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Tuesday, July 29, 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 1:35 p.m, at the Martin Luther King, Jr. Performing & Cultural Arts Complex, Mount Vernon Avenue, Columbus, Ohio, Honorable Robert W. Ney, [chairman of the subcommittee] presiding.
    Present: Representatives Ney, Jones, Tiberi, and LaTourette.
    Staff Present: Clinton Jones, Counsel; Cindy Chetti, Professional Staff; and Paula Johnson, Professional Staff.
    Chairman NEY. I want to—can you hear me?
    I want to welcome everyone here today for the Subcommittee on Housing and Community Opportunity. We're going to meet this afternoon to discuss housing and community development policies in the State of Ohio.
    With us today are Clinton Jones, and Paula Johnson—where's Cindy?—Cindy Chetti. Cindy, raise your hand. And these three are with the housing committee staff in Washington, D.C., who have come here for this—for this hearing.
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    And I want to thank my colleagues who will speak in a second here, to my right, Congresswoman Stephanie Tubbs Jones from Cleveland, Ohio, Cuyahoga County; and to my left here—missing, but he'll be right back—Congressman Tiberi, everybody, I think, knows him, from Columbus, Ohio, we also share half of Licking County with Congressman Tiberi; and, also, to the far left is Congressman Steve LaTourette, who is also from Ohio, around the Cuyahoga County area. So I want to thank my colleagues for coming here today.
    This is our 17th hearing, and the housing committee actually started around January 21st of this year, so it's been very busy. It has two bills out of the house and six bills out of the committee, all contributing to trying to help with the area of housing.
    As the housing subcommittee began a series of field hearings—this is the second field hearing outside of the capitol, the other hearings we had with our ranking member, Maxine Waters, out in Los Angeles a couple weeks ago—I promised a series of field hearings, I promised to shift America's housing debate outside the Washington beltway to different regions of this country.
    Today we focus especially on affordable housing availability in Ohio, the effectiveness of the Federal Government's Community Development Block Grant program, and the Section 8 housing voucher program for low income families.
    Within the State of Ohio, affordable housing is essential for this State to continue to grow and for working families in order to prosper. The subcommittee and its members of the Ohio delegation, some of them are here today, are committed to working with State and local officials on this very, very important issue.
    Today the housing subcommittee continues the process of listening, learning, and then discussing the situation.
    I am certain my colleagues from Ohio would agree that the best economic development plan for any city or community consists of three factors: Effective public safety, good schools, and affordable housing. When one of these factors is lagging, the community will deteriorate.
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    In the previous months we've heard a variety of opinions on causes and solutions to help build communities and prevent deterioration. While we may not all agree on the possible solutions, it's important that this committee act prudently and provide an exhaustive review of all existing housing programs and determine how regulatory and legislative adjustments could provide additional housing across the United States.
    At the same time, it is fair that the committee consider new ideas, provided they are fiscally prudent, maximize the taxpayers' investment, and provide accountability and results for the individuals that need assistance in this country.
    Among the forms that have been discussed is an administration proposal to replace Section 8 tenant-based housing vouchers with State-managed block grants.
    I introduced this bill at the administration's request and the request of Secretary Martinez so it could be debated. And that's, again, why we're here specifically today, but also to discuss other housing issues.
    Rather than contracting with an estimated 2,600 separate public housing authorities, as HUD currently does, the department would like to allocate funds to the 50 States, which could then work with public housing agencies or other entities to administer the voucher program.
    As well as examining the merits of this proposal, the subcommittee continues to look at other crucial housing programs, such as HUD's Community Development Block Grant program, or CDBG, which is what we also discussed in Los Angeles.
    CDBG is one of the primary vehicles for local Mayors and officials to revitalize our nation's neighborhoods and provide economic opportunity and hope for millions of lower income Americans to achieve self-efficiency.
    I look forward to hearing testimony from today's panelists on how the Community Development Block Grant program operates in the greater Columbus area, and how local development groups contribute to the effectiveness of the program.
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    And also we'll be hearing from people throughout the entire State of Ohio.
    And at this point in time I want to thank and recognize the gentlewoman from Ohio, Ms. Stephanie Tubbs Jones.
    Ms. JONES. Thank you. Good afternoon. I'm pleased to join Chairman Ney and my colleagues from around Ohio to discuss the issue of housing.
    Actually, I used to serve on this subcommittee for four years, and had a great opportunity to talk about the issues. Now that I've had an opportunity to move to the Ways and Means Committee, I still know housing is an important part of any fabric of any community.
    As we go through the upcoming years, specifically in Cuyahoga County, Ohio, we have a large number of foreclosures that come about as a result of lack of jobs et cetera, and we are going to need more and more affordable housing for people who traditionally may not have been looking for housing—or affordable housing, as well as the hundreds of people who are looking for affordable housing throughout Ohio.
    I'm pleased to be here. I look forward to the testimony, and look forward to asking some questions so we can get some responses on particularly the issue of the block grant for voucher—excuse me—for Section 8 housing.
    Thank you, Mr. Chairman.
    Chairman NEY. Thank you.
    And next is Congressman Pat Tiberi.
    Mr. TIBERI. Thank you, Mr. Chairman.
    I want to commend Bob Ney, the chairman of the subcommittee, for scheduling today's hearing entitled ''Housing and Community Development Policies in the State of Ohio,'' and scheduling it especially here in my Congressional district, in the city in which I've lived my entire life. But I also want to thank my colleagues, Steve LaTourette and Stephanie Tubbs Jones, for taking time out of their busy schedules from their districts to come down here and listen to the folks here in central Ohio about the issues impacting housing.
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    The hearing will focus on three topics: The current operation and administration of Section 8 housing assistance to families program, Community Development Block Grant program, and housing production.
    I want to thank Chairman Ney for his attention and dedication to the many housing issues that impact our country.
    For this hearing today we hope to learn more about problems faced by many of our working families and determine how we might better address their housing needs.
    Housing is the number one consumer product in America. And while the homeownership rate in this country is an impressive all-time high at 68 percent, there are still some that are unable to share in this American dream.
    It is essential to restore confidence and accountability to our nation's housing policies by reforming programs that are underused, duplicative, or hindered by vague objectives.
    Despite the fact that more and more people are sharing in the American dream of homeownership, many working families are finding it more difficult to find affordable housing.
    The nation's lost more than 197,000 units of federally subsidized affordable housing over the last several years, including more than 9,500 in Ohio. More than a third of those units housed poor seniors.
    It is essential that affordable housing be made available to people that need it.
    Clearly, we must take steps to encourage new production and preservation of existing housing stock. Many witnesses testifying today are working hard every day to provide affordable housing to those in need. We need to make sure that they have the tools necessary to enhance and define affordable housing.
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    The Section 8 program serves more than 2 million people throughout the country. In Columbus alone there are 10,000 recipients of Section 8 assistance from the Columbus Metropolitan Housing Authority.
    Recent proposals have been made that I believe threaten to destabilize the Section 8 program. The current proposals focus on shifting Section 8 management responsibilities to the States by converting them into block grants. This idea will not be effective, in my opinion, because the States have only limited experience with such programs. The last thing that the Columbus Metropolitan Housing Authority needs is another layer of bureaucracy upon it, which is certainly the outcome if these proposals are to be put into place.
    Changes must be made to this program as it loses 2 billion annually to fraud and other factors nationally. However, I believe the best solution to Section 8 is to give more flexibility to local housing agencies.
    These local agencies, along with elected officials, landlords, and others, work together to assure Section 8 provides the proper assistance. It's a simple idea: Local residents can better address local problems.
    Another important issue facing central Ohio is that of the Community Development Block Grants, CDBGs. While the criteria established by the Formula A of CDBGs in 1974 and Formula B in 1976 may have been fair and equitable at that time, continued usage of these formulas, these old formulas, have led to a tremendously unfair situation in the 21st century.
    Case in point is the criteria that we deal with the age of housing stock in Formula B. Formula B establishes houses built prior to 1940 as 50 percent of the funding formula. For cities such as Columbus, which saw the bulk of their growth occur after World War II, the failure to update this criteria means aging neighborhoods built in the '40s and '50s, such as the North Linden area, the Woodland and Joyce area, other areas, are ineligible for assistance under the CDBJ—BG grant program.
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    While these neighborhoods were not in need of assistance in the early 1970s, now they are more than 50 years old. They are experiencing the same level of need as older cities showed in the 1970s.
    Comparing Columbus to cities whose main growth was prior to World War II, you can see the disparities that have arisen.
    Take, for example, Saint Louis, Missouri, with a population of just under 350,000 people, it is the 49th largest city in the United States. In fiscal year 2001, Saint Louis received over $28 million in CDBG funding. Columbus, the 15th largest city, with a population of 710,000 people, received approximately 8.8 million. Similar discrepancies can be found when comparing Columbus to Baltimore, Pittsburgh, Boston, New Orleans, just to name a few.
    Yes, all these cities share one common theme, they're smaller than Columbus.
    Clearly, the criteria used in the formula needs to be updated and changed. The age of housing should be indexed to maintain fairness and consistency across the country.
    Mr. Chairman, Ms. Tubbs Jones, Mr. LaTourette, thank you for coming to Columbus today to be part of this hearing.
    We look forward to hearing from our witnesses.
    Chairman NEY. I want to thank the gentleman from Ohio.
    Congressman LaTourette.
    Mr. LATOURETTE. Mr. Chairman, thank you very much for the opportunity to be here today. Thank you for inviting us down here.
    I was going to begin my remarks by saying thank you for having this hearing in our back yard, but it's not really our back yard. And, as a matter of fact, Congresswoman Tubbs Jones and I needed a green card to get across the border, being from the state of Cleveland; but we're very happy—we're very happy to be here.
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    And I also want to commend our colleague, Congressman Tiberi, he was the fellow who approached me with your guidance a few months ago, indicated that this was an issue that would be vital to the constituents that he represented, and I'm happy to be here to aid in whatever questions come about today.
    And, Mr. Chairman, I want to commend you for your leadership. As you mentioned, this is the 17th hearing that the subcommittee has held, and your interest in this issue is not only known in the State, but nationally.
    The Section 8 housing voucher program, which was started in the 1970s, and there's no doubt that countless Americans have benefited from this Federal assistance and have found a means to put a roof over their heads, over the years, though, this worthwhile program has fallen victim to the same plague that, in fact, many government-run programs, in some instances, inefficiency, a lack of managerial accountability, and, in some cases, a bloated bureaucracy.
    There's no doubt in anyone's mind that the founding principles the Section 8 program were built upon are still intact, and are probably more relevant and necessary today than they were even a decade ago.
    The proposal, however, to reform the Section 8 voucher program introduced by the Bush administration has certainly generated a tremendous amount of interest and controversy. It is unclear to me, for example, whether or not States like Ohio will manage to be successful if the State begins receiving funding for Section 8 vouchers in direct Federal block grants.
    One of the tensions that sometimes exists in Washington, as we all know, is: Who is better able to take care of problems, is it the Federal Government or the State government? In this particular instance, I differ from time to time with my party and believe that the Federal Government has a role to play and needs to be an active partner with the States, and we just simply can't wash our hands and say: State, here, take this.
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    And I'm looking very much forward to the testimony that we receive from all of the panelists today as they help guide not only this subcommittee, but also the full Financial Services Committee and then the Congress of the United States in grappling with these important issues.
    Again, Mr. Chairman, I want to thank you for having this hearing today, and I look very much forward to hearing from everyone.
    Chairman NEY. I want to thank all three of my colleagues, all three members, for their time.
    I would note that this is the district work period for the Congress, and a lot of these members have given up their personal time and their items that they had scheduled to do to be here, so I want to thank all of them—all three of my colleagues for that.
    Chairman NEY. And could the witnesses please—please come forward, first panel.
    In the first panel is Bill Faith, Executive Director of Coalition on Homelessness and Housing in Ohio; LaToya N. Fisher, a resident, Columbus, Ohio—we'll get the chair there—Steven Gladman, Governmental Affairs Coordinator, Ohio Apartment Association, Columbus, Ohio, appearing on behalf of the Columbus Apartment Association and the Midwest Affordable Housing Management Association; Dennis Guest, Executive Director, Columbus Metropolitan Housing Authority; and Cornell H. McCleary, Commander, PRO-Private Police Training Academy, Columbus, Ohio; Thomas W. Slemmer, President, National Church Residences, Columbus, Ohio, on behalf of the American Association of Homes and Services for the Aging; and Fred Zawilinski, Executive Director of the Lake Metropolitan Housing Authority in Painesville, Ohio.
    I want to welcome the first panel. This is an official hearing of the U.S. House, and it's being transcribed. And also I would note that we're going to operate by the five-minute rule; each of the witnesses will have five minutes in which to present their testimony. And, also, without objection, all members' opening statements are made part of the record, any additional statements that they want to make, and each of the witnesses' statements, without objection to the written language, your statements will be made part of the record. You'll each be recognized again for five minutes, if there's additional information, without objection, to be put into the record, and the members of the committee will have 30 days in which to ask additional questions without objection of particular witnesses of the panel.
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    So when you hear the tone, you've got about a minute to wrap up, and so we'll hold you to the rule so we can get all three panels.
    I want to thank all of you for being here today, we'll start with Bill Faith.
    Mr. FAITH. Thank you, Mr. Chairman. I want to thank you for taking the time to come to Columbus for this field hearing. I also want to thank all the committee members for coming; particularly, Congressman Pat Tiberi, for allowing me to testify and to offer my comments and suggestions.
    I am here representing the Coalition on Homelessness and Housing in Ohio, better known as COHHIO. We're a statewide organization with over 600 member groups throughout all of Ohio's 88 counties.
    There are several issues that I want to bring up today. I have more extended written comments that I've submitted, but I want to make a few highlights.
    I know during this hearing you will be hearing from others who will talk more specifically about the housing needs here in Columbus. I wanted to bring to your attention a couple of more recent national studies.
    The reason is this—this crisis that we face in affordable housing is national in scope and does require a national response.
    The studies I want to point out to you is the most recent State-of-the-Nation's Housing Report published by the Joint Center on Housing Studies at Harvard University. One of the key points of their findings this year—and I included a graph which illustrates this—there is a 2-million-unit gap between the number of renter households in the bottom fifth of the income distribution and the number of physical units that they can afford to rent.
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    Also, in that same report, many households working at lower wage jobs are struggling to keep up with the escalating rents. I'll just illustrate a couple of these. Of the 2.1 million waiters, waitresses and cooks who rent, nearly half spend more than 30 percent of their incomes on housing; more than 40 percent of renter households with an earner employed in child care, home health care, cashiers, library assistants, maids, janitors, are similarly cost burdened. If they are the sole wage earner, renters in several other moderate paying occupations, like receptionists, carpenters, and electricians, also have a hard time affording their housing. And I included another graph which illustrates those dynamics.
    I also wanted to point out to you another study, which may not have come to your attention, but the President's New Freedom Initiative Mental Health Commission, which was chaired by Dr. Mike Hogan of the Ohio Department of Mental Health, recently issued their report, in fact, on July 22nd, and I just want to provide in my written testimony a brief excerpt from that report, which I will summarize.
    ''The lack of decent, safe, affordable, and integrated housing is one of the most significant barriers to full participation in community life for people with serious mental illness. Today, millions of people with serious mental illnesses lack housing that meets their needs.
    ''The shortage of affordable housing and accompanying support services causes people with severe—serious mental illnesses to cycle among jails, institutions, shelters, and the streets; to remain unnecessarily in institutions; or to live in seriously substandard housing. People with serious mental illnesses also represent a large percentage of those who are repeatedly homeless, who are—or who are homeless for long periods of time.''.
    All over the country, local and State governments have stepped forward to provide support for the affordable housing efforts by creating housing trust funds. In fact, today there are 282 State and local housing trust funds operating throughout the United States. In an effort to leverage other resources to better address the affordable housing crisis, local governments in Ohio, such as Summit County, Montgomery County, Toledo, here in Columbus, Franklin County, as well as the State of Ohio, have established trust funds and dedicated local and State revenues to provide permanent funding.
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    In fact, as a result of the recently passed State budget bill, on August 1st the recording fees will be increased with the first $50 million proceeds going to the housing trust fund.
    There's a similar bill that's been introduced at the national level, which would create a national version of a housing trust fund. This bill has very deep targeting, it would provide flexible resources——
    Chairman NEY. That's not our tone.
    Mr. FAITH. That's a really fancy tone.
    Chairman NEY. That's somebody else.
    Mr. FAITH. It would provide flexible resources to the State that are deeply targeted to those with the greatest housing needs.
    Chairman NEY. That's not ours either.
    Mr. FAITH. This legislation has tremendous grassroot support. There are now over 4,300 endorsements from across the country, and I've submitted a copy, hopefully for the record, if you will, Mr. Chairman, of all those endorsers, including 232 from across Ohio.
    The national housing trust fund legislation has 204 cosponsors in the house, and I want to thank Congresswoman Tubbs Jones for being one of them, and encourage the rest of you cosponsoring this legislation.
    There is, I guess, tripartisan support for the bill. 11 republicans have joined. But—and I urge you, Chairman Ney, to hold a hearing on this legislation. Surely, a bill with this level of support deserves such a hearing.
    I want to add my voice—I know you'll be hearing from other members of this panel—about the HANF proposal. We are very much opposed to this proposal. As Congressman Tiberi, I think, articulated the best, this is a ill-conceived proposal that would not add any value and simply put the State bureaucracy in the middle of an already burdensome process of distributing critically needed rental assistance.
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    And I work a lot with the State of Ohio, and I know that they do a great job at many things. But administering a rental assistance program, I don't believe is one of them. They are good at production, they are good at tax credit, the bond programs, the home program, but administering a rental assistance program, they are entirely ill equipped for. They would need a hire literally hundreds of new staff to take on that job.
    And, finally, my last comment, Mr. Chairman, is related to the Section 8 project-based. In the information I received, you're open to comments on that program, as well. And we—we are involved in this.
    Ohio has 86,000 Section 8 project-based units, more than any other State outside of California and New York. As you know, we're going through massive changes in that program because of all the expiring contracts. And my organization provides a small part, but an important part, in the average technical assistance grants that we receive from HUD.
    Now, HUD has held up distributing any new funds for this program, in spite of the fact that the Inspector General went through a very thorough audit, they moved into our offices for six weeks, went through all of our records, found no findings. I think the auditor almost came to tears when she realized they had no findings after six weeks.
    But in spite of no findings, this administration has failed to issue a NOFA for the past two years for any new funds for this program. And I encourage you to add an amendment to the bill which would require them to issue a NOFA to get this program back up and running.
    I know Ms. Jones has spent a fair amount of time—actually an unfair amount of time—trying to resolve this issue. And I think the only solution at this point is some additional legislation to require the administration to get back on the right track.
    So with that, I'll close.
    Thank you for your patience, and I'll be happy to respond to any questions.
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    Chairman NEY. Thank you.
    [The prepared statement of Bill Faith can be found on page 93 in the appendix.]
    Chairman NEY. Ms. Fisher.
    Ms. FISHER. Testimony of LaToya N. Fisher before the House Subcommittee on Housing and Community Opportunity.
    Chairman Ney, Ranking Member Waters, and the distinguished members of the subcommittee, thank you for allowing me to testify on the subject of the Housing Choice Voucher Program and the role of the Columbus Metropolitan Housing Authority and how it has been beneficial to me.
    My name is LaToya N. Fisher. I reside at 3035 Osgood Road West, Columbus, Ohio 43232. I am a 26-year-old single parent to four children, two of which I have adopted. I am currently employed at Ross Laboratories, and I attend Ohio State School of Cosmetology. My future goals are to complete the courses at this school to receive a certificate of completion in technology and further my education to obtain a degree in nursing.
    At this point, I do not have the knowledge to comment on the national implications of changing the Housing Choice Voucher Program; but I would like to share with you my experience about being a participant in CMHA's Housing Choice Voucher Program.
    I applied for Section 8 assistance in 1996. At the time my son and I were living at home with my mother and father, and I wanted to live on my own. I received my voucher several months after completing my application, and I was successful in finding an apartment that could fulfill my living needs at that time.
    Two years later, I had another child and moved into a house. I enrolled in the Family Self-Sufficiency Program in February, 2003. I was able to obtain information about this program through my realtor. This program was the beginning of my becoming a first-time homebuyer.
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    I was able to achieve the goal May 23, 2003. Without CMHA's homeownership program, I would not have been able to achieve this goal so soon in my life. Because of the benefits from this program, I was able to find a home in a nice neighborhood and a stable environment for my children. I am grateful to HUD and CMHA for the assistance provided for my family and myself.
    With the housing assistance, I am able to pay for school and afford the cost of everyday living for my family.
    Since I have started this program, I have built a strong relationship with the coordinators of the FSS program, Ms. Carol Winchester and Ms. Michelle Barthelemy. Throughout the process of finding my home, I have had to speak with either one or both of these ladies on a daily basis, so I would know which steps to take next.
    I am proud to say that I am very pleased with my relationship with CMHA staff—with the CMHA. The staff is friendly, courteous and professional.
    CMHA has provided a valuable resource to our community. I would not want any changes to the Housing Choice Voucher Program that would reduce its current impact upon the thousands of Housing Choice participants who reside in Columbus, Ohio.
    However, I would like to make a few suggestions on how to improve the program and weed out the people who don't plan to better their lives with this—with the help of this program.
    One, require all able-body individuals to work or attend at least 30 hours per week at school or work. With responsibility, these people can feel a sense of self-importance in their lives and not live by society's standards, but want to achieve more in life.
    Number two, take more of an aggressive against participants and landlords that are not following the CMHA rules.
    Number 3, have the landlords attend the inspection with the inspectors so that they will understand clearly what needs to be fixed and for which reason. Hold payment on landlords that do not keep up on routine maintenance.
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    Number 4, find a way to acknowledge the workers for their hard work.
    And Number 5, if possible, give more CMHA vouchers to assist families that are motivated to better their lives and current situation so that one day they can also live out the American dream and become a homeowner, also.
    I would like to thank you once again for your time and interest. And I would be happy to answer any questions that you may have about my comments and suggestions.
    Chairman NEY. I want to thank you for your fine testimony.
    [The prepared statement of LaToya N. Fisher can be found on page 100 in the appendix.]
    Chairman NEY. Let's move on to Mr. Gladman.
    Mr. GLADMAN. Thank you, Chairman.
    Chairman Ney and distinguished members, my name is Steve Gladman. I serve as the Executive Director of the Columbus Apartment Association as the Governmental Affairs Coordinator for the Ohio Apartment Association. Both organizations are affiliated with the National Apartment Association.
    I also am the Executive Director of the Midwest Affordable Housing Management Association, which is affiliated with the National Affordable Housing Management Association.
    All three of these organizations represent companies dedicated to provide quality rental housing.
    My involvement in these three associations provides me unique insight into the Section 8 rental assistance program.
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    I believe it's critical to meet the housing needs of low and moderate income families, and that improving the Section 8 program is a central part of meeting those needs. However, I urge Congress and HUD to enact reforms to the existing Section 8 program that will encourage apartment owner participation; and, in turn, increase housing availability to voucher holders.
    Although it is well intentioned, I think HANF will not reduce administrative costs to participating rental owners and will not maximize program benefits to—for residents.
    I support the Section 8 program as a means for private housing owners to provide affordable rental housing to families who need it.
    More apartment owners would participate if the costs of renting to voucher residents were more comparable to the costs of serving unsubsidized residents. Eliminating transactional barriers will encourage more owners to participate in the program. More owner participation will result in greater housing choice and increased voucher utilization rates.
    But do I think the Section 8 program needs to be improved? I think there are four simple things:
    First, fund the program adequately; second, ensure that the rental property owners are paid on time; set fair market rents so they're truly fair; and, finally, eliminate inspections and replace them with a process that is helpful to the resident and owner alike.
    Funding: I urge continued funding for the existing program structure administered by HUD. Historically, many have criticized the Section 8 appropriation structure because too much funding remained unused each year. Effective this year, Congress enacted changes to minimize recaptures and national utilization rates have risen to nearly 96 percent.
    I believe that the existing successful appropriations structure should be supported.
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    Timely payment: PHAs are required to make prompt subsidy payments to apartment owners. However, subsidy payments are sometimes untimely because of antiquated systems or processing delays. Just as owners would not regularly accept late rental payments from conventional residents, they should not be asked to accept late subsidy payments.
    Some PHAs already use automated systems, but it would be helpful if HUD would provide technical assistance, funding, and other support so all the PHAs have the capability to utilize automated payment systems. HUD should also establish some incentives to make sure that the owners are paid on time.
    Fair market rents: I urge that HUD enact a more efficient process for PHAs to apply for higher fair market rents that are more reflective of the submarket rents. I also propose changes that would allow PHAs to raise the payment standard to 120 percent of FMR without HUD approval and to afford PHAs increased flexibility in requesting higher payment standards when necessary. FMRs must be set high enough to encourage owner participation; and, in turn, create a sufficient supply of apartments and choices for voucher holders.
    I thank HUD for raising the current FMR level to the 50th percentile in 39 high-cost areas. But that level is insufficient in areas with outdated FMRs and in certain high-cost submarkets. In many areas of Ohio, FMRs have not been updated in years and are well below market rates in both high-cost and moderately priced areas.
    Inspections: Finally, I propose eliminating what many owners see as the greatest barrier to program participation, the inspection process.
    The current inspection requirement is a losing proposition for all involved. The owner doesn't like the inspection because it delays resident move-in. The PHA struggles to keep up with the demand for inspections, and realizes that the inspection requirement discourages many rental owners from participating in the program. The resident has to wait to move in and has fewer housing options because of the limited owner participation.
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    Rental housing is a competitive business, and housing quality is market driven. Local housing codes and State landlord-tenant law already provides adequate protections for residents.
    I urge that the inspection requirement be eliminated and the funds currently used for inspection be used to establish resident-owner liaisons. These liaisons would be PHA staff that work with both the resident and the owner to ensure both parties are benefiting from the Section 8 rental assistance program.
    If a housing quality issue exists, the liaison could intervene on behalf of the resident; if appropriate, a housing quality inspection could be performed. If there's a payment or resident relationship issue that exists, the liaison would work with the owner to resolve these problems.
    This process would focus on establishing a long-term relationship with owners and residents rather than focusing on a once-a-year inspection process.
    I believe the existing Section 8 program, with the improvements I've just noted, will make affordable housing available for more Americans.
    Thank you.
    Chairman NEY. Thank you for your testimony.
    [The prepared statement of Steven D. Gladman can be found on page 108 in the appendix.]
    Chairman NEY. Mr. Guest.
    Mr. GUEST. Chairman Ney and other distinguished representatives of the Subcommittee on Housing and Community Opportunity.
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    I'm Dennis Guest, I'm Executive Director of the Columbus Metropolitan Housing Authority, which is responsible for the operation of 3,814 units of public housing and the administration 9,732 budgeted Section 8 vouchers throughout Columbus and Franklin County.
    I might also add, since one of our residents talked about the self-sufficiency program, that we currently have 500 residents registered in the program with over $480,000 in escrow accounts.
    There are three issues on which I will comment:
    A, the HANF block grant proposal; B, the potential improvements to the Section 8 program; and C, PHA selected project-based vouchers.
    First, let me state that CMHA is opposed to the current proposal to block grant the voucher program.
    And I dare say, most other State PHAs would be in the same boat. And there are three reasons for my opposition.
    Number one, the concept of the voucher program could or should be coordinated with the TANF program is weak. Specifically, of the 10,000 vouchers currently under lease with CMHA, only 24 percent of households, heads of households with TANF, in Ohio called Ohio Works First, income, the majority, 76 percent, of our clients are seniors, the disabled, pensioners, and those working with modest incomes.
    Number two, it is proposed that the States could better administer the program because they are more aware of the local needs, and by allowing increased regulatory waivers could more adequately meet such needs.
    Members of the subcommittee, by passing the QWRA bill and by allowing the PHAs to utilize vouchers in a project-based manner, you have already encouraged the customization of the voucher program to the community level, an outstanding achievement.
    For example, CMHA has customized its program to meet the needs of the City of Columbus, Franklin County, the Alcohol Drug and Mental Health Board, MR/DD, Community Shelter Board, United Way, et cetera. In one instance specifically, The Ohio State University and CMHA have partnered to provide housing assistance to young mothers with children who are students at OSU. Special supportive services provided by the University will allow these mothers to pursue degrees and begin successful careers without the need for TANF.
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    I have attached a list of our partnering agencies and nonprofits.
    I am hard pressed to understand how a State-administered program could function more effectively at our city/county level. Rather, this committee should consider allowing PHAs more flexibility provided there is local governmental and community and private sector support.
    Number three, it is difficult to comprehend the transition of the voucher program to a State block grant program being anything other than a time-consuming burden. If the State of Ohio alone were to administer the program, absorbing just our portfolio of housing would require inspecting 14,000 to 15,000 units a year, conducting 14,000 to 15,000 annual recertifications a year, processing 30,000 individual landlord checks, establishing relationships with over 2,200 owners of property, hearing a thousand grievances, and negotiating 12,000 unit rents. Plus, dealing with 27,000 residents currently in our program.
    I might add, if you let the State of Ohio take all of these numbers and multiply them by about eight, then you'll find out what the volume of work would be at the State level.
    Of course, the State could elect to subcontract their work to the PHAs, or the State could even decide not to participate in the program. All three scenarios are possible.
    It is unlikely that this will create anything less than an administrative nightmare for HUD.
    B, if the goal is to improve this section, the voucher program, I suggest the following for your consideration, and Mr. Gladman and I are probably on the same page:
    We have variations of this, but we would allow PHAs to inspect units every two or three years, rather than yearly, based on unit history upkeep by landlords.
    At least 85 percent of the landlords here in Columbus, I would say, are diligent, professional and maintain quality units. Annual inspections of their property is wasteful of their time and the PHAs' time and of the residents' time.
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    Fewer inspections should result in cost savings for both the public housing authorities and eventually to HUD, and result in more individual landlords participating in the program.
    Number two, rent recertifications for senior citizens could be done every two years instead of yearly. For most senior citizens, you're seeing very little, if any, change in their annual income on a year-to-year basis. And rather than hauling them in on a yearly basis, money could also be spent and time saved, in terms of administrative savings in just doing that every two years.
    Number three, this is where we get into some real technical stuff that some people may or may not be interested at this hearing right now, establish a LOCCS system of funding for Section 8. LOCCS stands for Lines of Credit Control System, and it's the method in which housing authorities draw down money. It could be set up on a yearly basis schedule. It's very similar to the way we get subsidy and other funds right now, rather than individual requests for often only two months at a time, which are paperwork intensive.
    Finally, I would like to emphasize that the project-based program is tremendously successful locally. Because of the use of vouchers as financial backing, CMHA has been able to work with the Community Shelter Board and other nonprofit housing providers and support service agencies to develop over 200 units of housing for the homeless. Additionally, 48 new family units and 30 senior units are being developed with National Church Residences by utilizing project-based vouchers.
    Thank you very much for allowing me to make this presentation.
    Chairman NEY. Thank you.
    [The prepared statement of Dennis S. Guest can be found on page 115 in the appendix.]
    Chairman NEY. Mr. McCleary.
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    Mr. MCCLEARY. Honorable Members of the Subcommittee on Housing and Community Opportunity.
    I want to thank subcommittee chairperson, Bob Ney, committee members, and Congressman Pat Tiberi for bringing it to Columbus.
    Columbus, Ohio is a community under siege, and it's quickly becoming the murder capital of America. Our children are getting shot while they play and while they sleep. During daylight hours, people's homes are being broken into where they're either raped, robbed or both. Just recently, three young people were tied up and shot in the head, for the lack of a better description, executed.
    In our war on terrorism, we are not as worried about Saddam Hussein as we are worried about the boys in the hood, little Jermaine and Booboo.
    Dead center of this horrific development in Columbus is the Section 8 low income housing communities. These communities have become unintended breeding grounds for violent and destructive criminals.
    The public housing program was designed to provide safe, decent and affordable housing to low income families. In reality, the program has evolved to become a multibillion-dollar growth industry for politically connected developers, an economic nightmare for small and emerging property owners, and pure hell for too many low income families.
    The Bush administration advocates shifting most of the management responsibility of the program from the Federal Government to the States by converting the program into block grants. Currently, the program loses billions of dollars to fraud and other factors. If Congress were to, in fact, reshift management of the program to inexperienced States, fraud and waste factors in the program would go through the roof. Not to mention the possibility of States, for budgetary reasons, never earnestly attempting to resolve community crime issues associated with the program.
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    My formal written testimony that I have presented to the subcommittee for consideration in the matter of achieving to the community's ability, making a factual argument that we must earnestly go after the boys in the suites, as well as the boys in the streets; the blood flow—and I must say, mostly the blood of African-Americans—must be stopped; the omissions of powerful and politically connected developers and property owners, quote, their respectability, must be reconciled in favor of safe and stable communities, and this reconciliation must be done by the Federal Government. If this challenge is left up to the States, God would have to be the Governor to get the job done.
    Thank you for your invitation to speak.
    And I will at this time entertain any questions that the subcommittee may have.
    Chairman NEY. Thank you.
    [The prepared statement of Cornell H. McCleary can be found on page 167 in the appendix.]
    Chairman NEY. Mr. Slemmer.
    Mr. SLEMMER. Chairman Ney, Members of the Subcommittee.
    Thank you for inviting me today. I'm President of the National Church Residences, but today I'll be speaking on the American of Association of Homes and Services for the Aging. We think we have a unique voice as it relates to affordable housing and services for affordable housing for seniors.
    Also, as affiliate, is the Association of Ohio Philanthropic Homes and Services for Aging, and it represents 350 not-for-profit primarily faith-based organizations statewide.
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    I want to call your attention, my original testimony where we address several issues, including the Section 202 production programs, social service coordination, affordable housing and preservation and production. But first let me echo some of the sentiments of the panelists here as it relates to concerns of the administration's proposal to block—block grant Section 8 voucher programs as reflected in HR 1841.
    I have a couple of practical examples I thought you might be interested in, as relates to Columbus. In your district, Congressman Tiberi, under construction right now is a 300-unit affordable housing development on Waggoner Road, east of 270, in the eastern part of Columbus, in a recently annexed property.
    In that development we've established a partnership with the Columbus Metropolitan Housing Authority to develop 75 units of high-quality, affordable, service enrichment housing for senior citizens, and we've used HOPE VI funds, tax credits, tax exempt bonds, home funds from the city and State, as well as city TIF funds. Really, a complex development.
    We also have on that same location 55 units of senior housing that's been developed under the Section 202 program, in cooperation with the local HUD office, and a 176-unit family affordable housing development, which includes 50 four-bedroom houses. And in that family development, we have worked very closely with the Columbus Metropolitan Housing Authority to—and, Dennis, you said 48, but 50—53 Section 8 vouchers on that property to serve the poorest of the poor.
    And the emphasis I want to place on this was the close cooperation and working relationship with the Columbus housing authority, and their understanding of the local situation really brought that about, and especially as it relates to the need for four-bedroom housing industry for families.
    A second development in Westerville, Ohio, is starting construction as a 75-unit senior housing facility that was developed in partnership with CMHA. They've purchased the land and are leasing it back to us to help us with our targeted development costs. Furthermore, they provide 30 project-based Section 8 vouchers so that we can serve the poorest of the poor in those developments.
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    Both of these developments, I think, speak to the success of the current program. It's operating well. Section 8 vouchers are being administered well. And the need for close local cooperation between the development community and the public housing authority has been met and really is working well.
    It's our opinion that implementing HR 1841 will not improve the program. It is exactly the situation here in Columbus that really enables us to customize and meet the special local needs, which I think will be lost if this is administered at the State level.
    It's hard to imagine that transitioning the voucher program to the States will be anything more than a time-consuming burden, as Mr. Guest mentioned.
    It's really our experience that the existing program currently operated locally provides the flexibility and the partnership and the local coordination that you need.
    If I could speak just briefly about the Section 202 program that your committee oversees. Many not-for-profits, that's their primary vehicle for developing affordable senior housing for services. And in our written testimony we have several specific suggestions on how to make the program work better.
    But one of them, I thought I would bring to your attention, HUD has still not implemented, after three years, your committee's intent, which was passed in the legislation, which allows us to combine the 202 program with tax credits so we can expand affordable housing supply in this country. I would submit to you that that's embarrassing.
    Furthermore, HUD needs to speed up the process of refinancing its older portfolio of Section 202 housing. Some of those loans are financed at 9-1/2 percent interest. Right now, I think today, you could refinance those at 4-1/2 percent interest, and that money could be used to expand services and improve those properties. To date, that program has not been implemented. There's only been three applications approved so far in Washington.
    I submit that this committee ought to really look into that, and instead of HUD dragging its feet on those applications, they ought to be pushing sponsors to refinance and take advantage of that lower interest rate environment.
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    Finally, we're grateful for your support of the Social Service Coordination program. It is vital for senior housing. I know you know it. But on the written testimony, we express concerns that are also shared by the American Association of Service Coordinators, that the 203—2003 NOFA on service coordination we think adversely affects both the quality and the training program of service coordinators. We would urge you to take a look at that.
    Again, we want to thank you for your time.
    Chairman NEY. Thank you.
    [The prepared statement of Thomas W. Slemmer can be found on page 176 in the appendix.]
    Chairman NEY. Mr. Zawilinski.
    Mr. ZAWILINSKI. Thank you, Congressman Ney and Congressman LaTourette for the invitation to speak to the entire subcommittee this afternoon here in Columbus.
    My name is Fred Zawilinski, and I'm the Executive Director of the Lake Metropolitan Housing Authority headquartered in Painesville, Ohio. We are a suburban county to the east of Cleveland.
    The first point I'd like to make about the HANF proposal is that you're not going to see the results that the TANF proposal and welfare reform did in the last several years. First of all, you're not going to see the decrease in caseloads that has been celebrated as the success of TANF. The reason is, is that we're not operating an entitlement program; we're operating a program in the Housing Choice Voucher which has extensive waiting lists in most communities, if the housing authority's, indeed, even taking applications at all. Successes will be replaced by other folks from that waiting list. And sanctions do not carry the same impact under the Section 8 program that they would under welfare reform.
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    Simply put, sanctioning a family for not fulfilling work requirements not only penalizes the family for that, but also jeopardizes the business relationships housing authorities and those tenants share with landlords dependent on that steady stream of income that is promised through the contract that we sign with them.
    The Housing Choice Voucher is not a failing program. It's—its primary emphasis is not on families in the sense of TANF recipient cash assistance. There are approximately only 14 percent of our families that we assist that are receiving cash assistance, and a much higher percentage of our families are receiving Social Security and disability assistance.
    The Lending for Housing Commission has referred to the program as flexible, cost effective and successful under the commission. And the Housing Choice Vouchers' already administered at the most local level possible here in Ohio. Flexibility offered to us in preferences, payment standards allow us to adapt to the local needs of our community.
    And our governance is local as well. Our boards are appointed by locally elected officials, they are responsive to their communities, and—and offer the opportunity to provide input to every individual in our community.
    Additionally, housing authorities uniquely have the opportunity to administer Section 8 because of our—of our experience in public housing. Simply put, landlords have a greater trust for us because we share many of the responsibilities of a landlord through our public housing program.
    I serve on the board of the National—or I'm sorry—the Lake County Apartment Owners Association, and that participation, from the landlord's perspective, allows me to have greater input into apartment policies in our community; but also has provided the trust needed to develop the business relationships needed to expand our program over the last several years.
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    One of the justifications for making the HANF program is that there are hundreds of pages of HUD regulation and guidance that would be pared down at the Federal level. Indeed, that probably would happen. However, some of that guidance is offered to us through the Housing Choice Voucher Guidebook, which was designed in the last year, and provides tremendous relief as far as guidance to offering the program on a national basis.
    If given to the States, the opportunities for technical assistance and guidance is diminished because we are now dependent upon Columbus for that same guidance as every housing authority or administrator of a Section 8 voucher program would be dependent upon their State capital.
    The myriad of regulations that housing authority and, more importantly, the families that receive our housing assistance would indeed grow. They would not—not only be responsive to the Federal guidelines established for the program, but the States and indeed local communities would be still designing implementation policies that would affect their lives as well.
    One of the other arguments that has been made is that by paring the number of HUD-administered Section 8 recipients from 2,600 public housing authorities and nonprofit organizations to approximately 50 States and a few territories that we would be streamlining a program and that HUD would be better able to manage the program. I find this curious in an environment where they've established a very good indicator of Section 8 management through the SEMAP evaluation process, and more importantly in the development of information technology through PIC and the LOCCS system that Mr. Guest described where, indeed, management of 26,000 housing—2,600 housing authorities should not be much more difficult than administering 50, and simply shifting that burden to the States does not provide for the program efficiency of the people—to the people that most need it, the families that are—are involved in our program.
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    This is not to say that the Housing Choice Voucher Program is not in need of some changes and improvement. However, I would—I would make the analogy that it's more like taking your car in for a tune-up than buying a new car. The greater flexibility in setting H2S inspections to ensure that housing quality is maintained is indeed a good point that Mr. Guest made and others will make.
    Many of our landlords are very responsible, many are constructing new housing specifically for the program. And we have the opportunity to waive those inspection requirements.
    Rent calculations could also be simplified to—to allow families the opportunity to have less burden on them.
    And I'd also like to mention, in closing, that you've offered in the last five years the opportunity for housing authorities to explore deregulation to the Move Into Work program. You've created this demonstration for housing authorities to take essentially a block grant program, modify it, and design rules that will fit their local community. I urge you to take a look at those results and see what innovative housing authorities in our communities have already done.
    I thank you for your time this afternoon, and wish you well for the rest of this afternoon.
    [The prepared statement of Fred Zawilinski can be found on page 191 in the appendix.]
    Chairman NEY. I want to thank all the witnesses.
    We'll be in a series of questions.
    I just want to note to Bill Faith, in Los Angeles we had someone raise an issue about homelessness and Section 8 and something that HUD did not proceed with. And we have been in the process of finding out why that didn't happen. I don't know if you're aware of that or not. But it was raised to our attention.
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    So we'll—because every hearing, somebody raises something that we don't know that HUD hasn't done. So homelessness was raised out there. Today you raised the—what we did three years ago about combining the 202 and the—and the tax credits, so we'll follow back up on that as we're following back up on homelessness. So I just wanted to assure you of that.
    Just a generic question, I guess I'd want to ask, of people that—you know, when you look at the State of Ohio, and do you feel that the present piece of legislation that we presented for discussion, when it comes to—when it comes to HANF, do you think it's locked tight enough to guarantee that the State couldn't move monies?
    The only reason I mention that, the State acquired the TANF monies for Head Start—Mom and Dad used to call it stealing—but the State acquired those monies and moved those monies.
    So, you know, is there—do you think it's—if we did this that there's a foolproof way that State—the State would not be in a budget crunch if any money——
    Mr. MCCLEARY. Can I respond, Mr. Chairman?
    I think that you have to look at it this way: Basically, any money that the State can steal, they will steal it if there's a way to do it, it will be done.
    I mean, one of the problems of the program is a lot of independence, for a lot of people to get things done, and because we've never had the enforcement apparatus in place to stringently enforce the rules that we have. To give it to the State that's not heretofore—have no idea that bureaucracy, the money that they would need, just to get in place to take the program, it would be a nightmare.
    I think they would do it. They might not do it intentionally, but they probably would do it.
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    Mr. FAITH. Mr. Chairman, I just experienced very close-up and personal the State budget process this year. And I have to tell you that they were some four-plus billion dollars in the hole when they started. They looked for money under every rock, and even uprooted a few trees to see if there was any money under there. They raided rotary funds, they looked—they raided unclaimed funds, they raided any funds they could find, raised taxes, raised fees, which—some of which were very positive, by the way.
    However, they looked for money everywhere they could find it.
    And I don't—I don't think it's the administrators of the program that would shuffle money from here to there. But I think as States struggle with this very difficult economy and a lack of resources to simply fund basic State government services, you could bet there would be supplanting of—of funds. I mean, if they can get away with it, they would do it. Because they feel they're forced to. They don't have the resources that they need to manage their own affairs.
    So I think that's a fear.
    But I think there's a more fundamental problem, and that is the State is simply not in the ongoing rental assistance business. They—that's not their expertise; they have no history with that. They administer production programs and do a decent job of that, because it's basically a onetime commitment. They monitor for ongoing compliance, but they're not involved in the manner that Mr. Guest described with that kind of hands-on year-to-year basis with these owners and tenants.
    And I don't—and I just don't think that's their expertise, I don't think they want to get into that business, and I think that's one of the bigger problems with the proposal.
    Chairman NEY. Thank you.
    On the comment Mr. Guest made, is everybody pretty well in agreement about the rent recertifications for seniors, we could do it for every two years? And also the PHAS to inspect the units every two to three years rather than yearly? Does everybody feel pretty comfortable with that?
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    Mr. MCCLEARY. If there is a waiver where there is immediate inspection upon complaint. I think if there's a process if there's a problem, has to be well in place that the resident could ask for that at any rate.
    Chairman NEY. My final question, I did want to ask you——
    I'm sorry. Yes?
    Mr. GLADMAN. Mr. Chairman, if I may just add to what Mr. McCleary said. I think that that process for inspection, in my testimony, I'm suggesting eliminating it and going with a liaison person to resolve problems, because I think that we become focused on this process of inspection and really we kind of lose sight of housing quality in general. There's other issues besides the physical aspect of the properties. The point-in-time inspection, you could inspect it one day, it could deteriorate the next. There needs to be a process that's ongoing that provides the resident some support as well as the owner to make this program really work.
    But right now we're spending a lot of time and energy and frustrating a lot of people to do these point-in-time inspections.
    Chairman NEY. Thank you.
    My time's run out. But, Ms. Fisher, I did want to afterwards just get some of the ideas you had about—ideas of how we would reward people who have been hard workers, maybe later on we could.
    Ms. FISHER. I just think they should be acknowledged. I don't have any ideas as far as how——
    Chairman NEY. Acknowledge them.
    Ms. FISHER.——but I just think they should be acknowledged.
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    Chairman NEY. Thank you.
    My final question, Mr. McCleary, I noted in your testimony, you were talking about systematic—systemic, I'm sorry, problems relating to developers and private property owners having appropriate security-related budgets. So that would be—what would that be?
    Mr. MCCLEARY. Well, the current cap, I think, you have like a 10-percent administrative cost that goes to the property managers. The problem with that, they have—most property owners have to choose between maintenance and security and other issues, so the end result, maintenance taking priority to security unless they have a total crises. Then, the traditional response is, once the crisis is over, go back to inadequate security.
    One of the biggest things that hurt expansion of the program and people welcoming this program into the community is both the fear and perception of crime that's done in these communities. And putting different monies available to the property owners who do have security budgets and the legal—legal budgets to accommodate that, not only would it stabilize the community, but I think it would do a great job in changing the whole perception of this program in the broader community, and make more people welcoming in engaging the program.
    Chairman NEY. Thank you.
    The gentlewoman.
    Ms. JONES. Thank you. Thank you, Mr. Chairman.
    I would like to thank all of you for testifying here this afternoon.
    Mr. McCleary, I support many of the commentaries that you made. One of the things that we spoke out about last year was the fact that HUD reduced the drug elimination grant dollars going to public housing to address many of the various issues that you raised. And I guess our horses weren't just quite loud enough, because they still eliminated some of the money anyway.
    But I want you to know that your comments are not falling on deaf ears. There are a lot of us who know of many of the issues that you raised with regard to that.
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    Let me quickly, Mr. Guest, bring you greetings from Terry Hamilton Brown, who is now actually the head of University Circle, Inc., in Cleveland, but she told me—I told her I was coming, and she said, tell everybody she said hello.
    I want to talk briefly about this inspection piece. And I'll talk to Mr. Guest about it or anyone else.
    The dilemma I have comes from a history of having been an attorney for landlords as well as an attorney for tenants back in the day, as my 20-year-old son says, and dealing with the landlord-tenant laws and dealing with the—in someone's testimony, they said that the landlord-tenant laws were convenient or—adequate enough to address some of the issues that are raised by people in Section 8 settings.
    I would say, based on that—the background that I have that it would be very, very important that the housing authorities maintain as much control as possible over inspections because when you start going to the court system to resolve an issue that ought to have been resolved between you and the landlord and the tenant, it presents a problem.
    I don't understand—and I need a short answer, because we don't have very much time—what you're saying that the—a person could do, or you were talking about having a tenant representative or something.
    Mr. Gladman?
    Mr. GLADMAN. My suggestion is to take the existing funding that you use for inspections and transfer that staff and make them really problem-solvers and resolvers. So if there is a housing quality issue, they can do a housing quality inspection. But there are a lot of issues that are unrelated, that affect the quality of life, whether it's resident disputes or unfairly administered program rules as far as the owner.
    Ms. JONES. So you would be happy, then, if we put some money in for residents' disputes and other quality-of-life instances——
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    Mr. GLADMAN. The purpose——
    Ms. JONES.——not necessarily diminishing inspections, you just say there are other issues that ought to be addressed.
    Mr. GLADMAN. Yes. I think there are broader issues, and to focus—really, the inspection is the primary control, if you will, and it's a point-in-time inspection. The market drives that—what happens now is——
    Ms. JONES. Let me ask you this, Mr. Gladman: You know we're coming on the end of the 20 years where—period where there were all these contracts with these different buildings to provide housing, and now they are not renewed because the market value far exceeds the dollars that people are getting. When you start going into some of those facilities and looking at how they've deteriorated over the years, how do you justify no inspection?
    Mr. GLADMAN. Well, from the project basis, there certainly is an inspection process, as you know, I think the react process.
    But what happens currently, because inspections are such a barrier—an example, in the Columbus market we have several companies that have project-based properties all over the country and operate a variety of subsidized programs, but will not accept any vouchers in their market-rate programs because of all the transactional barriers because of inspections.
    My argument is if you eliminate the inspections or at least streamline, as Mr. Guest said, you will get more property owners that are providing a quality product, and there will be greater choice for voucher holders. That's one of the issues now is the choice.
    Ms. JONES. I hate to cut you off, but I want to go to a couple of issues before the day is gone.
    Talk to me, Mr. Slemmer, about what barriers there are to the construction of additional affordable housing across the country. A real short answer, if you could.
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    Mr. SLEMMER. In talking about senior housing, the barriers are basically the limitation of funds. To develop affordable housing, you have to have subsidies on the construction, the debt service side, or subsidies on the operations side. Both of them are very limited.
    One of the things that I've mentioned before to this committee is that the preservation of housing is, therefore, even more important, because you could preserve the affordable housing stock that we have at much less cost than we have—we have for new construction. So I would really urge you to consider that as we look at ways of—of expanding or continuing to supply affordable housing.
    Ms. JONES. Thank you.
    My time is up.
    I just want to go on the record in opposition to the proposal for block granting Section 8. I'm opposed to block granting Head Start. I'm opposed to block granting everything that we can block grant. Because there are so many issues that the Federal Government has requirements that will not be imposed by the State of Ohio. And I won't—I won't get partisan up here today, so I'll leave that alone.
    Chairman NEY. Thank you.
    On a bipartisan basis, I have to let you know, the good Congressman Tiberi, I introduced his proposal at 7:00 in the evening, and he opposed it at 6:30.
    Mr. TIBERI. Thanks, Mr. Chairman.
    Let me—let me continue down the road that Ms. Tubbs Jones talked about that was mentioned in several of your testimony, and that is this issue of inspections again from Ms. Fisher to Mr. Gladman to Mr. Guest.
    One of the issues that I've heard a little bit about from those who may be proponents of this block granting is the frustration with this particular issue, the inspection issue.
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    Mr. Guest, can you give me a—give the panel an idea of the breakdown in the Columbus Metropolitan Housing Authority of the Section 8 program of residents in private landlord facilities versus public facilities? Do you know that breakdown?
    Mr. GUEST. Well, we have—if you're looking at the size of programs, we have 10,000 vouchers right now. We're a little overleased over what we're allotted. So we're—we're past that hundred percent category here.
    We have 27,000 residents in the Section 8 program. In the public housing program, we have about 8,000. So there is no doubt that it is a predominant program in Franklin County. And it's critical that it work well.
    And in Congress we get going about the—we talk about the inspections and how all of this works. I've not seen the answers in two or three years. Obviously, Steve and I have variations. I think there is general agreement that it doesn't work the way it does now. And I think the key thing is that—I would propose, maybe on an experimental basis, maybe far more conversation, as to what are the alternatives to the current system of inspections? Are there criteria that could be set up where provided—you know, I would guess every two to three years somebody does a really good job, every time we've been out there, it's up-to-date, bang, bang, bang, bang, all right, it's three years before we have to go back out.
    Others who have been more problematical, maybe it's every six months you need to go back out. Or maybe you need to have a liaison system.
    But right now it does frustrate very good owners to say, well, I'd rather have—I mean, I hear from the other side of it, you know, every once in a while, you know, I don't want to have to go deal with somebody and spend time on an inspection when I've been leasing my units to other people, and they have the common sense to determine themselves whether that's a good unit or a bad unit.
    So I think we make great leaps and set up cumbersome procedures that may only affect a small number of people, we need to focus more on them. So what we can do to generate a more localized version of that, or at the national level, if you can just give more flexibility and say, come up with something at the local level that makes sense, that most everybody can agree on, I think would be really helpful.
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    Mr. TIBERI. Mr. Zawilinski, have you heard some of the same, similar issues up in Lake County?
    Mr. ZAWILINSKI. I agree that we have actually much different inspection needs than—than inner city Cleveland and Cuyahoga County faces in the sense that our housing stock is much newer. We get the reports, for example, on children that we receive, elevated blood levels for lead poisoning, and we may have one a year in our county for all houses, not subsidized housing. And certainly in many of the cities that is a much greater issue.
    If we could grant to owners the opportunity to—to be waived from inspections for two or three years, the safeguard to that is that the tenants or an owner can request an inspection at any time to verify that our inspection standards are still being met.
    Mr. TIBERI. You don't believe you have authority today to do that?
    Mr. ZAWILINSKI. To waive the annual inspection? I know we don't have the authority to do that. We have to do it every 12 months.
    Mr. TIBERI. Thank you.
    Mr. MCCLEARY. Congressman Tiberi, may I make a comment——
    Mr. TIBERI. Yes.
    Mr. MCCLEARY.——listening to them?
    Can I suggest we can put in place a sworn affidavit process, that the property owner signs an affidavit the unit meets the criteria set by CMHA, or whatever, with substantial penalties to anybody that perjured on the affidavit?
    I think that would accomplish the objective and save a whole lot of money and time. That way you only focus on getting the bad people. So if a complaint is validated that they lied, then there would be a heavy penalty for them for doing that.
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    Mr. TIBERI. Thank you.
    One last question because I know my time is about ready to expire.
    The issue that Mr. Gladman brought up of timely payments and fair market rents, and an issue that we've heard about today with respect to the number of housing units that are available in a marketplace, whether that marketplace be Columbus, Cincinnati, Cleveland, whatever city, is that an issue that you and Mr. Guest have heard about in terms of a national issue? Or do you guys have some flexibility in your local housing authority with respect to that issue with private owners?
    Mr. ZAWILINSKI. I would say for our housing authority, we've been timely based on the HUD-established timeliness standard.
    Mr. TIBERI. What does that mean?
    Mr. ZAWILINSKI. Well, it means that we get our checks out to our landlords within five days, business days, of when we get the money from HUD. And if the 1st happens to fall on Saturday, on Labor Day weekend, we don't get our checks out at best until the 4th. Landlords are typically expecting those checks out on the 1st. To us, we've been timely; to a landlord, they may not think so.
    Mr. TIBERI. Very good point.
    Mr. GUEST. I was going to say, that's a very similar problem that all of us have.
    Another issue that you may hear about is the whole project-based issue of payments on that. Now, that has been very slow. Like I said, we've got a lot of project-based developments we deal with, and there is a case—we're only doing two-month renewals oftentimes, the dollars—it's paperwork intensive. I know we've had some owners within the last four or five months, it's been as much as 20, 30 and 45 days before we have gotten the money from HUD. And we're not talking about a thousand dollars. We're talking about in some cases over $100,000. These are large developments. That is particularly—we can all imagine what that means.
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    Mr. TIBERI. Thank you all. Thank you all for coming.
    Chairman NEY. Mr. LaTourette.
    Mr. LATOURETTE. Thank you, Mr. Chairman and Fred, for both—thanks, Fred, for driving all the way from Lake County, and thank you more for describing why we call Lake County God's country in that part of Ohio.
    I—you would come to see me with a couple other fellows earlier in the year, and I'd like to just ask you to comment—I'll go ahead and turn the spotlight on you, and then maybe ask Mr. Guest to make an observation from Columbus's point of view—but on the omnibus appropriations bill at the beginning of this year had a provision that indicated that there was a cap placed upon the amount of administrative fees to be placed in an agency's reserve fund and in general reserve funds that could be maintained by a housing authority. If I remember—and you can certainly, in your answer, tell me if I remember it right—indicated—and then we'll go to Mr. Gladman and other folks' comments about timely payments to the landlord—but when you get to the end of the year, and you have to roll out the checks for the first of January of 2003 or 2004, it was—many times that those reserve funds made the difference between whether or not you were able to make the bills and the payments for the—for the landlords, particularly when—and I'll take a slap at the republicans and democrats—we didn't get our work done, and don't have an appropriations bill in place in a timely fashion on September the 30th of whatever year we're dealing with.
    Could you make an observation about the impact that you think that provision of the omnibus appropriations bill had?
    And, Mr. Guest, then I'd like you to share any thoughts that you have as well.
    Mr. ZAWILINSKI. The issue that you referred to is the recapture of administrative fee reserves that we had as the housing authority during that bill. And for us it provided a buffer so that were HUD to be late in releasing functions, or were Congress, in appropriating funds, that we have the ability to at least meet a month, perhaps two, if it broke down to that—that level of payments to our landlords on a timely basis. By recapturing those funds, we've lost a tremendous amount of flexibility in not only working our program, Section 8 program, but it also alleviated us of the opportunity of being able to use those funds for other housing-related purposes in our community.
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    It also has created an atmosphere and attitude that we have very little incentive to make equipment and programs stretch because the risk of recapturing those funds means that there's no reward for getting an extra year out of our inspector's car or computer.
    And so replacement of equipment on a much more quick basis, you know, will be more of an emphasis, because we have no incentive to save.
    Mr. LATOURETTE. And so basically if I—we've run into this problem with a number of programs on Capitol Hill. So basically the effect of the recapture provision was you might as well spend it if you've got it, because they're just going to take it back at the end of the year anyway.
    Mr. ZAWILINSKI. Well, and in our case, not only was it a recapture of funds from the previous year, but it was a buildup of surplus of funds over many years. And so the rewards of frugality and responsible administration were—were punished.
    Mr. LATOURETTE. Thank you.
    Mr. Guest, do you have a similar situation here in Columbus?
    Mr. GUEST. Yes, we're in a similar situation. Obviously, it cuts down on your flexibility to run into this situation where the funds aren't coming on time.
    But there's other issues that came up. For example, Mr. Slemmer mentioned that we help—that we're helping on developing a senior community up in Westerville. Over the years, we have accumulated money from being efficient. That land was purchased with the Section 8 funds in order to make that program work.
    So there is an incentive to make other programs come about because of it. And if that incentive, as Mr. Zawilinski pointed out, is removed, it is—gets to be, let's just spend it all this year. It's a terrible attitude, but that's what inevitably will happen.
    Mr. LATOURETTE. And to both of you, too, a question: In your experience, have either of your authorities returned Section 8 vouchers unused? Have you not been able to completely subscribe those?
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    Mr. ZAWILINSKI. We have not used the number of vouchers issued; but we've more than used the number of dollars issued, attached to those vouchers. Because of the rising cost in utilities and rental charges, we've always been able to use our dollars.
    Mr. LATOURETTE. And, Mr. Guest.
    Mr. GUEST. We haven't returned any. Like I said, we're overleased right now, so there won't be any coming back.
    Mr. LATOURETTE. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman NEY. Thank you.
    I want to thank a very good panel. I appreciate your input. It's important to the process. And appreciate your participation here at the U.S. House field hearing.
    And I want to thank the members for their time, also.
    And with that, we'll move on to Panel II.
    Thank you.
    We're going to move on immediately to the second panel. So if you don't want to stay for the second panel, move on.
    The subcommittee will come to order for Panel II.
    We'll begin Panel II, and introduce the Mayor.
    We welcome you, Mayor.
    Mayor Coleman of Columbus, Ohio, meet Congressman Tiberi.
    Mr. TIBERI. Thank you, Mr. Chairman.
    It's a pleasure and honor for me to introduce my Mayor, the Mayor of the City of Columbus, Michael Coleman, who was elected to City Council in the early 1990s, and really doesn't need to be introduced to anybody in the audience, but at least to the panel, was later elected council President, in 1999 was elected Mayor of the City of Columbus, and will be reelected to a second term in November.
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    Most importantly from my perspective, though, he is a constituent and a friend. Thank you for testifying today.
    Mr. COLEMAN. Thank you very much. Thank you.
    Chairman—Chairman Ney. Congressman Tiberi, who is my Congressman, and is doing a great job for his district and the City of Columbus and central Ohio. Congresswoman Stephanie Tubbs Jones, who's also my friend, welcome back to the City of Columbus. Congressman Steve LaTourette, thank you very much for being in the great City of Columbus.
    And I want to also thank all of you for bringing this hearing to our city and choosing the City of Columbus to talk about such an important issue as we are presented with here today.
    Housing. Housing has been a very important part of my administration, because in this city we view housing and residential opportunities as a way to build strong neighborhoods, strong families, and a better quality of life. In our neighborhoods we view them as key to the survival of our city. They're the lifeblood of our city. That is where we live, where we work, and where—and where we play and raise families.
    In Columbus we're doing a great deal to address many of our needs locally. The City of Columbus has helped finance or participated in approximately 6,000 residential units during my first four years as Mayor. And when we first took office, we felt that housing was so important, working with Columbus City Council, and Charleta Tavares, who is here today, that we pulled together what's called—what we called the Affordable Housing Task Force of members of the community who are involved in housing to address many of the issues in our city, in a city where only 49 percent of our residents own a home when the national average is about 68, 69 percent. There is a great disparity there.
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    We looked at things such as tax incentive for housing, land banking, streamlining the development process, driving down the cost of buying a home, and, very importantly, the establishment of a local housing trust fund and corporation.
    The Franklin County/Columbus Affordable Housing Trust Corporation was subsequently put together. It's a collaboration between the county commissioners and the City of Columbus where we utilize a dedicated resource of funding, that being the hotel-motel tax of about $1 million annually, to revitalize neighborhoods, increase homeownership, and make housing more affordable for people in our city.
    Presently, the affordable housing trust corporation has some 800 units through this trust fund.
    In addition, we've created five neighborhood investment districts, we call them NIDs. And these investment districts are areas of our city where there has been a disinvestment of—of businesses, people moving out of the area, fewer students in our schools, a proliferation of vacant lots. And in these five areas we indicated and designed a program where if someone were to move into the area, build a home on one of these vacant lots, or substantially rehab a home, they will receive a 15-year tax abatement and live there tax-free for 15 years.
    We have $3.4 million commitment of HOME funds for supportive housing as well. And in 2002 through 2003 we committed $6.3 million in HOME funds, upgrading three large Section 8 projects, to preserve affordable housing and enhance their contribution to our neighborhoods.
    Let me just touch on remedying the concentration of Section 8 projects in Columbus neighborhoods.
    One of our major efforts is to renovate and upgrade Section 8 housing, and that is being led by Community Properties of Ohio. They now own one of the largest scattered site Section 8 projects in the entire nation, more than 1,100 apartments and 249 buildings located in the central city. Through new homeownership agreement, we are now—we are not only helping leverage the rehabilitation of the housing stock, but also ensuring that these residents can continue to receive the affordable housing that they need.
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    Decentralization of these affordable units must also occur in order to improve the quality of life of the neighborhoods. Community Properties is currently working with members of Congress to design a solution that would allow Section 8 subsidies and use restrictions to be transferred to properties in areas of the city where such properties are not heavily concentrated.
    In other words, share the burden among everybody in the City of Columbus, not just in one area or two areas of our city. We all have that responsibility and obligation.
    This will help ease the concentration of poverty and allow new investments to flow into neighborhoods. I look forward to working with the legislature in this regard.
    Let me just touch on Section 8 vouchers. I believe that the proposal to block grant the Section 8 voucher program to States should not be enacted in this country. The Section 8 voucher program administered through our local public housing authority is the most effective way to assure local families' housing needs are addressed by a local community and not by the State of Ohio or any State, for that matter.
    Let me touch on the need for greater Federal commitment for housing and community development.
    In Columbus the combination of Federal home resources and local funds are still not enough to meet the housing needs of the very low income households. Those earning less than 30 percent of the area median income in the City of Columbus. That's why it is important that additional Federal resources be considered for increasing and preserving the supply of affordable housing in the City of Columbus.
    One option is the creation of a national housing trust fund, something that Congress is—has recently introduced and is entertaining. By leveraging additional Federal funds with the efforts of our local housing trust corporation that was established in 2001, we can increase the production of affordable housing and better address the housing needs of low income households in the City of Columbus.
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    I also ask that you consider the creation of a homeownership tax credit. An initiative that can have as great an impact on homeownership rate in Columbus as the low income housing tax credit has had for affordable rental housing.
    Columbus needs to increase the percentage of homeownership rate, which is, as you know, 49 percent.
    We believe that a homeownership tax credit can significantly increase the homeownership rate by attracting needed investment in new home development and complementing local efforts to stimulate owner-occupied housing in our older neighborhoods.
    Let me just touch on Community Development Block Grants.
    As in so many cities, parts of Columbus's urban core are still experiencing high levels of poverty, declining populations, and low homeownership rates. Columbus has received about $8 million in CDBG entitlement in the year 2003 to directly serve such areas. Yet, this amount is significantly below other cities of similar size and demographics in the country.
    The population of the older City of Columbus approximates that of several other—other urban areas, such as Baltimore, Memphis, Seattle and Honolulu. But Columbus receives less CDBG funds than any of these cities.
    The need for revitalization in Columbus is just as great as in those other cities.
    HUD should look at their current allocation formulas and update the criteria so that cities like Columbus, which experienced major growth after 1940, can get a balanced amount of CDBG funds.
    I urge you to partner with us to take a look at how the CDBG formula works and make recommendations on the distribution of these funds to reflect the community development and housing needs of our city and in other cities.
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    In summary, let me just touch basically again on the four—four or five areas that we're asking that you take a look at.
    Number one, transferring of Section 8 subsidies and use restrictions on the—one of the largest Section 8 projects in the nation, Community Properties, in order to reduce the concentration of subsidized housing in one area of the city, so they can be shared in all areas of the city.
    Number two is the proposed Housing Assistance to Needy Families should not be enacted. Local administration of Section 8 voucher program is the best way to address local housing needs.
    Number three, we need additional Federal resources, and they should be considered for increasing and preserving the supply for affordable housing. And one option is the creation of a national housing trust fund. We think that could go a long way when you partner with local communities around the country, particularly those communities that have trust fund incorporations like the City of Columbus.
    And number four, the creation of a homeownership tax credit to increase homeownership.
    And number five, take a new look at how the CDBG formula works, and make recommendations on the distribution of these funds to achieve a balanced allocation of CDBG funds to reflect the community development and housing needs of our city and other cities.
    I thank you for the opportunity to testify. Thanks for holding this hearing in Columbus.
    And I also want to thank those who have come out today to testify from all over the State of Ohio.
    Mr. Chairman.
    [The prepared statement of Hon. Michael B. Coleman can be found on page 90 in the appendix.]
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    Chairman NEY. Thank you, Mayor, for your testimony and your office's participation in helping us with this hearing.
    I really don't have any questions. Just a couple observations, though.
    I have supported the bill by Rob Portman, which would be of interest to you, with the tax credit.
    And then the issue of the CDBG was raised in California, too. They're looking at 1950-some statistics, is what they're looking at.
    Mr. COLEMAN. Yeah.
    Chairman NEY. Which opens it—that back up to be a huge food fight, because some cities are going to get less. We're probably all on the same page here, but other cities and other States that wouldn't be so happy with this. But it's an issue that keeps cropping up.
    And I'll move on to the gentlelady.
    But one—one statistic that you said shocks me. Columbus is 48 percent housing ownership?
    Mr. COLEMAN. About 49 percent. It was less than that a few years ago.
    Chairman NEY. This was my second home for 22 years between Belmont County and here going to Ohio State and also the legislature, and I've seen amazing growth in this city. And it's just shocking, I guess, with that growth not everybody has bought places to live.
    Mr. COLEMAN. Yes. And it's something that I saw back in '99, '98, that we felt was important to deal with because in my view—and the reason why homeownership is so important in our city, and the rest of America, not only for the American dream, but when people have ownership in their neighborhoods, they have a vested interest in the success of their neighborhoods.
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    And our rate is far too low. And it's going to take a lot of help from the Federal Government to increase homeownership rates in our community and all neighborhoods of our city.
    Chairman NEY. Gentlelady.
    Ms. JONES. Thank you, Mr. Chairman.
    Mayor Coleman, good afternoon. I'm so pleased to be in Columbus once again.
    I have not had an opportunity to say this publicly, I'm so very proud of the work that you do. It just makes my chest stick out. When I grow up, I want to be like you, run unopposed.
    But I—and your words are loud and clear, and I support many of the things that you've said.
    I am interested in talking for a moment in your testimony about the disbursement of low income housing so that it's not all concentrated in one area. Tell me what that will do for the City of Columbus.
    Mr. COLEMAN. Well, first of all, I think there's an obligation for everybody to be of help in this area, and every neighborhood, and not just one or two neighborhoods in the City of Columbus. Because we all have an obligation.
    Number two is that I believe it's important, for example, downtown—I call downtown everybody's neighborhood—but I believe like for our downtown that there has to be every income level represented in our downtown. Historically, we haven't had very much housing in our downtown. We've developed a plan, a policy, and now we're actually building units in our downtown now. But it is representative of the entire economic spectrum, the entire market within our community, the high income, the low income, and everywhere in between.
    And, in fact, the very first project we were involved in the City of Columbus was a low income housing effort and homeless effort downtown called Commons at Grant. That is now constructed on Grant, where there are a hundred units, and it took a great partnership between a lot of people, a lot of entities to make it happen.
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    But I think it makes stronger neighborhoods, a better quality of life, and spreads the opportunity among all neighborhoods in our city.
    Ms. JONES. Do you have a large network of community development corporations in the City of Columbus?
    Mr. COLEMAN. Well, it depends on what you compare it to. We've been actively—in fact, I've created a community development corporation, a couple of them now, and about to create a third one for this area you're in right now called the King-Lincoln Development Corporation.
    We have community development corporations. They need strengthening in the City of Columbus. They need tools. They need financing. They need capacities. And that's something that we could use some help on as well.
    Ms. JONES. I asked that question because in Cleveland we've had great success with community development corporations with a lot of the housing development that has occurred, and I am sponsoring a piece of legislation called the Seed Act, which provides capacity for community development corporations to train the members of the board because they're traditionally neighborhood folk, to offer them economists, architects, et cetera, et cetera, et cetera.
    That's my only paid political announcement. So anybody out there who would be interested in that, please call your Congressperson.
    And I will close with that, Mr. Chairman.
    Again, Mayor Coleman, it's so good to be with you this afternoon, and always good to see you. And I promise I'll be in touch.
    Mr. COLEMAN. Thank you very much, Congresswoman.
    Chairman NEY. Thanks, gentlelady.
    Mr. Pat Tiberi.
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    Mr. TIBERI. Thank you, Mr. Chairman.
    I'm going to put an ad in for Ms. Jones, as well, for the legislation, I'm a cosponsor of that legislation.
    And I'd make one request of you, Mayor, is before you leave, if you could put in—a word in for Ms. Jones, and make sure that she spends a lot of money here in Columbus before she goes back to Cleveland.
    Mr. COLEMAN. That's my Congressman right there.
    Mr. TIBERI. Thank you and your staff for your work on these issues, and for communicating with me and my staff, I truly appreciate that, Director Barbash as well and his staff on these issues and other issues.
    In fact, I was at the Homeless Families Foundation this morning, and both of your names came up, and your working with them on trying to partner with the Federal Government and the city on trying to improve their situation on the near west side.
    I really appreciate your relationship on the CDBG issue and look forward to working with you, and maybe not just with you, with other Mayors who face similar problems in their cities, who are being shortchanged because of the formula, and working with those Mayors and their members of Congress, maybe we can win that food fight, because it will be a food fight, with other members of Congress and those Mayors who now benefit from that formula.
    So thank you for your leadership.
    Mr. COLEMAN. Thank you.
    Chairman NEY. Congressman LaTourette.
    Mr. LATOURETTE. Thank you, Mr. Chairman.
    Mayor, it's a pleasure to be in your company. Although you're the Mayor of Columbus, your reputation certainly goes up to the part of the State that I'm from, and you are clearly an example of a chief executive of a city and how it should be run, and I congratulate you on that.
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    Mr. COLEMAN. Thank you.
    Mr. LATOURETTE. You don't have to worry about Ms. Tubbs Jones, Mr. Tiberi, she's cut the wide slot through many malls. And I'm sure—I am sure she'll do her part in the Columbus area as well.
    Mayor, my question, I was intrigued with—Mr. Faith was here on the first panel, and he talked a little bit about the same issue, being that of the national trust fund. One of the difficulties that I have with it, not being a cosponsor, even though it's tripartisan, as he indicated, it has the only independent, Mr. Sanders of Vermont, who is the lead sponsor, is how he proposes to fund it. So I was interested in your idea. Do you devote all of the hotel-motel tax to that purpose?
    Mr. COLEMAN. No. We have set aside a specific percentage of the hotel-motel tax collections towards providing for affordable housing in the City of Columbus. So that if you spend the night here in the City of Columbus——
    Are you spending the night here?
    Mr. LATOURETTE. I am.
    Mr. COLEMAN.——a percent of your bill that you will pay will go directly to providing housing for somebody in our city.
    Mr. LATOURETTE. Okay.
    Is it possible to get the Tiberi discount while I'm here, too?
    Mr. COLEMAN. As long as—as long as you use the word ''Tiberi.''.
    Mr. LATOURETTE. Can I ask you what is the rate that your hotel—what is the percentage?
    Mr. COLEMAN. Oh, let's see here.
    You've got me on that one.
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    Mr. LATOURETTE. Can I ask you and, maybe you can get back to it, but what percentage of whatever your rate is, is set aside for——
    Mr. COLEMAN. It's set aside by a council act, set aside, every year it goes into a fund, and the Housing Trust Corporation uses that to leverage private financing for affordable housing.
    It's about 20 percent of the bed tax. What's the bed tax?
    Mr. LATOURETTE. 80 percent more.
    Mr. COLEMAN. Yes.
    Mr. LATOURETTE. And that generates about a million dollars, you're saying?
    Mr. COLEMAN. Well, yes. The good thing about setting aside a percentage is that as that fund grows, as the—more people come to Columbus, and that's why we're glad that you're here, the more people that come to Columbus, they pay more for hotel rooms, and the bed tax goes up, and, therefore, they're supporting some of our neediest people in our city in the process.
    Our bed tax also pays for emergency human services, part of it goes to the general fund, part of it goes to the arts and the visitors bureau as well.
    Mr. LATOURETTE. I think that's—where I'm from, the bulk of it goes to the visitors bureau, if I have it right. And your idea of sort of separating it, or trifurcating it, or whatever the word for splitting it in fives is, is probably an idea that's worthy of studying in other areas of the State. And I've learned something today.
    And, again, I appreciate the opportunity to hear you testify, I appreciate the benefit of your insight.
    And, Mr. Chairman, the last question, this has nothing to do with housing: Mr. Mayor, is it Jerry Springer or Eric Fingerhut that gets your——
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    Mr. COLEMAN. I guess we'll just have to see.
    Mr. LATOURETTE. Thank you, Mr. Chairman.
    Chairman NEY. I can see why you're unopposed, and now I understand why our colleague, Steve LaTourette, keeps winning.
    Any further questions of the Mayor?
    Mr. COLEMAN. If I might, I might want to add on to the discussion with—about the community development corporations. Because what I have found as Mayor of this city is that community development corporations, if they have the capacity, are very, very successful in providing economic development opportunities and housing opportunities in this city.
    And we need to hold them up, we need to give them additional tools and additional capacity.
    And I can see many ways where the Federal Government can be of assistance.
    Chairman NEY. Thank you, Mayor.
    Appreciate your time.
    Mr. COLEMAN. Thank you.
    Chairman NEY. And we'll move on to Panel III. Panel III:
    Mr. TIBERI. While the chairman makes his way up here, I would like us all to give our thanks to Barbara Nicholson, the Executive Director—Barbara, can you wave?—of the King Arts Center and her staff for doing a wonderful job in accommodating us today in this wonderful facility.
    Thank you, Barbara.
    Chairman NEY. I want to welcome our third panel.
    And we—first, we have Bambi Baughn, the Deputy Director of the Community Action Commission of Fayette County, Washington Court House, Ohio; Walter Cates, Sr., President, Main Street Business Association, Columbus, Ohio; Roberta Garber, Executive Director, Community Research Partners, Columbus, Ohio; Amy Klaben, President and CEO, Columbus Housing Partnership, Columbus, Ohio; Cynthia K. Ring, Executive Director, Allen Metropolitan Housing Authority, Lima, Ohio; and April Weaver, a resident of Columbus, Ohio.
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    And with that, we'll begin with Bambi. Thank you.
    Ms. BAUGHN. Well, thanks for the opportunity to submit testimony on housing policy in Ohio to this subcommittee.
    Thank you, Chairman Ney, for convening this hearing.
    I'm the deputy director of Community Action Agency in Washington Court House, Ohio. We are not part of Columbus. We are 45 miles south of Columbus. We are contiguous to Ross County.
    My written testimony addresses the subcommittee's questions concerning affordable housing production. And it includes a description of the housing programs and activities of our agency and a rural perspective of the housing needs and activities in the State of Ohio, especially the difficulties in developing housing in rural areas compared to developing them in an urban area.
    So in this brief oral presentation, I'm just going to focus on what we're doing in our agency in Fayette County, I'm going to emphasize on homeownership programs. Because in the rural counties we have access to USDA rural developments, or as we always call it back home, the Farmers Home Administration, and we've found that homeownership under USDA is a good option for affordable housing.
    The Community Action Commission of Fayette County is a multipurpose organization. We've been in Fayette County for over 35 years. Fayette County is a rural county. We have 28,000 people total. And our agency is just one of a few social services in agencies in the county.
    And besides the housing program, we operate two Head Start centers, we have the public transit system, we offer home winterization, emergency assistance, we have health clinics and a dental clinic. We have numerous programs for the elderly and services to the families with children.
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    The housing programs created by our agency cover the entire continuum of housing services. We have prevention programs for persons facing impending homelessness. We operate an emergency shelter and transitional housing for the homeless.
    Our agency owns and operates a single-room occupancy facility for the homeless that provides permanent supportive housing for 17 single adults. That particular facility does have Section 8 project-based vouchers with it. So that's my experience with Section 8.
    And we're also involved in several rental communities, and we've used a variety of funding for that, which is tax credits, USDA 515, we've done some housing trust fund money from the State, and we've also used the HOME money from HUD, mainly as gap funding for tax credits.
    Our most successful housing activity, however, is our homeownership program, which we operate almost exclusively through USDA funding.
    Our program's called Self-Help Housing, and we have the only mutual Self-Help Housing program in the State of Ohio, although I do think there is one getting ready to start operating in Athens.
    Our program's funded through a USDA 523 grant. We began operating this program in 1995, after nearly five years of planning and predevelopment.
    Since it began, our agency has received five USDA 523 grants and four Self-Help Housing Opportunity Program or SHOP awards from HUD, totaling $1.75 million at leveraging additional funds for a total economic impact to Fayette County of 8.9 million.
    133 homes have been built through our Self-Help Housing program.
    Under this unique program, the agency organizes families in groups of six to five to eight, and we assist them in applying for USDA Section 502 single-family mortgages. We work with them as they put in over 1,000 hours of sweat equity in the building of their own and their neighbors' homes. No one moves into their homes until all the houses in the group are finished.
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    A skilled construction supervisor from our staff works with the families, providing training and technical assistance during construction. A family worker is on-site to monitor the family's schedules.
    After the families complete the homes, they have done 65 percent of the construction labor themselves, the families have approximately $10,000 of true equity in their homes. These are not soft second mortgages that need to be forgiven over a period of time. This is true, honest equity.
    In our Self-Help Housing program, we've used the housing assistance council's HUD-funded Self-Help Housing Opportunity Program. We received $850,000 in SHOP funds from HAC, and another $800,000 in loans from HAC's Rural Housing Loan Fund.
    The SHOP funding helps us buy land and put in infrastructure for our Self-Help Homes. Without this SHOP money, we would have a very difficult time doing Self-Help in a subdivision as we're doing now, because the cost of getting the land, putting in the infrastructure is high.
    For many rural families, homeownership through the USDA programs is another option in affordable housing. In our Self-Help program, a very low income family of 50 percent of the area median income can qualify for as low an interest rate as 1 percent on a 502 loan. The Self-Help Homes generally appraise for over $90,000; with the sweat equity, the mortgage amount is usually around $82,000. For an actual family in our program, their 502 mortgage is $80,588.76. The family's payment over a 33-year period is $245.77 per month for their mortgage, and with tax and insurance added to the mortgage, the total payment is between 350 and $400.
    This is equal to or less than rent prices in our area.
    And in spite of the benefits, homeownership is not an option for all families. A family's tenure limit in an area is short, renting may make more financial sense. And many of the families that come to our agency have very poor credit, making it impossible for them to qualify for a mortgage at that time. We do spend time with them to get their credit improved.
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    Another program I wanted to discuss with this committee, because it's growing in Ohio, is Youthbuild. The program provides academic and job training services to low income dropouts between the ages of 16 and 24.
    Chairman NEY. I'm sorry. I just wanted to note the time has expired. If you could please just sum it up.
    Ms. BAUGHN. Okay.
    The 13 Youthbuild——
    Chairman NEY. We will accept the rest of the record.
    Ms. BAUGHN. Okay.
    There are 13 Youthbuild sites in Ohio for rural, non-urban. I have the list of towns that they're in, if you are interested. And it's going to become very important in Ohio because we're the third highest State with Youthbuild centers.
    Chairman NEY. Thank you very much.
    [The prepared statement of Bambi Baughn can be found on page 75 in the appendix.]
    Chairman NEY. Mr. Cates.
    Mr. CATES. My name is Walter Cates. I am Founder and President, CEO, of Main Street Business Association. And I would like to thank the members of this committee, Mr. Ney, chair; Mr. Tiberi, my Congressman from Columbus; and Mr. LaTourette, and Ms. Stephanie Tubbs Jones. Appreciate your being able to be here.
    I'm just very glad to be at this hearing, this table of individuals. I asked them to take a picture so I can show it to my 89-year-old mother to let her know I'm still functioning. I'm the only guy sitting here, and I feel proud of that.
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    But out of all of the talk that we've been doing this afternoon, I've been listening, everybody's talking about the housing market, the problems with housing, affordability, and the need. I have my statement already presented in writing, so I will not talk from that.
    But when we have these needs for housing, does anybody think about the impact of the economic development in our community?
    Because if we just pack people in affordable housing in the central city, which is where they have gone, because I started out with this process with getting a first HUD-funded recreation center by Chalmers P. Wylie, the Congressman from our community, on Main Street, called the Blackburn Recreation at South 18th and Main Street. That was when I couldn't swim at the YMCA or anything else. So Congressman Wylie saw the benefit of that, and he provided a HUD grant in 1968. I was with the East Central Citizens Organization, first federally funded program in the nation from the Office of Economic Opportunity.
    The second opportunity I had to work with Congressman Wylie was to secure the funding for the Urbancrest—Urbancrest Hollow under the first black elected Mayor, lady Mayor, Mrs. Ellen Walker Craig, and Homewood Builders was sponsoring that, and he has always stood firm to do what he could to help develop our community.
    We haven't talked about the problem that has hurt us greatly in being able to deconcentrate housing; and that's exactly what we're going to have to do with this huge portfolio purchase by Broad Street Management.
    We have not talked about the fact that the 49-percent homeownership of housing in the central city has been sort of sidetracked due to redlining from the banks and from the insurance companies. Now, that's a reality. We've got predatory lenders running around throughout our State, and the State would not allow the local communities to deal with predatory lending, which goes after our senior citizens, people who sometimes have a house that's cash rich but unable to pay for the kind of flipping that they do of those mortgages. So that's another thing.
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    In Columbus we've got an issue called Win-Win and annexation. Win-Win protects the major suburban communities, like New Albany and other kinds of communities that are bumped up against Columbus, who want our water but don't want our children in their school districts. So you can locate next to New Albany and have a Columbus address but send your kids to the New Albany schools, those who can afford to buy close at hand.
    Now, those are the facts that we've got to deal with. Some part of it is just because of our local zoning laws, we understand that, so we're not going to flip everything over and blame the Federal Government for our local problems, because we don't have the guts to take on this type of things that are happening in our community.
    How should I know?
    Because I was born and raised in Columbus, and I was past-President of NAACP in 1973, and I filed a lawsuit against the police and the fire and the Columbus Board of Education, Penick U.S. College Board of Education.
    The police and the fire because two friends of mine, Vietnam era veterans, couldn't get a job who had returned home and applied for the police department. My one brother applied for the fire department.
    And the school systems were horrendous. So I filed suit about the desegregation because all the central city schools did not have air conditioning, nor carpet. The one on Main Street that elementary school has now been totally rebuilt, in the wintertime the coal furnaces that they had, had the kids—they couldn't heat the building, so the kids had to wear their gloves and their hats and coats in school. In the summertime they would have to open the top floors on third and use these big, heavy-duty fans to blow air and circulate around in there, and had bats and bugs and all kinds of things.
    When I filed that lawsuit, one of the settlements was is that they demolished all the central city schools that were falling down as a means of sort of placating the citizens.
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    So we've got problems on both sides.
    One strength that I would like for our Federal Government to look at is letting the local HUD office have the strength to do the job they should do. These folk here at the HUD office are like a bunch of high-paid secretaries. They basically just send everything to Chicago, send everything to Washington, and it can't get dealt with because there's no decision-making authority.
    So if anything that you can do, hold the local folk into account, but give them the authority to make decisions so that they can help the community. Because those of us who have been at this 35 or 40 years, we know what's needed in the community, we just can't get nothing done about it.
    Chairman NEY. Thank you.
    [The prepared statement of Walter R. Cates can be found on page 84 in the appendix.]
    Chairman NEY. Ms. Garber.
    Ms. GARBER. Thank you, Chairman Ney and Members of the Committee.
    My name is Roberta Garber, and I'm Executive Director of Community Research Partners. We are a nonprofit partnership of United Way of Central Ohio, the City of Columbus, and the John Glenn Institute at OSU.
    I would like to briefly touch on two areas today: One is to talk about research we have done on housing needs in central Ohio; and to talk just briefly about a topic that has already been mentioned a couple of times, the allocation of Community Development Block Grant resources to urban areas in Ohio.
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    There are three areas of housing needs that we've looked at: One is affordable rental housing needs; the other deals with housing condition needs and the third is homeownership needs.
    The testimony that I've presented to you in writing has data and sources on these topics, but I'd like to just touch on them briefly.
    Since renter households typically have lower incomes than homeowners, they comprise the largest group in central Ohio with housing needs. We've found that 75 percent of low income renters are cost burdened. That is, they pay more than 30 percent of their income for housing. And in 2002 a household had to earn more than $25,000 a year to afford a two-bedroom apartment at fair market rent in Franklin County.
    We've identified a large deficit of rental housing affordable to the lowest income renters, those at or below poverty level. That deficit is estimated at 22,000 units.
    There are few affordable rental units in central Ohio near the suburban areas where job creation is happening.
    Since 1996 we've lost over 1,200 privately owned HUD-assisted units from the affordable housing stock through opt-outs and prepayments; and with those that are expected to opt out in the near future, that represents 12 percent of that housing stock that will no longer be in the affordable stock.
    It all adds up to persons still being homeless in the community and over 7,500 persons a year experiencing homelessness.
    If we look at housing condition, we know that lower income renters and owners are more likely to live in housing that is in poor condition. The new American Housing Survey that was just released last week shows 29,000 housing units in Franklin County with severe or moderate physical problems, and two-thirds of these are rental units.
    There are over 12,000 vacant housing units in the older part of Columbus, and the city has over 1,600 active vacant housing cases that they're following.
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    We know that there are over 12,000 low and moderate income homeowners who may be able to—may not be able to afford home maintenance because these owners are paying more than 50 percent of their income for mortgage and utilities.
    Finally, there are homeownership needs. I know that there was some surprise at the fact that the homeownership rate in Columbus is only 49 percent. But homeownership rates are even lower for minority households. There's a huge gap in homeownership rates in Franklin County between white households and minority households. The gap ranges from 23 to 35 percentage points difference, depending on the groups you're looking at.
    There are few new single-family homes being built that are affordable even to moderate income households, those that may be making $45,000 a year. In 1999 only 10 percent of the new single-family homes built were affordable to that group.
    So, obviously, with those needs, the Community Development Block Grant and other HUD funds are very important to be able to address housing needs.
    As has been mentioned, there is a significant disparity between Columbus and other communities in Ohio only in CDBG allocation. We looked at per capita allocation for the total population of the largest cities in Ohio and found a huge disparity.
    If you look at per capita CDBG allocation only by poverty population of Columbus and the other big Ohio communities, there is still a significant disparity.
    But then we took it one step further, and pretended that Columbus only consists of the area within the 1950 boundaries of the city, before there was all this annexation. This area is much more like the other urban communities. We still found that Columbus ranks last among the large Ohio cities in allocation per capita of persons living in poverty.
    In this case, the annual grant to Columbus would need to be increased by 50 percent to nearly one hundred percent to be equivalent to the funds received by Cincinnati or Cleveland.
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    I want to close by saying that this formula issue has implications not just for Community Development Block Grant, because this formula forms the foundation of other HUD programs, such as the HOME program, the Emergency Shelter Grant program, and even some of the continuing care of allocations.
    Thank you.
    Chairman NEY. Thank you.
    [The prepared statement of Roberta Garber can be found on page 103 in the appendix.]
    Chairman NEY. Amy Klaben.
    Ms. KLABEN. Thank you, Chairman Ney.
    Thank you, Chairman Ney and Members of the Committee, and Mrs. Jones, for allowing me to provide you with comments this afternoon. Thank you for coming to Columbus, Ohio.
    I'm Amy Klaben the President, CEO, of Columbus Housing Partnership. We are a nonprofit housing development corporation, and we were formed 16 years ago.
    Access to safe, affordable housing is one of the most important issues we face in our nation. People cannot retain their jobs, stay in school, and live a decent life without an affordable home to go home to every day.
    We see in our community, without affordable homes, people continually change schools. We have mobility problems within the school system.
    And people cannot go to their jobs every day unless they have a home that is safe, decent and affordable.
    To enable people to purchase affordable homes, we provide both a housing counseling program and we build affordable homes. Our housing counseling program is supported financially through the CDBG program, and we thank you very much for that support. People need economic literacy training and people need to know how to buy a home. Without such programs, people cannot become successful long-term homeowners.
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    So far this year we've had 324 people complete an eight-hour homebuyer education program. We are HUD certified, and our numbers this year are twice what they were last year. We attribute that to a marketing program that we started this year. The marketing program needs to continue. I'm explaining this to you because part of the HUD funding that we received does not cover marketing, and it's so important for nonprofit organizations to be able to market their programs so people know what's available. Many people who currently rent don't know that they can one day become a homeowner, and we need to help them know that they can achieve the American dream of homeownership.
    We provide not only prepurchase counseling, but postpurchase counseling, default counseling, and other programs. All of these programs together are important to helping people remain successful homeowners.
    In the past 16 years, we've built over 3,200 homes in our community—homes and apartments. Most of our homes are built through the low-income housing tax credit program and are rental units. We currently have 70 units under construction, 70 will start in the next couple of months, and approximately that many next year.
    We have a pipeline for development, and that pipeline is very important for the continued development of affordable housing.
    We also have an AmeriCorps Community Safety Program, which I know you're not involved with, but it's a very important program to Mr. Tiberi. This program has been very important to dealing with community safety issues that must be addressed as we look at revitalizing our central city. This program works in conjunction with the HUD programs that we're involved with.
    As I said, we receive CDBG funds for our housing counseling programs. And I just want to say that there's not enough funds in Columbus to support the need for these programs.
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    We would be happy to participate in counseling participants in HUD's Housing Choice Voucher Program. This is a very important program to help Section 8 participants become and remain successful homeowners.
    CDBG funds and HOME dollars are also used for down payment assistance. We administer down payment assistance programs, and it's needed in conjunction with counseling. Not everybody's able to save funds necessary for a down payment. To enable people to become homeowners, down payment assistance is necessary, and I would like you to consider increasing the current cap of 80 percent area median income to 100 percent.
    If you look at revitalizing central city neighborhoods, we need to attract higher income people into those neighborhoods. One way to do that is by providing down payment assistance to incentivize people to come into the central city.
    There's currently limits on the amount of funds that we're able to use through the HOME and CDBG programs, for development of rental housing and homeownership opportunities. Those amounts need to be increased, as well. We find that the cost of building new homes is much higher than the amount we can sell the houses for in many areas of the central city. It's called an appraisal gap.
    To attract people to buy in these areas, we need to provide incentives.
    Thank you very much.
    Chairman NEY. Thank you. I appreciate it.
    [The prepared statement of Amy Klaben can be found on page 131 in the appendix.]
    Chairman NEY. Before we move on, is Ruth McNeil still in the audience?
    Ruth, do you want to stand up? She is with Congresswoman Deborah Pryce's office, so I wanted to make sure everybody saw her.
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    And we can move on to April Weaver then. Welcome.
    Ms. WEAVER. Good afternoon. Thank you for allowing me to be here today. I'm really excited to be here to sort of reiterate what Ms. Klaben was talking about with Columbus Housing Partnership.
    I began working with Columbus Housing Partnership, I would say, about a year ago, last July, I found out about one of the homeownership classes they were offering, found out about it through the newspaper, and I called and got enrolled in one of the classes. And I really think it's important what Ms. Klaben was talking about with—we all know it's one thing to buy a home, but it's probably another to maintain the home. I think that's what I really learned from the homeownership classes, a lot about budgeting, and a lot about home maintenance, and just all sorts of things.
    I also appreciate how well-organized the classes were. I didn't have a lot of time, because I'm a single parent, I have a 3-1/2-year-old little girl, so it's like time is money, I pay the babysitter by the hour. So it was nice to get into a class, have my itinerary, and to stick with that and get it finished. And I really learned a lot through those classes.
    Not only did I learn a lot through the classes, but I learned a lot through working with Ms. Klaben and her colleagues with Columbus Housing Partnership. They kept in touch with me through the whole process of buying a home. One of the representatives came with me to close on the home. And I've kept in touch with Columbus Housing Partnership through e-mails and phone calls. And any questions that I have and concerns there, they're there to help me out.
    Oh, yeah, I didn't introduce myself. I'm April Weaver. I teach second grade here in Columbus. And I love Columbus, I'm so happy to be here. I moved here from Akron two years ago. And two years ago, I was living in Section 8 housing in Akron and on food stamps. And it's just so great to be at this point in my life, I'm really excited about that.
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    I don't know what else to tell you. I guess—I just—I really feel like Columbus Housing Partnership has helped a lot of people. I recommended it to some of my schoolteacher friends, and they're very excited about it, they've called and are really interested in it.
    And I guess that's all I can tell you. I don't know what else.
    So thank you very much.
    Chairman NEY. Thank you.
    [The prepared statement of April Weaver can be found on page 186 in the appendix.]
    Chairman NEY. And we'll move on to Cynthia K. Ring, who Congressman Oxley had requested you to be here. And I think he said you won an award or something.
    Ms. RING. We did.
    Actually, he asked me to be here, and I want to thank Chairman Ney and the other Members of the Committee for allowing me to testify.
    Actually, I was gone last week, so I didn't get my written testimony to you in advance.
    I am the Executive Director of the Allen Metropolitan Housing Authority located in Lima, Allen County, Ohio.
    And I had to explain to Ms. Weaver where that was. For those of you who don't know, it's in northwest Ohio between—kind of halfway between Toledo and Dayton.
    I'm also past-President and a current member of the Ohio Housing Authority's Conference, called OHAC, that represents 75 housing authorities in the State of Ohio. Many of my colleagues are here today, as is our current President, Terry Meese.
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    These public housing authorities administer assistance to approximately 85,000 families under what you call—or what you know as the Section 8 tenant-based assistance program, called the Housing Choice Voucher Program.
    And AMHA proudly has served our community for 30 years. We're a high performer under the public housing assessment, or PHAS, and a standard performer under SEMAP. And recently, just last week, we received an award from NAHRO, which is the National Housing and Redevelopment Officials, at their summer conference, for innovation.
    We have a landlord training program that we have implemented in Lima. It's a cooperative effort between our city, our local law enforcement, and housing consortium. And it's provided free of charge to any landlord or property manager in our community.
    And we believe because of the flexibility we have as a local housing authority, we're able to have programs in our area that really meet our needs.
    Lima, of course—and I put approximately 50 percent of the housing stock is rental housing, and that's being kind, because there's a great deal more than 50 percent of our housing stock that's rental housing. So it's important for us to have landlords who are knowledgeable about State law and how to be integrated into the neighborhoods.
    We have a highly trained staff of 29. We provide housing services to the most needy populations. And I think sometimes we tend to forget about that. You see only the negative things in the media about PHAs and you don't hear about the positive things.
    We deal with our senior citizens, our handicapped and disabled individuals, and the homeless and families with children.
    And the families we serve are someone's grandparents, their mother or father, sister or brother, child, or perhaps grandchild, and we know what type of services they need, because we live and work in the community.
    And we give them something very special. I think somewhere that's—a decent home can sometimes be the first decent place that they've lived.
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    AMHA has sold 16 of our homes to public housing residents, and we continue to prepare others to accomplish the same goals.
    And last month HUD recognized our PHA during National Homeownership Month because we had another resident who was successful in purchasing her home through the 5(h) program.
    We also are preparing a Section 8 Housing Choice Voucher Program that will enable many of our other families to also realize the American dream.
    And we also have the Family Self-Sufficiency Program, which you may know about, that also will enable families to become free of any type of public assistance.
    We serve over 1,600 families in our community on a monthly basis through some sort of Section 8 rental subsidy. And we are surrounded by a lot of rural counties, and oftentimes families are able to have some sort of choice, and our housing authority is the place that they come to, to get that assistance.
    There is a portability issue, a feature with a voucher that they are allowed to use. And I know that Assistant Secretary of HUD, Michael Liu, has said that that is very complicated. And in our community, it is not. It's fairly simple to do, and we encourage the mobility.
    I want to tell you that the PHAs in Ohio need many more additional resources. We currently have had our waiting list closed for over a year. And we have about half the number of families waiting as we do spots available for housing. And it's not unusual to have your waiting list close when you anticipate the need being over one year.
    Last year we were 15 percent overleased, and that caused quite a bit of funding issues and concerns that we had until just recently. But one of the reasons that we were overleased is because of the great need that we have in our community; also, to meet HUD's program requirements; and because of our declining economy.
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    And lastly, I guess, I just want to mention to you that I would like seriously for you to look at the Section 8 administrative fee issue and the fee reserve issues very closely before agreeing to those.
    I have some additional information, and a letter that one of your colleagues sent that I would like to introduce into testimony.
    Chairman NEY. Without objection, the letter will be introduced for the record.
    Ms. RING. Okay.
    [The following information can be found on page 195 in the appendix.]
    [The prepared statement of Cynthia K. Ring can be found on page 173 in the appendix.]
    Chairman NEY. I want to thank all the witnesses.
    There is the American Dream Down Payment, we were talking about the down payments. I think a lot of people go out and they struggle with work, or work a second job, but they have a terrible time trying to get that down payment. And in my family, it took—my father was 45, I think he was, before he could get a down payment on a house. So I think that's a difficult thing. The American Dream Down Payment is going to help 44,000-some people. In fact, the committee has got tremendous bipartisan support.
    We've got to get this law and get it to the floor. If anybody can make a phone call, American Dream Down Payment, to a member of Congress, please—please do that. It's American Dream Down Payment, has tremendous bipartisan support, so I thought I would want to mention it.
    I wanted to ask April Weaver, you said—you read first about the housing opportunity in the newspaper, did you?
    Ms. WEAVER. Yes.
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    Chairman NEY. In the Columbus Dispatch?
    Ms. WEAVER. Yes.
    Chairman NEY. You saw it in the newspaper.
    What kind of ad was it? Do you know who sponsored it?
    I'm just always curious how people get all the information.
    Ms. WEAVER. It wasn't a very big ad. I just remembered looking through, I was actually looking for rental property, and I looked over in the homeownership, they had Homes for Families, and I called. And I think that class was actually closed. And so when I went to look at my house in the Hilltop area, the gentleman who showed me the home said, well, have you tried calling CHP and getting into one of their classes. I said, no, I hadn't tried calling again. He said, try again, and see if they're going to be doing that. So he was—sort of backed that up and encouraged me to call back.
    Chairman NEY. That's great.
    I'm a secondary ed degreed teacher.
    Ms. WEAVER. Oh, really.
    Chairman NEY. I think you've got a rougher job in elementary, by the way. Nice little kids, but kind of squirmy, running around, kind of like herding cats.
    Congratulations on that.
    Ms. WEAVER. Thanks.
    Chairman NEY. I want to ask Ms. Ring, were you talking about the portability of the voucher was a problem—the portability?
    Ms. RING. It is not a problem in our community, because we have a lot of rural counties surrounding Allen County, where there are no housing authorities; besides, they're able to use the vouchers to move elsewhere.
    Chairman NEY. And one point about the HUD——
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    Mr. CATES. Yes, sir.
    Chairman NEY.——we have had discussion on that, and at some point in time we'll talk to you about some discussions we've had about a better flexibility at local levels.
    Mr. CATES. No question.
    Chairman NEY. The gentlelady.
    Ms. JONES. Mr. Chairman, in the interest of time, I'm going to bypass my questions and let my colleagues ask questions.
    I want to thank all of the panel for coming here this afternoon and participating. And it's not that I don't want to ask you questions, but I want to try——
    You want to ask me a question, Mr. Cates?
    Mr. CATES. I would.
    I do appreciate your CDC's in Cleveland.
    Ms. JONES. Oh, yes.
    Mr. CATES. They are powerful. We have not yet began to make that happen in Columbus. And I can tell you a lot of reasons. The main thing is we've got a serious food chain operation: The sharks who've got installed stay at the top. That's just the best way to say that.
    Ms. JONES. Thank you, Mr. Cates, for the compliments.
    Chairman NEY. Mr. Tiberi.
    Mr. TIBERI. Just a question regarding homeownership in rural areas that kind of caught my attention on your testimony.
    You said Fayette County operates the only USDA Self-Help Housing program in the State.
    And also in your testimony, just to put that in perspective, you mentioned that while many people don't consider Ohio as a rural State, Ohio's the fourth largest rural population.
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    Why in the world aren't there more of you? In Ohio.
    Ms. BAUGHN. I don't know.
    We have had lots of interest from other counties, they have come and looked at our site. Our housing director is right behind me. We have talked the program up. We think it's wonderful. I mean, it's not just for housing development, it's an antipoverty program, it's no risk to the housing developer.
    We do think that we've got two counties on either side of us are in the predevelopment phase, Clinton County and Highland County. And there is a program, I believe, in—Athens?—Athens, there's a Rural Alliance or—Rural Alliance, I think.
    It's a hard program to start because it's not like a grant program where you write a grant and you fund activities. You have to actually have your families' loans approved, your lots secured, your home plans approved by your local—your localities. And basically the day you close the grant, the next day you build.
    So we were able to get predevelopment money from USDA and from the State of Ohio to hire Mrs. Griffiths to come in and actually do all of the predevelopment activities that needed to be done.
    But it is a wonderful program. I wish more people did that.
    Mr. TIBERI. Well, Mr. Chairman, I would—I would encourage—I would encourage you to look to see what they have, and it is in Washington Court House, it is a wonderful program. And if there's a way that maybe we or this committee can encourage others in the State to utilize it, I think it's a great program.
    Thank you all for coming.
    Chairman NEY. Mr. LaTourette.
    Mr. LATOURETTE. Thank you very much.
    And like Congresswoman Tubbs Jones, I don't have any questions other than to indicate to you, Mr. Cates, that the committee was sad when Congresswoman Tubbs Jones was elevated to the Ways and Means Committee because no one—there wasn't a bigger champion on predatory lending in Congress than Stephanie Tubbs Jones. All of us have horror stories from our districts where folks come in and use a variety of unscrupulous techniques, not only against the elderly but the poor and overleverage the value of homes. And so the Ways and Means Committee, now with the rest of the people is a so much more violent place, it was their gain, but it was our loss on the Financial Services Committee. And I know that I very much miss Stephanie—Congresswoman Tubbs Jones' leadership on that issue. And we're lucky to have such a leader in the Congress.
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    And I do just want to make a comment to Ms. Garber, in your observations, CDBG and how Columbus is being treated not fairly has come up as sort of a theme here, I'm getting—I'm in Columbus, I've got a theme. And I would suggest that it's going to be more than a food fight. Because the answer to these questions—we have a similar thing with the highway trust fund, for instance, where it's not based on anything reasonable other than who's got the biggest delegation of how many miles of interstate highway system you have, and so, as a result, while we get about 90 cents back on the dollar that we send to Washington here in Ohio, Massachusetts gets $2.25, and Pennsylvania gets $1.16. And I can tell you, as we're in negotiations on that as well, the guys from Massachusetts aren't saying, oh, we're sorry, it's not fair, here's some of your money back.
    And so the only way that we solve those problems is to grow the pot of money. And it's not a problem in the house to fix it, because usually there's more of us from those States, and we can beat up the other guys and take it back. But in the senate everybody gets two votes, and the senators aren't anxious to give it back.
    So I really think that the solution to the CDBG dilemma in Columbus is find yourself, and, Mr. Chairman, that we have to find a way to grow the pot, make more money available so that we can all benefit and perhaps rectify some of the situations that Columbus finds itself in.
    I thank you and yield my time.
    Ms. JONES. Real quickly, Mr. LaTourette, you've made up for your shopping comment.
    Chairman NEY. I also want to thank Fayette County for participation in Washington that you all have done to help us out there.
    A fine panel. And with that, we'll move on to Panel III. Thank you very much. Panel IV.
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    Move on with Panel IV.
    We have William Hale, President, Portage Area Development Corporation of Ravenna, Ohio; Amy Kuhn, Deputy Director of Community Development Division, Ohio Department of Development, Columbus, Ohio; Roy Lowenstein, Vice President, Development, Ohio Capital Corporation for Housing, Columbus; Sally Luken, Acting Director, Corporation for Supportive Housing in Columbus, Ohio; Charleta Bell Tavares, Columbus City Council, Columbus, Ohio; and Jeffrey Woda, President of The Woda Group, which is located in Columbus, Ohio.
    Thank you.
    Mr. HALE. Good afternoon. Thanks. I'm glad to see everybody's awake, and I'm surprised I—I'm awake, it's been an interesting afternoon.
    And the encouragements I have for you this afternoon, I don't think are new from the other testimony, but since I have five minutes, I'll go through it.
    It's exciting that you take this interest in housing. It's a critical needs——
    Ms. JONES. Why don't you move the microphone over.
    Mr. HALE. How about this?
    Chairman NEY. There you go.
    Mr. HALE. It's exciting because in the deficit era that we're in, both Federal and State, you know, we need to go ahead and concentrate on the lowest third income group in Ohio, those making under 80 percent.
    A little bit about PADCorp., we're a rural CBC nonprofit, covering all of northeast Ohio, rural being for us those populations under—under 50,000. We touch a number of Congressional areas, pretty much a mirror image of Congressman LaTourette's area. And by the way, we have found your office knowledgeable, helpful and responsive. And we thank you for this partnership.
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    We go ahead—we produce both affordable rental properties, preservation, as well as creation, as well as homeownership. Nothing that I say today should decrease the importance of the rental property. But I want to go ahead and focus on homeownership, because I find that the most dynamic tool in neighborhood revitalization, as well as family self-sufficiency and self-determination.
    We've been doing this since we started in 1985. In 2001 we went ahead and adopted NeighborWorks, a full cycle lending model. If you're not familiar with it, I have a section in my written testimony. It deals with intensive pre- and postpurchase counseling and homeownership education, and we feel it's a superior system, not that there aren't others that are also good, but we have found that by implementing it we've been able to go ahead and in two years double what we've done over the last 15.
    And so my first encouragement would be to go ahead and take a look at programs that are working for homeownership and support them, increase that pool that Congressman LaTourette was talking about.
    The second area that I would like to talk about deals with the Section 8 to homeownership program. I think this is a slick program. It goes ahead and takes those families that are on Section 8, that are working, that are productive members in their community, and it goes ahead and gives them the opportunity to make the Section 8 program what it was originally designed to be, and that's temporary.
    And so what we've done now is we have a memorandum of understanding with three different housing authorities. And it represents about 10 percent of what we have done to date—I mean, 10 percent of what we've done in the last couple of years. Those counties are very, very different, they include Lake County, Portage County, and Columbiana County, and, of course, as Congressman Ney knows, we're in discussions in—in Zanesville. All four of those areas are uniquely different. All four of those housing authorities are dealing with a different—a different population, with different market need.
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    I would encourage not to consider—or your result would be not to go ahead and have block grant—block granting Section 8 program because of those unique needs.
    The State of Ohio has some excellent service delivery systems, one's sitting next to me, and it's not so much that, but the unique need to respond to the communities can only be done on a local level with the local housing authorities. In some States they're not as fortunate as Ohio, and I think the product would suffer.
    The other two encouragements that I have for you—and then I'll quit—is, again, like my first encouragement, take a look at those programs that are working partnerships with housing authorities and nonprofits and go ahead and assure that they have adequate funding both in operation capital as well as financing capital.
    Last, but not least, there's been some discussion as to housing trust fund, and I encourage you to move forward on that. The State of Ohio, the legislature, and the Governor's office, went ahead I think and took a very bold step and its programs were stripped out of the Ohio budget. The housing trust fund is still there to go ahead and give positive force so that they can be a partner in affordable housing.
    Chairman NEY. Thank you.
    [The prepared statement of William Hale can be found on page 122 in the appendix.]
    Chairman NEY. Ms. Kuhn.
    Ms. KUHN. Thank you, Chairman Ney.
    My name is Amy Kuhn, and I'm Deputy Director of the Community Development Division of the Ohio Department of Development.
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    This division, among its many programs, is responsible for the distribution of Federal community development programs, including Community Development Block Grant, the HOME Investment Partnerships, Emergency Shelter Grants, and Housing Opportunities for Persons with AIDS.
    Before I begin, I would like to thank the members of the committee for the opportunity to speak here today, and I'll try to keep it brief.
    The State of Ohio and Ohio Department of Development have a long and successful history of working with its local communities and nonprofit organizations to maintain Ohio's great quality of life.
    Today I would like to address some changes related to the State's ability to continue to successfully administer the U.S. Department of Housing and Urban Development's CDBG program.
    The Department of Development requests your support of the following three minor but very important revisions to the CDBG program. None of the revisions would require an increase in funding or allocation levels, but would provide flexibility for the changing environment as I think we've heard about here today.
    The first issue is to increase flexibility at the discretion of the States to allocate technical assistance and administrative funds between the two activities without financial limitations and without a match requirement being applied to the technical assistant funds.
    Currently, States may allocate 1 percent of the annual CDBG allocations to technical assistance activities and 2 percent plus $100,000 to administration. As an example, in fiscal year 2002, Ohio allocated approximately $437,000 of CDBG funds to technical assistance, and $1,236,000 to administration.
    If the percentage requirements were eliminated, Ohio would have the flexibility to expend these funds based on the needs of the communities.
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    For example, in order for Ohio's rural areas to make the best use of limited resources, ODOD is encouraging Ohio Small Cities CDBG Program eligible communities to develop a community assessment strategy.
    Now, this is a planning document designed to encourage communities to match local needs with available resources; facilitate a holistic approach to addressing housing, economic, and community development needs, identify the type and degree of community development needs; identify the type and degree of community development needs within areas of low and moderate income concentration or distressed areas; and provide information that will serve as a resource for State planning efforts.
    In order for communities to develop a credible strategy, it is imperative that we be able to supply direct technical assistance. As with most initiatives, the initial training costs could be higher but will decrease as the communities build administrative capacity and experience.
    And I think you've heard from several folks today, from some of our rural counties and communities, which are very capable and provide very good services.
    If States were permitted the flexibility to allocate funds between technical assistance and administrative activities it would be much easier for these Ohio associations.
    The second issue is an increase in the State match threshold from 2 percent of the State allocation plus $100,000 to 2 percent of the State allocation plus $500,000.
    Basically, the States receive CDBG funds through a formula allocation. The allocation includes funding for administration of the program. The amount of funds available to States for administration is 2 percent of each state's formula allocation plus a hundred thousand dollars.
    However, States are required to provide a 50-percent match for any administrative funds received greater than $100,000.
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    As you heard, the latest biennium budget process, it was determined that the availability of the State funds as matching funds has been decreasing at an alarming rate. Until the economy improves, this trend is expected to continue. Although the threshold requirement has not been revised since the program's inception in 1982, the cost of administering the program continues to increase due to the many things we've discussed here today.
    If the State administrative threshold for the CDBG program were increased to 2 percent plus $500,000 of the State allocation, the States would have additional revenue to dedicate to administration.
    Without adequate administrative funding, ODOD will be unable to continue to effectively administer approximately 280 CDBG program grants every year.
    The final issue I would like to address is the dedicated source of funding for training and technical assistance activities.
    States would benefit greatly from a dedicated source of funding for training. If such an initiative were funded, the national organizations could access the funds needed to keep States abreast of new CDBG program rules and regulations, proper program administration, and tips for innovatively implementing projects and activities.
    In the past, HUD provided funds to these organizations and this has no longer been possible.
    Thank you.
    Chairman NEY. Thank you.
    [The prepared statement of Amy Kuhn can be found on page 136 in the appendix.]
    Chairman NEY. Mr. Lowenstein.
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    Mr. LOWENSTEIN. Thank you, Chairman Ney and distinguished Members of the Committee.
    I'm Roy Lowenstein, the Vice President for Development, Ohio Capital Corporation for Housing here in Columbus.
    Ohio Capital assists developers around the State to secure low income housing tax credits, and we operate an equity fund which purchases the credits.
    We have, since 1989, raised about half a billion dollars for investment in Ohio. We put it into about 200 different affordable housing developments with about 10,000 units.
    Recently we acquired a portfolio of more than 1,300 Section 8 units, primarily in Columbus, as well as a management company, renamed Community Properties of Ohio, which you've heard about—a little bit about earlier.
    Along with local partners, we will be rehabilitating and preserving a great majority of those units over the next few years.
    So we have a variety of roles, consultant, developer, investor, asset manager, and property manager, and those provide many insights into the rental housing and finance operation areas.
    You've heard already today from many of the other speakers today about housing needs in Ohio, so I don't need to comment further on that.
    What I would like to do is comment on some of the housing tools that we need in our toolbox.
    Ohio's a microcosm of the whole country, so it's not surprising that many different housing tools are needed. For example, fair market rents in some rural counties are so low that no new construction is incentivized. Some cities in Ohio have been losing population for 20 or 30 years, but they still need more affordable housing. Why? Because many of the people most in need are still there, and because people—other people are leaving, you don't see new construction going on, you need replacement housing just to maintain the housing stock.
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    Some neighborhoods in decline or that have declined and then stabilized, provide very little economic incentive for reinvestment without public dollars to lead the way to help recreate a market in some of our neighborhoods.
    The message here is that great flexibility is needed to craft solutions to these distortions to what's normally a market.
    Sometimes the biggest problem is housing supply; other times it's the gap between the income that the people have and what it costs to actually operate housing.
    Other times it's the appraised value being too low to allow for new development.
    So what programmatic tools do we need? Some of them are going to cost money, and actually some of them won't.
    Poor families need both rental subsidies and production subsidies to target to extremely low income households. However, rental subsidies are in very short supply as we've heard from other speakers.
    This is particularly a shame when we have a fair amount of vacancy in the market, and it's just a shame that we're not able to house more extremely low income households from our vouchers. Why? Because there aren't enough vouchers to go around, but there is a housing supply in some markets.
    It's particularly a concern here in Columbus where we have an exemplary program known as Rebuilding Lives to house long-term homeless individuals, using a range of Section 8 and McKinney funds as operating subsidies. Halfway to the goal of 800 permanent housing units for the homeless, we sure hope that the Section 8 subsidies will again materialize to provide an operating base for some of those most severely—or for people most severely in need.
    Secondly, we do need a larger Federal source of gap financing. Gap is the—what it costs to—the difference between what folks can pay and what it costs to develop housing. We've really been starving these production programs for the last 15 or 20 years compared to the amount of need there is in this country.
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    And basically what happens is that a project—given Ohio's relatively low rent structure, those rental properties cannot support such a high level of debt. And even in the case of Federal tax credits, a gap exists between what it costs to deliver new housing and what folks can afford to pay.
    And the tax credit program serves those who have enough income to maybe pay 400 or $500 a month in rent. But those people who can't pay that, basically the minimum wage or a little bit above minimum wage workers, they cannot afford enough in rent to support any permanent debt on the housing unit. And so that provides no incentive for folks to develop new housing for that population.
    We need a Federal targeted source that's going to help support production for people, for example, under 30 percent of the median income, along with providing operating support.
    Finally, we need greater flexibility in the Section 8 program to allow the portability of—for project-based rental assistance. That's a big issue in Cincinnati, and it's a big issue with our portfolio in Columbus, as well.
    [The prepared statement of Roy Lowenstein can be found on page 139 in the appendix.]
    Chairman NEY. Thank you.
    Mr. LOWENSTEIN. Thank you.
    Chairman NEY. Ms. Luken.
    Ms. LUKEN. Mr. Chairman, Representative Tiberi, and other Members of the Subcommittee.
    On behalf of the Corporation for Supportive Housing, thank you for the opportunity to testify.
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    CSH has a long-standing and productive relationship with this subcommittee and its excellent staff throughout the tenures of your predecessors, Mr. Lazio and Ms. Roukema.
    I appear before you today to draw on CSH's experience nationally, including Ohio, and my recommendations to the subcommittee are based on our experience with housing production, targeting the lowest income individuals and families, those that have been homeless repeatedly, for long periods, and those who are at risk of homelessness.
    In a moment I'm going to present some evidence about the supportive housing solution. But now I'd like to let you know what we're seeking from you today.
    CSH encourages the subcommittee to act to ensure that the HUD McKinney-Vento homeless assistance programs continue to sustain and produce new supportive housing.
    You can do this by establishing a homeless housing permanence account for renewals of expiring rent and operating subsidies under the Shelter Plus Care and the Supportive Housing Programs.
    And you can also do it by enacting authorizing legislation targeting 30 percent of those grants to permanent supportive housing.
    In addition, we recommend that the subcommittee enact legislation that will close the affordability gap for households earning less than 30 percent of area median income. Specifically, CSH endorses the creation of a national housing trust fund.
    Now to the evidence.
    In addition to grinding poverty and high housing costs, tens of thousands of Americans are homeless and struggle with mental illness, substance addiction, and other health problems that are creating barriers to their stability.
    Research from around the country and right here in Columbus and Franklin County show that as a consequence of this double whammy these folks are cycling repeatedly in and out of shelters and institutions and the streets, for months and even years.
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    Supportive housing ends this vicious cycle. It combines permanent affordable housing with flexible voluntary services that many people need to achieve stability. This includes mental health and substance abuse services, employment services, and other services that keep people housed, but also help them participate in their communities.
    Supportive housing is cost-effective as well as humane. Research has shown that it costs little more to permanently house and support these folks than just to leave them homeless.
    And Columbus and Franklin County was one of the first in the nation to overhaul its approach to homelessness in recognition of this research. Led by the Community Shelter Board and Franklin County and the City of Columbus, they launched, as Roy has mentioned, Rebuilding Lives. This initiative to address long-term homelessness is to create 800 units of permanent supportive housing.
    And what's great about it is it's working. Over 93 percent of Rebuilding Lives' tenants have retained their housing for one year or more. They are not going back to the shelter.
    In addition, the cost to operate a unit of supportive housing here in Franklin County is 36 to $38 a day. That's quite a bit less than the public systems that traditionally have served and taken care of these folks; namely, prisons and mental health hospitals.
    Policy makers at every level are taking a new look at homelessness, and a consensus is emerging. We can and must plan to end homelessness, not manage it.
    Recognizing that we face a significant but solvable problem, the Bush administration, Congress, and two blue ribbon commissions have adopted the goal of ending chronic homelessness.
    Most recently, as Bill Faith has mentioned, the President's new Freedom Commission on Mental Health has recommended that, quote, in partnership with the interagency council on homelessness, HUD develop and implement a comprehensive plan designed to facilitate access to 150,000 units of permanent supportive housing for people who are chronically homeless.
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    To speed the progress to that goal, the policy strategies that this committee should implement are amplified in my written report.
    But to reiterate them simply: Ensure McKinney-Vento homeless programs continue to generate new permanent supportive housing, and work to close the affordability gap for those lowest income Americans.
    Chairman NEY. Thank you.
    [The prepared statement of Sally Luken can be found on page 143 in the appendix.]
    Chairman NEY. Ms. Tavares, welcome.
    Ms. TAVARES. Thank you.
    Thank you Chairman Ney and Members of the Committee.
    I am Charleta Tavares, on I'm the chair of the Health, Housing and Human Services Committee on Columbus City Council. I want to welcome you to my city and to thank not only Chairman Ney, but also my friend, Congresswoman Stephanie Tubbs Jones, my Congressman, as well, Pat Tiberi, and Congressperson LaTourette for coming to Columbus.
    We're proud of what we're doing in this city. As chair of the committee, I work with our Mayor, Mayor Coleman, to focus attention on developing more affordable housing, increasing homeownership in our community, and revitalizing our older neighborhoods.
    We have developed a toolbox to help us in accomplishing these three goals. And we have created partnerships to strengthen and sustain our efforts. One of our tools was to create the Columbus/Franklin County Affordable Housing Trust Corporation with the city and the county, which enabled us to look at where affordable housing units were needed in our community, the community of Franklin, and to determine what kinds of units were needed, apartment, single-family, senior housing, et cetera.
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    In addition, we were able to pool our resources in order to better leverage our dollars and expand our partnerships to the public and private sectors.
    The housing trust corporation has three—has a three-part goal: To increase the number of affordable housing units as was expressed by another witness, we need at least 22,000 units; increase homeownership opportunities; and, three, to strengthen and revitalize our older neighborhoods.
    Increasing the number of affordable housing units is critical if we are going to provide opportunity and present—and prevent homelessness amongst our individual and family residents.
    Ensuring that we have safe, decent, and affordable housing for all families in our community has largely depended upon the partnerships we have had with the Federal Government through the Department of Housing and Urban Development and the Columbus Metropolitan Housing Authority.
    I'm going to touch on the Community Development Block Grant program. The CDBG program has been effectively used to increase our supply of affordable housing, to revitalize central city neighborhoods, strengthen our neighborhood and commercial strips, provide loans to create and expand small businesses, and help low income families maintain their homes. All of these issues are critical to central cities and rural communities who are attempting to rehabilitate older housing stock, attract business development, and eliminate blight and flight from the core city.
    The CDBG program has allowed communities to target the dollars where they are needed, to leverage the dollars with the private and other public investments, such as our housing trust and HOME funds.
    The next area that I want to touch on deals a little bit with the city and the county again and our work with the CDBG program.
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    I believe the key to this program is to keep it local, not to pass it on to the State, and not to pass it into any kind of a regional plan. The key has been that it's been a local program with the Federal Government. That has enabled us to develop the needs—meet the needs of our city and to develop the programs and services that best meet those needs.
    A State or regional administration would add another level or layer of administrative expenses, monitoring, and interpretation of regulations. Regional or State administration of the entitlement CDBG would add negative dimensions of competition between rural and suburban, small city, large city, et cetera.
    Unfortunately, there is nowhere in America that a family or an individual working a minimum wage job can afford a two-bedroom apartment. Mr. Chairman and Members of the Committee, as you know, far too many of our children are growing up in single-parent households, many working minimum wage or low wage jobs, who are one crisis, one paycheck away from homelessness.
    We are fortunate in Columbus, Ohio, that our cost of living is well below our sister cities, such as New York, Los Angeles, San Francisco, and Chicago. However, we cannot forget that we have thousands of families in our community living below the poverty line who are responsible, who are working, and who cannot afford a clean, safe, and decent place to call home.
    We have to do more. Our children and families are depending on us to ensure that their basic needs of food, clothing, housing, and health care are met.
    We have a need in our great city for more housing units that are affordable. It is both a cost and production issue in our community. Columbus is working hard to produce and decentralize our affordable housing units throughout the city. Many of our job centers are on the fringe areas of Columbus. And we believe, in order to make any affordable housing program work, we have to be able to locate the housing where the jobs are located, in the fringe areas of Columbus and suburban communities throughout this county.
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    I thank you, Mr. Chairman and Members of the Committee, and more than happy to respond to any questions.
    Chairman NEY. Thank you, Ms. Tavares.
    [The prepared statement of Charleta Bell Tavares can be found on page 182 in the appendix.]
    Chairman NEY. And Mr. Woda, although he has a Columbus office, he's a River Rat. And I'll let you explain that.
    Mr. WODA. Thank you, Mr. Chairman. Thank you Congressman Tiberi and the rest of the committee for allowing me to testify before you today.
    I am the last person to testify, so I will try to keep it as brief as possible.
    My name is Jeff Woda, I'm a member of The Woda Group. I grew up in rural Ohio, in Belmont County, and the last few years I have relocated to the Columbus area.
    Our expertise is developing, constructing, and managing housing in the rural area, and specifically affordable housing. And that's what I would like to concentrate my testimony on here today.
    In my written testimony, I've listed various programs that we have used to create such housing. And I've also gone on to talk about some of the challenges that we have encountered when working in programs that combine funds from HUD, tax credits with IRS regulations, funds from the United States Department of Agriculture, USDA, and different State programs. So I won't bore you with reading some of the horror stories that I've noted there.
    But we have found that a lot of times these programs have inconsistent policies that don't help us in either preserving or creating affordable housing in the rural areas.
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    I'd like to just cut right to the chase and talk to you about some recommendations and what we see that could be done in the rural areas to help us increase the affordable rental housing.
    The United States Department of Agriculture Rural Development Section 515 funds have been greatly cut over the years. That was probably the main producer of affordable multifamily housing in the rural areas. Those funds need to be either increased or looked at so we can best leverage what is already allocated.
    For instance, there are RD 515 funds allocated, a lot of times they're coupled with tax credits, but currently you're only allowed to use a 4-percent tax credit, which is less than half of the available 9-percent credit that's out there. In other words, one small change, we could double, if not triple, the amount of housing produced with the same funds already available.
    The rental assistance contracts that go with those funds don't have any minimum payment that a tenant has to pay. If that was somewhat modeled after the Welfare to Work program or where there were minimum payments, we could stretch those dollars a lot further.
    A new program that has really caught a lot of interest in the private sector is the USDA Section 538 guaranteed rural rental program. This program leverages private sector dollars, as the United States only provides a 90-percent guarantee to the lender. We've had some administrative rules that you've—that members of your committee have helped us change to make that more usable. Some other things that we see is that we provide interest credit up to 20 percent of your annual allocation. And what that interest credit does is you buy the interest rate down to the applicable Federal rate, which is around the 10- to 30-year treasury amount. Although it's not very expensive, that really helps the rural areas reduce our rents.
    And if you could look at expanding that 20 percent to a larger portion of the pool, again, not near as costly as the direct program that you've had in the past.
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    Also, you should offer flexibility to your State RD offices. If they have interest credit available, why not link it to those guaranteed loans that you have there. The program's already in place, dollars that are already there, with slight administrative changes could be much more leveraged and provide much more affordable housing in the rural area.
    The national housing trust fund may be another avenue if enacted to assist the rural areas. Our groups believe that a portion of that, 30, 40 percent, should be designated for the rural areas, but not only to provide support on the development of housing, but also the continuing support, such as the rental assistance program noted earlier.
    Another area that we see a problem is that currently county median incomes for the tax cutter program use the greater of the county AMGI, area median gross income, or the State non-metro average. Again, a slight change in using the State average would certainly widen the band of rural households that would now be eligible for this program.
    An example, a rural household consisting of a single parent, one child in Ohio, earning in excess of $24,300 is not eligible in most of our average counties. That's certainly a low number. With one change of how we calculate what the AMGI is, we could really broaden that band and make a lot more households eligible.
    Finally, I would like to express the support that we have for the homeownership tax credit. It's an excellent concept in rural areas, especially where you've been told by other people testifying about the gap in the rural areas, trying to get enough dollars to entice a developer to go out and build homes where the prices that you can charge can't generate enough dollars. The tax credit's an excellent avenue, if it could be modeled after the housing credit rental program that's there, that's been extremely successful, we see that that's another avenue that could greatly benefit all areas of Ohio.
    Please keep in mind, not all households, though, are meant to be homeowners. There is still a great demand out there for affordable rental housing. And I encourage you to keep that in mind as you look at these pieces of legislation.
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    Again, thank you very much for your time. I would be more than happy to answer any questions.
    Thank you.
    Chairman NEY. Thank you for your testimony. I explained to my colleagues, if you live on the Ohio River, you're a River Rat. So it's not an insult; it's a compliment.
    Mr. WODA. That was the nickname of our high school, actually.
    Chairman NEY. In Congress we call our Congressional softball team the Ohio River Rats, too.
    [The prepared statement of Jeffrey J. Woda can be found on page 187 in the appendix.]
    Chairman NEY. Ms. Luken, I thought 30 percent was dedicated in the McKinney-Vento language to permanent housing. Are you worried that that will change?
    Ms. LUKEN. Well, it's something that is happening on a yearly basis. And we're encouraging you to authorize legislation to make it permanent.
    Chairman NEY. Make it permanent. I see. So you're worried about future——
    Ms. LUKEN. Yes.
    Chairman NEY.——future terms.
    Okay. The—Mr. Woda, we had that Amendment 515, I think we're going to try to redo that. But it just does what was done for the urban program, you know, a long time ago. And I think that was a good idea, if we could do it.
    I have one question I want to ask, and I don't know if you can answer this, but I'm going to ask it, Mrs. Kuhn. Would the State of Ohio want the Section 8 block grant? It's a joint question. It's a bipartisan group. Would the State of Ohio want to do—if this piece of legislation passed, would the State take it, has it developed a position?
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    We do invoke the fifth amendment here in the subcommittee formally.
    Ms. KUHN. I don't have the official answer to that. But I do know that it's a very complicated issue. I think a lot of the points that have been brought up here today about our staffing levels, the ability of the State to do these additional duties, are something we would take very much into consideration.
    I think we have a very talented group of people that could do it, but it would take resources and whatever.
    So I don't know that we're really ready to answer that question.
    Chairman NEY. Thank you.
    Ms. JONES. Real short.
    I want to thank everyone for testifying this afternoon. The information you provided us was very useful.
    Mr. Woda, I just want to ask you one question: Remember back earlier in the year when we were debating tax cuts, there was a whole—and the dividend tax cut, there was a whole discussion about the impact dividend tax cuts had on low income housing tax credits. Can you briefly discuss that, if you could—if you would, or could.
    Mr. WODA. Sure. It was certainly a big scare to our industry, as we looked at it, the assumption was most of the investors would lose a lot of the benefit they have in investing in those credits because of the tax treatment of dividends.
    I'd just like to thank all of you for the way you worked it out, and that that scare has now passed. And I think whenever looking at an issue like that the unintended consequence of hurting probably our best producer of affordable housing in this country would not have been what any of us wanted. But you worked with the investors out there in the private sector to make sure that we had legislation that didn't do that.
    So, yeah, it was a big scare. A lot of our investors really pulled back until they saw what you ended up doing. And, again, I'd like to thank you for that.
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    Ms. JONES. Thank you.
    Chairman NEY. Mr. Tiberi.
    Mr. TIBERI. Thank you, Mr. Chairman.
    Ms. Tavares, thank you for coming to testify today. From where you sit in the council chambers and from your experience with this State, what—what can we do up here—what can the Federal Government do and the State government do to help you all? And I should have asked this of the Mayor, but I'll ask it of you: What can we do to help you increase that homeownership from 49 to 55 or 60?
    Obviously, knowing we're not going to get to a hundred percent. But getting it closer to the national average.
    Ms. TAVARES. I think a couple of things that have been mentioned about some of my other colleagues on this panel and other panels. Certainly the homebuyer education is critically important. We've got to make sure that people understand what it is they're venturing into, and to make sure that they have the assets, so to speak, or at least some cushion money set aside for whatever might happen when you own a home. All of us know that there are major expenses. And maybe we haven't educated individuals enough about how to get into homeownership and how to stay in homeownership. Because that's one of my other concerns, it's maintaining homeownership. It's one thing to get into a house. But to stay there, we have to make sure that people have the tools not only to fix the house, but also the assets or a pool of money to maintain that home.
    I think the other thing that the Federal Government can do is to continue work with us to keep the program as flexible as possible, the CDBG program, the HOME program, so that as we see there are other tools that we can develop locally, that we'll have the money to help us implement those programs.
    It's education. I think critically important is the education of our electorate that you can get into a home in many cases more easily than you can pay the rent that's being commanded today in the market.
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    Mr. TIBERI. Did you want to comment on that, too?
    Mr. LOWENSTEIN. Thank you, Mr. Tiberi.
    I think that the homeownership tax credit would be a critical tool to add to that. Because, for example, our company, you know, kind of in a small way got into trying to develop some new units in a relatively depressed neighborhood of the city, and the problem that we have in trying to sell new houses—and believe me even in an area that is, you know—isn't the best neighborhood in the city, they don't want to see little boxes built. People want to see nice houses put in. Well, it costs $120,000 or $130,000 to put in a fairly nice house. But the problem that you have in some of these areas is that the appraised value of houses in the existing neighborhood may be 60,000 or $70,000.
    So you need some vehicle to cover the gap between the mortgage that could be supported. Maybe you can get an appraisal at $100,000 or $90,000, but it costs another 30,000 or $40,000 to put in a new house. But that's what you need to help turn the neighborhood around.
    The same thing would be true if it's a rehabilitated house, with the cost of what rehab are, you still have that gap, and that's where you—a financing vehicle like the credit would be critical.
    Mr. TIBERI. Thank you.
    Chairman NEY. Mr. LaTourette.
    Mr. LATOURETTE. Thank you, Mr. Chairman.
    Folks, it's been a long afternoon, so I won't drag it out much longer. Thank you for coming.
    And for the record, Mr. Chairman, the tax board is a new constituency of mine, since the geniuses down here in Columbus did the redistricting. And I've been more than impressed with the work that you do, Mr. Hale, and your group.
    And, Ms. Tavares, I know you by reputation, and you certainly represent yourself well not only on behalf of your city but and party and the people that you represent and the issues you advocate, and it's a pleasure to finally make your acquaintance.
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    And, Ms. Kuhn, I'm going to try to be charitable to your organization, not you personally, but I think one of the reasons we put caps on various programs is that we haven't just made it up, it was subject to abuses, and not to say anything bad went on in Ohio relative to abuses, but that's why we have caps on technical assistance and also administration costs, we found that in some areas some States short of cash were siphoning off all the dough in administration costs, and that the money wasn't getting to where it needed to be.
    And I would say that if—if the issue that you brought to our attention, and that is the 2 percent plus 100,000 proposal were to come to me to take it to 2 percent plus 500,000, I don't think that I'd be favorable. Again, no criticism of you or your organization, but I, as an Ohioan, have been horrified, and as a republican, by this budget process, and the idea that our legislators would give back—it's not free money, but money back is like penalizing the taxpayers of Ohio twice. And not to have the political courage to come up with matching funds where assistance is offered from the Federal Government, I think is sinful, and I'm not proud of anybody that participated in that process.
    And I yield back the balance of my time.
    Chairman NEY. And we're not redistricting for ten years, so I'm agreeing with everything he said about the legislature.
    With that—they already did damage to me—I want to thank the panel. I want to thank our members. And we think this is the first housing hearing in Ohio that we've had in the history on the housing subcommittee on the books. Black caucus met two years ago, I believe, you chaired it up in Cleveland. And I think this is the first housing subcommittee, so we appreciate the staff coming in, the members spending their time, and all of you, it gives us good insight. Believe me, it was very helpful.
    We appreciate the Martin Luther King Center—Jr. Center and the director of that.
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    And with that, that concludes—I would note for the record, if members have additional questions they might want to ask the panel, if they want to ask them in writing without objection, the hearing record will remain open for 30 days for members to submit written questions and witnesses to place their response in the record.
    And I want to thank all of you again, and this concludes the hearing.
    [Whereupon, at 4:52 p.m., the subcommittee was adjourned.]