Segment 2 Of 3 Previous Hearing Segment(1) Next Hearing Segment(3)
SPEAKERS CONTENTS INSERTS
Page 56 PREV PAGE TOP OF DOC Segment 2 Of 3
H.R. 2--THE HOUSING OPPORTUNITY AND RESPONSIBILITY ACT OF 1997: BUILDING COMMUNITIES OF OPPORTUNITY
THURSDAY, MARCH 6, 1997
House of Representatives,
Subcommittee on Housing and Community Opportunity,
Committee on Banking and Financial Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:32 a.m., in room 2128, Rayburn House Office Building, Hon. Rick Lazio [chairman of the subcommittee] presiding.
Present: Chairman Lazio, Representatives Leach, Bereuter, Metcalf, Ney, Ehrlich, Fox, Kelly, Hill, Sessions, Vento, Frank, Kennedy, Guitierrez, Jackson, Hooley and Carson.
Chairman LAZIO. The hearing will come to order. This is a hearing on H.R. 2 before the Subcommittee on Housing and Community Opportunity. I particularly want to welcome our new Secretary of Housing and Urban Development, Andrew Cuomo. Before he makes his presentation, I just wanted to say a few words so we can quickly receive the Secretary's testimony. I would ask that any Member who has a written statement submit that for the record, and without objection, that will become part of the record. Secretary Cuomo is here to present the views of the Administration on H.R. 2, the Housing Opportunity and Responsibility Act of 1997, which I introduced on January 7 of this year.
I would like to note that we are graced with the presence of Congresswoman Julia Carson, who is making her first appearance back since she has overcome certain health obstacles. We are delighted that she is here with us today. She certainly graces this subcommittee.
The subcommittee will also be hearing later this afternoon from various representatives of the groups involved in Federal housing programs, public housing authorities, community leaders community activists and low-income housing advocates. I know that we all look forward to hearing your views.
Page 57 PREV PAGE TOP OF DOC Segment 2 Of 3
Our goal is to overhaul and refocus our Nation's assisted housing programs. This important reform legislation creates and fosters communities of opportunities instead of maintaining isolated communities of despair.
It bases Federal policies on concepts of personal responsibility, and the belief that there should be a mutuality of obligation between the provider of assistance and the recipient, and requires that HUD take strong action to finally take over the worst public housing authorities of our Nation.
This legislation wipes away the disincentives to work, yet retains tenant protections. Residents will now have a true choice, allowing them to pursue dreams of economic advancement and self-sufficiency.
Our bill encourages accountability in our Federal programs, and recognizes the unique nature and dynamics of individual neighborhoods and communities.
Secretary Cuomo shares my commitment to positive change in this area. I look forward to working with him to craft truly comprehensive reform legislation. We do need comprehensive reform, Mr. Secretary. Public housing in too many communities has become culturally and economically isolated.
Tinkering around the edges of these programs will not improve fundamentally the lives of our citizens. Streamlining some management processes but failing to ask the hard questions regarding the fundamental nature of these programs is simply to rearrange the deck chairs on the Titanic.
The National Academy of Public Administration's 1994 report on HUD stated that if the Department was not operating competently within 5 years, Congress should consider dismantling the Department.
We are now in year three of that NAPA report. The iceberg looms in the horizon, and the water is very cold. I very much look forward to hearing from you today, Mr. Secretary. I know that you have some bold proposals of your own to redirect the agency and its programs, and I welcome them.
Page 58 PREV PAGE TOP OF DOC Segment 2 Of 3
Now, I would like to turn to the Congresswoman from Indiana to see if she has any comment.
[The prepared statement of Hon. Rick Lazio can be found on page 272 in the appendix.]
Ms. CARSON. Thank you very much, Mr. Chairman. I'm still learning how to be a Member of this community. I apologize to the Chairman for being late.
I wanted to say that it's a great for me to be able to come and sit in this hearing. Perhaps if I had been a resident of a public housing project I probably would have been another month late getting here, but it's good to be here. Thank you very much.
Chairman LAZIO. Thank you.
Congressman Bereuter.
Mr. BEREUTER. Thank you, Mr. Chairman. I'm in a mark-up at 10:00 o'clock, so I want to hear as much as possible what the Secretary has to say, and would welcome him before this subcommittee for the first time. I wish you the greatest of successes, and I yield back the balance of my time.
Chairman LAZIO. Thank you. The gentleman from Massachusetts.
Mr. KENNEDY. Thank you very much, Mr. Chairman. First of all, I want to welcome the Secretary. It is a great pleasure having Andrew Cuomo before this subcommittee today, and I'm sure that I speak for all of us when I say that we're looking forward to working with you over the course of the next 4 years, or at least I will be for 2 years.
I do want to say how much we're looking forward to the professionalism that you have brought to the homeless programs, both before you became the Secretary and before you started working at HUD, as well as the innovation and creativity you showed in terms of getting more housing built for the homeless. Perhaps more than any other person in the United States.
Page 59 PREV PAGE TOP OF DOC Segment 2 Of 3
And the leadership that you showed for the past few years working with Secretary Cisneros on all the myriad of programs that you are charged with at HUD showed the kind of competence that can be brought to these programs.
There are a number of problems at HUD. I think all of us are looking forward to your taking on many of the management issues, as well as trying to make sure that we protect the growing number of very poor people that exist in this country that are in desperate need of housing assistance.
All of us recognize that we're working within a budget that is much reduced. The end result of those budget reductions is that if we're going to allow public housing to be able to sustain itself, the public housing authorities have to find ways of increasing the revenues to themselves. This inevitably means they have to find wealthier tenants to be able to brought into public housing, or they have to charge poorer tenants more rent.
And no matter how you cut it, that means that more comes out of the hide of the poor, less comes out of the hide of the Government, and as a result of that, it puts increasing pressure on the poor.
And I think that one of the most important issues that you can take on, Mr. Secretary, is how this country relates not just to those who currently get public housing assistance, or any kind of housing assistance, but the millions of Americans that are currently receiving no housing assistance. The numbers of this group are growing perhaps faster than any other segment of our society and desperately need this country to be able to find the moral conscience to move forward and provide some protections.
I think while many of us are looking forward to working with Chairman Lazio on a range of different issues over the course of the coming Congress, and welcome the fact that he has shown such an aggressive hearing schedule, there are issues that involve how we're going to deal with public housing specifically that I think warrant not only today's hearing but also I hope the spirit of compromise in working together into the future.
Page 60 PREV PAGE TOP OF DOC Segment 2 Of 3
I think essentially what we have here is a bill that represents sort of where the bill was last year when it came off the tracks. And if we're going to see us move forward, we will be looking forward to your leadership, as well as Mr. Lazio's leadership, to determine how we're ultimately going to deal with the 30 percent rent cap issue, how we're going to deal with targeting issues, which I know we have some differences on, and how we're going to ultimately deal with the notion of the repeal of the 1937 Act.
I think that if we can find ways of working together to make sure that we don't end up just arbitrarily hurting large numbers of very poor people without taking into account the kind of situations that they're going to be facing, I am hopeful that we can actually get a bill passed this year.
It's time after 6 years to finally get a housing bill passed in the Congress and I look forward to working with the Chairman and with you, Mr. Secretary, to get that accomplished.
Thank you very much for coming this morning. If the Chairman would just indulge me very briefly, I would like to also welcome Ms. Carson, who we were all very much looking forward to having join us on the subcommittee, and it's a delight to have her here, and we're looking forward to a lively session.
Thank you very much, Mr. Chairman.
Chairman LAZIO. I thank the gentleman, my friend. Are there any other opening statements?
Mr. Ney.
Mr. NEY. Thank you, Mr. Chairman. Not really an opening statement, but I just want to thank the Chairman for pursuing this important subject. I want to thank Mr. Cuomo for his time here. Also pre-apologize. If you think there's bureaucracy in HUD, we have three hearings at the same time, so my leaving doesn't in any way diminish the feelings that I have for the job we'll be doing together.
Page 61 PREV PAGE TOP OF DOC Segment 2 Of 3
Thank you.
Chairman LAZIO. Thank you, sir. I thank the gentleman. Are there any other opening statements? Any other Members wish to be heard?
[No response.]
Chairman LAZIO. That being the case, Mr. Secretary, welcome here. Thank you. We're looking forward to your comments, and the floor is yours.
STATEMENT OF HON. ANDREW CUOMO, SECRETARY, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Secretary CUOMO. Thank you, Mr. Chairman. It's actually truly my pleasure to be here in my first appearance since being Secretary. I was here in my prior capacity, as you know, as assistant secretary, but I am very much looking forward to working with the committee, with the Ranking Member. I thank him for his kind comments. I'll be sure to tell his sister that he was kind and gracious to me, at least in the opening statement. And I hope he stays that way all through the hearing, Mr. Chairman.
Let me also thank the entire subcommittee for the good work that we've already been doing together over these past few months. Even though this is the first hearing, as the subcommittee knows we've been working very hard over these past few weeks, and I already start to see a pattern of nonpartisan, nonpolitical action. I think it augers well for the future.
If I might, I will summarize my statement, Mr. Chairman, if it's OK to have the entire statement entered into the record.
Chairman LAZIO. Without objection.
Secretary CUOMO. Let me begin by introducing some of the HUD family who are here. Michael Stegman, who is the Acting Chief of Staff; Kevin Marchman, who is the Assistant Secretary for Public Housing; Hal DeCell, the Assistant Secretary for Congressional Relations; Rod Solomon, who is the Senior Director of Policy and Legislation for Public Housing; Paul Leonard, who is the Deputy Assistant Secretary for Policy; Cheryl Fox who is the Issues Advisor to me; and Frank DeStefano who is Senior Counselor to the Secretary.
Page 62 PREV PAGE TOP OF DOC Segment 2 Of 3
I have some specific comments that I would like to go through, but if I could make some general opening comments first, Mr. Chairman, apropos your statements and the Ranking Member's statements.
It has been 6 years since we've had a bill, which I think everyone would say is too long. I think the good news is that we are within the end of that hiatus, and we're looking forward to truly an historic piece of legislation being passed by this committee, and hopefully we can be a part of it.
And I think, Mr. Chairman, your comments are very well taken about the problems that we have in the public housing system. And the problems cannot be minimized, nor would the Department or myself personally seek to minimize them. They've gone on for too long.
When we've made mistakes in public housing, we made them big. You have many projects that in my opinion now exist throughout this country which were flawed from inception. They were flawed by design, and they were condemned almost at the point of construction.
They were too dense, they were too isolated, they were too concentrated, they were without support, they were without integration, they were without jobs, they were without opportunity. Literally those great buildings with the caged hallways in concrete bunkers. They were a mistake.
In many cases the best thing we can do is literally blow them up and start over, and we're doing that, to the tune of 100,000 units between now and the year 2000. And those were mistakes and none of us would want our children growing up in those buildings, and no one's children should.
There is no doubt that we have to address those, and address those fiercely. And I agree, Mr. Chairman, that you cannot be too aggressive in attacking that problem.
At the same time I think we have to have a caution not to allow the notable failures which they are to stereotype the entire public housing industry in this Nation. Because of the 3,400 public housing authorities only about 75 are so-called ''troubled'' housing authorities.
Page 63 PREV PAGE TOP OF DOC Segment 2 Of 3
The troubled ones tend to be the tail that wags the dog. They get the attention, and as I said, when they go bad, they go bad in a big way. But the vast majority of the public housing developments across this country were smaller, were more integrated, were placed within community and are operating well, which then suggests, as the Chairman pointed out last year, a different way for HUD to manage that portfolio as opposed to the troubled portfolio.
I think the Ranking Member raises a very interesting point, and a poignant point, when he speaks to the value of public housing in this country. It truly is a precious national resource. We have about one million units.
But the Department has just done some research which to me is staggering. What it says is the one million units which are public housing units are actually one-third of the affordable housing stock in this Nation, affordable to very low-income.
Without Section 8, and so forth, public housing is one-third of the available stock. If you are a minimum wage family, if you are earning minimum wage in the city of Boston, public housing represents 42 percent of all the available units to you. Minimum wage family, public housing is 42 percent of all the available units.
New York City, 65 percent of the affordable units are public housing units; Cleveland, 70 percent; St. Louis, 55 percent; Baltimore, 24 percent; Dodge City, Nebraska, 251 units, but it's about 16 percent of all the affordable housing, if you're a minimum wage family.
And there's going to be more and more minimum wage families coming off the welfare reform package.
If we need to do one thing in this Nation with affordable housing, it's to provide more affordable housing. The President's budget takes a step in that direction, and I hope next year to take an even broader step in that direction.
I also think it's important, Mr. Chairman, as you have pointed out many times, we're discussing public housing today. The institution of public housing, if you will. But for public housing to work, public housing must exist within a community and be integrated into a comprehensive community development plan.
Page 64 PREV PAGE TOP OF DOC Segment 2 Of 3
If all we do is provide housing to an individual or a community, it is not going to work. It has to be housing in a comprehensive setting, the transportation, the police, and most of all the economic development opportunity, the jobs, at the end of it.
We have already done much over these past few years, working together. We continued HOPE VI, suspension of One-for-One, the One Strike. So I think we have proven that we can operate in a nonpolitical and nonpartisan manner.
I also believe that we have agreement on the goals of what the committee sets out to do in H.R. 2. We were very close last year. I believe we are even closer at the beginning of the process this year.
The subcommittee's points about mixed income, encouraging work, deregulation of high performers, minimum rents, we agree. We have questions as to limits, and questions as to degrees, but we don't question the goals that the subcommittee seeks to reach.
We also propose a certain number of amendments, additions, if you will, to H.R. 2. In keeping with the Chairman's point, we understand at HUD that management is job one. The Chairman mentioned the NAPA statement and the extent of the management problems.
Nobody wants to go for a ride on the Titanic, I can assure you, Mr. Chairman. And HUD has done quite a bit of work over the past 4 years, and HUD will do more work in a more aggressive fashion, on a shorter timeframe, on the management issues over these next few years than I believe it has ever done before.
It cannot do what you want it to do without legislation. We cannot, by administrative fiat make the kind of changes we have to make to get the management to a place where this subcommittee would be proud to call HUD the model of Federal management that we want to make it.
We are downsizing HUD dramatically. Four years ago, HUD was about 13,000. Four years from today HUD will be about 7,500. 13,000 to 7,500 in 8 years. You downsize the work force that greatly, you have to change the way you do business. You can't come from 13,000 to 7,500 and not change your management style. We can't make that level of change without legislation
Page 65 PREV PAGE TOP OF DOC Segment 2 Of 3
It was necessary to get the bill, H.R. 2, passed last year. It was essential to get it passed last year. It is critical to get it passed this year, not just to the good reforms that you want to institutionalize in public housing, not just to make the minimum rent, and other changes, but it's also critical, Mr. Chairman, to allow us to do the management changes at the Department that we need. So it's doubly critical.
Let me quickly, if I might, run through some of the key points on both the policy points which are in H.R. 2 and a couple of the management reforms which we suggest to the subcommittee. The chart is up on the wall, Mr. Chairman, if your eyesight is very, very good. It could be a vision test. But you also have copies of the charts before you.
On the Brooke Amendment, I seek to extend the protections of the Brooke Amendment. The Department, in its legislative package, will afford flexibility to PHAs to charge up to 30 percent of adjusted income, which is where H.R. 2 is now. It will also allow PHAs to set what we call ceiling rents, what H.R. 2 refers to as flat rents.
However, we would restrict the amount that the ceiling rent or flat rent could be set at, so it couldn't go any lower than 75 percent of operating cost. In other words, a PHA could not set a ceiling rent below 75 percent of operating cost. The fear at the Department is if they go too low on the PHA side, HUD would wind up picking up the difference if they underestimated the actual need, and then we would have to further subsidize the operating cost.
So we put a floor on the flat rent, ceiling rent. No lower than 75 percent of operating, and we also put a cap of no more than market rent.
We agree with the minimum rents. $25 is the amount that we think should be a minimum rent, with exemptions for hardship, as H.R. 2 says. We would suggest exemptions for hardship determined either by the PHA or by HUD centrally.
So, $25 minimum rent. But the local PHA could find hardship or the Department could find hardship.
Page 66 PREV PAGE TOP OF DOC Segment 2 Of 3
On the income targeting, we agree with the goal of the subcommittee. We disagree with the degree set by H.R. 2. We agree on income targeting that we should have a mix in public housing. A mix in public housing works for everyone. It works for the working families coming in who need affordable housing, it also works for the very poor who are now in a mixed community. We agree.
We applaud the subcommittee for its goal. It is not a question of numbers, it is a question of degree. How fast do we get to a mixed income population in public housing? At what cost? And, obviously, there are extremes to the discussion.
For the next 25 years, because we are moving to a mixed income population there will be no housing for very low-income. It does not work. Because we want to move to mixed income, we want to accelerate it and put in just very poor. It does not work. So, it is a question of degrees, it is a question of numbers, but we agree on the goals and the concept and we agree with the urgency of the goal.
No one on the Department side is saying this is a worthwhile goal, but it is a goal that can be accomplished in the life of our children, as opposed to our lifetime.
We want to get it done. All the successful models show the intelligence of mixed income. We want to get it done. We want to get it done quickly. We want to get it done without unduly prejudicing people, the very low-income, who are looking for housing. I am confident that there is a formula, numeric formula that will work for both the subcommittee and the Department.
Making welfare reform work, we agree that PHA should be part of the solution. Public housing is not a final destination. Public housing is a stop on the way to a better future. We agree public housing was the first transitional housing in my opinion. That was the purpose of public housing. We want to get back to that goal and help people work, work with the dramatic change that welfare reform will bring. We want to be part of that solution.
PHAs should work with State welfare and employment agencies through cooperation agreements, and we will include those cooperation agreements, the extent to which they are doing cooperation in our evaluation of them.
Page 67 PREV PAGE TOP OF DOC Segment 2 Of 3
And we would reinforce whatever decision was made by the State welfare agency. If the State welfare agency reduced the payment to the family for noncompliance with the welfare reform plan, we would honor that reduction and not subsidize the family for that reduction.
We would also require community work for any residents who were not in the welfare reform requirements. And we would also have income disregards to encourage work, so the additional income is not taxed effectively at a 30 percent rent.
We would also push ferociously Section 8 homeownership for families. If you can pay a landlord's mortgage with a Section 8 voucher, why should you not be able to pay your own mortgage? We all want homeownership. We all want stakeholdership. It is a nonpartisan issue. Why do we not use the Section 8 Program to allow people to buy housing? It is foolish, I think, that we do not.
Shifting to the management side of the agenda. As the subcommittee has pointed out, in the Chairman's opening statements and last year, we want to deregulate public housing authorities. For us to manage the Department, Mr. Chairman, we have to go two ways. We have to move toward a performance evaluation system that says for the high performers, ''God bless you, follow the law, but we are going to withdraw from the day-to-day regulation business because you have proven yourself as a high performer.''
We are going to give the high performers more flexibility. At the same time, we are going to turn to the low performers and say, ''You are going to have additional scrutiny and we want to move the system,'' as the Chairman says, ''to a performance system as opposed to a funding process system.''
The way we do that is for all PHAs, we would reduce the monitoring reports from five to one. We would then convert the drug elimination grant program from a competition to a performance-based formula and we would propose to consolidate the TOP and EDSS programs into a performance-based grant to work with welfare reform.
For the nontroubled PHAs, the large and medium, we would propose a 5-year strategic plan with 1-year updates. And the high performing PHAs, we determined high performing by saying a 90 on the PHMAP for 3 years, would go to a 5-year plan with only one update within that 5 year period. So, they would do, in 5 years, 2 plans.
Page 68 PREV PAGE TOP OF DOC Segment 2 Of 3
Small PHAs we would go to one 5-year plan with one interim update. We would convert the CIAP, Comprehensive Improvement Assistance Program, to a formula grant. We would combine the operating and the capital funds.
Chairman LAZIO. Mr. Secretary, I need to interrupt you for a second. We just had a vote called and if you think that you can conclude the presentation in the next 5 minutes, I think we can accommodate you.
Secretary CUOMO. I can conclude in two and a half.
Chairman LAZIO. If you need more time, I am happy to have you have it after we come back from the vote.
Whatever is more comfortable for you.
Secretary CUOMO. I can wrap it up quickly, Mr. Chairman.
Chairman LAZIO. Thank you.
Secretary CUOMO. What I just outlined was the deregulation that we want to do. At the same time, the Department does not want to deregulate irresponsibly. We do not want to be back before this subcommittee in a couple of years with you questioning the flip side which is, you gave all this power to the public housing authorities and they went out and did activities that they should not have done. Because sometimes the pendulum swings back and forth and we do not want to run from one side to the other side.
So, deregulation, yes. And we are now in the spirit of devolution and everything is out of Washington to the localities.
In moderation, because we are afraid if we run all the way to the other side, when the pendulum comes back, we will be exposed on the other extreme.
So, we want to deregulate but we want to move to a more intelligent evaluation system in doing that.
We now have the PHMAP, which is our grading system of the public housing authorities. We want to change the PHMAP system. We want to add the physical site inspection component, we want to add performance measures, we want to take it out of what it is now, a self-certifying process evaluation to more of a performance evaluation. That has to be changed.
Page 69 PREV PAGE TOP OF DOC Segment 2 Of 3
We want to privatize the oversight of the HOPE VI construction programs. HOPE VI is a main construction program, development program for the Department. We want to bring in experts who can oversee that to make sure the money is going where it should be going. We want to withdraw the HOPE VI grants from poor performers who are now sitting there. They have won the grant but they are not spending it.
And for a troubled public housing authority, we would take a dramatic step which is if you are troubled, you will have 1 year to work your way off the troubled list. We will work with you on that year, we will give you technical assistance, we will do whatever we can do, but if you are still troubled at the end of the year, we would move to a receivership and handle it that way.
HUD does not have the staff or the capacity to be running troubled housing authorities across this country. We cannot do the downsizing and go into the retail public housing operation business, Mr. Chairman.
That is the outline of both our comments on H.R. 2 and the management changes which we are asking for, some of which are already in H.R. 2, some of which are technical additions which we seek.
But the main point is, Mr. Chairman, that we applaud the subcommittee for your goals, your vision; where you want to go is where we want to go. This is not Democrat/Republican, it is not liberal/conservative, it is an intelligent, practical, pragmatic view of the facts and what we are trying to accomplish.
We want to get to the same place. As I said, question of degree, timing, limits, but we want to get to the same place. And most of all, we need a bill passed this year. To have no bill in 6 years has been madness.
The inconsistency, the lack of continuity for the public housing authorities has taken a toll. And, Mr. Chairman, I cannot turn that Titanic around unless we have the legislative authority to do it. We have to get a piece of legislation passed to make that possible.
Page 70 PREV PAGE TOP OF DOC Segment 2 Of 3
Thank you.
[The prepared statement of Secretary Cuomo can be found on page 276 in the appendix.]
Chairman LAZIO. Thank you, Mr. Secretary, for your excellent presentation. I cannot tell you how uplifting it is, frankly, to be in agreement on a common vision and how much more likely it is that we are going to get to that objective. I find myself being very optimistic about both our chances of having a good bill and the chances for the Department, given the things that you have said.
We are going to adjourn this subcommittee for about 20 minutes. We will try and reconvene here at about 10:30 for questions and I hope that fits with your schedule, Mr. Secretary.
Secretary CUOMO. At your convenience, Mr. Chairman.
Chairman LAZIO. Thank you very much.
The hearing is adjourned until 10:30.
[Recess.]
Chairman LAZIO. We are back on the record.
I want to once again thank you, Mr. Secretary, for your excellent presentation, and also complement you on your fine staff who I have had the occasion to work with, particularly over the last 2 years and since you have been sworn in as Secretary. It is a fine team. I should also comment on the fact that if you have not had Frank DeStefano's eggplant parmesan, I understand that is the way to go.
[Laughter.]
Chairman LAZIO. I complement you on your selection.
I will reserve my questions for now and turn to Mr. Ney.
Page 71 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. NEY. Thank you, Mr. Chairman.
The question I wanted to ask--and it is in regard to two letters. One was sent September 11 to Secretary Cisneros, and the other was December 18. The first one was signed by myself, Chairman Lazio, and Peter Blute. And it was concerning what was known at that time as the Blute Amendment.
The second letter was a joint letter with the Senate including Senator D'Amato, and the issue is that H.R. 2 reaffirmed the Congressional commitment to streamline the designation process for senior only and disabled persons only and senior and disabled persons only developments. And it was an issue that had, I think, been quite thoroughly discussed and had a lot of bipartisan support. In fact, the second letter here, December 18, has the signatures of Mr. Gonzalez, and, you know, D'Amato, Joe Kennedy, both sides of the aisle.
A lot of us, I know, with the spearheading by Chairman Lazio, worked closely with Secretary Cisneros, and that was to ensure that seniors who were living in fear in the mixed populations would be able to live in peace and security in these populations.
The question I want to ask is it seems that instead of following the Congressional intent regarding designation, HUD issued a 16-page notice appearing to reinstate many of the burdensome requirements that we here as a subcommittee tried to eliminate.
After significant discussions between the Congressional staff and HUD, the Department agreed to reissue the notice to correspond to the spirit Congress intended. And that was the agreement. First the 16-page which we disagreed with and now the commitment to reissue a notice to correspond with the spirit of what we wanted.
Now, that was last year. When do you think that we can get this actually done and reissued, in your best opinion?
Secretary CUOMO. Forthwith, Congressman.
First, I share your concern on the substance of the issue. Senior housing was and is one of the real success stories of public housing. The intent of mixed populations was well meaning but it did not work well in implementation.
Page 72 PREV PAGE TOP OF DOC Segment 2 Of 3
This notice will now give clarity on how public housing authorities can operate who seek to keep senior only housing.
The Department also had a concern to make sure that we protect the disabled and that there are housing opportunities for the disabled also.
We have a new notice which has been done by the Department. It is at OMB for clearance. The clearance should be coming shortly and I will make it a priority of mine to get back with OMB and make sure that they clear it as soon as possible.
But we have done a new notice and it is out of the Department and it is at OMB. We will get it out of OMB and we will get it published.
Mr. NEY. I would appreciate that and anything you can do. And I appreciate your commitment to try with OMB. If there is anything we can do to assist you in that or any other Members of Congress or a Dear Colleague letter, anything like that you think particularly we can do. But I appreciate your commitment.
Secretary CUOMO. My pleasure, Congressman.
Chairman LAZIO. I thank the gentleman.
My friend from Massachusetts, Mr. Kennedy.
Mr. KENNEDY. Thank you very much, Mr. Chairman.
And, again, Mr. Secretary, as you pointed out, we are all sort of talking nicely and with great bipartisanship here. I think that it is important as we look at this bill, to try to understand what some of our differences are in terms of substance, as well.
I know that the Chairman has been willing to compromise on Mr. Frank's concern pertaining to both ceiling rents and the Brooke Amendment. And I think that it is important for you to address any possible disagreements that you might have on that issue.
I think it is important to talk about the flat rent issue and the potential stripping of certain projects that that could create. And we need to focus on the targeting issue.
Page 73 PREV PAGE TOP OF DOC Segment 2 Of 3
Everyone agrees with the basic statements that both you and the Chairman make, which is that as a result of a lot of the inclinations by people on this subcommittee to try to take care of homeless people, to try to take care of people with AIDS, we created a whole series of preferences, which had the sort of perverse result of creating public housing with the only the poorest of the poor.
And, so, what we really want to do is to try to enable public housing to attract additional tenants. One of the problems is how fast you actually get to these tenants. And I think that Mr. Lazio's bill, as I understand it, allows us to get to the 35 percent level by enabling almost 100 percent of the new tenants to come in at wealthier incomes.
We took a position last year that effectively said that only 35 percent of the new residents, as the apartments became available, would go to low low-income people, which had the effect that the glide path would be much more smooth in terms of the changes that were going to take place.
As I understand, we are still back at the 35 percent as a total maximum number. That could result in a precipitous drop in the number of very low-income people. As Mr. Jackson, Mr. Frank and I have expressed in the past, the concern is that the largest single number of people that we have in this country, that is growing the fastest, is the low low-income people that do not have any housing assistance.
So, I think all of these three issues together can end up exacerbating that problem. I believe the positions that the Democrats on this subcommittee took last year can help soften that problem.
And I wonder if you might address those issues in terms of where you see the proper balance being struck?
Secretary CUOMO. It would be my pleasure, Congressman.
First, on the Brooke Amendment, we have basically taken the Barney Frank position, Congressman Barney Frank position, modified it slightly, most significantly in that it is now the Bill Clinton proposal.
Page 74 PREV PAGE TOP OF DOC Segment 2 Of 3
[Laughter.]
Secretary CUOMO. But we would agree with----
Mr. KENNEDY. You put them all in the Lincoln Bedroom or what?
[Laughter.]
Secretary CUOMO. All right, we will go right past that one, Congressman, for the sake of family unity.
[Laughter.]
Secretary CUOMO. But we basically take the position of saying up to 30 percent of income, which is where H.R. 2 is now. And we would call it a ceiling rent, H.R. 2 calls it a flat rent but I think that is a more definitional question than anything else. We leave it to the option of the PHA as opposed to mandatory by the H.R. 2 bill and we have a floor and a ceiling.
We do not want the PHA to set it too low because we are afraid that we will wind up making up the difference. If the PHA charges less than the actual operating costs, HUD would be looked to for the difference. And then we have a cap of the market rent.
So, I believe they are very, very close.
Mr. KENNEDY. What is the difference between that difference today, the difference in the formula as exists today and the new one that you would be proposing?
In other words, do you not have to pick up that differential today if the operating costs of the building are very, very high compared to the rents being charged at 30 percent?
Secretary CUOMO. We could be in a position where we would have to pick up the difference on the operating costs if the PHA is operating at a deficit.
So, it could increase HUD's costs. But I think that is, again, as I tried to say in the opening statement, I believe that is a technical modification. Nobody wants HUD to have an increased liability to make up the shortfall if a PHA charged too low a rent.
But it is up to 30 percent which we all agree on, and the ceiling rent, flat rent, pick your definition. We leave it optional to the PHA as opposed to mandatory to the PHA.
Page 75 PREV PAGE TOP OF DOC Segment 2 Of 3
I do not see any significant differences, frankly, on those points. On the income targeting, I think we have more significant differences there.
And what I said, Congressman, was we both, we all agree with the goal, mixed income, not just to get working families in but also because I believe, sincerely and on the projects that I have developed and operated, the best housing programs are those that have mixed income.
We want to get to mixed income. I believe that H.R. 2 is overly aggressive in its timetable. Overly optimistic in its view of how quickly we can actually integrate the housing. And I think that under the numeric formulas proposed in H.R. 2 we unnecessarily jeopardize housing for the very low-income.
As I said in the opening comments, public housing is a precious national resource. And it is one-third of the available housing for people earning the minimum wage. Earning the minimum wage, $10,000 a year about, these are people who play by the rules, who do everything we ask, they are not people who are staying at home and watching soap operas. They are doing everything the American society and American people, American government says that they need to do and they then go out to find an apartment and cannot find one. It is not affordable. Your public housing stock is one-third of the Nation's affordable stock for people earning minimum wage.
Do not jeopardize that. I understand that we want to move toward mixed income, that will make better communities, that is right. But not by leaving people who cannot afford anywhere else on the street. We already lost Federal preferences which basically did this.
Homeless were at the top of the list and people in substandard housing were at the top of the list. The preferences are gone. The only thing we will have will be this income targeting.
So, we want to get to the same place. We think this is overly aggressive, unnecessarily risks housing opportunities for the very low-income.
I will also say this, it is literally a question of numbers. And as we both want to get to the same place, I do not think we should allow the rhetoric to prevail; I would rather see reason prevail and say, look, everybody wants mixed income. Everybody also wants to protect an affordable stock for the very poor. New York, 65 percent of the affordable housing for people earning minimum wage is public housing.
Page 76 PREV PAGE TOP OF DOC Segment 2 Of 3
We do not want to lose that. That is 65 percent! So, what is the number in between that is a reasonable solution that we can come up with? And I am confident that we will come up with it because everyone understands both extremes.
Mr. KENNEDY. Thank you, Mr. Secretary.
Secretary CUOMO. Thank you, Mr. Kennedy.
Chairman LAZIO. Mr. Sessions.
Mr. SESSIONS. Thank you, Mr. Chairman.
Mr. Secretary, welcome. It is a pleasure to have you here with us today. Mr. Secretary, I am delighted to hear your comments this morning and I think it is quite interesting that your comments have taken both the sides of not only Chairman Lazio's personal responsibility on behalf of those people who live in the public housing areas that you keep, but also that you are talking about HUD applying itself to that same theory when you talk about doing things with local agencies that are not meeting up to your standard.
One of the questions that I have is about the Government Performance and Results Act, which is something that your agency is working on now. I would like to hear some general comments about these agency initiatives in which you are trying to move off the high-risk list.
Is that going to be included in your inplementation of GPRA when you produce that? Because it has to do with, I think, efficiency and cost usage and certainly return that is important.
Secretary CUOMO. Congressman, it would be my pleasure. I think that what the GPRA is saying is let us change a mindset, let us change a culture and attitude, let us get from process and funding programs to performance product. Let us look less at how much money we are pumping through a system and more at what we are accomplishing with the funding that is going out.
The Chairman, in his comments, speaks about performance systems. I speak about performance evaluation systems. It is a building wide purpose and culture change at HUD. We are speaking about public housing today, but we are looking to do this in community development and FHA, right across the Department.
Page 77 PREV PAGE TOP OF DOC Segment 2 Of 3
Let us talk less about how much a program is in terms of overall dollars, how many people, how many bodies, more about what we are accomplishing with it. Where is it going, what is it doing, and then let us build on the strong and let us alter the weak.
We want to do that Department wide. Public housing is at the forefront of that for us. You have a very diverse portfolio on public housing. Some projects which, frankly, never made sense from the beginning, the design destined them to fail. The best thing you can do is blow them up--
I believe that--and start over. That is one end.
At the other end you have very well done, well managed, well maintained, housing authorities that are welcomed by the community and are a tremendous community resource.
Those are two polar extremes. Right now we treat them the same for all intents and purposes. Same attitudes, same regulations, same monitoring, same staffing pattern from HUD.
We are saying, no. First, let us come up with a performance evaluation system to decide who is a high performer and who is a low performer. A real performance-based system that judges what you are accomplishing with the money.
Once you come up with that performance evaluation system, say, you are now a high performer, you are going to have more deregulation, more flexibility. We are going to rely on you more and we will have less staff time attributed to the high performers.
On the other hand, you are a low performer. You are a ''troubled housing authority.'' You are near being a troubled housing authority. We are going to work with you more; increase the staff hours working with you, increase the monitoring, demand performance. If we do not get performance over a certain period of time, we are going to try to find a new management with all due respect. We will, once you become troubled, try it for a year to work it out. And at the end of that year it does not work out, we want to go to a receiver, a fundamentally different way of operating.
Page 78 PREV PAGE TOP OF DOC Segment 2 Of 3
A receiver, by the way, which is not managed by HUD, because we cannot be running housing authorities all across the country.
We have started to do that over the past few years. We have had some great success in some instances, Chicago Housing Authority, where working with the city, HUD steps into manage but we cannot do the volume that we are looking at.
Mr. SESSIONS. Do you view that at any point that you would withhold dollars or put those dollars at risk that would incent these individual agencies?
Secretary CUOMO. Yes, sir. I would go a step further. One of the amendments that we asked the subcommittee to add to H.R. 2 is to be able to withdraw funding. We have made grants to housing authorities who are not spending the money at all or who are spending it poorly. Right now we are restricted in what we can do.
We want to say to the authority if you are not performing, you are not spending, you are not progressing, you are not achieving, we should withdraw that money and give it to someone who can use it.
Money is very precious always. It is especially precious in HUD's current financial circumstances. Let us get the money to housing authorities, grantees who can use it best.
Mr. SESSIONS. Good. Thank you.
I would like to just go to one other area, if I could, please.
When you were speaking in your statement, and I do not want to take it out of context, but you used a term, we would require work, would require work, and I have tried to look at Section 105 where it talks about community work and family self-sufficiency requirement.
Mr. Secretary, my question is can you please discuss what that means when, would require work, and do you agree or disagree in Section 105 that--and I can hand this to you if you need this--but it is the ''community work and family self-sufficiency requirement.'' I would just like to hear your comments. Thank you.
Page 79 PREV PAGE TOP OF DOC Segment 2 Of 3
Secretary CUOMO. Congressman, my pleasure.
What I was referring to is we require community work for residents not already meeting welfare reform requirements. Meaning that the overwhelming majority of AFDC recipients who are in public housing will now be in welfare reform. They will be working with the State welfare agency, they will have a plan.
The bill calls it a self-sufficiency plan, if a PHA did it. They will have some equivalent to a self-sufficiency plan set up as a part of welfare reform.
So, that they will either have to be working or have to be in a training program, whatever the arrangement is with the State welfare agency. For those who are not within a State welfare plan, which would be a very small number, but for those who are not we would agree with what the bill says, community work for residents who are not already meeting the welfare reform requirements.
Mr. SESSIONS. So, I could take that as a comment that you agree with this Section 105?
Secretary CUOMO. I am not familiar with 105 but if what it says is community work for people who are not in State welfare plans then, yes.
Mr. SESSIONS. Well, what it says is that there is a requirement that adult residents of public or assisted housing enter into a self-sufficiency program, that they contribute no less than eight hours a month of volunteer work for the community in which the adult resides.
In addition, the family must set a target date by which it hopes to be able to move out of public housing.
Secretary CUOMO. I agree with the concept of moving to independence. I think, as a practical reality, under welfare reform the States are now charged with the obligation to come up with, let us call them, ''self-sufficiency'' plans. I do not know what a State will call it. Maybe they will call them ''State self-sufficiency'' plans. We will probably have 50 different definitions. But that is what welfare reform says the States have to do.
Page 80 PREV PAGE TOP OF DOC Segment 2 Of 3
I am saying rather than have public housing authorities now go do separate self-sufficiency plans with people and then have a State come in and do a second or separate work requirement plan, leave it with the States, let them do welfare reform, let us run housing--because Lord knows we have enough on our hands just doing that without now also doing self-sufficiency plans for everyone--and let the PHA cooperate with the States in doing that self-sufficiency plan and reinforce the welfare reform plan with the State.
Mr. SESSIONS. Well, I think you are agreeing with what is here. And, yet, implementing it--see, and I know it is difficult to get welfare assistance and public housing and medical, I know that it does not fit together as easily as I make it seem.
But that in order to get to the people who need it the most, which is what I think we would all agree needs to happen, we also need to set an expectation level and it is that expectation level that I am trying to find what your agency intends to give to people at the time we offer help.
Secretary CUOMO. Yes. And I think, Congressman, what I am saying is I think that task, what you want to accomplish, will be accomplished through welfare reform by the States, who will say, this is a contract in essence with that family who is on AFDC, do this or else or time limits, and so forth.
Let the PHAs, whose business really is running housing, accept and cooperate with the State welfare plan. So, let us reduce the bureaucracy. Not everybody does a plan. Not everybody goes to self-sufficiency plans. Let the State take the lead, we will follow the State's lead.
Mr. SESSIONS. Good.
Thank you, Mr. Chairman.
Chairman LAZIO. OK, thank you, Mr. Sessions.
I want to acknowledge the presence of the Chairman of the Banking Committee, Mr. Leach, who has graced us with his presence. Mr. Chairman, do you wish to ask a question?
Page 81 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. LEACH. Thank you. I have no questions. I just want to underscore that under Chairman Lazio there is a mandate to lead this Congress, the House side in particular, on all housing issues. Mr. Secretary, we appreciate your coming. I also wanted to extend my acknowledgement of a fine choice for the Secretary of HUD. We appreciate your leadership.
Secretary CUOMO. Thank you very much, Mr. Chairman.
Chairman LAZIO. Thank you, Mr. Chairman.
Mr. Jackson.
Mr. JACKSON. Thank you, Mr. Chairman.
Let me first begin by thanking Secretary Cuomo for appearing before our subcommittee today and indicate what an honor and a pleasure it is to see you at the Housing and Urban Development. I know at least two sets of parents who are extremely proud of the work that their children are doing in public service and I certainly want to welcome you to Congress.
Before I make my statement, I want to clarify at least something I have heard twice by a couple of my colleagues. I have heard the term, ''community service,'' ''community work'' a couple of times. And to me it sounds like a term that a judge uses when they require someone who violates a law to perform. That has been one of my biggest problems with welfare reform, welfare to work in the absence of jobs, is that the only crime that it appears that people who are born or live in public housing have created or actually been victimized by are the ones that we have created, the inability to provide adequate housing for them.
And, so, I hope we can move, at some point in time, away from the term, ''community service'' or ''community work,'' to express what we are trying to accomplish.
Mr. Secretary, when we considered this legislation in the last Congress, H.R. 2, and I think it was H.R. 2406 in the last Congress, welfare reform had not been enacted yet. And I have a particular sensitivity to this issue because 70 percent of the residents living in Chicago Housing Authority communities rely on public assistance. One-half of all of these residents are children. And if there are no jobs to meet the welfare to work requirements we will no doubt experience an explosion in the number of homeless and destitute among us.
Page 82 PREV PAGE TOP OF DOC Segment 2 Of 3
I know that HUD is working very diligently through their management team to assist the Chicago Housing Authority in their recovery process. The CHA is a large, severely distressed, public housing authority with responsibility for 11 of the poorest communities in the Nation.
I am concerned about the additional burdens that will be imposed on this community and those like it across the country, which will now be forced to operate without the benefit of the 60-year-old safety net.
This is compounded by the reality that levels of Federal funding for public and assisted housing are clearly inadequate to meet the real needs of communities. I wish you would comment on how HUD will work to address this impending crisis and also, more specifically, what, at least from your perspective, is the impact of the impending welfare reform bill on PHAs?
Secretary CUOMO. Thank you, Congressman.
Also, let me say it is a pleasure to be before you, sir, and I look forward to working with you on the problems of your district and the city and the Nation.
I think the Congressman raises a very significant point that welfare reform will have a dramatic effect one way or the other not just on the individuals who now receive AFDC in the communities they live, but also from a parochial point of view, on public housing.
The possible economic ramifications are significant. Remember that the way this now works, tenants pay 30 percent of their income, HUD basically subsidizes the difference. As the income drops or could drop through welfare reform, HUD might be in a position of having to pick up that financial obligation.
So, the long term economic effects, when these time limits start kicking in, when States start sanctioning, could be significant.
Let me say this to the Congressman's primary point, though.
We agree that welfare reform will have a dramatic effect one way or the other. I do not know that anyone knows how welfare reform will turn out. We are going to have 50 different States, 50 different experiments. Hopefully they are good. We are working very hard and I think the first charge for the Department is to work to make welfare reform a success.
Page 83 PREV PAGE TOP OF DOC Segment 2 Of 3
No one wants to be on welfare, as the Congressman knows. The last person who wants a welfare system is the welfare recipient. I have never heard a welfare recipient say, ''Help me get a welfare check.'' They say, ''Help me get an education, help me get a job, help me get independent.''
So, this could be a great thing for the people who are now on AFDC, if it works, if there are jobs at the end of the 5 years or whatever the time limit is. We should be working to get that education, to get that support, to get the jobs into those communities, which is what we should have been doing in the first place. So, we are working to make welfare reform work.
Second, if it does not work, and in some cases it will not work, the position of the Department is that we will not evict upon time limit violation if the person cannot find a job. In other words, if you get to that time limit, and the person has done everything right, played by the rules, filled out all the forms, went to all the meetings, and now they are time limit and AFDC ends only because they cannot find a job or because the opportunities are not there then public housing should be the safety net for that family.
That is the position of the Department and that is the position reflected in the amendments that we proposed to you today.
Mr. JACKSON. So, Mr. Secretary, is it safe to assume that then if, in fact, a person is unable or inable to find a job that the burden then shifts to HUD to provide the immediate assistance for housing, for their housing needs?
Chairman LAZIO. I ask unanimous consent for an additional 1 minute for the gentleman, so he can finish his question, without objection, so ordered.
Mr. JACKSON. Thank you, Mr. Chairman.
Secretary CUOMO. Yes, sir. The Department's position, Congressman, is that in that event a family reaches the time limit, the time limit expires, the State says ''You are cut off,'' and it is not the fault of the individual, but the job opportunity was not there, and so forth, I would say then HUD picks up the shortfall. The family's income goes to zero. And HUD would step in, pick up the shortfall to keep the family in the unit and the financial cost goes to HUD.
Page 84 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. JACKSON. And, just quickly, Mr. Secretary, are there any contingency funds that HUD has requested in the event that an individual is unable to find a job to cover the additional costs?
Secretary CUOMO. We would, Congressman. We have not factored that specifically into the budgets in the out years because it is very hard to come up with a calculation now, how many families, how much, and so forth. But that would be a mission of the Department.
Mr. JACKSON. I thank you, Mr. Chairman.
Chairman LAZIO. Thank you.
The gentlelady from New York.
Mrs. KELLY. Thank you, Mr. Chairman.
Mr. Secretary, thank you very much for coming and speaking with us today. It is always good to have someone who is from New York, who knows a lot about housing, come to speak with us.
Secretary CUOMO. Thank you.
Mrs. KELLY. I have a couple of questions that I would like to just put to you. During your confirmation hearing, I noticed you said that, if I am quoting you correctly, ''We have to do more with less.'' And I want to know if you could expand on that in the public housing area?
I have actually three questions. So, I am going to ask you to kind of limit your comment there, because I will talk with you later about it.
But, please, if you could just answer that.
Secretary CUOMO. We have to do more with less. To try to keep it brief, Congresswoman, and thank you, for your kind comments.
That is the mantra of the Department, basically, on the management side. We want to reduce the work force, we want to reduce the staffing levels, but we want to do more at the same time. It is not that the needs have gotten any less, it is not that there are not real problems out there. The number of people who need housing has gone up; homelessness, 600,000, real needs.
Page 85 PREV PAGE TOP OF DOC Segment 2 Of 3
But we cannot do it with the kinds of resources we have. We cannot buy our way out of this problem. We have to be more efficient, more effective. I did that in my previous position as Assistant Secretary of Community Planning and Development, and the staff came down 25 percent but we ran more programs, more funding. So, it can be done.
On the public housing side we are saying the staff is coming down. We want to move toward a performance evaluation system that gives the higher performers greater flexibility and, therefore, requires less management time on our behalf.
The troubled housing authorities who have not been performing, we have to find a different solution. The solution is not for HUD to come in by and large, and manage. We will go to a receiver, which is an outside third party form of management.
Mrs. KELLY. OK, thank you very much.
I understand then you would then also look at the use of people who live in the housing as a resource to help you bring down costs because you could actually use them as, if I understand your earlier comments here in this subcommittee today.
Secretary CUOMO. I think one of the greatest assets of any public housing authority are the residents who are in that housing authority. And I think that the directors would tell you that first.
And any way that they can be involved in the management, they can be empowered to be part of the process is all the better.
Mrs. KELLY. OK.
The second question I have is, I am not quite sure why you object to the tenants choosing between the flat income and income-based rent? Let me see here in the bill.
You had some objection, if I recall.
Secretary CUOMO. The 30 percent or the flat rent?
Mrs. KELLY. To flat versus income-based rents. Do you have some objection to that? I mean it seems to me that that is a good idea. It should be flexible. Can you kind of help me understand why it is not a good idea?
Page 86 PREV PAGE TOP OF DOC Segment 2 Of 3
Secretary CUOMO. Congresswoman, I believe it is a question of semantics. The H.R. 2 bill says it is tenant choice to pay up to 30 percent of their rent or a flat rent, the tenant will choose. We state it in a different way. We say that it will be the less of up to 30 or flat rent. We call it a ceiling rent.
If you assume that the tenant will choose the lower rent, then you come out at the same point.
Mrs. KELLY. So, you are not against the flexibility?
Secretary CUOMO. No. We stated it a different way. We say that it will be the less of the 30 percent or the ceiling. House Resolution 2 states that the tenant can choose. Theoretically the tenant may choose the higher rent. I do not know how often that would happen or under what circumstances. But assuming they are going to pick the lower rent then we would come out at the same place.
Mrs. KELLY. All right.
My third question is, Is the Administration's initial blueprint proposed to remove public housing authorities from the HUD's subsidies programs and make them compete in the private market? And, two, Consolidate sixty major categorical programs into three flexible performance-based funds?
I would like to know your views on the past attempts to restructure HUD's programs?
Secretary CUOMO. As the Congresswoman knows, I was in the Department for the past 4 years as the Assistant Secretary for Community Planning and Development which was not obviously directly responsible for public housing but I was part of the HUD team and we worked on the proposals together and I support the proposals that were put forward in the past. They did not win approval, as you know.
And they were very, very radical in the fundamental redesign that they were proposing. They did not pass so we therefore could not do them. We required legislation to make the changes, the extent of which we were proposing.
Page 87 PREV PAGE TOP OF DOC Segment 2 Of 3
I think the basic thrust of what we were saying is consistent with where we are now. The extent is different. And what I heard anyway in response to those proposals was that the intent is right, the extent is wrong. We were going too far, too fast. And this gets us down the same road in a more reasonable period.
Mrs. KELLY. Thank you very much.
[The prepared statement of Hon. Sue W. Kelly can be found on page 274 in the appendix.]
Chairman LAZIO. I thank the gentlelady.
I just want to recognize Mr. Sessions for the purpose of unanimous consent request to insert his statement in the record.
[The prepared statement of Hon. Pete Sessions can be found on page 275 in the appendix.]
Mr. SESSIONS. Thank you, Mr. Chairman.
To add my comments. Also, Mr. Chairman and Mr. Secretary, earlier when I had spoken about the words ''community service.'' I would just like to reiterate to you to make sure that there was no derogatory meaning when I talked about community service. Perhaps some of my fellow Members may have thought that it was implied. In fact, quite the opposite. I am an Eagle Scout and I am a Scout Master. I have raised nine boys to be Eagle Scouts. In every single rank that an Eagle Scout or any Scout achieves, community service is required.
It is a way for people to reach out to their community and it is a way for people to grow and see different and better things. And my reference to anything with community service should not be taken in a negative or derogatory context. So, I just wanted to give that clarification, sir.
Page 88 PREV PAGE TOP OF DOC Segment 2 Of 3
I believe in it, I am a product of it, and I try and teach it. I just wanted to make that clarification.
Secretary CUOMO. Congressman, I understand. None was taken by me. I was a Boy Scout and never made Eagle Scout. As a matter of fact, I did not make much of anything. But I was a ground level Boy Scout.
[Laughter.]
Secretary CUOMO. But I did not take it that way and it is the language from the bill, also, Congressman.
Mr. SESSIONS. Yes, and it was intended that way, too, Mr. Secretary, so, thank you.
Thank you, Mr. Chairman.
Chairman LAZIO. I thank the gentleman.
Mr. Frank.
Mr. FRANK. Thank you, Mr. Chairman.
I will quite deliberately change this subject. I did want to say at the outset that I appreciated your accommodating us on a point last year the Secretary mentioned with regard to the mixed use housing between elderly and disabled people, that we have made some progress.
And you and the Chairman of the full committee worked with us and we set up a new Section 8 Program that HUD has been diligent in putting into place to provide for the people with disabilities who would be losing places and elderly housing. I think that was a very constructive solution. I want to acknowledge that the leadership of the committee on the Republican side and HUD, we all worked together on this. The Appropriations Committee helped and I think that was a good example of how you can try and modulate this.
But resources, that also leads me to this issue because that was a case where some additional resources were helpful, so that it was not the elderly versus the disabled. We tried to find some resources for the disabled as well.
Page 89 PREV PAGE TOP OF DOC Segment 2 Of 3
And I think that is the problem. And, obviously, we will go through the various forms of reorganization but you cannot reorganize yourself out of totally inadequate resources. And I want to make sure that we do not do that.
And, as a matter of fact, we have an historic problem here of victim blaming. People talk about how terrible public housing is, and there is some very lousy public housing. Although, we should note that nobody that I know of lives in public housing under threat that they will be arrested or shot if they leave public housing.
That is as unattractive as it many of us may find some public housing units, there are people living there voluntarily because in this society that is the best they can get.
And before we decide to liberate them by freeing them from the terrible conditions they live in, we ought to understand that they have chosen to live there because of the lack of an alternative and the failure to provide some alternative leaves them worse off, not better off, when they are denied the housing they have chosen.
But one reason the housing is so bad is precisely that we have tried to do it with too few resources. We point to the Columbia Points, the Prude Igos, the Cabrini Greens, and people said, ''Gee, what a dumb idea this was. You built these huge buildings full of some of the poorest people in the world with no services and they were not all that well built and that did not work well.'' Well, is that not a great surprise?
And I do not remember the poor people saying, ''Hey, listen, we got a great idea. Why do you not try and help us as cheaply as possible per unit and build these great big places full of concrete with no services, that is where we want to live.''
The poor people did not decide to live there. That was our society's view that the cheapest way to deal with this problem was to put them there and it has not worked very well.
But the way to make it better cannot begin with putting in fewer resources than we started with because we got into trouble by trying to use too few resources in the first place.
Page 90 PREV PAGE TOP OF DOC Segment 2 Of 3
And this is the fundamental problem we have, that the problem we have with HUD is not with the structure of the law, although the law should be looked at and it can be approved and changed. The problem we have is that we are spending tens of billions of dollars to house Americans now in Europe and Japan to defend them against a nonexistent military threat and, as a result, if we are going to balance the budget we do not have enough money to put people in decent housing here in America.
And until we address this resources issue, we are not only going to have a problem of inadequacy in the services we provide, but we will make this mistake of blaming the program. And we have got people who have now decided that we got to give up on the whole notion of helping poor people because we did it badly. But we did it badly because we tried to do it too inexpensively.
And I want to get the best bang for the buck but I also believe that this is a problem where we do not have enough resources and unless we put in more resources we are going to be hurting badly.
And that was one of the reasons I was exercised last year over the proposal to raise tenant rents because that was motivated in part by the notion that the tenants should make up for the shortfall that the Federal Government was going to force the housing authorities to incur.
And I still think that is a great error. So, I would just ask you to address this question, Mr. Cuomo, it is not so much in authorizing ones and appropriating ones, but we are allowed to listen. Given the kinds of resources that we are talking about, what can we do and to what extent will these problems be alleviated if we could increase the resources?
Secretary CUOMO. Well, Congressman, I agree with the thrust of your point. I wish I had the total answer to it.
I think our point is right. I think the lack of resources actually has hurt us on two levels. One, we were short sighted when we went to build and construct in that we played an artificial game where we thought we would keep the costs down by building cheaply. When you build cheaply, in the long term it costs you more.
Page 91 PREV PAGE TOP OF DOC Segment 2 Of 3
The Congressman knows I previously had experience constructing housing. You can save money on construction, you can save money on land costs by building very dense. You get a piece of land, right, you get a plot and you paid for it, so, let us build 14 or 15 stories, pile it up, we paid for the land, what the heck.
You can skimp on construction costs and build cheaply and in the long term it costs you money, because the projects did not work from a community development point of view, because the construction did not work and you wind up doing more maintenance, more management, and more improvements.
So, you did not have enough resources to do it right, wound up costing you more in the long term, you did it wrong anyway.
The second place where the resources hurt you is you are helping a fraction of the people who are eligible for the assistance in the first place. Maybe 25 percent of the eligible population in this country, eligible for housing assistance actually receives it as the Congressman knows.
You now have 5.3 million families who now spend over 50 percent of their income on rent and you are not even talking about that problem. You are not even talking about that problem.
All of this discussion is only on that small percentage whom we actually have funds to help. And the people who are on the lists, the eligible population that does not even bother to put their name on the list, there has been no discussion about that.
That is a longer problem, as the Congressman knows. That is a different discussion in the constraints of the balanced budget, and so forth. But I hope to at least work on the first part of the problem which is for those whom we serve. Let us serve them intelligently and let us serve them well for themselves and for the taxpayer.
Mr. FRANK. In the language of today, Mr. Chairman, ''basta.''
Secretary CUOMO. Thank you.
Page 92 PREV PAGE TOP OF DOC Segment 2 Of 3
[Laughter.]
Chairman LAZIO. Thank you, very much, Mr. Frank.
Secretary CUOMO. At your convenience, sir.
Chairman LAZIO. We are going to resume 10 minutes after the last vote is called.
The hearing is adjourned until that point.
[Recess.]
Chairman LAZIO. The hearing will come to order.
While we are waiting for some of the Members to return from the last vote, I just want to acknowledge the fact that Congressman Vento is here with us today and, although, he is not a Member of this subcommittee, he is an important Member of the full panel and I very much appreciate having you here today, Mr. Vento.
I understand you would like to ask a few questions and with unanimous consent request. There being no objection, we are happy to accommodate you.
Mr. VENTO. Thanks, Mr. Chairman, I appreciate your invitation to participate.
Chairman LAZIO. You are welcome.
Mr. VENTO. I must say that I think the bill that has been put forth is improving and I think with the Secretary's commitment to work with you and the other Members of the subcommittee, that we hopefully will come to a good understanding and a consensus with regard to the legislation and the subcommittee on a bipartisan basis.
Mr. Secretary, first of all, congratulations, it is good to see you at the table in a formal role. We have, obviously, worked together in the past years, but it is great to see you assume this new responsibility.
You have highlighted quite a few issues in your opening statement, facing a comprehensive set of policy changes, some have been, you know, initiated by our colleague and chairman and others had, I think, various manifestations in HUD over the last various blueprints that have been put forth.
Page 93 PREV PAGE TOP OF DOC Segment 2 Of 3
Some are outside of that scope at this time, in terms of outside of HUD, but obviously, had been initiated by the Chairman. One of them is, of course, this new accreditation board that would be established and this has been a concern to many. It is pretty hard to argue this in the full House in terms of the breadth of what is being expected here.
How do you feel about the ability, for instance, I think this revolves around, in the past, HUD's difficulty in declaring or identifying troubled projects and bringing them back on to a position of competency and being able to exercise the responsibilities that they have.
Secretary CUOMO. Thank you, Congressman Vento.
I believe that you are correct in the hypothesis that HUD has had trouble identifying effectively so-called ''troubled'' housing authorities. We have a system called the PHMAP system which grades public housing authorities and then if you get a failing grade you are a so-called ''troubled'' housing authority.
There are, in my mind, real questions about the effectiveness of the PHMAP scoring process, when you say we are going to a performance system and we are going to do deregulation, based on whether or not you pass or fail.
I do not think the PHMAP system now is adequate to make those kinds of deregulation decisions.
I do not think the PHMAP system now is adequate to really judge performance. I think we radically have to change PHMAP. It does not take into account the physical stock of the housing authority, first of all.
So, we have to change PHMAP.
Does that mean we should go to an accreditation board? I do not think so. I think the accreditation board is yet another vehicle, yet another body, but it does not solve anything for you.
It says, ''We are now going to put together people from the industry to come up with an evaluation method.'' Yes, let us come up with an evaluation method. I do not think we have to set up a new body to do that.
Page 94 PREV PAGE TOP OF DOC Segment 2 Of 3
Let us come up with a PHMAP or call it whatever you want to, that works, a real standard that works. Should we consult with the industry and make the industry part of that design on the evaluation system? Certainly.
Could we set up a body that does that? Yes. But I would not set up another vehicle to put together an evaluation system which then would still need a HUD to go out and enforce that system and regulate the system and do the competitions. My initial impression is that it is unduly cumbersome, we should bring in the industry and we should redesign the basic system that we use.
Mr. VENTO. Well, one of the concerns that I have and the Chairman is exactly that particular point, that, you know, if the accreditation board is severed from the responsibility of then taking over the project and, in fact, improving it, in other words, I mean there is a certain synergy here that occurs between HUD and its PHMAP.
I mean taking it outside the Department, I mean is there some inherent flaw that this has to be independent of the Department? I mean is there some independence here that we are lacking that would, in fact, rectify the shortfalls that are perceived in terms of, in fact, providing for a rehabilitation, as it were, of a housing authority, a public housing authority that is not functioning properly?
And my concern is that it is easy enough to sit back and to make these rules, and this, I understand and I appreciate that this has to come back before the Congress before it is triggered into effect, based on the legislation we have before us. But for all intents and purposes, we are sending off to develop the rules and go through the whole format, when we are, in fact, setting in place a structure. If we think this is the best structure, do we need that independence and is it reasonable to assume that that in essence separating the responsibility might be a tendency to, in fact, dump work basically on HUD, dump certifications without any synergy between what the capacity is to deal with that within the Department?
I do not know what the budget requirements would be but they clearly are a significant matter.
Page 95 PREV PAGE TOP OF DOC Segment 2 Of 3
Secretary CUOMO. Well, Congressman, I could not agree with you more. There are three questions that from my point of view we have to answer when it comes to public housing.
What is the standard that we are going to judge them on? Who enforces it? Who goes out and monitors 3400 to make sure that it happens? And what happens when they fail?
What is the standard, who enforces it, and what happens when they fail?
We have to answer those three questions and the accreditation board answers none of them. It says we have yet another body which is going to be another vehicle that we have to coordinate with and it is independent.
So, to me, it raises more questions and issues than it answers. And that is not to say that I do not think we need a close cooperation with the industry in answering all three of those questions. But an independent body does not do it for me.
Mr. VENTO. My time has expired. I note a number of different issues that you raise and I think that there is an effort, I think a sincere effort, to try and reconcile some of those in the bill. I think they are much closer on the rent issue in terms of the Brooke Amendment, of course, which has been a difficult matter in the past. And it is good to see that there is a different tack being taken in terms of that.
There are, of course, concerns about the open ended. I notice on page six of your testimony, I believe that what you are referring to is that ability to, in fact, take all the benefits and turn them into a grant. And to the housing authority you say finally the concerns raised by H.R. 2's income targeting and rent provisions are complicated by the authorization for open ended grants in public housing in Section 8 the routing of these funds.
And you also, of course, in another section of the testimony point out that you are not for the suspension of a whole host of laws, most specifically with the civil rights laws with regard to preference.
Could you elaborate on those, Mr. Chairman, if you would permit?
Page 96 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. I ask unanimous consent for an additional one minute to give the Secretary a chance to answer. Without objection, so ordered.
Secretary CUOMO. I think Congressman, that you are referring to my opening statement, which I summarized in my opening remarks. We are all in favor of deregulation. It is a necessity given the staffing requirements and so forth of HUD. But we do not want to be responding to extreme swings of the pendulum, where today everyone is for devolution, deregulation. We have to get there but we cannot go so far toward devolution, deregulation that we lose all Federal control and oversight. Then we are here 2 years from now with the thrust being 180 degrees, and I am again sitting before you and you are saying, ''How did you let the public housing authorities do this? Did you not have any oversight, did you not have any control? You were supposed to be the Secretary of HUD, you must have been on vacation.''
And I would be saying, no, no, no, we did deregulation, devolution because they knew better. And we want responsible devolution, responsible deregulation. And there are Federal goals and purposes that we hold dear and that we are not going to give up and we are not going to devolve. These programs and funds go to a purpose and housing the very low-income is the most essential purposes. Civil rights is an essential purpose. We are not going to lose that, we are not going to abrogate that, we are not going to devolve that. That is why you have a Federal Government, that is why you have a Constitution and we are going to hold those dear within that overall deregulation scope.
Mr. JACKSON. My time has elapsed. I ask unanimous consent for an additional 30 seconds.
Chairman LAZIO. Without objection, so ordered.
Mr. JACKSON. Thank you, Mr. Chairman. First of all, I would like to apologize for being between two hearings, one mark-up and a bunch of votes, so I do want to apologize to you, Mr. Secretary.
Page 97 PREV PAGE TOP OF DOC Segment 2 Of 3
I want to make one distinction, apparently a distinction that was made when I left, between a community service and that of being a Boy Scout or Cub Scout, and community service in a punitive form as being passed by some judge for some criminal act.
And my concerns about H.R. 2, and I appreciate it if the Secretary could either comment on them or certainly officials of his office can contact those of us on the housing subcommittee to make sure that the aspects of H.R. 2 that are punitive, not in the community service sense, the Boy Scouts' definition of ''community service,'' and the punitive sense as in, ''You are lazy because you live in public housing, and therefore you must work eight hours.'' I think that is wrong.
And I think that suggests that people who live in public housing are just sitting back waiting to be forced to work by either a PHA, by a PHO, some officer in public housing, or by Administration officials. Thank you, Mr. Chairman.
Chairman LAZIO. I thank the gentleman.
Mr. VENTO. If the Chairman would recognize me on a point here. On this issue, on Section 105 of the bill, the community work and family self-sufficiency requirement, that is the section that is being discussed here, I think that the Secretary, as I understand it, has suggested that we not replicate the work that is already being done in terms of the State with regard to welfare.
I mean, if that someone is in the program, as you look through this, you have working families are excluded, senior citizens are excluded, disabled are excluded, persons attending school or vocational training are excluded, or physcially impaired persons. If you simply added the welfare, I wonder really what the necessity of this program is and what the role would be?
So I think we should try to minimize our role in terms of those types of requirements. I would suggest that trying to establish work-based tools and skills at the site is very important. In fact, in the area I represent, we have a program that is in place where they are providing computer and other types of link-up for work.
Page 98 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. JACKSON. Would the gentleman yield?
Chairman LAZIO. I hope we can keep this in regular order, if we can, unless the gentleman has something very pressing that he would like to say.
Mr. JACKSON. I'd like to.
Chairman LAZIO. The gentleman is recognized for 15 seconds.
Mr. JACKSON. Thank you, Mr. Chairman. If someone is pursing a job during the normal course of the pursuit of work, are we counting the time that they are pursuing a job as quantifiable under the 8 hours of ''mandatory, go do something''?
Chairman LAZIO. The answer is yes.
Mr. JACKSON. Thank you very much, Mr. Chairman.
Chairman LAZIO. I appreciate the concern. Let me conclude with a few questions. You have been very patient, and I appreciate it very much, Mr. Secretary. I am grateful that you've taken the entire morning with us.
I want to touch on a couple of points. One is the issue of money. I think I would probably be the last person to say that money is irrelevant, but it also is not the defining element that will dictate whether we have success or not.
I think in hearing some of your statements that you would agree with me. As a matter of fact, the budget numbers, at least in terms of outlays for the last couple of years, between the Administration and Congress have been virtually the same.
In some areas, as a matter of fact, the Administration would argue for less money on certain programs. Take for example the Chicago Housing Authority, where I visited, and I think you visited, and I know other Members of the subcommittee, Mr. Jackson in particular--it's his home area.
The mismanagement that occurred there in the past was not made less by the fact that there was surplus money that was never spent. There was, I think in that case, at least, $80 million of unspent money, and that comes down to management, particularly, lack of capacity in terms of management.
Page 99 PREV PAGE TOP OF DOC Segment 2 Of 3
Could you speak to that issue, where the Department is? You talked about right sizing the Department and the things that need to be done. As a matter of fact, in some ways you've asked for more flexibility than H.R. 2 provides in order for you to manage the reductions in staff.
Secretary CUOMO. Mr. Chairman, I do not believe, as I said before, in response to a question by the Ranking Member, that we can buy our way out of these problems. We do have funds in the Department that are not now being spent efficiently or effectively, and that's why we're asking you for the flexibility that we've asked you for.
We want to go back to grantees who have won grants who aren't spending them, and we want to take them back. Poor performers, we want to take the funding back. Literally. Because the funding is precious.
And there is no doubt that there are problems which have avoided and evaded solution for years which are not just a question of funding. There is no doubt. And as an overall thrust, of being able to do more with less, can we have better efficiencies and better effectiveness? Yes.
At the same time, long term, are we serving just a fraction of the eligible population? Yes. And I think there are two separate issues. Am I saying to you that HUD is the best managed, most efficient or most effective, or local public housing authorities are using the funding as well as we can be using the funding? I'm not saying that. We have a lot more to do.
We will do better with the existing funding. That's issue one. Issue two, is there an entire population of people out there whom we haven't even begun to serve, we haven't even begun to think about serving? Yes. And if we had more funding, could we do more good things for more communities and more people? Yes.
I don't think the two are inconsistent. The Chairman's point has been let's focus on job one, and let's prove the competence and credibility that we can use funding well. And that we can do what we say that we want to do, that we can run public housing, that we can do community development, that we can get homeless people off the streets, and that we can do it efficiently and effectively, and we can run a smart Department. Let's prove that competence first. That's job one.
Page 100 PREV PAGE TOP OF DOC Segment 2 Of 3
I agree. But at the same time, longer term, once we get past job one, there is an entire population that we haven't begun to think about, and that would need additional funding, because you're talking about our literally helping only a fraction of the population who need help.
Chairman LAZIO. You raise an important point, that's about quantifying results, and measuring success and establishing credibility as a predicate to additional funding, which I think is the political reality. And I don't think necessarily it's an unreasonable expectation.
The Inspector General has testified before this subcommittee and has said, if I can quote, and I would like to insert this for the record, although we already have it. ''PHMAP is the antithesis of what we should be looking for, because it measures management processes, and ignores whether we are achieving the desired program outcome, which is decent, safe and sanitary public housing. As a result, we have situations where public housing authorities are not deemed 'troubled' based on their PHMAP scores, but the residents are, in fact, living in squalor.''
Could you respond to that part since that is one of the reasons why we have suggested moving to an accreditation board? Do you have some other concepts of how we can strengthen the system so that you can meet these concerns if you deem them to be valid concerns by the Inspector General?
Secretary CUOMO. It would be my pleasure, Mr. Chairman. I agree with the thrust of the quote from the Inspector General. I think it is slightly overstated and overblown. But the thrust I would agree with.
Page 101 PREV PAGE TOP OF DOC Segment 2 Of 3
PHMAP is not a performance indicator. It is not a performance standard, the one that you would want, or the one that I would want to govern performance for this Department, period. It is even more aggravated when you say we want to do deregulation based on that standard, because now that standard really has to be credible.
I have three questions on this standard that I have to answer from a very parochial point of view of having to do the Department's work. What is the standard? Does it have a physical stock component, an on-site inspection? Is it a financial audit? Is it a management audit? So what is the standard?
Two, who enforces it? Once we come up with this standard, this formula, this criteria, who enforces it? There are 3,400 public housing authorities out there. Do we ask them to do it themselves, self certify, which is basically what they now do under PHMAP? I don't think you can, if you want to really judge performance.
So who enforces it? Who runs around to 3,400 public housing authorities?
Three, when they fail this standard, what happens to them? We now call them ''troubled.'' Fine. What happens? We take the management over. Good. Who is we? Is we HUD? Because if we is HUD, we can't do it.
Those are my three questions, What is the standard? Who enforces it? What happens when they fail? I don't believe the accreditation board, as it is now proposed, answers any of the three questions.
Page 102 PREV PAGE TOP OF DOC Segment 2 Of 3
The accreditation board doesn't say it designs the standard. It doesn't enforce the standard, and it doesn't help in the management.
Do I agree with a board saying we have to do this with the industry, and we need that peer concept? I agree totally.
Rather than transfer it to an accreditation board, which may sound good today, I'd rather just answer the three questions. I'm less concerned with the vehicle, but I agree with the concept of partnership with the industry.
Chairman LAZIO. I appreciate that. I think this is one of the few areas, I'm happy to say, in which we have some disagreement. Accreditation boards are used, as you know, by colleges and universities and hospitals. They have been integrated very well in terms of the industries. They're looked upon as objective and credible.
In fact, the legislation does establish a process for establishing standards. It does talk about the consequences of failure when we have chronic underperformers. And it is my expectation and commitment, and I think it is yours as well, to ensure that in cities like Chicago or Washington, DC., or New Orleans or Detroit, where we have had chronic underperforming, for not 1 or 2 years, but for the length of the time that we've been measuring some of these PHAs, that we've stopped tolerating failure, and that we have an instrumentality in place that gives us the empirical data upon which to make a judgment about success.
But let me ask you a question, though, if I can, about mixed income. This is more of a philosophical question, I suppose, because we've had discussions about the need to obtain mixed income. It's one of the difficult issues that we confront.
Page 103 PREV PAGE TOP OF DOC Segment 2 Of 3
In an ideal setting we would like to provide the means for every American to have housing, and to focus the help on the people at the very lowest end of the economic ladder. In another sense, when we've done that through Federal preferences, we have shackled local housing authorities, we have created concentrations of poverty. We have undermined the ability to have role models and what some experts call social capital.
And I am wondering if you could speak to that issue? Right now the median income of public housing residents is about 20 percent of area median income. And I think you and I both know that the PHAs are going to need flexibility in order to create environments where the very poor can move up the economic ladder if they have the wherewithal to do that for other reasons, and also to provide the flexibility so that housing authorities can help the working poor who are also very needy, and who would, but for some help, would be either homeless or face other devastating consequences, because they fall in between being very low income and making enough income where they can make choices based on the market.
And I am wondering whether you can speak to that issue?
Secretary CUOMO. It would be my pleasure, Mr. Chairman. If I could just quickly on the accreditation board, just to follow up if I could, because again I don't want the vehicle to cloud the goal. I agree with you on the goal.
The question is, What is the best vehicle? And I think we should not, at this point, go to an accreditation board, which is basically an industry board, at the same time that we're moving to deregulation. This board would be charged with setting the standard, judging the standard, and based on your standard, deciding how to disburse billions of dollars in Federal money.
Page 104 PREV PAGE TOP OF DOC Segment 2 Of 3
Since this is a new board just being set up, we really don't know how it will work, how it won't work. We're putting on top of this board a responsibility which is paramount in deciding where billions of dollars of Federal funding flows.
To put those two things together at this time, I think, puts us in a precarious situation. We could take a middle step, which is to set the standard, start to implement it, do it in cooperation with the industry, rather than transferring the responsibility to this new system, and literally having billions of dollars depend on whether or not it works?
But again, I agree with the goal of getting to the point where we have a real system which we now do not have, Mr. Chairman, with real enforcement, and a real trigger, where if you are a poor performer, something happens different, radically different, different management.
As a matter of fact, our proposal I believe goes further than H.R. 2 when we say a poor performer would go to a receivership, which is the most drastic remedy you can have. Goes to a receiver. The public housing board is dissolved. The executive director is normally transferred, let go, and you come in with a new board and a new director, and a court runs it.
So it is really one of the most drastic remedies you can take. But there can be more discussion on that.
On the income targeting, Mr. Chairman, again we have an agreement in where we want to go. The question is how we go there. We want to get to mixed income. The way we analyze the numbers, under H.R. 2, you could have very low-income people not accepted into public housing for 10 years.
Page 105 PREV PAGE TOP OF DOC Segment 2 Of 3
That you could have a period of 10 years where the working families at the higher end of the income spectrum, up close to the 80 percent, are the only admissions for 10 years.
If that were to occur, I think the Chairman would agree that with the backlog of very low-income, who now don't even have public housing for a period of 10 years, we would have created an intolerable situation.
Chairman LAZIO. If I can, just on that point, I want to make clear, that admissions within the targeting requirements would be completely up to the particular public housing authority. They're not mandated to turn away very low-income families. They are perfectly able to have flexibility.
Secretary CUOMO. Very true, Mr. Chairman. But then the position you put a housing authority in is this: I'm holding your current funding flat, or cutting back. And every housing authority would tell you, ''I don't have enough money. I don't have enough money to do the maintenance. I don't have enough money to do the capital,'' and so forth.
They're in that position to begin with, and we're saying, ''...but you can take people at the higher income limit who will pay more rent.'' In their self interest, economic interest, not a self-serving interest, in their economic interest, they have to go to the top of the spectrum, because they need the money, frankly.
They're not getting it from us. They are going to the people who can pay higher rents, because they have to. But then what happens to the extremely low income, who have no alternative? We're trying to do welfare reform, and get more people to work, minimum wage, with less and less housing, and under our analysis, which I'm sure we could discuss, it's for a period of 10 years. We're not talking 1 year or 2 years.
Page 106 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. May I just interrupt you on that point? I think one frustration is that if we delay mixed income communities, does that mean that we tolerate State Street in Chicago for 10 more years?
Secretary CUOMO. No, sir.
Chairman LAZIO. Could you answer how we can achieve these kinds of communities?
Secretary CUOMO. I agree. I agree. I think there are ways we do it. Encouraging work, the earned income disregards, getting the families in there, your idea of the flat rent, ceiling rent. I think we have initiatives that are encouraging people to work, also bring people from the list who are working inside.
But let's find a way to do it which wouldn't essentially exclude new admissions who happen to be very low-income for such a prolonged period of time, especially with no alternative.
Chairman LAZIO. I want to thank you, Mr. Secretary. We have two more panels this afternoon. I thank you for your graciousness in spending so much time with us, and all the other consultations we've had together.
I very much look forward to working with you. I greatly appreciate the common vision that we have, and I am very optimistic that we're going to be able to not only have a bill, but set the Department in the right direction and serve our communities in the way that they deserve.
Page 107 PREV PAGE TOP OF DOC Segment 2 Of 3
Thank you very much.
Secretary CUOMO. Mr. Chairman, let me just thank you for your leadership and your vision that you have brought to this, and I share the optimism. And working together the way we have already begun, we're going to make this happen, I'm confident.
Chairman LAZIO. This hearing is adjourned until 2:00 o'clock.
[Whereupon, at 12:35 p.m. the hearing adjourned to reconvene at 2:00 p.m. the same day.]
Chairman LAZIO. The hearing will come to order. This is a continuation of this morning's hearing on H.R. 2. Many of you who were here this morning heard the Secretary of the Department of Housing and Urban Development, Andrew Cuomo, presenting the Administration's views on H.R. 2.
At this second session of our hearing we will hear from representatives of, and participants in, these very important programs.
At the outset, I would like to say that several groups who will not appear here today before this subcommittee, particularly several groups who speak on behalf of disabled Americans have asked permission to submit their written testimony to the record.
They have also submitted some questions that if we do not have the opportunity to ask today, I will forward to the panel for a response to the subcommittee, if you will indulge me on that.
Page 108 PREV PAGE TOP OF DOC Segment 2 Of 3
I will ask unanimous consent that their written testimony be allowed into the record once it has been submitted, and based on the attendance of the subcommittee right now, I fully expect that there will be no objection to that unanimous consent request.
In addition, because many of our Members need to leave early today, I would remind everyone that, first of all, there are a number of conflicts in terms of committees and mark-ups, and some Members are going back to reattach with their families before they attend the bipartisan retreat that is being attended by over half of the Members of the House.
I might add, it's the single largest gathering in the history of the House outside of the Capitol, thus, we may not have the ability to have every one of the Members that would like to be here today.
But I am sure that the panel will be gracious enough to respond to questions if some of the Members are not here today. I appreciate that in advance.
You each will have an opportunity to make a presentation. I will remind everyone that their statements as written will be inserted into the record in whole, and you can simply summarize your comments so that we can move toward the questioning time.
The first panel of this afternoon's session will be comprised of several members who have deep expertise in housing and practical experience. I would like to introduce the five people who are on the first panel.
Page 109 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. John Hiscox, Executive Director of the Macon Housing Authority. He will be testifying on behalf of the Public Housing Authorities Directors Association. Mr. Rick Gentry, President of the National Association of Housing and Redevelopment Officials. I've had the pleasure of working with you many times, Rick, and I am grateful for your being here today.
Ms. Sunia Zaterman, Executive Director of the Council of Large Public Housing Authorities; Mr. Harold Sole, Director of Leased Housing, New York City Housing Authority, speaking on behalf of the National Leased Housing Association.
Mr. Jack Murray, with whom I've had the chance to talk many times. I appreciate your being here. He is the Managing Director of Insignia Residential Group, and is testifying on behalf of the National Multi Housing Council. Thank you very much for being here.
Without further delay I will turn to Mr. Hiscox for his presentation.
STATEMENT OF JOHN HISCOX, EXECUTIVE DIRECTOR OF THE MACON HOUSING AUTHORITY, ON BEHALF OF THE PUBLIC HOUSING AUTHORITIES DIRECTORS ASSOCIATION
Mr. HISCOX. Thank you, Mr. Chairman. To begin I would like to commend you for your valiant effort last year. It was a wonderful undertaking, and I commend you on your early start with H.R. 2.
House Resolution 2, however, is a big bill, and I only have a few minutes so I would like to dive into just a very few issues.
Page 110 PREV PAGE TOP OF DOC Segment 2 Of 3
First, concerning deregulation and accountability, housing authorities now work in a very perverse system, with too much regulation and not enough accountability. Too much micromanagement, not enough measurable results.
Even the most modest reforms are being vigorously resisted by the old system, by HUD. Not by the Secretary, but by the institutional HUD itself, by advocacy organizations, and even judging by the editorial comments after the demise of last year's bill, The Washington Post.
The deregulation must come. It must come to replace the failed system we have now. It is coming, that is the existing 1960's erected regulatory system is in the process of organizational shut down because HUD lacks the administrative capability, the staffing, to manage it now. It will even be more the case when there are 7,500 employees in the near future.
In this context, how do we ensure accountability? Well, the first thing I want to say is that PHADA is for it. We don't expect a blank check. We don't want one. We expect to be held accountable.
Let's take a look at the accreditation approach. We believe it is an excellent approach if. It is an excellent approach if we can avoid the ''two masters'' problem that will inevitably result if the board becomes a monitoring agency.
Our recommendation is to use the accreditation board to set standards, good standards, meaningful, measurable standards for performance. Then require housing authorities to certify to themselves, to their communities, and to HUD. Strengthen the IPA audit process measurably. Quantum strengthen it so that we can ensure that housing authorities are kept honest.
Page 111 PREV PAGE TOP OF DOC Segment 2 Of 3
Please don't create a separate Federal monitoring agency. In fact, PHADA recommends not creating the board at all until after the study called for in the bill is finished, and then consider whether the board should even be Federal.
After all, industry controlled boards work just fine for hospitals, universities, the CPAs, the lawyers, the AIA for architects, and so forth.
Second, on accountability, we would ask you to take a closer look at the low income housing management plan. Again, the issue here is whether HUD should have advance approval of such a plan.
HUD can't handle the avalanche of plans that are going to fall on them as it is. The 75 days for their approval will simply slow up the process and push planning back even further.
Again, we recommend self certification, accountability to your local community and your local government, and IPA post audit.
Finally, we would also recommend exempting housing authorities below 250 units from the process altogether. It strikes us as being excessive to have what is, in effect, a city planning process for a corporate entity that is, in effect, the size of a medium sized apartment complex, or smaller.
The next issue I would like to speak to is welfare reform and its impact on this bill, particularly the 8 hour work requirement and the self-sufficiency contract.
Page 112 PREV PAGE TOP OF DOC Segment 2 Of 3
We believe that welfare reform has trumped HUD and the housing side on this issue. Concerning the work requirement, virtually everyone would be exempt, but we do recommend that we clarify language to make it clear that any family who is also exempted by State government is exempt from this requirement as well.
On self-sufficiency, again, States are requiring the equivalent of a self-sufficiency contract for every recipient of benefits. We know that this would be expensive to administer. We know from our practical experience with the family self-sufficiency program that it costs about $9 per unit per month to administer such a program. The total tab would be nearly $130 million nationwide.
Drop these and instead look at real motivators to employment. Let's reform the public housing rent system, and give incentives rather than hiring social workers.
Got some comments concerning capital improvements. I can see the yellow light coming on. And I'll skip those and hopefully we'll get to those during questioning.
Perhaps the most important issue in the bill is the issue of who decides. How do we decide who we rent to, what we charge them, and how much subsidy it takes to support them?
It's the core issue. It's the heart of the debate. It's what we argued over all last year, and those are the issues that are still on the table.
The facts of life are simple. The warehouse concept is socially and financially bankrupt, and it's going to have to be replaced. We have many comments. They are included in our printed testimony, but here is the main point I wish to make.
Page 113 PREV PAGE TOP OF DOC Segment 2 Of 3
When Brooke replaced local rent control after 40 years, it created an entitlement for residents at a time when housing authority assistance was essentially block granted. And it bankrupted the housing authorities.
PFS was installed, an entitlement for housing authorities, that did essentially the same thing. House Resolution 2 leaves Brooke in place. The problem lies on the subsidy side.
If we keep Brooke as an entitlement for residents, and replace the subsidy system with a block grant type system, housing authorities will go bankrupt, housing authorities will die. We have two choices. We can either have a Brooke-type system, with a PFS deficit funding type subsidy approach. Or we can have local control of rents, and admissions, combined with a block granting system. You can't mix and match both.
Those are the only two sets of choices that we have. There is no middle ground. Leave us with a hybrid, and history will repeat itself. We'll be broke, and residents will suffer. Thank you very much.
Chairman LAZIO. Thank you very much, John. I want to note in response to your comment, that the Secretary has requested additional flexibility to exempt some of the smaller housing authorities to try and redefine the mission of the Department.
Mr. HISCOX. That's an excellent suggestion, Mr. Chairman. Frankly we would feel more comfortable if it was in the statute.
Page 114 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. His request is that we include it in the statute. We're going to be speaking with him and discussing the issue.
[The prepared statement of Mr. Hiscox can be found on page 296 in the appendix.]
Thank you very much.
Mr. Gentry.
STATEMENT OF RICHARD D. GENTRY, PRESIDENT, NATIONAL ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFICIALS
Mr. GENTRY. Good afternoon, Mr. Chairman, and Members of the subcommittee. My name is Rick Gentry. I am Executive Director of the Richmond, Virginia Redevelopment and Housing Authority, and also currently President of the National Association of Housing and Redevelopment Officials.
And, Mr. Chairman, I want to thank you again on behalf of NAHRO for allowing us to be part of this process as you have in the past.
On behalf of our membership, I have attached some detailed comments to the bill, and I am not going to try to go through all of those. What I would like to do is just hit a few points very briefly, and then respond to any questions you might have later on.
I would say at the outset that NAHRO supports the direction of H.R. 2, which seeks to devolve authority to local agencies. We fully support the direction of this bill, and much of the discussion that occurred this morning between you and the Secretary.
Page 115 PREV PAGE TOP OF DOC Segment 2 Of 3
And I would like to point out that much of that discussion involving deregulation and basically leaving the good housing authorities alone, focusing more attention on the problem housing authorities, rather than ensuring some uniform level of mediocrity, is the way the focus of the legislation should go. And we are fully in support of that.
We have some concerns. The first of those is with respect to funding. I realize this is not the Appropriations Committee. But I do know that there is a great correlation between the program rules and regulations that come out of this subcommittee and the level of dollars that come out of the other subcommittee.
And maybe it shouldn't be that way, but it is. And one of the things that housing authorities all over the country are forced to do is basically do what we can afford to do. We are constrained by certain amounts of funding available to us.
We've been hearing for a number of years about those limitations, which we fully believe are not going to go away, and believe that program rules should be structured based on current reality, instead of the reality based on some time in the past.
With respect to rent rules, as Mr. Hiscox stated a few minutes ago, we believe that that is one of the core issues. NAHRO, 2 years ago, and then last year, took a strong stance opposed to the Brooke Amendment, and those sorts of Federal restrictions on the rent setting ability of local housing authorities.
Ideally we still remain in that mode. However, we understand that full repeal of those sorts of limitations is probably not going to occur. In that regard we believe that the general position staked out by this subcommittee and also by your counterparts on the other side of the Hill form a good basis for a reasonable compromise that will incrementally begin getting us to where we need to be. And we believe the same is true in terms of targeting.
Page 116 PREV PAGE TOP OF DOC Segment 2 Of 3
One of the things that we are very interested in, in addition to dealing with the reality of money limitations, is the reality of the social pathology that's been created in many of our properties structurally through the concentration of very, very low-income families there with little opportunity for getting up and getting out.
And we believe that irrespective of money concerns, that there's a great need for income balancing within public housing to provide that we serve a greater range of incomes of people.
Within those broad confines, there are two or three problematic issues in the legislation I would like to point out to you, and I would be glad to discuss these at greater length during questions and answers.
One is the required community work and family self-sufficiency agreements. We are opposed to that, not because it's bad in principle, but because it will be bad in the end result. It will be, number one, an unnecessary bureaucratic obstruction and complication to the running of the housing authority, and will provide little good to the people we serve who have been punished for a full generation from being productive.
To turn around now and begin punishing them for lack of performing free work for the housing authority is the wrong signal, particularly in light of the welfare reform that is beginning to take place in a very real way in many States, Virginia included. So we would be opposed to the community work provision.
Page 117 PREV PAGE TOP OF DOC Segment 2 Of 3
We are also opposed to giving residents the right to choose between two different kinds of rent. What is on the surface a motherhood and apple pie issue that probably common sense would tell you to support, we believe again is an unwarranted bureaucratic intrusion that would create paperwork, but would not have a positive end result.
We believe that if there are going to be Federal restrictions on rent charged, let those be, if you will, a protective level. Let the housing authorities work within that, and the rent to the tenants always be what is going to be in the best interest of the resident, which is going to be the lowest rent possible.
We also are opposed to the flexible home grant rule. We believe that's an unwarranted Federal intrusion into local affairs. Every State in the Union has a provision already where a locality can take the full and direct control of the housing authority.
There are two cities in Virginia where that is the case. There are four cities in my home State of North Carolina where that is the case. Locals can make that decision on their own without the need for prompting from Federal officials.
We believe that with respect to those kinds of enforcement measures, the best way for you to go is some sort of an automatic kicker that would provide for judicial receivership, which is working extremely well here in the District of Columbia, where the reforms are under way that would not be under way were that not in place.
It is the policymakers, not the policy executors that matter. And in that respect that gives you your control.
Page 118 PREV PAGE TOP OF DOC Segment 2 Of 3
Finally, the issue of accreditation. We believe that perhaps accreditation may be an idea whose time has come. However, we do not believe that we should just go ahead and do it. We believe that there should be a considered decisionmaking process, and in that regard you have a model that has worked very well in another regard that could be employed here.
And that is the model used on the troubled housing authority properties in the early part of the 1990's that set up a database from which the HOPE VI program came. It was co-chaired by David Gilmore here in DC.
So we believe that there is a mechanism to make that decision, and we believe in NAHRO that it may be the right decision to make, with HUD's downsizing in the future that may not be there. At the very least, the industry greatly fears serving two masters at the same time, both HUD and accreditation.
We believe that a study would be an appropriate thing to do, and accreditation may be the right answer following that study.
Thank you, Mr. Chairman, for the time, and I'd be glad to respond to any questions.
[The prepared statement of Mr. Gentry can be found on page 311 in the appendix.]
Chairman LAZIO. Thank you again, Rick, for your thoughtful comments.
Ms. Zaterman.
Page 119 PREV PAGE TOP OF DOC Segment 2 Of 3
STATEMENT OF MS. SUNIA ZATERMAN, EXECUTIVE DIRECTOR OF THE COUNCIL OF LARGE PUBLIC HOUSING AUTHORITIES
Ms. ZATERMAN. Thank you, Mr. Chairman, and Members of the subcommittee for inviting me to speak on behalf of the Council of Large Public Housing Authorities.
My organization represents 65 of the largest housing authorities and they manage collectively somewhere around a half a million of the country's 1.3 million public housing units, primarily in large urban areas.
We've been greatly encouraged by the Chairman's commitment to principles of reform and deregulation, both last year and this year, and we appreciate the Chairman's commitment to public housing reform by introducing H.R. 2 so early in the session.
We hope this bodes well for long awaited changes so desperately needed.
I would just like to summarize a few of my key points. First, greatly reduced funding for public housing demands much needed reforms, or disaster is inevitable. Again, I understand I'm not speaking before the Appropriations
Committee, but if we don't draw the connection between appropriations funding and program reform, I think we've missed the context for this bill.
I would just like to point out to you that we estimate that from fiscal year 1993 to fiscal year 2002, the loss in operating subsidy alone will be somewhere near $5.3 billion, that's with a ''B'', dollars. And that assumes flat funding. Add to that loss slashed modernization funding, reductions in Section 8 administration fees, and rent losses due to welfare reform, this is not a happy picture.
Page 120 PREV PAGE TOP OF DOC Segment 2 Of 3
But more importantly, and regardless of funding levels, we must create more diverse and healthier social environments for the sake of families in public housing, their children, and the surrounding neighborhoods.
And I would just like to refer to Mr. Frank's very pointed remarks about blaming the victim in terms of our reform strategies, and despite, I think, our very sincere advocacy efforts and our sincere prayers, we have not been successful in securing the level of funding necessary to serve very poor people adequately in the public housing system.
My second point is H.R. 2 contains some very basic noncontroversial elements of reform. We cannot let another year pass without making them permanent. Important and largely noncontroversial changes in last year's appropriations bill, in both House and Senate appropriations bills, include the repeal of Federal preferences, the repeal of One for One requirement, rent setting flexibility with the 30 percent affordability cap, self-implementing ceiling rents, and operating in a capital fund with some fungibility, and the ability to engage in public/private partnerships.
We'd also like to include in that list site-based waiting lists on the agreed to list, if you will. We strongly support this provision in H.R. 2, as I believe my colleagues in the other professional organizations do, as I believe the Low Income Housing Coalition has put it from the advocacy community has put out in their recent position statements.
No other applicant for assisted housing, including the much hailed Section 8 Program, is denied the ability to apply for the development of their choosing. How can we foster economic and socially stable communities if housing options do not take into account a family's child care, employment or support system network needs?
Page 121 PREV PAGE TOP OF DOC Segment 2 Of 3
We believe that all these matters should be passed promptly in both houses, and perhaps we should consider, and leave for further discussion, the more controversial issues of targeting and rent setting, although we have our positions on those.
Please do not leave us limping along year by year at the mercy of the appropriations process to secure these very basic reforms.
Third, the H.R. 2's income profile targeting will boost social diversification and help PHAs improve rental income. I do have to take exception to the Secretary's remark that no housing authority would be required to accept a poor person for the next 10 years if profile targeting were put into place.
Our recent surveys of housing authorities employing the repeal of Federal preferences, and using local preferences, indicates virtually all of them are using some form of Federal preference to balance the need for mixed income and the worst case housing needs in their community. So I think these fears are unfounded.
Accreditation. It is time to sit down and talk about this. I think the industry groups, particularly CLPHA, have made a commitment to it. Our members have pledged funds to initiate a study. We believe that HUD in their downsizing state will not have the capacity to do that, nor have they demonstrated over time the ability to provide the oversight and monitoring needed for housing authorities, to both improve their performance, set the trigger for those that are in trouble, and deal with the troubled housing authorities.
Page 122 PREV PAGE TOP OF DOC Segment 2 Of 3
However, we recognize your desire to assure the creation of an entity by a date certain. But we think that the appropriateness and the parameters must be studied carefully, because it is a complicated process, there are concerns the Secretary raised that are legitimate.
We are your partners in this endeavor. Please trust us, and create an accreditation study along the lines that we have proposed. I don't think you will be disappointed, and I think we will have a better system, and we will all benefit from it.
Just another point, make H.R. 2 a decontrol bill in fact, and not just in preamble. We do have to ask if anything could be streamlined and decontrolled with 315 pages of legislation. We ask that you review every page carefully whether it furthers our mission of decontrol.
And one last point, if you will indulge me a moment. The Home Rule provision, we have serious concerns with. I think we need to look no further than the District of Columbia. If you look at Receiver David Gilmore's strategy for success, it is to separate the housing authority from the city.
If you look to Detroit, where a very reform-minded and committed mayor has worked hard to improve the housing authority, and part of that strategy is to remove it from the city structure. I think we gain fungibility through the moving to work demonstration. I think we can foster closer cooperation through the CHAS and annual housing plan process, and I don't believe the Home Rule gives us anything further than that.
We do have problems with the rent choice, and I think we can work together to provide the level of flexibility and the affordability caps for very low-income people that we think are very important.
Page 123 PREV PAGE TOP OF DOC Segment 2 Of 3
In conclusion, we again support heartily your stand on reform and decontrol. We appreciate your staff's outreach efforts to us, we hope we will have further discussions to strengthen the bill.
[The prepared statement of Ms. Zaterman can be found on page 346 in the appendix.]
Chairman LAZIO. Thank you very much.
Mr. Sole.
STATEMENT OF HAROLD SOLE, DIRECTOR OF LEASED HOUSING, NEW YORK CITY HOUSING AUTHORITY, ON BEHALF OF THE NATIONAL LEASED HOUSING ASSOCIATION
Mr. SOLE. I am speaking on behalf of the National Leased Housing Association, and I am assisted by Charles Edson and Ken Schwartz. In my work day, I am Director of Leased Housing for the New York City Housing Authority.
And just as the public housing program in the New York City Housing Authority is the largest in the country, and generally regarded as the best in the country, the Section 8 Program administered by the housing authority is the largest in the country, with almost 72,000 families being assisted in buildings owned by more than 25,000 different landlords.
And we would like to think that it is one of the best in the country.
Page 124 PREV PAGE TOP OF DOC Segment 2 Of 3
Among the things that we fully support and are very glad to see in H.R. 2, the title of the bill, ''Housing Opportunity and Responsibility Act of 1997.'' We like the idea of putting into the title responsibility coupled with opportunity.
On the particular parts of the bill, the merger of the certificate and voucher into choice-based, one program; all PHAs have been in favor of that for many years. The elimination of Federal preferences, obviously everybody is in favor of that.
The elimination of the ''take one/take all.'' This was a program, Section 8, that started with landlords voluntarily entering the program, and then once in they were bludgeoned somewhat into remaining. So the elimination of that is all to the good.
We also like very much the statement in H.R. 2 that the determination of the dwelling unit in which an assisted family resides, and for which housing assistance is provided under this title shall be made solely by the assisted family.
So that the choice is that of the family. The National Leased Housing Association has been concerned about the repeal of the 1937 Act, but apparently the technical problems have been worked out. Our counsel worked with your staff to fashion a compromise.
With all these good provisions in H.R. 2, are there any changes that we would recommend?
And I am going to talk in terms of nuts and bolts, really, the day-to-day work of what works and what doesn't work.
Page 125 PREV PAGE TOP OF DOC Segment 2 Of 3
There is a provision in H.R. 2 that says the Secretary shall differentiate between major and minor deficiencies, in talking about housing quality standards. For about 5 years, at least, we and many other PHAs have been talking to HUD personnel in terms of making this differentiation, and HUD has always agreed with us, but nothing has ever been done.
So we think it might be advisable to put in a target date for when that should be accomplished, within so many months after the enactment of the bill.
The shopping incentive: shopping incentive, many of us feel, is something that in a book or in an ivory tower sounds very appealing. In actual practice, the way this worked out was--studies were done of this in past years, throughout the country; Abt Associates did a study for HUD--fifty percent of the shopping incentive went to people who remained in place. They didn't shop at all. They didn't move. Throughout the country.
In New York City at that time, 80 percent of the shopping incentive went to families that rented in place.
We have made the point all along that when families have their rent reduced to 30 percent of their income, and they are quite happy at that prospect, and then they are told, really they don't have to pay 30 percent of their income, because the apartment that they rented is below the payment standard, and they only have to pay 20 percent of their income. Where in some cases, some families have been paying 11 percent of their income.
We think it's gilding the lily. It's money wasted that would be better used for other purposes. And, by the way, while families pay 30 percent of their income for rent, in New York City, in terms of the contract rent, what share of the contract rent are families paying? As of December 1996, the families were paying 22.7 percent of the contract rent.
Page 126 PREV PAGE TOP OF DOC Segment 2 Of 3
So what we recommend is in this version, in H.R. 2, you have taken the shopping incentive, you have cut it in half. You say you will give half to the family in a very elaborate escrow account, and half would go back to the agency.
Well, we would recommend that there be no shopping incentive. Use that extra money, if there is extra money, to help more families. In other words, I don't see any point in reducing a family's share of the rent from 30 percent to 15 or to 12 percent.
We think that the money could be better used, especially in these austere times.
In terms of the earned income disallowance, there is that provision in the Public Housing bill, but there is no similar provision in the Section 8 bill. And there is tremendous concern nowadays about not having disincentives to work.
And we certainly think there should be a provision for disallowing a portion of earned income. Furthermore, the wording in the public housing portion of the bill, on what this allowance would be, just pertains to people who have ben unemployed, and then become employed.
We would recommend that there be a disallowance of earned income, even for people who have been employed, but when they get, let's say, salary increases, because if you think of a fairly low paid person who gets a salary increase, and then, and let us say in New York when there are Federal taxes taken out, the State tax, the city tax, the increased Social Security tax, and then the 30 percent that HUD takes, there's little left.
Page 127 PREV PAGE TOP OF DOC Segment 2 Of 3
Just one last point, so that we think that--I would recommend that there be a flat 10 percent disallowance on earned income, and the money that you lose there could be made up by having, by getting higher rents from other families.
Last point, portability. We certainly support portability throughout the entire United States. But the billing of portability is an atrocious nightmare for some agencies, and suggest one half of turnover certificates--or vouchers or whatever the new Section 8 is called--should be used to absorb cases where those agencies are presently billing.
In other words, the law should mandate that an attempt should be made to decrease the billing where possible.
[The prepared statement of Mr. Sole can be found on page 356 in the appendix.]
Chairman LAZIO. Thank you very much, Mr. Sole.
Mr. Murray.
STATEMENT OF JACK MURRAY, MANAGING DIRECTOR, INSIGNIA RESIDENTIAL GROUP ON BEHALF OF THE NATIONAL APARTMENT ASSOCIATION AND THE NATIONAL MULTI HOUSING COUNCIL
Mr. MURRAY. Thank you. Chairman Lazio and Members of the subcommittee, my name is Jack Murray. I would like to commend you for calling this hearing to discuss H.R. 2, and to thank you for including me on the panel.
Page 128 PREV PAGE TOP OF DOC Segment 2 Of 3
I speak today from more than 25 years of experience in the property management business. I am Managing Director of Insignia Residential Group, a subsidiary of Insignia Financial Group, headquartered in Greenville, South Carolina, and one of the Nation's leading fully integrated real estate services companies.
Insignia is the Nation's largest manager of apartment housing, with more than 275,000 apartments in more than 2,000 properties. Approximately 40,425 of these apartments in 358 properties are part of the U.S. Department of Housing and Urban Development's resident- and project-based Section 8 Programs.
I am here today on behalf of the National Apartment Association and the National Multi Housing Council. The National Apartment Association and the National Multi Housing Council represent many of the Nation's firms participating in the multi-family rental housing industry.
Our combined memberships are engaged in all aspects of the development and operation of apartment communities, including ownership, construction, finance and management.
While my comments today are confined primarily to the resident-based Section 8 Program, I would like to point out that the National Apartment Association and the National Multi Housing Council strongly support the continuation and improvement of the project-based Section 8 Program as well.
The resident-based Section 8 Program can and should work. But I am here today to tell you that the program does not operate as well as it should, because since it was established, it has been amended to include a set of rules that run contrary to sound private market practices.
Page 129 PREV PAGE TOP OF DOC Segment 2 Of 3
Studies conducted by HUD over the past few years reveal that as many as 20 percent of voucher recipients fail to find suitable housing, and return their vouchers unused. Eighty percent is a terrific success rate if you're running for reelection. But in my view, a 20 percent failure rate is too high for a matter as critical as locating suitable housing for our Nation's low- and very low-income families.
This failure is, in part, a result of the anti free market design of the program. The immensely burdensome requirements of the program have caused owners and managers of good quality, well located rental housing to shy away from participating in the program. That's the bad news.
The good news is that of all aspects of the HUD reform that have been discussed during the 104th and 105th Congress, there is perhaps a greater degree of consensus on how to fix the resident-based Section 8 Program than on any other topic.
Conventional assisted and public housing providers, Members of Congress, and on many points the Department of Housing and Urban Development, agree on changes that will improve the program. A foundation of this consensus was a 1994 report commissioned by the National Apartment Association and the National Multi Housing Council, and conducted by Abt Associates.
The report was based on focus groups conducted with owners and managers with experience or an interest in the Section 8 Program. The answer that came back was clear: owners would be more likely to participate in the program if it is amended to operate as much as possible within the bounds of the private marketplace.
Page 130 PREV PAGE TOP OF DOC Segment 2 Of 3
In other words, vouchers should be as good as cash; Section 8 participants should be given all the protections of their nonsubsidized friends and neighbors, but receive no greater protection; and owners should not be penalized with rent up delays, late payments from public housing authorities, and constraints on market-driven decisions.
Mr. Chairman, I am pleased that your measure, H.R. 2, includes nearly all the recommendations that were proposed by a coalition of eight organizations, including NAA and NMHC, in the 104th Congress, and based on the Abt Report. We commend you for your leadership in fashioning a measure that will work better for both residents and owners alike.
Let me discuss in a little bit of detail two of the most widely held disincentives to owner participation in the Section 8 Program: the ''endless lease'', and the ''take one/take all'' provision.
As you know, the ''endless lease'' provision does not allow owners the option to opt-out of a rental relationship with a resident upon expiration of the lease. Outside the Section 8 Program, it is a well established provision of the landlord/tenant law that when a lease expires both the owner and the resident have the option of ending the relationship.
Owners need this option to protect their investment from residents who cause losses, and residents need the option to opt-out if an owner is providing an inferior product.
Under the Section 8 Program, however, owners are required to continue a rental relationship indefinitely or go through a lengthy, costly eviction process to end it.
Page 131 PREV PAGE TOP OF DOC Segment 2 Of 3
The ''take one/take all'' provision, like the ''endless lease'' provision, was enacted with the intent of protecting Section 8 recipients, but, like the ''endless lease'' provision, it has created a disincentive, rather than an incentive, for owners to participate in the Section 8 Program.
As you know, Congress took an initial step when it enacted last year's appropriations measure which temporarily eliminated the ''endless lease'' and the ''take one/take all'' provision. It is time to make these changes permanent through H.R. 2.
I would also like to briefly mention one other provision of H.R. 2 that we support. We strongly support Section 702 of the bill. This provision would preclude HUD from establishing occupancy standards, recognizes that State standards are presumed reasonable, and provides for a reasonable standard in the event that a State does not have an established standard.
Owners must be provided with a reasonable, unambiguous standard in order to provide current residents with requisite maintenance and services and protect the stock of rental housing for future residents.
We thank you for your time today, and will take your questions as you wish.
[The prepared statement of Mr. Murray can be found on page 361 in the appendix.]
Chairman LAZIO. I want to thank you and I want to thank all the panel for some very fine testimony. I'm going to reserve my questions now and turn to Mr. Ney, if he has any questions.
Mr. NEY. No questions.
Page 132 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. Mr. Ney will also reserve his time.
Mr. Kennedy.
Mr. KENNEDY. A couple of questions, Mr. Chairman. First of all, I want to thank all the representatives of public housing and private housing. Jack, how did you get here today? But anyway, we thank you for coming in.
I thought there were a couple of interesting concepts that were put on the table. I wonder if I could ask John Hiscox to just repeat that dynamic that you were talking about in terms of how the Brooke Amendment would affect people? I didn't follow exactly what you were trying to get across, so if you could just repeat it, I would appreciate it.
Mr. HISCOX. Thank you very much, sir. It was not because of your inability to follow, but I had the VCR on fast forward.
A little history is in order here. When the Brooke Amendment was created, up until the time the Brooke Amendment was created, public housing essentially paid for itself, from operating rents, and the assistance that housing authorities received was in effect block grants.
The Brooke Amendment radically dropped the rental income available to housing authorities, and within a few years the entire public housing industry was pushed basically to the edge of bankruptcy. Those of us who were around at the time saw it happening. Fortunately, the Congress----
Mr. KENNEDY. Was it the Brooke Amendment that did that?
Mr. HISCOX. Yes.
Page 133 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. KENNEDY. Or was it more the fact that we put so many preferences----
Mr. HISCOX. Actually, the Brooke Amendment caused that also, because by making the same commodity, the exact same commodity, much more valuable to the people who had paid the least for it, very low-income families displaced the working families, not just in housing, but also on the waiting list as well.
It engineered a demographic turnover, but there was an immediate drop in rental income when Brooke passed. Immediate drop, followed by a radical decline that happened over a period of time.
Now, this is not necessarily to say that this was bad policy in itself. It was a decision made. In fact, it was part of a series of decisions that were made in the late 1960's through the 1970's, culminating in the Housing Act of 1981. The decision was that public housing needed to serve, that it was a scarce resource, and that it needed to serve the very poorest of the poor.
At any rate, by 1975, public housing, which had had very light subsidies prior to that point for operating, was functionally bankrupt all over the country, and it was rescued by the performance funding system.
The performance funding system basically establishes an arbitrary baseline, an allowable expense level, and says that ''We'll fund your deficit. You take in whatever rental income your residents can afford to pay you, based on Brooke, and we'll cover the difference.''
Page 134 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. KENNEDY. That's the operating subsidies?
Mr. HISCOX. Exactly. That's the operating subsidy, and we created, in effect, an entitlement. We created an entitlement for our residents. We created an entitlement for the housing authorities.
The problem with that is that for about the last 10 or 12 years the cost of that entitlement has grown at the rate of 2.2 times the rate of inflation. Because of the problem you alluded to earlier. We're serving people at about 17 or 18 percent of median income, as opposed to 33 percent of median income in 1981.
I remember when I was----
Mr. KENNEDY. We've got to speed it up.
Mr. HISCOX. OK. Here's the core issue, though. The issue is not whether the Brooke Amendment is necessarily a bad thing, and Representative Frank certainly spoke to this very well in the last session when he talked about the need to preserve the Brooke Amendment as a maximum that a family could pay.
The issue is simply this: since the late 1960's, housing authorities lost complete control over income. The amount of income that we have is dictated by Federal formula. As long as that is being covered by PFS operating subsidy, that's no problem, as long as Uncle Sam can pay for it.
Page 135 PREV PAGE TOP OF DOC Segment 2 Of 3
However, if you shift us to a block grant formula system, with that amount frozen or trended only for inflation, and we have no control whatsoever over the other side of the equation, we will go bankrupt.
We have those two sets of options. Either you can have local control of the income and block granted subsidy, or you can have a Brooke Amendment Federal Government type of rent system, and Uncle Sam has to pay the operating costs.
Mr. KENNEDY. Got it.
Mr. HISCOX. If you try to do a hybrid, we will go broke.
Mr. KENNEDY. Yes. Well, I think that's what happened around here, that we arbitrarily cut the housing budget by 25 percent. Then, the position that the housing authorities were left in was trying to find the resources from someplace else. This created an enormous amount of friction between, at least, some of the Members on the Democratic side of this aisle and some of you who represent the housing authorities.
I listened to Sunia talk about ''trust.'' It's fine to talk in terms of trust, but the truth of the matter is, there are times when we're going to have different interests. It is, I think, very important for you to continue to keep in mind the fact that there's simply not enough money in this budget to accomplish what has to be done if we're going to effectively deal with the needs of the poor, and particularly the growing needs of the poor with regard to public housing.
Page 136 PREV PAGE TOP OF DOC Segment 2 Of 3
And I just think that to ignore that debate and have these technical discussions on Brooke, on targeting and all this other stuff, without dealing with the fact that we have just dramatically cut back on the amount of resources the Federal Government is putting into this is a real mistake.
If the Chairman would allow me an additional 30 seconds, I'd like to make a point.
Chairman LAZIO. No objection.
Mr. KENNEDY. On Harold Sole's issue, we wanted to deal with the issue of the disincentive to work, so we allowed the individual recipient to be able to retain some of the funds that are possible by virtue of the cap.
Your suggestion that all of the money goes back, I think, would be difficult, but if you took just the Government portion and put that back into new housing, I think that's a very, very interesting idea, and something that we should definitely consider.
Mr. SOLE. I wasn't talking on the disincentive to work on that point. I was talking the shopping incentive, when the family rents an apartment below the payment standard. And what I am pointing out is that that's entirely fortuitous. It isn't as though somebody looks for housing to find decent housing and also make, let's say, $25 on the deal. That isn't what happens.
People select the housing that they move into for many reasons, whether it's near schools, shopping, whatever it is. If it happens to be below the payment standard, to return half of that, quote: ''savings'' to the family, I'm saying, in effect, the Government should take that money and use it to help more families.
Page 137 PREV PAGE TOP OF DOC Segment 2 Of 3
The shopping incentive becomes icing on a cake that is completely unnecessary.
Mr. KENNEDY. Thank you. One very brief final point. If you're going to adhere to Brooke, and you're going to deal with John's point on the bracketing, then I think that there is an enormous issue about how you target the voucher-based program.
In other words, you've got to increase the amount of low low-income people who are going to be taken care of by vouchers, which is something that I hope that Mr. Lazio will be flexible on. Because, the way the bill is currently written, I believe, there is a 35 percent targeting number for low low-income people on the voucher program, which I think would be devastating, because you're going to throw them out, and they're going to have no place to go.
You're not going to re-up them.
Ms. ZATERMAN. Mr. Kennedy, we would support a fungible profile targeting that would allow----
Mr. KENNEDY. What does that mean? A ''fungible targeting''?
Ms. ZATERMAN. Well, if you give me a minute, I'll explain it. It means that you would look at both your public housing and Section 8 portfolio and use it interchangeably to deal with very low-income housing needs.
That would mean targeting deeper on the Section 8 side to allow greater flexibility to create income mixes and greater social--better social--environments in public housing while still addressing the very very low-income housing needs through the Section 8 Program.
Page 138 PREV PAGE TOP OF DOC Segment 2 Of 3
And so we would look to some kind of targeting that would give local housing authorities the flexibility to use their Section 8 Program to do deeper targeting, while achieving a greater social mix in the public housing side.
Mr. KENNEDY. I think it's worth talking about. Thank you.
Chairman LAZIO. I thank the gentleman.
Mr. Frank.
Mr. FRANK. I appreciate that last point, because it gives me some hope that I was losing, frankly, collectively in you. I have to say I think there's a general problem here. You are means who think you are ends. You are, as far as I am concerned, the means through which society tries to help low-income people.
But as I read your testimony, you seem to think the end is to make you whole, and whether or not we help low-income people is somewhat incidental. That's the total focus. Ninety-eight percent of what you're talking about is about this.
Mr. Kennedy brought up a very important point, because the combined thrust of what you say is to reduce the services that public housing and other institutions provide to low-income people. That may be a necessary step, but I didn't see in any of your testimony, maybe I missed it, I will try to read through it, a concern about what happens to those people.
Page 139 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. Kennedy brought that point up and I am glad to hear you accommodate this. But your testimony is overwhelmingly concerned with your institutional health. There is very little in here about what happens to the people. And it may be that the people living in the institution will be better off if there are fewer poor people around.
But I don't see among you--I thought your goal, in part, at least, was to help house people and that is not in here.
I will say, Mr. Gentry, I was pleased to see in NAHRO's statement a reference to the funding, and to the need for more funding, and I appreciate that. In the CLPHA I was appalled to see a sneering reference to those of us who worry about appropriations. We are ivory tower advocates, or maybe we just pray. And you just dismiss that.
What you essentially present to us is the picture of people who have decided to accommodate yourself to a society which has decided to be tougher on poor people, and you're going to figure out how to keep your institutions whole in that operation.
And even where you do tell us that you support some changes, overwhelmingly--overwhelmingly--the thrust of your lobbying is institutional self-preservation, as opposed to increased housing.
I do not remember much help from you when we fight--and we do fight--we don't just have appropriations fights. We have fights on budgets. I don't remember this kind of support on budgeting.
Page 140 PREV PAGE TOP OF DOC Segment 2 Of 3
I have never seen you as activists when it came to the Brooke Amendment. I'll give you a chance to respond to this, but first I want to ask Mr. Gentry, because I am still puzzled by this, and in fairness to Ed Brooke, a very distinguished supporter of trying to help low-income people, and apparently he thought helping low-income people was more important than helping housing authorities, which may be one of your differences with him. But he wasn't the one who put a work disincentive in it. Let's call it the Brooke-Reagan Amendment, because it was Ronald Reagan who got the Congress at the time to make the 30 percent a floor as well as a ceiling.
So I have to ask you, Mr. Gentry, you say, and I appreciate your talking about the need for more money. But you say the Brooke Amendment is a disincentive to work. If we repeal the floor part of the Brooke Amendment, how is a 30 percent ceiling, which is what Mr. Kennedy and I were trying to do, a disincentive to work? How is it a disincentive to work to tell people that while their rent could go below, it will not go above, 30 percent of their income?
Mr. GENTRY. Mr. Frank, there are three or four things I heard there.
Mr. FRANK. No, I want to ask you this one specific question. I'll give you time to answer the other stuff. But you said it is a disincentive to work. Now, my question is, I understand the argument that a 30 percent floor is a disincentive to work. If your income goes up, your rent goes up. But if we said that there was no floor, but there's only a 30 percent ceiling, how is that a disincentive to work?
Mr. GENTRY. The Brooke Amendment generally refers to two pieces of legislation. Perhaps we should find a different word for it.
Page 141 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. FRANK. Are you then saying--because I really need an answer to this specific question. Let me rephrase the question. I'll withdraw that one.
Mr. GENTRY. What I am saying, sir, is that there is a short answer and a long answer to your question. The short answer is that what you just suggested is far better than what we've had in the past, and it would be a marked improvement.
Mr. FRANK. But that's what we did last year, you realize. That's the amendment you were opposing last year. The amendment to remove it as a floor is what we offered last year. Now, let me rephrase the question.
Mr. GENTRY. What we were looking for, Mr. Frank, was the flexibility for some local discretion in that matter.
Mr. FRANK. Please. That is not remotely responsive to my question. I have to ask you a question and I wish you would answer it. Is a 30 percent ceiling without a floor a disincentive to work?
Mr. GENTRY. Depends on the location. In most cases it probably would not be. But in some cases it could be.
Mr. FRANK. So then in your statement----
Mr. GENTRY. All we're looking for--Mr. Frank, I'm trying to answer your question.
Page 142 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. FRANK. No, you're not trying to answer my question. You're trying to evade my question. I don't understand. How is it a disincentive to work if we say that. As a matter of fact, it seems to me, you're the one who is now saying, ''If you make more money, we're going to take more money.''
I'm saying to some people, ''If you make more money, you can keep it all.'' So how is a 30 percent ceiling only a disincentive to work?
Mr. GENTRY. In and of itself it's not.
Mr. FRANK. Thank you.
Mr. GENTRY. But it precludes other actions the housing authorities could take to provide encouragements to work, such as setting flat rents for certain properties, the same way they list bad properties and other community development program do in their own right.
Mr. FRANK. So you do agree that it's not in and of itself a disincentive to work, and I appreciate that advance. But the other thing, though, is it deprives you of some revenues? Is that how it becomes a disincentive? Because that's my fundamental issue.
You pay some service here to increase revenues. But none of the rest of you. Ms. Zaterman, I have to say I was really disappointed in your kind of dismissive reference to those of us who are ''ivory tower advocates and prayers,'' because you don't get the money.
It seems to me that you and your people have accommodated yourself to an atmosphere in which poor people are going to get screwed, and you want to make sure that you make out well in it.
Page 143 PREV PAGE TOP OF DOC Segment 2 Of 3
Ms. ZATERMAN. May I respond to that?
Mr. FRANK. Please.
Ms. ZATERMAN. I don't recall anyone offering any amendments to increasing operating subsidy or modernization levels in the last 3 years when the appropriations bills came to the House floor.
I don't think anybody can dispute CLPHAs commitment and the industry's commitment to get as adequate a level of funding that we have. And I think there is a myth created about preserving the institution. What is the institution? The institution is bricks and mortar and roofs that house poor people.
If we do not have enough money to keep the heat on, to collect the garbage, the poor people that are in there now will not be served.
So when we talk about preserving public housing, we're talking about preserving it for the people who already live there, not this mythic institution that you referred to.
Mr. FRANK. No, you're just wrong. Because we have, in fact, had that fight. By the time the appropriations bill comes up, it's too late sometimes. But we have had that fight on the budget, and I do not remember your presence when we have fought for budgets which would have provided more funds in the budget resolution for that situation.
Page 144 PREV PAGE TOP OF DOC Segment 2 Of 3
I do not remember your help when we've tried to cut military budgets which have been necessary. The overwhelming thrust of your lobbying has been for institutional concerns. And, you're right, it's bricks and mortar, but what you're saying is the way to preserve the bricks and mortar is to serve people who aren't, on the whole, as poor. Within a limited budget that is true.
But what you have not been is present when we were fighting that, and the fact is that we have had fights over budgets, and I do not remember you joining our effort to get a better overall budget in the budget resolution and in other places.
Ms. ZATERMAN. Mr. Frank, I beg to differ. We feel that we're a lone voice out in the woods, and when the fight comes in appropriations committees and on the floor, we don't hear a single Member supporting additional funding or offering amendments to increase appropriations levels.
Mr. FRANK. You are just wrong about the process. The fact is that by the time the appropriations process comes, it's often too late. We do this in the budget every year. We have offered, many of us, budgets that would have provided much more money for the housing function.
And you may be off in the woods, but we don't debate the budget in the woods. We debate it here.
Ms. ZATERMAN. And if I can say that you are the articulate advocate that you are in the budget process, we are still at a point, as I said, that we will be $5 billion underfunded by 2002.
Page 145 PREV PAGE TOP OF DOC Segment 2 Of 3
And we're looking for solutions, and we would very much welcome you to provide some solutions on how we keep----
Mr. FRANK. Oh, I have tried, and you people are too busy with your own institutional needs to join the general lobbying on reallocation.
Mr. GENTRY. I beg to differ. If I could make a brief comment. Mr. Frank, we are all public servants, whether we are on the Federal level or the local level. We are all means to the same end.
What we are positing is structures that will provide the transfer of benefits and accomplish an end result. Now, if that didn't come through, then perhaps you and we could sit down and figure out a better set of words. That's exactly what we said.
And, quite frankly, on behalf of my organization and my industry, I don't appreciate your interpretation. I think you are entirely wrong. We're talking about some basic reinterpretation of the way some work is done.
And what we're doing is positing the way our organization can help our people.
Now, laws that you've passed that help this body, and the Congress, better serve the American people could be characterized the same way that you characterize the position we've taken.
Now, I'm not cynical enough to believe that. I think that you need your own support devices to serve the citizenry, just as we as an industry need our support devices to serve our clientele. And that's all in the role we're talking about here.
Page 146 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. Let me see if I can give you an opportunity, Mr. Hiscox, to respond. I would like to move on to the other panel after this.
Mr. FRANK. I just have a couple of brief questions.
Chairman LAZIO. If it's brief.
Mr. HISCOX. Just a short remark. The people who live in our neighborhoods aren't a clientele. They're not an abstraction. They are not some demographic slice that shows up on a computer printout.
We're full retail. In our neighborhoods the people that we serve are real live human beings. They have names. They have faces. They have runny nosed kids who occasionally wipe their nose on your pants leg. We are fully retail. These are our folks.
When PHADA introduced the first rent reform legislation as a stand alone bill, we had sponsorship, and through that sponsorship introduced a stand alone rent reform bill in 1992. When we came to Washington, we bought 50 resident leaders from across the State of Georgia. It caught fire among public housing residents all over.
The changes we're concerned about, about removing disincentives to work, restoring that escalator so that people can come in, move up and out and leave better off than they were. These were driven primarily by our concern about what's happened to our neighborhoods and what's happened to the people who live in them.
Page 147 PREV PAGE TOP OF DOC Segment 2 Of 3
We don't apologize for asking for enough money to run the place. A bankrupt housing authority can't unstop a toilet, much less operate a family self-sufficiency program.
But I want you to know that all of us who are at the local housing authority level--there may be an exception somewhere--we're not like the governor in the Blazing Saddles movie who hears about a problem and goes ''Harumph, harumph, we've got to protect our phoney baloney jobs, gentlemen.''
This is more than our livelihood. It's what we do in our communities. We're an integral part of those communities, and we work with those people, as individuals every day.
Mr. FRANK. I did want to take 10 seconds to say I would be reassured by that if it was accompanied by what is the most important thing, and I agree with that, lobbying for the resources, and I have not found you collectively and individually to be very, very effective in joining us, those of us who have been trying to lobby for more resources from the Federal Government as opposed to the low-income tenants you serve.
Mr. GENTRY. Mr. Frank, I don't think any of us have been very effective.
Chairman LAZIO. Let me see if I can move our discussion along. I know we're going to have another opportunity for this dialogue.
Let me ask, if I can, a couple of concluding questions before we move on. There has been a dialogue about profiling and mixed income efforts that both the so-called Brooke Amendment and income targeting impact on.
Page 148 PREV PAGE TOP OF DOC Segment 2 Of 3
I am wondering if you could address the social gains by mixed income, if any. Give me a sense of where we are, where we were, and where we need to go, and why that's important for the people who are in the environment of public housing. I'll begin with Mr. Hiscox.
Mr. HISCOX. I look out my office window to development that was built in 1941 that has over 400 units on 20 acres. And despite the fact that we've got some excellent job training programs and a family investment center and that sort of thing, in this particular development, one family out of 12 goes to work.
The buildings are typically eight- and twelve-unit rowhouses. That means in many of those rowhouses there is not a single household who has a member that gets up and goes to work every morning. There are only three two-parent families in the entire development.
We've created an extremely artificial community here, a community in which the things that we consider to be not the norm in the rest of society are the strongly reinforced norm within this community.
And a young person, facing important life choices, looks out there for the role model, the person who simply gets up and goes to work every day, and sees very, very few.
When you have that kind of environment, negative social outcomes feed on themselves. Please do not take that as a vilification of welfare recipients. Many of the people we work with are excellent neighbors, excellent citizens, great people. It's when you pack so many in one place that you have the problem.
Page 149 PREV PAGE TOP OF DOC Segment 2 Of 3
But what harm would be done if we admitted more--not middle income people, not even moderate income people, but working poor people into that same environment? We've heard so much about how public housing is a precious resource and it's scarce. That was the thing that drove the decision early. It was part of Reagan's safety net to be sure. It's a scarce resource, let's allocate it this way.
There's something you might not have thought about lately. Nationwide, the vacancy rate in public housing is 9 percent. That's 125,000 vacant units. The Atlanta Housing Authority is able to demolish 3,000 units because they have over 5,000 vacant units, give or take. They can't really count them all.
In the early 1980's, the Chicago Housing Authority, as badly designed and as badly managed as it was, had a vacancy rate under 1 percent. Now it's around 15 percent, over 10,000 units. That's 10,000 units that could have been occupied by working families without displacing a housing opportunity for a single homeless or destitute person.
Last of all, but not least, I would ask you the simple question, Which is more damaging to a family? To wait on a public housing waiting list an extra 1 or 2 years before they are admitted, or for them to wait an extra 2 or 3 generations before they escape poverty?
Chairman LAZIO. If you could answer that question also, Mr. Gentry. I noticed that when there was a comment by the Secretary regarding the fact that it would be 10 years before another poor person would be allowed----
Page 150 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. HISCOX. In Manhattan. Not the rest of the country.
Chairman LAZIO. You were aghast. Could you address that issue also?
Mr. HISCOX. We have excellent public housing in Macon. 2,300 units of it were a high performer. And it's physically about as good as public housing gets on the average in our region. And we have a waiting list of about 400 people for 2,300 units.
On the Section 8 side, we have a waiting list of approximately 3,000 people, and we only open the waiting list for 5 days once every 2 years. Now that should tell you something about the marketability of 50 year old inner city public housing.
The big problem, though, is not so much the structure. The 400-unit development I mentioned to you has been modernized. It's decent. It's well maintained. We get to maintenance work orders within 24 hours. It's good quality housing.
Why don't people want to live there? The reason is even the very poorest of the poor don't want to live in a welfare ghetto if they have any other choice.
Mr. GENTRY. Two observations involving some discrete numbers, and I'll use 1981 as the base year. In 1981, we as an industry housed people with an average income of about 34 percent of median. Right now, the average income, Nationwide is about 17 percent of median. In Richmond, it's 14 percent of median. In Chicago, it was 10 percent of median.
Regardless of whatever level of subsidies available, that is a horrendous number. If what we do is we reinforce social pathology and social disfunction, we don't have enough working families and we don't have systems that reward families for working.
Page 151 PREV PAGE TOP OF DOC Segment 2 Of 3
The rent, particularly after 1981, absolutely punished families for working. We have a full generation of families now whom we have punished for being positive and productive in their behavior.
What we need is to reverse that. We do that by some admissions differences, and also by rewarding people, once they're in, by positive behavior. I'll give you a recent Richmond number.
Last year, in the appropriations bill that passed this Congress, you included the first significant deregulation I've seen in my 25 years in this industry, and the first step in the right direction. And those tentative, short term reforms that came through are already bearing great fruit.
We implemented those in Richmond in May of last year. Since that time, of those people we've admitted to the Richmond Public Housing Authority, 64 percent have earned incomes.
They're nowhere near median income. What we're talking about are people earning $10-, $12-, $14-, $16,000 per family per year, rather than the average in Richmond, which is $7,000 per family per year.
Chairman LAZIO. So that they couldn't afford a market rate unit either?
Mr. GENTRY. No.
Page 152 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. So the distinction here is between someone making 10 or 15 or 20 percent of median income, and someone making 40 percent or 50 percent of median income. If both families can't afford a market rate unit, from a moral standpoint, what is the appropriate course of action?
Mr. GENTRY. What is necessary--what the legislation particularly since 1981 did was to warehouse the poorest of the poor by priority, and then to punish them for trying to get up and get out.
And what makes for healthy assisted housing developments are ranges of income. Not necessarily middle class, but at least families with different levels of income, different levels of behavior with respect to work.
That, in and of itself, is healthy, irrespective of an appropriations amount.
Mr. FRANK. Mr. Chairman, could I just ask your indulgence. That is, 1981 is significant, because that's when the Brooke Amendment was no longer the Brooke Amendment, but was amended by Gramm-Latta.
Chairman LAZIO. Exactly.
Mr. FRANK. Poor Ed Brooke, who keeps getting beat up by these people, was out of Congress for 3 years by the time that happened. That was the Gramm-Latta addition to the Brooke Amendment.
Page 153 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. HISCOX. It's become an industry term for all of it.
Mr. FRANK. But Ed Brooke's still a living human being. And the concept--I'm curious--it's more than semantics. That was not the Brooke Amendment as it was passed. That was what was changed in Gramm-Latta when people wanted to save some money.
Mr. HISCOX. Your point is very well taken. Mr. Chairman, could I add something to what my colleague just said?
Chairman LAZIO. Briefly, please.
Mr. HISCOX. We have managed at the Macon Housing Authority, through aggressive use of these temporary reforms we had through the appropriations bill, and through the change in the admissions system, and through job training liaisons, family investment center, family self-sufficiency, we've had great success in the last 2 years.
In 24 months we increased the number of families who are working at the Macon Housing Authority by 47 percent. We went from one family out of six working, to one family out of four.
But, nevertheless, out of 2,300 families--we scanned this recently to determine our possibility of doing a home ownership program, and of the families we had who were between $12,000 and $20,000 a year--we had none over $20,000--in other words, in round figures, the people who were between $5.50 an hour and about $9 an hour.
Out of 2,300 apartments, with a tremendous increase in working families, we had a total of 17 such families. These are truly the working poor. And for the life of me, I cannot understand why we don't have some compassion for the working poor.
Page 154 PREV PAGE TOP OF DOC Segment 2 Of 3
The welfare-dependent poor are certainly a big part of our clientele. They always have been, they always will be. Also the elderly, and also the handicapped. But somewhere in here someone has to shed at least one small salty tear for the poor guy who is trying to make it on minimum wage.
Ms. ZATERMAN. If I could just make a brief comment about the Secretary's statement. I think what the Secretary said does not take into account, one: Who is on the waiting list currently? The fact that housing authorities are run by appointed boards from the community, that if you say that all politics are local, so are all housing authority operations in some sense, that we have seen from city to city, regardless of their stock and their financial situation, that they have consistently made commitments to balance the worst case needs and the very lowest income households with providing a mix of incomes.
I think the Secretary is assuming that housing authorities will tear up their waiting lists, will move all of their poor people out of housing, and only accept people at higher incomes. And we all know that that is not possible.
At turnover rates of 11 percent on average for large housing authorities, that's going to be very difficult to do. We really have to recognize the constraints which we think are good constraints locally of community pressure, of a CHAS system, of a mayor and a board attuned to what the local housing needs are, that no one is wholesale tearing up their waiting lists and ignoring the very low-income needs.
In fact, many of our members say they are not--that they are continuing to use Federal preference-like systems, because that is what their boards say is their mission and their priority.
Page 155 PREV PAGE TOP OF DOC Segment 2 Of 3
So I think these kinds of sweeping generalizations only do us harm.
Chairman LAZIO. Thank you very much.
We need to establish rent as a percentage of income, even if there's a sliding scale, for housing authorities that are not flexible enough, not quick enough, to adjust to changes in income in the course of a relatively short period of time, or there will continue to be disincentives to higher income.
Mr. FRANK. Just briefly, let me say, first of all, I want to make it very clear that I want more resources, so we can do both. I agree. I'm not talking about punishing them.
But when it comes to protecting the working people, I am absolutely baffled as to how you protect working people by allowing their rent to go above 30 percent of their income? I think, when we were fighting to keep the 30 percent cap on income, we were, frankly, trying to prevent the disincentive. Because you talk about it being a disincentive if they get more money and their rent automatically goes up. Well, if you take the 30 percent cap off, you're allowing it to go up even more.
Let me just add that it's the working people who seem to me to be likely to be hurt by that. Somebody making no money, or making $7,000 a year, is probably not going to get hurt by taking the 30 percent cap off. The 30 percent cap becomes a factor for people who are making some money, where it's worth something. So I don't see how we are ignoring the working people, where all we're trying to say is there ought to be a 30 percent cap on the amount they can be charged in rent.
Page 156 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. Reclaiming my time, that's exactly the people that you're punishing the most by the rule as it exists today.
Mr. FRANK. We're not. That is some myth you people carry around because you don't want to argue the real point. No one is for keeping Reagan's 30 percent floor.
Chairman LAZIO. If the gentleman would please allow me to make my point, and I would be glad to yield back, so we can have a civil dialogue.
As long as we have a system that ties income to rent, whether it's 20, 25, 27, 18, 22, 30, whatever point is established by a particular housing authority, and somebody chooses to go to work or make extra income, or work overtime, or have a spouse whose income is imputed to them, they are going to have, in my opinion, some disincentive to make those choices.
Mr. FRANK. You have eloquently refuted a position which no one still holds, except for Phil Gramm. Maybe we should call Phil Gramm because it was part of Gramm-Latta. Maybe Phil Gramm is still for it, and maybe Del Latta is; I don't know. Bob, you check with Del Latta when you go back to Ohio. The fact is that you're making a point that no one believes in any more, and Ed Brooke didn't believe in.
We are not talking about a fixed percentage of income. What we are saying, what our amendment was, and what we'll keep saying and you'll keep trying to evade, I guess, is that 30 percent is the limit. You can have whatever other formula you want, but that in no case can it go over 30 percent.
Page 157 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. May I ask this question?
Mr. FRANK. Yes. I'm much more tolerant to interruptions than you, so you go ahead.
Chairman LAZIO. No, no. I would like to ask this question, and then I'll allow you to answer.
If it happens to be not 30--but 27, or 26, or 23--and that's the limit that the housing authority happens to set, why is it any less of a disincentive to work? If it's anything above the marginal tax that you would pay, in general, why would that not still be a disincentive to work?
Mr. FRANK. Well, I suppose any rent is a disincentive, I suppose, if you're saying you can do more. But we're not requiring them to do a percentage. You misinterpreted. All we're saying is, it can't be above 30 percent. You can do whatever formula you want. You can charge whatever you want. All we are saying is there will be a cap, that in no case can it be above 30 percent.
So you're saying it's a disincentive if we put an overall limit on it. We are not trying to tell them it has to be a percentage. It can be whatever they want. It just cannot, in no case, be higher than 30 percent.
How in the world is it a disincentive to have a cap only? We're not setting a percentage for the rent.
Page 158 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. As long as you allow the housing authorities to set rent as a percentage of income, you're going to continue to have this problem.
Now, you're saying, whichever is lower. What our bill, what H.R. 2 suggests, is that the tenant ought to have the choice.
Mr. FRANK. Are you then saying you are no longer trying to raise the 30 percent cap? I would be for this, if that's what you're talking about, that the housing authority can set whatever rent it wants, as long as it, in no case, it goes over 30 percent of rent. That's fine. That's what we're for. Is that what you're for?
Chairman LAZIO. I'm saying exactly what's in the bill. The bill says the tenant, on an annual basis, should have the choice, if they believe they have the ability to have higher earnings capacity and they want a flat rent, and they think they will not be disincented because of that, they will have every ability, under the terms of the bill if enacted, to choose a flat rent that would be in place.
If they think they did not have income capacity and that they wouldn't need to have a sliding scale protection for income limitations, they would be able to choose that. That is exactly what's in the bill.
Mr. FRANK. Yes, but that misses the whole point of this argument. One: people might make a mistake; they might not know for sure. I still don't, for the life of me, understand how simply saying that whatever else you do, there's this 30 percent cap--we're not mandating that they have to set it by a percentage. We're saying that a 30 percent cap, or as the Secretary said, is lower, that's what it would be.
Page 159 PREV PAGE TOP OF DOC Segment 2 Of 3
I don't understand how a simple cap on the amount you can be charged in anything is a disincentive. There is no other walk in life in which anybody argues that a cap is a disincentive.
Chairman LAZIO. I'm going to move the discussion along, only because we have some time limitations and we've had a panel that's been waiting since this morning. I appreciate the gentleman's comments.
I want to thank the panel for their thoughtful presentations and for engaging in our discussions.
I appreciate everyone taking time to be with us here today. The written testimony that you have presented will be included in the record, and I appreciate very much the time that everyone has spent in framing the presentation in writing. We will have a chance to read through your comments. I would ask that you summarize your statements. We're going to try and adhere to the 5-minute rule, so to the extent you can summarize your presentation, that would be very much appreciated.
Let me introduce the panel. First, Mr. Benson Roberts, who is the Vice President for Policy, Local Initiatives Support Corporation. I'm so used to calling you LISC.
Bob Moore, who has graced this subcommittee before, I'm happy to have you back again, Mr. Moore. He's the President of the Development Corporation of Columbia Heights.
Paulette Turner, who is the President and Commissioner of the Massachusetts Union of Public Housing Tenants, is here at the request and through the intervention of the Ranking Member, Mr. Kennedy.
Page 160 PREV PAGE TOP OF DOC Segment 2 Of 3
Mary E. Rone is President of the New Jersey Association of Public and Assisted Housing Residents. Cushing Dolbeare is a member of the Board of Directors of the National Low Income Housing Coalition. Thank you very much for your attendance.
Finally, Mr. David Bryson is the Acting Director of the National Housing Law Project. Welcome, and thank you very much for joining us today.
Mr. Roberts, the floor is yours.
STATEMENT OF BENSON F. ROBERTS, VICE PRESIDENT FOR POLICY, LOCAL INITIATIVES SUPPORT CORPORATION
Mr. ROBERTS. Thank you very much, Mr. Chairman. I am Benson Roberts, Vice President for Policy at LISC, the Local Initiatives Support Corporation.
For the last 17 years we have worked with grassroots, nonprofit, community development corporations that are rebuilding neighborhoods around the country. The work they are doing is working very well. Bob Moore here, to my immediate left, is one exemplary case of a CDC director doing wonderful work here in Washington.
Over the last 17 years we have raised about two billion dollars from the private sector and invested that through CDCs, with about 68,000 units of housing. Last year alone we provided about half a billion dollars to CDCs.
Page 161 PREV PAGE TOP OF DOC Segment 2 Of 3
It is based on a set of values: self-help, strengthening the community, local decisionmaking, partnerships, investment, tangible results, and sustainable results over the long term. But Federal resources have been absolutely critical to that. We have had the good fortune to have Federal resources that reflect those same values, principally, the HOME VI program, CDBG, low-income housing tax credits, and the Community Reinvestment Act, all very important to put those kinds of partnerships together.
PHAs have had, in some ways, to work with a tougher set of Federal policies and history. In many cases, projects are old now, but even when they were new, they were poorly located, poorly designed, and in some cases, poorly built. Managing them is hard.
PHAs have had to work with excessive regulation from the Federal Government, and a government that has been long very remote from the communities where the housing operates. Federal preferences, as we have heard, have helped create a great concentration of poverty within public housing, and you heard eloquently about the social ramifications of that.
Finally, PHAs haven't had enough money to do the job. So, we want to emphasize that most PHAs are doing a good job, in spite of these obstacles, and they are providing housing to very poor people. But we are hopeful that the public housing system is now poised to move in a very positive direction. We think that CDCs can be good partners with PHAs in the redevelopment process, and we've already started to work with PHAs and CDCs to do just that. But if this is going to work, then the policy framework has to change substantially.
We do believe that H.R. 2 is moving in the right direction in this regard. We are not experts in public housing. We know about community development, but we do not have the long experience of the last panel in public housing, so we can't comment on every provision of this bill. But we agree very strongly with many of the principles that are articulated and reflected in this legislation.
Page 162 PREV PAGE TOP OF DOC Segment 2 Of 3
First, that public housing should be part of a broader community revitalization strategy. Public housing should be neither a warehouse nor a halfway house. It needs to be a stable part of the community and its surrounding neighborhood.
Second, we like the idea of creating block grants for operating support and capital improvements. We think that will give PHAs some of the flexibility they need to do their job.
Third, to the extent possible, we like the idea of redevelopment engaging partnerships with community organizations, as well as the private sector. We think this is the way you're going to get accountability to the community, resident involvement, and the discipline of the marketplace as well. Those elements have been very important to the work that Bob Moore's group and thousands of CDCs around the country have done.
Next, we do support efforts to diminish the intense poverty within this housing. There are a lot of things in this bill specifically that move in that direction: changing the income mix of new tenants, permitting local preferences, site-based waiting lists, ceiling rents, temporary disregards of additional increases in income, promoting employment, that's all to the good. We think that there should be a good range of incomes within each project, as well as on a portfolio basis.
But, at the same time, it is crucial to protect the needs of poor tenants who depend heavily on this housing for shelter. Otherwise, we're going to wind up with even worse homelessness than we have today.
Page 163 PREV PAGE TOP OF DOC Segment 2 Of 3
So what we would suggest is, if we are going to move the projects toward more income mixes, as we think is necessary, then the operating subsidies should be targeted to the benefit of the very poor within the projects, and that the Section 8 certificates and vouchers should also be targeted as much as possible to the needs of the poor, so that they're getting served as well.
Finally, we do support a reduction in unnecessary regulations, especially for well run PHAs. But again, there needs to be a balance, with more local control being balanced by more local accountability, through publicly available data for how the resources are being used, as well as meaningful citizen participation.
Finally, we do have some real reservations about the prospect of creating the Home Rule block grant. We're just not sure we're quite ready for that yet, if at all. We would need to understand that a lot better before we would feel comfortable with it.
So, with that, I will conclude. Thank you very much.
Chairman LAZIO. Thank you very much.
[The prepared statement of Mr. Roberts can be found on page 368 in the appendix.]
Mr. Moore, I want to congratulate you. I understand that David Gilmore was in the audience at one point today.
Mr. MOORE. Yes, he was.
Page 164 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. Mr. Gilmore is the receiver for the DC. Housing Authority. Finally, after a couple of years, we've gotten the ability to have some of those vacant properties transferred. I congratulate you for that.
STATEMENT OF ROBERT L. MOORE, PRESIDENT, DEVELOPMENT CORPORATION OF COLUMBIA HEIGHTS
Mr. MOORE. Thank you very much, Mr. Chairman.
Let me first thank you for your assistance on two levels. One, at the special hearing you held about 2 years ago, in which David Gilmore was a participant, on housing in the District, and we brought to your attention, after a lot of frustration, the problems of a multifamily property known as Clifton Terrace, through the hearing and the meetings with Susan Gaffney, who was at that hearing, immediately after the hearing, HUD took action to take over Clifton Terrace and is now in possession of it. We are about at the threshold of redeveloping that property into something that's a real community asset. I think our testimony and the participation of HUD in that procurement was the key to that.
In addition, as you know, we have been trying to get vacant subsidized housing, scattered site housing in the District, redeveloped for 10 years. At that hearing, we also had a chance to talk to Mr. Gilmore and recently an agreement was signed to redevelop that housing that has been vacant for over 10 years, all over the city, to bring it back into productive use as home ownership opportunities for public housing residents. So I thank you very much.
My written testimony contains most of what I would say. I just want to focus on three items that are included in the legislation.
Page 165 PREV PAGE TOP OF DOC Segment 2 Of 3
One is choice. I think that choice provision is an excellent beginning. The foundation of empowerment and to empowerment is the capacity to make choices, and an informed choice. I think that we would support the residents choosing the rent that's most beneficial to them economically, and have other people choose interest rates and other financial opportunities. I think the rent choice is a good way to start and a good way to begin to empower people to making those decisions that affect their lives.
The Home Rule option. I worked in both a freestanding housing authority and one that was also part of general purpose government. I'm not sure. I don't think the question is the block grant, good or bad. I think cities that have the opportunities to design a flexible strategy to solve its housing problems ought to have the option for the block grant.
But I do think there is a larger question we're all hitting at, and that is, much of our time we spend trying to solve public housing's problems within public housing. The problem of public housing cannot be solved within the public housing development. Public housing exists in a neighborhood, in a community, and in a city. That solution must be developed at that level, at least at the neighborhood level, so that we need to have vouchers. We need to have a variety of options.
The issue is housing people well, whether it's in a development or whether it's in neighborhoods, or whether it's throughout the city. The option is to provide an environment that is supportive of positive family life. I think the option of using block grants is good, that we should focus on, but some language should be in the legislation to encourage PHAs to do the planning and development as part of a neighborhood or a city as opposed to being isolated.
Page 166 PREV PAGE TOP OF DOC Segment 2 Of 3
We have a situation in some parts of Washington where Mr. Gilmore is taking very strong action to redevelop public housing. What we're going to wind up with is redeveloped public housing in a rundown, distressed neighborhood. That does not do any good. I mean, if there are no stores, no services, no supports, outside of newly renovated, reduced density, townhouse structures being built, and we don't have any full neighborhood revitalization to support that, then I think we're going to miss a real opportunity to make a difference.
Having worked in public housing for a long time, the 30 percent rule certainly is an issue. It has been in the only part of housing where your income determines your rent. I am for ceiling rents. I wonder and I'm having a hard time, I'm working with some public housing residents now who are trying to save money to become homeowners. They're trying to buy property. As long as their rent escalates, then it really retards their ability to save and put away dollars to become homeowners. So the rent as you have proposed it I think is a very good way to go.
One question that we may want to look at is how we provide greater opportunity to public housing residents. I think, as this bill opens up new ideas and new ways of doing business, I think we have to look at broadening not only the housing choices but the employment and service choices that we have.
I'm an advocate of what I call community empowerment centers. What I mean by that is, as I have looked around the country, there are lots of programs that are designed to provide opportunities for low-income people to participate in the whole variety of transfer payment programs. There are centers where you can get on public assistance, you can get food stamps, you can get WIC, you can get health care, you can get a number of services that are a part of our social service package in this country.
Page 167 PREV PAGE TOP OF DOC Segment 2 Of 3
There are no similar places where you can go to get off welfare. If we're going to do anything else, we have got to be able to put together comprehensive centers where you go in one door unemployed and you come out the other door ready for work.
We have a double whammy hitting our neighborhoods. We have not only the changes in housing, but in the neighborhood where I work, we've got 3,500 units of assisted housing. So we have a Section 8 crisis looming, we've got welfare reform, and we've got public housing. I think, to move us forward, we've got to be able to put together those kinds of resources that help people to move up economically.
That completes my testimony.
[The prepared statement of Mr. Moore can be found on page 378 in the appendix.]
Chairman LAZIO. Thank you very much.
Mr. KENNEDY. Mr. Chairman, would you mind very much if I took the privilege of introducing Paulette Turner?
Chairman LAZIO. No. It would be my pleasure.
I do want to remind the gentleman, also, that you had asked that a March 6th document from the Center for Community Change, be inserted in the record.
Mr. KENNEDY. Yes, Mr. Chairman. I would appreciate that very much.
Page 168 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. Without objection, so ordered.
Mr. KENNEDY. I just wanted to briefly introduce Paulette Turner, who had the privilege of asking the Chairman to represent some of the interests of the tenants in public housing.
Paulette has spent 25 years in administrative experience in accounting management, and 5 years as a housing commissioner in the Needham Housing Authority. She has been a trainer and facilitator for comprehensive resident counselor training, including leadership training, bylaws development, paramilitary procedures--I hadn't gotten that far. Now I'm a little nervous about you, Paulette.
[Laughter.]
----Goal setting, problem solving, and developing and implementing partnership strategies for PHA management and resident organizations.
I think it's very important that we hear from active and involved tenants and people that have taken the time to actually work with the people who live in public housing. We need to make sure that their interests are going to be met by whatever changes we're anticipating in terms of how public housing is going to set its rules and regulations, and who's going to live there and how they're going to live, and under what terms and conditions any changes might take place.
So, Paulette, we thank you very much for coming down, and I appreciate the Chairman allowing me the privilege to introduce you.
Page 169 PREV PAGE TOP OF DOC Segment 2 Of 3
Please proceed.
Chairman LAZIO. Thank you.
STATEMENT OF PAULETTE TURNER, PRESIDENT, MASSACHUSETTS UNION OF PUBLIC HOUSING TENANTS
Ms. TURNER. Thank you. It is an honor to be here.
I am always saying that we're always never at the beginning of issues, and today I feel that, for once, we're here.
I'm going to read off my testimony because I'm afraid of losing the great ''bullets'' that I have in there, so I want to go on.
I'm a public housing resident of Needham, MA and an officer of the Mass. Union Public Housing Tenants. The Mass. Union is a Statewide organization that trains and organizes resident groups, Statewide, throughout the Commonwealth of Massachusetts.
I am also a publicly elected commissioner of the Needham Housing Authority, in which I live. That housing authority is made up of three elected resident commissioners, and the difference is we have to be elected by the town, not by the tenants. So we have to compete against anyone that runs, so it's wonderful that we have three on our board where I live.
I am also the President of the Massachusetts Chapter of Public Housing Commissioners, which I formed only a month ago because I did find out there was a need to train commissioners on the housing authorities. I am also on the National Association of Public Housing Commissioners.
Page 170 PREV PAGE TOP OF DOC Segment 2 Of 3
But most of all I'm a resident, and proud to be a resident, and do a lot of work and make sure we have strong leadership in our housing authorities for the residents.
For over the past year I have worked intensely with three young public housing residents, whom I will call Gwendolyn, Margaret and Tanya. These women had no work experience and very limited education and skills. However, while in public housing, they received a lot of good training, education, and social services. And because of these resources, they each have finally gotten jobs. One is a hairdresser, one is a daycare worker, and one is in the computer industry.
I ask you to look at some of the provisions of H.R. 2 through the lens of their experiences, with the hope that you will improve the bill and, in so doing, improve the lives of these three women and millions like them.
Under rent policies, H.R. 2 requires each PHA to establish a flat rent, and residents may annually choose either this flat rent or an income-based rent. During the course of a year, a tenant with severe financial problems may request a change from flat rent to income-based rent, but allowance of this request is at the PHAs total discretion.
We thank this subcommittee for the substantial progress it has made in its consideration of rent policies, and we think this idea has promise. But we also see some problems. These problems are:
One, under the current system, the law requires a tenant's rent to be reduced when his income goes down. The current law is clear and not administratively confusing. Nevertheless, Mass. Union receives scores and scores of calls from tenants whose housing authorities, either through mistake, neglect or other reasons, fail to lower rents in a timely fashion. This leaves the family with a rent that outstrips their means because a PHA could not properly administer current mandatory requirements. That's the real story out there. Many people fall through administrative cracks.
Page 171 PREV PAGE TOP OF DOC Segment 2 Of 3
Because of that, these real life problems could easily be made worse under H.R. 2's proposal. The election system is more confusing and the PHA is given the total discretion to decide if a tenant can switch the rent system midyear when a change of circumstances arises.
First of all, the PHAs will have to do a lot of work educating residents as to when and under what circumstances they can switch. The right to switch must be clearly understood in order to be effective. But housing authorities often lack the staff and the expertise to carefully explain such a confusing system to tenants. They just won't know their rights. Gwendolyn, Tanya and Margaret are having enough trouble understanding all the new details of their employment. Without a lot of help, they will not easily know which rent system will benefit them the most.
You see, there is no training of tenants in advance about their lease.
The proposal leaves way too many unanswered questions. What will these flat rents really be? What is ''severe financial hardship''? If Margaret loses 1 day a week of work, will this be counted as severe financial hardship? If Tanya must switch to more expensive day care, is this a severe financial hardship?
We believe that the system that would best encourage self-sufficiency is one that would improve on the current rent policy with a combination of: (a), a maximum rent of 30 percent of income; (b), ceiling rents; (c), generous and mandatory income disregards for rent calculations; and (d), no minimum rents, so that most fragile families will be protected.
House Resolution 2's mandatory rent exclusions are very helpful and will assist residents to enter the world of work. We applaud you for this progress. We urge you, however, to make the permissive work-related exclusions mandatory. Removing all work disincentives in the rent structure will further increase employment and result in savings to other Federal programs. Give Margaret, Gwendolyn and Tanya maximum opportunities to earn a modest living without fear of a steep rent increase. Allow the choice to be work.
Page 172 PREV PAGE TOP OF DOC Segment 2 Of 3
Income targeting. These three women will likely be denied admission to public housing under the targeting procedures in H.R. 2 because most developments already have far more than 35 percent extremely low-income residents, the target amount in the bill.
The restrictive targeting provisions in H.R. 2 would put these women at risk of homelessness in an unaffordable private rental market, where the vacancy rates are under 2 percent. In our area, rent and utilities for modest two bedroom apartments are rarely less than $850 a month. These three new workers could never pay that sort of rent, even with their full time employment.
We urge you to keep public housing available to poor households on the waiting lists. Do not exclude the applicants who need public housing the most. Instead, include residents in the world of education, training, and employment. Do not keep poor households out. Educate, train and support current residents in ways that enable them to earn a living wage and become the self-supporting middle income residents in public housing.
Time limits. House Resolution 2 requires each adult member of a household to sign self-sufficiency contracts written by housing authorities, who would have complete discretion to dictate the terms. These contracts would force tenants to agree to a target date by which the entire family would ''graduate'' from and terminate their tenancy from public housing.
This puts Gwendolyn, Tanya and Margaret in a lose/lose situation. If their new jobs fall through, if one of their kids gets sick, if they lose their daycare, if a bus route gets discontinued, despite the fact that they're doing all the right things, they could both lose their jobs and then be terminated from housing for not fulfilling their contracts.
Page 173 PREV PAGE TOP OF DOC Segment 2 Of 3
On the other hand, if these women succeed and keep their low paying jobs, they will then be forced to graduate from public housing in some specified time period. I ask you, where will they graduate to? They will be right back in a rental market they can't afford.
For Margaret to afford a two bedroom unit, she would need to earn $33,600 to pay the fair market rent of $859. But her minimum wage job pays under $10,000. Evicting her from public housing won't help to bridge the gap between her income and the cost of renting on the private market. Help people keep the stability of affordable rents and the supports that enable them to find and keep jobs and raise their families. We strongly urge you to remove time limits from H.R. 2.
I will skip grievances.
Voluntary vouchering out. House Resolution 2 gives housing authorities the discretion to voluntarily convert habitable and viable public housing to vouchers with no real HUD oversight and only token notification and consultation with residents.
If Tanya, along with thousands of other residents, were forced to leave public housing with a rental voucher, she would probably not be able to find a unit. Her voucher, and those of the others that would flood the local market, would be almost worthless. The result, after years of public investment, would be that a valuable public housing asset would be lost forever, replaced by a voucher whose usefulness is at the whim of the market.
We urge you to delete the voluntary vouchering provisions and keep public housing as a public asset.
Page 174 PREV PAGE TOP OF DOC Segment 2 Of 3
Last, and most important, resident membership on housing authority boards. House Resolution 2 provides that housing authority boards shall have at least one elected resident member, except for housing authorities with less than 250 units, such as where I live, the Needham Housing Authority. Under H.R. 2, 45 out of 66 housing authorities in my State would not be required to include the voice of tenants in management decisions.
Our experience in Massachusetts is that when there is a single, lone tenant voice on the board, that person is outnumbered, often mistreated, and isolated. We recommend that if you really want to strengthen the voice of tenants in the management of their housing, that a minimum of two residents be on the boards of larger housing authorities, and that a minimum of one resident be on the boards of smaller housing authorities.
Thank you for the opportunity to testify on this important legislation. I hope you will remember Gwendolyn, Margaret and Tanya as you go about your important work on this bill.
Thank you.
[The prepared statement of Ms. Turner can be found on page 381 in the appendix.]
Chairman LAZIO. Thank you very much.
Ms. Rone.
STATEMENT OF MARY E. RONE, PRESIDENT, NEW JERSEY ASSOCIATION OF PUBLIC AND ASSISTED HOUSING RESIDENTS
Page 175 PREV PAGE TOP OF DOC Segment 2 Of 3
Ms. RONE. Good afternoon, Mr. Chairman, Members of the subcommittee. I am Mary E. Rone of Newark, New Jersey, and I am here to give some resident input into H.R. 2, which you are examining today. I am here on behalf of the residents of New Jersey that I represent as President of the New Jersey Association of Public and Subsidized Housing Residents, Inc. I am also the President of the Newark Tenants Council and New Horizon Gardens, Inc.
A public housing resident for over 35 years, I am a certified social worker for the Essex County Department of Citizen Services, and presently supervise the Office of Child Support Enforcement. I served on the HUD ad hoc committee and presently chair two committees for the National Coalition of Resident Tenants to Save Public and Assisted Housing.
I must admit that, initially, I was very upset that benefits that residents have been struggling to preserve for over 25 years were being taken away by the repeal of the 1937 Housing Act. After reading through the proposed H.R. 2, I realized that there were some strong points, but also some items of resident concerns.
Some of the things I want to talk about are, what is the penalty if a family cannot meet the estimated transition date from public housing? When the unemployment rate is due in part to lack of the necessary skills to obtain decent wages, what will be put in place for education/job training and placement?
Section 225, Family Choice of Rental Payment. This section seems to have provided adequate safeguards for residents. The provision to switch from flat to income-based rents should decrease the number of evictions due to nonpayment of rents. Individuals in Newark who were given a waiver because of longevity are now being increased over 100 percent in order to adjust to the 30 percent income level. Flat rents would definitely give some relief to these type situations. Also, it would increase the probability of income mix, allowing people with higher incomes to pay reasonable rents.
Page 176 PREV PAGE TOP OF DOC Segment 2 Of 3
Section 103, Resident Membership on the Board of Directors. In general, residents feel that there should be at least a simple majority of residents on the board. The New Jersey Association of Public and Subsidized Housing Residents addressed this issue by introducing a bill into the General Assembly in New Jersey in 1992. Also, there is as much need for residents of a public housing authority with 250 units to have a voice on the board of commissioners, even if the only function of the PHA is to provide rental assistance. The inclusion of resident commissioners elected by residents is a very strong point.
I wanted to lead off with what I had written, but I also want to elaborate on the deregulation of public housing, when you talk about the high performance housing authorities have and the right to be deregulated.
I concur with Secretary Cuomo in reference to the present PHMAP not being adequate to allow such deregulation. I say that because with the present formula that is being used under PHMAP, there are no physical inspections. The housing authorities are allowed to do whatever they may want to do and come up with the scoring that certainly does not have the residents in mind, nor the input of residents.
I have another problem with H.R. 2, and as I was reading H.R. 2, I discovered there is very little resident participation. In order for any of these housing programs to work, resident participation must be in it from the beginning to the end.
I had some other points here. In H.R. 2, also, it states that the Housing Act, as it stands today, the 1937 Act, guarantees all people to have decent and sanitary housing. But as I read H.R. 2 proposal, it speaks to certain families being helped to seek affordable housing and assisting other low-income residents to find housing. But it does not guarantee housing for all low-income people. It cuts that particular part out of it.
Page 177 PREV PAGE TOP OF DOC Segment 2 Of 3
I don't want to leave here today without talking about the need for proper resources. We have to be funded. Housing authorities must be funded in order to make sure that residents have safe, decent, and affordable housing.
I wrote down a few points as some of the others were speaking, and I didn't want to leave out some of the things they were talking about, so I'm taking a minute to look at these points.
Chairman LAZIO. Keep in mind, Ms. Rone, that everything will be submitted into the record. So, if you miss anything, believe me, we'll read it.
Ms. RONE. I just wanted to make sure that I say it to you.
I want to thank Mr. Frank and Mr. Kennedy for their sensitivity, I must say, when it comes to low-income residents. And you, too, Mr. Lazio. I don't want to leave you out, either. But, you know, I have been sitting here and I've been involved over the years, and watching what is actually going down, with who cares about residents. You know, we find there are not too many out here who care about low-income people.
I want everyone sitting here today, and everyone in this audience, to understand that when I went into public housing as a mother of four children, my husband was the only one working. I think he made like $80 a week. Had it not been for public housing, I would not have been able to go into community programs, get my GED, go back to school, and be able to get to the point where I can sit here before you and talk about representing public housing residents.
Page 178 PREV PAGE TOP OF DOC Segment 2 Of 3
I want you to understand that everybody in public housing certainly is not lazy and shiftless. We're people that want a chance to pull ourselves up and do what we can to make sure we do the right thing while we're living in public housing.
I just want everyone here to understand that when I lost my husband 18 years ago, I still had four children to take care of. Living in public housing, I was able to do that, because the income that was lost by his death--and it was during the time when Social Security was taken away if the child then went to high school--I think it was in 1981 when they enforced that law--so that meant that my income was almost nothing.
Had it not been for public housing, where because my income was less, that they could decrease my rent so that I could go on and raise my children, I would have been Lord knows where. What would have happened to me?
So I make sure that I take the time to volunteer my services, even though I work for the welfare board in Newark as a supervisor. I feel that I owe the people in public housing something. I owe them the right to be able to live there, and I come out and advocate for them because there's a need for it.
I want to thank you for being sensitive to the needs of low-income people. I want to thank you for holding such hearings, but I also want you to know that when I talk about a simple majority on the board of commissioners, we're talking about three people on a seven person board and two persons on a five person board. That's what we call a simple majority. If you know anything else, you know that people are appointed.
Page 179 PREV PAGE TOP OF DOC Segment 2 Of 3
I know it's time to shut up, but I just need to say a little bit more.
People are appointed by the powers that be, the mayors in the cities, the councilmen. We want elected residents to sit on the board of commissioners who are sensitive like yourselves to their needs.
I just want to say thank you again. I must have said it over and over again. But I want you to know that there's a need for you to keep plugging for low-income people, and please, don't allow a lot of this deregulation that is actually going to hurt us tremendously unless PHMAP has been changed.
What was the other thing I wanted to say? Also, make sure that resident participation is a part of any kind of regulation that you take on. We want you to keep CFR 964. That happens to be the regulation, CFR 964. That's the regulation that deals with residents having full participation.
Thank you so very much.
Chairman LAZIO. Thank you very much. I appreciate your passion. You are a true success story.
Ms. Dolbeare.
STATEMENT OF MS. CUSHING N. DOLBEARE, CHAIR, POLICY ADVISORY COMMITTEE, NATIONAL LOW INCOME HOUSING COALITION
Page 180 PREV PAGE TOP OF DOC Segment 2 Of 3
Ms. DOLBEARE. Thank you very much, Mr. Chairman.
I want to begin by fully endorsing the comments of Mrs. Rone, and Ms. Turner as well, about the importance of resident participation. This has been a major concern of the National Low Income Housing Coalition ever since 1974, when the Housing Act of 1937 was being rewritten and we introduced a proposal, which didn't get very far, for elected tenants as representatives on housing authority boards.
My name is Cushing Dolbeare. I am currently the Chair of the Policy Advisory Committee of the National Low Income Housing Coalition. As I think several of you know, I am also the founder of the Coalition and spent about 12 years as either full time or part time executive director of the Coalition. So I have been rather intimately involved with the Coalition over the course of its history.
Before turning to the specifics of H.R. 2, I would like to take just a couple of minutes to talk about the housing context, because I hope the way you approach the issues in this bill will be in the framework of our overall context of housing needs.
Subsidized housing, tenant-based and project-based, accounts for approximately 5 million of the Nation's more than 100 million housing units, so it's about 5 percent of the total housing supply. Public housing is a little more than 20 percent of the subsidized housing units. So, out of the total of over 100 million housing units in this country, approximately 1.2 million are subsidized public housing. So we are talking about a very small part of the total housing stock.
Page 181 PREV PAGE TOP OF DOC Segment 2 Of 3
Would that this were the same dimension of the low-income housing problem, but it isn't. The vast majority of extremely low-income people don't live in subsidized housing at all because we, in fact, have not provided subsidized housing for them. And yet they have urgent housing needs.
The fact is that a substantial number of extremely low-income renter households not only cannot pay fair market rents, but their entire incomes fall below the level that is necessary just to pay the operating and maintenance costs and taxes on a lot of rental housing.
Privately owned and subsidized rental housing cannot be viable for about a third of the housing stock, unless the incomes of their tenants can be increased through more gainful employment, or unless they receive some kind of housing assistance. I think it's important not to lose sight of that very critical need for housing assistance.
I would like to ask permission, if I may--the dog didn't eat my homework, but my computer disk crashed when I was working on this statement--I would like to ask permission to introduce some additional factual material as a supplement to my statement, if I may.
Chairman LAZIO. All that is included in the record.
Ms. DOLBEARE. Thank you.
You know, I am sure, that HUD's latest study of worst case housing needs shows that, for every household who is now living in Federally-assisted housing, there is another household, a very low-income renter household, who is not receiving housing assistance, with a worst case housing need.
Page 182 PREV PAGE TOP OF DOC Segment 2 Of 3
The bulk of those households have incomes below 30 percent of median, so that, in effect, every time we add to the income mix in currently subsidized housing, we are removing a unit that might otherwise be available for a household with a worst case housing need, with income below 30 percent of median. I think we need to be very careful how we think through the consequences of that.
The National Low Income Housing Coalition has always supported increased funding for housing because we don't see how you can solve the housing problems and the community development problems in this country without adequate funding.
I would just point out that we do have entitlements to housing assistance in this country, but they aren't for low-income people. They're for homeowners when they fill out their income tax returns. In fact, the increased cost of housing assistance for low-income people which is proposed in the 1998 budget, which is $400 million, while the increased cost of homeowner deductions between 1997 and 1998 is estimated by the Treasury to be $3.3 billion. So there is 8 times as much an increase in the cost to the Treasury of Federal tax expenditures which benefit upper income people as the very modest and inadequate increase which is proposed in the current budget.
I would like to suggest that the context and the criterion for your consideration of the specific provisions of H.R. 2 be to avoid further exacerbating the critical housing problems faced by extremely low-income people and, in particular, that you not withdraw housing assistance unless and until those low-income people are able to obtain decent housing that they can afford in other ways.
Page 183 PREV PAGE TOP OF DOC Segment 2 Of 3
We have a series of specific recommendations on H.R. 2. I just want to highlight a couple of them, rather than read the whole list.
On graduation dates and work requirements, we believe the best way to move ahead here is not by mandatory requirements but by providing the resources and incentives that housing authorities need to assist people to move to more economic self-sufficiency. By and large, residents don't need incentives nearly as much as they need opportunities.
On housing management plans, we point out it is critical to have resident involvement, not just citizen involvement, and I hope you will revisit that part of the bill as you look at that. Our suggestion is that you require that the first plan submitted include resident participation and describe that resident participation and contain a plan for continuing resident participation in decisionmaking, so that it becomes a continuous thing.
On income targeting, I think there is a misperception of the relationship of income and work. The fact is, if you look at the figures in the HUD worst case needs report, even at the very lowest income level, a substantial number of households get the bulk of their income from work. Twenty-three percent of households with children with incomes below 20 percent of median get the bulk of their income from work, and 46 percent of other non-elderly households do. So it is possible to not only introduce working families into public and assisted housing, but that is not inconsistent with retaining targeting requirements. We do suggest that you might want to look at a different basis of targeting requirements, which is less by income but having some proportionality for the incidence of these problems by income.
Page 184 PREV PAGE TOP OF DOC Segment 2 Of 3
Until 1968, public housing legislation, the below market interest rate programs, the other Federally-subsidized housing programs, all had two criteria for admission. One was income eligibility and the second one was that the household have a severe housing problem. They either had to be displaced or live in seriously inadequate housing. That was before we had the kind of housing cost burdens that we have.
So we think it might be well worth exploring a requirement that, in order to receive housing assistance, you have to have what HUD calls a ''priority problem.'' This would not be a ''preference,'' so it would not involve sifting the waiting lists all the time to see who rises to the top out of a pool of five million who are eligible. It would simply say that, as long as housing assistance is as limited as it is, we are only going to admit people who have, in addition to their income eligibility, serious housing problems, and that we will do this in proportion to their incidence by income. We can do this through the local CHAS planning process--or whatever--to determine the approximate mix. Nationally, about 40 percent of renter households with housing problems have incomes below 30 percent of median. So that you could have some proportionality, but you could get more flexibility in which families you select and selecting among those families with critical needs and very low-incomes, working families and other family types. I think that would strike a balance between the kind of flexibility which is being sought and at the same time not undermine the basic concern of the National Low Income Housing Coalition, and I believe a concern which all of you share on the subcommittee, that the people with the most urgent needs are the people who get served first. So we would like to present that proposal for your consideration.
Finally, I would just like to say that we do appreciate the opportunity to testify today. We look forward to working with you as you try to work through the bill, and we hope that we can be helpful in reconciling some of the specific proposals in the bill which we have criticized here in the statement with our overall concern, which again I believe you hope and share, of avoiding adverse consequences to extremely low-income tenants and applicants for assisted housing.
Page 185 PREV PAGE TOP OF DOC Segment 2 Of 3
Thank you very much.
[The prepared statement of Ms. Dolbeare can be found on page 288 in the appendix.]
Chairman LAZIO. Thank you very much, Ms. Dolbeare.
Mr. Bryson, welcome.
STATEMENT OF DAVID B. BRYSON, ACTING DIRECTOR, NATIONAL HOUSING LAW PROJECT
Mr. BRYSON. Thank you, Mr. Chairman, and Mr. Frank. Thank you both for having us come and testify today. We appreciate this opportunity very much.
Mr. FRANK. I would just say, if you want to see more Members and more reporters, come some day when we talk about banking. You will see there are other Members to this subcommittee.
[Laughter.]
Mr. BRYSON. Unfortunately, I know nothing about banking.
Most of my suggestions for improvement of the bill are in the written testimony and, of course, I'm only going to summarize some of them here.
Page 186 PREV PAGE TOP OF DOC Segment 2 Of 3
I will jump right in, given the time limits, and discuss targeting. I think it's unfortunate that we are spending our time trying to decide how to divide up the very limited resources that are available to meet the housing needs of poor people in this country. We wouldn't have a targeting debate if there was enough housing assistance to meet the needs of everybody in the country who needs it. That is the real problem, and I think Mr. Frank made that point earlier in the hearing.
Nonetheless, given the fact that there is a very limited amount of housing assistance available, it is very important to ensure that the poorest people don't get cut out of that housing assistance.
My concern is that the way that H.R. 2 is now drafted, it will not reserve for very low-income people a fair share of the housing assistance that is appropriated. And let me explain why I think that's going to happen.
The way the bill is drafted, it sets aside for public housing 35 percent of the units for people with incomes beneath 30 percent of the median. The first thing to look at is, what is the 30 percent of median income in different areas----
Chairman LAZIO. I think we're at 40 now, 40 below 30.
Mr. BRYSON. The tenant-based will be 40. Right now, though, I want to talk about just the income level that we're talking about. We're reserving a certain number of units for people with incomes between 0 and 30 percent of median.
Page 187 PREV PAGE TOP OF DOC Segment 2 Of 3
It is important to know what those real dollars are. They vary from area to area. In the large metropolitan areas, they are much higher, I think, than most people would expect. In my testimony I pointed out cities where they come out to $15,000 a year.
If what we're talking about is reserving housing, a portion of the stock, for people with incomes below 30 percent of median, it would be a mistake to think that that reservation means that all of those people are going to be welfare recipients. Nowhere in this country does 30 percent of median work out to be less than a welfare grant. Welfare grants are always lower than 30 percent of median. In half of the areas in this country, minimum wage earnings, $10,000 a year, are less than 30 percent of median.
So when we're talking about setting aside a portion for poor people, it is not as if the only people who are going to get those units are welfare recipients. Many of them are people earning minimum wage, and they deserve a chance to get into housing. It's important to ensure that they do get a chance to get into housing. That leads me to my next point, the question of profile targeting versus admissions targeting, which was discussed earlier both in the Secretary's testimony and when the housing authorities were testifying.
Profile targeting has the effect of nullifying the targeting rules, as far as admissions are concerned, for a period of at least 5 years--the Secretary thought it would be 10 in some cities--but, for sure, it's 5 years. It means that during the next 5 years, people with incomes below 30 percent of median will not have a right to be admitted, will not have a protection of the targeting statute. Because there are already so many people in public housing who are below 30 percent of median, it will be 5 years before another person with an income below 30 percent of median has to be admitted.
Page 188 PREV PAGE TOP OF DOC Segment 2 Of 3
We have to remember what those 5 years are. Those are the 5 years when we're undertaking welfare reform. The 5-year time limit in welfare reform is going to run simultaneously with the same 5-year time during which no welfare recipient would be guaranteed a place in public housing. It doesn't make sense, while we're embarking on welfare reform, in trying to get people to move from welfare to work, to exclude them from assisted housing. This is a key 5 years in which they ought to get easy access to public housing, so that they then can make the transition from welfare to work.
As Ms. Rone indicated, if you don't have public housing to live in, it's very, very difficult to make any transition to work.
I know my time is up, but one other thing I would like to point out is the rent provision. I think I understand the aims and agree with them. There are two aims. One is to get rid of any disincentives to work, which the floor part of 30 percent of income rule creates, and that is very important to get rid of. The other part of it is to make sure that nobody who is poor has to pay more than 30 percent of their income.
The difficulty with the choice is really the difficulty that Ms. Turner raised. What happens to somebody when they lose their job? You've got a minimum wage worker who opted for the flat rent, and then loses their job. The way the bill is drafted, they don't go to 30 percent automatically. They only go to the 30 percent if the housing authority is willing to let them switch.
The financial incentives on the housing authority are not going to work right on that. For them, if they let people switch, they're going to get less income and there's not going to be an operating subsidy to make up the difference. So it's important to make that 30 percent cap automatic, not contingent upon the housing authority making the decision, and certainly not one in which the housing authority has absolute discretion to say no to the tenant who has just lost their job.
Page 189 PREV PAGE TOP OF DOC Segment 2 Of 3
I'm sorry that my time has run out, but I would be glad to answer any questions.
[The prepared statement of Mr. Bryson can be found on page 387 in the appendix.]
Chairman LAZIO. I thank you very much.
Let me reserve my time for a moment and turn to Mr. Frank.
Mr. FRANK. Thank you, Mr. Chairman.
Let me pick up with the flip side of what Mr. Bryson said. If we're now talking about a 30 percent cap, I think we're within an area where we agree in principle on trying to work out the details, but I worry about the flip side of this.
You talk about the tenant who opted for a flat rent and then lost their job. What about the reverse, a tenant who opted for the percentage, being unemployed at the time, and then a month or two later can get a job? Then the existence of the percentage income as opposed to the flat is a disincentive to the person getting a job.
I would assume we're talking here about people, many of whom are in the least stable part of the work force, people who might be part time, people who might be vulnerable to being laid off. So that is the problem with the choice concept. It could be a disincentive to work and it could be a problem. That's why I hope we could work on this.
Page 190 PREV PAGE TOP OF DOC Segment 2 Of 3
Ms. RONE. May I----
Mr. FRANK. Yes, Ms. Rone, you may. You were nice to me today, so you can go ahead. Nobody else was, so you can.
Ms. RONE.----I'm glad you were here. You have been a great help to low-income residents.
Let me say this. With the up to 30 percent that you recommend, that's the best proposal for people who are low-income people----
Mr. FRANK. Let me say----
Ms. RONE.----Wait. Let me finish.
The next part of it, the ceiling rent part, where you say flat rent, that ceiling rent would be better for someone working like myself. So to have a choice is really the best thing that----
Mr. FRANK. I agree with that. I have to take back my time and say this. I agree with that. I think the flat rent concept has a lot to be said for it. What I worry about is the inflexibility of your choice. That is, we're talking about people whose job status will change from employed to unemployed, as Mr. Bryson mentioned, but also from unemployed to employed. I worried and we need to work on that, to give greater flexibility.
Page 191 PREV PAGE TOP OF DOC Segment 2 Of 3
It seems to me you might say, ''If you make the choice, you're locked in for a year, unless there has been an involuntary change in your job status.'' You might want to say then you could change as a matter of right, if you either lost your job or if you were going to get a job, because then we would get into the disincentives. But I think we are closer to working that out.
Ms. RONE. Let me say this, too. For the Secretary, I think his proposal, the part where he talked----
Mr. FRANK. Ms. Rone, he isn't here now. You'll have to worry about him on his time.
[Laughter.]
OK. Be quick.
Ms. RONE. I'm talking about the 75 percent, if you're going to deal with that flat rent, it would be beneficial to us. So look at his proposal.
Mr. FRANK. I appreciate it. I think we're getting closer, clearly closer on the rent thing, and we can work----
Chairman LAZIO. If the gentleman will yield, as I understand the Administration's proposal, it is a floor, not a ceiling, proposal.
Mr. FRANK. I haven't looked at that. I'm reluctant to discuss that in the absence of the Secretary, and that's why I had to miss some part of his testimony.
Page 192 PREV PAGE TOP OF DOC Segment 2 Of 3
Let me ask Mr. Roberts, too, because you're very much involved in the private/public sector operation here. One of the arguments we have gotten for the reduction of public sector resources is that we don't have to do as much anymore because you're there.
I'm wondering what your impression is. I will tell you that my sense is that people who talk about the existence of private sector resources as a substitute for public sector resources are generally people who haven't been there trying to provide the private sector resources. So I would be interested in your sense of that.
Does the presence of operations like yours mean that we can cut back public sector resources without any harm?
Mr. ROBERTS. Thank you for the question, Congressman.
Absolutely not. In fact, we could not do any of this work with CDCs but for strong public sector participation. We see a principal role of the public funds as unleashing the private funds. Without those public funds, it is not economic for the private sector to participate.
Mr. FRANK. Mr. Moore, you seem to have some views on that subject, I think. Would you care to respond?
Mr. MOORE. Yes, Mr. Frank.
As a CDC director, very few things that we do we do without public sector resources. Just this morning we were getting a loan from Nation's Bank, and the lender to me says, ''Show us the letter of your commitment of HOME VI funds and we'll release our private funds.'' I mean, it is critical that the public funds be there, because it leverages. It's not the other way around. Public funds leverage private funds.
Page 193 PREV PAGE TOP OF DOC Segment 2 Of 3
Mr. FRANK. I'm glad you said that, and I will close with this, Mr. Chairman.
This is such an important lesson, because we do have people who sort of--I can understand if they haven't had a lot of experience with this--who assume that the existence of private funds means you don't need public funds. As you just said, Mr. Moore, in the absence of public funds, we will get less of the private funds. There are some things private funds won't be able to do, and you need the leveraging.
I guess I saw this nowhere more forcefully stated than in the booklet that the Catholic bishops put out last year, or 2 years ago, a booklet dealing with issues on the election in a nonpartisan way. They noted in some phraseology that the Catholic Church is obviously the largest provider of charity in the United States, and as the largest provider of charity, they wanted to make the point that you cannot do without public assistance as well. So I appreciate that very important point, that you can't use the existence of resources such as yours as a reason to cut back public resources. In fact, we make you less useful rather than being able to assist you.
Thank you, Mr. Chairman.
Chairman LAZIO. I thank the gentleman. I agree with the gentleman. We do agree sometimes.
[Laughter.]
Page 194 PREV PAGE TOP OF DOC Segment 2 Of 3
I want to ask you, Mr. Moore, to address this question, and maybe Mr. Benson could speak to this also. We have tried to create some opportunities in H.R. 2 for some partnering, some joint venturing, between not for profits, CDCs, and PHAs, looking for the kind of capacity to where there may be some competitive advantage on both sides and things you can work out together.
What do you think about what we have done so far, and do you have any other ideas on how we can build on that? First, do you think it's a good idea at the outset?
Mr. MOORE. Thank you, Mr. Chairman.
I think it's a great idea, and timely. The ability of nonprofits and CDCs to work together in public housing is really, I think, going to be another option for public housing residents. We're doing deals with tax credits that can house folks with public housing incomes. We're doing homeownership projects that can house folks.
We have two different constituencies. There is a constituency that's looking for housing, that nonprofits really cater to, and then we have public housing residents. It's almost as if we have two different societies, and that's not true. So we need to find a way to blend our resources to support the resident councils, to provide--As I just talked to David Gilmore, we are a major micro-lender in the city, our organization. He said we don't make loans to public housing residents, and the only reason we don't is because we're not working together to tap out the 12,000 households receiving public housing in the District. There have to be a few thousand who want to go into business as their option for self-sufficiency.
We need to bring things together, and I sure think the language in the bill could even maybe be stronger, to encourage a greater partnering between nonprofits and the private sector to get into public housing in a real way, to make some dramatic difference.
Page 195 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. I would like to hear your input on that, Mr. Roberts.
Mr. ROBERTS. Here are some examples of the kinds of policies we need to have in order for this to work.
In the olden days, there were these rules, and well founded in antidiscrimination principles, to prevent the development of public housing in already concentrated low-income areas or minority areas. But if we're going to redevelop low-income communities with public housing, that means we don't need to red line those areas; we need to green line those areas. So there is an old policy that should not continue in this new world.
Second--and this is a tough one to get through sometimes--but if you're going to have private mortgage lenders involved in this housing, that means that you have to subordinate the use restrictions on that housing in the event of a default and foreclosure. We've got those rules in the low-income housing credit and the HOME VI Program, and they have enabled private lenders to lend. So we need to come up with some similar mechanism or it's going to be very hard to get private mortgage lending into this housing. So those are a couple.
Similarly, we are all for reaching down to serve very poor people, but those people need some kind of operating support or rent assistance in order for that housing to work economically over the long term. It's no good, whether it's a PHA or a CDC or a private owner, to impose an income targeting requirement and rent restrictions appropriate for those folks but not to provide the ongoing assistance to enable them to be served without bleeding the project to death.
Page 196 PREV PAGE TOP OF DOC Segment 2 Of 3
So we have to make sure there is sufficient operating subsidies or rent subsidies, or whatever, targeted to serve those folks in order for this to work.
Chairman LAZIO. I wonder if you two gentlemen, who have a lot of background in this area, could help maybe flesh out some of the concepts that we've just discussed, so that we can consider them for incorporation? I think it's part of the future of where we need to go.
Ms. Turner, one of the ideas in the bill that we are trying to foster is to allow more business activity on the site of public housing and allow the tenants to keep their rewards of profit, if there is a profit, in the business activity.
Is that a good idea? Do you think we can do more of it? Do you think there can be more learning, or can there be computers? What kind of opportunities do you think are good opportunities in the public housing developments?
Ms. TURNER. At the public housing site? From what I have noticed, yes. We need to have as much training on site as possible, to be able to get out there.
What I'm finding is that a lot of the programs, self-sufficiency programs right now, some work and some don't. We need to first of all work with the tenants and find out what they want, not to be told what they think is going to be great for them. We need to work with them in the beginning to find out what they want.
For instance, the campus for learning, for some housing authorities and some residents, it doesn't work. But that's the only thing they were supplied. So we need to look into it locally as to what helps that housing authority or those residents, and to work in asking them what will work. But yes, the education program is a must to have with the residents of public housing.
Page 197 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. On-site?
Mr. TURNER. Yes, on-site. On-site or off-site, but mostly on-site, I go on a lot of on-sites to do training, and they found them more comfortable in me being there on-site than them coming off-site to do it. The attendance is higher on-site. They're listening and they're focusing on-site. If they have to get up and go outside their area to get training, you're going to have a low attendance. But yes, I think it's very important that you look into having a lot more training and education programs on-site.
Chairman LAZIO. Thank you.
Mr. Bryson.
Mr. BRYSON. Just a quick point on the earlier point about subordinating the use restrictions to private lending.
One has to be very careful in doing that, because we may very well end up where we were with an analogous situation, namely, on the Section 221(d)(3) and 236 projects, where it's not exactly the same, but the use restrictions ran out after 20 years and then you have the question of what do you do? The same problem.
If you had a foreclosure situation and you subordinate the use restrictions to the private lenders' interest, what are you going to do?
Page 198 PREV PAGE TOP OF DOC Segment 2 Of 3
Chairman LAZIO. It's sort of a tradeoff of accessibility, in a way.
Mr. BRYSON. Yes. You've got to work that out so that you don't lose the housing when the foreclosure occurs.
Chairman LAZIO. Ms. Rone.
Ms. RONE. I would like to support the on-site training, as well as off-site. Let me tell you about one program we have dealt with.
The Newark Tenants Council had what we called the ''Step Up Program.'' We have 25 residents in this particular program. They would go off-site, but we made sure they had their car fare to go to where they were going, and that they had babysitting services available. Out of the 25 people that we sent, 22 have completed that course. Some of them ended up working for the law department and various ones in the insurance department.
I'm saying that they succeeded. So there are programs, if you make sure they have all the tools that it takes to go off-site, off of their complexes and not worry about the children, not worrying about getting there, the car fare, it could happen. I've seen it happen. So I just want you to know that on-site, as well as off-site, can work equally.
Chairman LAZIO. Thank you.
I want to thank this panel. It has been very informative, very helpful. You all spoke from the heart, and you waited all day long to help us out. We will continue to work with you.
Page 199 PREV PAGE TOP OF DOC Segment 2 Of 3
This is a bill that has been 2 years in its formation, and hopefully I will be the last person to say we're going to be inflexible on everything if we have a better way of doing it. Thank you very much.
The hearing is adjourned.
[Whereupon, at 4:35 p.m., the hearing was adjourned.]
Next Hearing Segment(3)