Segment 1 Of 4     Next Hearing Segment(2)

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Thursday, May 22, 2003
U.S. House of Representatives,
Subcommittee on Housing and
Community Opportunity,
Committee on Financial Services,
Washington, D.C.
    The subcommittee met, pursuant to call, at 2:03 p.m., in Room 2128, Rayburn House Office Building, Hon. Robert Ney [chairman of the subcommittee] presiding.
    Present: Representatives Ney, Green, Tiberi, Harris, Waters, Velazquez, Carson, Lee, Sanders, Watt, Clay, Miller, and Davis.
    Chairman NEY. [Presiding.] Today, the subcommittee will hold the first in a series of hearings to examine the current operation and administration of the Section 8 housing choice voucher program and to review various proposals intended to make the program more efficient and cost-effective.
    The Section 8 housing assistance program was authorized under Section 8 of the U.S. Housing Act of 1937. It is a major vehicle providing rental assistance to low-income families and individuals commonly referred to as the Section 8 voucher program. It is the largest program in the Federal government that subsidizes the housing costs of low-income households. It is administered Federally by HUD, but is managed locally by the public housing authorities, also known as PHAs.
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    For fiscal year 2003, over $12 billion was provided for the voucher program, accounting for more than one-third of the HUD discretionary budget. Through the housing choice voucher program, eligible families can receive subsidies called vouchers to reduce their rent in housing units owned by private landlords. This is different from the public housing program which allows eligible families to move into low-rent housing units owned by the Federal government. Over the years, the program has often been criticized for its inefficiency. More than $1 billion are recaptured from the program every year despite long waiting lists for vouchers in many communities. The rising cost of the Section 8 program and some of the administrative concerns have caused many in Congress and the Administration to conclude that the program is in need of reform. The omnibus appropriations bill for 2003 adopted proposals to address the rising costs of the Section 8 program. Provisions were included that for the first time base the appropriation for Section 8 renewal program on the total amount necessary to renew all housing units currently under lease, rather than on the baseline number of units allotted to each public housing authority. The rationale for this change was that there have been no significant improvements in the utilization rate of these funds for the last five years. The omnibus bill also created a central reserve fund that the PHAs can use to supplement the rental subsidy costs of vouchers not reflected in their annual financial statements. This will allow the PHAs to lease up to their baseline levels if possible.
    In its fiscal year 2004 budget proposal, the administration proposed converting the Section 8 housing choice voucher program into a State-administered block grant. This legislation would dramatically change the way the Section 8 voucher program is funded and operated. The administration's proposal would convert the Section 8 tenant-based voucher program and the Section 8 project-based voucher program to a State-run block grant called Housing Assistance for Needing Families, HANF. While I recognize, as the administration does, that we have to constantly seek ways to improve America's communities and strengthen housing opportunities for all citizens, particularly for our poor, I also recognize the issue of reforming Section 8 is a contentious one.
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    However, it is an issue that I do believe deserves debate and a sustained debate, so all interested parties should and shall be heard. To that end, beginning today, I intend to hold a series of hearings on the overall Section 8 program and the administration's HANF proposal, receiving testimony from groups and individuals across the spectrum. This is a very important discussion and is one that I will be fully engaged with in the days ahead.
    With us today to discuss the administration's view is Mr. Michael Liu, Assistant Secretary for Public and Indian housing at HUD. The administration has put forth a sweeping proposal, and without objection I would like to be lenient with the allotted amount of time for testimony today to give the assistant secretary the opportunity to explain the administration's proposal. I have also introduced a bill by request in the administration on dealing with the issue.
    With that, I would see if we have comments from our ranking member.
    Ms. WATERS. Thank you very much, Mr. Chairman. I certainly appreciate this hearing that you have organized.
    The housing choice voucher program, commonly referred to as Section 8, named after the section of the U.S. Housing Act that authorized it, is the largest Federal low-income housing assistance program. The Section 8 voucher program currently serves about two million families at an annual cost of over $12 billion. Some 2,600 housing agencies, mostly local, administer the program. H.R. 1841, HANF, Housing Assistance to Needy Families, your bill, would convert the Section 8 voucher program to a block grant, transferring its administration to the 50 States, and giving them discretion over allocation of funds.
    Directly or indirectly, Section 8 supports over four million apartments. Roughly one in seven renters nationwide benefit from some form of Section 8 assistance. Of the four million Section 8 households, about 35 percent, 1.4 million, have portable vouchers. The HANF proposal would fundamentally change the Federal funding systems for tenant-based housing assistance from one based on actual cost to a block grant that simply distributes Federal appropriations among States. One of the Stated goals of the administration for HANF is to improve the under utilization of the Section 8 program. However, with the recent passage of HUD's funding year 2003 budget, block granting the program to States for this reason is unnecessary, as the problem of under utilized vouchers has already been addressed. The budget provides only enough funds to ensure that every family currently assisted under the program will continue to be assisted, rather than continuing the policy of funding all vouchers, even if they are not being used.
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    Senate VA-HUD Appropriations Subcommittee Chairman Kit Bond, in a Statement at a March 6, 2003 subcommittee hearing, said, and I quote, in my opinion, HANF is premature. The VA-HUD funding 2003 appropriations bill created a new funding structure for Section 8. Vouchers where public housing authorities receive the funding for all vouchers in use and for any vouchers that can be used up to a PHAs authorized level. This funding approach should result in a more realistic assessment of Section 8 funding needs, and reduce the need to go through the annual ritual of rescinding large amounts of unused excess Section 8 assistance. I think it will take several years to ensure the reliability of this new funding system, but I am optimistic that will become a good gauge of both the actual cost and the use of vouchers.
    A January, 2002 GAO report compared the six active Federal housing programs and found that Section 8 vouchers were the most cost-effective. Historically, funding for block grants such as HANF has failed to keep pace with inflation. Under HANF, funding levels would be based on inflation-adjusted figures, as opposed to current policy which bases renewal funding on actual housing costs. Between 1998 and 2003, rents rose by 25 percent. Over the same period of time, the consumer price index increased by 12 percent. Even at inflation-adjusted levels as suggested by the administration, housing assistance is likely to erode steadily under HANF.
    If funding levels fall behind the program's needs, as likely will occur, States will either have to contribute their own funds to the program or reduce assistance to low-income families and elderly and disabled individuals in one or more of the following ways: reduction of the number of families that receive housing vouchers, despite the fact that three out of four low-income families eligible for vouchers already go without assistance because of funding limitations. A reduction in the number of vouchers would make the shortage of affordable housing even larger by cutting costs, by shifting assistance to higher-income families. Such families need smaller subsidies to be able to afford housing. As a result, the average cost of providing housing vouchers to these families is smaller than the cost of serving poor families. Also cutting costs by shifting rental burdens to families participating in the program. This can be accomplished by requiring families to pay more than 30 percent of their income for rent, or reducing the total amount of rent that a voucher could cover, thereby making fewer housing units accessible to voucher families.
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    There is a lot more here, but I think that which I have shared with you basically describes my concerns about HANF. I am very, very worried about this program, Mr. Chairman. This is one of the most significant programs to assist poor people that we have in this country. I come from a State where we have a $35 billion deficit. If you block grant that money to my state, they are going to take some of it and use it for other things. Or if they needed to subsidize it in any way, they could not do it because we just do not have the money. So I would like to hear from others today about your legislation, but I think that this would be one of the greatest shifts in a program that I have seen certainly since I have been in the Congress of the United States, and maybe historically.
    I yield back the balance of my time.
    Chairman NEY. The gentlelady yields back the balance. Does the gentleman have a written statement?
    Mr. GREEN. No public statement, thank you.
    Chairman NEY. We will send you a bill for that. The gentlelady from New York?
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    I would like to thank the chairman and ranking member for holding this important hearing today. I would also like to thank Assistant Secretary Liu for testifying.
    The Section 8 program is a vital safety net for our most at-risk families. It provides vouchers that allow families the flexibility to receive government-subsidized rental housing in the private market. The tenant-based program gives low-income families the opportunity to move into housing they could not otherwise afford. This gives parents more say in what schools their children attend and more opportunity to live closer to their place of employment and public transportation.
    However, the Section 8 program is struggling. As a result of chronic underfunding, only one-fourth of low-income households that are eligible for vouchers receive any Federal housing assistance. Additionally, landlords are opting out of the project-based program and many more are refusing to rent to new voucher tenants. The President says he has the solution; the Housing Assistance for Need Families block grant. President Bush expects us to believe that block granting the Section 8 program will not reduce the number of families assisted. He expects us to believe that it will not shift burdens to low-income families. Mr. Chairman, I believe the President has made his lack of commitment to Section 8 abundantly clear.
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    In fiscal year 2001, 79,000 new vouchers were appropriated. That was the last year of the Clinton administration. As soon as President Bush took office, the number of new vouchers dropped to 18,000. In fiscal year 2003, no new vouchers were appropriated. The current HUD budget proposal calls for a mere 5,500 new vouchers. Mr. Chairman, there are hundreds of thousands of families on waiting lists. While the rhetoric coming out of the administration is that they are creating new housing opportunities for low-income communities, the reality is that they have systematically ignored them for the past two and a half years. HANF will seriously undermine the financial and moral integrity of Section 8. It creates an unnecessary and costly new layer of bureaucracy, and eliminates flexibility in the program. It will result in no new housing opportunities, and potentially limit the length of time tenants can receive Section 8 benefits.
    For these reasons, I authored a letter with my colleague from New York, Mr. Nadler, asking appropriators to fund 79,000 new Section 8 vouchers this year. This letter was signed by 66 members of Congress, including every Democrat on this panel. I will ask unanimous consent, Mr. Chairman, that this letter be inserted in the record today.
    Chairman NEY. Without objection.
    [The following information can be found on page 166 in the appendix.]
    Ms. VELAZQUEZ. I understand the chairman intends this to be the first in a series of hearings on this topic, and I commend him for this decision. We must consider the suggestions of a full range of expert witnesses before rushing to a markup. I believe that the current proposal will not only fail to address the needs at hand, but will make our housing crisis even worse, leaving more families out of assistance and out in the cold.
    Thank you, Mr. Chairman. I yield back the balance of my time.
    Chairman NEY. I want to thank the gentlelady. Also, without objection, all members' opening statements will be made part of the record.
    The gentlelady from California?
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    Ms. LEE. Thank you, Mr. Chairman. I want to also thank you and Ranking Member Waters for convening this hearing, and to the assistant secretary, thank you for being here.
    Today, we all know that our nation is facing an affordable housing crisis; 4.9 million families across the nation pay over 50 percent of their income or rent often for substandard housing. Even when the economy was strong, rising housing prices kept safe, decent, affordable housing out of the reach of millions of American families. The combination now of a weak economy and rising housing and rental prices has created a situation for low-income families that is very untenable.
    The Section 8 voucher program has been the principal form of assistance for low-income families, the elderly, and we cannot forget the disabled also. Only 15 percent of Section 8 voucher recipients live in high-poverty neighborhoods, as compared to approximately 54 percent of public housing residents. Clearly, showing the success of integrating communities through the Section 8 voucher program is what we are beginning to see.
    So I recommend that we look at how the Section 8 program performs after the changes that were made during last year's appropriations cycle. We should also look at the issue of recaptures and bring in our local housing leadership and tenants to talk about the real problems with local housing affordability and potential solutions. Block granting will not work. This proposal I believe goes in the wrong direction. Most importantly, I think we must increase the flexibility and funding for vouchers in order to eliminate our long waiting lists, recruit more landlords, and broaden our pool of affordable rental units. That is the direction I think we need to go in.
    The Housing Assistance for Needy Families fails to effectively address the needs of the Section 8 voucher program and would compound our nation's growing challenges with our housing and state budget crisis. So I think that we do, as the ranking member and Congresswoman Velazquez indicated, I think we need to look at this. We need to have more discussion and we need to try to come up with a bipartisan approach to this. I look forward to working with members of the administration, HUD, and with members of this committee on, really, I believe what amounts to saving our Section 8 program, because I think going in this direction truly will possibly eliminate it for many of our communities.
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    Thank you, Mr. Chairman, and I yield the balance of my time.
    Chairman NEY. I thank the gentlelady, who yields back the balance of her time.
    The gentleman from North Carolina, do you have an opening statement?
    Mr. WATT. Thank you, Mr. Chairman. I will not take the full time, but I would just thank the witness for being here, and for being available to answer questions.
    I am all in favor of improving the Section 8 program. In parts of my congressional district, it works; in other parts, it does not work. But I am not sure that I understand how simply passing the problem along to the States addresses that. I do not necessarily view that as an improvement in the Section 8 program. I suspect what you will get are some improvements in some places and some substantial un-improvements in other places. One thing we know for sure is that there will not be the body of information and experience that has been built up about the Section 8 program by HUD over all of these years, because in effect what we are doing is telling States to start doing something that they have not been doing in the past. I am not sure I understand how that improves the situation. It gets it off of HUD's plate. It passes the buck, but somebody has got to do the hard work.
    So I am looking forward to hearing how we think this improves the Section 8 program, not just moves it from one location to another location. So if I can get some answers to that, either in your opening statement; I was looking at your opening statement and it is just kind of like we assume that this movement somehow improves the program. I do not see the structural definition of how that occurs, other than just the assumption. So I hope you can address that as we move along, and I will yield back the balance of my time.
    Chairman NEY. The gentleman yields back the balance of his time.
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    We want to welcome Mr. Liu to the committee; the Assistant Secretary for Public and Indian housing. Without objection, your written statement will be made part of the record. Welcome.
    Mr. LIU. Thank you very much, Mr. Chairman, Ranking Member Waters, and members of the committee. I appreciate the opportunity to appear before you today to discuss H.R. 1841.
    The purpose of the Housing Assistance for Needy Families, or HANF proposal, is to improve the delivery of tenant-based assistance to very low-income families. We believe that it will accomplish this objective by retaining the core elements of the tenant-based assistance program, while stripping away the unnecessary requirements and regulations that are not central to the program's fundamental mission. The current program's basic concept is still sound. However, there are serious shortcomings with its design and effectiveness. This is evidenced by two very troubling figures. Over $1 billion of tenant-based assistance have been annually recaptured by Congress; and two, HUD pays upwards of $1 billion in over-subsidy due to errors resulting from the current complicated restrictive program rules which we do have. So on the one hand, money goes unused and thousands of eligible low-income families do not receive subsidies. On the other hand, the government is paying too much for what is used. Reforming and simplifying the program can eliminate both of these staggering problems and provide more, not less housing, to those in need.
    In addition, HUD must administer the voucher program through rules and regulations in a one-size-fits-all mode to over 2,500 entities throughout the nation, half of which administer only 250 or fewer vouchers. The sheer number of local administrative entities has significantly diminished HUD's ability to provide quality assistance to the program and to monitor and accurately measure performance. Under H.R. 1841, HUD would be authorized to make grants available to States to provide tenant-based rental and homeownership assistance, either directly or through local entities, to eligible families. I repeat, we are authorized to make grants to the States. We are not mandating that the States take on this program. States who want to take on this program would have to apply with a plan, and we would have to approve that plan.
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    We believe the States, those who accept this challenge, would be able to make more timely and informed policy and funding decisions based on local need and market conditions, as compared to administrators back here in the beltway in Washington, D.C. These decisions include moving unused funding to heavy demand areas of the State at any given time during the fiscal year; something that takes HUD many weeks, if not months, to attempt to implement; and then tailoring the program to better address the practices of the local market and needs of the community.
    States would have the ability to contract with the most effective entities to manage the program in any given area of the State, fostering greater accountability and competition in the program. State administration would reduce the administrative burden associated with running the program by consolidating many of the administrative duties currently replicated by every single PHA in a single state, such as reporting and budget. HANF would retain and expand portability of tenant-based assistance to all areas of the country, including those few areas not currently covered by the voucher program. State administration would eliminate the burden of portability moves within a State which account today for over three-fourths of all moves between PHA jurisdictions. Moves between States would also be easier to accomplish. The number of vouchers available to the State at a given time through normal turnover would permit the State to absorb the family into its own program and eliminate the cumbersome billing process which currently exists among PHAs across state lines.
    Some concerns have been raised that the HANF grants may be more susceptible to budget cuts as a block grant or that increases in rents would out-pace inflation. We believe just the opposite would be true. Because the changes brought about by HANF would facilitate greater utilization, the funding levels would be more sustainable and justifiable compared to the current program which Congress just this year adjusted funding levels to account for under utilization. Some assert that block grants have been more vulnerable to cutting in the annual appropriations process than others. In fact, the funding history of the very similar affordable housing type of program, the HOME block grant program, just does not support this suggestion. In the President's fiscal year 2004 budget, the requested appropriation for the HOME program is 14 percent higher; that is adjusted for inflation; than in the program's very first year. The program has in fact received regular annual increases since 1993.
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    We believe that support in the budget and appropriations process for programs does depend in good part on their performance. By strengthening the performance of the housing choice voucher program, the administration's proposal would increase the chances that future funding increases will be provided by Congress. I want to point out that our 2004 requests for HANF is over $900 million than our fiscal year 2003 proposal. Under 1841, annual funding would be adjusted by a formula that would take into consideration data specifically tied to housing costs, not just inflation in general, as well as the number of the families assisted, extent of poverty, state performance, and funding utilization.
    Another misconception is that States would be able to divert HANF funds for other purposes. Our legislation is clear that the program would be limited to tenant-based rental and homeownership assistance and the costs of administering those grants. Conversion to the HANF program would maximize the number of families receiving housing assistance, without shifting assistance away from those families with the most need. The initial amount of the HANF grant would be equal to the sum of all voucher funding currently provided to public housing agencies in the State. The States would be required to maintain assistance for at least as many families as are currently served, and families under the voucher program at the time of the conversion to HANF would continue to receive tenant-based rental assistance under the current regulations through fiscal year 2009. In addition, any family participating in the homeownership voucher program at the time of the transition to HANF would continue to receive homeownership assistance under the same terms and conditions as the current program. Lenders can continue to underwrite loans with the full assurance that the rules under which they base those loans would not be impacted by the conversion of the program.
    A major goal of 1841 is to simplify and reduce the administrative burden on the program providers. For instance, a significant problem plaguing the voucher program is the unacceptable error rate of approximately $1 billion a year on the calculation of adjusted incomes and rental subsidies. One of the root causes of the problems is the myriad of different rules covering what qualifies as annual and adjusted income, coupled with numerous temporary full and partial exclusions and income disregards. There are even rules which talk about capitalization of indebtedness; rules involving depreciation of assets; hard to believe when we are talking about a population that really we are not considering those types of issues when we are looking at them.
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    These policies, however well intended, and many of them directed by past Congresses, have simply made income determinations a far too complicated process. Under HANF, all income determinations would be based on gross incomes. States would have the flexibility to set the percentage of gross incomes that families would be required to contribute as their share of the rent, but that percentage could not exceed 30 percent. Under the current voucher program, families may choose to pay more for higher-priced rental units if they wish.
    In summary, 1841 offers us an opportunity to make significant improvements to the housing voucher program. It moves administrative decisionmaking out of Washington, closer to the communities and families affected, along with program flexibility to address local needs. States would have the means to take actions that may be necessary so that program funds are expended promptly and most effectively. Importantly, the HANF program provides government support of self-sufficiency efforts for assisted families, efforts to reduce homelessness, and to help the disabled live independently. It does this by facilitating greater coordination with state-administered programs relating to education and job training and child care and health care, inclusive of programs like TANF and One-Stop Career Centers.
    I thank you again for this chance to testify, and I look forward to answering any questions you might have. Thank you, Mr. Chairman.
    [The prepared statement of Hon. Michael Liu can be found on page 161 in the appendix.]
    Chairman NEY. I want to thank you for your testimony. They have also called two votes, but we will try to get some questions in and then vote and then return.
    I just wanted to give you an example, and I do not know if you have looked at this or how it would be written, but in my own state there was a grab of TANF monies, and those monies which should have gone into, in my opinion, the work program went into supplement Head Start. Now, it is not legal and I did not think it was then, but it was done based on the fact that somehow they did education for parents; there was some clever way to remove, or as I used to say, appropriate or steal those funds over, whichever way you want to put it. I did not agree with what they did. If you do this, how do you craft this so you make it crystal clear that funds cannot be used for any purpose but exactly what traditionally the PHAs have used them for?
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    Mr. LIU. Mr. Chairman, we fully anticipate that in review of the plans from the States that we will be obviously looking to ensure that their plans to make clear that the funds will be used for a tenant-based voucher program. Secondly, in the initial phases of the program, we believe that it is very likely that we will monitor more than just one a year, probably at six-month intervals, again just to ensure that there is compliance with the program requirements, compliance with their plans, so that these types of intrusions on the intent of the program are mitigated and certainly are prevented to the extent that we can.
    Chairman NEY. Just to follow up on that, because again I think that we would have to look at other options or what options would be out there, if the governor of a State would not in fact comply and somehow said, look, I think these monies could be shifted and supplemented for; I cannot think of an example right now, but the Head Start was the best example. Do you sue the governor if the State is running a program? Because technically, you cannot use Federal dollars. HANF money, in my opinion, cannot be used to supplement Head Start money that the State of Ohio, for example, should have put in. So what happens, I guess; has anybody thought that out?
    Mr. LIU. We have a range of options in the event that a State oversteps its bounds or is not compliant with the program outlines. We can take back the program administration. There is no question in the legislation that the Secretary has the power to do that. We can withhold funds until we are satisfied that the State has righted its ways or assured us that it will not proceed down the wrong path. We have the ability to penalize the administrators involved through civil as well as potentially criminal actions. So we think that we have an array of tools that we can use to prevent those things from happening, Mr. Chairman.
    Chairman NEY. The gentlelady from California, do you have a question?
    Ms. WATERS. Thank you very much, Mr. Chairman.
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    This may be a question that is easily answered and everybody else may understand except for me. What if a State decides it does not want to take the block grant?
    Mr. LIU. Then HUD will administer the program under the guidelines as outlined in 1841. In other words, we will administer the program with the entities within the State that we feel are good performers, know how to manage the program, and with the flexibility and simplicity which we feel the State was intended to at the start to be managed by.
    Ms. WATERS. Obviously, the administration of this program demands a large number of personnel to do it. So if all of the States decided they were going to take the block grant and administer the program, that means you would have to kind of get rid of this part of HUD. Is that right?
    Mr. LIU. Absolutely not, Ranking Member Waters. The history of HUD over the past, prior to this administration, because we have increased our personnel at HUD.
    Ms. WATERS. What are you going to do with all these people who used to administer Section 8?
    Mr. LIU. Right now, these people are basically looking through paper, doing rote type of work. We want to free these people to provide the type of quality assistance, technical assistance, qualitative thinking that right now we have to go outside the agency to get and to pay millions of dollars for. We want to use our staff to do the type of qualitative work with the State entities and their partners in making this program more efficient and better.
    Ms. WATERS. We are going to have to go, but I am concerned about all of this monitoring that you are going to do that you cannot do now. What you are basically saying is that HUD cannot do it now. But then you tell us, you are going to make sure the States do it because you are going to set up all these monitoring systems. Now you are trying to tell me you are going to take all of these employees and you are going to use them to do something related to the program, while my state and other States are going to be using part of this block grant to put up whole new systems by which to administer the program, which is extreme duplication. What are you doing and why are you doing this? Don't answer now, we have to leave. We will come back.
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    Mr. LIU. I will answer you, Ranking Member Waters.
    Chairman NEY. If the gentleman will hold, we will be back.
    Chairman NEY. We will begin again, and we will go for questioning to Mr. Green.
    Mr. GREEN. Mr. Liu, I guess the biggest question I have is what do you see as the main barriers to increased participation in the Section 8 rental program? What is it that we should be doing to attack those barriers?
    Mr. LIU. The main barrier is, as I have outlined, congressman, one, simplification; getting back to the basics of what the program was intended to do, to help people with low income so that they do not pay more than 30 percent of their gross income; very simply. We have over the years created layer upon layer of different directions, many well intended, where in fact we have problems now in figuring out just who qualifies and does not qualify for the program. We end up, as I stated, paying $1 billion more than we should for those vouchers that we use, and then for the vouchers that we do not use, we lose $1 billion on the back end.
    Number two, we have a very inefficient system currently in trying to make use of these precious dollars; over 2,600 entities, over half of them manage fewer than 250 vouchers. We spend $10 million extra just to take care of so-called troubled agencies. Those administrative, as well as programmatic in terms of policy, are the biggest barriers.
    Mr. GREEN. You have in both your written testimony and your response just now, you have put some dollar figures on inefficiencies and anecdotes and examples. Do you have any idea program-wide what kind of savings we are talking about? Obviously, you must believe that there are savings. I think that is the philosophy behind what you are trying to do or what you are proposing to do. Do you have any idea what those numbers would mean, and therefore what the increased participation could mean?
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    Mr. LIU. Very, very roughly in terms of cost savings, from a very conservative estimate of anywhere from $150 million upwards to; the difficult part is how do you value the type of quality assistance that we are not giving now that we could give to managers of the program. That is difficult to quantify, so that could be another $100 million, maybe more.
    Mr. GREEN. Okay, thank you. Mr. Chairman, I have no more questions.
    Chairman NEY. The gentlelady from New York?
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Mr. Liu, I am disturbed by what I believe to be a large number of misleading statements in your testimony. To cite two, on page three you said, ''some assert that block grants have been more vulnerable to cutting in the annual appropriation process than others, so that block-granting vouchers means that funding is less likely to keep pace with inflation in the future. The funding history of HUD's HOME block grant for housing does not support this argument.'' However, provisional data from the CBO indicates otherwise, and I have it right here. During the current administration, funding for HOME and CDBG has increased by only 4 percent, while inflation has been 6.1 percent.
    Then, additionally, on page four, you said, ''States will have the flexibility to set the percentage of gross income that families would be required to contribute as their share of the rent, but that percentage could not exceed 30 percent.'' Yet the language in H.R. 1841 clearly says that, and I quote, families may choose to pay more to secure better quality housing. To me, this indicates that HUD will expect, and as the budget crisis gets worse, HUD will encourage any family who wants safe, decent housing as opposed to just a roof over their head, to pay more. Yet that is not what you imply in your testimony.
    How do you respond to these contradictions, and how can we believe your testimony?
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    Mr. LIU. First of all, they are not contradictions, congresswoman. The number you gave from CBO is the combined CDBG and HOME figure. The HOME figure is in fact adjusted for inflation at 14.7 percent since the start of the program. For the specific fiscal years you mentioned, the increase is at 10.7 percent. Secondly, in regards to what the legislation States, the legislation clearly States the maximum that the State could impose. Currently, as the program exists now, that any one family could pay is 30 percent of gross income. Excuse me; in terms of the ability of a family to pay more if they wanted to, that is the status quo right now. If a family wants to pay more than 30 percent more, they can. So there is no contradiction, congresswoman.
    Ms. VELAZQUEZ. You said that block grants are not susceptible to inflation; eroded due to inflation. But when you look to the block grants, big block grants——
    Mr. LIU. There has been an increase in CDBG. I did no mention CDBG in my testimony. I mentioned HOME as the program that we feel is most comparable because HOME program; I said HOME program. That is very specific. The example that we used in our testimony is the HOME program.
    Ms. VELAZQUEZ. Someone said that block grants have been more vulnerable. I think that is clear English.
    Sir, how will owners respond to the fact that vouchers will no longer be permanently awarded to participating families? How do you respond to arguments that they will be worried about renting to voucher holders because they know that they could be terminated at any time, even if they have always paid the rent, and they are still income-eligible?
    Mr. LIU. Congresswoman, the program currently is based on annual contracts, annual leases, by and large, in the various communities that have the program. Landlords are not promised now lifetime commitments on the part of the agencies, nor would they be permitted to be counting on lifetime contracts or leases with tenants in the future. The program will be managed as it is now. Private sector landlords would sign leases with tenants. Those tenants will be by and large on an annual basis.
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    Ms. VELAZQUEZ. What about if there is a change in family income during the year?
    Mr. LIU. Currently, if there is a change in family income and the family goes over income, the housing authority is supposed to make adjustments to the rent paid by that family. If they are in fact ineligible, if they become ineligible, then the housing agency does have the right to terminate that lease. That is under the current program.
    Ms. VELAZQUEZ. And if their income goes down?
    Mr. LIU. And if their income goes down, the housing agency has the ability and they have the responsibility to adjust the rent paid by that family accordingly.
    Ms. VELAZQUEZ. How will that happen if the block grant has already been distributed?
    Mr. LIU. The block grant will be in terms of the sums provided to the States. The State will still have to administer the program through leases made with private landlords, just as they are done right now.
    Chairman NEY. The time has expired, but I would note we can go into a second round afterwards. What I would like to do at this time is I had yielded part of my time to the gentlelady from California so we could both get a question in. So I have got one more and then we will go on to the gentleman from North Carolina.
    The question I have, if this was a recapture problem, did the omnibus fiscal year 2003 bill, did it take care of the recapturing?
    Mr. LIU. The omnibus bill took care of the recapture issue, but it did not take care of the programmatic issues, nor did it take care of effective utilization issues. Through the reserve fund and through the ability to reallocate, it took care of the recapture issue, but it did not take care of the complexity issue. It did not take care of the over-subsidy issue. It did not take care of the administrative issue that we have to deal with all these very small entities, thousands of different PHAs that we have to work with now, Mr. Chairman.
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    Chairman NEY. The reason I asked that, most of the thrust of what I have always heard of why this is needed is because of the recapture issue; the money has come back to Washington and did not get out to the people. So naturally, I was thinking if the omnibus bill took care of the recapture issue, why would we have to proceed? But you are saying there are other factors that would cause the block-granting beyond the recapture issue, correct?
    Mr. LIU. Absolutely, Mr. Chairman, absolutely.
    Chairman NEY. That makes a whole difference; I will do a second round of questions. If it was just an issue of recapture, one would think that what a housing authority does not use within a State it could automatically shift back to the State, so it does not come back to Washington to be decided whether it was recaptured or not. That could be corrected in a measure.
    Mr. LIU. Yes.
    Chairman NEY. You are saying that it is issues of utilization, and what else was it?
    Mr. LIU. Administration, a better delivery system, complexity of the program so that we can do away with the current problem of for the vouchers we do use, we essentially end up paying $1 billion more than we should be.
    Chairman NEY. How much more?
    Mr. LIU. Over $1 billion.
    Chairman NEY. For?
    Mr. LIU. For over-subsidies. In other words, we have found out that our agencies have such a difficult time in calculating income requirements, whether it is for new tenants or recertifications, that we end up paying more than we should be. And then finally, the ability to, from a case management standpoint for providing the best social service playing field for these families, we believe that working with the States who also have primary responsibilities in so many of these programs relating to education, job training, the TANF programs, career training programs, that it only makes sense, good sense, to combine the housing component; not the resources, but the program delivery alongside these other programs.
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    Chairman NEY. At this time, we will move on to the gentleman from North Carolina.
    Mr. WATT. Thank you, Mr. Chairman.
    Mr. Liu, how much is HUD now spending to administer the Section 8 program?
    Mr. LIU. The full total amount of the program has fluctuated over the past few years between $12 billion and $14 billion for the tenant-based program.
    Mr. WATT. That is the administration cost?
    Mr. LIU. That is the overall program. For the administration, we have——
    Mr. WATT. I am looking for the administration. Has HUD done a calculation of what it costs now to administer the program?
    Mr. LIU. $1.2 billion.
    Mr. WATT. $1.2 billion, Okay. And how many employees is that? How many employees do you have administering the Section 8 program?
    Mr. LIU. That $1.2 billion is what we——
    Mr. WATT. I did not ask you whether that; I assume the employees, the salaries are included in that, but how many employees administer the Section 8 program?
    Mr. LIU. I could not give you that figure because the number——
    Mr. WATT. If you can get that for me later.
    Mr. LIU. I can get that for you.
    Mr. WATT. Okay, alright. As I understood what you said in response to Ms. Waters's question, you are not going to cut any of those employees.
    Mr. LIU. I need to clarify that. The $1.2 billion is what we provide to the housing authorities currently to pay for their administrative costs.
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    Mr. WATT. That is not the question I asked, though, Mr. Liu. I want to know how much; has HUD done a calculation of what it costs HUD to administer the program?
    Mr. LIU. It is about $15 million.
    Mr. WATT. $15 million, okay. And you still do not know, I assume, how many employees HUD is using to do that? If you will get that information for me.
    Mr. LIU. I can get that for you, sir.
    Mr. WATT. Okay. Let me just raise some concerns that I have based on your testimony, which I think is very conclusory in the way it is presented, but raises more questions than it answers. First of all, starting at the end, with the comment that you just made in response to Mr. Ney's question, you say that this is more efficient because it does this by facilitating greater coordination with state-administered programs related to education, job training, child care and health care, inclusive of other state-administered Federal programs like TANF and One-Stop Career Centers. Yet there is no mixing of resources, and for the life of me I cannot understand how this process makes it more efficient if there is not going to be any mixing of resources.
    Number two, you say on page four of your testimony that there is an unacceptable error rate of approximately $1 billion in the calculation of adjusted incomes and rental subsidies. I assume that those errors are not being made by HUD; they are being made at the local level. Is that correct?
    Mr. LIU. Yes, sir.
    Mr. WATT. Okay. So it is not HUD that is incompetent; it is whatever agencies are administering the program in local communities that are doing incompetent monitoring, and you are still going to have some income criteria, so somebody in the local community is still going to have to administer those, I assume.
    Mr. LIU. Yes, sir.
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    Mr. WATT. Okay. And so do you have discretion now; does HUD have discretion now to contract with somebody other than housing authorities to administer Section 8?
    Mr. LIU. If the housing authority falls into what we call ''troubled status.''
    Mr. WATT. Okay. And then you would have to snatch it back and administer it yourself, not contract with somebody else, right?
    Mr. LIU. We would probably, through a contract, then administer the program with potentially——
    Mr. WATT. Are you doing that anywhere?
    Mr. LIU. Yes, we are.
    Mr. WATT. Okay. So you have found some places where they were just so inept that you had to get somebody else to do it. You are saying the State is more likely to be able to find somebody else than the Federal government is?
    Mr. LIU. We think the States are closer to the action.
    Mr. WATT. I understand that the State is closer to the action, but this is Federal money that we are administering, and if we are going to cut all the strings that are attached to it, it seems to me we ought to get out of the housing business and let the States collect the money and we would not be involved in the process at all. The Federal objective here, I take it, of Section 8 is to provide decent; we have a national policy to provide decent and affordable housing to people throughout the country. I think me and Mr.—what is the guy's name who ran against Hillary Clinton in New York? Mr. Lazio and I had about a two-hour debate on the floor of the House where he was trying to eliminate that from the housing bill. Finally, he relented. Our national objective still is to provide safe and affordable housing to every American citizen; not a right, but an objective. What I hear you saying is we are going to pass that objective to the States and rely on them to achieve the national objective that we have set. If we have a national objective, it seems to me, and we are going to use national money, it seems to me that we ought to be ultimately accountable for the use of this money. I just do not see that this block granting approach either adds efficiency; we are going to keep the same number of employees and the States are going to come up with a new infrastructure at the State level. They may contract with new people at the local level to administer the program who have no experience in doing it. So we are likely, it seems to me, to end up with an inordinately more inefficient program than we have now. I am just having a lot of trouble understanding that.
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    Chairman NEY. The time has expired.
    Mr. WATT. I thank the gentleman.
    Chairman NEY. We will have another round of questions. I want to move on, and then we can come back, so if you could hold that. Can you answer that?
    Mr. LIU. Very quickly. I would just point out that in fact today 34 States have experience with the program and manage some form of the Section 8 program. We have national objectives for many areas of domestic policy; in agriculture, in health, in education; and the States manage many parts of those programs.
    Chairman NEY. Thank you.
    Mr. Tiberi?
    Mr. TIBERI. Thank you, Mr. Chairman. I apologize for coming in late.
    Mr. Liu, I was dealing with a HUD constituent matter, you can appreciate that. Just kind of following up on Mr. Watt's thoughts, he and I are agreeing more and more lately, which I am not sure is scarier for me or scarier for him. But in terms of the States, if you could share with us your thoughts regarding States' roles in this issue. Let me give you an example and have you respond.
    The chairman and I have served in the State legislature in Ohio. Ohio right now is going through, like many other States, a budget crunch. One of the things that the State does not do right now is really deal with housing. They have an agency within the Department of Development that deals with housing from a macro standpoint in terms of bonds. But in terms of actually administering a housing program like the Columbus Metropolitan Housing Authority does today, they simply are not capable of doing it and do not do it.
    So my question is two-fold, if you could give me your thoughts on the theory behind the program, if it became the law of the land. How would States like Ohio have to structure and beef up and provide a bureaucracy for such a program and oversight for such a program? And number two, what would happen to housing authorities today as we know it, in terms of their right to exist, as well as the employees that they have today? I know they are concerned, at least in Ohio, that they would be put out of business.
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    Mr. LIU. Thank you for your question, congressman. I, too, have served in a State legislature. My home state is Hawaii, where it has a very active housing program, where it does administer a very active loan program. As I mentioned earlier, the legislation in our proposal is not a mandatory program on the part of the States. If the States did not feel that this is the right time for them; if they felt that this was, for whatever reason, not the right program for them to come in for, they need not be part of the application process. In which case, HUD would manage the program.
    Mr. TIBERI. Let me share with you, though, my concern. Maybe I did not express it very well. Ohio is going through a budget crunch, and they look, wow, here is some money that maybe we can put into the Department of Development and try to do what HUD is trying to do, maybe for even less money. Many argue that the system is already balkanized. Could this balkanize it worse, when you do not have, really, in some States a bureaucracy, and States would be attracted to the fact that there is this pot of money coming from HUD, let us grab it and try to deal with this issue?
    Mr. LIU. The program, first of all, would have to be used for a tenant-based program. There would not be the ability, and it is written into the law; there would be monitoring to that effect that they could not use these funds for other than a tenant-based voucher program. The easiest way for a State, and we think a logical way for a State to deal with the issue of a quick ramp-up to be able to administer the program, would be to contract with those entities within their States which are doing a good job now; those larger entities that have substantial programs which are in fact meeting many of the requirements of even the current complicated situation that we have.
    In Ohio, 34 percent of the agencies there are of the small category. That is not an insignificant number. Very easily, the State could contract with those housing agencies that do well, such as the one in the town that you mentioned, in Columbus, to continue managing the program.
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    Mr. TIBERI. Excuse me, Mr. Chairman, one last question. If that is the case, then under the scenario today, under the theory that you have provided to us under this bill, that let us push it back to the State level, why not just push it back to the local level to start with under that theory?
    Mr. LIU. Because we believe the States right now are uniquely situated because of the other types of social service self-sufficiency programs that they are a key player in, in order to manage the program on a regional basis. Local entities are very local in their outlook, in their city or town. The voucher, because we want to give the portability aspects the greatest amount of flexibility and because most of the portability which we see in the voucher program lies within specific States, really sets itself up as the States are in fact the best entities that we see to manage this program.
    Mr. TIBERI. Just to follow up, Mr. Chairman, you do not have any concern with respect to States who do not have that ability in abusing that right, that effort?
    Mr. LIU. We believe that we will have enough of a monitoring presence to mitigate those concerns, sir.
    Chairman NEY. I thank the gentleman. Do you want to co-author that bill with me? Okay.
    Mr. Davis from Alabama?
    Mr. DAVIS. Thank you, Mr. Chairman.
    Mr. Liu, good afternoon to you. Let me, if I can, pick up a little bit on Mr. Tiberi's questions and maybe go in a slightly different direction. There is one layer of concerns, I suppose, that States strapped for cash as they are, will take money that should go to housing and use it for other purposes. There is a more subtle concern that I have got. It is that a lot of States have significant disparities in their urban and rural housing needs, or at least the people who are sitting in state capitals have a perception of that. As you know, in most States, State Legislatures are affected by the population. They are determined by the population, so the urban areas have a lot of votes; the rural areas do not.
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    I am concerned about the fact that if this program were transferred to the States as you and the administration want, that it would give the States an enormous amount of flexibility to discriminate, if you will, between urban and rural areas. Are there any particular strictures or provisions in place that would prevent States from reallocating funding in ways that might discriminate against rural areas, or even in some cases against urban areas?
    Mr. LIU. Congressman, the legislation would require us within 12 months of enactment to come up with a formula that looks at the number of families being served, extent of poverty within the State, cost of housing within the State, the performance of the State in administering grant amounts under this Act or others, the extent to which the State has any funds previously appropriated under the Act, and other measurable items. To the extent that there may be a concern and issues regarding rural versus urban, the Secretary has indicated that is certainly something that we can work on with this committee and others in developing that formula once this is enacted.
    Mr. DAVIS. And just if I can follow up on that, Mr. Liu, that I think is a point worthy of being followed up on because as you know, once this is down-loaded and sent to the States with all the things that HUD is doing, monitoring what the State of Alabama does with respect to York and with respect to Birmingham is not exactly going to be high on the priority list. So the concern that I think some of us would have is whatever changes are made, there need certainly to be some provisions in place. For example, Medicaid right now has certain rules and provisions that require States to allocate funding in ways that do not discriminate across regions.
    Let me move to one other area. It is my understanding that under the changes that you have proposed, that some of the income-targeting would also be changed. Right now, it is my understanding that about three-fourths of the money under Section 8, or three-fourths of the vouchers, I should say, have to go to what are classified as low-income tenants; people that fall within a certain median range. As I understand it, that could be reduced to as low as 55 percent. Is my understanding accurate, first of all?
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    Mr. LIU. We would have the ability to waive the 75 percent requirement down to 55 percent, which still preserves the majority of the vouchers going to those at 30 percent or below of median income. But currently under the program, under the current targeting requirements, we find housing authorities having a difficult time providing vouchers to seniors who do not qualify because they may be getting more under Social Security; to those under the TANF program who because of their new work involvement are earning more than the required, or just above the 30 percent level. So while we preserve the basic parameters of the program as they exist today, we believe that the flexibility to allow the States to request waivers from HUD that could not do it on their own, is a reasonable one because we do preserve that a majority; at a minimum 55 percent; would still have to be at that level.
    Mr. DAVIS. Let me cut you off just in the interests of time. My concern with that, Mr. Liu, is that may be a fairly noble goal to get more seniors involved in the program, and of course there is nothing that would require States to reallocate the money to seniors. My concern is that at a time when the economy is in such dire straits, we are potentially singling out the most vulnerable people for cuts. That leads to my last area of questions. Right now, as I understand it, States can impose a minimum rent requirement of $50 a month, which doing the math, is $600 a year. Now, it strikes me as being somewhat curious public policy at a time when unemployment is rising and when poverty is rising in some parts of this country to raise the rents on people who are in this program, because of their limited ability to pay rent in the first place. That certainly does not strike me as good policy, and it does not strike me as a good selling point for the administration either.
    Mr. LIU. Fewer than 8 percent of the families would be affected by the $50 rent requirement.
    Mr. DAVIS. But it would be the poorest 8 percent, though, would it not, Mr. Liu?
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    Mr. LIU. No, no. Our analysis shows that those who would be affected by the $50 are those that right now are claiming certain exclusions from income; exclusions that would not be available because we are simplifying that whole formula to 30 percent of gross income.
    Mr. DAVIS. Mr. Chairman, I think my time has expired.
    Chairman NEY. I want to thank the gentleman.
    Mr. Clay of Missouri?
    Mr. CLAY. Thank you, Mr. Chairman.
    Thank you, Mr. Liu, for being here today. You know, if block grants follow their historical pattern and the funding levels erode over a period of years, why would you consider this approach for Section 8 vouchers? Are you interested in sustaining the program or letting it erode over a period of years? We already know that most States would not have the funds to take over the slack caused by the Federal reduced funding. Is this a method of eventually killing the program?
    Mr. LIU. Absolutely not, congressman, although I appreciate your concern. Our intent here is to put the program back on a much more sound footing, so that it can perform at a level that we would all be comfortable with so that in fact we can ask for more dollars in the future. Our proposal for 2004 is over $900 million more than our request in 2003. I think that is a specific sign that we are not looking to erode or kill this program.
    Secondly, as I mentioned earlier and it was included in my testimony, we cite the HOME program, a block grant program for affordable housing, as indicative of a block grant program that has in fact increased since its inception; increased to the tune of 14 percent since the first year of its coming into play. The administration's 2004 proposal is significantly higher than the 2003 proposal.
    Mr. CLAY. Well, predicting an increase would indicate that you predict an increase in the number of people qualifying for the Section 8 program.
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    Let me also get back to the line of questioning by Mr. Davis, along the States administering the block grant program. I come from Missouri, a Midwestern state. What entity in Missouri do you envision being able to administer the Section 8 funds? I mean, I am sure your staff maybe can help you answer that, but just give me an example of who you would look to, what entity would you look to in Missouri to do this?
    Mr. LIU. We would look to see in a State like Missouri, which I do understand the history there, that we would think they would be wise to look toward housing agencies now that are doing a good job in your State of administering the program, and by contract having them do the work for that, and combining the inefficient operators in the State of Missouri with the larger and better-operated programs, which solves many of the issues of delivery. If there were a concern and Missouri decided they did not want to get into the program, they do not have to.
    Mr. CLAY. Oh, it is optional?
    Mr. LIU. It is not a mandatory program. Yes, sir.
    Mr. CLAY. Optional.
    Let me also point to a tenant management-run group in St. Louis called Carr Square Village. Representative Waters grew up in that community. It is run by a tenant management group. It is a troubled site. Yet, no action has been taken on that site. Do you have any background information on it? Could you let me know what you plan to do there? Can you shed some light on it?
    Mr. LIU. Are you specifically mentioning Carr Square?
    Mr. CLAY. Yes, I am mentioning Carr Square Village, yes.
    Mr. LIU. Yes, Carr Square, we have taken action, sir. We have moved in court to take over that tenant management association. They have challenged us and we are now in a court battle with that TMC group.
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    Mr. CLAY. So that is a pending court case?
    Mr. LIU. It is in court right now.
    Mr. CLAY. And if you prevail in court, then you will contract out with an agency that takes over troubled sites?
    Mr. LIU. We will have to find a unique way to deal with that because that is actually an old HOPE I site.
    Mr. CLAY. Yes.
    Mr. LIU. It is a very complex situation.
    Mr. CLAY. And it is very troublesome for us in the community who had so much hope for the project and would like to see some action taken in the very near future on it.
    Mr. LIU. We have. We have, through our enforcement center.
    Mr. CLAY. I thank you very much, and that concludes my questioning. Thank you.
    Ms. CARSON OF INDIANA. Mr. Chairman?
    Chairman NEY. Does the gentlelady have a question?
    Ms. CARSON OF INDIANA. Thank you very much, Mr. Chairman.
    Chairman NEY. I am sorry. Would the gentlelady yield?
    Ms. CARSON OF INDIANA. I am sorry.
    Chairman NEY. I am sorry. Mr. Sanders is next, and then the gentlelady.
    Mr. SANDERS. Thank you, Mr. Chairman.
    Mr. Chairman, I would ask unanimous consent that my statement be placed in the record.
    Chairman NEY. Without objection.
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    [The prepared statement of Hon. Bernard Sanders can be found on page 158 in the appendix.]
    Mr. SANDERS. Okay. Mr. Chairman, I was also very pleased to hear everybody's respect for the role that States play in our national system. I would hope that that respect would remain when we deal with the Fair Credit Reporting Act, and I look forward to widespread support from your side of the aisle to not preempt States from passing stronger consumer protection, because I will use the record to show how much we respect States' rights and how good States do things. We will look forward to your support when we move to the Fair Credit Reporting Act on that.
    Mr. Liu, thank you very much for being with us today. My first question is a pretty simple one, and again because of time constraints, I am going to ask you to be brief. I apologize for that. We have about four million American households who are paying over half of their limited incomes on housing. We have in the course of a year in terms of homelessness in the United States, we are going to have about 1.3 million children at one time or another living out on the streets. Do we have a housing crisis in the United States of America?
    Mr. LIU. We have a concern with all families of low income, sir.
    Mr. SANDERS. Do we have a housing crisis in America, in your judgment?
    Mr. LIU. What we have, sir, is in regions, in certain areas of our country, we certainly do have very difficult housing situations, but it does not stretch across the country in all areas.
    Mr. SANDERS. Boy, that was a good answer; very impressed by that. Let the record show that I think we have a serious housing crisis, which is why among other things we have 195 cosponsors on legislation called the National Affordable Housing Trust Fund, which would build 1.5 million affordable units over the next 10 years. The point is, I do not think the administration does think we have a crisis, which is why I think we are not getting the kind of support that we need for affordable housing.
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    Mr. Liu, my deep impression is that this administration is not strongly supportive of affordable housing. In the year 2001, 79,000 new Section 8 vouchers were appropriated. That was in 2001. But in the year 2002, despite what I consider to be a major housing crisis, that number dropped to only 18,000, and for 2003, no new Section 8 vouchers were appropriated. Can you tell me why in the midst of what I consider to be a severe housing crisis, we have seen a drop to zero in terms of new housing Section 8 vouchers?
    Mr. LIU. Congressman, our budget from 2000 to 2003, and inclusive and then adding on 2004, has increased our request by over $2 billion for the Section 8 program.
    Mr. SANDERS. But Mr. Liu, you know that is a bit disingenuous as an answer, because you have not added new housing vouchers, unlike previous administrations, but more importantly what you are saying is you are obligated by law to pay the rent for a certain number of vouchers. Rents have soared, and you have paid those rents. Isn't that why we have seen an increase in expenditures?
    Mr. LIU. Congressman, we have made requests of upwards of 34,000 for new incremental vouchers, and we did not get them funded.
    Mr. SANDERS. From whom?
    Mr. LIU. From this Congress.
    Mr. SANDERS. The administration has requested 34,000; okay, Mr. Chairman, I would just note for the record that Mr. Liu has told me something that I did not know, that he says that the administration has requested 34,000 new Section 8 vouchers, which the Congress did not——
    Mr. LIU. This was in 2003.
    Mr. SANDERS. This was in 2003. Mr. Chairman, if I could, Mr. Liu made that presentation. I do not know; I am assuming it is accurate. We would hope that you would; is that accurate?
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    Chairman NEY. I am told it is accurate.
    Mr. SANDERS. I would hope that you would use your influence or have the chairman of this committee help us with those 34,000 new Section 8 vouchers.
    The other question that I want to ask, Mr. Liu, is that my understanding; and please correct me if I am wrong here; but the requirement that 75 percent of vouchers go to extremely low-income families could be reduced to as low a number as 55 percent. And the limitation that no vouchers can go to families with incomes over 80 percent of local area median income is modified to permit elderly and disabled families with incomes of over 80 percent of median income to receive assistance. Doesn't this create a situation where some of the lowest income people in our country might be denied Section 8 vouchers, while some upper income people will receive those vouchers? Isn't that a problem?
    Mr. LIU. Our current program allows for the exceptions for seniors and disabled, as you read there, congressman. The legislation does permit HUD to grant waivers to the States, with justification, to lower the 75 percent requirement down to 55 percent. However, I do point out that we can currently provide waivers for that requirement for housing agencies under the current program.
    Chairman NEY. The time has expired.
    Mr. SANDERS. One last question?
    Chairman NEY. Let us move on to Ms. Carson.
    Mr. SANDERS. Okay. Thank you.
    Chairman NEY. The gentlelady from Indiana?
    Ms. CARSON OF INDIANA. Yes, sir, thank you very much, Mr. Chairman. I will not take a moment. I was really learning a lot from Congressman Sanders.
    In Indianapolis, as in St. Louis, we have a major project there that just is not working. Unfortunately, it is not anybody's fault. Designed as a senior citizens complex and because of the rules, they began to integrate everybody into that system; people that were recently released from mental institutions, people that were released from prisons were integrated into this senior citizens complex, and just created havoc. At this point, the Wye Baker Terrace is I think being consumed by HUD. I have been begging HUD for years to let us do something. My question is, when you have to pull back out of a project like that, what do you do? Do you put it on the market for sale? Or do you seek out new management?
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    Mr. LIU. It depends on the program, congresswoman, and I am not specifically up to speed on that site that you mentioned. If it is a troubled public housing site, we can mandate that housing agency to get new management. We can take over the agency.
    Ms. CARSON OF INDIANA. This is a Section 8 operation.
    Mr. LIU. If it is a Section 8 complex, we can take over that property; HUD can take over that property to manage it itself, if need be. We can take it over. Is it a multi-family insured——
    Ms. CARSON OF INDIANA. It was designed specifically for senior citizens. That was the origin of it, and then it just turned out into——
    Mr. LIU. HUD has the power to take over and manage that site.
    Ms. CARSON OF INDIANA. I think you are going to take it back, but I was wondering; well, we can talk about that later.
    In your Statement, I was trying to find it right quick, are you integrating both vouchers for Section 8 and homeownership as well into this project?
    Mr. LIU. We mentioned homeownership because currently for the last year and a half, we have had a homeownership option with our Section 8 program, where qualified Section 8 holders in certain agencies that provide this option can use their voucher to go to the bank, find a home that they can afford and purchase, and that voucher, the monthly voucher value can be used to write-down the monthly mortgage expense for periods of between 10 and 20 years.
    Ms. CARSON OF INDIANA. Okay. So if I am on Section 8, I can take my Section 8 voucher and replace that with a down payment on a home?
    Mr. LIU. Not a down payment, but it can help to defray your monthly mortgage costs. It can help underwrite the mortgage.
    Ms. CARSON OF INDIANA. Okay, question. If I am in a Section 8 qualified unit that is being provided for by Section 8, and I want to buy that unit, I can use that voucher to buy the unit that I am in?
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    Mr. LIU. If the owner wants to sell it to you; if you can come up with an agreement with the owner.
    Ms. CARSON OF INDIANA. I do not want to belabor the point. I was just trying to understand it. But it does not apply to somebody that is not a current Section 8 recipient. For example, this high rate of unemployment in my district; high rate of foreclosures in my district in Indianapolis remain unabated, and people are losing their homes through no fault of their own. The jobs are vanishing.
    Mr. LIU. I see.
    Ms. CARSON OF INDIANA. Could they become instantly eligible for Section 8 to use the money for a mortgage payment?
    Mr. LIU. No.
    Ms. CARSON OF INDIANA. It would be a damned good idea.
    Thank you, Mr. Chairman, I yield back.
    Chairman NEY. Would you like to ask another question?
    Ms. CARSON OF INDIANA. I am through. Thank you, Mr. Chairman. I yield back. Thank you very much.
    Chairman NEY. Ms. Waters?
    Ms. WATERS. No, I suppose that my question was answered in my absence, about the administering of the program. If not, I will talk with you about it at a later date. But let me just say this, even though my chairman is sitting here and he is carrying the bill, this bill is scaring the living daylights out of a lot of people. We do not know what it means. Some of us are afraid that this is the first step toward the dismantlement of HUD, and that worries us an awful lot. And so, we are going to have to fight and oppose the direction of my good friend's legislation. It will be a friendly fight, but it is going to be a tough one. We just do not think that a change of this magnitude is in the best interests of the folks who need the program out there.
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    Chairman NEY. I thank the gentlelady. I would note there are going to be 50 minutes worth of votes, so the chair would note that some members may have additional questions for the panel, which they wish to submit in writing. Without objection, the hearing record will remain open for 30 days for members to submit written questions, and for the witnesses to place their response in the record.
    The hearing is adjourned.
    [Whereupon, at 3:50 p.m., the subcommittee was adjourned.]

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