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THE SECTION 8 HOUSING
ASSISTANCE PROGRAM:
PROMOTING DECENT AFFORDABLE
HOUSING FOR FAMILIES AND
INDIVIDUALS WHO RENT—DAY 2
Tuesday, June 10, 2003
U.S. House of Representatives,
Subcommittee on Housing and
Community Opportunity,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to call, at 10:00 a.m., in Room 2128, Rayburn House Office Building, Hon. Robert W. Ney [Chairman of the subcommittee] presiding.
Present: Representatives Ney, Green, Bereuter, Miller of California, Hart, Tiberi, Waters, Velazquez, Carson, Lee, Watt, Clay, Miller of North Carolina, Scott, and Davis. Also present was Representatives Ryun and McCotter.
Chairman NEY. I want to welcome you. Today the subcommittee holds the second in a series of hearing to examine the Rental Vouchers Program and the various proposals intended to make the program more efficient and cost effective.
The Housing Choice Voucher Program is HUD's largest program, both in terms of annual budget authority and units under contract, and it is currently administered by approximately 2,600 State and local agencies.
While the costs of the program remains sound, the program has often been criticized for its inefficiency. More than a billion dollars is recaptured from the program every year despite long waiting lists for vouchers in many communities. I think, frankly, that recapture probably is what has stirred this debate.
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The rising costs of the Section 8 program and some of the administrative concerns have caused many in Congress and the administration to conclude that the program is in need of reform. Last month the administration appeared before this subcommittee to discuss the housing assistance for needy families, or HANF, proposal as outlined in its fiscal year 2002 budget proposal.
On May 2, 2003, HUD Assistant Secretary Michael Liu testified that States would be able to make more timely and informed policy funding decisions based on local need and market conditions as compared to administrators in Washington, D.C. These decisions include moving unused funding to heavy demand areas of the State at any given time during the fiscal year and tailoring the program to better address the practices of the local market and needs of the community.
Our two panels today, and I want to welcome the panels, consist of tenants, local public housing authorities, the industry groups directly affected by Section 8 programs. I look forward to hearing the different perspectives, and would like to welcome all of our distinguished witnesses as we continue to discuss the ways to improve America's community and strengthen housing opportunities for all of its citizens.
I also want to note that I have done a bill by request to the administration to get the whole issue out there for discussion purposes, without a conclusion frankly on my part in either direction. Also it is the goal of the subcommittee, and we have talked with the ranking member, Ms. Waters of California, to have a thorough discussion and debate on this issue and to have hearings not only here in the U.S. Capitol, which we appreciate you all coming the distance that you have, but also take the hearings out to communities both large and small, in varied parts of the United States to also receive input so that more people will be able to attend that hearing process, and our ranking member will be here.
Right now I will defer for an opening statement to Mr. Scott of Georgia.
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[The prepared statement of Hon. Robert W. Ney can be found on page 174 in the appendix.]
Mr. SCOTT. Thank you very much, Chairman Ney. I appreciate this opportunity. Let me commend you for your continuous hard work on this issue, and thank you for holding this important hearing today regarding the Section 8 program and the administration's proposal to change this important program.
I also wanted to thank the distinguished panel of witnesses that we have today. Thank you for coming and giving your testimony.
First, let me say, Chairman Ney, that I believe that no Federal program should be sacrosanct. From time to time Congress should ask if a particular policy is working and if it can be improved. Now, with that being said, I cannot understand how block granting the Section 8 program will help or improve the current system which provides housing opportunities for needy families.
In my State of Georgia, nearly 200,000 low income people are served under the Section 8 program through approximately 200 local housing authorities. These officials understand at the local level the local real estate markets, the local housing issues far better than our good friends, the good folks at the State Capitol.
And, finally, I am concerned about the effect that changes to the Section 8 program would have on residents who are moved out of communities as part of the HOPE VI Revitalization Project. Several questions certainly need to be addressed here today, and one of which to housing authorities is this: How would the hypothetical block granting of the Section 8 program affect the overall operation of your housing authority?
That to me is the fundamental question we have got to answer today. It just seems to me that this process is working. We have to really answer the question, why these changes, and will our local communities be better impacted for this.
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I have some serious questions on that, Mr. Chairman, and I look forward to this very interesting discussion this morning. Thank you.
Chairman NEY. I want to thank the gentleman from Georgia for his statement, and I will defer now to Mr. Green of Wisconsin.
Mr. GREEN. No opening statement.
Chairman NEY. Thank you. Mr. Miller.
Mr. MILLER OF NORTH CAROLINA. No.
Chairman NEY. Mr. Bereuter.
Mr. BEREUTER. No.
Chairman NEY. With that, I also I would like to submit for the record a Statement, without objection, the Statement from the National Association of Realtors and the Institute of Real Estate Management, to the subcommittee. Hearing no objection, it is part of the record.
[The following information can be found on page 272 and 276 in the appendix.]
Chairman NEY. I would also note to the witnesses there is 5 minutes allotted time. When the clock turns yellow, you have got about a minute left. When it turns red, it will conclude your testimony. But we would also accept, without objection, hearing no objection, all of your written testimony for the record.
So the 5 minutes is basically just to summarize, and then it will be open to questions from the Members. On Panel I, I want to welcome Panel I, Terri Ceaser is the first Section 8 voucher tenant appointed to serve on the Board of Directors of the Virginia Housing Development Authority. She is enrolled full time in a Master's program for career and community counseling with an expected graduation date of December 2004. Early congratulations on your graduation.
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Ms. Telissa Dowling 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 Coalition.
Craig Garrelts has been the Executive Director of the Hocking Metropolitan Housing Authority—great county I would note in the State of Ohio, and a great district in the 18th—for over 19 years. He received the 1997 National Award of Merit and Program Innovation in Affordable Housing from the National Leased Housing Association, on whose behalf he is appearing today. Also, Secretary Martinez recently paid us a visit down to Hocking County.
Andrew Showe, Vice President of Showe Management Corporation based in Columbus, Ohio, where he works with 60 projects in a Section 8 program. He is an Ohio licensed real estate broker and a certified assisted housing manager. He also serves on the Board of the Ohio Apartment Association.
Barbara Thompson is the Executive Director of the National Council of State Housing Agencies.
I want to welcome all of the people here to testify today. Appreciate you coming to the United States Capitol. We will begin with Ms. Ceaser.
STATEMENT OF TERRI CEASER, TENANT, HOPEWELL, VIRGINIA
Ms. CEASER. Chairman Ney, Ranking Member Waters, other members of the subcommittee. I am Terri Ceaser, and I live in Prince George County, Virginia. Thank you for your invitation to address you this morning.
I am here today as a Section 8 tenant, not representing an organization or agency. I have had the good fortune to be a recipient of the Section 8 voucher issued by Prince George County Housing Authority since 1994. I was first approved for a voucher and was placed on a waiting list for a voucher in 1990. I had separated from my husband and was employed as a secretary at Prince George High School. I was not receiving any child support and did not earn enough money to afford rents on decent housing.
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We lived in a house that was too small, in poor condition, exposed electrical wiring, dangling pipes and an unsafe porch. When my name came up to the top of the list and I was issued a housing voucher, I was able to move my children to a decent, affordable home in a safe neighborhood.
This is the home at which I have raised my children. My oldest graduated from college this May. My middle child has finished his second year in college, and my youngest is in high school now.
Not only are my children busy with their studies, but I am also hitting the books. I just completed a lifelong dream of obtaining a Bachelor's Degree, and am enrolled full time in a Master's program preparing myself for a career in community counseling. I will complete graduate school in December 2004.
While still in undergraduate school, I did a class project on the Section 8 housing voucher. Mrs. Hampton Wade, the Director of the Prince George Housing Authority was very helpful with this program. Sometime after I had completed my project, Ms. Wade recommended me for the position on the Virginia Housing Development Authority Board of Commissioners. I was honored to be chosen by Governor Warner to serve.
My family's story is an example of the success of the Section 8 voucher program, but I did not want to give the impression that our life has been easy. Completing my education and making sure that my children do well in school requires choices and sacrifices. We must adhere to a very strict budget with no cushion, but the sacrifice is worth what we will achieve. Section 8 has afforded me the opportunity to provide my family with a stable and safe environment. So I consider this a hand up, not a handout.
I face each day with the determination to succeed, to improve my life and to continue to make a better life for my children. Section 8 continues to make this possible, because decent affordable housing in a decent neighborhood is available. Knowing that I do not have to make a choice between feeding my family and paying rent is a tremendous weight that I bypass, all because of Section 8.
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I am not an expert on Federal housing policy, but I am expert on my family and my community. As such, I have very deep concerns about HUD's proposal to take the Federal Section 8 housing program that has a proven track record of success and currently helps 2 million families and turn it over to States that may not be able to do as well, much less even want to administer the program.
Under the program's current structure, the Prince George Housing Authority administers 175 vouchers and has 100 percent utilization rate since 1989. The Prince George Housing Authority has never turned back any voucher funds. Further, there are 110 families on the waiting list in Prince George. We do not need to dismantle our program and start over. What we need is more vouchers.
I want to call attention to three problems that I see in the HANF proposal. The first idea is that the housing voucher program needs to be to changed so it will be more like the welfare program TANF. This seems to be based on the mistaken notion that most people who receive Section 8 vouchers are also on TANF. In fact, the income of most households that rely on vouchers to be able to afford housing comes from employment, pensions or disability income.
Other concerns is one that will not affect me directly since the Governor has already made a commitment to ensuring tenant representation on the State board. But some governors may not be interested in the perspective of tenants and may do away with the current requirement as far as Section 8.
My single largest worry is that there is no assurance that the program will continue to be funded at a level that will keep up with rising housing costs. The point of the Section 8 housing voucher program is to make sure that low income housing people can afford to live in a decent house. If you approve this proposal, Section 8 vouchers could end up with their current homes being unaffordable and having to move to poor quality housing in unsafe neighborhoods, causing disruption in jobs and schooling.
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I hope that each of you will take a careful look at this proposal and what it could do to our community. Once you do this, I am sure you will agree that this is a bad idea.
Thank you for the opportunity to share my thoughts.
[The prepared statement of Terri Ceaser can be found on page 179 in the appendix.]
Chairman NEY. I want to thank you. Next witness.
STATEMENT OF TELISSA DOWLING, PRESIDENT, RESIDENT ADVISORY BOARD, NEW JERSEY DEPARTMENT OF COMMUNITY AFFAIRS
Ms. DOWLING. Good morning, Chairman Ney, Ranking Member Waters and members of the subcommittee. I am very honored to testify about the Section 8 program. I am testifying today on my own behalf. I will not be telling you that the voucher program is perfect, but I know from personal experience how the voucher program can help low income people find stable housing and better their lives.
I first received a voucher in 1996 from the New Jersey Department of Community Affairs through its transitional housing program. I now reside in Guttenberg, where both my daughter and I were able to improve our educational opportunities. My daughter is 14 years old now and is already talking about going to college.
When I first received my voucher, I was on public assistance and homeless. But within a year I was able to leave the welfare program with the help of the Section 8. It gave my life the stability I needed to be able to attend school, and my studies helped my community work service at the Public Housing Authority into a job. So I was able to leave welfare.
I received my associate's degree in public policy and urban studies in 2000. I recently became a program manager of a housing resource center. Without a voucher I would not have been able to get my degree. I might not have a job, and my daughter and I would still be homeless.
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My studies also gave me the knowledge and confidence to participate as a tenant. When the New Jersey Department of Community Affairs announced the formation of a resident advisory board as required by the Quality Housing and Work Responsibility Act of 1998, I understood that this would be the opportunity for me to provide input. I was elected as President of my RAB in 2001 and serve now on behalf of 19,000 voucher holders. I now serve on the boards of the National Low Income Housing Coalition and ENPHRONT, a national public housing residents' organization.
From my experience the proposal to change the voucher program into a block grant to the States is a bad idea, to say the least. First, I do not want States to have that kind of flexibility that the block grant proposal will allow. I know that it is important to hold on to rules that the Federal Government has established so that taxpayers and Congress will know that the money is being used well to help those most in need. Turning the program into a block grant would give States so much flexibility that it will be detrimental to the very people that the Federal housing assistance is supposed to help.
Another problem with the block grant is its effects on the opportunity for tenants to provide input. Under the block grant, States would not be required to have a resident advisory board. My State has obviously done the right thing already, but other States may not be as enlightened as mine.
I also do not believe that having States administer both TANF and the block grant will guarantee good coordination. Additionally, only approximately 13 percent of the people receiving vouchers are even on welfare.
One program that helps voucher tenants improve their economic circumstances is the Family Self-Sufficiency Program. FSS provides subsidized savings in case management for voucher tenants seeking better employment opportunities. But States will not be required to continue this program under the block grant.
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My experience has shown me that the poorest people have the most trouble affording housing, but the block grant would allow States to reduce the percentage of extremely low income people admitted to the program from the current 75 percent to 55 percent.
It is also very important to me and other voucher holders that we do not have to pay too much of our limited income in rent. But the block grant would change the general rent standards, and tenants could be required or would be required to pay significantly more than 30 percent of their income for rent.
Another problem is whether tenant based rental assistance under the block grant would be able to help people live in better neighborhoods. The subsidy that the States would pay might not be enough to let tenants live in neighborhoods that have better housing, schools, and job opportunities.
My biggest worry is that the funding of the block grant will not keep up with the need over time, and that could cause States with even good intentions to have to make changes that would hurt tenants in the program. The block grant will divorce Congress from direct responsibility for individual vouchers, making it easier for Congress to avoid keeping up with the real increases in housing costs.
For all of these reasons, I respectfully and strongly recommend that Congress continue the current system of allocating specific numbers of vouchers to local and State housing agencies under the general framework that exists today.
There are some ways to improve the voucher program without turning it into a block grant, and I testified about some of these improvements last year. I hope that you will consider improvements to the program that are not as radical, risky and insensitive as the block grant.
Thank you.
[The prepared statement of Telissa Dowling can be found on page 183 in the appendix.]
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Chairman NEY. I want to thank you. Next, Mr. Garrelts.
STATEMENT OF CRAIG A. GARRELTS, EXECUTIVE DIRECTOR, HOCKING METROPOLITAN HOUSING AUTHORITY, LOGAN, OHIO, ON BEHALF OF THE NATIONAL LEASED HOUSING ASSOCIATION
Mr. GARRELTS. Mr. Chairman, and the members of the subcommittee, my name is Craig Garrelts. I am the Executive Director of Hocking Metropolitan Housing located in Logan, Ohio. I am representing the National Leased Housing Association, whose members include owners, managers of Section 8 housing, as well as public housing agencies that administer the Section 8 voucher program.
We appreciate the opportunity to testify on H.R. 1841, the administration's block grant, or HANF program, which is proposed as a replacement for the Section 8 voucher program.
We urge the subcommittee to reject this proposal. It is a rash proposal, advanced under the guise of reform, that can damage a form of housing assistance that has had decades of bipartisan support.
The Section 8 subsidy has been a powerful and versatile tool for almost 30 years. It can serve the very poorest who need substantial help, to helping those who only need shallow assistance to live in affordable and decent housing.
Among its specialized functions, Section 8 has been used to replace older forms of subsidies that are less flexible, and in the process has preserved older projects and improved affordability for tenants. All told, over 1.9 million families receive rental assistance from the Section 8 certificate program.
The Section 8 program has been the most successful housing assistance program of any housing program at any time. The major problem we have with the program is we just don't have enough of it. Recently, it became quite a common complaint that not all of the funds appropriated each year have been used.
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Until this year, appropriations were sized based on an assumption that every authorized voucher would be used for a full 12 months. No one expected this to occur, and the funds were routinely recaptured and rescinded. The recisions reduced the cost of each year's appropriations to the amount actually used for the program. So there was no ongoing adverse fiscal impact from this method of calculating appropriations.
When a problem did arise it was the result of disagreements with the appropriation committees and taking the recisions to offset nonhousing appropriations. For fiscal year 2003, and presumably beyond, the appropriators have taken actions to minimize recaptures, and therefore the potential loss to housing programs of the Section 8 recisions being allocated for other uses.
But today we are more interested not in the recaptures or the recisions, but trying to help as many families as possible use the authorized level of vouchers assigned to each community. Here, action by the voucher administrator and HUD has steadily improved utilization rates. Industry groups and HUD have encouraged administrators, primarily local housing authorities, to take aggressive steps to increase leasing rates. National utilization rates have risen from 91 percent 2 years ago to 95.3 percent as of this January.
We look forward to improving upon this in the future. By no means is this current program a failure. However, we believe the proposed HANF program, if enacted, would be a failure. HUD says the Section 8 program has grown too complex and that by block granting the program to the States it would be simpler. On the contrary, if this proposal is enacted, the current Section 8 program would remain the major program for several years, with all of the so-called complexity. And one or two additional programs with different rules would coexist with the program. How would this be simpler?
To illustrate, all tenant-based voucher holders would be grandfathered for 5 years under the terms and conditions of the Section 8 program. Holders of project based vouchers and those receiving home ownership assistance would be grandfathered for 10 or more years under the old rules. Assuming 1.9 million families are grandfathered and the annual turnover rate is 10 percent, at the end of the first year 1.71 million voucher holders would still be covered under the current system, while 190,000 vouchers would be turned over to the States for the block grant program. At the end of year 5 we would still have 1.1 million vouchers under the current program, and about 800,000 that have gone over to the block grant program.
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HUD complains that the Section 8 program requires it to deal with a large number of local public housing agencies. These are the local hands on administrators who, among their many duties, screen and select tenants, check their incomes, find a deal with landlords who agree to participate in the program. They inspect the unit for housing quality standards and lead-based paint requirements, determine maximum subsidies within the HUD established parameters, and select and negotiate with owners who wish to participate in the project-based program.
The Section 8 program as it currently exists requires that public housing authorities be the administrators. The language of H.R. 1841 would result in the continuation of this administrative structure for the grandfather vouchers, with the exception that an additional layer with associated costs would be added.
The movement of funds from HUD to the State to a new administrator and then the landlords would extend the process. We are then more really worried what is going to happen to the families.
Mr. GREEN. [Presiding.] Mr. Garrelts, if you could summarize your testimony. The red light has gone on. We will, of course, be reading your full written testimony as well.
Mr. GARRELTS. Our final concern is with the families, because the change within the program, changing from the basic rent of 30 percent of adjusted income to 30 percent of gross income would have a tremendous impact upon the individual families. And an example cited in our testimony, the net result would be a 25 percent increase in rent to the families.
We are also concerned about making sure that we have landlords participate in the program.
Mr. GREEN. Mr. Garrelts, I need you to wind your testimony up. We have other witnesses we need to get to as well.
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Mr. GARRELTS. Thank you. On behalf of National Leased Housing, we appreciate the opportunity to testify today.
[The prepared statement of Craig A. Garrelts can be found on page 198 in the appendix.]
Mr. GREEN. Great. Thank you. I apologize for having to cut you off.
Before I turn to Mr. Showe, I would like to turn to the ranking member of the subcommittee, Ms. Waters, for her opening statement at this time.
Ms. WATERS. Thank you very much, Mr. Chairman.
I appreciate the opportunity to get my statement on the record. I do know that you want to move on with the testimony. However, it is important that as we move into this very, very difficult area and address the proposal of the administration that everyone is clear on how we stand on this.
The housing choice voucher, commonly referred to as Section 8, named after the section of the U.S. Housing Act that authorized it, is the largest Federal low income housing assistance program. The Section 8 voucher program currently serves about 2 million families at an annual cost of over $12 billion. Some 2,600 housing agencies, mostly local, administer the program. H.R. 1841, the Housing Assistance to Needy Families legislation, would convert the Section 8 voucher program to a block grant, transferring its administration to the 50 States, and giving them discretion over allocation of funds, directly or indirectly.
Section 8 supports over 4 million apartments. Roughly 1 in 7 renters nationwide benefit from some form of Section 8 assistance. Of the 4 million Section 8 households, about 35 percent, or 1.4 million, have portable vouchers. The HANF proposal would fundamentally change the Federal funding system for tenant based housing assistance, from one based on actual cost to a block grant that simply distributes Federal appropriations among States.
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With the passage of HUD's funding year 2003 budget, block granting the program to States for this reason is unnecessary as the problem of under utilized vouchers has already been addressed. If funding levels fall behind the program's needs, as likely will occur, States will either have to contribute their own funds to the program or reduce assistance to low income families and elderly and disabled individuals.
A National Association of Redevelopment Officials report shows States would face a 1.1 billion to 1.8 billion in costs to close the funding gap created by the administration's block grant proposal. California represents a large component of the Section 8 program, with 14 percent of the Nation's vouchers and 16 percent of the Nation's leased vouchers. I am concerned that assistance to families currently participating in California's Section 8 programs would be jeopardized under the new proposal.
Under the current Section 8 Housing Choice Voucher Program in California, the average per family rental assistance cost per year is approximately $8,364. The funding shortfall for California to cover 87,018 low income families is at $8,364 per family, and for over a 5-year period would equal $727,878,552.
My question to this administration is, what happens to working families who cannot afford decent apartments under this proposal if States implement a time limit? Only 20 percent of housing choice voucher holders receive welfare benefits. The other 80 percent rely on earned income, pensions or disability income. The need for housing assistance is driven by local housing market conditions and rental housing cost inflation. So using the TANF model is inappropriate.
The uncertainty of block grant funding could have a greater impact on the use of vouchers to support home ownership. Vouchers can only be used to support home mortgages to the extent that mortgage lenders are confident that funding will continue to be available for the length of the mortgage.
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Again, I do not believe that a block grant to the States is the best way to realize improvements in Section 8 program, and we need to continue this dialogue to find solutions that work.
I thank you for the opportunity to put that on the record, Mr. Chairman. I will yield back the balance of my time.
Mr. GREEN. I thank the gentlelady for her opening statement. And we would turn to Mr. Showe to resume testimony from the panel.
STATEMENT OF ANDREW SHOWE, VICE PRESIDENT, SHOWE MANAGEMENT CORPORATION, COLUMBUS, OHIO, ON BEHALF OF THE NATIONAL MULTI HOUSING COUNCIL, NATIONAL APARTMENT ASSOCIATION, AND COLUMBUS APARTMENT ASSOCIATION
Mr. SHOWE. Thank you, Mr. Chairman, Ranking Member Waters and distinguished members of the subcommittee. My name is Andrew Showe. I am Vice President of Showe Management Corporation, past President of the Columbus Apartment Association, and current member of the board of Ohio Apartment Associations, and a member of the National Apartment Association.
I am also a member of the National Multi Housing Council, a national association representing the Nation's larger and most prominent apartment firms, and NMHC operates a joint legislative program with the NAA, an industry group representing over 30,000 apartment executives and professionals. It is my pleasure to testify today on behalf of both organizations.
NMHC and NAA commend you, Chairman Ney, for your leadership, and we thank the members of the subcommittee for your valuable work in addressing affordable rental housing in America. We also commend the U.S. Department of Housing and Urban Development Secretary, Mel Martinez, and the administration for their interest in improving the Section 8 Housing Choice Voucher Program.
We too believe it is critical to meet the housing needs of low and moderate income families and believe that improving the Section 8 program is a central part of meeting these needs. However, we urge Congress and HUD to enact reforms to the existing Section 8 program that will encourage apartment owner participation and in turn increase housing availability to voucher holders.
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Although it is well intentioned, we think HANF will not reduce the administrative costs to participating property owners and will not maximize program benefits for residents. Instead, the proposed legislation could create new obstacles to apartment owner participation without alleviating existing burdens. The net result can be fewer available apartments for voucher residents.
We wholeheartedly support the Section 8 program as a means for private housing owners to provide affordable rental housing for families who need it. We believe that more apartment owners would participate if the cost of renting to voucher residents were more comparable to the costs of serving unsubsidized residents. We propose the following recommendations to achieve this goal.
First, we urge continued funding for the existing program structure administered by HUD. Historically many criticized the Section 8 appropriation structure because too much funding remained unused each year. Effective this year, Congress enacted changes to minimize recaptures, and, moreover, national utilization rates have risen to nearly 96 percent. We believe that the existing successful appropriations structure should be supported, and we have considerable concerns about a proposed State level funding structure in HANF.
Next, we propose speeding up the move-in process by amending the inspection procedures. We propose allowing PHAs to conduct unit inspections within 60 days after the resident moves in. PHAs could also conduct building-wide rather than unit by unit inspections in certain cases, and rely upon recent inspections.
Alternatively, PHAs initially could inspect a representative sample of units in order to certify that the building and communities are eligible. This would reward well managed properties and allow PHAs to focus their scarce resources elsewhere.
The apartment industry relies on seamless turnover, and delays caused by unit by unit inspections deter participation. As proposed, Section 11 of the bill would extend the existing inspection requirement to HANF, and do nothing to fix the lost revenue problem.
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Finally, we urge HUD to enact a more efficient process for PHAs to apply for higher fair market rents that are more reflective of submarket rents. We also propose program changes that will allow PHAs to raise the payment standard to 120 percent of FMR without HUD approval and afford PHAs an increased flexibility to request higher payment standards when necessary. FMRs must be set high enough to encourage owners' participation, and in turn create a sufficient supply of apartments and choices for voucher holders.
We thank HUD for raising the current FMR level to the 50th percentile in 39 high cost areas, but that level is insufficient in areas with outdated FMRs and in certain high cost submarkets. In many areas of my home State of Ohio, FMRs have not been updated in years and are well below market rent in both high cost and moderately priced areas.
In summary, we believe that the existing Section 8 program with improvements I have just noted will make affordable housing more affordable to more Americans. Thank you.
[The prepared statement of Andrew Showe can be found on page 260 in the appendix.]
Mr. GREEN. Thank you for your testimony. Ms. Thompson, welcome.
STATEMENT OF BARBARA J. THOMPSON, EXECUTIVE DIRECTOR, NATIONAL COUNCIL OF STATE HOUSING AGENCIES
Ms. THOMPSON. Thank you, Representative Green, Ranking Member Waters, and members of the subcommittee. Thank you for the opportunity to testify on the administration's proposal to block grant Section 8 voucher funding to the States. I am Barbara Thompson, Executive Director of the National Council of State Housing Agencies.
Mr. Chairman, NNCSHA is grateful to Chairman Ney for stepping forward in defense of the low income housing tax credit when it was threatened by the administration's dividend tax relief proposal. Thanks to his intervention and that of Representative Frank and many other members of this subcommittee, housing credit apartment production is protected under the recently enacted tax bill.
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Now, we ask your help in enacting the Housing Bond and Credit Modernization and Fairness Bill, H.R. 284. This bill repeals the MRB 10-year rule, updates MRB purchase price limits, and makes housing credit development viable in very low income communities. We thank the Chairman and the 20 other members of this subcommittee who have cosponsored H.R. 284. If you have not cosponsored this legislation, we urge you to join the 253 House Members who have and urge your House leaders to enact it in tax bill this year.
NNCSHA also is grateful to Chairman Ney for introducing the Housing Assistance for Needy Families Act. NNCSHA neither supports nor opposes this legislation, but we believe it deserves Congress' full consideration. NNCSHA supports a voucher block grant in concept. However, we have taken a neutral stance on the administration's plan because of our serious concerns about the adequacy of the program funding and flexibility it proposes.
Section 8 vouchers are one of our most important affordable housing tools, but the voucher program is not meeting its potential. Its complex rules and regulations block innovation, drive up costs, discourage private sector involvement, and confuse customers and administrators.
The decentralization of funding to more than 2,500 PHAs complicates program administration, increases costs, prevents maximum utilization of funds and frustrates regional and statewide housing strategies. If implemented with sufficient funding and flexibility, HANF could resolve many of the current program's problems and create new opportunities for voucher use.
States have the capacity to administer the voucher program. States possess a multi-decade record of responsibility, effectiveness, and accountability in administering tens of billions of dollars in housing assistance. They possess statewide sophisticated financial asset management and administrative oversight capability. Many States already administer Section 8.
States are uniquely positioned to administer Federal housing resources. They understand local housing needs and markets, while bringing a State and regional perspective to problems that cannot be solved within municipal boundaries. States can ensure housing funding is applied where it is most needed and integrated with other public investments in their communities.
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Moreover, States have the ability to bring together State agencies and resources. State agencies are partners, for example, with welfare agencies to coordinate TANF funds with housing assistance. The voucher program, adequately funded and rationally regulated, would benefit from State administration.
States' knowledge of local housing markets, access to other housing and nonhousing resources, ability to respond to changing local circumstances and prioritizing needs across States would overcome many of the voucher program's current limitations.
Federal oversight would be more efficiently concentrated on 50 entities. However, HANF must not be an underfunded mandate. We urge Congress to safeguard vouchers and the low income families who depend on them by authorizing mandatory voucher spending in an amount at least adequate to finance all currently authorized vouchers. Authorizing legislation must also specify that funds would be adjusted annually to cover cost increases.
To work HANF must be a flexible program. It must be free from unnecessary and burdensome Federal requirements. HUD regulation must be limited to that necessary to assure nondiscrimination and accountability for the use of funds to achieve goals Congress sets. Performance standards must not compel States to respond to Federal priorities rather than their own.
In conclusion, exploring ways to improve the Section 8 voucher program is timely and appropriate. A block grant to the States merits Congress' examination and NNCSHA is available to assist you in that effort.
Thank you.
[The prepared statement of Barbara Thompson can be found on page 265 in the appendix.]
Mr. GREEN. And thank you, and thank all of the members for their testimony. I will begin with questions.
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Ms. Thompson, you indicated that your organization supports voucherizing in concept, but you were neutral on this particular proposal. What would your organization support? What is it that you would like to see in a voucher program that you would support?
Ms. THOMPSON. We believe this proposal, the idea of block granting the voucher program at least deserves a serious look. We feel, however, that this proposal, the administration's proposal, fails to do two essential things: One, to assure States that they would have adequate funding. We share the concerns of all of the panelists here that what the administration has proposed would not protect States from funding cuts over time, and that is unacceptable.
In addition, it does not give States the flexibility they would truly need to achieve the efficiencies that the administration believes a voucher block grant would achieve. So we would need to see guaranteed funding, mandatory spending, which has been done under other programs like the TANF program, for example. States would need to know from year to year that they were going to get sufficient funds, not only to provide for the families who currently receive them, but to cover increased costs over time. And, frankly, we would like to see new voucher program money in this program. No new vouchers have been appropriated by Congress for several years, yet only one in four families qualified to receive voucher help gets it.
So our view is let's fund the program, not only at a level that will cover families who currently receive the assistance, but let's grow this program to meet the need.
Mr. GREEN. So to summarize, you are looking for more money and more flexibility?
Ms. THOMPSON. Lots more money and lots more flexibility.
Mr. GREEN. You added the lots into that.
What I would invite you to do is take a look at the specifics of the proposal from the administration, and if you could supply to us some written suggestions and language suggestions, I think that would be useful as we go through this process.
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Ms. THOMPSON. I would be pleased to do that.
Mr. GREEN. Thank you. Mr. Garrelts, what recommendations would you have with respect to the current program that would make it more effective, more cost effective and more efficient in its administration?
Mr. GARRELTS. Well, the current program, the housing authorities are the primary administrators, and we are the local—being the local administrators, we have to work day to day with the landlords and the tenants. There is a basic cost there to the program that can't be avoided. We do have the management of the actual case for each individual client.We do have to do all of the contracts with the landlords. We have the requirements to maintain updated computer systems that communicate data to the Federal Government. Our basic program, especially in my area, which is a very rural area, there is not a whole lot of fat in the program to be done.
There is a discussion within the HANF program to reduce the number of inspections, and I understand that landlords may like that but our experience has been that we especially work with a lot of mom and pop type landlords. And if they can avoid repairs, they will do so.
But our annual inspections assure that those properties are maintained. That is a cost to the program, but we need to continue forward for doing annual inspections of those units if we want to keep good housing stock. So the basics of the program, at least at the local level, there is not a whole lot of fat to be cut out.
Mr. GREEN. I am not necessarily suggesting that cutting fat is what we are looking at as much as making the program operate more smoothly. Is it your testimony that we can't enact reforms that make it operate more efficiently and more cost effectively?
Mr. GARRELTS. If we would allow, again at the local level, the individual communities to address the variances in the markets at the local level with some HUD oversight for doing variances for, as was mentioned about fair market rents, that is an issue. In my case we have experienced a very tight market where we have an inadequate supply of housing, allowing us to adjust our fair market rents high enough to generate new construction because we are not—I will use our example—in the last 10 years we had an 11 percent growth of our population. During that period of time, that amounted to 1,100 families added to our community. During that period of time we only had 47 new apartments built. The fair market rent in our area was not high enough to generate enough interest from local developers to build any more rental housing. Then we throw in the overall economic status of our community is that 48 percent of our county are eligible for the program. Now, that is very typical in rural areas, is that we have—our median income is low. We do not have a lot of job opportunities available. Therefore, the rent burden is very high for families. So the flexibility needs to be at the local level so we can adjust, either by increasing our fair market rents so that new development can occur, or reducing it if we have plenty of housing stock available, reducing the fair market rent in order to fill the vacancies that exist.
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Mr. GREEN. Thank you.
Ranking Member Waters, questions?
Ms. WATERS. Thank you very much, Mr. Chairman.
How many panelists can tell me what their waiting lists are for Section 8 in that area? Do you have any idea?
Ms. DOWLING. Good morning. I can give you an approximate number. Because we are a Statewide agency, we have roughly about at least 8- to 9,000 in different areas throughout the State. We roughly, I would say, have a good 17,000 on the waiting list as a total throughout the whole State.
Ms. WATERS. That is what State?
Ms. DOWLING. New Jersey.
Ms. CEASER. Yes, ma'am. As far as Prince George County, Virginia is concerned, right now there are 110 families that we have on our waiting list.
Ms. WATERS. 110 families?
Ms. CEASER. Yes, ma'am.
Mr. GARRELTS. In our community, because of the very tight market condition, when I say we have no waiting list it is a little misleading, is because we are issuing vouchers upon demand when people walk in the front door. We have a hundred families every month searching for units. That is how we are able to maintain our hundred percent utilization, that although we are not maintaining a waiting list, that is because we put every one on the street to search.
Ms. WATERS. Thank you.
Ms. Thompson, do you have any information about waiting lists for Section 8 vouchers?
Ms. THOMPSON. No specific information on specific States. I can tell you we constantly hear there is simply not enough assistance to meet the needs of families eligible for it. That is why we think it is so important to get beyond this discussion of simply maintaining funding for the current families served. Why aren't we also talking about trying to meet the needs of the many families who are not served?
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Ms. WATERS. How many of you believe that if this is block granted that your well-funded States with all of their balanced budgets are going to reduce the number of folks waiting for Section 8? How many believe that?
Okay. Just to add to what you think, the State of California, we have a $350 billion deficit. Not only can we not take care of the many services, many of those services we have done well with over the years, I believe that that legislature would be looking to cut, reduce, do whatever they could to get that budget down. So I would not—so I certainly would not want this to be block granted to my State.
Ms. THOMPSON. I would agree with that concern. And California, as you know, Congresswoman, is not the only State. Many States are facing very severe budget deficits. So we share your concern. Many, many States confront that. That is why we feel it is so essential, and we could only support something like this if the funding was truly mandatory, funding that was guaranteed to flow from the Federal Government to the States in a sufficient amount to cover the needs of families in the program, new families getting into the program, and to cover increased costs over time.
Otherwise, you are absolutely correct. The States could never assume this. They cannot pay for this program. This would only work if the Federal Government continues to support it adequately, just administer it through the States. So we agree with you. That is one of the major reasons, Congresswoman, we have not endorsed this proposal.
Ms. WATERS. Well, I want you to oppose it because—for everything that you have said. I understand you are wanting to have a debate, but you know, I am afraid that this administration is trying to literally get rid of too many programs that the people really rely on and that the States—we cannot count on the States to really continue these programs and administer these programs. In some cases, even through maybe not Section 8, but Head Start and others, they would actually siphon off the dollars from these programs to help reduce those deficits.
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I was reminded from a Californian I said 350. But it is $38 billion rather than 350.
Ms. VELAZQUEZ. 350 was the tax cut.
Ms. WATERS. Mr. Chairman, just one more thing. Everybody that I have listened to, and I haven't heard everyone, talked about the fact that the vouchers are not keeping up with the real market rates out there, and I suspect that is true. Again, you know, California is off the scale. I mean, the rents have just exploded. The cost of housing is just off the scale. So unless we increase the value of these vouchers, I don't know how apartment owners are going to make it. I think it is very important for everyone to continue to say that.
It doesn't matter whether they remain with the Federal Government or, God forbid, if it you know transferred to the State, the fact of the matter is we need to increase the value of those vouchers. Does everyone agree on that?
Mr. MILLER OF CALIFORNIA. [Presiding.] The gentlelady's time has expired.
Thank you. Ms. Thompson, you commented that you expected a guarantee from the administration, and that is very difficult because that is our responsibility. We can set a program up but it has to be funded through the appropriators, and an example would be the Buyer Down Payment Assistance Program. We enacted a program, but it has never been appropriated, so we have never been able to benefit from this program.
Looking at the things that were mentioned, I mean the concern about the program, the shortages, I know, Ms. Waters, when we had a hearing last year, Los Angeles County came forward and said their vacancy factor was 3 percent, which meant that they were a hundred percent occupied. The conclusion I drew at that point was you have got X amount of vouchers chasing a limited amount of units.
And Barney Frank and I introduced a bill, H.R. 1985, which increases the FHA loan limits for multifamily, hoping in some way to move people into a place they own. And I think I like the Down Payment Assistance Program, the concept of taking a person who is reliant upon renting a unit and knowing that their rents continue to increase—as you stated, they have in the marketplace year after year—if we can give those people a voucher and let them buy a home, then their rents are capped at a certain limit until they own that unit. That is how I think you create more Section 8 housing out there, if you can get people to a situation, whether we do it with FHA limits, and we can help them with vouchers through the HUD program to go out and buy their own home, that they can take pride in and say this is mine until I die and leave it to my kids.
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But it gets them off the system, because if you look at a person who is relegated to Section 8 for 5 years or 10 years, you look at what they were paying originally, and 10 years later you look at what they are paying in rent. The concept of having that person's rent remain consistent from the day they buy it, that is really interesting to me, to be able to get somebody in a home.
I was a developer for years. It is tough, and you talked about building units. The problem we have in many communities, I have seen, I know so many developers who try to do it, when they go a community and they say they want to build Section 8 housing there is an outcry from the neighbors in many cases. Yet when you have communities that would accept them, there is generally no vacant land. We passed a bill out of this committee on brownfields, allowing the local communities to take these polluted sites, to clean them up and we can build affordable housing within communities who want them and need them. But it appears to be a circle conversation here that we are trying to put people in units that just aren't available.
But I would like to hear your opinion on the vouchers for people getting in new homes, be able to buy them.
Ms. DOWLING. The only reason I say that is because this bill doesn't even mention anything about the Section 8 home ownership component at all. That was my question. What happens to that? Because last year we came and we spoke about that. How do we improve it? And now we have got people actually doing what they need to do as far as paying, cleaning up their credit reports, getting into schools, and because we are under the impression that we are going to take the Section 8 voucher and now become a home owner. We understand that it was for 15 years, but at least my mortgage would be paid. Now that is even taken off the table.
Mr. MILLER OF CALIFORNIA. I hope the appropriations committee funds that this year. I think it is an extremely important program to get people into a home that they own. I am on the advisory board for a group called Hart, it is a nonprofit. They put about 50,000 families, first time home owners, into homes. It is 100 percent private dollars. They give them the down payment to help them get in the home.
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Ms. DOWLING. You know, God forbid if you block grant this program, I can't get a mortgage from anywhere if they don't know if my funding is going to be paid the following year. So now you take my dream back from me.
Mr. MILLER OF CALIFORNIA. I have to back up to what Ms. Waters said. There are some States I wouldn't mind block granting, but it would scare me to death in California today.
We have some funding in the Federal programs for seniors as an example that the last 2 years didn't get passed through, because they didn't have a budget on time, they get capped basically for cash flow purposes for the State. When the State finally passed a budget, some of these dollars tended to disappear, and that bothers me. But you know when we are looking at a program that almost 10 percent is eaten up in administrative costs, that bothers me. That is a concern, because that seems like an excessive amount.
And, yes, I know there is some people who own units need a little oversight. But I don't believe everybody is a bad renter. There is not everybody out there who owns units that when they get a call from their tenant will not acknowledge that there is a problem and fix it.
Ms. DOWLING. But that is only being done because tenants are not allowed to be at the table, because you cannot tell
me—in my area, that is what helped me a lot in the State of New Jersey. I am very fortunate because we have a State law that protects our Section 8 voucher holders where people can't discriminate if they are renting to them.
But our biggest thing was getting the word out to the residents. We had so many vouchers, and we need to hit the street to utilize these vouchers or the Federal Government is going to take the money back. And we went up from 78 percent utilization to 98 percent overnight. And that——
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Mr. MILLER OF CALIFORNIA. My time has expired.
Ms. DOWLING. I was so excited about the fact that we had the law that gave us the opportunity to be at the table, and I think that is why we don't need to block grant this program. We just need to go back to what we put on the table. We worked 2 years to put some very good suggestions on the table about the Section 8 program and all of the changes that have occurred, and we never even got the opportunity to see one of those changes implemented, and now you just want to do away with the program.
Mr. MILLER. Thank you. Mr. Scott from Georgia.
Mr. SCOTT. Thank you very much, Mr. Chairman. I appreciate this. This is just a terrible, terrible idea, and it is my hope that we will not move forward with this effort.
Mr. SCOTT. I served for, well, over 20-some years in the State legislature as Chairman of the Rules Committee and on the Budget Committee, and I can assure you that Ms. Waters is absolutely right, States will use this money any way they can, for anything other than for block granting. States are not equipped to handle this. We do not even have a Housing Department in the State of Georgia. Taking it and moving it away from the local communities is not the right thing to do. There are just so many areas; it reduces assistance to low-income, it weakens the low-income protections, it curtails tenant protections. It is just a bad, bad, bad piece of business.
I certainly am sympathetic to your concerns, Ms. Thompson. I am glad to see that you are at least neutral on this issue. But I would say that the major argument of HUD, in terms of having to deal with 2,600 more entities, is really flimsy. That is what they are there for. They are a Federal agency. They are equipped to handle. They handle hundreds of thousands of contacts with other folks, 13,000 subcontractors with Section 8 already, nearly 4,000 public housing units. And just to say that they are having difficulty with another 2,600 is sort of superfluous.
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Let me ask a couple of questions for the local housing, if you could just give me very briefly what changes, hypothetically, would be in place if we were to go forward with this. I think it is important for you to get on the record what impact that would have on these local housing authorities if such a thing would go forward.
Mr. GARRELTS. Well, I think one of the things that may occur is there is no mandate to the States to distribute the funding in the manner in which we are currently receiving it. So in our case, in Ohio, and probably in Georgia, where you have many rural housing authorities serving small populations, we may end up in a competitive process in order to retain the housing resources we have within our State. I have already had discussions with my peers in Ohio that if that opportunity was available, the larger cities would go after every dollar they could to bring into the cities, which after all is where a larger population center is, and they would like to take all the dollars into their coffers. So that would certainly have an impact upon the rural housing authorities throughout the country if the State would allow that type of process to occur. I think that is certainly a concern that we would have from a small housing authority.
Ms. DOWLING. But also, with this new bill, if you block grant it, it goes from helping 75 percent of the extremely low-income people to only 55 percent. And then if you block grant it, that means the housing authorities are now going to look for people that are making well above the extremely low-income people to actually bring them on board to help offset that voucher. Because once you give them the vouchers, what the State will do locally is set. If a voucher at a certain amount, like $500, then you will have to find someone where their 30 percent will offset the $500.
So now my extremely low-income people are still homeless, yet HUD keeps saying they want to do away with homelessness. This will create a cycle of even more homelessness and now touch on families that become homeless. It is just not a good thing at all. It is just going to be terrible, really terrible.
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Mr. GARRELTS. She brought up an interesting issue about the 80 percent of median and the very low-income target population we have now. I think that, within the guise of this HANF proposal, there is a thought that you would reach a higher income group through this proposal. But, actually, if you look at the payment standard and you do the actual mathematical calculations, in many markets, and this is not going to be true of all markets because this is a market-driven issue, certainly this would not necessarily be the case in Connecticut that has very high rents, but in Ohio, Georgia, Indiana, Illinois, where you have a mix of rents, when you do the mathematical calculations for the family, if you have a family approaching 80 percent of median, and you do 30 percent of their income requirement for their housing cost, more than likely it will exceed the payment standard established by the State.
It does that now under the fair market rent schedule that we have. In my county, in Hocking County, Ohio, if I have a family at 80 percent of median and I do the mathematical computations, 30 percent of their family income is greater than my fair market rent standard, so they get no assistance.
Mr. MILLER OF CALIFORNIA. [Presiding.] The gentleman's time has expired.
The language in the bill does clearly state that the same amount of people have to be helped through block granting, you cannot decrease it from 75 to 50 percent. So that statement is, in fact, not accurate based on the language of the bill itself.
Ms. DOWLING. But when you go back and use——
Mr. MILLER OF CALIFORNIA. No, that wasn't open for a response.
Ms. Hart is recognized for 5 minutes.
Ms. HART. Mr. Chairman, I'm interested in a response, actually, from Mr. Garrelts and Mr. Showe, if that is correct, regarding how you would envision, considering that you are now dealing with housing projects where 20 percent of the voucher system's funds are connected to the specific units themselves under the project-based voucher program, when a PHA enters into an assistance contract with an owner for those units, it is for a specified unit, a specified term. Do any of you, first of all, deal in project-based vouchers? I'm assuming you do, but maybe I'm wrong.
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Mr. SHOWE. I can respond to that. Our organization does have project-based rental assistance, however, it was contracts entered into directly with HUD. I realize there are those tenant-based vouchers that can be assigned to privately-owned houses, but my company does not have any of those units available to be assigned to our company. In our experience, we have solicited trying to get those types of permanent tenant-based assistance assigned to our apartment units and we have found, in dealing with the different housing authorities, that they did not have sufficient funding to go do that. So that is our experience.
Ms. HART. Okay.
Mr. GARRELTS. In our experience, we attempted to try project-based programs on a couple of occasions. But working in a tight marketplace, where we are trying to obligate the owners for a 10-year contract, they just were not interested because they had a line out their front door, and they could lease as many units as they wanted to. So having a project-based certificate just had no value to them. So we could not interest them at all.
Then again, with our fair market rents——
Ms. HART. Could you not interest them because of——
Mr. GARRELTS. They had so many folks. if you have a unit in my community, you would have five people wanting to rent that, and you do not need to have any assistance to get those clients in there because they will pay the rent.
Ms. HART. Okay.
Mr. GARRELTS. It may be unique—well, it is not unique when you go around the country. There are many marketplaces that are like this right now, where the demand for units exceeds the supply. And in those types of circumstances, project-basing is really of no use because the owner doesn't need that. Project-basing works in those weak markets in which the marketplace has too many units for clients. And then in those types of cases, the owners really like that because then they are guaranteed some money for their units whether or not they are occupied.
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I shouldn't say this, whether or not they are occupied or not, because that is not totally true, but they are at least guaranteed they are going to get someone referred to them to fill that unit within a reasonable time.
Ms. HART. Do you envision any change to that under the new HANF block grant proposal? Do you think that would change the situation at all?
Mr. GARRELTS. Under the new HANF program, they have not defined anything as it relates to project-based vouchers or certificates. And as I understand it, there is a new HUD rule that is coming out on project basing that is going to be implemented, and certainly that would have, or HANF would have a negative impact on that new rule. I have not seen the new rule, but I understand that the industry is pretty happy with that.
Ms. HART. Okay. Mr. Showe, anything additional?
Mr. SHOWE. I guess from our perspective we feel the public housing authorities do a terrific job in administering the Section 8 vouchers, and as far as the ownership of these different properties are concerned, the most important thing to do is to allow it to be transparent whether they are a Section 8 renter or whether they are a conventional renter. And the ways to make that happen is to eliminate the lease addendum in order to allow our managers to work off of one lease agreement. Because it causes tremendous confusion in training and administration of the lease rules and policies when you have to have two separate leases for the Section 8 voucher holders as compared to a conventional rental unit.
The other factor is we lose a lot of money trying to get the inspections scheduled for the individual apartment units. Sometimes it takes up to 30 to 45 days to schedule those inspections when in fact the family is ready to move in immediately. So not only do we lose but the voucher holder loses too because they are anxious to move in and find housing.
Ms. HART. So is that red tape experienced by both of you as far as the whole system itself?
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Mr. GARRELTS. No, I think that is a market-driven issue. In our community we are able to respond very rapidly. Within basically 10 days of a request to go out and do an initial inspection, we are able to do that quickly. But if you go into large population bases, and again this gets back into the basic staffing requirements in order to do the program, in large population bases where you may have 5,000 or 6,000 units in an area, they do not have 5,000 or 6,000 inspectors. So it is a little tough to get the inspectors around to inspect. If they are leasing out 400 units in a month, and that is not an unusual number that could occur, you just physically cannot have enough people around to go do those inspections.
Mr. GARY MILLER. The gentlewoman's time has expired. Miss Velazquez is recognized for 5 minutes.
Ms. VELAZQUEZ. Mr. Garrelts, you state in your testimony that you believe H.R. 1841 has the potential to have a dampening effect on landlord participation in the Section 8 program. You make specific mention of potential for problems with the project-based Section 8 program.
Would you please expand on this conclusion and indicate if you believe this effect is likely on both the tenant and project-based program or only one of the two?
Mr. GARRELTS. For the project-based program, it is of great importance, in order to attract an owner to participate in the program, that it is an easy process for them. Any extra administrative burden thrown at them is an extra cost for them, and they have that operating cost to be concerned with. So if under the HANF program we would go forward and we would still have the old existing project-based certificates in place, they are grandfathered, you would have the problem that that management company would be faced with two different sets of rules. So you have just violated the basic principle of keeping it simple. The management company would be real reluctant to continue participating in project-based units if they have different rules to follow.
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The same would occur within just the regular tenant-based program where the tenant is going out and searching. You have a tenant that has a grandfather voucher. They go out and call on a landlord, walk up to the landlord and say I would like to rent your unit. The landlord is accustomed to our program, they rent him up, they know the paperwork and everything is just fine. The next tenant comes along and says I have a new voucher under the proposed rule and I have all these different things I have to do. Suddenly the landlord is saying, I don't want to learn anything new.
Most of the landlords want to be able to keep their management relatively easy to do. They have staff they have to train. The process of keeping everything standardized is very important.
Ms. VELAZQUEZ. Thank you. Ms. Thompson, in your testimony you cite approximately $1 million in annual Section 8 rescissions as one of the most significant symptoms of problems with the current Section 8 system. Yet in the fiscal year 2003 appropriations bill steps were taken to better account for Section 8 funds and ensure fewer rescissions. Given these new changes to the Section 8 program, doesn't it make sense to see the results of those changes before authorizing a complete overhaul of the program?
Ms. THOMPSON. Certainly steps were taken in the most recent appropriations bill to avoid those kinds of large recaptures in future years, but that doesn't solve the under utilization problem.
We don't think an answer to under utilization is to simply take back the money you gave to PHAs. That's effectively what Congress is trying to do. They are trying to identify just how much money is really being used, and in case we are wrong we will create this little contingency fund. But our answer is, wait a minute, we want to see all authorized vouchers used. And we think a way to do that is to create the program flexibility that will lead to higher utilization as the HANF proposal could do.
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Ms. VELAZQUEZ. So tell me, how is rescission issue answered through the proposed changes?
Ms. THOMPSON. I don't think the rescission or recapturing or avoiding recaptures solves the problems that vouchers cannot be used in all communities. We think a program that has more flexibility to move those vouchers around the State so they can be used to change payments standards where necessary to increase usage—we think this is what needs to happen, not just taking the money back if it doesn't get used.
Ms. VELAZQUEZ. How do you respond to concerns that State flexibility will make it harder for voucher holders to move between States?
Ms. THOMPSON. To move from State to State? We have many housing programs now where the rules are different from State to State and the housing industry manages those rules fine. You already have portability issues, even within States, under the current program. So I don't see that as a barrier. In fact, we think it is an advantage that States with very different local conditions can design a program that meets their needs, not one that looks like every other State.
Ms. VELAZQUEZ. Thank you. Thank you, Mr. Chairman.
Chairman NEY. Thank you. Ms. Lee.
Ms. LEE. Thank you, Mr. Chairman.
Let me just thank you again for this hearing, and I want to associate myself with the remarks of our Ranking Member from California, Ms. Waters, who kind of laid out what many of the issues are in California as it relates to Section 8 housing.
Me, coming from northern California, for example just in Oakland alone, we have 8,000 people on the waiting list for Section 8 housing. Section 8 housing is such an important instrument for affordable housing. I hate to see it going in the opposite direction, which I think this bills takes it. I don't think this will strengthen Section 8 and provide for more adequate housing for those who are on waiting lists, but, in fact, provide less housing for less individuals.
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A couple of things I just wanted to ask, I guess Ms. Thompson and Ms. Dowling. One is this new legislation allows now for the State to contract with or to designate any agency, whether it is a public housing authority or not, just any agency, to act on behalf of the Feds in terms of providing Section 8 housing. How do you see this in terms of, one, the political ramifications of this, and, two, in terms of just the discriminatory or the possible discriminatory ramifications of allowing any agency that has not been involved with housing to become part of this process in terms of administering the program?
Quite frankly, this provision really does scare me to death. Ms. Thompson, then Ms. Dowling, please.
Ms. THOMPSON. We think the flexibility that the legislation gives States to work with partners, both existing PHAs and other entities, is important. We know that the States would impose standards, high standards, on who would qualify to do that work. We believe that many PHAs currently operating, good PHAs, and the vast majority of them are very effective, would continue to be the States' partners in this program.
Ms. LEE. How do you know that, though?
Ms. THOMPSON. In talking with our State agencies, they report to us that the vast majority of PHAs in their States are very effective. They see themselves stepping more into the role of HUD, hopefully, with a lot less regulation and bureaucracy, than stepping into the role of the PHAs.
Ms. LEE. You don't see any politicizing of this as a possibility?
Ms. THOMPSON. Certainly, there will probably be some PHAs that States will prefer not to work with, based on their track record, but we think, on the whole, the very effective network will be preserved and the partnership between the States and the local PHAs would be an effective one, much more effective.
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Ms. LEE. Then why wouldn't we just use existing public housing authorities, if they are so effective?
Ms. THOMPSON. I think it is important to give States the ability to decide whether or not to work with them. There may be entities in some localities that would be more effective than the existing PHA. We all know there are some, though limited in number, ineffective PHAs. So that flexibility is important.
But, remember, what we are trying to do here is create a program where States can come up with different requirements so it is not a Washington-driven program. And HUD can't oversee a program like that, 2,600 different programs around the country. But, States can, and we think they can do it well. But, again, I want to stress only with adequate resources and flexibility, which this proposal does not provide.
Ms. LEE. What about standards and requirements?
Ms. THOMPSON. We think——
Ms. LEE. And nondiscrimination?
Ms. THOMPSON. We think certain standards are appropriate. This legislation contains a lot of them already. If you were to go in this direction, we would want to work closely with you to determine what are the appropriate standards. Certainly Federal standards, in terms of who is served under this program, would be appropriate. We would just hope that they would not be extensive, such as the requirements under the existing program.
Ms. LEE. Ms. Dowling, what do you think in terms of the questions I asked?
Ms. DOWLING. Well, first of all, I know straight off, I can keep it simple, there is going to be a lot of discrimination going on. That's why we had to implement a law within the State of New Jersey to protect our voucher holders.
And as far as the other, there is no mechanism within any State I know, other than the State of New Jersey. The residents come out and participate. We will fight and, hopefully, it will be done properly within the State of New Jersey, but that is not going to happen across this country. You're going to have the ''good old boy'' network getting back in charge, and saying, you know what, we're going to take care of you if you can get me some votes coming up out of your area.
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So we are going to have even more discrimination. It's going to be worse than what it ever was before. Everything we fought to get here within the last 30 years with civil rights is going to go right out the window, and I can't make it more simple than that.
Ms. LEE. Thank you very much.
Finally, let me just say that I find it very ironic that generally those pushing this, the Republicans especially, this type of initiative, support local control. But in this instance now, we are going to another form of State control, I guess, and taking really away the local control aspect of Section 8. For me, this is backwards and will hurt us in the long run.
Ms. DOWLING. But you know what, I think great minds think alike, because that was the first thing when I read the bill, it was like, ''oh, you know what, this is going to break up a lot of strongholds across this country.'' And that's exactly what they're going to do with it.
Ms. LEE. Thank you.
Chairman NEY. Thank you. We appreciate the witnesses on the panel, appreciate your testimony, and thank you for coming to the U.S. Capitol.
We will move on to Panel II, and we will have a couple of introductions.
Mr. R.E. ''Tuck'' Duncan, Chairman, Topeka Housing Authority, Topeka, Kansas; Ms. Sandra Henriquez, Administrator, Boston Housing Authority, Boston, Massachusetts, appearing on behalf of Council of Large Public Housing Authorities (CLHPA); Mr. Tino Hernandez, Chairman of the New York Housing Authority, New York, New York; Mr. James Inglis, Executive Director, Livonia Housing Commission, Livonia, Michigan, and Senior Vice President, National Association of Housing and Redevelopment Officials, Washington, DC; Mr. Kevin Marchman, Executive Director, National Organization of African-Americans in Housing, Washington, DC; and Mr. Neil Molloy, Executive Director, St. Louis Housing Authority, St. Louis, Missouri, appearing on behalf of Public housing Authorities Directors Association (PHADA).
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We now will defer to Mr. Ryun for an introduction of Mr. Duncan.
Mr. RYUN. Well, first of all, I want to thank the Chairman for allowing me the opportunity address this subcommittee. I am grateful that you have scheduled a series of hearings on this important subject and specifically applaud you for the balanced set of witnesses you have selected.
I will be very brief, but I am extremely pleased to have the opportunity to welcome a constituent of mine to the subcommittee, Mr. Tuck Duncan. He is the Chairman of the Board of Commissioners for the Topeka Housing Authority in my district. Tuck truly is working on the front lines of this issue we are discussing, and his commitment is not only signified by his appearance here, but it shows as to how significant he believes this is.
I believe that you will benefit tremendously from the experience and expertise that Tuck has acquired from his services in Topeka. This is an excellent opportunity to hear from someone who knows, firsthand, the issues surrounding this debate.
Tuck, thank you for being here, and thank you for the work you do for everyone in Topeka, and I return my time to the Chairman.
Chairman NEY. Mr. McCotter, for an introduction.
Mr. MCCOTTER. Thank you, Mr. Chairman, and the entire subcommittee for kindly allowing me to welcome and introduce one of my constituents and one of your panelists this morning.
Since 1977, Mr. Jim Inglis has been the Executive Director of the Livonia Housing Commission, which tirelessly and effectively serves approximately 1,500 low and moderate-income Livonia families through a wide range of State, local and Federal programs. In fact, under Jim's leadership, the Commission has been rated a high performer by HUD's Public Housing and Section 8 Voucher Assessment Systems. Further, his peers have recognized his outstanding achievements, and Jim currently serves as Senior Vice President of the National Association of Housing and Redevelopment Officials.
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Jim, welcome, and thank you for appearing before this committee to testify on the issue of affordable housing. And good luck on the flight back, because I know you like to fly about as much as I do. Northwest will be kind to you, and tell my mother I am behaving out here.
Thank you, Mr. Chairman.
Chairman NEY. I thank our two members for their introductions, and with that we will go straight into the testimony, starting with Mr. Duncan.
STATEMENT OF ROBERT E. ''TUCK'' DUNCAN, CHAIRMAN, TOPEKA HOUSING AUTHORITY, TOPEKA, KS
Mr. DUNCAN. Thank you, Mr. Chairman.
First, as a former miler and cross-country runner, I must say I am humbled to have Congressman Ryun introduce me. It has placed me in seventh heaven. And if my spouse of 29 years heard that I said I was humbled, she would probably find that amazing, but nonetheless.
Mr. Chairman and Ranking Member, I am greatly pleased to be here this morning. The committee has already accepted our remarks for part of its record, and I am not going to read my remarks. I have a few notes and comments I would like to make, and I would like to try to briefly respond to some issues that have been raised by some of the questioning of the other committee members.
As Congressman Ryun noted, I am a volunteer. I am one of those uncompensated persons on the front line of the Board of Commissioners throughout the country and those 2,600 housing authorities, save one or two larger housing authorities. We were a troubled agency in Topeka, Kansas, in 1999, as so declared by HUD when I went on to the advisory board. We, for a couple of years, worked to get ourselves extracted from under the aegis of the city government and became an independent governmental entity under our municipal housing laws in 2001, and it has been my pleasure to serve as Chairman ever since.
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The first thing I would note is that I think if there are housing authorities out there that are in trouble, I think HUD, quite candidly, has been slow to recognize them and, therefore, slow to act. So if I have one recommendation it is, the first thing is that the sooner we identify those local housing authorities that are in difficult times, the sooner we get in and try to provide them with assistance.
I congratulate HUD in working with us, and I guess I am one of the few who perhaps feel that we have had some really great Federal-local partnerships. But for the work of the TARC office out of Cincinnati and the work of the Kansas City area office, I am not sure we would be as good a housing authority as we are today.
In my comments, I noted that when we started we had a vacancy rate of almost 20 percent in public housing, and we were only using 60 percent of our vouchers. So we were one of those housing authorities that had under utilized vouchers and you were recapturing money, and we were accruing those funds and having to pay it back in the following year, because we were getting the money, were spending it, et cetera. So what did we do? Well, we simply applied some very lean management principles of business in order to try to make ourselves effective landlords in public housing and effective administrators of a Section 8 program. Today, my vacancy rates are less than 3 percent in public housing, and we have 100 percent utilization of our vouchers.
The point of that is, that by applying public sector management principles, you can run an effective program. Now, I was here at your first hearing, I happened to be in business, I listened to the Secretary's comments. I guess my difference is that I see housing as a national problem that requires national solutions. I don't see how 50 different approaches for solving this problem and 50 different slowly dwindling, patched-together funding stream combinations are going to be an improvement. I guess I have more faith that the Congress and the Federal agencies can address these issues than perhaps some others do.
I notice that Congress and HUD have already enacted a number of reforms, such as the Quality Housing and Work Assistance Act in 1998, the final rule received in 1999, the notices received in 2000. I guess what I see is that merely creating the States in the in between is creating a series of 50 or 60 mini-HUDs. We don't need a series of mini-HUDs. We already have them; they are called the regional offices, and we can work with the regional offices just as effectively as we can with the State governments.
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Additionally, I think you should, as Congress, give it some time before the reforms take place. In essence, before we reform the reforms, let's see if the first set of reforms are having some impact. Like any investment, you don't expect your profits or your return quickly. You try to take a long-term approach. Based on HUD's own March 2000 Section 8 reports I think there already is an awareness, both nationally and at the front line, that we must improve performance. If we hear nothing else today, we must improve performance if for no other reason than the participants of this program deserve our best efforts.
The question's been asked, how many are on waiting lists? I checked this morning before I came in, and I have 1,525 on the waiting list. I have about 1,100 vouchers. Part of the problems that we are having are there are no incentives for landlords to get involved in this program. If you want to have housing, you have to have landlords under Section 8. And you want to have quality, good neighborhoods, because one of the problems is mobility; move people out of areas where the fair market rents allow you to rent into areas where the fair markets otherwise wouldn't allow you to rent. And we have difficulty there. That is one of the goals. I don't see that the State is going to know any more about that than I do.
Well, 5 minutes goes fast. I will be glad to respond to any questions that the committee may have, and I have some specific recommendations if you are so interested.
Thank you, Mr. Chairman.
Chairman NEY. I thank the witness. And, again, the testimony can be submitted for the record that you have in writing, without objection, and we will go on to the next witness.
[The prepared statement of Robert E. Duncan can be found on page 189 in the appendix.]
STATEMENT OF SANDRA HENRIQUEZ, ADMINISTRATOR, BOSTON HOUSING AUTHORITY, BOSTON, MA, APPEARING ON BEHALF OF COUNCIL OF LARGE PUBLIC HOUSING AUTHORITIES (CLHPA)
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Ms. HENRIQUEZ. Good morning, Mr. Chairman, Ranking Member Waters, and members of the subcommittee. My name is Sandra Henriquez, and I am the Executive Director of the Boston Housing Authority. Today, I am here representing the Council of Large Public Housing Authorities, CLHPA, whose members manage over 30 percent of the Nation's Section 8 tenant-based assistance, primarily in large urban areas. Thank you for allowing me to testify before you on the Section 8 Rental Assistance Program and the administration's proposal to block grant Section 8 rental vouchers to the States.
The Section 8 Rental Assistance Program is a great success by any measure. Not only is there no evidence that block granting voucher funds to States will improve the program, there are indications that this proposal will undermine Section 8 success. National utilization rates have increased 6 percent over the past year, from 89 percent to slightly now over 95 percent. If this trend continues, the average national lease-up rate could reach 97 percent by July of this year. And in Boston our success rate increased from 85 percent to its current 100 percent. This success indicates strongly that we will not continue to see large amounts of unspent funds as in recent years, and the program does not need significant reform. Devolution to the States, however, will undermine this success.
Section 8 rental vouchers are an important resource for families with extremely low incomes. It has been estimated that less than a quarter of those eligible for vouchers and other forms of low-income housing assistance actually receive any form of aid. The remainder live in substandard housing, double-up with family and friends, pay more than 50 percent of their income for housing or are homeless. Section 8 rental vouchers help solve this problem for nearly 2 million households.
Unfortunately, this proposal would result in the program's serving fewer of the neediest families. The block grant proposal includes changes in income-targeting requirements and the evaluation factors for the program that will push States to serve higher-income families and support the lowest quality housing in poorest neighborhoods because this is all the program will be able to afford.
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The current legislative proposals would enable States to divert voucher funds to State programs and possibly, depending upon how HUD defines supporting activities, could enable States to divert voucher funds to a range of nonhousing programs. States block grants would also add an additional layer of bureaucracy and cost to what is essentially a local program.
The block grant proposal erroneously argues that States will be more responsive to local markets than HUD, even though it is the local housing authorities that currently administer the program and develop and maintain relationships with local landlords. The cost of the additional layer of bureaucracy cannot be ignored. The evolution of the Massachusetts State Rental Housing Assistance Program, called the Mobile Rental Voucher Program, is illustrative of my concern with block granting the Section 8 voucher program. The administration's budget calls for $100 million of Section 8 funds to be set aside for start-up costs, which instead should be used to support 15,000 vouchers for families in need.
The bill also adopts a most disastrous provision from the 2003 Omnibus Appropriations Bill that caps the amount of earned administrative fees a public housing authority can maintain to use for low-income housing purposes. The Boston Housing Authority currently uses this earned administrative fee to fund a variety of low-income housing programs, including a security deposit program for homeless families, lease-up counselors who assist homeless families in Boston to find housing; bridge loans for HOPE VI and redevelopment activities to support operating costs of public housing, since these funds have been severely cut in recent years.
There is interconnectedness among these housing programs. The flexibility to use this earned fee for a variety of low-income housing program is crucial to maintaining a cost effective, low-income housing strategy that meets local needs. Limits and caps on this funding, coupled with splitting the fee between two layers of bureaucracy, States and localities, will make it even more difficult to administer the program effectively.
And even though Section 8 is successful, we agree with the administration that the program could be even better if HUD were to provide localities with more regulatory flexibility to meet the changing needs in the local real estate markets. HUD already has the authority under the current law to make the program less complicated, enabling local housing authorities to use Section 8 funds more creatively, for things such as tenant counseling enhanced security and deposits improvements to ensure the quality of the Section 8 stock.
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Another proposal that would help housing authorities better use Section 8 would be greater flexibility regarding the location of project-based units, the process of procuring project-based developers, and the number of units that can receive project-based subsidy in a building. All of those would go a long way towards creating more housing choices for needy families.
For all these reasons, CLPHA strongly encourages Congress to reject the proposal to block grant Section 8 rental vouchers to the States and, instead, please encourage HUD to grant more flexibility to housing authorities administering the Section 8 program so that we can better address the local housing needs in our communities. Thank you.
Chairman NEY. Thank the witness for her testimony.
[The prepared statement of Sandra Henriquez can be found on page 203 in the appendix.]
Chairman NEY. Mr. Hernandez.
STATEMENT OF TINO HERNANDEZ, CHAIRMAN, NEW YORK CITY HOUSING AUTHORITY, NEW YORK, NY
Mr. HERNANDEZ. Chairman Ney, Ranking Member Waters, members of the committee, I am Tino Hernandez, Chairman of the New York City Housing Authority. On behalf of Mayor Michael R. Bloomberg, thank you for this opportunity to testify about the housing assistance for needy families block grant proposal.
New York City has much at stake in your deliberations. The New York City Housing Authority is the largest public housing agency in North America, providing housing and direct-rent subsidies to 633,000 low- and moderate-income residents in the five boroughs of New York City. Our conventional public housing program comprises 345 developments, encompassing 2,702 buildings and 181,000 apartments which provide housing for 419,000 residents.
NYCHA's Section 8 program currently has 85,928 vouchers under contract. New York City administers one of the Nation's most extensive Section 8 programs. New York City is the Nation's third largest, after the entire States of California and Texas. In New York City total, we have approximately 105,000 Section 8 vouchers. NYCHA contracts 85,928 vouchers serving 214,000 residents, and we have 27,694 participating landlords. Our sister agency, Housing Preservation and Development, oversees 19,000 vouchers, with 5,300 participating landlords.
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New York City's Section 8 program is among the most successful in the United States. NYCHA's voucher utilization rate is currently at 98 percent, and HPD is now at 100 percent. Local control, at the local level, is the key reason for New York City's success in administering the Section 8 program. Housing conditions vary widely from city to city and localities best understand their housing needs. No State agency can know a local market as a city or locality can.
In New York City, we have been able to tailor the Section 8 programming to meet the unique needs of our real estate market. We are able to set fair market rent levels by neighborhood, acknowledging the varying rents within New York City communities. We are able to be responsive to the needs of landlords with the goal of gaining greater participation in the Section 8 program. We have streamlined the processing of rent payments to landlords. We have shortened the approval process for Section 8 transfers and rentals. We have automated inspections, introducing technology. We have automated rent calculation systems, minimizing errors. And we pay holding fees to landlords for apartments for processing time.
The scarcity of affordable housing in the New York City market is dramatic. The New York City vacancy rate is among the lowest in the country. Within the context of local control, NYCHA has been able to work closely with Mayor Bloomberg and its sister housing agencies to ensure that the City's priorities are addressed. NYCHA's Section 8 program is an integral part of the New York City's strategy to deal with special populations, such as victims of domestic violence and homeless families, and we do that on a regular basis.
New York City, working in collaboration with the Mayor's office and also with HPD, has also unveiled an important major housing program which will result in the production of 65,000 additional units of affordable housing over the next 4 years. The Mayor's program will preserve existing housing stock, produce additional housing, and identify development opportunities, all of which are supported by the Section 8 program's role in preserving the existing housing stock.
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Under the Section 8 block grant proposal, we have concluded that we would be adding an unnecessary and costly third-party administrative layer. HANF will not improve the delivery of tenant-based housing assistance. It would only complicate it, and the distribution of Section 8 vouchers will become more problematic. We believe that this particular proposal could disrupt the success of New York City's program, and we strongly believe that the Section 8 program should be administered at a local level.
Thank you.
Chairman NEY. I thank the witness.
[The prepared statement of Tino Hernandez can be found on page 210 in the appendix.]
Chairman NEY. We will move on now to Mr. Inglis.
STATEMENT OF JAMES M. INGLIS, EXECUTIVE DIRECTOR, LIVONIA HOUSING COMMISSION, LIVONIA, MI, AND SENIOR VICE PRESIDENT, NATIONAL ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFICIALS, WASHINGTON, DC
Mr. INGLIS. Good morning, and thank you for the opportunity to testify before the committee, Mr. Chairman and Ranking Member Waters. It is a pleasure to be before the committee. My name is Jim Inglis, and I am Executive Director of the Livonia, Michigan Housing Commission.
The Livonia Housing Commission assists approximately 1,500 families with affordable housing and community development programs. I am here today representing the National Association of Housing Redevelopment Officials, and I currently serve as their Senior Vice President. NAHRO is the oldest housing community development organization in the United States, having over 19,000 members.
There are several concerns I have regarding the HANF proposal which we would like to outline today. First of all, the funding shortfalls. The major concern in this program is that in the out years, the next 5 years, housing assistance payments will be reduced by $1.1 billion to $1.8 billion over the next 5 years. The reason is that the Consumer Price Index rate of inflation and HUD's automatic adjustment factors will not keep up with rents increasing in the Section 8 market. In addition, the administrative fees are proposed to be capped at 10 percent of the housing assistance payments. It is our concern that would represent a 13 percent cut for most housing agencies across the country, thereby reducing their ability to provide needed housing assistance and counseling to Section 8 clients. That would reduce the landlord outreach, housing counseling, and support for local residents.
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What would happen if these funding shortfalls take place in the funding out years is that the States will be faced with several very serious questions. First of all, how would they increase rent burdens or reduce the value of the voucher to make sure they are assisting a sufficient number of families? Two, will they use State revenue to make up that shortfall? I doubt it, given the situation now in most States. Or, three, which is likely the most palatable option for the States, would be to reduce assistance to low- and moderate-income families under the Section 8 program, which these charts provide information on.
The issue of cost containment has always been one Congress has been concerned about, and one thing that should be acknowledged is in the 2003 appropriations bill, we now have a way of making sure we reflect the actual cost of housing and the number of units that are leased in the market based on quarterly information we are providing to the Department of Housing and Urban Development. This has, in fact, eliminated the large recapture issue that Congress was concerned about in the past. So in terms of cost containment, I applaud Congress for that work they did in the appropriations bill to now accurately reflect the cost to administer the program.
There is one other concern we have, relative to grandfathering, if it goes to the States. The States are required to administer the program under the current rules. However, there are provisions within HANF that say if there is insufficient funds to operate the program, there is a loophole for the State to reduce that assistance, which no longer provides a safety net for residents but basically a trapdoor. These residents will no longer be able to receive assistance under the program.
The current Section 8 Housing Choice Voucher program is highly successful, and I think that is one point that needs to be made. The Millennial Housing Commission Report, mandated by Congress, indicates the program is flexible, cost-effective and successful. Housing choice voucher leasing rates have continued to increase. In the year 2000, it was 92 percent, year 2002 it went up to 94, and HUD's own projection is by the year 2004, it will go up to 96 percent, and the charts being put up reflect this. The concern we have is that 96 percent is an excellent utilization rate and leasing rate, and only in Washington does HUD determine that to be insufficient or a failure by the local housing agencies. Again, this is a highly successful rate under the voucher program.
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Basically, the program is already a block grant. It is a block grant to the local unit of government, the lowest local unit of government, which really is the most practical administrative agency within the State. The local unit of government is involved in local planning. They have relationships with landlords, local decision-making, local accountability, they can actually address local issues relative to the market, and so really we have a block grant program that goes to the local unit of government which is most effective.
The under utilization issue is really not an issue. As you can see, since the initiation of QHWRA, leasing rates have continued to go up along with voucher utilization and the number of families being served in the program. Under HANF, we expect these numbers will continue to go down in the future.
Flexibility? The members of the committee have asked about flexibility. We believe HUD has the tools now to provide regulatory relief to smaller agencies. There was an August 2002 interim proposed rule that has not been released by the Department, we encourage them to do that for smaller agencies. Also, complete the project-based voucher rule, which has been recently withdrawn. Timely reallocation of unused vouchers. There are some agencies that can't use vouchers, and if they would timely reallocate those to other agencies, that would greatly assist the program. And, lastly, give us the flexibility to work within a changing market condition, to adjust fair market rents to make the program work.
Again, the biggest recommendation that I have from my agency is we have 752 vouchers, we have a waiting list of 6,000 people, and there is just not enough supply for the demand people have for the Section 8 Housing Choice Voucher program. So I encourage more resources that would go to the local communities to assist in the program.
Thank you very much.
Chairman NEY. I thank the witness for his testimony.
[The prepared statement of James M. Inglis can be found on page 216 in the appendix.]
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Chairman NEY. The next witness.
STATEMENT OF KEVIN MARCHMAN, EXECUTIVE DIRECTOR, NATIONAL ORGANIZATION OF AFRICAN AMERICANS IN HOUSING, WASHINGTON, DC
Mr. MARCHMAN. Chairman Ney, Ranking Member Waters, my name is Kevin Marchman, and I am the Executive Director of the National Organization of African-Americans in Housing.
This morning, we have heard from voucher users, local program administrators, industry leaders, apartment owners, resident leaders. All have said this proposal is not needed and perhaps unwise. All have said improvements need to be made. HUD agrees. I suggest over a year's time that the administration convene a representative group, as they have recently done with this HOPE VI Program, and discuss and suggest needed changes and improvements to the program.
The Section 8 Voucher Program is the bedrock of the Nation's affordable housing program, not the States'. Each administration seeks to make improvements to this program, to make it more flexible, more responsible. Indeed, when I was responsible for the administration of this program, we preliminarily explored the option or the possibility of block granting this program. We rejected it for some of the same reasons you have heard this morning. Again, I believe that HUD is earnest in wanting to improve the Section 8 Voucher Program. I believe the way to do that is to convene a group, perhaps a Secretary's task force, for the improvement of the Section 8 Voucher Program and report back to this committee in a year's time with administrative solutions.
Thank you very much.
Chairman NEY. I thank the gentleman for his testimony.
[The prepared statement of Kevin Marchman can be found on page 239 in the appendix.]
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Chairman NEY. Mr. Molloy.
STATEMENT OF NEIL MOLLOY, EXECUTIVE DIRECTOR, ST. LOUIS COUNTY HOUSING AUTHORITY, ST. LOUIS, MO, APPEARING ON BEHALF OF PUBLIC HOUSING AUTHORITIES DIRECTORS ASSOCIATION (PHADA)
Mr. MOLLOY. Thank you, Mr. Chairman, my name is Neil Molloy. I am the Executive Director of the St. Louis County, Missouri Housing Authority.
Today I am representing the Public Housing Authority Directors Association, PHADA. PHADA represents over 1,900 men and women who serve as the executive directors of America's local housing authorities. We wish to go on record, and I will try not to repeat what everybody else has said, and that will make it a little bit difficult, but first you heard from a former member of this body, Representative Susan Molinari of the Millennial Housing Commission that the Housing Choice Voucher program is a success, and it is the linchpin for low-income families in the private housing market. The second recommendation from the Millennial Housing Commission asked for more funds on an annual basis. That is what is really needed to make the program work.
I want to talk specifically about one of the proposals in HANF. PHADA represents many of the smaller agencies that run programs of 250 units or less in the voucher program. There are some assumptions in this proposal about cost. These programs represent about 7 percent of the total program but they are very critical to the local market in these small towns and rural America. These programs were specifically designed to deal with many problems with senior housing, people who are on fixed incomes, receive small pensions or small Social Security payments. And if the local rural community and that housing authority did not have these vouchers, you would have a terrible housing crisis in these communities. HUD should just deregulate the small housing authorities, stop calling them a burden, because they are not, they are a very valuable asset to the small towns of America.
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As a former member of the Missouri General Assembly, with nine years of service on the Appropriations Committee, I served with Representative Clay, I have a little experience dealing with State bureaucracies and their capacity. In Jefferson City, bureaucrats like to treat legislators like mushrooms, keep them in the dark and feed them lots of manure. I imagine it's the same here. I think this proposal for HANF came out of a mushroom farm in the basement of HUD instead of the tenth floor. But what really scares me about HANF is the absolute chaos it would create in the program. Can you imagine having 50 different policies for a national housing program? This program has developed incrementally over three decades, and it works. It needs some fine-tuning, some minor adjustment, but the program really does work.
In his testimony before this committee, Secretary Liu 15
essentially told you that HUD is going to spend $15 million a year to continue the program, even if they switch it to the States, and they are not going to cut any employees. I think this is just creating a new level of bureaucracy and administration that is not needed, and I think it is a really poor use of taxpayers' money. As previously mentioned, the $100 million to ramp up the States could house almost 16,000 families for a year. That would be, in my opinion, a sin and a shame.
Finally, if the program is a block grant, it States specifically in Section 6(d)(2) that if there is not enough money, the States will have to make their best efforts to fund all the current voucher holders. Well, in my State, Missouri, the General Assembly is meeting today to cut teachers, to cut State employees, to cut social programs, health programs, education programs. They do not have the capacity. What will happen if this grant goes forward, if HANF goes forward, States will use the money like they have used the tobacco money, they will substitute it for declining general revenues whenever they have a problem. Housing is not the first priority in the State of Missouri, and I don't believe it is the first priority in any of the States.
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Finally, HANF will mean a real rent increase for residents. What I am talking about is when you go from adjusted income to gross income to base your rent on and you go from $25 to a minimum of $50, that affects the people who are on the fixed incomes and the very lowest income, and it also affects people who went to work. Because a TANF check or a Social Security check is gross income. A paycheck is not gross income, it's net income. So we are going to set our rents on the gross income, which is unfair to these working families.
Finally, if the program is not broken, please don't break it. When HUD came to you and said, we can't regulate this program, it's too complicated, it reminds me of the old cartoon character Pogo, and his famous words, ''We have met the enemy, and it is us.'' when this body, in 1998, with the former Chairman of the committee, Representative Lazio, passed QHWRA, the preamble it said the purpose of the bill was to deregulate well-run housing authorities. Quite frankly, that has not occurred. It should be the responsibility of this committee to ensure that HUD does that.
We know how to do the programs. If we could make things a little simpler, a little less complicated, the program would work fine, but it definitely needs more appropriations. We have 6,000 vouchers, we are at 102 percent utilization and we have 6,000 people currently on our waiting list. And we only open up our waiting list about every 2-1/2 years to allow people to come on to the list on a lottery system.
So there is a great demand out there, and it is time for us to do something. Thank you.
[The prepared statement of Neil Molloy can be found on page 243 in the appendix.]
Chairman NEY. I want to thank the witnesses.
I am just going to make one statement, and then I will yield to members who will want to ask questions, and we have a time factor here.
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I am torn on this now. At one point in time, I think everybody was running to the Capitol and saying it's broke, the money is being taken back by the Congress, and we have to do something about it. Now, all of a sudden the money is not necessarily brought back through the appropriations process. But that doesn't mean that some things aren't, I don't want to say maybe two broken legs, but maybe a broken arm along the line.
I apologize for having to come in and out, I had two commitments, but I have the testimony, and some of the things I'm interested in hearing are what you think are some problems. I will get away from the word broke, but there are some problems. I think at the end of the day, if individuals, for whatever reasons, the States, suspicion of the States, whether it will work or not, whether a State will opt in, the housing authorities go away and all of a sudden the States say, here, take it back, and now, you recreate it. I can give you a whole bunch of scenarios that are alarming. On the other hand, HUD itself has pointed out that monies were returned, they weren't used. Now, because of an act of Congress they aren't returned, but does that mean the system doesn't need some type of repair?
I hope as this progresses, that advocacy groups, the housing authorities, tenants, the large housing authorities, the small, the medium-sized, the rural, the urban can get together. And if there are admitted problems out there, could come together with some consensus of how those are repaired or fixed. So maybe the patient doesn't need open heart surgery, but maybe you need to do some exploratory. So I understand where you are all coming from, but I hope down the road a lot of ideas can be jelled around to see what happens at the end of the day.
So I appreciate your testimony, and with that, I will defer to the Ranking Member, Ms. Waters.
Ms. WATERS. Thank you very much, Mr. Chairman.
We were just talking about what we could possibly do to offer some alternatives to this block granting. I am opposed to it certainly, but I think as we move to fight this idea, we do have to come up with a few things that we could do.
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Let me just raise these questions. First of all, I think there needs to be more money. I personally would like to see money to help offset the capital cost, particularly small landlords with certain number of units, et cetera. It seems to me that when you have to put on a new roof or do some capital repairs, that perhaps we should try and offset those costs in some way. I don't know.
Someone mentioned here today, the question about the inspections process and some other things. I think we have to keep in mind that we cannot and we should not have slum properties, and we have to make sure that they are inhabitable, they are livable, they are a good environment to raise children and families. Is there anything in this area that you consider unreasonable, that could be changed or that could be looked at in a different way as it relates to the inspection process?
I don't know what is required after each family moves out, what the landlord is required to do. Is that reasonable? Are there complaints of any of the landlords relative to the amounts of monies that they are mandated to spend? I guess that would be for so-called rehab, upkeep, et cetera? Is there any room there for discussion?
Mr. INGLIS. Yes, through the HOME program there is a rental rehabilitation, where they can take low-interest loans to assist in the rehabilitation of the property so we can facilitate working with landlords in that area. We have done a lot of work with our landlords on lead-based paint issues, asbestos issues, and we continue to work with our landlords on local housing inspection ordinance issues. So there are a lot of different programs that we can work with our landlords to mitigate some of the issues relative to housing quality.
I concur, housing quality is the key to the program. We want to make sure we are housing people in safe and affordable housing, but we need to make sure we work with our landlords, we have good partnerships with our landlords. We meet with them on a regular basis to make sure we understand their needs and what we can do for them. And I believe there are Federal programs at our housing agency, because we are a housing and community development program.
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Ms. WATERS. Do cities set aside any CDBG or HOME or any of those monies for the upkeep of any of these properties? I don't even know if that is appropriate.
Mr. INGLIS. I don't think the Department has set aside, but we, as a local agency, in putting together our consolidated plan or our agency plan could do so in making sure that we look at these resources and make some programs available for the local landlords, especially the smaller landlords, as you are concerned with.
Ms. WATERS. Any other thoughts? Thank you.
Ms. HENRIQUEZ. If I might. In Boston, we have been talking with other housing agencies who also administer Section 8 vouchers when we do orientations with our landlords about what is expected, what are the housing quality standards they have to hit, we then array for them programs they might go after if they want to get into the program but need a little help on the capital side. And, in addition, we have been working with the States to try to pilot a program to provide an incentive for particularly smaller landlords to come into the program.
For instance, a repair that needs to be done to a hot water heater. Is that worth a $300 advance? Is there something we can do in the short-term that gets them over the hump to meet the quality inspection they have to do through? So we are looking at those kinds of incentives to help people come into the program who might otherwise be on the fence?
Mr. MOLLOY. Some of the comments from the gentleman from the Multifamily Council about streamlining the process could work. You have to be careful on how it is done. You have to make sure the quality is there in the inspection process.
One of the other problems that comes up, we are a jurisdiction, in St. Louis County, with 93 municipalities, and we have Section 8 vouchers all over the county. A number of the municipalities have local occupancy permits and their own inspection programs. So sometimes it becomes onerous for landlords at that level to go through our inspection and a municipal inspection. And if something is not fixed, and depending on the severity of the item, they have 24 hours to fix emergency items, or up to a further period of time to fix nonemergency items. We could do that.
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I think the Millennial Housing Commission also had some recommendations.
Ms. WATERS. Could we look at memorandums of understanding where you have several jurisdictions that have various laws relative to inspections, upkeep, et cetera, so that if you get memorandums of understanding, one, hopefully ours, HUD could be the lead agency to determine?
Mr. MOLLOY. I think it would be very difficult for HUD to negotiate with the local communities because most of them are very suspicious of HUD for a lot of good reasons. But I believe you could probably do that on a local area. Maybe try to have joint inspection programs, try to coordinate that. But it does become a hassle for the landlords, and we try to speed that process up as much as we can.
Ms. WATERS. Well, that may be an area that we could take a look at.
Let me tell you what my concerns are. With the housing market being what it is, and landlords able to get market rents for their properties, I don't know why many of them are going to want to be in Section 8 at the rate that the market is performing. So I want to do something to give a little bit of an incentive.
So if each of you would think about that and feed that information back to us, I would be very grateful. Thank you.
Chairman NEY. Thank you.
Ms. Velazquez.
Ms. VELAZQUEZ. Thank you, Mr. Chairman. I would like to take this opportunity to welcome my Chairman from the New York City Housing Authority. Mr. Chairman, I am just really amazed to see that here in Congress some people are always advocating about flexibility and local control, but—and they have been good at staying on message. But it seems that on this legislation they lost that page.
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I would like to ask the Chairman of the New York City Housing Authority, were you consulted when this legislation was being put together?
Mr. HERNANDEZ. No.
Ms. VELAZQUEZ. So they didn't consult with any of the people that are running this local authority?
Mr. HERNANDEZ. I always have to check with my staff. I was not personally consulted.
Ms. VELAZQUEZ. But we continually say that you people at the local level, you know best what works and what doesn't work. But when it comes to drafting legislation that supposedly makes the reforms that are needed for Section 8, we do not consult with you.
So let me consult with you, Mr. Chairman. The bill now pending before the committee will limit the fee to 10 percent of an agency's allocation. Can you tell me what uses the city puts to the fee, whether you believe a 10 percent ceiling on the fee is appropriate and whether you favor greater flexibility regarding the use of the fee by the local agency?
Mr. HERNANDEZ. We have been able to use the administrative fee really for a variety of purposes. One is that we have had—since I have been Chairman, one of the things that we have done is that we have put a lot of emphasis on the Section 8 program because we believe it is probably one of the best vehicles to be able to provide housing for low- and moderate-income New Yorkers.
So through the fees, we have been able to do all of the improvements that I have articulated earlier. We were able to—because I thought that it was important to really deal internally to create efficiencies that would—as business practices, pay landlords on time, to be able to facilitate the inspections, we moved to handheld computers so that we would be able to do inspections in a very timely or expeditious basis. We have used that.
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In New York City we have always used administrative fees for other housing purposes. They have been tied to being able to round off a financial package for new developments or substantial rehab so that we would be able to put project-based Section 8 certificates within new housing as a way of expanding affordable housing in New York City.
So we think it is a key component of the program.
Ms. VELAZQUEZ. Would any of the other witnesses like to comment?
Mr. DUNCAN. Briefly, if you cap fees on reserves, all you are going to do is make people spend money that they would not otherwise spend, because they are not going to be able to accumulate funds for some other, greater purpose.
I expect the fees with 85,000 vouchers in New York is considerably more than the fees for 1,200 vouchers in Topeka, Kansas. It is going to take me a little more time to collect those reserves. So capping is really contrary to any type of entrepreneurship that you want to put into the program.
Ms. VELAZQUEZ. Thank you.
Mr. Duncan, in your testimony you said that HUD already has within its existent framework the ability to improve Section 8 through regulatory reform.
Given this, do you believe any legislative changes are necessary at this time?
Mr. DUNCAN. Well, one—in the real world, I am an attorney. One of the things I do is I represent wholesalers, so I am familiar with attempting to try to have business practices that reduce the number of points of contact. I understand HUD's desire to want to limit the number of points of contact that it has when it is dealing with housing authorities that have less than 250 vouchers.
But I don't think the State is the way to do it. I do think Congress should consider, maybe there is a de minimis level of vouchers, which in light of, if you looked at my testimony, I mean, you have got to have a law library to know what the heck to do to run these programs.
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So there may be cooperatives between small housing authorities or contracting with other housing authorities that may be more effective and reduce the number of points of contact. But I suspect that Congress is going to have to set that limitation, whether that is 50, 100 or 249, I don't know.
But when I was on the school board in Topeka, Kansas we had interlocal agreements with other school boards to operate a vo-tech school. We couldn't have done it on our own, but with eight or nine other school boards, we were able to operate a vo-tech school. I think that is something that helps accomplish what HUD wants, reducing points of contact, makes things more efficient and yet keeps us on a local level with knowing local market conditions.
Mr. MOLLOY. Thank you.
In Missouri, one of our local housing authorities has gotten affected by this new rule and the cap on admin fees. They are over the 105 percent level, so they won't earn any fees. They have been saving up money for 25 years. They are planning to use the money to build a homeless shelter in Joplin, Missouri. Then the city would take that area where the old homeless shelter was, redevelop it for economic development, they would have a new shelter, you would have economic development in the city. But this rule that HUD imposed has really sort of put that on hold.
I think if you look at other Federal programs, and when they deal with indirect costs, a lot of Federal programs have indirect costs that are way in excess of 15 percent, and they don't have provisions for recapturing funds or requiring people to administer programs and not get paid for it. I think that provision that was put in the law last year was a mistake. It needs to be repealed.
We have used admin funds to build community centers in communities that have Section 8 tenants and public housing tenants, to provide education programs and sports programs. Housing authorities have used the money wisely. If they don't, there should be a local responsibility, and the appointing authority can appoint a new board and, you know, change the management.
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Chairman NEY. The time has expired.
Mr. Watt.
Mr. WATT. Thank you, Mr. Chairman.
Mr. Marchman, you made my ears perk up when you said that HUD has a working group working on revising HOPE VI.
Mr. MARCHMAN. Yes.
Mr. WATT. That is news to me. I asked the HUD officials about it when they came over to testify, what they were doing to look at HOPE VI. The only thing I was aware of was that the President has recommended terminating HOPE VI.
Tell me what—I know this has nothing to do with Section 8, but do you know something I don't know?
Mr. MARCHMAN. I can't say that. But, I think it is 2 weeks ago or so, the assistant secretary convened a group of individuals to talk about the HOPE VI program and/or alternatives to the program.
It came as a surprise to many, inasmuch as public housing residents weren't invited or participated or were involved in that decision-making; that, in large part, the industry groups did not know. And while I don't speak for a——
Mr. WATT. Who was on the working group?
Mr. MARCHMAN. I can't tell you. I believe that there were individuals representing developers, people representing people in the tax credit markets, people representing, I believe, housing authorities, or at least one.
But, I believe—and as I said, I don't speak for HUD any longer—I think it was their attempt to be responsive to Congress in terms of looking at the HOPE VI program and alternatives to the program.
And my suggestion and my testimony is, a more——
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Mr. WATT. I understood what you were saying. You were saying a working group for Section 8 vouchers would be appropriate too. So maybe they will follow that recommendation since we recommended a working group about 6 months ago for HOPE VI. So maybe they listen to these things.
Mr. Hernandez, one of the things that Mr. Martinez testified—or maybe it wasn't him, whoever came over to testify about this block grant approach on Section 8—was that it was going to give more flexibility to the States to contract with different providers to administer the Section 8 voucher program.
Did I understand you to say that New York City has two different providers, your department and something called Housing Preservation, and you have some Section 8 vouchers and they have some Section 8 vouchers?
Mr. HERNANDEZ. Correct. We have two housing agencies, the New York City Housing Authority, which is my agency, which is an agency that essentially manages all of the property of conventional public housing and, in addition to that, has a Section 8 program of over 85,000 vouchers.
We have another agency, our sister agency, the Department of Housing Preservation and Development, which is really the development arm of New York City. They handle a lot of the affordable housing development and they also have a program, a Section 8 program.
We work collaboratively. The HPD tends to have an approach with Section 8——
Mr. WATT. Well, let me—I just want to be clear on what you said, to clarify. So HUD is now contracting with two separate agencies in New York City?
Mr. HERNANDEZ. Correct.
Mr. WATT. Would there be any value, in your estimation, to—well, first of all, before I get to that, I assume they have some flexibility now to do that; otherwise they wouldn't be able to do that?
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Mr. HERNANDEZ. Sorry? That HUD——
Mr. WATT. That HUD has flexibility to contract with different agencies to administer the Section 8 program now?
Mr. HERNANDEZ. Correct.
Mr. WATT. Would there be value, in your estimation, to having the State come in and have you and Housing Preservation start to bid against each other to run the Section 8 voucher program, so that one agency in New York would do it all?
Mr. HERNANDEZ. Congressman, I would essentially be echoing most of the concerns that have been expressed here already.
It has already been indicated that in New York State, for instance, the State is facing a major budget deficit. The language is uncertain about how the State would formulate this program. We would be concerned that resources could be diverted for other purposes, as well as that Section 8 assistance could be diverted within the State.
Moreover, it is our contention that it is really the locality of the City of New York that has the relationships with the landlords and that understands really the marketing trends within New York City.
Mr. WATT. My time is about up. I want to ask one more question. We have asked two panels now. I haven't heard anybody say they favor this. Even the State housing authority agency organization on the last panel said that they were indifferent about it. I guess they would be the beneficiaries of State administration. And they didn't even advocate.
Is there anybody on this panel who supports this?
Mr. HERNANDEZ. I would say that—as my esteemed colleague indicated, I do believe that HUD may have some legitimate concerns that need to be looked at, points of contact, and the regulatory environment, which I think, by the way, they can reform without this bill.
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Mr. WATT. How do you administer a Section 8 program anywhere without points of contact? I mean, you have got to have points of contact. Someone is going to have to have points of contact with them, either the State has got to have points of contact with them——
Mr. DUNCAN. Congressman, you can streamline the number of points of contact.
Mr. WATT.—as between HUD and the number of points of contact. But somebody down the line is still going to have points of contact; otherwise, you are not going to have any supervision.
Mr. DUNCAN. You would have it. As long as you end up with a cooperative, or somebody who is close to the customer. Let us not forget, it is the customer, the tenant, the working poor, that we need to be most concerned about; start there and work back up the line. And once we do that, then we can have an effective, streamlined process by which to get these funds into place.
Mr. HERNANDEZ. For New York's City's purposes, we have an effective, viable model being the point of contact for HUD in New York City.
Mr. WATT. Thank you.
Mr. MILLER OF CALIFORNIA. [Presiding.] Mr. Davis.
Mr. DAVIS. Thank you, Mr. Chairman. Let me welcome all of you all, and I associate myself with a lot of the comments that frankly all of you have made, and the panel before you.
One of you made the observation that if the program is not broke, don't break it. It appears that this program is joining the long list of Head Start, Medicaid, and several other programs, including HOPE VI, that don't appear to be broken in a lot of ways, but that the administration wants to reexamine.
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Let me focus on one specific problem that some of us are concerned about. It is what is going to happen to the money behind Section 8 if it is block-granted. Most of us have the old experience from our political science classes that when you block-grant a program, that typically the funding does not keep pace with, in this instance, rental costs, for example.
Can any of you address that? What do you expect to be the financial consequences in terms of a lot of States, in that they have this new burden thrust upon them, given the fiscal crisis a lot of States are facing now.
Ms. HENRIQUEZ. If I might, I would like to talk a bit about what happened in Massachusetts. About 20 or so years ago the State of Massachusetts had the foresight, and should be commended for starting its own State-like Section 8 program. And, it is now called, the Mobile Rental Voucher Program.
And at the time, it was keeping pace with the marketplace, vouchers were being used by residents; and over time, as the pressures on the State budget were beginning to catch up and the rental market in Boston, particularly, was heating up, those vouchers then no longer kept pace with their fair market rent.
The State then tried to contain the costs in a number of ways. First, they changed eligibility so that higher-income people could get vouchers, therefore, diminishing the amount of subsidy hit to the State. When that didn't work, because the rental market kept heating up and heating up, the State then decided that they would charge—would increase the percent of one's income one paid for rent from 30 percent to 35 percent.
And so numbers of people were then leaving the program. When that didn't contain costs, they then flatly decided to cap the program, so there was no growth opportunity at all. As real estate prices began to continue to escalate, more and more landlords were opting out of the program because they couldn't get the rents they wanted. Landlords wanted to help, they wanted these stable, ongoing incomes that came in from the program, but they could clearly make more in the marketplace or make more in the Section 8 program.
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My agency went from 604 such vouchers several years ago, now down to just a little over 250 vouchers, or a decrease of 62 percent in the number of families that I can serve under that program.
Massachusetts now faces a projected $3 billion deficit. I hear 38 billion for California, so I think—but it is all relative; it is all local. So 3 billion for us is huge in the State. I am fearful that with block-granting Section 8 to Massachusetts, or to any State having the same sorts of hot real estate markets and deficit spending in their budgets, this program will also then die. It will help less and less people because it will not keep pace.
If I could just add one more thing—I am sorry. Fundamental to all of this is that there has always been historically a commitment on the part of the Federal Government for housing programs, especially to support low- and moderate-income families and individuals. We continue to take a walk from that Federal commitment on a moral and ethical level.
Mr. DAVIS. One of the things that I am hearing from all of you is that there is no significant support in the housing community for this kind of wholesale change in Section 8. A lot of you who work on these programs on the ground say there is no empirical need to make this kind of a wholesale change.
So it would seem fairly clear to me that what the administration is doing in some sense is trying to undercut the attractiveness of the program and trying to really lessen the political commitment to the program.
All of you kind of agree with that, that it is the underlying agenda? Nod your heads to that.
Mr. DUNCAN. I can't read that into it. I would assume that there is some effort to try to streamline and become more efficient and apply some more efficient principles. I think it is misleading, though, to use the term HANF, because it seems to imply something closely akin to TANF, and only 13 percent of my voucher participants are welfare recipients.
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So this is not a welfare program and should not be viewed as such. It is a program to assist working poor, elderly who are on fixed incomes, and SSI persons, and particularly in my community, when we close State hospitals, persons who are mentally challenged that have no place to live.
Mr. DAVIS. Mr. Chairman, if you would indulge me for 30 seconds, I do want to pick up one area and get Mr. Inglis to focus on this.
One of the things that I have noticed with the Section 8 program is that it is disproportionately concentrated in urban areas, and that is a matter of common sense, I suppose, to some extent because of the lack of housing stock in rural areas.
But can you talk for a second about what strategies might exist to increase the rural penetration of Section 8?
Mr. INGLIS. I think the major concern with going to the State is how are the resources going to be allocated in the future? Are they going to get to the rural areas? Are they going to get to the communities where the local housing authority is the main housing provider in the area?
They are the one-stop shopping agency for public housing and for Section 8, and they have a variety of housing tools to address the needs in rural communities.
It is a concern of ours that with this allocation, reallocation of funding, some of the States may play politics with the reallocation, and they may end up going more to urban areas and not to some of the suburban and rural communities that have a high amount of need.
So your point is well taken, in that we are very concerned; especially, we believe that the rural agencies are probably going to suffer most with this proposal.
Mr. DAVIS. Let's assume a current baseline for a minute. Let's say for whatever reason we keep the program exactly as it is. What can be done within the context of the current program to increase the rural penetration?
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Mr. INGLIS. I think the basic thing is getting back to the flexibility, using the tools that were provided by the Quality Housing and Work Responsibility Act of 1998 and implementing those.
Project basing is one. We still do not have a final rule on project basing.
We also do not have a deregulation final rule on small- and medium-sized agencies, which was proposed in August of 2002, and had very strong support by the Department. They reduced the comment period to 30 days because they wanted to get it on the street. It is still not on the street today. So there is no deregulation.
Mr. MILLER OF CALIFORNIA. The time has expired. Thank you.
Mr. Clay.
Mr. CLAY. Thank you, Mr. Chairman. Let me also thank all of the witnesses for being here to help us do our work. I really wish that Secretary Martinez was here; he was here a couple of months ago. And perhaps someone from HUD is here; they can report back as far as the transcripts of this testimony, and let him know that his testimony has been refuted.
He told us a couple of months ago that the reasoning behind turning over Section 8 voucher programs to the States is because of local housing authorities' deficiencies and inefficiencies in administering the programs. He said—claims that now almost half of the States administer Section 8 through vouchers. And so I find this testimony in contrast to his.
Let me ask, Mr. Molloy, who also hails from Missouri and who—we served together in the State legislature in Jefferson City. You made an interesting analogy of mushrooms and politicians. Can you go over that again for me?
Mr. MOLLOY. Well, I think most members of this committee have served in legislative bodies or in local government and have had that experience of a lack of information to make a policy decision.
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And I think this current HUD administration has not been forthright with sharing that information with policymakers on a timely level. You need that information to make the correct decisions.
And I think HUD needs to share that information with this committee.
Mr. CLAY. With both of us having served in Jefferson City, how would you envision this program—this block grant being administered out of Jefferson City, the State capital of Missouri? What agency would get it? How would decisions be made? How do you envision that?
Mr. MOLLOY. Most likely it would be the Missouri Housing Development Commission, which has headquarters in Kansas City. They do the tax credit program.
To give you an example, about 4 or 5 years ago, they administered a Tenant-based Section 8 program. They gave it to local housing authorities, because they weren't doing an adequate job on their lease-up rates.
So they turned the Tenant-based program over to the local housing authorities. I think it would be chaos. I appreciate the competency of our local State housing finance agency, but I still think changing this program from the current Federal model to a State model would be an absolute disaster.
I think we would lose thousands of landlords if they had the prospect of having 50 different sets of rules, particularly the landlords that operate in a multi-State environment. It would just drive them absolutely crazy.
And I think it would also drive the tenants nuts with coming up with a new set of rules, and then having this overlap period of 6 years where you have the existing current voucher program and this new voucher program, having two different sets of rules.
We have gone through that before, when we switched the certificate program to the voucher program. I think everybody on this panel who has a Section 8 staff can tell you the headaches the staff went through during that conversion process.
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Starting up a new program would be a disaster.
Mr. INGLIS. This proposal is what is best for HUD, in terms of administrative ease. That is not what it is about. It is about assisting people and do we want to continue with the Federal commitment of assisting low-income working families and elderly and disabled persons in our country. And this should not be about administrative ease for the Department.
This should be a well-thought-out program that continues to assist low-income people in this country and also looks at assisting more people in the future.
Mr. CLAY. That is a great point.
Mr. DUNCAN. May I comment very briefly? The irony is, HUD is still going to deal with us as a public housing agency. And there has been a lack of consideration about the interrelationship. I may have two lists, one for public housing and one for Section 8, but I am dealing with the same constituency. So I may be able to put them in public housing until they work themselves up the Section 8 line.
It is going to be less productive for the person of economic—who is in economic distress, needing housing, and HUD is still going to deal with us.
Mr. CLAY. Mr. Hernandez, tell us, does New York have a waiting list for Section 8 vouchers?
Mr. HERNANDEZ. About 146,000 people are currently on our waiting list.
Mr. CLAY. How do you envision the State of New York, if they were to get the block grant, how would they alleviate that waiting list through this program?
Mr. HERNANDEZ. I have expressed concerns about that. Part of what New York City does is, through our Section 8 program, we provide a priority preference to homeless families and victims of domestic violence as well as disabled individuals. And in addition to that, as part of our plan to expand affordable housing, we use Section 8 to deal with development of new affordable housing in substantial rehabilitation of buildings, which is part of the Mayor's plan moving forward.
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Mr. CLAY. I thank you all for your answers, and thank you.
Chairman NEY. Ms. Velazquez.
Ms. VELAZQUEZ. I would like for—Mr. Hernandez, for you to expand on your Statement to—your answer to Mr. Clay. The 65,000 units of housing that the City of New York envisioned, how do you think it will be impacted by the block-granting of Section 8?
Mr. HERNANDEZ. The Mayor released a vision of a housing plan to create 65,000 units of affordable housing really by doing two things; one is to preserve housing, the other one is to expand housing throughout the city.
Part of the way that our sister agency, HPD, has done development in the past, and will continue to do it, is by utilizing Section 8 and being able to really round off the economic package to be able to deal with housing.
Moreover they use it for mortgage—to help with mortgage payments. They also help to really do—to do housing for people they move into apartments.
We are working—we have a revolving solicitation right now to offer Section 8 vouchers for anyone that is doing new construction or substantial rehabs as a way of being able to expand our Section 8 pool as well.
So it is an integral part of our plan, moving forward, as we do this.
Ms. VELAZQUEZ. Thank you.
Thank you, Mr. Chairman.
Chairman NEY. [Presiding.] I want to thank you. Any further questions?
I would note that some members may have additional questions for this panel which they may wish to submit in writing. Without objection, the hearing record will remain open for 30 days for members to submit written questions to the witnesses and to place their responses in the record.
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I want to thank both panels for your time and indulgence and your time here in Washington. Thank you.
[Whereupon, at 12:30 p.m., the subcommittee was adjourned.]
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