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H.R. 3995—THE HOUSING AFFORDABILITY FOR AMERICA ACT OF 2002
TUESDAY, APRIL 23, 2002
U.S. House of Representatives,
Subcommittee on Housing and
Community Opportunity,
Committee on Financial Services,
Washington, DC.
The subcommittee met, pursuant to call, at 2:00 p.m., in room 2128, Rayburn House Office Building, Hon. Marge Roukema, [chairwoman of the subcommittee], presiding.
Present: Chairwoman Roukema; Representatives Green, Ney, Kelly, Miller, Grucci, Tiberi, Velazquez, Carson, Schakowsky, Jones, Watt and Israel.
Also Present: Representatives Oxley and Baker.
Mr. GREEN. [Presiding.] Good afternoon. This hearing of the Subcommittee on Housing and Community Opportunity will come to order. Opening statements. Without objection, all Members' opening statements will be made part of the record.
The Chairwoman of the subcommittee, Chairwoman Roukema, has been detained and will be joining us shortly, but I wanted to get things underway and I will at this time read her opening statement and will proceed to recognize Ms. Velazquez.
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This is a second in a series of hearings on H.R. 3995, the Housing Affordability for America Act of 2002, which is designed to increase the availability of affordable housing and expand home ownership and rental opportunities across the country. Our first hearing on this legislation focused specifically on the home program, housing production, the National Housing Trust Fund as proposed in H.R. 2349 and the Thrifty Production Voucher as proposed in H.R. 3995.
As the Chair has stated before, new production of affordable single and multi-family housing is essential to the goal of expanding home ownership and affordable rental opportunities. That first hearing was most informative. Clearly there are different ways to address the shared goal of increasing production. The Chair trusts as we move forward on H.R. 3995 that we can all stay focused on the goal and keep an open mind on how best to achieve that goal.
There are many problems that need our attention relative to housing in this country. Certainly we need to look at ways to increase production and we need to search for new ways to address the increasing costs of Section 8 contract renewal. If we do not, it will soon consume the lion's share of HUD's budget. In light of the country's growing elderly population, seniors are finding it harder and harder to find affordable housing or to simply stay in their home. There are over 34 million Americans 65 years and older. By the year 2025, that number will increase to 62 million, or one in every six Americans. Growing numbers of seniors are suffering from worst-case housing needs from 1991 to 1997. The number of senior low income renters paying more than 50 percent of income toward rent rose 8 percent. At the same time, the number of senior low-income households receiving public rental assistance dropped 13 percent. These factors could combine to create a crisis level lack of affordable housing for senior citizens within the next decade. We need to establish comprehensive aging-in-place strategies to link affordable shelter with compassionate services through public-private partnerships. The reality is that solutions to these problems will not be easy. That is precisely why Congress thought it necessary to establish both the Millennium and Seniors Housing Commissions. We have asked them to think outside the box and to come up with solutions to address these growing and pressing problems. H.R. 3995 is a first step toward addressing the problems that we could address right now in anticipation of a Millennium Housing and Senior Housing Commission reports that are due later this year.
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This hearing today will focus on programs that provide direct Federal housing assistance to low income Americans. We have asked our witnesses to comment on the Section 8 program, public housing, elderly, disabled, homelessness and HOPE IV. The Section 8 program is the primary type of direct Federal housing assistance to low income Americans. At last year's hearing, we heard how in certain communities, voucher underutilization is a significant problem. Underutilization of vouchers has been attributed to various causes, including the tight rental market, poor performance by public housing agencies, targeting of a large percentage of vouchers to very low income individuals, low fare market rents and rent caps of 40 percent of adjusted monthly income. H.R. 3995 includes provisions that provide flexibility to public housing authorities and tenants alike within the Section 8 program. Some of the provisions included in this legislation would establish a thrifty voucher production voucher to be used in conjunction with new construction or substantial rehabilitation, permit the 40 percent cap to be based on gross income versus adjusted income, and allow public housing authorities to use up to 5 percent of the funds allocated for counseling, down payment assistance, rental security deposits and other activities that assist families in finding suitable housing to directly assist hard-to-house families.
Through the public housing program, HUD gives grants to public housing authorities to finance the capital costs of construction, rehabilitation or acquisition of public housing developed by these PHAs. Title 5 of H.R. 3995 includes provisions that would relieve some of the administrative burdens for PHAs such as giving the Secretary of HUD the ability to waive the resident commissioner requirement, suspending the reporting requirement for small PHAs of 100 or fewer, and granting HUD the authority to investigate the feasibility of an alternative evaluation system to assess the overall performance of a public housing agency.
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H.R. 3995 reauthorizes HUD's homeless programs through fiscal year 2004 and funds renewals of contracts through the housing certificate fund for one year at a time through 2004.In addition, it reauthorizes the Indian housing block grant programs, housing opportunities with AIDS and HOPE VI.
Finally, H.R. 3995 includes reforms to the HOPE VI program that will allow eligibility for small PHAs.
We are looking forward to all the witnesses' testimony today, and I want to thank all of you for being here.
At this time, the Chair recognizes Ranking Member Velazquez for her opening statement.
Ms. VELAZQUEZ. I just would like to note that I am not the Ranking Member on this subcommittee. It is Congressman Barney Frank from Massachusetts, but in light of the fact that a short notice was given about this hearing, he had a previous commitment. I will be reading my own opening statement. I would like to thank Chairwoman Roukema for holding this important hearing today and the witnesses for taking the time to share their expertise. The programs that we will be addressing during today's hearing are crucial safety nets for the most vulnerable among our population and we must ensure that as we move forward, we continue to meet the needs of the population they are meant to serve. Rental assistance programs, be it public housing, Section 8 or a program targeted to a special needs community such as the elderly, disabled or the homeless, are among the most vital programs administered by the Federal Government. They are the difference between families having a safe stable environment to call home and oftentimes living on the street.
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While I applaud the President's move to increase home ownership, it is imperative that we not lose sight of the fact that for many families it is simply beyond reach. I am troubled by implication that home ownership is the answer for all Americans when many of my constituents cannot afford low rent apartments. Making the leap to home ownership is not under the list of immediate priorities. Paying next month's rent is, and we need to ensure that they can afford to do that today. I was glad to see that the Chairwoman included in this bill a proposal that I had advocated to ensure the rights of Section 8 and have voucher holders remain in their homes. I believe this language is a good start and I look forward to working with her to ensure language matches the legislative intent.
This bill contains several new proposals that, while aimed at increasing the availability of affordable housing, may have the opposite effect. Specifically I am eager to hear the witnesses' opinion on such items as the potential conversion of public housing to project base Section 8 and expanded ability of PHAs to engage in joint ventures. I believe it is important that the subcommittee knows what long-term impacts should we be expecting from such measures.
Of particular concern to me is the fact that increases in worst case housing needs are greatest in urban areas and among working minority families with children. It is not enough to say that no child will be left behind. Actions must support the rhetoric. Yet when parents are forced to work 2 or 3 jobs to afford safe, decent housing, both children and families are left behind. We cannot allow this to continue. It is difficult to imagine how the proposed shift from the current standard of rents not exceeding 40 percent of net income to gross income will make housing any more affordable. It may push many families one or even two steps back.
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In closing, while this bill looks to address an impressive range of housing issues, it is my hope that we can do all of them justice. The Chairwoman should be commended for taking separate days to address different programs and I hope that we will seriously consider the comments and suggestions of our expert witnesses before rushing into a markup that does not fully address the needs at hand.
Thank you, Mr. Chairman.
Mr. GREEN. Thank you.
At this time the Chair would recognize Chairman Oxley, Chair of the Financial Services Committee, for any opening statement he may have.
Mr. OXLEY. Thank you, and I want to commend you Vice Chairman Green and Chairwoman Roukema for your hard work on the bill. We are here to discuss the Housing and Affordability for America Act. Under your leadership, this subcommittee conducted a series of hearings last year examining the affordable housing crunch occurring in many of our Nation's areas and the obstacles that kept too many families out of homes. The hearings outline many of the complex issues involved in addressing various affordable housing problems across the Nation, and this bill makes the strong step toward addressing those issues.
Today we will hear from many experts on public housing, Federal role subsidies, homelessness and elderly and disabled housing initiatives as we face what some depict as a housing problem in high cost areas. It is incumbent we not only address the home ownership side, but the other housing support systems that assist families to pursue the American dream. In that light, reinivigorated public-private partnership initiatives provide the best opportunity for new affordable housing. Though we can be proud that American home ownership is at a record high of nearly 70 percent, we know there are segments of our population that continue to face challenges to owning a home. As well as being a community anchor, housing is a point of strength in today's economy. Low interest rates have made home ownership more feasible, allowing many first-time buyers to enter the housing market. Rates have also created a boost in refinancing, which frees up cash to go to other sectors of the economy. The shaky state of the stock market has made real estate investment increasingly more attractive. And on the rental front, affordable rents for working families provides a foundation for future home ownership and ultimately strengthens families and communities. Not only is home ownership a good equity investment and good for the economy, it is an investment in our local neighborhoods. It is critical to communities that affordable housing is within reach for all income levels and that home ownership is an attainable goal for any working family. Housing affordability is an opportunity that everyone deserves, and this bill will help to ensure it is an option for more American families.
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Today I want to welcome Mr. Thomas Slemmer of Columbus, Ohio, who represents the National Church Residences. Approximately 6 months ago I attended a ribbon-cutting ceremony in Mansfield, Ohio, in my congressional district for 50 homes brought to our community by Mr. Slemmer's organization. We are proud of your work in Ohio and look forward to your testimony today.
And I would like to welcome another Ohioan, Ms. Terri Hamilton Brown, who is executive director of the Cuyahoga Metropolitan Housing Authority, which includes Cleveland. I understand that you have made significant strides in your short tenure.
To you and to all of the witnesses on this panel and the next, we look forward to your testimony and expertise in helping craft legislation that truly brings the American dream to our constituents. And I thank the Chair and yield back.
[The prepared statement of Hon. Michael G. Oxley can be found on page 278 in the appendix.]
Mr. GREEN. Chair recognizes Ms. Jones for 3 minutes for an opening statement.
Mrs. JONES. Thank you, Mr. Chairman, Chairman Oxley, Ranking Member on a number of my committees, Ms. Velazquez, and to my colleagues, to the members of the panel, good afternoon. I seek unanimous consent that my full statement be included in the record.
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Mr. GREEN. All opening statements will be made part of the record.
Mrs. JONES. Owning a home is the most rudimentary element of financial independence and the beginning of a wealth creation process. Furthermore, purchasing a house means more than just a place to live and a good investment. Home ownership is an opportunity for a better life. For many Americans, owning a house can also mean collateral for a small business loan or be the first steps toward building a strong credit history. It is of vital importance that we ensure the ability of all Americans to have access to the resources that are required to realize this basic piece of the American dream.
Chairman Oxley spoke to the fact of 70 percent of home ownership in this country. But the reality is it is less than 50 percent for African Americans and less than 50 percent for Hispanics. And as much as I support and push home ownership and wealth education and the fact that predatory lending has taken over many of our communities where home ownership used to be, I am as much concerned about those who will never own a home, those who want affordable housing and need the opportunity to be able to live in affordable housing and affordable rental housing, and that is why I am pleased to have an opportunity to be a part of this hearing and this subcommittee.
We are here today to discuss the merits of the Housing Affordability Act of 2002. The intention of the act is to increase availability of affordable housing and expand home ownership and rental opportunities. Although I support the spirit of the legislation, we must make sure that we address all of the issues in full. An inadequate or flawed response to the problem will not suffice, is not enough for us just to say that we passed a piece of legislation that might help housing or affordable housing in our country. As legislators, it is our job to look at all the evidence that is before us and to make some decisions as we pass legislation that will do what we are saying it is going to do, and the only way we can to do that is go to the people who are in the know.
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Having served in many other capacities—and I know that sometimes you put legislation or you put an ideal at the top and it never sinks down to the bottom, it kind of floats on the oil. It is important that we, as we deal with this housing crisis in this country—and we do have a housing crisis, that we take care and make sure that we do the right thing at the right time to save all the people who are looking for us to be their safety net in this community.
I have some more, but I will not read it, Mr. Chairman. I ask that the balance be included in my statement. And I need to say from my congressional district, our executive director is here, but I will wait until my time to introduce her, because I do not have any time left now.
[The prepared statement of Hon. Stephanie T. Jones can be found on page 280 in the appendix.]
Mr. GREEN. Mr. Miller of California, do you have any opening statement?
Mr. MILLER. Thank you, Mr. Chairman. We continue to discuss barriers that really preclude us from providing affordable housing, and they are so numerous. If you talk to builders who are trying to build houses, the approval process is so slow in many cases that they just cannot provide enough housing to meet the demands, and that is the situation we are facing today. And when you have more demand, as you know, than you have supply, you artificially increase the price of housing. And this morning I was meeting on a separate issue, which is going to impact affordable housing, and that is Canadian soft wood lumber. On May 2, there is a hearing on whether a 29 percent tariff should be placed on soft wood from Canada. That equates to about $1,500 in increased costs for housing if that happens. And the problem we face in this country is we do not provide enough soft wood to meet the demand. And if you look to some groups, they want to continue to shut our forests down, but we continue to decrease the amount of logging that occurs, thereby decreasing the amount of lumber we have to be able to provide housing. I commend the Chairwoman for taking this on. We have a problem that is just growing daily, and it is not just one sector causing it, it is an overall ballooning of problems that the industry has to face and costs they have to absorb in providing housing. And, therefore, we are continuing to meet and discuss a problem that we know is probably going to be worse next year than it is this year, and we have to get to the root of the problem.
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I know in many of your western States, Endangered Species Act is a huge problem. When your builders go in and buy properties that they think are reasonable to produce affordable housing, just to find out that some spider, rat or fly lives on them, and all of a sudden, instead of owning property that they can provide affordable housing on, they own a habitat, and they go through countless years of litigation and lawsuits and spending money on attorneys just to end up, by the time they are through, meeting exorbitant requests by agencies, and therefore the cost of the housing is so much, it is no longer affordable. I commend each of you for trying to provide needed housing for people at the low-income levels who really need housing, and it is incumbent upon us to look beyond that and say what is causing this problem. And I agree with Mr. Green and many other Members of this subcommittee who are looking to that.
We are trying to figure how do we get to the root of the problem. We continue to look at the problem and just put a Band-Aid over it and it will get us by to the next week, but it does not resolve the problem that is causing the sore, and the sore is a lack of affordable housing because the demand far exceeds the supply. And I keep repeating it, but until we have a move-up market for people to move up to that is affordable, there is never going to be an affordable housing market because 59 percent of the people who want affordable housing have no place to use a Section 8 voucher especially in California. So I am looking forward to the hearing today.
Mr. GREEN. Mr. Watt, opening statement?
Mr. WATT. Thank you, Mr. Chairman. In the interest of hearing the witnesses and time, I think I will waive my opening statement. I did, however, want to commend the Chairwoman for having a witness that will focus primarily on the HOPE VI program and some of the concerns that several people have raised about that.
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When we started the reauthorization process to award reauthorization of HOPE VI, I wrote to the housing authorities in my congressional district and asked them to submit any comments they may have, and also wanted to ask unanimous consent to submit the responses that I received from the Greensboro Housing Authority, Winston-Salem Housing Authority and Charlotte Housing Authority to my request and ask unanimous consent to submit their responses about the HOPE VI program.
Mr. GREEN. Without objection, so ordered.
[The information can be found on page 293 in the appendix.]
Mr. WATT. And I yield back the balance of my time and thank the Chair for allowing me to introduce the witness from my congressional district, but I will do that later.
Mr. GREEN. Mr. Baker, opening statement?
Mr. BAKER. Nothing at this time, thank you, Mr. Chairman.
Mr. GREEN. As we introduce our first panel of witnesses, the Chair reminds witnesses that they will have 5 minutes to provide an oral summary of their testimony. Their full written statements will be made part of the record. Since we will be having Members who will be introducing individual members of the panel, we will introduce each speaker right before he or she speaks.
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Our first speaker is Telissa Dowling. She is the president of the Resident Advisory Board of the New Jersey Department of Community Affairs. The board represents 19,000 voucher holders throughout New Jersey. Ms. Dowling also serves as a member of the board of the National Low Income Housing Coalition. Welcome, Ms. Dowling.
STATEMENT OF TELISSA DOWLING, PRESIDENT, RESIDENT ADVISORY BOARD, NEW JERSEY DEPARTMENT OF COMMUNITY AFFAIRS, ON BEHALF OF NATIONAL LOW INCOME HOUSING COALITION
Ms. DOWLING. Good afternoon. Thank you, Vice Chairman Green and Members of the subcommittee. I am honored to be here today to testify about H.R. 3995. My name, once again, is Telissa Dowling and I am the president of the Resident Advisory Board New Jersey Department of Community Affairs. The DCA administers the 19,000 vouchers throughout the State of New Jersey. I am testifying here today on behalf of the National Low Income Housing Coalition. I am a member of the coalition's board of directors and I am representing its members nationwide who share the goal of ending affordable housing crises. We know that the intent of the bill is to expand both rental and home ownership opportunities and to make existing programs work better.
As the subcommittee knows, housing affordability, availability are serious problems. Vouchers do help close that affordability gap by paying rents that would be unaffordable otherwise. Today, 1.5 million low income families are served by vouchers. Choice and mobility are important attributes of vouchers but, as you know, people in many places, people with vouchers are having a lot of trouble finding a place to live. The bill would let PHAs use 5 percent of their funds for improving voucher success. While we think this is a good idea, we think it should be limited to 2 percent and to PHAs meeting certain criteria so there is a connection between the use of the funds and the need. And if PHAs take advantage of the new policy, they should have to report it in their PHA plan.
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We also have a problem with increasing the tenants' portion of the rent to 40 percent of the gross income. This could make housing accessible to voucher holders, but it comes only at the tenants' expense. The tenant would pay even more of an already small income on rent and really suffer trying to make ends meet. One way to improve voucher success that does not come at the tenants' expense is to let PHAs increase their payment standards to 120 percent of the fair market rent without HUD's approval if they meet certain conditions.
My written testimony includes some other suggestions for increasing voucher success. We are very worried that some of the changes proposed in the bill will stifle opportunities for tenant input and participation. These opportunities became law only 4 years ago with the enactment of the Quality Housing and Work Responsibility Act of 1998, known as QHWRA, where PHAs were given more flexibility, but were also made accountable to their tenants and communities.
We stand firmly against the proposed waiver of the tenant resident commissioner requirement. Exceptions already exist to this requirement and the Secretary should not have broad waiver authority for this requirement.
We also oppose the 3-year suspension of the filing of PHA plans by PHAs with less than 100 units. Without the planning process, PHAs are under no obligation to include tenants in their decisionmaking process.
In addition, depending how the terms small public housing agency is interpreted, the 3-year suspension could include PHAs with fewer or no public housing units, but significant numbers of vouchers. For example, my PHA administers approximately 19,000 vouchers, but has no public housing units. There are also PHAs around the country with fewer than 100 public housing units, but many more vouchers.
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In my own experience as a voucher tenant and as the president of the RAB, the planning process has made the PHA take tenants into account. The PHA has been making changes without understanding their effect on tenants. But the PHA planning process requires PHAs to consider tenants and their needs.
And we also have serious misgivings about the development-based subsidy proposal in the bill. We worry that an untested concept for private financing will not be able to make up a big budget gap in an already underfunded program area.
We are also very concerned about the loss of actual public housing units permitted through this program. My written testimony describes our concerns about the HOPE VI program and provides our proposal for reauthorization. We think that the loss——
Mr. GREEN. If you could wrap up your testimony, I would appreciate it.
Ms. DOWLING. We think that the laws of the public housing unit will help big in the development-based subsidies for public housing and will undercut the goals of the production program in the bill and will put even more pressure on the voucher program. And my written testimony addresses some additional issues that I did not have time to discuss today, including expanding the ROSS and the FSS program, improving enhanced vouchers and other issues.
Thank you again for the opportunity to speak with you today.
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[The prepared statement of Telissa Dowling can be found on page 381 in the appendix.]
Mr. GREEN. Thank very much for your testimony. And you did well rushing at the end. Do not worry.
Our next witness is Ms. Joan Walker Frasier. She is the President of the Atlantic City Residents Advisory Board in Atlantic City, New Jersey. She also serves as a State delegate for the National Organization of Public Housing Residents, ENPHRONT. Did I get that right?
STATEMENT OF JOAN WALKER FRASIER, PRESIDENT, ATLANTIC CITY RESIDENTS ADVISORY BOARD, ATLANTIC CITY, NEW JERSEY, ON BEHALF OF ED WILLIAMS, PRESIDENT OF ENPHRONT
Ms. FRASIER. Good afternoon. My name is Joan Walker Frasier. I am a disabled resident of public housing in Atlantic City, New Jersey; President of the Atlantic City Housing Authority Advisory Board and, as you state, a State delegate of the National Organization of Housing Residents, and we are affiliated with 46 members around this country.
I am testifying this afternoon on behalf of Mr. Ed Williams who is president of that organization and unable to be with us today.
I would like to first say greetings to Members of the subcommittee.
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ENPHRONT believes that the basis for well run public housing is not only about sound brick and cement, but also deep, sustained and meaningful participation by residents in shaping all aspects of a public housing agency's policies. To this end, ENPHRONT strongly opposes the provisions of H.R. 3995 that will waive the requirement that housing authorities appoint residents to their governing boards if they make their best efforts to do so, but fail to comply.
When the Resident Commission Mandate was enacted in 1998, residents nationwide celebrated. The requirement marked a fundamental shift from the Federal Government's earlier policy of simply encouraging housing agencies to appoint resident commissioners. The requirement was also thought to be a necessity, given the fact that the Nation's 2200 housing agencies have been deregulated by the 1998 Public Housing Reform Act. And it is against this backdrop that we believe the provision in H.R. 3995 to be both harmful and unnecessary. Housing agencies have already been granted significant regulatory relief from the requirement.
First, under current law, housing agencies can be exempted from the requirement if they first satisfy a few basic conditions.
Second, when HUD released its proposed rule on resident commissioners in June of 1999, the draft rule required housing agencies to appoint resident commissioners within a set timeframe. Housing agencies immediately fought against the implementing schedule of the requirement, citing the complexity of local, political environments as the reasons for not being able to appoint resident commissioners within that timeframe.
In response, HUD later published a final rule allowing housing agencies to appoint resident commissioners without a set deadline. Though the resident commissioner mandate remained intact, the final rule allowed the Nation's housing agencies to move at different speeds in complying with the requirement.
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It has been over 3 years since the enactment of the law on resident commissioners. ENPHRONT believes that by now the majority of the Nation's housing agencies should have done all necessary to make residents serve on governing bodies a reality.
ENPHRONT also opposes an H.R. 3995 that would exempt small housing agencies from having to submit annual plans for the next 3 years. ENPHRONT questions the need for such a waiver provision. Under current rules, small housing agencies already submit to HUD's streamlined annual plans.
Furthermore, HUD has the power to further simplify the format of planned submission. Why eclipse this provision and the relief provided by it with a 3-year waiver provision? Indeed, ENPHRONT does oppose the waiving of the annual plan requirement for small housing agencies, but on the other hand, we are willing to discuss ideas for further simplifying the process. In discussing these ideas, we are in no way in support of stripping away or watering down on resident participation policies currently in place. These policies include Resident Commissioner Mandate as a requirement that the housing authorities establish and provides support to resident advisory boards.
On behalf of ENPHRONT and the millions of public housing residents nationwide, I thank you for this opportunity to testify before this subcommittee and look forward to working with you in the future. Thank you.
[The prepared statement of Joan Walker Frasier can be found on page 376 in the appendix.]
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Mr. GREEN. Thank you very much for your testimony.
Our next witness is Mr. Kevin Marchman, who is the Executive Director of the National Organization of African Americans in Housing, a non-profit organization here in Washington, DC. He has over 24 years of experience in the public housing field, having served as Assistant Secretary for the Office of Public and Indian Housing at HUD and as Executive Director of the Denver Housing Authority. Welcome.
STATEMENT OF KEVIN E. MARCHMAN, EXECUTIVE DIRECTOR, NATIONAL ORGANIZATION OF AFRICAN AMERICANS IN HOUSING, WASHINGTON, DC.
Mr. MARCHMAN. Thank you. Members of the subcommittee, my name is Kevin Marchman and I am the executive director of NOAAH. I want to thank you for the opportunity to comment upon this bill. Like you, NOAAH is a champion of affordable housing opportunities for all people, especially people of color. NOAAH's membership is a unique combination of public housing agencies, including executive staff, housing professionals, consultants, contractors, industry trade groups and resident groups and other advocates. Indeed, as a former public housing resident and public housing director and assistant secretary, I have the vast pleasure of leading an organization that has the diversity and the experience to look at issues, programs and legislative initiatives from many perspectives. And while the subcommittee is interested in NOAAH's views on certain public housing issues relative to this bill, I would like Members to be aware that NOAAH's advocacy extends beyond simply those issues highlighted today and includes initiatives and programs targeting environmental and health issues, specifically lead, mold and pests, expanded home ownership for minorities, economic development for the low income, fair housing, especially increased penalties for predatory lending, the aggressive disposition of the FHA portfolio, the HOME program expansion and other opportunities on behalf of our diverse membership. And while our members often find themselves on competing sides of the same issues, all are committed to expanding opportunities for African Americans and other disenfranchised minorities.
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Four things with respect to public housing: The leveraging of public funds. This proposal in the bill will allow housing authorities mixed use of private and public financings to rehabilitate and modernize public housing developments. We believe this is a good thing, but there are some kinks. We have to make sure that this particular proposal safeguards the public housing stock in this country.
The waiver of the resident commissioner requirement. NOAAH supports this waiver, but only in terms of where State laws preclude the requirement.
The HOPE VI program. The HOPE VI program is probably one of the more successful programs that HUD offers, and for the last 10 years in the majority of the cases, it worked well in communities in which it has been implemented. It is not perfect, and I believe between working with Congress and the Administration and members of the public, this particular program can be made much better.
Fourth, the suspension of the filing requirements for public housing authorities for 3 years. Good idea, but it is a bit short. We believe it should be at least 250 units. However, any suspension of the requirement must not preclude the active involvement and participation of public housing residents.
There are others, but I will let my written statement stand.
As I said, NOAAH is a housing advocate for all people of color. Our members are assisting NOAAH staff with identifying, creating and developing programs to increase affordable housing stock in this Nation. NOAAH's membership is constantly documenting best practices, designing initiatives using technology to improve the quality of life in identifying opportunities, public and private, for expanding availability of the affordable housing stock and improving the quality of life for the low and moderate income.
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Thank you very much.
[The prepared statement of Kevin E. Marchman can be found on page 371 in the appendix.]
Mr. GREEN. Thank you for your testimony.
At this time the Chair recognizes Ms. Jones for an introduction.
Mrs. JONES. Thank you, Mr. Chairman. It gives me great pleasure to be able to introduce to this subcommittee and other members of the panel and those listening to this testimony the Executive Director of the Cuyahoga Metropolitan Housing Authority, Terry Hamilton Brown. Prior to becoming the executive of one of the largest public housing authorities in this Nation, Ms. Brown served as the Director of the Department of Community Development for the City of Cleveland, and it was under her leadership that the Housing Construction Office was created. As well as under her leadership in the City of Cleveland we have built more housing in the City of Cleveland in the last 12 years than there was built in the City of Cleveland from the Korean War. And it was under her leadership that that was done. She is responsible for more than 1,100 employees as director of CMHA. In addition to all the work that she does, she serves on the boards of the Urban League, Shore Bank, University Hospitals of Cleveland and the Greater Cleveland Roundtable. She is a graduate of MIT and the University of Chicago, is a native Clevelander, and resides down the street from me. So it is a great pleasure that I introduce the Director of the Cleveland Metropolitan Housing Authority. And just one liberty to all the other witnesses as well as the second panel, this event was scheduled for another day and I am in the midst of strategic planning with my congressional staff, and we do not get that opportunity very often. So if I slip out, it is not that I am not concerned about what you are doing. I can read very well and I will keep up, and I thank you, Mr. Chairman, for the opportunity.
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Mr. GREEN. Ms. Hamilton Brown, welcome.
STATEMENT OF TERRI HAMILTON BROWN, EXECUTIVE DIRECTOR, CUYAHOGA METROPOLITAN HOUSING AUTHORITY, CLEVELAND, OHIO
Ms. BROWN. Good afternoon, Vice Chairman Green, Members of the subcommittee, and to my neighbor and Congresswoman, Stephanie Tubbs Jones, thank you for the kind introduction and thank you for the opportunity to testify before you today on behalf of the Council of Large Public Housing Authorities.
In the time allotted I would like to highlight four points of my written testimony, and key to my comments and of most concern is adequate funding. No program or provision in this bill can be successful without adequate funding.
First, thank you for proposing the reauthorization of the HOPE VI program. HOPE VI has proven to be successful at transforming distressed public housing and having a substantial impact on the surrounding communities. I support the provision of the bill to facilitate redevelopment needs of small housing authorities, but stress that targeting distressed properties must remain a primary focus of the program. Coming from Cleveland, being one of the first housing authorities created in the country, CMHA has a housing stock that was built in the 1930s and early 1940s. It is functionally obsolete and in some cases beyond modernization. In Cleveland we estimate that 21 family units are or will be eventually candidates for HOPE VI grants.
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As to the HOPE VI, my recommendation is to create a two-track grant-making system, one track that continues to provide large grants to the most severely distressed properties and a second track that would focus on smaller redevelopment projects that require other grants and work with small housing authorities.
Next, related to the private debt financing strategy for public housing included in this bill, it appears that it is proposed that the expense of full funding of the capital fund program could limit the potential of private investment and could lead to opt-outs in public housing.
As I see it, a successful private debt financing strategy needs to do three things. It needs to ensure adequate Federal funding, leverage private resources, and protect public housing units. This bill accomplishes only one of these. The provisions giving HUD the authority to remove low income use restrictions on public housing property in the event of foreclosure is of particular concern as it places public housing units at risk and in danger. This could result in additional loss of low income housing in many communities like Cleveland that have already experienced numerous HUD-insured property foreclosures. The debt financing model included in this bill takes away resources from the capital fund and does not necessarily recognize that public housing authorities are already using capital funds to leverage millions of dollars. While we appreciate additional development tools, we do not ask for it at the cost of capital funds and the loss of public housing.
Third, the supportive housing for elderly provision in the bill does not include the conversion of public housing into assisted or supported housing. With nearly 700,000 seniors living in public housing, public housing authorities serve more seniors than any Federal housing program and should be included in this bill.
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In Cleveland we created a program called the Manor at Riverview. It includes 69 units of supportive housing and a health clinic through modernization efforts of a large elderly highrise. Our experience shows that it takes a huge investment in capital improvements and significant operating dollars to keep the ongoing personal care and health services as well as to fund social service coordinators. It is quite challenging finding the resources to make this affordable to very low income families. Additional Federal assistance is needed if we are going to support seniors and public housing, avoid premature shifts to nursing homes and save Medicaid funds.
To that end, CLPHA is renewing its Elderly Plus proposal. This initiative would create a demonstration of $100 million of competitive awards for public housing authorities, both large and small, for innovative conversions of obsolete buildings. This would allow our seniors through Elderly Plus to remain and age in place and create equal access for supportive living environments.
Lastly, related to the Section 8, the provisions in the bill we support. However, there would be an additional comment to add flexibility and improve utilization in tight real estate markets. While CMHA has moved from a troubled to a high performer and we have high utilization, that is not always the case for my colleagues in tight real estate markets. Despite good program management, people are having difficulty using the vouchers if there is a shortage of rental and affordable housing in their marketplace. We believe many of the Section 8 enhancements in H.R. 3995 will provide for better utilization, especially the provision that would assist hard-to-house families, and the simplification of rent calculations. The details of my recommendations related to that is included in the testimony.
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In conclusion, CLPHA members remain committed to providing quality housing for low income families. H.R. 3995 provides opportunities and tools to assist public housing authorities in carrying out our work but, I repeat, no program can be successful unless it receives adequate funding. Your efforts to provide policy guidance and increased resources for public and assisted housing is critical to ensuring that low income Americans can have access to safe, even affordable housing, both rental and home ownership.
[The prepared statement of Terri Hamilton Brown can be found on page 357 in the appendix.]
Chairwoman ROUKEMA. [Presiding.] Thank you. I did not hear your whole testimony, but I am sure this whole panel is very constructive, and we will move along together to be constructive to get a good bill. But I do want to apologize to everyone for not being here on time, although I was on a delayed AMTRAK train from New York and New Jersey, not, however, the one that I understand was crashed this afternoon. No. We were just delayed and I am sorry for that and I regret it, and I do thank Congressman Green for sitting in for me and helping me, and I can assure you that we will go over in great detail all your testimony, and I thank you all.
I understand that you all have been very compliant about conceding to the time limits here, because we not only have this panel, but a second panel to go through. And with that, I believe Mr. Baker would like to introduce his friend and colleague and authority from Louisiana.
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Mr. BAKER. Thank you, Madam Chairwoman. I appreciate that courtesy and do wish to extend a welcome to Mr. Hans Dekker, who is not only a constituent, but a very distinguished leader in our community and State in bringing innovative thought to providing housing to those who need it. I think his experience in directing the Baton Rouge Area Foundation, which is one of the top 10 in the country as far as generating assets for quality housing, is very admirable.
Prior to that 3-year stint, he, of course, was the director of the local initiative support corporation, known as LIST to most of us, for some number of years. So I am particularly pleased to have his testimony before the subcommittee, Madam Chairwoman. I think you will find him to have particular good insight and helpful recommendations.
STATEMENT OF HANS DEKKER, BATON ROUGE AREA FOUNDATION, BATON ROUGE, LOUISIANA
Mr. DEKKER. Thank you, Madam Chairwoman, and I would like to recognize and thank Congressman Baker for his commitment to housing in neighborhoods in East Baton Rouge Parish. He has been a true leader in building a community-wide strategy to address our most pressing needs.
HOPE VI is one of the most important community tools in the Nation. It represents one of the only very large focused investments available to revitalize distressed public housing and its surrounding neighborhoods. The private market, to a large extent, has left America's toughest neighborhoods and it is an important and vital role for the Federal Government to serve as a source of funding for revitalization. HOPE VI has and should continue to do this. The changes to the HOPE VI program proposed in H.R. 3995 are needed and timely. HOPE VI has always devoted most of its resources to help the most largest, most troubled public sites in the country. This policy has meant that much of the HOPE VI funding has benefited only the largest cities in the Nation.
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In fact, almost 50 percent of the HOPE VI funding for the year 2000 has gone to 13 different housing authorities. While targeting the largest, most troubled public housing sites was a deliberate policy objective at the beginning of HOPE VI, since 1996 the program has supposed to have been available to a wider swath of authorities. Unfortunately the bias for large cities and large public housing sites has continued in the program. It is biased in two fundamental ways.
First, the way the funding is allocated greatly benefits large public housing authorities with large housing sites. Second, the funding and selection criteria that HUD uses are biased to large cities. This bias is ironic, because HOPE VI is really intended to reduce our Nation's stock of distressed not necessarily large public housing units. The fact is that in each of Baton Rouge three HOPE VI applications, they were awarded the maximum points for the distressed nature of their units for which they were applying. However, because of the bias in the allocation of funds toward larger public housing sites and, by extension, large cities, the distressed nature of sites is overwhelmed in the scoring process by the size of the complexes and the units. This bias exists despite the fact that in small and medium sized cities, especially in the southern United States, we have some of our Nation's highest rates of poverty and neighborhood distress.
Let me use Baton Rouge as an example. The median household income in the 5 census tracts that make up the immediate neighborhood around the sites targeted in our HOPE VI application is between $5,000 and $11,000. The average net income for public housing residents in our HOPE VI application is $3,400. 25 percent of the land in the immediate neighborhood is vacant and/or abandoned. This poverty and abandonment translates directly into high levels of crime and disease concentrated in our most distressed neighborhoods. For the year 2000, Baton Rouge was ranked sixth in the Nation for crime rate. Our level of violent crime was twice the national average and Baton Rouge has the twelvth highest AIDS case rate per capita in the Nation among our major metropolitan areas.
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Simply put, we have great need, too. The 2001 HOPE VI awards exemplified the bias to large cities or public housing sites. Of the $540 million HOPE VI budget, 225 million was set aside for projects with 300 or more units at one site. If these large site applications were not funded from the site, they were automatically placed in the application pool for the remaining 265 million. A smaller applicant like East Baton Rouge with 171 units totaled between two sites could only compete in the second highly competitive pool of funds. As a result, only three sites in 2001 with less than 300 units were funded. These sites received just under 12 percent of the HOPE VI funding in 2001. Additionally, more awards were made in 2001 to housing authorities which have recently appeared on HUD's troubled housing authority list. This support for troubled housing authority has had predictable results, many of them being unable to execute their HOPE VI grants successfully.
The support for troubled housing authorities is especially exasperating when you look closely at the scoring criteria for HOPE VI applications. One of the areas for which East Baton Rouge's most recent application lost points is the lack of experience and capacity of our housing authority to implement the grant. However, our housing authority is not classified as troubled; has acquired high quality assistance in the preparation and implementation of its grants and has successfully managed large scale HUD modernization grants; and has obligated funds in a timely and effective manner as required.
There are numerous other technical aspects of the program that perpetuate a bias against small public housing sites that I have detailed in my written testimony, but the major point I would like to leave with you is that it is needed and timely for the HOPE VI program to open its funding and selection to all public housing authorities on an equal footing.
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Thank you.
[The prepared statement of Hans Dekker can be found on page 364 in the appendix.]
Chairwoman ROUKEMA. I thank you. That was a very excellent testimony, right to the point, and you did it within the timeframe. Thank you.
Mr. Harry Byrd. I believe, Congressman Watt would appreciate introducing you as one of his North Carolina representatives.
Mr. WATT. Thank you, Madam Chairwoman. I want to thank the Chair for allowing two witnesses to talk about the HOPE VI program and for also giving me the opportunity to introduce Mr. Harry Byrd, our final witness on this panel, who is currently a Principal in The Harkin Group, a project management and consulting firm, and previously the Senior Vice President and chief Operations Officer of the Housing Authority of the City of Charlotte, North Carolina. In that capacity, he had a number of things under his supervision. Most important for our purpose today was the HOPE VI program at the Charlotte Housing Authority. And since he has left the Charlotte Housing Authority and formed his own consulting group and project management group, he has continued to consult not only with the Charlotte Housing Authority, but with other housing authorities which are implementing HOPE VI grants. He knows the successes and the shortcomings of HOPE VI, and I think it is important for us to hear both successes and problems, and we welcome him here today from my congressional district, Mr. Harry Byrd.
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STATEMENT OF HARRY A. BYRD, JR., PRINCIPAL, THE HARKIN GROUP, LLC, HUNTERSVILLE, NORTH CAROLINA, ACCOMPANIED BY JOHN KENNEDY
Mr. BYRD. Thank you. Good afternoon, Chairwoman Roukema and other Members of the Subcommittee on Housing and Community Opportunity. My name is Harry Byrd, principal of The Harkin Group. With me today is John Kennedy, also a principal.
On behalf of the company, I thank you for the privilege of addressing this subcommittee today and sharing with you some of our experiences and what we have learned as a result of working with the HOPE VI program over the last 9 years. The Harkin Group has been involved with the HOPE VI program since it was first introduced in 1993. Currently we associate it with HOPE VI as private consultants.
Obsolete public housing sites that are redeveloped under the HOPE VI program are transformed from communities of isolation and hopelessness into viable self-sustaining neighborhoods of opportunity and vitality. The true intent of HOPE VI can be accomplished. However, we have recognized that there are strategic areas of this program that should be improved to afford housing agencies the opportunity to better accomplish the overall goals established by the program.
Of major concern to us as well as to proponents and opponents of HOPE VI alike are a number of original residents of the public housing site who returned to the revitalized community. There are a number of reasons that this number may be lower than desirable. The design of HOPE VI communities seeks to decrease the concentration of poverty in a specific geographic region by decreasing density on the public housing site, resulting in decreased public housing inventory. Fewer units result in fewer residents that can be accommodated. Based on our experience, housing agencies are replacing from 35 to 50 percent of HUD-subsidized housing units lost through HOPE VI demolition revitalization.
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To combat this impact, it is necessary to strengthen the requirement for the development to ensure increased financial commitment on the part of the public and private sectors. This action would provide necessary resources to increase the boundaries of the revitalization area beyond the mere footprint of the public housing site itself, thus allowing an increase in the number of units developed.
Currently, there is no requirement for one-for-one replacement of public housing units lost to HOPE VI development. While we realize that one-for-one replacement is difficult to achieve, a greater commitment toward achieving this goal should be emphasized in the requirements of the program.
Typically, public housing residents living in a development targeted for HOPE VI revitalization are relocated prior to commencement of demolition and construction. It has been our experience that the timeframe between residents being relocated from the site and new housing units being developed that allows them an opportunity to return can be anywhere from 3 to 5 years or longer. Specific examples are cited in our written testimony. This time span alone can cause residents to be become frustrated and disillusioned with the program and choose not to return.
Reducing the period between the time residents are relocated and the time they can return to the site can have a positive effect on the number of residents returning. One way to accomplish this is through comprehensive, up-front planning that ensures the housing agency is ready to begin immediately upon grant award. The greater degree to which all components are developed and in place, the greater degree of speed and efficiency in which they can be implemented.
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Along with involvement of residents at the outset, it is imperative that public housing agencies provide good tracking and monitoring of residents during redevelopment. PHAs must provide adequate follow-up and supportive services to keep residents involved in the redevelopment process and working toward their eventual return. In instances where this is lacking, many original residents who were displaced from the site are lost.
Of foremost consideration in the HOPE VI programming and implementation are the residents for whose benefit the program was conceived and designed. Community and supportive services must be in place early on that include activities designed to help residents make smooth transitions into their new living environment. It is incumbent upon housing agencies to develop comprehensive transitional housing programs that provide the necessary support, training and resources through case management in assisting families to be prepared to return and to move toward self-sufficiency.
Design and programming for build-out of the site should include economic strategies that will provide sustainability of these communities going forward. If the mix that is typically recommended by HUD can be achieved, then the economics of the project will define the level of private sector participation required to ensure sustainability.
Another important element is the attraction of market-rate development and reinvestment back into the community by fostering public/private initiatives to change long-standing perceptions.
Just as critical is the level of participation and commitment from local government. Although the program is funded through local housing agencies, local government buy-in and commitment of resources are essential to securing HOPE VI funding and to the long-term success of the program. The return on investment for these stakeholders is realized in the form of an increased tax base and elimination of revenue distressed and revenue-draining communities. Moreover, HOPE VI revitalization serves as a catalyst for economic and other development efforts in the city that may not otherwise occur.
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Chairwoman ROUKEMA. Mr. Byrd, can you summarize and conclude please?
Mr. BYRD. HOPE VI programs are very complicated and quite different from other capital improvement programs that many housing agencies have undertaken. Earlier program requirements call for housing agents to have program management in place to enhance capacity and to protect the interest of the PHAs as necessary. That requirement has been dropped. As a result, many housing authorities are left without capacity.
If we can implement HOPE VI programs consistent with the requirements and guidelines established by HUD, we will build better communities that include senior housing, homeownership and family housing—neighborhoods that have been targeted into the broader community and include a true mixture of affordable, market rate and subsidized housing.
In our opinion, the HOPE VI program was well-conceived and has provided many opportunities to public housing agencies and the residents they serve. We strongly feel this program should be continued. And I apologize for extending my time.
[The prepared statement of Harry A. Byrd Jr. can be found on page 346 in the appendix.]
Chairwoman ROUKEMA. That is all right. Fine. I thank you for everyone's cooperation, and recognizing that I was late to begin with, but I will ask all my colleagues, in consideration of the number of people that we have here, that we are able to get through this first line of questioning. We will begin with Mr. Green.
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Mr. GREEN. Thank you, Madam Chairwoman.
Let me begin with Ms. Dowling and Ms. Walker Frasier. You both expressed some concerns over the suspension of planning requirements for small PHAs and the waiver of the resident commissioner requirements. Can you offer some thoughts on how we can achieve the goal of regulatory relief for small PHAs and sort of ease the regulatory burden and the paperwork burden while still maintaining tenant access?
Ms. DOWLING. Yes. That is very simple. Because when the CORA went into place back in 1998, when it was mandated, all the hurdles that we had working out the PHA plan was addressed; and most of the housing authorities that are in good standing actually are allowed to submit a streamlined version of the PHA plan. So it is not like you would have to go every year and reinvent the wheel. It is just that you are going to plug in different components throughout the year.
So that's why it is very difficult for us to understand why would small PHA plans—housing authorities have problems with submitting this plan when HUD gives it to you over the web, HUD gives you the opportunity to even have it streamlined from the beginning? So it is already there. We are just asking to use it.
Mr. GREEN. So you don't see a need for regulatory relief I guess is what you are saying?
Ms. DOWLING. Maybe I am not clear what you are asking me about regulatory relief.
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Mr. GREEN. I guess what I am taking from your response is that you don't believe that PHAs do have a problem with onerous paperwork requirements they are filing.
Ms. DOWLING. No, not at all.
Mr. GREEN. Ms. Walker Frasier.
Ms. FRASIER. I don't understand myself what the particular small housing agencies are telling you what their problems are. Because of the 18 components, then why not look at streamlining those requirements that they have to face? If they are talking about there is too much information being asked from them, then the requirements made by HUD need to be looked at.
Mr. GREEN. I guess, Mr. Marchman, I would like to get your response. I know that your organization is in favor or at least supports the resident waiver—commissioner requirement being waived.
Ms. FRASIER. No, I am sorry.
Mr. MARCHMAN. On the onset of public housing authorities developing these plans, I think it was about 4 or 5 years ago, perhaps in a hearing like this, the then secretary of HUD, in response to a question from a subcommittee Member, talked about the lack of strategic planning for public housing authorities. We spoke about it a lot, and the criticism was that PHAs simply did not do a good job in planning for the future.
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The PHA plan was created, I submit to you, for large, medium and small—it is too much information, information that HUD does not read and does not have the capacity to do anything meaningful with. If you look at even the smallest housing authorities, some of which I work with, those 18 points just don't get to the issues of how to run and plan for a well-run public housing agency.
That does not preclude, however, the very strong need to have involvement of residents and other community members in the planning of that housing authority. I think that is crucial. Indeed, I would say that public housing agencies have become much more well managed in the last 10 years, particularly in the last 5 years, and due to residents being on boards of commissions.
But the PHA plan is too much for smaller housing agencies, and they spend too many of the resources in putting those things together, giving it to HUD, HUD's simply approving it and filing it away.
Mr. GREEN. Do you have other ideas for easing the paperwork and regulatory burdens that you might want to share?
Mr. MARCHMAN. I think there are probably four or five crucial areas that smaller public housing agencies could submit to HUD that would suffice for the 18 they currently submit. I think they can be submitted either over the web or paper into the local offices; and they will simply cover the areas of operation, management, relationships with residents of the community, exactly what you plan to do with the funds that you are receiving from the Federal Government. Not much more needs to happen, but it has to have the involvement of everybody, specifically residents who sit on the board.
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Mr. GREEN. I would invite you to supply some written information to us on that. That would be very useful as we go about this process. Thank you. Thank you, Madam Chairwoman.
Chairwoman ROUKEMA. Thank you, Mr. Green.
Congresswoman Velazquez.
Ms. VELAZQUEZ. Thank you, Madam Chairwoman.
Ms. Hamilton Brown, I agree with the concerns voiced in your testimony regarding the project-based private debt financing strategies. Specifically, I am concerned about the potential to cause long-term problems through the gradual phasing out of publicly assisted rental housing.
You mentioned the need to ensure the preservation of these units for low-income families. Would you please expand upon this, and also what strategy would you advocate? Do you believe it is possible to maintain this housing while leveraging private funds?
Ms. BROWN. My concern as the provisions are laid out in the bill that it would give HUD a lot of authority to waive the use restrictions. So while we believe that we should be able to use capital funds to leverage private dollars to expand the amount of financing and development, more production, my concern is, in the case of foreclosure, if the authority goes to HUD that we could lose public housing units to the market and that the housing authorities, whether directly or through partnerships, should have more control in developing that financing structure.
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The other concern that I have is that this is too strict, and it sort of implies that all markets are the same and that I think we need to learn more how financial markets across the whole country, not just in certain tight real estate markets, will respond to that and that additional study needs to be looked at in other ways to generate private dollars.
However, the point is that, as a tool, we need to provide leveraging. We certainly know that Federal funds by themselves won't do it, but the security measures and the structure need more work.
Ms. VELAZQUEZ. Thank you. I was happy to hear you address the issue of PHAs getting back into the housing production business. I believe that, at the very least, we need to create an exemption from the prohibition on public housing production for high-performing authorities in tight markets. Would you support such a proposal, and what effect do you believe such a proposal would have on housing affordability in these markets?
Ms. BROWN. Absolutely, I would support it. In fact, in Cleveland, though it's not with public housing moneys, we have received upgrade grants for foreclosed properties in the past, and we are using those in a partnership with a local non-profit to produce more affordable housing units. In effect, the housing authority is creating product that the market will not create. So I think it will enhance our ability to serve more low-income families in those markets.
Ms. VELAZQUEZ. Thank you.
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Ms. Dowling, the house voucher right to remain language is of particular interest for me. In fact, the language, as it currently exists, was an initial draft of a bill that I intended to introduce. However, the language was not quite as tightly drafted as I would like. We have held off. For this reason, I appreciate your concern about the drafting of the language as it exists in the bill. How specifically would you want to see it altered?
Ms. DOWLING. Can I give you that more in writing? Because we did sit down and come up with a proposal and I wouldn't want to not give you all that we have right now. We do have it in writing.
Ms. VELAZQUEZ. So I will work with you and my staff. Thank you, Chairwoman.
Ms. DOWLING. Thank you.
Chairwoman ROUKEMA. Yes. I hear your concern about that, and certainly my intention is to go into this in more depth. Certainly your goal is a proper one, and we should be able to work this out, but we don't have all answers here.
So, Ms. Dowling, we New Jersey people should be able to resolve this problem. I should acknowledge the fact that both Ms. Dowling and Ms. Frasier are from New Jersey, and we appreciate their leadership.
Ms. VELAZQUEZ. So we should work with the Low Income Coalition on the language. Thank you.
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Chairwoman ROUKEMA. Yes. Thank you.
Mr. Ney, Congressman.
Mr. NEY. Thank you, Madam Chairwoman.
By the way, I want to welcome all the panelists, especially those of you from Ohio.
HOPE VI was enacted to provide relief to severely distressed public housing authorities where developments were beyond repair, and the hope was that new development funds could be used to revitalize community neighborhoods. We all know that purpose. Do you think it has met its objectives? Also, how do we address displacement where public housing money is used to redevelop, that maybe less than 50 percent of the tenants would return? Anybody on the panel? I was just curious what you think.
Ms. BROWN. I will start. Yes, I think HOPE VI is showing that it is successful. There is just not enough funds to address all the severely distressed properties, as I noted in my testimony. The age of our housing, too.
While we have received three grants and we have completed some components and are under construction with others so it is very fluid, the three grants don't begin to really address all of our needs. Cleveland is a little different in that, for the grants we have received, we are replacing almost all of the housing. The only areas we haven't is where we had efficiencies or one bedrooms where we already have that kind of inventory, but the real need for us are the three and larger bedrooms, and we have replaced them maybe not always on site, but using other land in the community. Working with the city, we have replaced it with off-site development. So that's not exactly our condition.
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Mr. NEY. The same within my area in eastern Ohio, we haven't had a particular problem.
Is there anybody on the panel who has had a similar situation?
Ms. DOWLING. Yes. Telissa from New Jersey.
With the HOPE VI, one of the major problems is finding out exactly what do you mean by severely distressed. Because now you have housing authorities that are allowing the property to really become terrible in order to qualify for the HOPE VI funding, and that is not the intent of what HOPE VI was supposed to be about.
Also, under the HOPE VI, the problems that we are having, the housing authorities even adhering to the Uniform Relocation Act, as far as helping the residents that are being relocated pending the new apartments that are coming, find decent and affordable, safe housing, they are giving them the vouchers that are not being able to be utilized and are just throwing them over to the voucher program and saying, do what you got to do until we are able to build something. But, in the meantime, they are building it, and they are building it not for that resident in mind. Because that could be an extremely low-income resident, but now they are building mixed-income residences where that extremely low-income resident cannot return with HOPE VI the way it is now.
We understand intent, and that is why we also have something in writing to submit to the panel in reference to strengthening the HOPE VI program to really make it more effective for everyone and not just displace poor people and put mixed-income people in there. I know they have a problem finding rent, also, but I can give you an example in the State of New Jersey that we have an executive director of a housing authority making $90,000 and living in public housing. That is a problem. That is a problem.
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Mr. NEY. I would agree with that.
If I have the time left, one quick question. There has been some concern that the Section 8 contract renewal situation will eat up the HUD budget. I just wondered, and if I run out of time, any creative ideas you can submit. I know you can tell Congress the answer is to put some more money in, but maybe there are some things we are missing.
In Ohio, we try to do some housing trust programs and come up with creative ways, and I am sure there are examples around the country, but we are missing something as a Federal Government. So if you have any ideas—I don't want to take the chairperson's time, but I would appreciate it.
Chairwoman ROUKEMA. You have one more minute. Go ahead.
Ms. FRASIER. One of the biggest problems I am finding, at least even in New Jersey with the HOPE VI program in Atlantic City itself, is that they are building these houses under HOPE VI, but they are not all designated for public housing residents. So now you have got 600 units you are building, and you are displacing 214 people, but they are not all coming back. You have not built anything to put them into, so where are they going?
It is easy to say we will give them vouchers, but if you know the area of Atlantic City, affordable housing with vouchers is not always possible, and everyone cannot just relocate.
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Ms. DOWLING. I am sorry. I will give you that in writing in reference to how to make the Section 8 work better.
Mr. NEY. I would appreciate it, and also if there are any stats that you could give the Chair.
Ms. DOWLING. Yes, we do.
Mr. NEY. Also, if anybody has done post interviews, where these individuals have gone to that they could not get back into the system.
Ms. DOWLING. Oh, yes.
Mr. NEY. Thank you.
Chairwoman ROUKEMA. Congresswoman Jones, I believe you were the next to arrive.
Mrs. JONES. Thank you, Madam Chairwoman. In your absence, we all complimented you on hosting this series and bringing us an opportunity to address this.
Ms. Hamilton Brown, in your written testimony at the last page you said that, despite the important role of public housing and serving the neediest families, there is also a statutory bar to the development of incremental or replacement public housing. Can you speak to that issue briefly for me, please?
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Ms. BROWN. Right. This is the requirement or the inability to do one-for-one replacement housing, and it is really lack of funding. As the two persons speaking before me are saying, there really is a need to replace public housing as you are doing HOPE VI to return residents to their home. And without having adequate funds or tools to leverage more dollars, maintain the units as public housing, we really are not creating more housing. We are just shuffling, I imagine, and putting people in other places. So not every property maybe requires one for one. So you have to find what is the appropriate mix for the locality.
As I answered before, we don't have a strong demand for efficiency so as we demolish any of our units that were of that size, we don't replace them. But for the larger bedrooms, three and more, there is absolutely a need to replace each unit in the market, at least in our area, as you well know.
Mrs. JONES. Talk to us about some of those programs that you worked on with the City of Cleveland and other private ownership as some innovative ways to replace some of the housing that is lost as a result of the inability to replace units.
Ms. BROWN. In Cleveland, we use block grant dollars as well as home dollars for housing production, affordable housing, whether it is in a housing trust fund that is locally established to provide gap financing with developers as well as non-profits. In effect, this past year was the first time the public housing authority has received a grant of moneys from the City of Cleveland.
We are using home dollars with one, our Carver Park HOPE VI to help us meet the need for the number of units that we want to replace. We are also using moneys through the city's empowerment zone to help make housing more affordable in our mixed-income development. So those are the ways that our city is using moneys for affordable housing.
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Mrs. JONES. Let me ask you one additional question or a couple until my time runs out.
In H.R. 3995, as proposed, I believe it allows for only 2 years of assistance for families. Can you tell me, based on your experience, whether a 2-year period of time is a sufficient time for families to be able to—rental assistance dollars, are they able to adjust? What have you found to be the appropriate period of time for them?
Ms. BROWN. Related to? I am sorry.
Mrs. JONES. That is a good question. I don't know all the background on it, but——
Chairwoman ROUKEMA. Excuse me. I am wondering what the 2-year period is that you are referencing.
Mrs. JONES. I am using a question that somebody wrote for me, and I don't know. So I am going to withdraw that question and go on to something else.
Chairwoman ROUKEMA. All right. Withdraw it, and then if you review it and if you want to come back later.
Mrs. JONES. I appreciate it.
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Can you tell me what are the dangers of basing rent calculations on the average median income versus utilizing the now standard fair market rent equivalent? Can you help me with that?
Ms. BROWN. By using the SMR we believe we will be able to provide more choice, housing options to families and to also move people out of areas of concentrated poverty and that they will have more choice in the rental market.
Mrs. JONES. Are you, as a housing authority, able to do mixed-income housing under the current standards that are set forth, regulations set forth by HUD?
Ms. BROWN. Actually, using the capital fund, you are able to do mixed-income financing. Perhaps there needs to be greater rules that HUD should put forward, regulations to really describe the range, but housing authorities are able to do that now. I believe Atlanta is one of those that has been very successful at using public funds for mixed-income financing.
Mrs. JONES. I want to thank you again, Madam Chairwoman.
I am in the midst of a staff retreat, so I am going to try to do some strategic planning myself. I thank you all for coming and please excuse me.
Chairwoman ROUKEMA. Thank you.
Congressman Miller.
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Mr. MILLER. It is so nice you have you here, Ms. Chairwoman. I am sorry that train wasn't on time.
Chairwoman ROUKEMA. I am glad I wasn't on the other one that crashed.
Mr. MILLER. I know the one in my district has a lot of people hurt.
Ms. Brown, thank you for elaborating on that. Your statutory bar—I had no idea what type of housing you were talking on this. It was my question, so I am glad you did respond to that.
Mrs. Dowling, I always looked at homeownership as a way for individuals to create wealth and stability within communities, especially in volatile housing markets where home values increase rapidly. Why don't you think Section 8 vouchers should be used for down payment assistance in those areas?
Ms. DOWLING. We didn't say it should not be used. It should be used, but not 5 percent. Two percent. Because then you are giving the housing authority the opportunity to say we are going to use the whole 5 percent toward a down payment for homeownership, so that cuts out the security deposit, cuts out even helping to utilize the voucher activities. We don't totally disagree.
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Mr. MILLER. You don't oppose that.
Ms. DOWLING. No. We just said not the whole 5 percent unless you are going to give me strong language that clearly states that the housing authority cannot use the whole 5 percent. Because that is a substantial amount of money when you start looking at the budget. I am telling you it will be as true as this table that the housing authority will take that money and just use it for pushing the homeownership program, and then we are going to lose out on getting those vouchers utilized in the first place.
Mr. MILLER. Because I look at it as, if you can get people into housing, in a few years they won't need Section 8 vouchers. They will have equity built up.
I think that is a great opportunity for us, but we have neglected that for years not taking advantage of that opportunity.
Ms. DOWLING. But even in my written testimony you will see we want to tie the self-sufficiency program into the homeownership program, and that is exactly what we are doing at the New Jersey Department of Community Affairs. Those residents are moving through from the self-sufficiency program and actually own homes.
Mr. MILLER. Mr. Marchman, I don't think you were asked the question, but you support a third-party public housing assessment. What type of issues should be a prototype examination on that, and what kind of local or regional issues should be factored into that assessment, do you believe?
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Mr. MARCHMAN. Yes, I do agree there needs to be a third-party assessment system. We have been through two or three at HUD, and it simply has not been able to characterize or to take a snapshot of a well-run housing authority. Like any industry, I believe a third-party assessment would be a good thing. I think it should look at areas with respect to how well the management is run, the physical condition of the building; and, because public housing agencies throughout the country are in different climates, they are in different locales, that has to be a part of it.
I think once you begin to independently assess public housing authorities, they will continue to improve, knowing that those standards are fair standards in which they can manage toward.
Mr. MILLER. There is one project that I applaud an Orange County developer for processing. He is building about a $400,000 home community, but he is also mixing in low-income apartments into that process, which to me is the direction of the future, to be able to create neighborhoods, that you don't focus just totally on people from one income level which, as you know, in Government housing has caused problems sometimes, but to integrate people in different income levels. But the problem that he faced was he had to go through about 30 agencies just to get that low-income project approved and get it through HUD and everything.
What would you recommend that we do to avoid that in the future to encourage individuals who want to do this, who are trying to provide housing for those in need, yet the bureaucracy and the red tape they are going through is just overriding sometimes?
Mr. MARCHMAN. Having been a former municipal employee working for a mayor, I know how difficult that could be. I would simply suggest usually developers are profit motivated, although they may have very good intentions. Perhaps we could look at extension of tax credit programs to give them an incentive and to give the city the incentive in order to support such a thing. I would support any developer who was looking at mixed-income, mixed-financed housing as the goal.
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It is certainly the goal of a HOPE VI program. There is no reason why it couldn't be the goal of a city or town. But they need ways to get around the multilayers of approvals that you need and, sometimes, as you know, heavy resistance.
I have known developers who are looking to do exactly this, but some segments of the community say we just don't want that low of an income here. But I think there have been some examples, and I am sure people here can tell you of mixed-income housing under the HOPE VI programs and others that have worked and perhaps they can share that with you.
Mr. MILLER. In this particular case the developer had the zoning. He could have taken and built apartments that would have rented for considerable money that he decided to use them for. But just the process of going through the HUD process for low-income—I mean, he had 30 agencies he had to deal with, and it was just a bureaucratic nightmare, based on the testimony I have heard him give to individuals, which would put other individuals in a situation where they might not want to go through the hassle to try to help people really in need. That is scary, and I think we need to address that.
I yield back.
Chairwoman ROUKEMA. Thank you, Congressman Miller.
I might observe, having been on this subcommittee for a long time and gone through a few secretaries of Housing and Urban Development, I think it might be well for us to readdress that question to Secretary Martinez—I think we need some direction from the HUD Secretary—and put ourselves together with him to make that a primary goal of these programs. So we have had him before this subcommittee, but I think, following the numbers of panels we have had, including this one, I think we will have to take that issue up with Secretary Martinez again.
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With that, Ms. Carson, Congresswoman Carson.
Ms. CARSON. I will be very brief.
I want to first thank you, Madam Chairwoman, for convening this matter here regarding the dearth of housing available to low-income Americans. You are to be highly commended for that, and I appreciate it very much.
I don't know if the panel will be able to respond. I am from Indianapolis, Indiana; and we have a major HOPE VI program. Unfortunately, in my district, my district has the highest rate of home foreclosures anywhere in the Nation; and I am trying to figure out what happened.
You know, we pushed homeownership. Then we got over a thousand people right now that are in a foreclosure situation within my congressional district, and it is not considered a poor district, a lot of low-income housing and stuff like that.
That is my one question, to see if you have any idea what perpetuates these loss of homes once you move these families into a housing environment.
Number two, a very delicate, delicate question. We are doing a lot of revitalization, historic preservation, that kind of thing in my district; and I sort of work with the neighborhood to say it is OK for low-income people to move in, relax, it is really OK. We closed down a mental facility in Indiana. A major mental health facility was shut down. Those people were supposed to go to group homes, but instead they got Section 8 vouchers. And I guess that is not your first time at the rodeo. You have heard that before. And we are just having all kinds of problems.
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When you try to get the mix and then you have people that truly need mental health services who are out with Section 8 vouchers, living next door to somebody that has got a $400,000 residence, what do you do about that?
Then the mix of elderly with people of those circumstances, people who have drug addictions. We have had major senior citizen housing complexes that were integrated with Section 8 vouchers.
Of course, poor people aren't all——
Ms. DOWLING. First of all, with reference to your foreclosures on the housing, that is done because there is no follow-up. What we do at the New Jersey Department of Community Affairs, the residents go through an extensive training so that, when they do purchase their homes, they are just not left out there to not understand what that private market is all about and if there is a lot of foreclosures going on there is no follow-up.
That is where social services—where we were encouraged, even through the HUD training that we got as residents, to form partnerships within the communities, even though we might not be receiving Section 8, because we are homeowners. We forged partnerships with the social services in the neighborhood, local non-profits that specialize in following through and helping people build skills that they will need to live in the private sector. Maybe that is something that might need to be done there or something that could correct that problem.
But also what we did with a lot of the mental housing we have had closed, we are now pushing for supportive housing like Ms. Brown was talking about. We took the vouchers and allowed private developers to develop and bring in social services and build in supportive housing, but there are components within the voucher program that allows for the housing to be taken care of.
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But through the partnership the social services actually come in and give the medication when they need to follow through. Are they keeping their apartment the way they are supposed to be? So that you can actually go into affluent communities and you would never know that there was a house full of mentally ill people there. That is what we did in New Jersey.
Ms. CARSON. What happens when you are in a city in a State that is in a financial crisis, where they are having to cut back on major social services and supportive service for people who are in need of services?
Ms. DOWLING. But there is other funding, like Ms. Brown had mentioned. There is also funding like CBG moneys.
We are also looking into—I am sure you could elaborate more than I could.
Ms. BROWN. Right. I would add that, in Cleveland, we have a group of social service providers. We call it the Gateway Group, and we issue our vouchers for special need population working with this group of providers. They work with the County Board of Mental Health, which is funded through the State. They also get moneys from local foundations as well as using the city's block grant or home dollars. I imagine there are other Federal funds also that go through some of these social service providers.
On the point of foreclosures that you were mentioning, when I worked with the City of Cleveland we used private investment by negotiating with bankers, our entire community, using the Community Reinvestment Act to get lenders to commit moneys for education, buyer education, counseling as well as foreclosure prevention counseling.
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So I think that is a way to get additional moneys into your community, hopefully working with your local banks. Because foreclosures are not good for their business, either.
Ms. CARSON. I think we have a lot of predatory lending that goes on that is subprime.
Ms. BROWN. So we have to do things to get the other lenders to do counseling. What we are finding when I was working with for sale housing predominantly is that it would take a while to get buyers ready for ownership. It can't always happen immediately. So that kind of education is really what must be stressed.
Chairwoman ROUKEMA. I am going to close this line of questioning at this point in time, but it is an excellent line of questioning. I would ask that each member of the panel here please submit your own observations on that question of predatory lending, because it is an important issue, and we haven't really gone into it in any depth. But we would appreciate your experience and your understanding, if indeed the predatory lending is a problem.
Mr. Baker.
Mr. BAKER. Thank you, Madam Chairwoman. I appreciate very much your calling this hearing on this important subject.
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I am going to move through a couple of points rather quickly, because I have one thing I want to focus on with a little more time.
Mr. Dekker, I want to express my appreciation to you for appearing here and also bringing to light the analysis of the distribution of the funds. I quote from the statement, ''of the $4 billion already invested through fiscal year 2000 in HOPE VI, nearly half has been awarded to 13 large housing authorities.''
Looking at the appropriations reports through 2001, that figure moves to an excess of $4.8 billion—in congressionally accurate terms, we would say almost $5 billion has been allocated through 2001, almost half of which has gone to 13 particular authorities around the country, which is not distressing in itself, unless, of course, you are not one of the 13.
Ms. Brown, I noticed in your statement ''I endorse,'' and I'm skipping a little language, ''creating a two-track system for HOPE VI. One track continues to provide grants to the most severely distressed and a second track that would focus on smaller redevelopment projects that require smaller grant amounts. Such a system would provide housing authorities of all sizes with greater access to funds.''
I wanted to get that statement emphasized on the record because, as I understand it, the top tier of housing authorities now compete in the first grant of money. If you are unsuccessful in pot one, you then move into pot two with all of the smaller authorities and compete a second time, I think a point worth making at this hearing.
Ms. Frasier, I have read part of your statement which was not part of your oral remarks. For a number of reasons, your organization believes that HOPE VI has hurt more than helped low-income residents living in public housing. ''one of our primary concerns about HOPE VI is the lack of comprehensive and objective information revealing how the program is actually performing. HUD has published glossy, colored publications full of pictures that examine select HOPE VI sites and select elements of HOPE VI within those sites. However, the public has yet to see any broad data on how the program is truly operating.'' .
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Which leads to me to my next point, Madam Chairwoman.
Mr. Marchman, you were HUD's Assistant Secretary of Public and Indian Housing under Secretary Cisneros for some time, is that correct?
Mr. MARCHMAN. That is correct.
Mr. BAKER. In that capacity, you engaged in a discussion with the Housing Authority of New Orleans, Tulane University, and HUD for the purpose of creating a cooperative endeavor agreement, which you served on the board of the commissioners to which Mr. Ron Mason, the executive monitor, reported.
Subsequent to that and subsequent to your departure—I want to make the record clear that there was some controversy with regard to the PHMAP score for the HUD office using a particular type of factors to certify that HANO had, in fact, reached a satisfactory non-troubled score of 60.
Madam Chairwoman, in 1995, HANO, by objective measure, had a PHMAP score of 28.7. Somehow, magically, without a coat of paint or structural modifications, it reached a PHMAP score of 85.1.
Subsequent to that period of time, Mr. Marchman, I understand that you have been engaged at least at some point by Mitchell & Titus to do additional consulting work to HANO or to HUD on the HANO project. I am not clear exactly how that works. My point is to establish you have ongoing and intimate knowledge of HANO's unfortunate circumstance.
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You may not recall that, since 1992 through the year 2000, public funds amounting to $800 million have been spent at the Housing Authority of New Orleans. I can absolutely tell you from personal observation the conditions are at least as bad if not worse than they were before we spent the first nickel. Tell me it is working.
Mr. MARCHMAN. Well, as you know, I have been out of HUD now for 4 years. Let me say I think there are several issues with respect to the Housing Authority of New Orleans.
Yes, it was among the worst-run housing authorities in the country for a long, long time; and there are a lot of folks who had something to do with that, among them city administration, management of the housing authority, private managers of the housing authority and the Department itself. It seems as if in some cases people treated HANO differently, and standards were not adhered to. That is very clear.
Two issues with respects to HANO. The management of the housing authority, I would submit, has improved in the last 4 to 5 years. There is no question about that. Their ability to attract good individuals to work at that housing authority is still limited, and I understand the Department is working on that as well.
In terms of the buildings themselves, for many reasons, none of which I do know, the redevelopment of the desired property, the redevelopment of other properties has been unusually slow, but I understand things are moving. I understand that HUD has acknowledged some of that. But even though they are——
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Mr. BAKER. If I may interrupt, because I know the Chairlady's time is limited to have another panel, I want to point out that things are moving. They are knocking buildings down. We are not necessarily replacing it with new housing. I am not convinced that the poor who are now without housing are being afforded any more opportunity today after spending $800 million of taxpayer money. I am very concerned about the independent certification of those PHMAP scores, which look, from the outside, look to have been manipulated for some reason.
We don't have time here today to get the full advantage of your knowledge. I am not in any way asserting that you had involvement in any of this. I am simply trying to pursue someone who is knowledgeable in the matter to get the benefit of his thinking.
At some appropriate time, Madam Chairwoman, I would like to follow through on this, because it is an enormously significant problem that has no positive resolution in over a decade of my work in this area.
Mr. MARCHMAN. I would be absolutely pleased and look forward to the opportunity of sitting down with you and your staff to review the long and sometimes painful history of the Housing Authority of New Orleans. There are many, many factors that should be discussed and looked at and perhaps——
Chairwoman ROUKEMA. That is what I was going to recommend. How it applies now to a reform in this legislation.
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Mr. BAKER. I really appreciate the Chairlady's interest in this matter, and I appreciate your courtesy.
Mr. MARCHMAN. I am deeply, deeply interested in the improvement of the New Orleans Housing Authority.
Chairwoman ROUKEMA. Mr. Dekker, of course you are not New Orleans, you are Louisiana, but I don't think we have any time for you to go into this now. Do you want to take——
Mr. DEKKER. We are the Albany to their New York City.
Chairwoman ROUKEMA. I see. All right. But you don't have anything to contribute at this point in time to that particular subject?
Mr. DEKKER. No, I don't.
Chairwoman ROUKEMA. Congressman Grucci.
Mr. GRUCCI. Madam Chairwoman, I have no questions at this time, but I do have an opening statement that I would ask be made part of the record.
[The prepared statement of Hon. Felix J. Grucci Jr. can be found on page 288 in the appendix.]
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Chairwoman ROUKEMA. Thank you. That will be included.
Chairwoman ROUKEMA. I do thank the panel. You have been very helpful and very constructive.
Again, not only those items that you have publicly offered to submit information to for the permanent record, but if there is been anything else that has been covered here and not completely covered in terms of the responses, please, we welcome your written responses. We will add to them to the record, and every Member of the subcommittee will be—that information will be shared with them, and we will take it under consideration as we move down this legislative track. Thank you very much.
The second panel will move forward, please. Hopefully, we will get the second panel before the Members leave. We had such a wonderful turnout of Members with interest. Let's keep this moving.
We welcome our second panel here today, and I must ask unanimous consent to, under the subcommittee's rules, insert into the record the written statements from the National Association of Realtors, who did not have anyone on the panel today, and the National Association of Housing and Redevelopment Officials.
[The information can be found on page 305 in the appendix.]
Chairwoman ROUKEMA. With that having been said, let me introduce people in the order in which we have them appearing and giving testimony: Mr. Thomas Slemmer, President and CEO of the National Church Residences in Columbus, Ohio; and I believe Congressman Tiberi would like to present an introduction since he is very familiar with the work you are doing.
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Mr. Tiberi.
Mr. TIBERI. Thank you, Madam Chairwoman. It is an honor for me to introduce a man from Columbus, Ohio, where I hail from, Thomas Slemmer, who is President and CEO of National Church Residences, which is located in Columbus, Ohio.
National Church Residences was founded in 1961 as one of the country's leading non-profit organizations specializing in the development, construction and management of over 14,000 units of affordable designed to service the elderly, the low-income families and persons with disabilities through Federal and State grants, loans and tax credit programs.
Mr. Slemmer serves on the Board of Directors of the American Association of Homes and Services for the Aging. He is past chairman of the Elderly Housing Task Force, the Long-Range Committees on Aging, the House Committee and the Ad Hoc Committee on Aging in Washington, DC., here. Mr. Slemmer has served as Vice President of the Board of Directors for the Ohio Association of Philanthropic Homes and Housing for the Aging. He is a former Director of the Board of Directors for the Ohio Capital Corporation and is currently on the board of the National Affordable Housing Trust.
He has testified before the House and Senate Appropriations Committees on senior housing needs in 1990, 1996, 2000, and July of 2001. In 1994, Mr. Slemmer received the Commissioner's Award for the U.S. Department of Housing and Urban Development and the Excellence in Housing Award from the Ohio Association of Philanthropic Homes and Housing for the Aging. In 1995, he received the Distinguished Service Award from the American Association of Homes and Services for the Aging.
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Madam Chairwoman, I had the opportunity to visit the headquarters in Columbus, and it is an organization that is doing some outstanding things in housing, and I am pleased, Tom, that you are here today. Welcome.
Chairwoman ROUKEMA. I thank the Congressman.
Mr. Slemmer, we are anxious to hear your testimony.
STATEMENT OF THOMAS SLEMMER, PRESIDENT AND CEO, NATIONAL CHURCH RESIDENCES, COLUMBUS, OHIO, ON BEHALF OF AMERICAN ASSOCIATION OF HOMES AND SERVICES FOR THE AGING
Mr. SLEMMER. Thank you very much. Congresswoman Roukema, Members of the subcommittee, we are pleased to be presenting a unique perspective we think to your subcommittee today, and that is the perspective of affordable senior housing.
I am pleased here to be representing the American Association of Homes and Service for the Aging 5,600 providers and not-for-profit services, and lots of those are providing low-income housing to the elderly.
I also would like to commend you, Chairwoman Roukema, and Members of your subcommittee for introducing H.R. 3995. I am particularly pleased, since I was here last summer to help you with some of the hearings you had last summer to identify some key issues, and one of those key issues that we are grateful is included in this bill is your recommendation under Title III to address modernization needs for older federally assisted elderly housing. We are pleased that is in there, and we urge your continued attention to what we think is a critical problem facing affordable senior housing.
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You have identified in the preamble to this proposed legislation that a growing number of seniors are suffering from worst-case housing needs; and I think, in the interest of time, I want to talk quickly about some of what we see as critical issues facing affordable senior housing.
Chairwoman Roukema, we operate a facility in West Orange, New Jersey—I see that is your birthplace—called Wood Valley Manor. Just to give you an idea of the crying demand for this kind of housing, that facility was built 5 years ago, 57 apartments. Forty-five of the original residents are still there. We have shut off, with the permission of HUD, the waiting list. As 95 people are on the waiting list to get in there, we are not accepting any more. That is about two-and-a-half people turning over a year; and, as you can see, it is a 40-year wait to get into that facility.
There is a crying need for that kind of housing, and the situation is getting worse. That is because the production of affordable senior housing is not keeping pace with the loss of it, and the loss of affordable senior housing is primarily coming from existing housing facilities opting out to market rate housing and to other housing really becoming functionally obsolete because of lack of funds for modernization. We believe that the most critical need that faces us in terms of senior housing is to halt and replace those units that are opting out.
Now the National Housing Trust developed this list of 150,000 units of federally assisted housing. This is a loss over the last 5 years. That is more than we are creating.
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In my testimony last summer I talked about some of the strong cooperation, relationships we developed with the local communities, trying to preserve senior housing like in Pacifica, California; Manhattan, Kansas. But, unfortunately, over the last 6 months since I spoke with you last, I had my eyes opened to some really serious problems, especially as it relates to the 236 portfolio that is housing lots of elders in this country.
In northeastern Ohio—and I can't tell you the exact project because of a confidentiality agreement—there is a 200-unit 236 project that has been serving as affordable senior housing for the last 20 years. That project is now offered for sale. The selling price is less than half of what it would cost to develop that project new. Those 200 units are about the same amount as the entire allocation for the State of Ohio under the 202 program. Those units are going to be lost and sold to market rate housing unless somebody can step in and figure out how to buy those. There is a building side by side that was already sold and was opted out of the program.
You ask, how can that happen? We are concerned that it is not even on anyone's radar screen, because the residents in that building will get enhanced vouchers. They will be able to stay there during their lifetime but, as they leave, market-rate folks will be replacing those people in that housing. The problem is the preservation effort cannot keep pace with the kind of the market factors facing this 236 portfolio.
We are, frankly, concerned at AAHSA that we are going to lose every single affordable senior housing project that is in one of the better market areas, and I call your attention to that. We think that is the most serious problem facing us. We have made some suggestions, and we would love to have a dialogue with your subcommittee on how we can address this very serious problem.
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One of the recommendations we have made as a kind of focal point is to develop an Office of Preservation at the Department of Housing and Urban Development. They still have lots of tools available to help with this process. They have HUD insurance, they have various programs that can help streamline the process of acquiring these, and we urge you to gives some thought to leadership at the national level to focus on this preservation effort.
We have covered lots of other points in your H.R. 3995 proposed legislation. One of the best ideas that you have is social service coordination. We urge you expand that to the 811 program and also to not-for-profit sponsored tax credit projects. We think that is the best idea that Congress has had in a long time, and we thank you for that, and we thank you for allowing us to testify. We think there are serious problems happening with affordable senior housing.
Thank you.
[The prepared statement of Thomas Slemmer can be found on page 400 in the appendix.]
Chairwoman ROUKEMA. Thank you, Mr. Slemmer.
I should have notified each member of the panel that you do have in front of you, if you can see it, the timer that will turn yellow to alert you that your time is running out and red when your time is out. So just be aware of that.
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We won't go into the West Orange deal, but I am sure—although I haven't been in West Orange for many years, my classmates were mayors and councilmen, and my uncle was the leading councilman. I would like to think that my uncle was the one that got that West Orange housing initiated. I am going to look at that. I wouldn't be surprised if he did.
Now we have Andrew Sperling. Mr. Sperling and I have dealt together on other issues. The issue that he is bringing up today relating to housing is with affordable housing for the severely mentally ill.
Mr. Sperling is the Deputy Executive Director of the National Alliance for the Mentally Ill, an organization which is very meritorious and which I take great pride in working with them and following their leadership.
Mr. Sperling.
STATEMENT OF ANDREW SPERLING, DEPUTY EXECUTIVE DIRECTOR, NATIONAL ALLIANCE FOR THE MENTALLY ILL, ARLINGTON, VIRGINIA, AND THE CONSORTIUM FOR CITIZENS WITH DISABILITIES HOUSING TASK FORCE
Mr. SPERLING. Thank you, Madam Chairwoman. I am here representing NAMI, the National Alliance for the Mentally Ill, and also the Consortium for Citizens with Disabilities, the Consortium for Citizens with Disabilities Housing Task Force, which is made up of major national disability organizations including United Cerebral Association, Paralyzed Veterans of America, the Arc, Easter Seals and NAMI as well. Before moving into the body of my testimony, I would be remiss if I did not note, Madam Chairwoman, the other priorities we work on, and I want to, from NAMI's perspective, congratulate and thank you for your years of leadership in the House in ending insurance discrimination against people with mental illness and their families, and pledge NAMI's support to get your parity legislation through Congress this year and to the President's desk.
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Let me talk about the housing needs of people with disabilities before I jump into some suggestions and comments on H.R. 3995. HUD's most recent worst case housing needs report in 1999 reported that 1.3 million adults with disabilities receiving SSI had worst case housing needs. CCD believes that this estimate is very low because it, in fact, does not count individuals with severe disabilities, non-elderly adults with severe disabilities who are residing in institutions, be they nursing homes or psychiatric hospitals or institutions for people with mental retardation. And we believe that estimate is actually much higher. Last year, we at CCD published data comparing SSI income levels to fair market rents and found people with severe disabilities are 18 percent of median income and that people with disabilities on SSI needed to pay on average the national level 98 percent of their SSI benefits to rent even a modest one-bedroom apartment leaving, in many cases, less than $10 or $15 a month to pay for food, transportation, telephone, rent, and so forth. And in 2000 there was not a single housing market in the country where a person with a severe disability on Supplemental Security Income, SSI, could afford to rent an efficiency or a one-bedroom apartment. This is obviously an affordability crisis.
There are also some other issues that affect this, the first being the impact of some changes that Congress made a decade ago to allow private owners of assisted housing and public housing authorities to restrict occupancy on the basis to elderly only. This has had a tremendous impact in terms of people with disabilities getting access to affordable housing in the community.
Number two, the Section 811 program was almost double what it was a decade ago. It has crept back up again, but there is a growing burden on the Section 811 program to handle more and more things, a new tenant-based program, tenant-based rental assistance program that was authorized a decade ago, the growing burden of renewals for that tenant-based rental assistance program within Section 811, creating a growing burden.
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Number three, we see the lack of programs such as HOME and CDBG, the mainstream programs within HUD providing assistance to people with severe disabilities. This is largely because many jurisdictions find it very, very hard to do an operating subsidy when they do production in HOME or CDBG in order to reach people below 20 percent of median income.
And, finally, we also see discrimination. It still exists out there. There is the Fair Housing Act, Section 504, the Rehab Act, and the ADA that are designed to serve as civil rights protections that are designed to end discrimination. But unfortunately we see discrimination that still exists in the marketplace and, in fact, lack of adherence to the accessibility guidelines for people with severe disabilities in programs such as CDBG and HOME and the low income housing tax credit.
Let me turn now briefly and talk about some of the really important provisions that CCD believes would be a major step forward in H.R. 3995, the first being the homeless programs, the reauthorization there. My colleague, Ms. Friar, is going to talk in more detail about that, but we would note the programs that are emphasized on the homeless programs in H.R. 3995 are a major step forward for people with disabilities, given their disproportionate representation among the chronically homeless population.
CCD strongly supports the 30 percent permanent housing set-aside and the shift of the Shelter Plus Care and SHP renewals to the housing certificate fund. We support the new production program.
CCD also supports the Low Income Housing Coalition, National Low Income Housing Coalitions, national housing trust initiatives as well as H.R. 2349, Mr. Sanders' legislation. We support the thrifty voucher program and the voucher success fund. We believe those are major steps forward. And with the thrifty voucher program, we urge the subcommittee to consider allowing site-based waiting lists for those developments built with thrifty vouchers.
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Finally, on Section 811, I know my time is running out, there is a full recitation of our recommendations on Section 811, including our testimony that we urge the subcommittee to take a look at. But the program really needs to be streamlined and simplified to make it much easier for non-profit disability organizations to operate and do production under Section 811.
Thank you very much, Madam Chairwoman.
[The prepared statement of Andrew Sperling can be found on page 340 in the appendix.]
Chairwoman ROUKEMA. I thank you.
Ms. Friar, is that the way you pronounce it? Thank you, Ms. Friar. I believe Ms. Velazquez would like the opportunity to introduce her.
Ms. VELAZQUEZ. Thank you, Madam Chairwoman. It gives me great pleasure to introduce a friend from New York City, Ms. Maureen Friar. Ms. Friar earned her BA at Brown University and a Master's in Public Policy at the University of California at Berkeley. Since 1993, she has served as Executive Director of the Supportive Housing Network of New York, a coalition of not-for-profit agencies that develop and manage affordable housing with on-site supporting services with low-income and formerly homeless single adults. Over the past 9 years she has led the growth of the coalition from a membership of 40 agencies, managing 4,000 units of housing, to over 150 agencies operating over 18,000 units of housing statewide. In 1998, the network launched the New York City Housing Network, now a prominent voice in the city, advocating for the housing needs of persons living with HIV, AIDS. She continues to lead the network at the forefront of the Blueprint to End Homelessness in New York City initiative. She is a member of the National Advisory Group for the National Alliance to End Homelessness. Ms. Friar, thank you for your outstanding work in our fight to end homelessness in New York City. Welcome.
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STATEMENT OF MAUREEN FRIAR, EXECUTIVE DIRECTOR, SUPPORTIVE HOUSING NETWORK OF NEW YORK, AND ADVISORY COMMITTEE MEMBER OF THE NATIONAL ALLIANCE TO END HOMELESSNESS, WASHINGTON, DC.
Ms. FRIAR. Madam Chairwoman and Members of the subcommittee, I am honored that you have invited me as a representative of the National Alliance to End Homelessness to testify today, and I would like to thank my friend, Congresswoman Velazquez, for your leadership on behalf of New Yorkers, especially low income and homeless New Yorkers with acute housing needs.
The Supportive Housing Network represents 150 non-profit agencies that have developed permanent housing with on-site services for over 18,000 low income and formerly homeless individuals and families in New York State. The National Alliance to End Homelessness is committed to ending homelessness, a goal that we are all convinced is well within our reach as a Nation.
Today, speaking about H.R. 3995, the Housing Affordability Act for America of 2002 includes several items that are critical to the goal of ending homelessness. To end homelessness, several important steps have to be taken. One is to prevent people from becoming homeless. H.R. 3995 begins to address this by targeting flexible housing resources to people with extremely low incomes below 30 percent of the area median income. This is especially important, considering that the amount of housing affordable to low income households has been steadily declining for several decades. In New York City, 27 percent of households pay over 50 percent of their income in rent, and we have over 200,000 households on the waiting list for public housing and subsidized Section 8. So the need is critical.
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Indeed, homelessness also requires that we open the back door out of homelessness by providing the housing and supportive services needed for families and individuals to move into permanent and stable homes. The dimensions of the homeless problem are sizable. In New York City alone, each night we have over 33,000 men, women, and children sleeping in our shelter system, which is the largest census since 1987, with homeless children the largest growing population. Roughly 80 percent of people who become homeless enter this homeless system and exit it again relatively quickly. They have a crisis that affects their housing and they typically address their immediate problem. And despite the shortage of affordable housing for people, they find housing. Of the over 5300 families in our shelters each night, half would leave tomorrow if we had affordable housing for them to go into. What we should be doing is have a homeless system that facilitates the move to housing and making the homeless episode as brief and least traumatic as possible. When services are needed they should be delivered while the family or individual is in stable permanent housing. We should try to decrease the amount of time that families, especially children, are in transition in shelters.
While the majority of homeless people do not need specialized housing, about 20 percent have more significant barriers to ending their homelessness. They have one or more chronic disabilities, including mental illness or substance abuse, and live in shelters and on the streets, and the episodes of homelessness can last months or years. Many are also veterans. We would think that sheltering would not cost as much as housing homeless people, but that is not the case. Homelessness costs us tremendously.
A recent groundbreaking study by the University of Pennsylvania, which was vast and released last year, they looked at the 4,000 people who had been placed in supportive housing in New York, homeless people with chronic and persistent mental illness, and looked at how much they cost us 2 years before they entered housing and 2 years after. And the average cost to taxpayers is $40,000 per individual per year. And this is so expensive because these individuals use high cost public services such as emergency and psychiatric hospitals, veterans services and shelters, and they are just cycling through and costing us a lot.
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But we have a solution and that solution is supportive housing. Supportive housing combines permanent stable housing with on-site services. What we like about the bill is that 30 percent of the funds provided under HUD's homeless assistance grants will be used for permanent housing which will get localities focused on the permanent housing as opposed to the transitional and emergency care. Also that the Shelter Plus Care and Supportive Housing Program, permanent housing renewals will go through the housing certificate fund. This will free up money for new supportive housing. And in New York we would use up all our McKinney funding just for renewals if we were not able to shift those renewals to a different fund. I know my time is running out.
The answer to homelessness is not just HUD, but we feel very strongly that HUD's leadership and HUD money should be focused on housing. And the more that is done federally with the legislation to get localities to do that, to focus on the permanent housing that then often leverages the HUD money—the rental subsidies will leverage other investment, corporate equity investment as well as State investment into more housing. So it is really the best use of HUD money.
And I commend this subcommittee for caring about homeless people and the affordable housing needs of New Yorkers and the rest of the Nation, and would be glad to work with you in any way possible to make our goal of ending homelessness a reality. Thank you.
[The prepared statement of Maureen Friar can be found on page 336 in the appendix.]
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Chairwoman ROUKEMA. Thank you for your attention to time and for your specific contribution to this discussion.
Our next panelist—I do not know whether we arranged it this way that we have so many from New Jersey or we are just outstanding leaders in the country, but I do want to welcome Roy Ziegler. He was a Director of the State of New Jersey Section 8 Housing Program for I think almost 20 years; isn't that correct? And now you are currently President of Assisted Housing Services and work with a consulting company in New Hope, Pennsylvania. So we are happy to have you here for all your practical experience and insights, and we look forward to working with you.
STATEMENT OF ROY ZIEGLER, FORMER DIRECTOR, NEW JERSEY DEPARTMENT OF COMMUNITY AFFAIRS, SECTION 8, ON BEHALF OF NATIONAL LEASED HOUSING ASSOCIATION, WASHINGTON, DC.
Mr. ZIEGLER. Good afternoon, Chairwoman Roukema and distinguished Members of the subcommittee. I have to say that I was on an earlier train than you were and I guess we are both lucky today.
I want to thank you for the opportunity to speak today on behalf of the National Leased Housing Association. Over the years, the housing voucher program has made remarkable improvements because of the consolidation of regulations and elimination of certain barriers to landlord participation as well as giving us flexibility to help families become self-sufficient and even become homeowners with the housing vouchers. Your bill will go a long way toward leveling the playing field and we support it, because the housing vouchers really need the additional flexibility that your bill provides.
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PHAs and administering agencies around the country and many communities are faced with rising rents and tight rental markets, and this rising rental rate in many of these areas has far outpaced the housing voucher of fair market rents. Often there are more vouchers in the community than there are landlords willing to accept the voucher. So you find that the public housing agencies are sending out like three or four or more vouchers for every slot they have available because so many families are unsuccessful and cannot use their vouchers in their communities. This is really frustrating for families who have waited a long time for their voucher and see it just go up in smoke. And it increases the agency's work load. It costs more money when you have to spend more time getting more vouchers out on the street.
HUD has already taken an important step in the direction in resolving this issue by giving 50th percentile rents in many communities across the country. And we are requesting that Congress urge HUD to expand that 50th percentile fair market rent to all the communities in all the markets in the United States.
Congress can also take steps to improve the family's ability to use vouchers. For example, housing authorities can set their payment standard. The payment standard determines how much a family gets for a subsidy. PHAs can set that standard between 90 and 110 percent of the fair market rent to address the immediate needs of their area. And this is without HUD approval. We are supporting the ability for public housing agencies to raise that from 90 to 120 percent rather than 90 to 110 percent. This will give us a dramatic increase in the rents that we need to address the actual market in our areas. Fair market rents are not fair unless they compete with market, at least the average rents for the community.
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Now it is our understanding that the initial draft of H.R. 3995 did not have this provision included and we are asking that it be restored by the subcommittee.
Now in regard to the 40 percent cap, the amount that a participant pays in Section 8 is limited by the 40 percent cap, that is the family cannot pay more than 40 percent of its adjusted income for rent. We have supported this in the past, but our PHAs have told us that there are many circumstances where a higher rent is sensible.
Just as an example, an elderly person who has lost a spouse immediately becomes, because of the decrease in income for that household, becomes eligible for a voucher. Here is a family who has been living in this unit for many years. The spouse who is alone faces the fact that she is going to have to pay 43 percent of her income for rent. The program only allows 40 percent. That elderly person would have to leave that housing that she has been in for many years because she is 3 percent over the 40 percent of adjusted income. And if she loses the voucher, she is probably going to pay 60 to 70 percent of her income for rent.
So we are asking that the PHAs are given this opportunity to give a waiver to that 40 percent to adjust to situations like this. Section 402 of the bill would do that. And we are asking that this cap be available to PHAs as another tool in their arsenal to help families stay in place, not just elderly, but families who are in place who lose it because of that 40 percent threshold.
And with regard to administrative costs, the current fee for administering the program is often inadequate to allow effective tenant counseling, landlord outreach and addressing special populations like the homeless we just heard about it. And this often contributes to the success rate being very low for voucher usage. We applaud this subcommittee recognizing this problem by allowing the PHAs to tap unused budget authority to use for services to help families find decent housing and provide mobility services for families looking for housing.
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NLHA also supports the bill's revision to provide incentive fees for high performing agencies. But there is one other area we would like you to look at and that is the fact at one time there were preliminary fees for housing agencies getting new vouchers. Doing tenant briefings, finding apartments, negotiating with landlords and trying to get housing for families is very difficult. It takes 4 to 6 months in some cases, but there are no fees for the program until you actually lease somebody up. So we are asking that the provision be allowed to restore the preliminary fees so that housing agencies get the ball rolling and get families into housing faster.
With regard to enhanced vouchers, we approve all of the things that you have said and we are very happy that you have addressed the issues with regard to the enhanced vouchers.
We ask that you look at the HQS requirements for inspections. If there is an inspection done within 12 months, we would like to see that the HQS be unnecessary for that particular year.
And we also support the Section 505. We have keen interest in 505 which would give an asset-based approach to public housing, and we will send you our comments later.
Just one other thing. We oppose the thrifty vouchers. We think there is a very difficult problem with administering the thrifty voucher program and we have sent you an awful lot of information about how we feel—about how our members feel, that thrifty vouchers are perhaps unnecessary.
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[The prepared statement of Roy Ziegler can be found on page 418 in the appendix.]
Chairwoman ROUKEMA. We will look at that material that you are advancing to us.
Now, our final panelist is Mr. Gary Eisenman, who brings a distinct contribution here to the panel. He is Executive Vice President of Related Capital Company, a financier of real estate properties, as I understand it, so you are representing the private sector here today. However, your background gives you extensive experience as General Deputy, as Assistant Secretary for Housing, and Deputy Federal Housing Commissioner for HUD and the FHA, so that you come with Government experience as well as experience in the private sector. We welcome you here today, Mr. Eisenman.
STATEMENT OF GARY EISENMAN, EXECUTIVE VICE PRESIDENT, RELATED CAPITAL COMPANY, ON BEHALF OF THE NATIONAL MULTI-HOUSING COUNCIL, WASHINGTON, DC.
Mr. EISENMAN. Chairwoman Roukema and distinguished Members of the Housing and Community Opportunity Subcommittee. My name is Gary Eisenman and I am executive vice-president of Related Capital Company, a developer, manager and financier of real estate properties that oversee over 1100 properties in 47 States in the United States. I am speaking on behalf of National Multi-Housing Council, a trade association representing the Nation's larger and most prominent apartment firms. NMHC operates a joint legislative program with the National Apartment Association, a trade group representing over 30,000 apartment executives and professionals. It is my pleasure to testify on behalf of both organizations.
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I have been asked to speak today about the Section 8 housing choice voucher program. NMHC and NAA commend you, Chairwoman Roukema, for your leadership and we thank the Members of the subcommittee for their valuable work in addressing the important issue of affordable housing in America today. We too believe that it is critical to meet the housing needs of low and moderate income families. We also believe the Section 8 program can be one of the most effective means of doing so.
However, the program's potential has been constrained and its success should be greater. We support the provisions of H.R. 3995 aimed at improving the voucher program. However, even with those important reforms, the proposed legislation falls short of increasing supply of housing which voucher holders may choose by broadening market accessibility. Without a sufficient supply of housing, voucher holders do not have choice, which is precisely what the Section 8 program aims to accomplish. We believe that the chief reason for the lack of housing available to voucher holders is the program's burdensome structure and administration which discourages private owner participation and makes it difficult for voucher holders to compete with unsubsidized residents for vacant apartments. NMHC and NAA support greater owner participation, which should not be at the expense of the property owners. Rather, the program should be as similar as possible to providing housing to market rate residents.
Therefore, it is essential that the subcommittee's efforts to improve the Section 8 program support broader owner participation. To increase owner participation, the program must be more transparent to the market. And what we mean by transparency is that we need to minimize the differences between a holder of a voucher and a non-voucher-holding market rate tenant who approaches an owner for a vacant unit.
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We recommend the following toward that goal. Owners should be able to turn vacant and subsidized units over within a reasonable time that is comparable to the time period required to turn over market rate units.
Owners should expect timely rent payments for subsidized residents and they should have the right to expect timely compensation if those payments are delayed.
All residents, including voucher holders, should be held accountable to common standards and laws established by States and localities.
In addition, the program should only include Federal laws that are applicable to both voucher and non-voucher residents.
I will now discuss some specific proposals along those lines. First, improve the housing quality standards unit inspection process. Currently, before a apartment is eligible to lease to a Section 8 voucher holder, the administering PHA must inspect that unit for compliance with HUD-prescribed housing quality standards. And we agree voucher holders should reside in decent, safe, and sanitary environments, but we also believe that this can be achieved without conducting lengthy individual unit inspections. Unit-by-unit inspections delay resident occupancy even if the PHA conducts its inspection within the required timeframes, and some apartment owners report delays of 30 days or longer.
Given that the professional apartment industry relies on seamless turnover to meet its overhead costs, the financial implications of such delays to owners are significant. We propose speeding up the move-in process by allowing PHAs to conduct individual unit inspections within 30 days after the resident moves in and payment commences.
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We also suggest that PHAs advise voucher holders they should not accept a apartment in significant disrepair and they should report those apartments to the PHA.
Second, we need to improve the subsidy payment system. Just as owners would not accept a late payment from a market rate tenant, they should not be forced to accept late payments from voucher holding tenants. Requiring all PHAs to make automated electronic fund transfers would assure that the timely payment of the subsidies would be made. HUD has made great improvements to the financial management systems of its other housing programs, including the HOME program. It should do the same for Section 8.
Third, increase the payment standard. And I am not going to reiterate what my colleague Mr. Ziegler said, but we support those positions on 40 to 50 and greater latitude to go from 120 percent of FMR to 150 percent of FMR.
Finally, we support amending the lease addendum. HUD's standard lease addendum is many times incompatible with State and local landlord tenant laws and disregards industrywide model lease language developed by NAA. This inconsistency causes difficulties for owners who must comply with one set of lease requirements for voucher holders and another for non-voucher holding residents. This creates a disincentive to accept someone who is coming with a voucher.
In summary, we support the Section 8 program and wish to engage more fully in it. However, such participation is not economically maximized without reforming the program to reduce the significant costs and burdens it imposes on apartment owners.
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I thank you for the opportunity to testify on behalf of the National Multi-Housing Council and the National Apartment Association and wish to offer our assistance as the subcommittee continues its important work.
[The prepared statement of Gary Eisenman can be found on page 330 in the appendix.]
Chairwoman ROUKEMA. I thank you very much.
Before I call on Mr. Grucci, I am going to just ask the panel here, you have heard me make reference before the previous panel and I would like to offer you all the opportunity not here now, but in written form, to submit to me and the subcommittee your recommendations as to how we can reduce the bureaucracy and the overwhelming HUD dictatorship here. By the way, I do not mean that in a negative way. I just want to be constructive as to how we all work together to improve HUD and get more housing for people and we cannot possibly afford all this unless we are able to improve the delivery system and the HUD responsibility and that regulatory relief that we need from HUD, while not opening up loopholes for corruption, and so forth. So I would like to have on the basis of your experience on this panel your recommendations on how HUD should be reforming its procedures here in order to get more housing at less cost. If you would do that.
Mr. Grucci.
Mr. GRUCCI. Thank you, Madam Chairwoman. I do not have any questions of this panel at this time. Thank you.
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Chairwoman ROUKEMA. All right, thank you very much.
Ms. Velazquez.
Ms. VELAZQUEZ. Thank you, Madam Chairwoman.
Mr. Ziegler, I was interested in the part of your testimony which addressed the proposal to add flexibility to the 40 percent rent cap by permitting that the 40 percent cap be based on gross income versus adjusted income. It seems that you have conflicting feelings about this proposal. And while I support the idea you put forward of increased flexibility in helping tenants remain in their homes, I am forced to wonder if this could open the door to further price gouging by unscrupulous landlords. Do you believe there is cause for legitimate concern.
Mr. ZIEGLER. I think it is important that we look at what we are proposing is in-place tenants. These are families or elderly folks who have been in place sometimes for 20 or 30 years and have been paying rent all along and they lose somebody in the household who was an income earner, wage earner, and no longer have that income available to them. Here they are living in the same apartment with the same rent with much less income. What we are asking for is some flexibility so if we have that additional 40 percent beyond the adjusted to the gross that perhaps that particular elderly person could stay in place and avoid being displaced. When you are displaced you are out in the community where there is no cheap housing available, in the first place.
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Ms. VELAZQUEZ. Ms. Friar, would you please discuss what use your organization has made of rental subsidies in providing permanent housing options for the homeless. How do you think we could better target these funds to address the needs of the communities targeted by programs such as Shelter Plus Care?
Ms. FRIAR. Both programs have been critical to developing supportive housing in New York because it provides the operating funding to manage the buildings. It provides the rental subsidies so that the tenants will only pay a third of their income in rent, but managing the buildings, operating the buildings is more than that, and that difference is the Shelter Plus Care. With that funding, there has been investment made by both the city and State toward capital to renovate these buildings, to purchase and renovate old hotels as well as do new construction. And there has also been a tremendous amount of corporate equity investment through the low income tax credits, historic tax credits program. And, because there is the rental voucher, the funds are guaranteed over a period of time so that other investment is leveraged. And so it then makes what our priorities in terms of spending money is not just on the emergency needs constantly sheltering people, but we have places where they can go and it is actually most cost-effective to have them in the permanent housing than in our shelter system.
Ms. VELAZQUEZ. Mr. Slemmer, when this subcommittee last took up the issue of senior housing, I put forth a proposal to ensure that any application for 202 funding that did not meet HUD's debt line due to the fault of a third party would not be deemed ineligible. Would you please discuss what sort of impact this will have on groups facing difficulties getting the required paperwork out of local bureaucracies? Would you support inclusion of such language?
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Mr. SLEMMER. For sponsors that did not submit what?
Ms. VELAZQUEZ. When a community group submits an application for 202 housing and they did not meet HUD's debt line, not because of their own fault, fault of their own, but because of the third party. Like in New York, if a community-based organization is going to build in a vacant lot and they need to get site control and they have everything in place, but they do not have that letter coming from the locality, we should not penalize that organization from getting the application approved.
Mr. SLEMMER. I am not familiar with your recommendation, but it is certainly true that in areas like New York and California where there are terrific amounts of land use restrictions and regulations, it does take longer to put together an application. The 202 program gives you 60 days to get together an application with site control. So I think it is a good idea. I think some areas you have to have more time available to get through the land use process. I think it is a good idea.
Ms. VELAZQUEZ. Thank you, Madam Chairwoman.
Chairwoman ROUKEMA. Yes. Congresswoman Carson, no questions?
Ms. CARSON. No questions.
Chairwoman ROUKEMA. Congresswoman Schakowsky.
Ms. SCHAKOWSKY. Thank you very much, Madam Chairwoman, and I really appreciate this day of witnesses. Just been an excellent, excellent panel and I thank you very much for that.
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I also wanted to run by a proposal. I am sure a lot of units that you had on that list are in my district, senior housing that is operating out—and a lot of seniors in crisis right now. When the apartments go—stay as rental apartments and the enhanced voucher does allow people to stay there. But if it goes condo, then whatever voucher loses its enhanced status and therefore there is absolutely no way that they can stay in the community. And what I would like to suggest is that residents of units in that situation would be able to—that the vouchers would be able to maintain their enhanced status in order for them to seek housing within the same community. And I wanted to just run that by any of you that would like to comment on it. Maybe Mr. Slemmer.
Mr. SLEMMER. I had forgotten about the condo situation. What we are seeing mostly is the senior housing in more affluent areas. Great locations are being lost forever simply because they have more value because there are higher rents in the market situation. But the concern I have about the enhanced voucher is that it is designed to help the existing residents. But what it does is it takes the pressure off the problem. And so I think we are going to wake up 5 years from now and have lost a lot of senior housing that might have been kept if the community had known about the problem.
In other words, if a building is going to opt out and the community knows about it, sometimes they will go to great extremes trying to figure out a way to preserve that housing. It kind of maxs the problem or inoculates the situation. That is the only concern I have about enhanced vouchers. I think it is quietly creating a problem for us down the road because it is making the problem less visible and taking it off of peoples' radar screens.
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Ms. SCHAKOWSKY. I hear you, but at the same time I think those people—in our situation, it is a lot of condo conversions and then there is just nowhere to go with that. Anybody else want to comment on the use of enhanced vouchers beyond just in place, but in the community?
Mr. EISENMAN. One thing you might need to consider when you are doing that is when you have the enhanced voucher, it is enhanced to the property that has been opted out so that the measuring stick is the market for the units that are in that property. If you are going to make those vouchers enhanced on a portable basis, you are going to need to define the limits of the market that it will be enhanced within, because then you are getting into, well, what properties are you saying are comparable and what is the absolute high range that you would take that enhancement to? Because when you are doing it in place, you have that limit built in by the limits of the property that is being opted out.
Ms. SCHAKOWSKY. That is an important consideration. Thank you for that.
Mr. EISENMAN. One thing I might offer that you consider similarly in the markup to market program in the project-based Section 8 program, you have a limit at 150 percent of FMR capping the markup to market, which can be liberated when there are certain criteria such as concentration of elderly and valuable resource for the community, local government involvement. Those are the criteria in the statute that allow you to exceed the 150 percent FMR cap, but it is an act of discretion that allows that.
Mr. ZIEGLER. One other thing you may want to do is research the statute in New Jersey, which helps essentially after the fact of enhanced vouchers being created that there is a very aggressive stance with regard to the State that the owner of the property may be required to market the unit that leaves the enhanced voucher inventory to voucher holders in the community. That might be helpful for you.
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Ms. SCHAKOWSKY. Thank you.
Ms. Friar, I wanted to ask you, the Coalition to End Homelessness I understand has put a dollar figure on what it would really cost to effectively address homelessness, if not to end it. And as I recall, it is a pretty modest $1.5 billion. Is there a dollar figure that——
Ms. FRIAR. Well, I do not know that specifically. We have a whole Housing First campaign going on in New York around affordable housing and investing $1 billion in new affordable housing from homeless to middle income. And that is for New York actually—the capital budget. I think in some ways we see a lot of this, the cost savings experienced when you house someone versus the cost of sheltering them or having them cycle through homelessness and using emergency services virtually pays for the solution itself. One unit of supportive housing, to develop it, operate it and provide the social services is about $17,000 a year. And the cost savings experienced for a person who is housed—I said they cost $40,000 a year, you save in the first year $16,000 in tax dollars because they are using the hospitals less and other services. So it is not so much just pour new money into it, but in a way, I guess it is putting money that is going to result in less use of dollars and other areas. And, unfortunately, this subcommittee goes beyond, you know this, addressing more the housing. Some of this is bringing in service dollars or in coordination, which is why we like the bill—has the interagency council being recommended, because in that way it is bringing in other players who are involved in homelessness. Often the homeless system is taking individuals who are being discharged from the criminal justice system, the mental health system, and so forth, and then we call them homeless, and it is a long road to getting them being housed again, and so the coordination is an important piece also.
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Ms. SCHAKOWSKY. If I could, Madam Chairwoman, say one more—and I realize my time is up. I wanted to respond to a comment that you made. I think we do have the money to do the kinds of things that your bill has suggested, and that when we set priorities in this country, there are the dollars and, as you pointed out, if we take a broader view and not just a narrow budget-by-budget-by-budget view, that in many cases the kinds of good suggestions you are making may really save us money, not just down the road, but in the following year. And so it really is just a question of will and a question of priorities. And I think that it is so important as each of you talk about this crisis that we are facing that it be acknowledged as that and that we have an aggressive can-do attitude about solving these problems that you all have so articulately not only laid out, but the solutions that you have proposed are all very, very doable, and that has to be our attitude, that we can achieve the goals that you have set out for us. So thank you very much.
Chairwoman ROUKEMA. Thank you. And I think we have concluded here. But I have one last question.
Mr. Eisenman, forgive me if you were explicit on this in your testimony, I know you referenced it and you discussed it, but could you focus just for a minute or two on what more we should be doing with the private sector? Because, as I stressed, you are here not only with your public experience with HUD and FHA, but also as a representative of real estate property interests. How can we improve that partnership, the public-private partnership here, and enhance more private sector involvement?
Mr. EISENMAN. Well, I will speak particularly with respect to my testimony that this is an important point, because I think that the statistics that we are seeing—and we took a look at some things for this hearing—that the number of available units that are coming vacant, which are at the FMR or below are quite substantial and more than enough to cover the lack of success. There was a recent HUD study that showed that the success rate in voucher use by residents had dropped substantially over the last several years. And so what voucher holders are finding, particularly in high markets, is that they cannot go out and use those vouchers. And part of what we are suggesting here is that this might be a no-cost type of change where a little less regulation and little smarter regulation, using technology as opposed to paper, seamless payment systems, using an inspection process which puts a little less burden on the landlord will encourage more landlords to come into the program and therefore create a greater supply for the holders of the vouchers.
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Chairwoman ROUKEMA. Is that more expanded and documented in your testimony?
Mr. EISENMAN. Yes, it is in the written.
Chairwoman ROUKEMA. All right. Thank you very much. I will be more than happy to explore that and study it carefully. We thank all of you for your contributions here today, and please continue to work with us as partners. We must find a way of not only improving and making a more efficient delivery of these services, but also expanding in an economic way for the people in this country. Thank you very much.
[Whereupon, at 4:40 p.m., the hearing was adjourned.]
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