms of extrapolating the costs. I note that, reading ahead here, and I won't be able to stay, but the General Accounting Office is, I believe, if I have read right what they have suggested is critical of the extrapolation that HUD uses with regards to the vouchers. That is to say that they do not extrapolate very far into the future. But there is each year an accumulation of vouchers that have to be renewed. What are we up to now in terms of the appropriation?

    Mr. RAMIREZ. Rich.

    Mr. KEEVEY. The outlays of about $15 billion that we spend now on Section 8.

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    Mr. VENTO. And that comprises how many of the assisted units, both?

    Mr. KEEVEY. About 2.5 million.

    Mr. RAMIREZ. 2.5 million.

    Mr. VENTO. I know my friend, Congressman Frank, had asked about the issue of the efforts to deal with the assisted housing and the opt-out provision in terms of resources. I would just like to underline the importance that I place on that marking the higher cost units to market and how we deal with that particular problem. I appreciate the fact that there is an effort in HUD to deal with that. We have also had some separate initiatives that we have submitted that simply spend real money rather than the commitment money with regards to the mark-to-market proposal. In any case, it is obviously a very urgent problem because we have 260,000 units that are potentially at risk with regards to that. We have got—I mean, we have talked about losing 100,000 in the last three years, but the cumulative number is much higher than that, isn't it, Mr. Ramirez?

    Mr. RAMIREZ. Yes.

    Mr. VENTO. What is the cumulative number, do you know?

    Mr. RAMIREZ. Not off the top of my head, but I can get that in just a second.

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    Mr. VENTO. Well, I think it is about 300,000 units, you know. So it is a lot of units that have been lost. I note that you have a special emphasis on some special programs. I commend you for the commitment in terms of the homeless programs, and is there any—we had had an ongoing disagreement I guess with HUD with regards to the block granting of most of those funds. Some of them, of course, are ready to go out in formula with regards to the emergency shelter program. Others do not. Is there any rethinking going on with regard to what might be block-granted?

    Mr. RAMIREZ. We have found that our experience is that as the continuum of care is developed at the local level that communities, by and large, are finding that this system is much more equitable in getting the kind of resources that they need. It's of a competitive nature, but it also creates a vehicle for greater assimilation of resources and assembly of resources at the local level and allows for the community to better prioritize those needs up front and then compete for those resources.

    So we are pleased with the way the continuum of care has evolved and the fact that now communities have gone through several cycles of this process, they, too, feel that it can help better address their needs in this fashion.

    Mr. VENTO. The criticism in the GAO report says, ''the budget does not provide sufficient information to evaluate the request with regards to a $1 billion increase in the Section 8 Rental Housing Assistance Program,'' that increase. What increase are we talking about here?

    Mr. KEEVEY. We're talking about the increase in BA for the basic Section 8 program, basically driven by increases in rents and/or the new units that we added last year. We provide a certain level of data in our budget and in the backup data and we have a whole range of other data available to GAO and they're now in reviewing that information.
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    Mr. VENTO. Yes, well, they haven't had very much time to do it, I guess, so maybe they'll correct their statement. The issue is that the fair market rents, of course, are going up.

    Mr. KEEVEY. That's part of the reason and part of it is we added some new vouchers last year that has cost in it in the year 2000.

    Mr. VENTO. Can you explain in any detail the changes that you're doing? I noticed that you had drug elimination in here. Are you still pursuing the COMPAC changes in terms of legislation which we've pursued? And you're saying ''yes'' with your head.

    Mr. RAMIREZ. Yes.

    Mr. VENTO. But that doesn't help us for the record, Mr. Ramirez

    Finally, on the program, I'm interested in the Congregate Housing Services Program. I note that you refer to it in the document. Can you give me any further detail on that?

    Mr. RAMIREZ. I'm sorry, Congressman, on the——

    Mr. VENTO. Congregate Housing Services Program. I believe you referred to it as ''nursing program'' within public housing. But the Congregate Housing Services Program?

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    Mr. RAMIREZ. Yes, we are working to make sure that the resources that we provide within this program are addressing the needs and assessing also the demands for those needs as they grow. It is something that, again, we want to make sure that we're not duplicating our end of it with other Federal agencies and we are working toward——

    Mr. VENTO. Well, maybe we could get you the $1,000 credit for the long-term care. With the frail elderly, I think we should realize that there's a significant change in the population of these senior citizen housing units.

    Thank you, Mr. Chairman.

    Mr. RAMIREZ. We would sure appreciate that and it would go a long way.

    Chairman LAZIO. I thank the gentleman.

    The gentlelady from Oregon, Ms. Hooley.

    Ms. HOOLEY. Thank you. First of all, good afternoon and I have to give you a compliment. I know this is a surprise.

    Mr. RAMIREZ. We've been getting more of them lately, by the way, Congresswoman. Thank you.

    Ms. HOOLEY. Oh, good. Well, I appreciate you taking management and making that a top priority. I know when I got to Congress two years ago that people were talking about eliminating HUD and I think the progress you have made, thanks to you and the Secretary and staff, has been amazing. And I would hope that you would continue to make that a top priority, because I think, in essence, it is how you deliver the services that counts. Before I got here, I was on a Housing Authority Board for nine years, so, I've dealt with HUD on the front line and I am pleased to hear what you've done and I hope you continue in that direction. But let me just ask you a couple of quick questions.
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    Mr. RAMIREZ. Yes, ma'am.

    Ms. HOOLEY. My first question regards the Office of Rural Housing. Last year's appropriations gave you $25 million for the Office of Rural Housing and I understand it's not anything you asked for and I don't think we gave you very good directions of what we wanted you to do with it. But I was intrigued with it as a Member who has mostly rural communities in my area. And then, I also saw that you, again, asked for money this appropriations period. So I was wondering if you'll just take a minute and tell me what you've done with last year's appropriations in this program and then what you intend to do with this year's appropriation for that program.

    Mr. RAMIREZ. Well, what we've done is we've been able to help serve rural areas that are in distress. We have put in initiatives along the U.S.-Mexico border in areas called ''colonias'' with this money. We have also worked toward expanding our initiatives along the Mississippi Delta, another area that's rural and highly economically depressed. And we've also gone and started to work within Indian country and developing different initiatives, in particular, one, our Pine Ridge initiative, as well.

    We are looking to take to the next level our activities to better coordinate what we've got by way of expertise, some additional program facilitation that we can make available and coordinate that work with the U.S. Department of Agriculture, which is the principle agency to serve rural America and its needs. But we feel that because there is a great deal of blending that's occurred in our country, that we have expertise and program availability that is non-traditional that can go into our efforts to assist rural America.
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    We've also, within this year's programs, dealt with migrant farm workers and their needs, as they move up and down the country to work, as well as some farmer activities, as well.

    Ms. HOOLEY. Would you tell me, specifically, just give me one example of what you've done with migrant housing?

    Mr. RAMIREZ. What we've done is we're working with the folks in Seattle. They've got a big season for apple-picking. And there is about a four-month period that sees, in certain pockets of the State, the population grow several times over the normal population of the small communities around these orchards. We're working with the State of Washington, local organizations involved in assisting migrant workers, to set up temporary housing that's safe and decent. Because many of these farm workers spend this four-month period living in tents, sending their kids to school with no adequate sanitary facilities and other amenities that are to be and we have come to expect that most Americans can enjoy by way of living conditions.

    Ms. HOOLEY. Let me ask you a question. The NOFA on the rural program was not released as part of the Super NOFA that was released in February?

    Mr. RAMIREZ. No, ma'am.

    Ms. HOOLEY. What?

    Mr. RAMIREZ. No, it went out today.
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    Ms. HOOLEY. It went out today?

    Mr. RAMIREZ. Yes, ma'am.

    Ms. HOOLEY. OK. Thank you. If I have time, Mr. Chairman, just another quick question. You have initiated a new budget proposal, the American Private Investment Corporation, this time?

    Mr. RAMIREZ. Yes.

    Ms. HOOLEY. And this would infuse capital into some of those areas, poor areas, that are currently left behind in this economic expansion. In my district specifically, we've had huge changes in fishing, logging, and agriculture, which has certainly created a burden for my constituents. I have a district that has very hard-working, very skilled people, but what is missing is not only capital investment, but training opportunities for people hurt by these economic changes. Will this program help in those types of situations?

    Mr. RAMIREZ. We will certainly put into this program an incentive for them to include training components, but what we look to do here is to draw from other resources within the Federal Government, again, to coordinate and leverage the programs that we have and we're looking forward to working with the Small Business Administration, as well as the Department of Labor, and others, as we move into the program itself with HUD taking the lead in the development of this program.

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    Ms. HOOLEY. And let me ask one last question. I have several, but just let me ask one last question. I know that there have been problems in many of the tribes in regards to their housing. It was housing that was built very cheaply. It's falling apart. What are we doing about that?

    Mr. RAMIREZ. I'm sorry, Congresswoman. On the housing needs——

    Ms. HOOLEY. On the housing needs for some of the tribal communities.

    Mr. RAMIREZ. Well, we're working with them to develop—in this case, with the Department of Interior, I've had at my level several meetings. And then staff, within the ONAP Office, as well as BIA, to work to develop a system of easier access to financing for homes within the reservation. A more current initiative that we have, as I mentioned to you earlier, was our Pine Ridge initiative, in which we're building—we're working toward sometime in July and August, both having a symposium and summit on how we can attract additional investment into the reservations, as well as a subsequent build-out of homes over a period of about three weeks. And we're going to put on the ground multiples of ten homes at a time during that period.

    Ms. HOOLEY. Let's hope we build them better than we did last time.

    Mr. RAMIREZ. Well, last time we didn't build them. That's why they weren't as good.
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    Ms. HOOLEY. Thank you. Thanks for the time.

    Ms. HOOLEY. Yes, and I would yield time.

    Chairman LAZIO. I'm going to recognize the gentlelady directly.

    Ms. LEE. Thank you very much, Mr. Chairman.

    Let me just ask you about the $20 million budget request for the Regional Opportunity Counseling Program which, I assume, provides for innovative counseling that enables Section 8 families to move into other areas where there are better education and job opportunities.

    Mr. RAMIREZ. Yes, ma'am.

    Ms. LEE. Tell me just a little bit about that because, for example, I know that in my district, or if it were I, for example, going through this counseling to seek better housing in another area, just in my region, I'd be run out of town in many of those areas. Racism and discrimination is alive in America. Do you have built into this counseling of landlords in those metropolitan areas where the Section 8 recipients would be advised or counseled to seek housing in?

    Mr. RAMIREZ. Yes, ma'am. We do. And what we've done with these $20 million is we've engaged organizations that have multiple sites at the local level, engaging those sites with a pass-through, in essence, to develop the kind of counseling services that deal with, you know, how to deal with transitioning yourself—but more basic things like how to work a budget, what kind of—how to plan for home ownership, and those——
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    Ms. LEE. I'm not talking about the tenant. I'm talking about the landlords where these people will be moving to seek housing. Are these landlords being counseled to be told that there are anti-discrimination laws on the book and they must give people fair treatment?

    Mr. RAMIREZ. Yes. Oh, yes, I'm sorry. Yes. And we are doing that and we do more of that with our FHEO program and using local organizations that we also fund. In fact, we are requesting for an 18 percent increase in our Fair Housing Programs to be able to better facilitate additional awareness of the fact that there are laws out there that do not allow for discrimination to take place and that afford equal opportunities.

    Ms. LEE. And be coordinated with the Regional Opportunity Counseling?

    Mr. RAMIREZ. Yes, ma'am.

    Ms. LEE. Thank you very much.

    Chairman LAZIO. I thank the gentlelady.

    Before you leave, Mr. Secretary, you have heard that there is a broad array of questions and concerns.

    Mr. RAMIREZ. Yes.
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    Chairman LAZIO. We're going to be submitting additional questions which we'd ask the Department to respond to. One last point I'd like to make, because it's really in line with some of my concerns and some of the other Members' concerns about the Department's position on the Section 202, 811 programs involving the seniors and persons with disabilities. While the Department is advocating a $2.5-billion increase in this budget, not one additional dollar is being proposed for Native American housing, which is the worst housing that we have in the continental United States, with all due respect to that trust relationship. It seems to me that the Department, in terms of taking some direction and establishing a mission, has got to be focused on those people who are very most in need. There is not a single Native American reservation in my district. But I think it is a measure of who we are as a country that we do not participate more fully regarding the housing of Native Americans. They have special needs because their infrastructure needs far outstrip the infrastructure needs in other parts of the country. I know because of where you come from, you are personally sensitive to this, but when it comes to Native Americans, the elderly, and the disabled, the Department's advocating an increase of $2.5 billion on all the other programs and on these three, either a decrease or not one new cent? I hope you go back and if you can, please rethink some of those priorities.

    Mr. RAMIREZ. Well, we certainly will look at that, Mr. Chairman. As you know, we do have $620 million that have been set aside, that's flat fund for Native Americans under the new NAHASDA legislation which is now taking its—actually is in implementation and being carried out. It is helping us better assess the kinds of needs that can be served with the resources that we provide and we will certainly be looking to address them in an effective way and look forward to working with you, Mr. Chairman, and the rest of this subcommittee to do so.
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    Chairman LAZIO. I thank you, Mr. Secretary.

    Mr. RAMIREZ. Thank you.

    Chairman LAZIO. Thank you very much, gentlemen. Thank you.

    Next panel, please.

    The next witness is welcomed. She's Ms. Judy England-Joseph, who's no stranger to this subcommittee, has been of extraordinary assistance to both the subcommittee and to myself. She's Director of the Housing and Community Development Division for the U.S. General Accounting Office. She has superior expertise within housing and community development areas. The public is very fortunate to have you as a public servant and you've provided invaluable insight and expertise for many years to both myself and the subcommittee.

    So I welcome you back and thank you for your submitted testimony and recognize you for your opening statement.


    Ms. ENGLAND-JOSEPH. Thank you, Mr. Chairman. Thank you for your very kind comments and to Members of this subcommittee. It's a pleasure to be here today to talk about the Fiscal Year 2000 budget request for the Housing and Urban Development Department. Before I start, though, I want to be sure that it's clear that we're doing work for the Senate and House Appropriations subcommittees responsible for HUD, and so this report today is simply a status report, an early status report, having just received HUD's budget justification about two weeks ago. And as of yet, we've had very little contact with people in HUD to get documentation and background in support for this budget proposal. So we will be working with HUD and with the appropriators over the next several months with the idea of reporting out by the end of summer.
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    My focus today would be to talk about two things: the new initiatives or significant increases that are proposed by HUD, and our observations about HUD's request for funding relating to several issues we've reported on in the past year.

    One thing I do want to make clear is that it was very intentional on my organization's part not to use the words ''high risk'' in this statement. I don't know whether anybody picked that up, but it was intentional because I agree with the Deputy Secretary that it should not be on the basis of that designation, or that designation alone, that any decisions about the future budget of HUD should rest. It should be about what is needed in terms of supporting the financial needs of the housing policies of the Nation, and whether, in fact, the agency has the capacity and ability to carry that out.

    So, with that in mind, there are five points that I wanted to highlight. First, that we are concerned about HUD's capacity to begin new work when it is in the midst of significant efforts to reform and reinvent itself. To support what we count as nineteen new programs and initiatives, HUD is requesting nearly $731 million of its' $28-billion request for Fiscal Year 2000. And in each case, these are funds for purposes that the Congress did not provide funding for in Fiscal Year 1999. HUD also proposes several large increases to existing programs.

    While the budget impact, a net increase of about 9 percent in new budget authority, of the new programs and increases to existing programs that HUD proposes may not seem overwhelming, the budget request does raise questions about HUD's capacity to manage such an increase. Questions arise because HUD is currently going through a significant, complex and time-consuming organizational reform in which functions that it once managed in many field offices will be managed in one or more centers in various parts of the country. This reform is necessary to improve the efficiency and effectiveness of HUD's operations and to address longstanding, yet very basic problems in program management.
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    In addition, new initiatives and programs require a certain amount of dedicated resources to plan, implement, and manage over the long-term, and so it's questionable whether these resources are available at this point in time in the reinvention of HUD. Therefore, we are concerned about whether HUD has the capacity to effectively initiate and oversee the set of new programs it's proposing for Fiscal Year 2000 while it's also trying to develop for itself a new operating style and a new way of doing business.

    Our second point relates to one of the most significant increases in HUD's current programs. That's the billion-dollar increase in the Section 8 Rental Housing Assistance Program. HUD would use these additional funds to renew expiring contracts in both the tenant-based and project-based components of this program. However, the budget does not provide sufficient information for us to evaluate this request.

    We believe a number of associated issues exist that warrant further review, including the extent to which HUD has used unexpended balances to offset its request, the basis for the Section 8 contract renewal cost, and the rationale for the $4.2-billion in advanced appropriations for Fiscal Year 2001 requested in this budget request.

    The third point we'd make about HUD's proposal is the tracking and oversight of many of HUD's new initiatives which are made difficult because of information in HUD's grants management system. HUD's grants management system currently is unreliable, and without reliable information, HUD cannot effectively administer and monitor new initiatives in its Community Planning and Development program area.

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    Although HUD plans to develop a new system, it is several years away from implementation, and in the meantime, HUD's Fiscal Year 2000 budget request proposes to continue adding set-asides to the CDBG program. HUD cannot be assured that financial tracking of the individual grants and grantees will be adequate using the current information system.

    Fourth, in one of its largest new initiatives, HUD is requesting over $200 million to fund contract administrators for its project-based Section 8 Housing Assistance Program. We, as well as the HUD Inspector General and the National Academy of Public Administration, have done work in the past and reported on HUD's contracting activities, saying there are weaknesses in HUD's ability to administer contracts and monitor contractor performance.

    HUD's budget request states that having contractor administrators will give HUD field staff more time to perform program management functions. We believe that the success of this program will depend on the adequacy of HUD's contract selection, administration, and most importantly, oversight of its contractors. The Congress needs to be assured from HUD that it has the capacity to perform this functions for such a large initial contracting endeavor.

    And finally, HUD is proposing both a new initiative and a program increase in the area of empowerment zones, as well as two set-asides in the Community Development Block Grant program for empowerment zones. These proposals raise questions about how the programs will coordinate with and benefit from each other because they target similar beneficiaries.

    This concludes my remarks, Mr. Chairman. I'm happy to answer any questions you or the Members might have.

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    Chairman LAZIO. I thank you very much. And once again, thank you for your summary and your entire statement will be included in the record.

    You had mentioned at the outset that you were reluctant to use this designation of ''high risk'' as a way to characterize the Department. Why is that, number one; and number two, can you describe what you believe ''high risk'' means to an average American? How does it translate to their lives?

    Ms. ENGLAND-JOSEPH. Well, my point, in part, was to respond to the Deputy Secretary about putting forth testimony like ours—when the agency has been identified as ''high risk''—as if to indicate that the designation, in and of itself, should dictate what decisions Congress and others might need to make. And I wanted to make it very clear that ought not to be the sole basis on which decisions be made about HUD's appropriations.

    The fact that HUD is ''high risk'' is on the table, it is an issue. There are a number of issues associated with HUD's management and oversight of its programs, its organizational structure, and its capacity in terms of resources and staff that make its programs, taken together, at high risk to fraud, waste and abuse. However, I think when you're looking at the appropriations process, it's important to look at each individual request and determine on the merits of the request whether those are, in fact, important enough to fund. And whether HUD has the capacity to carry those out.

    So, I have not wanted to make that the issue. The issue ought to be the sum and substance of what I've heard you all talking about today, which are the individual programs that are important to the Congress and how effective are they being carried out and could they be improved? And are there other priorities that Congress would rather see in the budget than perhaps the priorities that the Department has set out.
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    In terms of what does the ''high risk'' designation mean to an average American. It simply means that we, the General Accounting Office, are unable to report to you, the Congress, and to the taxpayers, that HUD's programs are managed in a way to assure that they can be effectively carried out without minimizing the opportunity for fraud, waste and abuse. It's a management issue that ultimately ends up being a means to an end, because these means, which are the management aspects of any agency's activities, are all carried out with the idea of having effective outcomes, effective results, in terms of program implementation.

    Chairman LAZIO. Last May, HUD predicted that it would be off the ''high risk'' designation list by the Spring of this year, Spring of 1999. However, GAO's January 1999 report seemed to say while there's been progress made, there is still a long way to go in terms of some of these management problem areas which translates into this ''high risk'' designation. When do you think that we should reasonably set as a timeline for us to reassess HUD and when do you think we can expect HUD to no longer be a high-risk Federal department?

    Ms. ENGLAND-JOSEPH. I can't really say when I think HUD ought to be off the high risk list. That really is dependent on the progress that HUD makes over the next year or two.

    I think the next 18 months are critical to HUD because of the management reforms that were implemented last year. Those management reforms have just now begun to be a part of the fabric of this agency's activities. And so, the next 18 months or so, we will see the results of the newly created centers that they have established for enforcement and real estate assessment and contract management for Section 8. Those are all important organizational changes the organization has made, but they are not up and running in a way that fully shows that they are achieving the results we are expecting. We also do not know whether the reforms deal with the underlying problems that we have identified in the past.
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    Today, there are a number of things that still cause HUD to be high risk. HUD does not know today and cannot tell you about the stock that they have responsibility for overseeing in the multi-family area. They are in the process of assessing the physical and financial condition of those properties, but today they cannot tell you for that inventory the physical conditions of the housing. They cannot today tell you about the Section 8 tenant-based program where many people use subsidies to rent from private owners. We do not know, nor does HUD, no one really knows the condition of the properties that those people are renting.

    Today, HUD cannot tell you what really are the needs of public housing authorities, both physical and financial, in terms of modernization. And I think this came up a few minutes ago when the questions were being asked by Mr. Frank and Ms. Velazquez. There are many issues associated with understanding what will be needed to financially support and modernize a public housing stock that today is in much need of repair.

    HUD, today, cannot tell you about the quality of appraisers who are appraising the properties that are currently insured by the single-family FHA program. That's over $300 billion of outstanding debt for which the Government holds 100 percent insurance liability if those loans go under, and I certainly don't want to give the impression that these loans are going to go under. However, HUD does not know the quality of the appraisals that are done and that underlie the collateral on which we are basing this 100 percent insurance.

    Today, they don't know the performance and financial activities of the CDBG Program where nearly $5 billion a year is awarded to a number of States and entities through cities and entitlement communities.
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    I can go on and on. There are a lot of things that, if we were looking at an agency we'd like to see managed to a standard that said it's a well-run agency; HUD isn't anywhere near that standard. And because HUD doesn't have the kind of information I'm suggesting to you it needs, the Department is vulnerable to fraud, waste, and abuse.

    Chairman LAZIO. Five years ago, NAPA, the National Academy of Public Administration, issued a report which said that: ''If, after five years, HUD is not operating under a clear legislative mandate and in an effective accountable manner, the President and Congress should seriously consider dismantling the department and moving its core functions elsewhere.'' It's now almost five years since this report was issued. Few really want to dismantle this department. But the time clock is ticking and many of us are concerned about the direction of the department, its lack of core mission, its evaluation of where the department needs to go for the next twenty years, which functions it needs to shed and which it needs to focus on.

    The fact that some of the personnel decisions have been made without an understanding of what the core mission is, without adapting itself to a new, more modern mission in some senses. Could you comment on that, as to whether you think that that is a core problem? A lack of understanding of what the core mission is going to be and how much of the problems that HUD has follows from that?

    Ms. ENGLAND-JOSEPH. HUD has a tremendous responsibility, absolutely tremendous responsibility, and it affects everybody, every American. To that end, it's very difficult, I think, to have an agency with such a broad mission, or many missions, try to satisfy them effectively. That's why I think this five-year limit from the NAPA report, is probably not a reasonable question for me to even attempt to answer. It's a policymaking issue—it is for you all as policymakers to decide really what the future of HUD is.
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    But what I do know is that HUD has a number of responsibilities and continues to add new responsibilities to its plate when it adds new initiatives. And when that happens, some of the core responsibilities are jeopardized. This includes responsibilities like public housing and Section 8, and really understanding where should we be going in terms of housing policy in the future, given issues like the elderly and the aging stock that we're dealing with. These issues are probably the most important for HUD officials to focus on. And right now, they do have a lot on their plate. I don't know if they can do any one of them as effectively as we might like.

    Chairman LAZIO. Thank you.

    Mr. Frank.

    Mr. FRANK. It did seem to me that HUD raised an interesting question when it talked about the congressional earmarks, setting up administrative requirements over fairly small projects. What's GAO's evaluation of that?

    Ms. ENGLAND-JOSEPH. I'd have to check with our budget people who do a review of the entire Federal budget.

    Mr. FRANK. No, no. I'm not talking from the budget standpoint. I'm talking about from the management standpoint. You're here talking about management and about capacity being stretched. It does seem to me—have you looked at what the effect on HUD's management capacity is of these congressional earmarks, setting up all these individual programs?
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    Ms. ENGLAND-JOSEPH. No, sir, we haven't.

    Mr. FRANK. Why not? Why haven't you? Is it that nobody ever thought of it?

    Ms. ENGLAND-JOSEPH. One-hundred percent of our work is congressionally requested or mandated by law.

    Mr. FRANK. Well, but nobody ever told you not to look at this. People said ''look at HUD.'' This is part of HUD. Why would this not be part of your looking at HUD?

    Ms. ENGLAND-JOSEPH. Typically, when we are asked to do work by the Congress, we identify——

    Mr. FRANK. Excuse me. You did an overall view of HUD, did you not?

    Ms. ENGLAND-JOSEPH. Yes, we did. We looked——

    Mr. FRANK. And did you do that and say ''but don't look at congressional earmarks?''

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    Mr. FRANK. Even by our standards, that would be a little bit self-serving. So why, when you looked at HUD overall, did you not look at what would seem to be a very reasonable point. You point out that you think HUD's making a mistake by asking for new programs. Well, is it not a mistake for Congress to give HUD new programs?

    Ms. ENGLAND-JOSEPH. It's really a decision of Congress to give HUD new programs. When we——

    Mr. FRANK. Oh, no, no. Excuse me. Excuse me. Yes, of course it's the decision of Congress. It's the decision of Congress whether we should accept HUD's request or not. But you also have a right to evaluate them. You have said that HUD has management problems and that these management problems would be exacerbated by the proliferation of new programs. Is the fact that Congress is the source of that proliferation part of the study?

    Ms. ENGLAND-JOSEPH. Two things. One, the fact that we've done work in the ''high risk'' area where we've identified issues of capacity, we looked at the core, basic, broadest commission——

    Mr. FRANK. That's not—excuse, again. I'm sorry, but——

    Ms. ENGLAND-JOSEPH. I just want to explain why we were doing what we did——

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    Mr. FRANK. No, but that's—I am talking about your testimony in which you talk about, and are suggesting that it's a bad idea for them to get into new programs. So what you just told me is wholly irrelevant to that. I'm quoting you. You have cited new programs and said ''be careful about getting into new programs.'' HUD makes a perfectly reasonable point that much of the new boutique kind of things they have to get into, Congress mandates. So that's got nothing to do with what you just said.

    Ms. ENGLAND-JOSEPH. When we looked at this budget, when we looked at the budget for Fiscal Year 2000, we looked at every program that was proposed in that budget. In fact, we looked at everything that was being proposed.

    Mr. FRANK. I don't understand why this is difficult for you. The problem, of course, is that we are talking about programs that are not proposed in HUD's budget, but are proposed subsequent to the budget getting here by Congress. Have you ever looked at the impact on HUD's management of the congressional earmarks and the requirement that HUD pay attention to them?

    Ms. ENGLAND-JOSEPH. No, sir, we haven't.

    Mr. FRANK. OK. I must say that seems to me a pretty glaring omission.

    Ms. ENGLAND-JOSEPH. Is that something that you would like us to look at?

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    Mr. FRANK. Well, I——

    Ms. ENGLAND-JOSEPH. Is that what you're suggesting?

    Mr. FRANK. Well, frankly, I haven't paid a lot of attention to what I thought you ought to do. I am saying, though, that if you're going to come here and represent that you've looked at HUD overall, you've made a pretty glaring omission.

    Next, I have some questions about some of the areas you've said where HUD hasn't done enough. You said that they were at risk because they haven't done a good inventory of all the private housing where there are Section 8 units. Is that correct? You said they didn't know what condition these houses were in. Is that correct?

    Ms. ENGLAND-JOSEPH. Today. Yes, sir. Today.

    Mr. FRANK. How many Section 8 private units are there? Do you know?

    Ms. ENGLAND-JOSEPH. Currently, today, there are approximately 1.5 million units of tenant-based Section 8 housing.

    Mr. FRANK. So your view is that HUD is deficient because it hasn't inspected all those 1.5 million? What would it cost HUD to look at those? You see, I think this is part of the problem. Frankly, if HUD were out checking every single one of those 1.5 million, what would the budgetary impact be?
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    Ms. ENGLAND-JOSEPH. Sir, I'm not suggesting that they need to go out and inspect every single property, but they do need to have enough of an idea about those properties——

    Mr. FRANK. How do they get that idea? Remember, we're not——

    Ms. ENGLAND-JOSEPH. They take a random sample.

    Mr. FRANK. What?

    Ms. ENGLAND-JOSEPH. They sample. Just the way they did as a part of the Ernst and Young study last year.

    Mr. FRANK. I'm talking about—I don't care about Ernst and Young or anything else. Here's the problem: we don't give them enough money and then we complain if they don't do that. How much do you think they would have to spend to go out, of the 1.5 million units, how many would they have to sample and how regularly to satisfy you that they knew what the condition was?

    Ms. ENGLAND-JOSEPH. I'd have to talk to my statisticians——

    Mr. FRANK. I'd like you to get back to me about what it would cost to do that kind of—on an annual basis——
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    Ms. ENGLAND-JOSEPH. Well, actually, sir, that is what HUD has proposed to do.

    Mr. FRANK. No, I'm asking you what you think it would cost. What HUD proposed doesn't become relevant at this point. I want to know what you think it would cost.

    Ms. ENGLAND-JOSEPH. But to some extent, sir, it does become relevant because we have supported the strategy that HUD has said that they——

    Mr. FRANK. Would you tell me how much you think it would cost when you get back to me?


    Mr. FRANK. That wouldn't be hard, would it? It would make me happy, you wouldn't mind to do that?

    Ms. ENGLAND-JOSEPH. Absolutely, I would be very happy to do that.

    Mr. FRANK. You see, I think that when we find out how much that would cost, we would say ''don't do that'' because there is a check on the Section 8 housing. The individuals are out there trying to get it. Now, very few people have an incentive to live in really rotten housing. So, when you have the Section 8 program, it's got a kind of built-in check. You are giving this to the individual and the individual goes out and tries to find the housing. And I think they try to find, being rational, the best housing they can find. So I'm a little less worried than you about that.
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    But let's move on now to the CDBG. You say that's not being checked enough?

    Ms. ENGLAND-JOSEPH. I'm saying that the program—the data and information that's available to HUD is unreliable.

    Mr. FRANK. The data and information about the program?

    Ms. ENGLAND-JOSEPH. For overseeing—yes, for overseeing——

    Mr. FRANK. Meaning that the cities and towns and States can't be trusted?

    Ms. ENGLAND-JOSEPH. No, sir. It means——

    Mr. FRANK. Well, they're the ones who spend the money. CDBG is spent entirely by cities and towns and villages and States. So, what's the unreliability? Are they wasting it? Stealing it? Because that's—again, we're going to run into a problem, because if we started to increase oversight, I guarantee you this place would be full of people who were called by their mayor and their governor saying ''get those people off my back and stop harassing me.''

    Ms. ENGLAND-JOSEPH. Actually, sir, we've just finished work on the CDBG program. We went out and talked to grantees and sub-grantees, and they have absolutely no problem with the data that they know they're required to provide to HUD. The system that HUD has laid out to provide that information is flawed. It's a problem.
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    Mr. FRANK. How is it flawed? What data are they not getting that they should get?

    Ms. ENGLAND-JOSEPH. The information system that HUD has——

    Mr. FRANK. Excuse me, what data are they not getting that they should get?

    Ms. ENGLAND-JOSEPH. Program activities, program information on how those CDBG funds are being used.

    Mr. FRANK. From the standpoint of what—whether they're being used illegally? Because, I have to say this, if it's a question of effectiveness, we have said that's none of HUD's business. HUD gives those funds according to congressional mandate to municipalities and States. They should only be given to places that are eligible. But as to effectiveness, we've taken that decision out of HUD's hands, haven't we?

    Ms. ENGLAND-JOSEPH. Well, actually, what you have said is that there are certain program requirements that you want HUD to meet and those grantees to meet. That you have put some——

    Mr. FRANK. They're eligibility ones, but they're not effectiveness ones. What are——
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    Ms. ENGLAND-JOSEPH. They're program—and that's what I'm talking about, simple program requirements.

    Mr. FRANK. Just eligibility.

    Ms. ENGLAND-JOSEPH. Basic program requirements.

    Mr. FRANK. Well, besides—beyond eligibility, what are they? That's what I'm trying to get you to tell me.

    Ms. ENGLAND-JOSEPH. Well, that's the basic information that HUD requires——

    Mr. FRANK. Tell me what the—no, I——

    Ms. ENGLAND-JOSEPH. Performance activities, the projects that those dollars are being used for, and the activities that those dollars are being used for.

    Mr. FRANK. Well, I, again, I don't understand what you're afraid of. Are you afraid that they would be ineligible under the law, that they went to people that had too much money? Because beyond that, I don't know what HUD has to say about it. I mean, the CDBG is a local delegation. Other than they're being spent in an ineligible area, what would be the problem that you would expect to find?

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    Ms. ENGLAND-JOSEPH. Besides ineligible activities?

    Mr. FRANK. Right, besides ineligibility.

    Ms. ENGLAND-JOSEPH. It would be any indications where the money wasn't going for what it was said to be spent for.

    Mr. FRANK. Well that's—I don't see how HUD would check that. I mean, who, how, people—unless they went out and monitored this. HUD's supposed to go out and check to see if the communities are lying to them?

    Ms. ENGLAND-JOSEPH. HUD has a requirement on the books and a responsibility to oversee and monitor——

    Mr. FRANK. Oversee and monitor are very vague words. I really need to get specifics. The notion that HUD has to do more checking up on the cities—again, I think you would run into a problem.

    But let me go on to the last one, FHA. You were suggesting that HUD's at risk because you don't have good FHA appraisers or that we don't know if we have good ones. My sense, though, is that the FHA program these days is working pretty well and it's pretty secure. Do you think the loss ratio on FHA is excessive?

    Ms. ENGLAND-JOSEPH. No, sir. The work that we did——

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    Mr. FRANK. So there's no objective problem with FHA?

    Ms. ENGLAND-JOSEPH. The work that we did last year indicated that there were some questions associated with the quality of appraisals.

    Mr. FRANK. I understand that. Please don't repeat yourself, because we don't have a lot of time. I know that you said there was a problem with the appraisals. What I'm saying to you is that maybe that's not such a big deal because we have the FHA results and if, in fact, bad appraising was causing problems, wouldn't we see it somewhere in excessive losses, people being given loans they couldn't maintain? What's the loss record of the FHA?

    Ms. ENGLAND-JOSEPH. The appraisal issue is not associated with necessarily the loss, sir. It's the quality of housing that's actually being underwritten by the Federal Government and at some future point whenever those people can no longer stay in that housing, then it's, yes——

    Mr. FRANK. I agree, but——

    Ms. ENGLAND-JOSEPH. But if they don't leave that housing, they're living in housing that may be substandard and not of the value that it was appraised for.

    Mr. FRANK. Well, I understand that, again—but if there was a problem with the appraising, it didn't just start recently. It would have been over time. And is there any showing that inaccurate and faulty appraising has caused problems over any period of time?
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    Ms. ENGLAND-JOSEPH. Actually, there have been changes to the appraisal process in the last three years and so, no, we wouldn't be able to see over time because we'd probably see these problems in the next three to five years.

    Mr. FRANK. OK, thank you. I would just, if I could, I would like to see what is the formula by which an agency becomes ''high risk.'' I'd like to see the written description of the criteria and the formula.

    Chairman LAZIO. Thank you.

    Ms. CARSON. Thank you, Mr. Chairman. I don't want to be redundant, but I have some concerns about the observation, if you will, of HUD. Because we have a lot of activity in my district and I know that HUD is trying laboriously to upscale its operations, given the limited manpower that it has. It's been creative in terms of creating community builders and to stay on top of that. Could you tell me specifically what you would do if you were head of HUD in terms of responding to the magnitude of problems HUD is having? What would you do?

    Ms. ENGLAND-JOSEPH. I would centralize the focus to the highest priorities in the department in terms of public housing, Section 8, and the FHA program and CDBG. Those are the four basic programs that HUD has. And I'd focus very direct attention to the issues associated with fiduciary responsibility, trying to equally balance that with customer or client service.

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    Now, some of that, HUD is attempting to try to do and we have been very positive about the actions that HUD is taking to try to move itself into more of a collaborative, yet fiscally responsible agency. But this is still very early in the implementation of these reforms and so it's yet too early to tell how successful HUD will be. We have been very supportive of the plan that HUD has had and that they are embarking on, but it's much too early to see if they are going to be able to effectively accomplish what they've said they wanted to accomplish.

    Ms. CARSON. So then, in conclusion, you would allow that it is too early to make a definitive, positive, critical analysis of HUD in terms of where it's going? It's too early.

    Ms. ENGLAND-JOSEPH. It's too early to tell whether the reforms—the results of those reforms, are effective. Absolutely.

    Ms. CARSON. Thank you, ma'am.

    Mr. Chairman, I have no further questions.

    Chairman LAZIO. Thank you very much, Ms. Carson.

    Let me just ask, if I can, a couple of questions. Getting back to the FHA portfolio, because it's a very important question. And I think the issue really is are we losing money that we shouldn't be losing? Do we have such a lack of capacity in terms of management, that properties are held unnecessarily in default for a long period of time, costing losses that erode our ability to perform other tasks? Even though properties are not necessarily pushed into foreclosure. So the question I have for you is where is HUD making basic errors in terms of the management of HUD-insured properties, FHA-insured properties that are already effectively in default?
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    Ms. ENGLAND-JOSEPH. So you're saying from the time that they have defaulted, but they have not been foreclosed upon?

    Chairman LAZIO. Yes.

    Ms. ENGLAND-JOSEPH. I can't tell you where HUD is today on that particular issue. They have been talking about making changes to that aspect of the program. Our recent work has been much more focused on how HUD has managed its portfolio of foreclosed properties.

    Chairman LAZIO. So in terms of assignment, disposition, property disposition, how would you characterize that?

    Ms. ENGLAND-JOSEPH. So you would include all the way to the selling of that property?

    Chairman LAZIO. Yes.

    Ms. ENGLAND-JOSEPH. When we issued a report back in March of 1998, HUD had some serious problems. Over the last several months they have been discussing ways in which they could change the way they oversee and manage those properties and their disposition of those properties.

    So we have not gone back in since March. I am aware that the NBC show that aired the other night, where NBC was able to find with ease properties that were in the same condition we found back in March, I guess, in three cities that we had not visited and then a fourth city that we also had visited. So it might suggest that HUD has some plans and some actions underway to try to improve the way they manage and dispose of those properties, that they haven't really gotten to a point of affecting those properties today.
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    Chairman LAZIO. Yes. ''The Fleecing of America,'' the NBC show, did highlight the effect of some of these properties on their surrounding communities That report is completely consistent with testimony that we've had before this subcommittee and many, many, many advocates who have worked through the subcommittee staff and have talked to me directly.

    When you have HUD-owned property that is allowed to fall into disrepair, that becomes a blight on the community, that becomes a place for illegal activity, a magnet for all the worst problems the community has, it has a corrosive and malignant effect on the community. Especially one that's trying to get its act together. And for the Federal Government to be responsible for that is a huge anomaly, considering the rhetoric that we often use about trying to help some of the most underserved communities, because that's exactly the communities that are most likely to be the ones who have this problem as a result of Federal inactivity, whatever it might be.

    I hope we can focus on that. I would ask that GAO spend some time on that and be prepared to report back to the subcommittee on the progress of the department in terms of addressing what I think is a very serious problem for America's communities.

    I want to thank you for your testimony. As always, I know it is a tough job. There are some tough questions that have to be asked. You answer them professionally and I am grateful for that because that aids this subcommittee immeasurably in getting the right things done. I thank you.

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    Ms. ENGLAND-JOSEPH. Thank you very much.

    Chairman LAZIO. This hearing is now in adjournment.

    [Whereupon, at 5:23 p.m., the hearing adjourned, subject to the call of the Chair.]