Page 1       TOP OF DOC

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

    The subcommittee met, pursuant to call, at 2:45 p.m., in room 228, Rayburn House Office Building, Hon. Rick Lazio, [chairman of the subcommittee], presiding.

    Present: Chairman Lazio; Representatives Ney, Bereuter, Baker, Roukema, Leach (ex officio), Frank, Velázquez, Hooley, Vento, Lee, and Jones of Ohio.

    Also Present: Representative LaFalce.

    Chairman LAZIO. The hearing will come to order. I want to welcome everybody this afternoon to our hearing on the Aging Crisis and H.R. 202, Preserving Affordable Housing for Senior Citizens into the 21st Century. What the subcommittee is engaged in is an attempt to review and rethink the way we provide for seniors, both in terms of housing and supportive services and the way we preserve our aging Section 202 stock. All of these are important issues for the subcommittee to be addressing.
 Page 2       PREV PAGE       TOP OF DOC

    I want to begin by acknowledging that our Ranking Member, Representative Barney Frank, is going to be a few moments late because of a conflict, but he will be here. And I also want to thank some of the other Members and I want to acknowledge the interest of the Chairman, Jim Leach, as well as the Ranking Member, John LaFalce, who is here.

    Today the subcommittee continues a series of hearings to examine the aging crisis and affordable housing needs of senior citizens in the next century. On the cusp of a new millennium, Americans are living longer. We are enjoying more active healthy lives. More than 33 million people in the United States are now over 65 years of age and older, and by the year 2020 that number will grow to almost 53 million, or one in every six Americans. The shift in demographics is not news to us. Our current national debate on the future of Social Security, Medicare and Medicaid and commerce in our communities is a realization that we must plan for the future today. In this environment we must also recognize another critical issue affecting all of us, the possibility that millions of senior citizens across this country will suffer a crisis of safe, affordable housing if we fail to prepare. Even today, the United States General Accounting Office and the United States Department of Housing and Urban Development have determined that at least 1.4 million senior citizens are already experiencing worst-case housing needs. Seniors are more likely than any other adults to be poor, and nearly 40 percent of senior citizens not in nursing homes are limited by chronic conditions, unable to perform the simplest activities associated with independent living. My own State of New York is among the six States with the highest number of low-income senior households with housing difficulties.

    None of us should accept the possibility of a future where our grandparents, parents and the generations to come are forced to live in crowded institutions, or worse, live isolated and without hope in dilapidated buildings as their homes crumble around them. If we work together we can preserve what we have built today and expand opportunities for more Americans tomorrow. A great tool in this effort has been the Section 202 housing for the elderly program. Although the present Administration has consistently attempted to reduce Federal funding for affordable senior housing, congressional efforts have been successful in maintaining the resources necessary for the program.
 Page 3       PREV PAGE       TOP OF DOC

    On the first day of this Congress, Chairman Leach and I joined to introduce legislation designed to preserve the portfolio of Section 202 developments built prior to 1990. This is an inventory that provides affordable housing opportunities for more than a quarter of a million seniors across the country, including almost 25,000 in my home State. Specifically the bill will allow for the financing and modernization of older senior housing developments. This would be accomplished by converting the debt held by non-profit housing providers into direct grants and by moving away from reliance on Section 8 rental subsidies to the post-1990 project rental assistance contracts. Without that reform, the cost of fully renewing the Section 8 rental subsidies for pre-1990 senior housing could well reach an annual level of $2.9 billion by 2021.

    Currently between 40 and 60 percent of Section 8 rental subsidies granted to senior housing providers is returned to the Federal Government as debt service every year. Our legislation would reduce the pressure on the Section 8 rental subsidy account and streamline the administration of the program into a single system. The legislation would also increase Federal funding for senior housing by $40 million, and for persons with disabilities housing by almost $30 million.

    As many of you know, we have been working to refine the legislation and incorporate elements of other proposals, including legislation introduced by Chairman Leach and I, to address the growing crisis of Section 8 opt-outs. Let me also recognize the Ranking Members of both the subcommittee and committee as well as Representative Vento, among others for their work in this regard. It is my hope that in partnership with our committee Minority we can move to a committee markup of the consolidated legislation before the August district work period and proceed to the House floor consideration in September. Now, because Mr. Frank is not here, I am going to acknowledge and recognize the Ranking Member of the full panel, Mr. LaFalce.
 Page 4       PREV PAGE       TOP OF DOC

    [The prepared statement of Hon. Rick Lazio can be found on page 30 in the appendix.]

    Mr. LAFALCE. I thank the distinguished resident of the State of New York for his recognition.

    We in this subcommittee have a very excellent opportunity to enact bipartisan legislation in housing similar to the way we enacted legislation in H.R. 10, bipartisan housing legislation designed to preserve and expand the supply of affordable housing, to give owners of affordable housing units the resources to fully maintain and rehabilitate those units and to strengthen the continuum of care for elderly housing to promote independence and aging in place.

    The decision of subcommittee Chairman Lazio to combine the best provisions of several bills into one omnibus elderly housing and preservation bill enhances our ability to seize that opportunity.

    The challenges we face in addressing our elderly housing needs is laid out quite well in the testimony provided today by AARP. The findings of AARP's 1998 survey tell a tale of low vacancy rates, long waiting lists for affordable housing, an aging population and an elderly population that is becoming increasingly frail.

    One can reasonably conclude from demographic trends driven by the baby boomer phenomenon that these factors and the challenges they create will continue to grow. The most obvious response lies in creating additional affordable housing units for the elderly and other low-income Americans. HUD projects that over one million elderly families have worst-case housing needs. That is, they pay over 50 percent of their income for rent or live in severely substandard housing, yet far from expanding our affordable housing stock, that stock is shrinking through the growing risk of opt-outs.
 Page 5       PREV PAGE       TOP OF DOC

    That is why we need to provide full funding for HUD's mark-to-market preservation initiative as is or with modifications or expansions that maintain HUD's basic approach of targeting scarce resources to those projects most at risk. We also need to authorize and fund enhanced vouchers for all of those tenants whose units cannot be preserved.

    Second, if and when the House takes up tax legislation, it certainly should include an expansion in the low-income tax credit, and I am very pleased for those who are not aware to advise you that an amendment to do exactly that was passed today in the House Ways and Means Committee during the markup process.

    But the challenges we face are not simply that of preserving and expanding our supply of elderly housing. An equally important goal is to enhance the continuum of care for our Nation's elderly, to provide living alternatives which promote aging in place. That is why several of us on the Banking Committee introduced H.R. 1624, the Elderly Housing Quality Improvement Act. Our bill contains an array of provisions to enhance our continuum of care, to promote elderly independence and aging in place with a focus on the capital repair and maintenance of our aging elderly affordable housing stock of largely in the 1970's and 1980's, the expanded availability of assisted living opportunities for low-income elderly who need assistance with activities of daily living, and the expanded use of and flexibility of service coordinators in assisted and public housing to help seniors utilize community services.

    I applaud HUD for its leadership on these very same issues. HUD's fiscal year 2000 budget initiative included provisions to promote and expand assisted living facilities and service coordinators, some of which were used to develop some of the provisions in H.R. 1624. I also want to thank Representative Lazio for including a number of provisions from 1624 in this revised version of H.R. 202 and as we move toward a markup of this legislation, I would hope for his and all Members' consideration of those provisions that have not yet been included in the first draft provision of H.R. 202.
 Page 6       PREV PAGE       TOP OF DOC

    I ask unanimous consent to submit the entirety of my testimony. I thank the Chairman and the subcommittee Members for their indulgence.

    [The prepared statement of Hon. John J. LaFalce can be found on page 33 in the appendix.]

    Chairman LAZIO. Without objection, so ordered. I am going to recognize now the Chairman of the Full Committee, the gentleman from Iowa.

    Mr. LEACH. I thank you, Mr. Chairman. I want to thank you also for your leadership on this issue and that of Mr. LaFalce and Mr. Vento.

    I would only say that there is a background in housing that is extraordinarily important here, but it relates above all-too-human need and the issue of demographics. In this century Americans have almost doubled their life span, for women increasing from about 48 to 79 years of age, and for men from 46 to 72, and yet elderly Americans are often our poorest Americans and those most in need of the basics, and we sometimes forget that the basics include shelter. And so to deal with this issue of shelter is something that this Congress has an absolute responsibility to deal with and some of it relates to past policies that have nuances that were somewhat unexpected or at least in their impact greater than we envisioned and this legislation goes a long way to recognize that circumstance.

    So I am very hopeful that this will be legislation that can come to fruition in the near future. Thank you, Mr. Chairman.
 Page 7       PREV PAGE       TOP OF DOC

    Chairman LAZIO. Thank you, Mr. Chairman. I would now like to recognize the gentleman from Massachusetts, Mr. Frank.

    Mr. FRANK. Thank you, Mr. Chairman. I had a previous commitment to speak to the Junior Statesmen of America, so I apologize for being late.

    I am very pleased to be at this hearing and deal with this subject because it is a specific example of a broader point. We are all here to celebrate the expenditure of tax money by the Federal Government, in this case on elderly housing. That is an activity, the taxation of the public and the expenditure by the Government of those tax revenues, which a number of people claim to think is a terrible thing these days, and there is so much condemnation of it in general that it is often lost from sight that most of us are very enthusiastic about it in many particulars, and this is an example. We have housing needs in this country, and we have the demographics that the Chairman of the Full Committee just mentioned. What we have here is an overwhelming recognition by elected officials that unless the Federal Government taxes people and spends the money through the Federal Government, some important public purposes will not be accomplished. People sometimes make, it seems to me, the inaccurate opposition between the people getting the money and the public, the Government getting it.

    In fact, a true description is that there are important needs that individuals have, some of which they can best satisfy with money that they can spend individually, but some of which can be satisfied most efficiently when we spend them collectively, and that is an example.

 Page 8       PREV PAGE       TOP OF DOC
    So I am delighted to be here to celebrate this example of public expenditure. I would just note that we do have a mathematical fact which confronts us. We in Congress have from time to time exempted ourselves from some laws, but the laws of mathematics are harder, although not impossible, to evade.

    The sum of the parts cannot be greater than the whole. When you shrink the whole on a regular basis, you inevitably have some impact on all of the important component parts. So the notion that Government should always and at all times be reduced, that Government is a bad word, that taxes should always be cut and any revenue lying around ought to immediately be sent back in individual ways to the people, I think is counteracted by this hearing, which says that there are some important needs that people have that are best served if we maintain the monies and spend them wisely, and that is always something that we strive for together.

    So I am glad to be here and will be looking forward to working on this legislation so that we can go forward with this very important publicly-funded purpose.

    Chairman LAZIO. Thank you very much, Mr. Frank. Do other Members wish to make an opening statement?

    Mr. Baker.

    Mr. BAKER. Thank you, Mr. Chairman. I wish to compliment you on your calling of this hearing and your work to apparently bring together divergent aspects of legislation suggestions into H.R. 202 and simply wish to state, as others have, that the importance of available quality housing to our elderly population is a goal which is not only important, it will become increasingly so as years go by. As we contemplate mathematical probabilities it is evident that the baby boomer group is around the corner from retiring and, in an era when we will have more people retiring in our country's history than ever and living longer, we are likely to see relatively fewer people in a productive work force. This is going to create inordinate difficulties in managing our fiscal resources and meeting the public need. In this case I don't think that there is any dispute from any sector that adequate resources through H.R. 202 are not only warranted, but we must view this almost as a moral obligation to care for those who have worked a full life and yet find themselves without the ability to acquire decent housing.
 Page 9       PREV PAGE       TOP OF DOC

    So I commend the Chairman for his work and wish to express my appreciation for his continuing leadership here and elsewhere.

    [The prepared statement of Hon. Richard H. Baker can be found on page 32 in the appendix.]

    Chairman LAZIO. I thank the gentleman.

    Any other Members wishing to make an opening statement?

    Mr. VENTO. Mr. Chairman.

    Chairman LAZIO. Mr. Vento.

    Mr. VENTO. Thank you, Mr. Chairman. I will be brief. I commend you for trying to put these measures together. Most of us have worked and our constituencies have been working to try to deal with the dilemmas facing assisted and public housing, including the important 202 housing, and clearly the issue that looms over most of this is the scoring in the budget details. In fact, I think it is to a great extent once we straighten out some of the fair market rents and deal with the opt-out question, I think that the issue or the uncertainty of Section 8 assistance, the year by year contracting issues and budget numbers present a real dilemma that we are going to have to face if we are going to maintain the existing assisted and public housing for low- and moderate-income persons, including of course the important elderly population that Section 202 specifically targets. All of our legislation, whether it is H.R. 425 or specifically the LaFalce bill, H.R. 1624, or your own bill, 1336, have as an example usually an elderly component with it.
 Page 10       PREV PAGE       TOP OF DOC

    We have some very serious problems, as well as the service problems, and the frail elderly, and many other matters that we need to deal with in the committee and try to garner the type of support from the standpoint of the budget that they merit so we can write—I think we are on the road to writing some major improvements in terms of these assisted and public housing programs. But in the absence of building the type of political support to sustain the dollars in the budget, we face a very, very serious problem in terms of the housing crisis.

    So we look forward to working with you to build the best product we can and hopefully being able to garner the type of dollars that are necessary to fund these programs. I thank you.

    Chairman LAZIO. I thank the gentleman. Other Members wishing to make a statement?

    Ms. Hooley, one of the most pleasant people, by the way.

    Ms. HOOLEY. Pardon?

    Chairman LAZIO. Who is one of the most pleasant people who we serve with.

    Ms. HOOLEY. Oh, thank you.

 Page 11       PREV PAGE       TOP OF DOC
    Mr. FRANK. Which was not a hard thing to win in this group.

    Ms. HOOLEY. Well, I am delighted—thank you, that was very nice.

    I am delighted that we are working on this issue. Affordable housing is a problem for all of us. Especially it hits our seniors I think even harder. As I look at the threats to affordable housing for seniors throughout Oregon and the rest of the country, two that are discussed most often are Section 202 rehabilitation upkeep and construction and then probably just as threatening to seniors, though, is the potential loss of hundreds of service coordinators throughout the country that really work to keep seniors in their homes and out of nursing homes. So I am glad that you are looking at incorporating several of these bills to go along with H.R. 202 to provide the resources for senior housing construction, preservation and services and I look forward to working with the Chairman as well as the rest of the Members of this subcommittee and I hope that we get this passed.

    Chairman LAZIO. Thank you very much.

    Now I would like to move to the first panel if we can and ask the panel please come forward. We have an excellent panel for our first witnesses, Mr. Thomas Slemmer, Jane Baumgarten, and Ellen Feingold.

    I want to thank you all for your written testimony. Let me advise you that the written testimony will be included in the record, so you can summarize without fear that any of your written testimony will not be reflected in the official record of the subcommittee.
 Page 12       PREV PAGE       TOP OF DOC

    I know Mr. Ney wanted to add some particular comments in the introduction of Mr. Slemmer. Let me just say that he is the Chair of the Working Group on Section 202 Housing, the American Association of Homes and Services for the Aging in Washington, which is one of the most significant and helpful groups that we have had working with us. I want to thank you.

    Mr. Ney, you are recognized with respect to the introduction of Mr. Slemmer.

    Mr. NEY. Thank you, Mr. Chairman. On behalf of Congresswoman Jones and myself, it is a pleasure to introduce Tom Slemmer, who is from our home State of Ohio. Mr. Slemmer is President and CEO of National Church Residences and it is one of the Nation's non-profit sponsors and managers of affordable housing for seniors, including over 10,000 federally-assisted housing units.

    Mr. Slemmer is here today on behalf of the American Association of Homes and Services for the Aging, where he serves on the board of directors and on the housing committee, as was mentioned by our Chairman. The American Association of Homes and Services for the Aging is the largest organization representing non-profit sponsors of senior housing who own and manage over 300,000 units of market rate federally-assisted housing, including the largest number of sponsors of HUD Section 202 elderly housing facilities, which I think is very, very impressive.

    Also I should note that he received his Master's degree in Resource Development from Ohio State University, of which I am a graduate, and I don't know what year you graduated. I used to go to school when we used to beat Michigan every year. He also has two housing units in the district where I live, and so on behalf of Congresswoman Jones and myself, we want to welcome you here.
 Page 13       PREV PAGE       TOP OF DOC


    Mr. SLEMMER. Thank you.

    Ms. Jones, I just want to mention that I was in Cleveland yesterday and I am sure you are familiar with FAMICO, a local organization, and Jim Williams. I saw one of the finest examples of Section 202 housing in the country. I mean that literally. It is combined with office space on the first floor, a renovated convent, the Notre Dame School, and just a wonderful example of combined, not only 202 housing, but tax credit housing and commercial space for their neighborhood association. Just a wonderful example of housing and I hope that you—you probably have seen it. It is a beautiful facility.

    Thank you for that kind introduction, Chairman Lazio. We just really appreciate being able to testify before you today. First of all, AAHSA would like to thank you and the Members of the subcommittee for holding these very important hearings for elderly housing and particularly the Section 202 program and the legislation that is designed to strengthen affordable housing opportunities for seniors in this country.

    We especially would like to express our gratitude to you, Chairman Lazio, for your outstanding leadership on elderly housing issues.

    Mr. Chairman, in your invitation to testify you asked that I address the urgent problems facing 202, especially those built before 1990. I would like to do that, and also I particularly address my oral comments at least toward the new capital advance program and the conversion program. So if I might do that and also refer to my written testimony which we have already submitted.
 Page 14       PREV PAGE       TOP OF DOC

    First of all, let us get on the record very clearly that we strongly support H.R. 202, which was introduced and then enhanced by important bipartisan legislation. We want to make sure that you all understand that we are strong supporters of this legislation. We believe that this consolidated bill offers practical solutions confronting not-for-profit sponsors of elderly housing.

    As you may know, Section 202 is one of the Federal Government's most successful housing programs. I say that after seeing this kind of housing across the country. The 202 program is really a national asset and should be preserved. It is providing vital housing and really quality affordable units across the country. One of the key provisions of H.R. 202 would simplify and preserve existing affordable housing for elderly residents by providing many options for sponsors to restructure their debt and to improve the 202 capital advance program with Project Rental Assistance, PRAC, a very important part of this bill, and we really support that. As you may know, AAHSA has been working for several years on a long-term solution to the financial administrative needs of elderly housing stock, and during this time I chaired AAHSA's study group where we had many not-for-profit members on that group and we worked intensely with technical experts, Government officials and also your very capable staff here from the subcommittee. Our efforts really predate the anticipated crisis in expiring Section 8 contracts and focused on various alternatives to preserve affordable housing for very-low-income seniors. Our work demonstrated the need for the financial restructuring of the existing 202 mortgages and we determined that the most workable solution was to give sponsors of pre-1990 Section 202s the option to convert to the capital advance program supported by PRAC. This process is outlined in a white paper that AAHSA produced, and I would like to make sure that that gets into the record.

 Page 15       PREV PAGE       TOP OF DOC
    Chairman LAZIO. Without objection, so ordered.

    [The information referred to can be found on page 50 in the appendix.]

    Mr. SLEMMER. Pre-1990, Section 202 provided 40-year loans combined with ongoing Federal assistance through the Section 8 program. Essentially, the Federal Government provides Section 8 assistance to not-for-profit sponsors and then they provide the dollars to pay off that loan. In essence, the Federal Government is paying to repay itself, and while amounts vary from project to project, the burden on a typical Section 202 facility ranges between 40 and 60 percent of the Section 8 subsidies.

    So recognizing this administrative redundancy and better program design for special needs for the frail elderly, the program was changed back in 1990 to the capital advance program and really we believe is a much better solution to providing funding and capital for the 202 program.

    AAHSA believes the solution is straightforward. Sponsors should be provided the option to convert to the capital advance program and the unpaid balance of the Section 202 loans should be converted to long term capital advances with future operating subsidies through the PRAC program. We think that there is a general consensus that this is a practical and good idea. We note the technical obstacles that are created through the Federal budget scoring system. To help our members understand that, we commissioned a white paper on the budget scoring. We would like to have that submitted for our testimony.

    [The information can be found on page 77 in the appendix.]
 Page 16       PREV PAGE       TOP OF DOC

    Chairman LAZIO. Without objection.

    Mr. SLEMMER. We think that the long-term solution of basically converting to a PRAC program is fiscally neutral. We think that it is a wash. Unfortunately, the conversion doesn't score that way and AAHSA commends the subcommittee for your comprehensive approach that you have taken in your bill to provide for conversion and to refinancing of this program. And we understand your discussions with the Congressional Budget Office have led to a proposal for an annual phase-in of the debt forgiveness. We think that is an idea that works and we commend your subcommittee for coming up with that very good idea.

    I just want to finalize by saying that the 202 conversion is really similar to the mark-to-market strategy that is going on with Section 8 housing, there are lots of benefits that we would like to call your attention to. Number one, it really provides long-term stability for the Section 202 portfolio and provides a much more compatible kind of approach in that the older 202s now can be operated with the post-1990 202s.

    Finally, we just want to thank you again for the opportunity to testify before you and I look forward to any questions you might have following our initial responses.

    [The prepared statement of Thomas W. Slemmer can be found on page 38 in the appendix.]

    Chairman LAZIO. Thank you very much, Mr. Slemmer.

 Page 17       PREV PAGE       TOP OF DOC
    We have a series of votes, two votes which have been called, but before we depart I would like to ask Ms. Feingold if she would like to testify. I am going to turn to Mr. Frank, who is going to make the formal introduction of Ms. Feingold.

    Mr. FRANK. Ms. Feingold came at our request because she is a very important person in this type of housing. She has a 5:00 plane and there were no other planes available to where she is going, and so we will accommodate her now. I just want to say that Ellen Feingold, as the President of the Jewish Community Housing for the Elderly, has been one of the premier leaders in the provision of elderly housing. She has been involved in every aspect of this. She administered it. She has helped me legislatively with suggestions to improve the program. She has built several of these. She really knows this as well as anyone and runs a program as successful as it can be for the elderly. The buildings that she presides over are among the most desirable anywhere in Massachusetts, and I am delighted to have her here and, as I say, I will apologize on her behalf in advance because she may not be able to stay for all of the questioning given the transportation problem.

    Chairman LAZIO. Thank you, Mr. Frank.

    Ms. Feingold, what a pleasure it is to have you. Please begin.


    Ms. FEINGOLD. Thank you so much. I am really pleased to be invited here to testify today on behalf of H.R. 202.
 Page 18       PREV PAGE       TOP OF DOC

    I want to join in with the others who have complimented the Chairman for combining the many good bills proposed this year into a very good piece of legislation. We support its enactment.

    Jewish Community Housing for the Elderly is a non-profit, non-sectarian organization founded in 1965. We built and manage five buildings in the Boston area, where over 1,300 elderly low-income people live in their own apartments. We make available a wide variety of services to our tenants, largely through contracts with other service agencies. We consider ourselves to be housing providers, not service providers. Nevertheless, the residents in our buildings have available to them an extensive range of services, public and private.

    A few facts about our organization, because I want to give you a picture of what is on the ground. With over 1,300 residents, 274 are over 85 and 105 are over 90. Turnover is less than 9 percent a year. 3.6 percent move to nursing homes, 3.6 percent die and only 1.5 percent leave to live somewhere else.

    People really age in place in a well run, well serviced elderly housing environment. The average income in our urban buildings is under $7,000 per resident and in our suburban buildings it is under $10,000. These are very-low-income tenants.

    Our waiting list ranges between 1,500 and 2,000. And most will wait between two and six years for an apartment. We desperately want to build more. Can you imagine telling an 80 year old that she will have to wait two to six years for a home?

 Page 19       PREV PAGE       TOP OF DOC
    Housing is fundamental. In this day of national focus on health care, it is useful to remember that without decent housing and without the support services that enable vulnerable people to stay in their homes, the best health care system in the world will be helpless.

    The 202 program is the Nation's success story. It is the Government's, it is HUD's success story. If you want to demonstrate, as Congressman Frank said, how the Federal Government can really do things right, show off the 202 program. Take people to see our buildings. It is the one Federal housing program that has a minimal failure record. It is a program with very few critics, very few owners wanting to cash out, and few residents who are not grateful for the opportunity to live there. It does include housing that is old and frayed and in need of bringing up to today's standards.

    Our programs at JCHE represent the history of the 202 program. The first and oldest building with 243 units opened in 1971 when the program's low cost money was enough to make it affordable to low-income elders. Later in the 1970's when the oil crisis drove heating and other operating costs up, Section 8 contracts were needed to keep rents affordable for this building's tenants.

    Our second building is a 256-unit Section 236 which opened in 1973. Our third, with 211 units, financed by the Massachusetts Housing Finance Agency, opened in 1978. All of these buildings are on a single site, and the units are supported with project-based contracts. Nine hundred people of widely varied and diverse backgrounds live in this complex, more than half of whom are immigrants. We run about 40 classes of English-as-a-Second Language and citizenship each week. Over a hundred people each year become citizens. It is exciting and it is something we can do in a 202 environment.
 Page 20       PREV PAGE       TOP OF DOC

    Also opening in 1978 was another 202 with 125 units. 1978 was the golden age of the 202 program, providing the largest units, the most generous public spaces, provisions for meals, mandatory meals if sponsors wanted it, and other amenities were permitted to cover 80 percent of the units under the Section 8 contract, so 20 percent of the residents in this building are market tenants. It works. It works very, very well. The waiting list in this building ranges from four to six years for both the market and the subsidized units.

    In 1994, we opened a 75-unit 202 PRAC addition to this building. We were the first to ask HUD to permit one owner to have two 202 projects that are contiguous, with corridors running into each other so it forms one building. The 202 program requires single purpose ownership for each 202, and we needed Congressman Frank's intervention to help the Secretary to issue a waiver making this addition possible. I would urge that the whole issue of single purpose ownership is another issue that the subcommittee needs to deal with.

    The fifth building with 100 units was opened in 1984, financed under the Modest Design and Cost Containment guidelines governing Section 202 at that time. It was a hard project to build because at that time HUD was committed to the least possible expense in the buildings it funded, and did not recognize the urgent need for public and community space.

    Finally, last fall we added a 46-unit 202 PRAC to this building. For the first time in our history the 202 program's financing was insufficient to complete those 46 units. In addition to the 202 funding, we needed substantial additional money from the State's HOME allocation, the city's community development block grant funds, and the Federal Home Loan Bank of Boston's affordable housing program.
 Page 21       PREV PAGE       TOP OF DOC

    Four financing programs, four real estate closings creates higher costs. Layering is not the best way to finance housing, but it may be what is necessary to get enough money to do the job.

    Do you want me to continue? I see my time has expired.

    Chairman LAZIO. We are under five minutes right now to the vote, so we are going to have to recess this hearing until a quarter-to if we can. So this hearing is now in recess until a quarter-to.


    Chairman LAZIO. This hearing is back in session. Before we recessed, Ms. Feingold was just about to complete her statement.

    Ms. FEINGOLD. I had a little more.

    Chairman LAZIO. Why don't you finish up.

    Ms. FEINGOLD. What I wanted to say is that what makes H.R. 202 so attractive is the options it provides, the fact that it is a tool kit from which we can choose what makes the best sense for our housing. For example, my organization supports Section 101, authorizing conversion to a 202 PRAC, even though it is highly unlikely that we will use it. The major reason we would not use it is that a lot of our 202s are pre-1984, which means that tenant eligibility for them is limited to 80 percent of the area median income. Based on our statistics, you know that most of our residents are extremely low-income, under 50 percent, but we want the ability to house people between 50 and 80 percent of median, which is not permitted in post-1984 202 PRAC projects under current guideline rules.
 Page 22       PREV PAGE       TOP OF DOC

    So, any way to make the 202 PRAC program more attractive to some owners would be to modify it to permit pre-1984 buildings to keep the 80 percent of median eligibility.

    We are very glad that H.R. 202 makes conversion to 202 PRAC at the option of the owner. The decision to do the conversion should be made on the basis that it works for the housing, rather than something that looks good on some abstract measure from HUD.

    Likewise, we support Section 102, authorizing refinancing of 202s, even though I don't know that we would refinance. The buildings we are talking about have mortgages at 2 1/2 to 4 percent interest rates. That is what mortgages were in the early 1970's. There is very little to be gained here by refinancing, but we strongly support the ability to refinance because the universe is full of developments where refinancing makes all the sense in the world.

    In the Sections 303 and 304 permitting mixed income, H.R. 202 authorizes waivers that allow developments with a high vacancy rate to raise its income ceiling from 50 percent of median to 80 percent of median. I would suggest that you consider making 202 much more flexible in this regard. I am very interested in this Cleveland project where there are all kinds of mixing going on.

    JCHE strongly believes in income mixing in our projects, just as we believe in ability mixing, just as we believe in racial and religious and ethnic diversity. The more diversity you get, the more interesting the projects are, the more people are able to help one another, the less uniformity, the less one-size-fits-all. In my written testimony I speak to
this in more detail.
 Page 23       PREV PAGE       TOP OF DOC

    I would also urge that where H.R. 202 deals with the owners who choose to opt-out, that you designate Section 8 freed up from the opt-out process to be reassigned to non-profit housing developers.

    The expiring use crisis is causing the loss of thousands of units all over the country. Here, you have the opportunity to take those Section 8s and to offer them to other non-profits to use for the same purpose, so there is no net loss in low-income and affordable units.

    I want to congratulate you on the findings at the beginning of Title IV. They are an excellent, concise statement of the increasingly desperate housing shortage faced by the country's poorest and most vulnerable people.

    Thank you for having invited me to testify today, and thank you to the committee for this excellent piece of legislation.

    [The prepared statement of Ellen Feingold can be found on page 104 in the appendix.]

    Chairman LAZIO. Thank you, Ms. Feingold, for your very fine testimony.

    Ms. Baumgarten, I wanted to thank you for your willingness to testify, but I want to recognize Ms. Hooley, who wanted to make some introductory remarks.
 Page 24       PREV PAGE       TOP OF DOC

    Mr. FRANK. Nice remarks.

    Chairman LAZIO. Very nice remarks.

    Ms. Hooley.

    Ms. HOOLEY. Thank you, Mr. Chairman.

    First of all, I would want to welcome Jane from North Bend, Oregon for being here today, and she has a resume that all of us would be actually very jealous of. It is both at the national level and State level and local level. Before she was on the board of AARP she was chair of AARP's National Health and Long-term Care Advisory Committee. She has been on a variety of boards for AARP. She has also served on the Governor's Commission for Senior Services, one of many State boards she has served on. And then locally, and just to show what a well rounded person she is, she has been on the Coos-Curry Area Agency on Aging Advisory Committee. She has been the director of the Oregon Coast Music Association, the board of directors for the Pacific Child Center in North Bend. She has also been president of the North Bend Education Association. She has been to the White House Conference on Aging and on the School Budget Committee.

    She is a retired educator and prior to her retirement she taught in several States as well as in France and Saudi Arabia, and she was recently awarded an RHO Chapter of Delta Kappa Gamma Women of Achievement Award. She is a real voice for all Oregonians, but particularly seniors, and I would like to welcome her today.

 Page 25       PREV PAGE       TOP OF DOC
    Chairman LAZIO. Thank you very much. With that introduction I am going to recognize you, Ms. Baumgarten.


    Ms. BAUMGARTEN. With that introduction, I approach this with trepidation.

    Good afternoon, Mr. Chairman and Members of the Subcommittee on Housing and Community Opportunity.

    My name of course is Jane Baumgarten. I do live in North Bend, Oregon and I serve as a member of AARP's board of directors. AARP appreciates the tradition of strong bipartisan support for housing programs serving older Americans that has characterized this subcommittee's work.

    Mr. Chairman, we especially appreciate your leadership in addressing issues related to Section 202 housing, reverse mortgages and other programs that benefit older persons with low- and moderate-incomes. We hope that the same bipartisan spirit will extend to your current efforts to craft the best legislation for meeting the future needs of older persons.

    Projections by the U.S. Census Bureau indicate that by the year 2020, the number of persons age 65 and older will grow to over 53 million. It would represent a 55 percent increase from the 34 million estimated for 1998. Changes in the distribution of the Nation's older population are also occurring. Presently, the aging of the older population is driven by large increases in the number of persons aged 75 and older. Further, in 1998 there was an estimated 4 million persons aged 85 and older. The Census Bureau projects this figure to reach approximately 6.5 million people by the year 2020. This would represent an increase of 62 percent for the 85-plus age category alone.
 Page 26       PREV PAGE       TOP OF DOC

    It is especially relevant for the purposes of today's hearing to recognize that as the elderly population increases, the proportion who have difficulty performing one or more activities of daily living, such as bathing, dressing, eating, will also be increasing.

    An analysis prepared for AARP by the Lewin Group estimated that in 1994, there were over 1.7 million elderly—65 years of age and older—who had difficulty performing two or more activities of daily living.

    The same study estimated that by the year 2020, the number of similarly aged persons with two or more of these disabilities would increase to 2.8 million, a 65 percent increase from 1994.

    In my remarks today, I want to communicate the Association's position on several important pieces of housing legislation now before this subcommittee that will directly affect older Americans.

    But first, I wish to illustrate the need for prompt and comprehensive action by Congress, by briefly summarizing several findings from a soon-to-be-released AARP study of the Section 202 supportive housing program for the elderly. The 202 program is the only federally-funded, new construction housing program specifically designed to address the needs of elderly residents. This study was conducted by the University of Illinois and sponsored by AARP. The study surveys the effects that demographic forces, modernization needs, and several legislative changes have had on Section 202 housing projects during the ten-year period from 1988 to 1998. The appendix to my written testimony includes a more complete summary and explanation of key study findings. AARP would be happy to provide the subcommittee with copies of the full report when it is released in a few weeks.
 Page 27       PREV PAGE       TOP OF DOC

    From the perspective of frail older persons, housing and services, and I want to repeat this, housing and services are often the keys to continued independence and dignity. Comparisons of the 1998 survey findings with those from the 1988 survey document:

    One, long waiting lists and low vacancy rates that indicate a strong, continuing demand for Section 202;

    Two, there are increasing average ages and frailty levels of residents to which managers are responding with additional service coordinators and accessibility features designed to meet the changing needs of the tenants;

    And three, found expanding capital needs, especially for the older projects, which have the oldest residents and the greatest repair needs.

    The essential conclusion to be drawn from this report is that adapting Section 202 housing to the changing needs of its residents can mean, for them, the critical difference between maintaining an apartment in a supportive community surrounded by one's own belongings, or admission to more expensive nursing home care, often sharing a room with a stranger.

    With regard to the housing legislation that is pending before the subcommittee, the Association urges you to integrate into whatever elderly housing legislation finally emerges from the subcommittee, aspects of—and I have a red light. May I continue?

 Page 28       PREV PAGE       TOP OF DOC
    Chairman LAZIO. Yes, you may.

    Ms. BAUMGARTEN. H.R. 202, which would provide for a mechanism to refinance Section 202 housing and the establishment of a national commission on elderly housing issues is of concern; H.R. 1624, which would provide the means to integrate housing and services for frail older people; and H.R. 1336 and H.R. 425, which would provide incentives to preserve Section 8 projects for persons with low-income.

    By combining these elements, this legislation would expand housing options for needy older Americans, improve the delivery of supportive services, and stem the tide of housing losses to shape the evolving mission of housing for older persons.

    The subcommittee can be justly proud of the legacy of success on housing programs for older persons that many of you helped to build and foster. By moving the legislation before you to enactment, you will be writing an important new chapter in serving older persons through housing programs.

    Mr. Chairman, AARP looks forward to working with you and the other Members of the subcommittee on this important elderly housing agenda. I will be happy to answer any questions you may have.

    [The prepared statement of Jane O. Baumgarten can be found on page 110 in the appendix.]

    Chairman LAZIO. Thank you very much. I want to thank both of you, and, of course, Ms. Feingold who had to catch that last plane, had to leave, and we were under notice beforehand that she had to. I want to thank her in absentia for her excellent testimony.
 Page 29       PREV PAGE       TOP OF DOC

    Let me just ask a couple of questions. My first question has to do with mixed income housing, and Ms. Feingold testified as to the need for flexibility in her community in the developments that she is involved in, in order for it to be economically sustainable. We have had very significant debate involving achieving mixed income and public housing and Section 8 where you are dealing with the non-elderly population, and many of the arguments that are raised have to do with establishing role models, a conduit for job information. Several of these issues that may not be particularly relevant for elderly housing or for the Section 202 program.

    Let me ask both of you, do you agree that there is a need for mixed income housing? How do we best achieve it, and why is it important?

    Mr. SLEMMER. I would be glad to start by saying the 202 program, as you may remember, was mixed income for many years in its earlier stages. States, I think, across the country have been recognizing a need for mixed income, and so, for example, in their tax credit application process, they are requiring or giving extra points for mixed income projects.

    We, for example, are building one right now in Columbus, Ohio, in Whitehall, where we have a low-income housing tax credit facility for seniors that is going to have 20 percent of the apartments that are going to be available for market rate folks, and we think it allows you to offer a housing unit to the community without the economic barriers or the perception that this is low-income housing.

    We think it is very helpful and healthy. We like to see it in our developments, and we think it is possible to do in the 202 program. The problem has always been the allocation of scarce resources at the Federal level, and when you are limited, you are trying to limit those dollars to people that need it most. I understand that.
 Page 30       PREV PAGE       TOP OF DOC

    I do believe, though, that by mixing the financing with the 202s, that there is a way to also mix the incomes. In other words, if you are allowing 202s to be mixed in a financing unit with a limited market rate, I think you could do it quite well.

    Chairman LAZIO. Ms. Baumgarten, did you want to respond?

    Ms. BAUMGARTEN. I was just going to say that the important thing is to meet the demands for housing that are out there. With the growing demographics and the aging and frailty in the different homes, the accessibility of the services with the housing is extremely important.

    So the problem is to meet the need that is out there. We are facing a major crisis if we don't take care of it.

    Chairman LAZIO. Let me ask you this also, because I think this is an increasingly important issue as we think through how do we develop a continuum of housing for people who have different physical limitations. In some cases, psychological limitations.

    How do we achieve the correct balance between those people who have physical independence and those who must rely on a more assisted living environment? I mean do we have enough incentives in place for providers to house and to provide services for people that are in need of more help because they are the frail elderly and they may have need for assisted living support?

 Page 31       PREV PAGE       TOP OF DOC
    Mr. SLEMMER. Well, I would say that this legislation goes a long way toward making sure that we have social service coordination in all of our Section 202 housing facilities. I really would recommend that. If you are asking the question whether there is an easy answer to providing affordable assisted living, I would suggest there is not one. Because the housing component is perhaps only 10 to 30 percent of the total cost of providing assistance in an assisted living facility.

    Although I was just discussing with the staff earlier the tremendous job that I think Section 202 does in providing for people that are frail and otherwise perhaps would end up in a much higher cost of care. There are lots and lots of seniors out there in 202s that because of neighbors and people living next door to them, across the hall, and friends in the neighborhood really get by quite well in independent living, and I think this program is an outstanding example of how to provide the lowest cost care. But there is no easy answer to the high cost of assisted living, certainly not something that is in any of the HUD legislation. It really has to come through Medicaid waivers and those kind of approaches in the States.

    Ms. BAUMGARTEN. I was just going to say that it is housing and services together that help to keep the frail elderly independent and the services managers that—the survey found 80 percent of the projects had service coordinators, some of them on staff, some of them through the community. But they utilized services that were already available to help people remain independent longer. Seniors like to age in place. The older you get, the less you like to move and the more difficult it is to move away from what you are familiar with.

    Chairman LAZIO. Well, I just want to conclude by saying we are about trying to achieve some solutions to some of the short and intermediate problems of the 202 housing crisis, but we also need to begin to fundamentally rethink the way we deliver both housing and services. We talk about a continuum, moving from the need for skilled nursing facilities to assisted living, to housing for people who have the ability to live independently, to homeownership, and that continuum of housing programs for seniors and services, I think we need to think through in a very fundamental way, and hopefully we can do this in a bipartisan fashion.
 Page 32       PREV PAGE       TOP OF DOC

    With that being said, I would like to recognize Mr. Frank.

    Mr. FRANK. Thank you, Mr. Chairman.

    People sometimes comment about the division of labor that still exists in our society, I mean seriously with women taking on the role of caregivers, and it is not an accident that this is one of the few hearings in this city where you would find more women than men present, and, I think, that is in recognition of the concern women have. It is also, I think, a sign of the movement we are making toward diversity, particularly on our side, frankly, that there are five people here on the Democratic side and four of them are women, and the only man is me. So this is obviously a new world we are in.

    The subject you were just on is relevant—although, actually, both of them I think are. First of all, on the continuum of care idea, I think that is very important. I know HUD has been working on this and cares deeply about this.

    The other, though, is the kind of mixing of incomes. Mr. Slemmer made exactly the point I was thinking when you made it, which of course, Mr. Slemmer, nothing makes you think more highly of someone than when he or she says what you were thinking, so I thought, ''Wow, what a smart guy.''

    The problem with income mixing is not income mixing in itself. I don't know anyone who thinks that is a bad idea. All of us understand the importance in human interrelationships of income mixing. The problem comes when letting people in at 78 percent of the median comes at letting them in at the expense of—we have to meet the need. So there are two different ways of doing income mixing.
 Page 33       PREV PAGE       TOP OF DOC

    Frankly, in the public housing context, or the Section 8 context, some of us were concerned, because you are there talking about a fixed housing vacancy, either a building vacancy in a public housing unit or a Section 8 voucher, and the question is, will a very, very poor person occupy that or a moderate-income person? And inevitably in that situation, the moderate-income person takes it at the expense of a low-income person. Now that is the dilemma, and that dilemma can be resolved by having more money.

    In the case of Section 202, given the nature of the program, I think what you were suggesting, Mr. Slemmer and Ms. Feingold and others, is we can avoid that by allowing flexibility in the use of the dollars so that in this case, the income mixing does not come by having someone of moderate- or even market-rate income replacing a poor person, but rather allowing for a mixing of the financing sources so they can live side-by-side. I think that is why in 202, you will find, I think, much more support for it, because it does not become a zero-sum game. Indeed, in some cases, an appropriate intermixing here can make your subsidized money go further, by providing more help.

    So, I am all in favor of this, and I was particularly pleased—not surprised, because Ellen Feingold has a great wealth of information on this—that she suggested, as do the others, some ways of increasing this.

    I do want to get back to what Ms. Baumgarten said about meeting the need, which seems to me is the central point. We have appropriated a sum for the 202 program; I would like to appropriate a lot more. Let me ask both of you, what is the waiting list situation that you are aware of? Are we able to—do we need more? Ms. Baumgarten, you talked about meeting the need. How are we doing on need-meeting?
 Page 34       PREV PAGE       TOP OF DOC

    Ms. BAUMGARTEN. The survey pointed out that there is very little—there is a high occupancy rate, so there is very little housing open. Second, the fact that the waiting list is long, and you heard Ms. Feingold testify, something like four to six years.

    Mr. FRANK. I don't have to hear it from her, I hear it from the people she has talked to, because they call me up next. They are in my district.

    Ms. BAUMGARTEN. I am not trying to put words in her mouth.

    Mr. FRANK. So we have a substantial unmet need for this kind of housing.

    Ms. BAUMGARTEN. And now, with the increasing demographics, it can only get much, much greater.

    Mr. FRANK. Mr. Slemmer, would you agree?

    Mr. SLEMMER. Absolutely. In fact, I think the AARP study points that out, I think the average waiting list per-unit was 8.1 persons, and now it is 8.3 persons, so it is creeping up. People on the waiting list per-unit of housing.

    Mr. FRANK. Let me ask you this question, then, both of you, it is not meant to be rhetorical, because we have some people argue this. They say, ''Well, let's take any additional surplus revenue and return it to individuals.'' What about the option of simply cutting $8 billion or $9 billion in taxes, giving everybody some more money and letting the private market meet that need? Why don't we do that, Mr. Slemmer?
 Page 35       PREV PAGE       TOP OF DOC

    Mr. SLEMMER. I don't think the private market is ever going to meet the need of the kind of people that are being housed in Section 202 where the average income is approximately $8,000 or $9,000 a year.

    Mr. FRANK. What if they get a tax cut? Then they will have $8,002, or $8,003, maybe they could pay some more.

    Ms. Baumgarten.

    Ms. BAUMGARTEN. I was just going to say that Section 202 provides housing for the very, very-low-income, and if we have people opting out in some of the housing projects because the rents are subsidized too low, then I don't see private industry coming to the fore.

    Mr. FRANK. Well, you have both convinced me. Thank you.

    Chairman LAZIO. Questions? Mr. Bereuter.

    Mr. BEREUTER. Thank you, Mr. Chairman.

    Thank you very much for your testimony, the three of you, the two of you now.

    I would like to focus a little bit on service coordinators.
 Page 36       PREV PAGE       TOP OF DOC

    Ms. Baumgarten, you referred to some survey results on page 8 of your testimony which relate to frail elderly residents. Mr. Slemmer, you have a section on page 9. Your Association, according to your testimony, does believe that service coordinators should serve as a resource for the entire community for the poor and for the near-poor and not be limited to only low-income elderly, as I understand it, that happen to be living—and also those that happen to be living in the vicinity of the project.

    I would like to have, if you could, just a few examples of the kind of services that have been provided that you would contemplate being provided by these service coordinators, and then if you could, about the practical arrangements about who would be the employer; would contracting with certain types of social service agencies be the way to go? How big of a project would justify having a service coordinator? Could you help me address those kinds of issues?

    Mr. SLEMMER. Those are excellent questions. I think our Association is grappling with the exact answer to that. But what we are finding is that social service coordination, first of all, is providing the assistance for people to access services in the community. That is the primary role.

    Oftentimes, it is overcoming paperwork hurdles; oftentimes just contacting individuals with the agencies that can provide transportation or health care services, housekeeping services, meal services and those kinds of things.

    The reason I think AAHSA suggests that the social service coordinator be also available to the community is that our hope is that the Section 202 housing itself can be a community asset and a focal point in the community, and that the social service coordinator perhaps can also help with the community needs.
 Page 37       PREV PAGE       TOP OF DOC

    For example, lots of Section 202 housing has aging meal sites located within that particular property.

    Mr. BEREUTER. So that would be a permanent presence in an office of at least so many hours a day or something of that nature?

    Mr. SLEMMER. Right. So the 202 can really be seen as a community asset. So that is the reason for that. As it relates to the contracting versus individual employer and the extent of social service coordination, it really depends on the age and the frailty of the building. The older the building, the older the age and the higher the frailty in 202s, and we find that 100 units per social service coordinator is a good rule of thumb. Our organization particularly has found that contracting with quality agencies in the local community oftentimes is a very good solution to the social service coordinator problem.

    Mr. BEREUTER. Do you see any impediments to that kind of contracting arrangements that we need to be concerned about? Is it likely to happen, for example, that you have an area aging agency that seems to have that capacity? Is it likely that a 202 project, their sponsor would go to that source or be able to go to that source?

    Mr. SLEMMER. I guess I would have to ask for us to kind of research our members, but I think it would be very likely. For our organization, it is one of the first places we look. Social service coordinators, unless you have a very large building, have to be shared anyway, so contracting makes a lot of sense. The average size 202 now being developed is around 50 units, and we are looking for ways of combining social service coordination between one or two buildings or three buildings.
 Page 38       PREV PAGE       TOP OF DOC

    Mr. BEREUTER. Ms. Baumgarten, do you have anything that you would like to contribute?

    Ms. BAUMGARTEN. Yes. I was just going to mention that in the survey that AARP attached to the written testimony, it was noted that service coordinators were becoming a standard part of operation Section 202, and that by 1998, a total of approximately 80 percent either had a social service person, social coordinator, a services coordinator on staff, or had one available in the community, and they were dealing with programs already in effect, so that you are acting like a facilitator to bring these services into these people. Oregon has done quite a bit of that. The services that they provide seniors follow wherever the senior lives. It is part of their continuum of care.

    Mr. BEREUTER. Thank you.

    And there are provisions in the other bill for that, Mr. Chairman, is that correct?

    Chairman LAZIO. Yes.

    Mr. BEREUTER. Thank you very much.

    Chairman LAZIO. Ms. Velázquez.

    Ms. VELÁZQUEZ. Thank you, Mr. Chairman.
 Page 39       PREV PAGE       TOP OF DOC

    Mr. Slemmer, as you know, the senior citizens in New York City rely heavily on the New York City Housing Authority, which houses more than 62,000 elderly individuals. Many of these persons are retirees who worked hard all of their lives, and now live on small pensions and are often dependent on Social Security or SSI.

    It is just as important that these residents are afforded the same opportunity as Section 202 residents when it comes to the option of living in a supportive community. If Congress approves a grant program for conversion of elderly rental units to assisted living, should quality housing agencies be eligible for such grants?

    Mr. SLEMMER. In my opinion, absolutely.

    Ms. VELÁZQUEZ. Do you believe such a conversion program will be feasible in large urban public housing agencies like New York City? In other words, could you discuss some of the impediments to Section 202 projects, as well as public housing agencies, in funding the annual costs of living in an assisted living facility, even assuming that capital needs are met through a grant?

    Mr. SLEMMER. I think the problems are very significant. As I mentioned before in my testimony, the cost of assisted living, the cost for the housing component of assisted living in my estimation is between perhaps 10 and 30 percent of the total costs. So the costs really involve the service component, and unless the State or the Federal Government makes that available, it is very, very difficult.

 Page 40       PREV PAGE       TOP OF DOC
    We, for example, have a low-income housing tax credit facility in Toledo, Ohio where we have converted one floor to assisted living. Under what they call in Ohio the RSS program which provides, believe it or not, a total of $800 a month to provide for three meals a day, the supervision of medication, housekeeping, coordination of transportation, and it is very, very difficult to do that. We have to go out into the community to get grants. And we can only support a small, 16-unit assisted living facility. The problem is primarily the service side, that is where the dollars are really needed.

    Ms. VELÁZQUEZ. Thank you, Mr. Slemmer.

    Ms. Baumgarten, your testimony about the soon-to-be-released AARP study of the Section 202 supportive housing program for the sites' projected growth rates of between 50 percent and 62 percent over the next 20 years, in the number of seniors in this age bracket, between 65 and 75, 75 and 85, and 85 and older.

    What do you project this will mean for housing affordability for these seniors if we fail to increase funding or develop new programs to build new affordable senior housing? Will this be where we see our largest homeless population increase, ages 65 or older?

    Ms. BAUMGARTEN. Considering the situation that we have now, where we already have housing pretty much at capacity, and where we have frailer people in them, we don't have enough housing now. And as you continually increase the number of elderly people competing, if you don't meet the needs, you end up with a lot of people that don't have any housing, and you end up with a major crisis and a sudden panic reaction. It just seems prudent to plan ahead and try to deal with the large aging population we have coming in the turn of the century.
 Page 41       PREV PAGE       TOP OF DOC

    Ms. VELÁZQUEZ. Thank you.

    Thank you, Mr. Chairman.

    Chairman LAZIO. Mrs. Roukema, former Ranking Member of Housing.

    Mrs. ROUKEMA. Thank you, Mr. Chairman.

    Mr. Slemmer, I am sorry I wasn't here for your commentary, so if I ask a question that you have already advanced, please forgive me.

    I do know that you have been both responding to the question of the assisted living component here. I am very intensely interested in that area, because, of course, the demographics. We have to deal with long waiting lists and so forth for all senior citizens and we want to hopefully catch up with that. This bill will help us, to some degree.

    But to really get ahead of the curve, as each of you have said in one form or another, the demographics are leading to significantly more needs for assisted living. There is no question about that.

    Now, how can we improve this bill on the physical space side? I do understand that we have to deal with the costs, the higher costs for assisted living. Mr. Slemmer, did you reference waivers, getting waivers under Medicare or Medicaid for payments, for the service component? That is one part of it.
 Page 42       PREV PAGE       TOP OF DOC

    But aside from that, how can we deal with the intense needs here? What can we do to improve this bill to help us focus more directly, or do you feel that the bill is doing enough in that respect for new assisted living units, or transformation of 202 units to assisted living? I don't get the sense that we are providing enough incentives or resources.

    Mr. SLEMMER. Let me just say quickly, I think this bill does a lot on the housing side. You are providing the opportunity for 202s to convert.

    Mrs. ROUKEMA. Yes, yes.

    Mr. SLEMMER. But, I am suggesting to you that that is only a small part of the problem of providing assisted living to low-income people. The service component is a much bigger part of the financial equation. I think there are only twelve or fifteen States that have Medicaid waivers that allow Medicaid to provide those services to low-income folks, like in Oregon and several others. But that is the critical piece.

    This legislation does provide some assistance and allows us to convert, but the big issue is where do you get the dollars for the service component.

    Mrs. ROUKEMA. Well, I hear that, and that case has been made very well. But it seems to me that you can't just rely on the transference of 202s to assisted living. It seems that we have got to have more new buildings, new development, and I would hope that you could help us in that regard in how you think we might even expand what we have in this bill, or another way of reaching that goal, because otherwise, we are going to be way, way behind the curve in a very, very short period of time.
 Page 43       PREV PAGE       TOP OF DOC

    Ms. Baumgarten.

    Ms. BAUMGARTEN. One of the first things we need to do is stop the amount of opt-outs from the Federal contracts that is happening. They are happening at a large rate each month, we understand.

    The other thing is we need to have the dollars for the new construction which is what 202 does. It has specifically-designed housing, and it is the only one with Federal dollars for the elderly.

    Mrs. ROUKEMA. You mean new development, new 202?

    Ms. BAUMGARTEN. New, yes, because it is specifically designed. And as 202 has progressed, they have realized that they need more accessibility and accommodation. So new construction, keeping people from opting out, and meeting the market prices for subsidized housing will be a way to keep people in. So I would suggest that direction.

    Mrs. ROUKEMA. I have seen some non-profits in my region that are really beginning to press ahead in some meaningful ways on assisted living, and I would just like your best advice as to how we can improve this bill to help deal with that.

    Thank you very much.

    Chairman LAZIO. Ms. Hooley.
 Page 44       PREV PAGE       TOP OF DOC

    Ms. HOOLEY. Thank you, Mr. Chairman.

    For Ms. Baumgarten I have a question. We have talked a lot about assisted living. What do you see the trends are in assisted living?

    Ms. BAUMGARTEN. Pardon?

    Ms. HOOLEY. The trends in assisted living. What do you see as the trends?

    Ms. BAUMGARTEN. Could I refer you to our—to page—let me take a look. I want to find the report, and I would like to refer you to page 7, and the reason I do that is people like—as I said, seniors like to age in place, and so as they get older, they often require more needs to remain living independently, and that includes some of the things that are listed on page 7, that you need to help them stay there, and it makes a list: being able to get in and out of chairs—these are services we are talking about: the accessibility to the apartment; the non-skid floors; the accessibility to the toileting facilities; being able to bring in Meals-on-Wheels; grab bars; railings; bright lighting within—because of the need for differentiation between dark and light, that is so essential; being able to get to their appointments with the doctor. Some of these are services that are provided in the community and are already there. But it is a combination.

    Ms. HOOLEY. Do you think if we funded these conversions, that these 202 projects would actually convert?
 Page 45       PREV PAGE       TOP OF DOC

    Ms. BAUMGARTEN. Would you repeat that? I want to think about that.

    Ms. HOOLEY. Yes. We are talking about converting some of the housing into 202 projects, and my question is, do you think that if we allowed that to happen, that it would actually happen?

    Ms. BAUMGARTEN. OK. I want to—again, I want to point out something that the service managers were asked in the survey, because I found it extremely interesting, and it was that they asked the service managers if they had the reserves to retrofit, and it said that only 8 percent of the owner-sponsors reporting had adequate services to finance retrofitting. One of the provisions in one of the bills was to change the loans to grants so that they could accumulate the resources to retrofit, and if they don't have it, they can't even think about it. And if you do go to market rates, that would be an added incentive.

    So I would say the incentives would have to be there for the private market to do it.

    Ms. HOOLEY. To make that happen.

    Ms. BAUMGARTEN. Yes.

    Ms. HOOLEY. Mr. Slemmer, I have a question for you. When we talk about housing assistance, we talk about Section 202, Section 8 vouchers and through low-income housing tax credits. In providing senior housing, which is the most effective of those programs, and which ones should we be focusing on, or is there a good combination of those?
 Page 46       PREV PAGE       TOP OF DOC

    Mr. SLEMMER. I think without question the Section 202 program is the most outstanding program for housing seniors that has ever been conceived. It really is literally a national asset that is out there in terms of high quality senior housing.

    We talk about assisted living and that is a problem, but there is a tremendous problem in just providing affordable housing and when people find affordable housing they often find ways to manage without the high cost of assisted living. So I would just applaud you for your support of the 202 program. It really is the best program out there.

    Ms. HOOLEY. OK. Thank you. Thank you very much.

    Chairman LAZIO. Thank you very much.

    Mr. Vento.

    Mr. VENTO. Thanks, Mr. Chairman. I have come and gone, and I am back again, but I will try and be brief.

    Mr. Slemmer, I appreciated your testimony, and I just wanted to highlight some of the points. I noticed that, especially in reading the testimony of Ellen Feingold, that she pointed out a couple of problems, some of it probably amusing to some ears in terms of mixed income raising the limits. Of course, we lose the focus of where we are going sometimes in that process. I don't know, with the lack of movement and the long waiting list, whether in fact that causes as much of a problem. So you can comment on that if you wish.
 Page 47       PREV PAGE       TOP OF DOC

    But she especially pointed out that one of the oldest projects was still financed at 4 percent and had a reasonable reserve. The oldest project she indicated was 1971. That is pretty atypical I think of the circumstance that most of the projects, or most 202 housing is facing, isn't it?

    Mr. SLEMMER. You mean having a low interest rate?

    Mr. VENTO. Yes. Four percent, and good reserves. She points out that most of the projects probably don't have reserves, and probably need capital infusion and repair and so forth and so on.

    Mr. SLEMMER. Right. I think she has a very unusual situation.

    The 202 program was funded, I believe, in 1976 under the current situation where there was basically a loan, a 40-year loan to the sponsor at the Federal borrowing rate. Before that, it was a subsidized loan very similar to the 236 portfolio. In fact, the old 202 and the 236s are very similar, and for the most part, those had some of the most serious problems in terms of physical plant needs in that portfolio. So I think she is in a very unusual situation.

    Mr. VENTO. The other aspect, of course, is I think in some of the testimony here, which really comes through, I think, because we are always saying that most of the housing dollars are Federal dollars. Whether they are State bonds or whatever they are, they end up being Federal dollars, either through tax expenditure or through direct appropriation.

 Page 48       PREV PAGE       TOP OF DOC
    But one of the issues that is pointed out, and that is the charitable contribution element that has been increasingly playing or picking up the slack insofar as the Federal programs don't make it, or the State programs don't make it. Do you want to comment on that, the charitable contribution aspect of this?

    Mr. SLEMMER. I think our experience in the membership of AAHSA is there is a significant charitable contribution, but it primarily is providing dollars for services and perhaps for financial assistance for people who are running out of funds. But I think as it relates to the capital development, people are still relying on the State and Federal sources to develop the facilities. There is some component of charitable giving, but it is not a large component, I think, as it relates to the building of low-income housing.

    Mr. VENTO. So it is principally on services.

    Some years ago we were going through a debate about the mandatory contracts; that is, if you became a resident of a building, you had to buy into the meals program, and buy into some of the other other services. Is that still an issue? Obviously, some of the groups have been suggesting that if they didn't happen to like the menu for that week, they ought to be able to opt-out. I was sort of on the other side of fighting it, because you had to have the planning for the kitchens and services and you couldn't do this on a voluntary basis.

    Mr. SLEMMER. Well, we could get you the statistics on this, but the HUD rules have changed to the point where I believe you are no longer allowed to have mandatory meals in 202 facilities. So those programs that are out there, I think there are very few of them now, and they are voluntary, and the problem of course is that getting the magnitude, you know, the volume that you need to keep that program running.
 Page 49       PREV PAGE       TOP OF DOC

    We could have our Association get you some statistics if you are interested.

    Mr. VENTO. Well, I just was wondering if it is not a problem, if we are getting along with it on the basis of it being voluntary at this point, I suspect a lot of programs have atrophied if you didn't have the critical mass to keep it going, beyond the argument there isn't much point in me opening it back up. I don't think we are going to—but I do think it makes it more difficult to offer the services under those issues.

    We have gone through quite a catharsis here in terms of the services provided, assisted living and so forth, and finally I guess in the last appropriation cycle, we did provide the extra money.

    Ms. Baumgarten, did any of your group in Oregon experience problems with not being selected in the lottery?

    Ms. BAUMGARTEN. Did I hear lottery? Would you repeat that for me, please? You lost me.

    Mr. VENTO. Well, I think that there was a lottery as to who was going to be funded and who was not going to be funded for service coordinators. Did you have any problems? Did any of your groups have problems with the lottery system?

    As an example, St. Paul, Minnesota, which I represent, its lucky number didn't come up, and so after having one of the programs for many years, it wasn't funded. This was the Secretary's answer, I guess, to having too few dollars and too many applicants.
 Page 50       PREV PAGE       TOP OF DOC

    Do you know what I am talking about? Apparently you don't. Mr. Slemmer, I am sure, does.

    Ms. BAUMGARTEN. What I wanted to say was that we have a system that has been developed for continuum of care where the services follow where the person lives. They also, besides using, and I am talking about the use of Medicaid dollars now through senior and disabled services. They also have a program that is all State-funded that on a pro-rated basis helps people who are living independently to use services.

    Mr. VENTO. That is a good idea.

    Mr. Slemmer, did you want to comment about my question?

    Mr. SLEMMER. Our service coordinators—there is a lot more demand than there is money. I was just checking with our staff here. I thought it was something like $30 million worth of the request last year, maybe $15 million worth of allocations. I may have missed that.

    This legislation goes a long way toward, I think, filling the demand out there for social service coordination and coordinators, so hopefully, St. Paul will——

    Mr. VENTO. Maybe they qualified after the supplemental appropriation. I couldn't quite understand the letter the Secretary sent back to me, but I think that is what he was saying. He waited about three months to answer me until we actually had the supplemental appropriation, so I think it actually solved his problem for him.
 Page 51       PREV PAGE       TOP OF DOC

    On the enhanced voucher issue, the supplemental, that is an important aspect of this. Obviously when we start talking about that, that is real dollars, so providing extra dollars is important, but you might want to comment on the phenomena of the uncertainty of the annual Section 8 appropriation that is building up here concerning individuals that are serving the elderly or the 202 housing which seems to me is our focus today.

    Mr. Slemmer.

    Mr. SLEMMER. This particular legislation is suggesting some super vouchers to help people stay in their communities when the owner is opting out. I think that is a good first step. There are lots and lots of very serious problems occurring, especially in areas where there is a high demand for housing, like in California, Ms. Lee's area. We are working with the City of Pacifica, for example, where the owners are opting out and actually published notices to the seniors at 3 o'clock in the morning and the city is so alarmed about it that they are actually trying to go through eminent domain proceedings to slow down that process.

    So the components of this legislation that helps those kinds of housing units stay in this program I think are helpful, and that voucher is a piece of that. I think it is a temporary piece. We think, in our organization, that if we can get resources to the States and to the not-for-profits as a vehicle for preserving this housing, you are going to have a much longer term solution to the affordability and the housing problem. You do not see—Section 202 and not the profit sponsors opting out of this.

    Mr. VENTO. If you permanently lose a sponsor, you might have the voucher, but a lot of times we don't have availability of housing with it that is affordable, even though it is enhanced. But obviously, the big difference that the Chairman has made in his bill is the 100 percent debt forgiveness on the year-to-year basis, and you seem to be satisfied with this particular policy path, although perhaps you would prefer the latter, but on a budget basis, apparently that doesn't translate into an acceptable outcome.
 Page 52       PREV PAGE       TOP OF DOC

    Mr. SLEMMER. Well, I wish I was as smart as your staff and could figure out all of this budget scoring. There is a white paper that I have read, but I am not sure I understand all of that either. It seems to me to make common sense if you are going to do it, to do it all at once. It doesn't seem to make common sense to do it year by year, but I guess it makes technically sound budget scoring sense, so I guess I leave that in the hands of people that are a lot smarter than me.

    Mr. VENTO. OK. My time has expired. Thank you very much.

    Chairman LAZIO. Ms. Lee, thank you for your patience.

    Ms. LEE. Thank you, Mr. Chairman. This is a very important issue for me, and I am delighted to see this bill.

    Let me just say, of course, and I guess you anticipated maybe a couple of the questions I may ask. I come from the Bay area of California, Oakland, Berkeley, California. There is really no affordable housing available. There is barely any unaffordable housing available, let alone for seniors. The housing stock is just not there.

    Now, I think part of my question had been answered earlier with regard to the availability of Section 202 funds for construction, because in many areas such as mine, for example, now the stock is not there; we have to move forward in constructing these units, whether they are assisted or not assisted, for senior citizens.

 Page 53       PREV PAGE       TOP OF DOC
    Given the fact that this new construction is necessary, one, let me just ask you, in terms of this bill or other measures that are taking place, how do you see us getting there, or are we just beginning to get there? Second, how do you address the issue of affordability when the construction costs are so enormous and market rates are so great that senior citizens living on $700 a month won't even be able to afford the ones constructed?

    Mr. SLEMMER. Well, it is an unbelievable problem, especially in the Bay area. The specific project that I mentioned, the fair market rents that HUD was paying in this building were like $950 a month. We did a market study to see if we could support this property, and the market rent was $1,100 for a one-bedroom apartment. If this facility loses its Section 8, there is no affordable housing for 60 miles, so it is a terrible problem.

    This legislation that you are about to pass, I hope, authorizes more Section 202 housing. The Section 202 housing does provide 100 percent capital in advance, and so in California, if it is administered correctly, it should continue to provide, at a modest pace, some more senior housing.

    The biggest problem you have in California, however, is the opting out. Real estate is so valuable there that lots of owners are opting out of the program, and anything that you can do to provide some real resources to prevent that from happening and get that in long-term community, not-for-profit, some kind of ownership I think is something that you really ought to focus on.

    Ms. LEE. I wanted to find out, though, within the context of this legislation, knowing that that problem exists, do you have any recommendations on how we could begin to fix that, as we are doing this?
 Page 54       PREV PAGE       TOP OF DOC

    Mr. SLEMMER. Yes. We do have recommendations in our written testimony, and it revolves around a couple of different scenarios. One of them is, if you are going to lose a Section 8 project out of a vicinity, and that those dollars are leaving the program, there ought to be a way of getting those dollars back into the community.

    So say, for example, there is a 100 unit building in Pacifica that is going to be lost or opted out, there ought to be a way of preserving those dollars so that you can have it opted in by putting it in a not-for-profit kind of—or a community ownership, so that you can rebuild that housing. It seems to me like there ought to be savings for an opt-out there and there ought to be a way to provide for some kind of program that would allow you to reconstruct that.

    And again, I would urge you to look at the 202 program. You don't have Section 202s opting out. That housing, we have a 202 facility in Laguna Beach overlooking the ocean. That is going to be affordable housing for as long as the lease lasts on that property. It was leased for a school district. So it is not the same problems that you get. I would suggest that there ought to be money, if there is opting out, to opt-in; there are provisions to provide super vouchers in there to slow down the opting out process, but I don't think it does enough and I think it is a temporary solution.

    Ms. LEE. Thank you very much.

    Mr. Chairman, I would like to talk to you further about some of these recommendations.
 Page 55       PREV PAGE       TOP OF DOC

    Chairman LAZIO. Thank you very much. I would be happy to. Thank you.

    Let me also comment, if I can, Mr. Slemmer, and compliment Larry McNickle and Gerard Holder who are sitting behind you who have been very able representatives and advocates for seniors, both in terms of housing and supportive services. They ought to make you very proud, I am sure they do, and they have been of great assistance to this city and this Chairman.

    With that, let me thank Ms. Baumgarten and Mr. Slemmer and your respective staffs for helping to make the case more effectively. I am confident that you have provided some momentum for this subcommittee to move a bill to the floor that will help assist in providing the quality of services that you want to provide.

    With that, this hearing is adjourned.

    [Whereupon, at 4:55 p.m., the hearing was adjourned.]

    [insert offset folios 29 to 144 here]