[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
                DEPARTMENTS  OF  VETERANS  AFFAIRS  AND
                 HOUSING  AND  URBAN  DEVELOPMENT,  AND
                  INDEPENDENT AGENCIES APPROPRIATIONS
                                FOR 1998

=========================================================================

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                              FIRST SESSION
                                ________

            SUBCOMMITTEE ON VA, HUD, AND INDEPENDENT AGENCIES

                    JERRY LEWIS, California, Chairman

TOM DeLAY, Texas                     LOUIS STOKES, Ohio
JAMES T. WALSH, New York             ALAN B. MOLLOHAN, West Virginia
DAVID L. HOBSON, Ohio                MARCY KAPTUR, Ohio
JOE KNOLLENBERG, Michigan            CARRIE P. MEEK, Florida
RODNEY P. FRELINGHUYSEN, New Jersey  DAVID E. PRICE, North Carolina
MARK W. NEUMANN, Wisconsin           
ROGER F. WICKER, Mississippi         

 NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.

  Frank M. Cushing, Paul E. Thomson, Timothy L. Peterson, and  Valerie 
                     L. Baldwin, Staff Assistants
                                ________

                                 PART 6

               DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                              

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
40-907 O                    WASHINGTON : 1997

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             For sale by the U.S. Government Printing Office            
        Superintendent of Documents, Congressional Sales Office,        
                          Washington, DC 20402                          







                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        THOMAS M. FOGLIETTA, Pennsylvania   
HENRY BONILLA, Texas                   ESTEBAN EDWARD TORRES, California   
JOE KNOLLENBERG, Michigan              NITA M. LOWEY, New York             
DAN MILLER, Florida                    JOSE E. SERRANO, New York           
JAY DICKEY, Arkansas                   ROSA L. DeLAURO, Connecticut        
JACK KINGSTON, Georgia                 JAMES P. MORAN, Virginia            
MIKE PARKER, Mississippi               JOHN W. OLVER, Massachusetts        
RODNEY P. FRELINGHUYSEN, New Jersey    ED PASTOR, Arizona                  
ROGER F. WICKER, Mississippi           CARRIE P. MEEK, Florida             
MICHAEL P. FORBES, New York            DAVID E. PRICE, North Carolina      
GEORGE R. NETHERCUTT, Jr., Washington  CHET EDWARDS, Texas                 
MARK W. NEUMANN, Wisconsin             
RANDY ``DUKE'' CUNNINGHAM, California  
TODD TIAHRT, Kansas                    
ZACH WAMP, Tennessee                   
TOM LATHAM, Iowa                       
ANNE M. NORTHUP, Kentucky              
ROBERT B. ADERHOLT, Alabama            

                 James W. Dyer, Clerk and Staff Director









   DEPARTMENTS OF VETERANS AFFAIRS, DEPARTMENT OF HOUSING AND URBAN 
     DEVELOPMENT, AND INDEPENDENT AGENCIES APPROPRIATIONS FOR 1998

                              ----------                              

                                           Tuesday, March 18, 1997.

            U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                               WITNESSES

ANDREW M. CUOMO, SECRETARY
DWIGHT ROBINSON, DEPUTY SECRETARY
MICHAEL STEGMAN, ACTING CHIEF OF STAFF
HAL DeCELL, ASSISTANT SECRETARY FOR CONGRESSIONAL AND INTERGOVERNMENTAL 
    RELATIONS
NICOLAS RETSINAS, ASSISTANT SECRETARY FOR HOUSING--FEDERAL HOUSING 
    COMMISSIONER
KEVIN MARCHMAN, DEPUTY ASSISTANT SECRETARY FOR DISTRESSED AND TROUBLED 
    HOUSING RECOVERY, OFFICE OF PUBLIC AND INDIAN HOUSING
KEVIN CHAVERS, PRESIDENT, GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
HOWARD GLASER, DEPUTY GENERAL COUNSEL FOR POLICY AND PLANNING, OFFICE 
    OF COMMUNITY PLANNING AND DEVELOPMENT
BOB HICKMOTT, COUNSELOR, OFFICE OF GENERAL COUNSEL
SUSAN FORWARD, DEPUTY ASSISTANT SECRETARY FOR ENFORCEMENT AND 
    INVESTIGATIONS, OFFICE OF FAIR HOUSING AND EQUAL OPPORTUNITY
SUSAN GAFFNEY, INSPECTOR GENERAL
MARILYNN DAVIS, ASSISTANT SECRETARY FOR ADMINISTRATION
JOHN KNUBEL, CHIEF FINANCIAL OFFICER
MARK KINSEY, ACTING, DIRECTOR, OFFICE OF FEDERAL HOUSING ENTERPRISE 
    OVERSIGHT
WILLIE GILMORE, ACTING DEPARTMENTAL BUDGET OFFICER, OFFICE OF BUDGET

                  Welcoming Remarks by Chairman Lewis

    Mr. Lewis. If we could have the meeting come to order.
    Ladies and gentlemen, this afternoon it is my pleasure to 
welcome Secretary Andrew Cuomo to his first hearing with the 
VA, HUD, and Independent Agencies Subcommittee as Secretary of 
the Department of Housing and Urban Development.
    As you all know well, Secretary Cuomo is no stranger to 
this subcommittee. He was Assistant Secretary for Community 
Planning and Development under former Secretary Henry Cisneros. 
My colleagues and I are looking forward to substantive 
discussions over the next three days regarding HUD's budget, as 
well as its overall mission.
    Mr. Secretary, as you know, both the Congress and the White 
House have signed on to balancing the budget by the year 2002. 
I have never seen such harmony in both bodies and both parties 
and downtown regarding that subject. There are some 
disagreements, I guess, or misunderstandings, as to how we 
might get there, but in the meantime, we're all in the same 
boat and we'll see.
    Unfortunately, we continue to target the ever-shrinking 
pool of discretionary dollars without emphasizing entitlement 
spending. Of course, that's the major rub.
    I note with some interest and concern that, although we are 
committed to balancing the budget by just after the turn of the 
century, nearly every one of the 20 agencies funded by this 
appropriations bill, with the exception of NASA, has requested 
a funding increase.
    I am not quite sure how we ever reach a balanced budget if 
all of our agencies continue to grow year after year.
    Now, I would add to that, Mr. Secretary, if we're dealing 
with a reasonable world, the fact is that we can look to those 
agencies and commissions and address the question of reducing 
the rates of growth and really get on pretty reasonable targets 
in terms of balancing the budget. So much of our task involves 
looking at those portions of our agency responsibility where 
money has been well spent, and then look at areas where we 
don't judge the money to have been very well spent, and try to 
make some sense out of all that.

                 increase in section 8 renewals request

    Having expressed my concern, one of the biggest challenges 
we face centers around a $6 billion increase in expiring 
Section 8 contract renewals this year, and a $10-15 billion 
increase over the next several years. These renewals are 
driving our budget process this year and pose a very real 
threat to overwhelm the entire HUD budget over the next few 
years, unless we take some very decisive actions in the very 
near future.
    There is plenty of blame to go around as to how we got 
here. The most important task we now face is averting a crisis 
that could force literally millions of people out on the 
streets.
    Let me state very clearly for the record, for all of those 
who would be listening, this Congress is not about to put 
people who currently receive assistance out on the streets. The 
challenge we face has been raised to the highest level of our 
leadership, including Speaker Gingrich, Budget Chairman Kasich, 
Ways and Means Committee Chairman Archer, and Housing 
Subcommittee Chairman Rick Lazio.
    Mr. Secretary, I look forward to your thoughts and ideas 
into how we can all work together to deal with this extremely 
difficult subject area, and just as importantly, how we avoid 
traveling down a similar path in the future.

                       review of hud investments

    Secretary Cuomo, I have shared with my colleagues my firm 
belief that our Americans are willing to invest a portion of 
their tax dollars to assist the less fortunate families in 
meeting their housing needs, as long as this investment is 
spent wisely and shows positive results. I must say that many 
taxpayers across the country continue to question past Housing 
and Urban Development investments. If we don't begin to get a 
handle on future HUD investments, public support will begin to 
erode very quickly.
    With that said, I do believe that HUD's mission is a very 
important one. However, HUD must continue to eliminate or 
change ineffective programs and push for more efficiencies, 
both at headquarters as well as out in the field. With a 
shrinking pool of dollars, HUD must become more creative and 
efficient.
    I think it is safe to say that all of my colleagues, as 
well as our constituents, want to see--well, ``more bang for 
the buck'' is suggested here. NASA, I might mention, has 
already stepped up to the plate. Some would suggest it is now 
the responsibility, as well as the turn, of other agencies, 
including HUD.
    For example, the American taxpayer wants to see a rental 
assistance program that is no more expensive than in the 
conventional marketplace, not artificially inflated above 
market cost. This is but one of many areas where Congress and 
the administration can and should work together to change where 
we have been in the past.
    HUD's annual outlays are about $35 billion. It is this 
taxpayer investment that has made HUD one of the most important 
partners in building a housing infrastructure that is unrivaled 
in the world. However, I believe the American taxpayer expects 
us to do better. Excluding single-family homes that enable 
homeowners to take advantage of tax deductions, there are 
approximately eight million homes that are federally subsidized 
in some fashion. Of that total, HUD has contributed resources 
for at least six million homes. Thirty-four hundred public 
housing authorities own and manage about 5,000 apartments that, 
by and large, are good homes for families. That achievement I 
think we can all take some pride in.
    However, this achievement is diminished by miserable 
failures, of the likes of Robert Taylor Homes and Cabrini Green 
in Chicago, Desire Homes and St. Thomas Homes in New Orleans, 
and Clifton Terrace in Washington, D.C. Also, extravagance in 
HUD's Indian housing programs, illustrated recently in the 
Seattle Times, make it very difficult to argue that taxpayers 
are getting the biggest result for the dollars spent. Over the 
course of the next several days, I do plan to focus in some 
detail on HUD's mismanagement of Indian housing programs.
    It is my strong belief that Congress and the administration 
have a very short time to get a handle on these difficulties. 
We must change existing circumstances, where necessary, and all 
of us should be a part of that. Let me clarify that statement 
just a bit.
    We must expect property owners and tenants to treat these 
federal assets like they were their own. We must confront those 
people head on who take advantage of the system by fraudulently 
diverting taxpayer funds, and who have systematically been--
well, it can be classically demonstrated as ripping off the 
poorest of the poor. I want to expand the role and mission of 
the Inspector General and other federal law enforcement 
partners in this effort. I want to see waste, fraud and abuse 
cases prosecuted to the fullest extent possible under the law.
    Each and every program at HUD must be reformed so that 
those individuals and families intended to benefit do benefit 
in a manner which is accountable to the taxpayers.
    From this point forward, I want every owner, mayor, 
governor, public housing executive director and developer, to 
view HUD's budget as a precious resource and treat it 
accordingly. I don't believe that the Secretary or my 
colleagues want us to reward mismanaged public housing 
authorities, or state and local governments, with more of HUD's 
precious dollars if they're performing poorly. I do not want to 
punish housing providers who are doing a good job by diverting 
HUD's scarce resources away from them to an inadequate housing 
provider. I want to see HUD become totally accountable for 
every taxpayer dollar it spends.

                   importance of housing to americans

    Last week, I concluded a series of housing roundtable 
meetings with a broad mix of housing providers. One of the 
points that was repeated during those roundtables was that 
housing rates dead last on the list of congressional and 
administration priorities. It is time to change that rating if 
we believe that neighborhoods and communities are important to 
the American way of life.
    We must also remember that housing needs aren't just big 
city phenomenon. Housing needs for rural and suburban America 
are every bit as real and important as those in the big cities.
    Mr. Secretary, as you begin your tenure, I am extremely 
interested in learning from you, as well as your senior staff, 
how each and every program administered by HUD benefits those 
families and individuals they were created to serve, whether 
you can quantify those results, and if not, what you need to do 
to move the program in that direction.
    Again, Mr. Secretary, we very much welcome you to this 
committee. Frankly, I am very anxious to work closely with you 
and your positive supportive staff as we move forward down 
these avenues.
    Now, because I know my ranking member, Lou Stokes, has not 
just a long interest in this subject but a great contribution 
to make to this effort, to kind of refocus, it is my privilege 
to call upon Mr. Stokes for any comments he has.

                    Welcoming Remarks by Mr. Stokes

    Mr. Stokes. Thank you, Mr. Chairman.
    Let me just take a moment to join with you in welcoming Mr. 
Andrew Cuomo before our committee, as the new Secretary of HUD. 
He has appeared in this forum on many occasions, but this, of 
course, is his first appearance here in this new capacity. We 
anxiously look forward to his presentation on this occasion.
    I join with you also, Mr. Chairman, in your remarks 
regarding the fact that it is incumbent upon us on this 
subcommittee to scrutinize their budget submission very 
carefully and analyze it in accordance not only with the new 
reforms being proposed, but also from our appropriation budget 
perspective. There are a lot of ongoing issues that I think are 
of importance to the Nation in the housing area today, and much 
of the legislation we passed in the last Congress impacted upon 
the HUD agency. So for that reason, I, too, will be posing some 
questions relative to some of these very specific areas of 
concern.
    It's a pleasure to have you here, Mr. Cuomo, and we look 
forward to your testimony.
    Secretary Cuomo. Thank you.
    Mr. Lewis. Mr. Secretary, before I ask you to begin your 
testimony, have you been to the other body yet?
    Secretary Cuomo. Is there another body? [Laughter.]
    We have begun to have some discussions, yes.
    Mr. Lewis. But in terms of formal meetings, have you given 
public testimony there? I'm just curious. Is this your first 
meeting?
    Secretary Cuomo. We have had an authorizing hearing 
earlier, yes.
    Mr. Lewis. Very good.
    Secretary Cuomo. Focusing on public housing primarily.
    Mr. Lewis. Mr. Secretary, your entire statement will be 
included in the record. You can proceed as you wish, either 
presenting it all or off the top, whatever you want to do, and 
we'll be glad to interpose questions from there.

                   Opening Remarks of Secretary Cuomo

    Secretary Cuomo. Thank you very much, Mr. Chairman. I think 
in the interest of time, and as the official testimony will all 
be submitted, let me give you an overview so we can get on the 
with discussion, which I think is probably the most beneficial 
use of the committee's time.
    Let me first thank you for the warm welcome. It is not my 
first time here, but it is my first time as Secretary of HUD. I 
am looking forward to the same type of productive relationship 
that we've had over the past 4 years when I was the Assistant 
Secretary for Community Planning and Development.
    I am firmly convinced that the way we will get things done 
is by doing them together. It has been the experience in the 
past and I'm sure that's going to be the experience in the 
future.

                  introduction of hud principal staff

    Let me, if I might, Mr. Chairman, also take the opportunity 
to introduce the HUD team who is here today. We're almost full 
strength today, and I know you'll be hearing from them over the 
next few days. But let me introduce them to put some faces with 
the names.
    We have the Deputy Secretary of the Department, Dwight 
Robinson; we have Mike Stegman, who is the Acting Chief of 
Staff; Nic Retsinas, who is the Assistant Secretary for 
Housing--FHA Commissioner; Kevin Marchman, Assistant Secretary 
for Public Housing; KevinChavers, President, is here from 
Ginnie Mae; Susan Forward, Deputy Assistant Secretary for Fair Housing; 
Hal DeCell, Assistant Secretary for Congressional Relations; Susan 
Gaffney, the Inspector General; John Knubel is the CFO; Bob Hickmott is 
Counselor; and Marilyn Davis, Assistant Secretary for Administration, 
is here. I think that's everyone.

                  Introduction of Chairman Livingston

    Mr. Lewis. Mr. Secretary, I might mention that, if you've 
introduced that portion of the team--it is certainly not all of 
it but those that we may be dealing with--the Chairman of the 
full Committee apparently is out in the hall and he wants our 
permission to come in. I have never turned down my Chairman. 
[Laughter.]
    Secretary Cuomo. Neither have I.
    Mr. Stokes. And you're not about to start today.
    Mr. Lewis. I think he might want to say a few words, if we 
could have him do that, and then you can continue with your 
testimony. He has to be at a meeting at 2:30.
    Mr. Chairman, I heard that you might be in the hall.

                     Remarks of Chairman Livingston

    Mr. Livingston. I apologize for disrupting the Committee.
    Mr. Lewis. This is our first meeting with Secretary Cuomo, 
and we're happy to call on you for whatever time you might 
consume, Mr. Livingston.
    Mr. Livingston. Thank you very much, Mr. Chairman.
    Mr. Secretary, welcome. Congratulations again to you. I 
have had a chance to meet you and extend my congratulations in 
the past. You have some difficult issues and we certainly wish 
you well. Under Mr. Lewis' guidance, we will work closely with 
you to try to resolve some of the very tough problems that face 
you.
    I guess, with the members' indulgence, I just would have to 
say that, coming from the city of New Orleans, we have some 
very significant problems down there. I know that you're aware 
of them. I look forward to working with you and with Chairman 
Lewis. He was nice enough to go down there a couple of weeks 
ago and take a look at the problems, significant problems. But 
we can work our way through them. I know he has a lot of good 
ideas, and I know you have some great innovations you would 
like to bring with you to your new job.
    The more we can work with the existing institutions--Tulane 
and Xavier are working to bring some common sense to the whole 
effort. If we can develop those scattered sites and 
rehabilitate old housing that's available in abundance down 
there, I think we can solve that problem, and maybe even set a 
pattern for other cities that have similar problems.
    Mr. Chairman, I really don't have any significant 
questions. I just wanted to thank you and I wanted to take this 
opportunity to extend my best wishes to the Secretary.
    Mr. Lewis. We appreciate your being here, Mr. Chairman. The 
Secretary has indicated he's going to present his full 
testimony for the record, and we have indicated we are happy to 
have him proceed as he wishes, and then we'll go to questions.
    Mr. Livingston. Great.
    Mr. Lewis. Mr. Secretary, proceed.

               balancing the budget with many priorities

    Secretary Cuomo. Thank you very much, Mr. Chairman.
    I think, very much in association with the Chairman's 
opening comments, we at HUD are in the midst of very 
interesting times and pressing challenges, with priorities to 
balance the budget. It's the President's priority and it is a 
priority of this Congress, to balance the budget by the year 
2002.
    The best way is with a working economy that is pulling 
people up, pulling people out of poverty, keeping the interest 
rate debt down, and making home ownership affordable. So 
balancing the budget is no doubt a top priority.
    At the same time there is a priority to balance the budget, 
there are also very pressing needs that it is within the 
Department's purview to address. You still have 600,000 
homeless people who are on the streets. You still have one out 
of five children in poverty this evening. You still have a 
dream of home ownership that is beyond the reach of many 
Americans. You still have people on waiting lists for public 
housing. So I think our challenge is within this balanced 
budget environment, with that as a priority, how do you meet 
the needs of the people we're trying to serve and serve to 
balance the budget.
    I think as the Chairman said, the task is to come up with a 
better, smarter, leaner, more effective HUD. We think we can do 
that. It's not just a question of a smaller HUD. We can 
definitely do that. We can definitely get the place smaller.
    The challenge is smaller and better. I don't think it's the 
intent of this Committee just to see a smaller Department in 
terms of work force or in terms of a budget, but to see a 
Department that is serving the clientele, serving the mission 
better than ever before, with a more efficient and effective 
mechanism. That is our goal.
    We also realize that it's going to be a significant effort 
for us at the Department. We have much work to do. But we have 
already done much work over the past 4 years. I think if we 
keep the productive relationship that we've had in the past, 
and apply that going forward, the future is bright, not just 
for the Department but for its primary recipients.

                           priorities of hud

    If I can, Mr. Chairman, to abbreviate the presentation, we 
have a few charts that I would like to flip through, which will 
give you our sense of what we're doing in the Department, and 
then whatever question you might have, it will be our pleasure 
to respond.
    [Chart Presentation.]
    The priorities we have laid out for the Department----
    Mr. Lewis. In case the members don't know it, you have 
these charts at your table, I believe.
    Secretary Cuomo. The priorities we have laid out for the 
Department, Mr. Chairman, very much echo those that you just 
articulated in your opening statement.
    The first priority is averting the so-called Section 8 
crisis. The second priority is expanding affordable housing 
opportunities--that's doing the main work of the Department, 
the housing work. The third priority is making welfare reform 
work. Although HUD is not directly involved in welfare reform, 
our clients are, and the communities that we serve are. The 
overlap between welfare and HUD's mission is astonishing. And 
the fourth priority is restoring the public's trust.
    Mr. Chairman, much of the testimony that you just gave the 
HUD team is similar to what we've been saying at the Department 
for the past few months.

             averting a section 8 contract renewals crisis

    The first priority is averting the Section 8 crisis. The 
Committee knows the numbers. You're right, Mr. Chairman, we've 
been talking about it for years. However, it is now upon us. 
The issue is ripe.
    We have the 30-year contracts that are coming due; we have 
the 20-year contracts that are coming due; we have 15-year 
contracts coming due; and then we have the 1-year contracts of 
late, and now we have a great wave of renewals which is 
cascading upon the Department at one time.
    In 1998, you see a big spike in the cost and the number of 
units, 1.8 million units which are coming up for renewal just 
in 1998. As the units come up for renewal, the cost goes up. In 
1997, it was $4.5 billion, and in 1998, $10 billion, and then 
it goes up from there, close to $19 billion in the year 2002.
    In terms of the number of Americans affected--we talked 
about 1.8 million units that will expire and the cost to renew. 
About 4.4 million Americans are in the units that are expiring. 
Mr. Chairman, we have lists of expiring contracts that the 
Committee might be interested in. These contracts are literally 
all over the country. There are very few places, very few 
cities, that are immune from this crisis.
    In terms of the budget that we have submitted, there is a 
$5.6 billion increase in budget authority for this year. That 
$5.6 billion, which is a large increase, especially given the 
fiscal constraints we're under, is almost entirely to renew the 
Section 8 expirations. That increase is just to cover the 
Section 8 crisis. The rest of the HUD budget is basically flat 
but for the Section 8 renewals.
    We did not come to this Committee asking for new BA without 
having cleaned our own house first, if you will. The cost of 
renewals is the $5.6 billion, plus $2.4 billion which we have 
accomplished in program and Department savings. So we're not 
asking for the entire cost of renewals. The $5.6 billion 
doesn't represent the entire cost. It's $5.6 billion plus $2.4 
billion, which we are finding in savings.
    The $2.4 billion comes from reduction of subsidies to 
landlords, the so-called ``mark to market'' or portfolio 
reengineering proposals, increasing the number of working 
families to fill vacant units, limiting annual adjustment 
factors, maintaining a $25 minimum rent, reducing 
administrative funds to PHAs, and some other miscellaneous 
savings.

               expanding affordable housing opportunities

    But once we get past the Section 8 problem--and we're 
optimistic and hopeful that we will--the second priority 
becomes the main mission of the Department, which is expanding 
housing opportunities and doing it better than we've ever done 
it before.
    We ask again for 50,000 new housing certificates, 
incremental certificates, to get into that backlog of families 
who qualify for housing and whom we haven't been able to reach 
for too long. To renew the vouchers is important. To renew the 
Section 8 contracts is important. To start to make some 
progress on the people who have been on the lists for years is 
equally important.
    The President is very optimistic that we can have the 
highest home ownership rate in history, and we want to work 
towards that goal. We want to continue our efforts on helping 
the homeless, and as the Chairman mentioned, with an approach 
that recognizes the myriad of problems affecting the homeless 
populations, the mental health problems, substance abuse 
problems, and treating the underlying problem as opposed to 
just the symptom. We are continuing to transform public 
housing, to work with the success of the HOME program, and to 
do all of this in a context that ensures fair housing.

                       making welfare reform work

    The third priority, as I mentioned, is making welfare 
reform work. While we're doing HUD's mission, one of the main 
factors driving the lives of our customers, and driving the 
dynamic of the community, will be welfare reform. We want to be 
a positive synergy with welfare reform.
    The bottom line for welfare reform in many communities will 
be do you have the jobs at the end of welfare reform, period? 
HUD can help by providing economic development activities that 
can go a long way towards providing those jobs. We announced 
the second round of empowerment zones, which is one of the 
President's priorities. We are requesting $25 million for the 
Brownfields initiatives. As the Committee knows, Brownfields 
are a pressing problem for urban areas all across the country, 
large and small. How do we clean up ``dirty sites'' and make 
them potential for redevelopment.
    For the CDBG program, which is one of the mainstays of the 
Department, we ask for the same level of funding as last year. 
We ask for $50 million for the EDI, the Economic Development 
Initiative program; $1.3 billion in the Section 108 loan 
program, which is basically the same as last year; $30 million 
for the Youthbuild program; and $10 million for the Bridges-to-
Work program, which works directly with welfare reform, trying 
to get people to where the jobs are, if the jobs aren't where 
the people are. This program aims at getting people out to the 
suburban communities that more often than not are the locus of 
the jobs. And then 50,000 new housing certificates, which we 
mentioned, will cost about $305 million.

                      restoring the public's trust

    The fourth priority, and once we get past the Section 8 
crisis, Mr. Chairman, is what we will focus most intenselyon, 
which we have already begun to work significantly on, restoring the 
public's trust in the Department.
    I couldn't agree more with the Chairman's comments. I think 
in many ways job one is showing that HUD can perform, HUD can 
perform well, and these programs can work well, that when it 
comes to the public's trust, it is sacrosanct at the 
Department.
    We're going to be working on cracking down on bad 
landlords, cleaning up troubled housing authorities, clearing 
out drugs, gangs and crime from public housing, which is 
through the drug elimination grants, and Operation Safe Home, 
which has been such a big success for the Department, and the 
``one strike and you're out'' policy in public housing.

                    downsizing and integrity at hud

    At the same time, we are very aware of the Committee's 
concern for fiscal integrity and downsizing. We have made 
significant strides over the past 4 years, going from over 
13,000 employees to about 10,400 today. Over the next 4 years, 
we intend to go from 10,400 to 7,500 employees, which means in 
8 years the Department will have gone from over 13,000 to 7,500 
employees, I think the Committee would agree, that is a 
dramatic downsizing. We're trying to do it in the spirit that 
the Committee has suggested.
    But I just don't want to make this a numbers game. If I 
come to you, Mr. Chairman, 4 years from now and said, ``Well, I 
brought the work force down the way I said I would, but I don't 
have a better record of accomplishment and achievement'', I 
don't think I will have done my job as Secretary.
    We are not about a downsizing exercise as an accounting 
exercise. It is a management exercise that says there is waste 
and there is fat that can be cut. Let's come up with a new 
mission for the Department, a new management vision for the 
Department, and then a staffing pattern that fits the vision. 
We're not going about this as a downsizing effort first. We're 
going through it as a revisiting of the mission of the 
Department, what is the vision for HUD, what do we want HUD to 
do, and then, how do we manage the resources to fulfill that 
mission.
    We have the vision of HUD in the year 2000, we are 
developing the policies and programs to implement that vision, 
and then we will come up with staffing and resources to do it. 
We talk about it in terms of downsizing, but actually, it's 
flipped. It's a new vision first and the downsizing is the 
bottom line.
    In just the past few months, Mr. Chairman, we have done 
quite a bit of work towards that regard. Secretary Henry 
Cisneros started us on this road 4 years ago, and we've made 
good progress thus far. We are looking to keep up the pace, if 
not accelerate it.
    Again, Mr. Chairman, we're looking forward to doing all of 
this in concert with the good productive relationship that 
we've had with this Committee in the past, and we're looking to 
keep that going for the future.
    Thank you.
    [The information follows:]

[Pages 11 - 36--The official Committee record contains additional material here.]


               section 8 renewals and tax policy proposal

    Mr. Lewis. Thank you very much, Mr. Secretary.
    For the members present, I have had a discussion with Mr. 
Stokes and with the Secretary as well, that we're going to 
proceed through a number of issues, Section 8 being a very high 
priority, today. We probably will, if you will bear with me, 
put off questions that involve Indian housing until the very 
beginning of our session tomorrow morning. So if you have 
questions in connection with that, I would prefer we take those 
up tomorrow. The Secretary will be with us for a limited period 
of time at that point, but in the meantime we'll proceed with 
other priorities, Mr. Secretary.
    Going right to the crunch of Section 8, the contract 
renewal issue is clearly the most serious funding issue the 
Congress will face this year. It's going to dominate a lot of 
our discussion with members of the Budget Committee, as well as 
play a very significant role in the pressures that are placed 
upon all the other discretionary pools of money available to 
the process that's the Appropriations Committee's work.
    Section 8, in fact, is driving the entire discretionary 
budget. If we're honest, there's no ``silver bullet'' to 
eliminate the problem. Its cost can only be ameliorated.
    Last year the Appropriations Committee, after substantial 
input from the House and Senate housing subcommittees, and non-
Federal partners, including a demonstration aimed at the 
Section 8 project-based contracts that expired in 1997. Though 
I would have preferred a less restrictive demonstration, the 
compromise was the best that we could do.
    Since then, I have devoted a good deal of time studying 
this issue, and I am fairly well convinced that a congressional 
response will be less than adequate if a solution to the tax 
problems the owners of these properties face is not included in 
the final policy.
    Mr. Secretary, I am mentioning that up front because there 
is many a facet to this problem and I'm sure that your people 
have not only worked with the implications of tax policy, the 
impact it had on this marketplace, we're very much interested 
in your staff expertise, working with us as we begin dialogue 
with committees like Ways and Means in the House.
    While I have approached both the Ways and Means Committee 
as well as Chairman Archer, personally, to alert them to the 
need for legislation in this area, they at this point in time 
are highly skeptical. I think maybe many of the professional 
staff are wondering how did we ever possibly get ourselves into 
this box in the first place? And as I indicated in my earlier 
comments, there is enough blame to go around but to say the 
least we are here and the crunch is now.
    It occurs to me that if Congress agrees to deregulatethese 
buildings in a thoughtful manner, reduce the mortgage to a level that 
can be sustained by rent levels appropriate to the individual building, 
underwrite the new mortgage to include the costs of modernization and 
rehabilitation so that the property can attract clients, and eliminate 
the tax consequences of debt forgiveness, all at the expense of the 
taxpayers, that the taxpayers ought to be able to get back in return, 
including a property that this statement says, never--I try not to use 
the word, never, but hopefully--never falls into disrepair without 
serious consequences to the owner and manager, long-term affordability 
for a significant number of families and responsible management.
    These are just a few of the items that taxpayers ought to 
be able to expect for its investment. There may be more. And 
perhaps you have some ideas, Mr. Secretary.
    Would you care to comment first on this general statement 
and do you plan to introduce a proposal that deals with Section 
8 contract renewal issues and will it include a provision to 
address the tax problems?
    Mr. Secretary.

                          tax policy proposals

    Secretary Cuomo. Thank you, Mr. Chairman.
    I, again, could not agree more with the Chairman's 
statement. There is no silver bullet, to use your expression, 
on the renewal problem. Because at one point, as the expression 
goes, it is what it is. The contracts are coming up for renewal 
and if we seek to renew them, which I would urge we do, there 
is going to be a cost associated with it. I would also point 
out to the Chairman the difference between the budget authority 
increase which is significant and the outlay increase which is 
much, much, much less significant.
    The increase in outlays is about $1 billion, while there is 
a very significant jump in budget authority. So, this is a 
budget authority problem we are looking at as opposed to an 
outlay issue.
    Mr. Lewis. If I could interpose there for a second.
    You are absolutely correct but I know that you are 
experienced and wise enough not to fall into that congressional 
trap which says that, you know, talk to me now and pay me 
later. The reality is that when you do extend budget authority 
we absolutely are going to have outlay that is connected with 
that over time.
    And as long as we are dealing with between now and 2002, we 
have got to keep that in mind.
    Secretary Cuomo. No, I could not agree more, Mr. Chairman. 
That is why I did not raise it in my initial comments and saved 
it for the question. So, it is a BA issue, but I understand it 
is nonetheless a very significant issue.
    I also agree that the proposals we have put forth in the 
past both mark-to-market, and portfolio reengineering, without 
a tax fix, so to speak, they were not going to work. The 
Department has learned that lesson. I think the Congress has 
learned that lesson. When we looked at the numbers in 
practicality, how this would work on a building-by-building 
basis without a tax piece of legislation, the numbers do not 
add up.
    We do anticipate putting forth a proposal. We do anticipate 
putting forth a proposal that has a tax fix in it. And, Mr. 
Chairman, your caution I think is well advised. If we are now 
going to offer tax benefits to the owners of these buildings, 
who have had tax benefits in the past--they had the normal 
depreciation on the building, many of these buildings were then 
syndicated which was an additional tax advantage to the owner. 
If Government is now going to offer another tax benefit to the 
owners of the building, we want to make sure that there is 
consideration back and that the American people are buying 
something for this additional tax incentive and that it is a 
transaction that we are all proud of.
    We want to extend the affordability of those units so we 
preserve that housing stock and we can preserve it for a 
significant period of time, 20 years or 15 years, and we do not 
have to revisit this in the immediate future. We will get the 
best management that we can get, be that private management or 
not-for-profit management and let the market work. I do not 
know why we should be wholly wed to project-based. We should 
consider tenant-based vouchers that allows the market to work 
and allows owners to compete for tenants. We should consider 
rehabilitation where we can do it, and a fair bargain and sale. 
Do we need the tax fix? Yes. But we want to make sure that the 
American people are preserving these units and preserving the 
housing at a fair price. And those will be the cluster of 
issues that the proposal we put forward will be addressing.
    But I agree, Mr. Chairman, that we have to address it, and 
the best we can do is change the mark-to-market to bring with 
it a tax piece of legislation and then let us make sure we make 
a good deal for the American people.

              congressional action on tax policy proposal

    Mr. Lewis. I might repeat, Mr. Secretary, that there are 
preliminary discussions at the tax committee level. I have no 
idea what is going on at the other body. But within the House, 
people are scratching their head and looking with some serious 
question as to how we got there. The memory is not very long 
when staff of 10 years ago or 15 years ago did something that 
now is something we are suddenly having to deal with.
    So, it seems to me that at all levels we need to be 
starting now communicating with each other. So, with that, I am 
very interested in having input, before we end up moving our 
bill out of committee, from you as to when you think a proposal 
might be prepared that would come up? I would not expect that 
you would have that answer today but soon we are going to need 
it and your people know the time frame. Do you expect 
Congressional action during this Fiscal Year? I would hope the 
answer to that is, yes.
    If not, do you have any suggestions to improve the 
demonstration that is included in the appropriations measure? 
We are very interested in following--well, let me have you 
respond to those couple of questions.
    Secretary Cuomo. Mr. Chairman, I think sooner rather than 
later. You can expect a proposal from us in the next several 
weeks, if not a piece of legislation. We will defer to the 
Committee and you tell us which is a more prudent course and 
constructive course of conduct for the Department and that is 
the one that we will follow.
    But we will have a proposal and/or a piece of legislation 
in the next several weeks and I would hope that we have a piece 
of legislation at the end of this session that does something 
about this beyond the demonstration because it is not enough.

               washington post article on clifton terrace

    Mr. Lewis. I would agree with that, Mr. Secretary.
    It is very apparent to me though that the various 
committees have not really, at a staff level, been 
communicating and when you have very fine and talented staff 
people who have been used to trying to find solutions 
almostoblivious to this problem it is an indication of just how little 
we have brought other people into the mix. And it is important that all 
of us, the administration, as well as our committee staff, help us 
accelerate and provide some efficiency in connection with that need.
    Mr. Secretary, on October 16 1996, the Washington Post ran 
a story with the headline, ``Misery's New Landlord: In a move 
that symbolizes the failing anti-poverty effort, the U.S. is 
taking over Clifton Terrace.''
    This story reflects that Clifton Terrace, an FHA-insured 
property, that HUD recently assumed ownership where we did, is 
filled with crack dealers, hookers, human waste and toddlers. 
Tenants are charged $1,140 per month to rent a two-bedroom 
apartment where the most recent city inspection turned up 
nearly 1,000 housing code violations.
    The former owner of this property for 13 years was a North 
Carolina multi-millionaire, according to the news article, 
named Rick Marshal.
    He is a partner in 100 other subsidized complexes across 
the country. In the Post story, Marshal called Clifton Terrace, 
``My laboratory'' where he tests his theories about poverty and 
psychology and where, according to him, he ``makes 
unconscionable amounts of money.''
    One of his laboratory tests, about which he speaks quite 
freely, was to study what happens when no security is provided 
in a project infested with criminal elements. Included in that 
laboratory test was $300,000 that HUD provided to him 
specifically for security.
    During the course of the ``experiment'' an elderly 
gentleman was shot in the laundry room by a man stealing 
washing machine tokens.
    After many years of contractual and regulatory violations, 
HUD filed a lawsuit alleging that Marshal and his partners 
improperly pocketed more than $1 million in profit and fees and 
left the complex so unsafe as to present an immediate threat of 
injury. The parties to the lawsuit settled. HUD's rationale for 
settling was to avoid further decay of the building in light of 
Marshal's action to declare bankruptcy and let the property 
disintegrate further.
    I raise this example, Mr. Secretary, because HUD has 
requested $25 million to improve enforcement strategies. I 
applaud this decision especially because Assistant Secretary 
Retsinas allows that there may be other Clifton Terraces in the 
country. However, I am very concerned that the enforcement 
tools HUD suggests have no teeth in them.
    For example, the justification stated that you planned to 
remove bad owners, improve lender and subsidize administrator's 
performance, encourage competition by projects for residents, 
identify, diagnose and resolve troubled properties and train 
asset managers and so forth.
    Frankly, that strategy sounds to me like business as usual. 
While I think you ought be employing these strategies as a 
matter of course, I would suggest, with all due respect, that 
they are not serious enforcement actions, nor will people like 
the Rick Marshals of this world think of them as such.
    So, let me provide a few questions that follow this line.
    Secretary Cuomo. Please.

                 proposed legislation for bad landords

    Mr. Lewis. Have you instituted an audit of the financial 
dealings of every property in which Mr. Marshal has an interest 
to determine potential fraudulent activities?
    Secretary Cuomo. May I make a general comment, Mr. 
Chairman, in response?
    Mr. Lewis. Yes.
    Secretary Cuomo. Mr. Chairman, first, I agree with the 
thrust of the Chairman's comments. The multifamily portfolio is 
a serious challenge at the Department of Housing and Urban 
Development; about 20 percent of the portfolio or about 5,400 
properties are so-called troubled.
    And I agree that the criticism, business as usual, may be 
fair in this regard, Mr. Chairman, and I think you will be 
seeing over the next several weeks a more aggressive strategy 
from the Department on the multifamily portfolio.
    First, we are going to be proposing legislation that 
increases not only the civil sanctions, equity-skimming 
sanctions, civil penalties, but also increases the criminal 
sanctions against the so-called bad landlords. We want to send 
a signal to the landlords in multifamily that HUD is serious. 
It is nothing like business as usual.
    Not only are we going to come after you on a civil side, 
with our auditors, investigators, program people, but we are 
going to come after you on a criminal side and we are going to 
be looking to make the case for U.S. Attorneys across the 
country and we are looking for legislation to do that.
    The second piece we will have in the legislation is we are 
looking to privatize. We want to have a professional asset 
management capacity. We need to privatize the asset management 
function, in my opinion, which is essentially a private sector 
function. We need to contract the function to the people who 
are qualified, who are in the private sector, who run 
multifamily housing and who can go in for us and do the 
inspections and do the audits and turn over to us the problems, 
which we may not have been able to discover ourselves.
    The third piece is we are looking for legislative relief is 
for bankruptcy. All too often the Mr. Marshals of the world run 
into bankruptcy and find protection within that thicket because 
then we wind up with a long lawsuit in bankruptcy court, and 
the building is going down and we are in limbo.
    So, criminal sanctions as part of a new get tough policy, 
privatization of the asset management function and a piece of 
bankruptcy legislation to remove that as an impediment.
    Specifically with Mr. Marshal, I know the Department has 
been very aggressive in investigating him and all the related 
dealings that he has with the Department and I can find out for 
the Chairman. If we do not know now we will know shortly the 
exact status of those investigations and audits.

                    hud actions against rick marshal

    Mr. Lewis. Mr. Secretary, I am very interested in this 
subject because Mr. Marshal was kind of put out in glaring 
highlight because the Washington Post seems to be read around 
here. It is by way of saying that both my colleague, Mr. Stokes 
and I are very interested in working closely with you in an 
effort to make certain that we are putting the highest 
spotlight on those who, in a systematic way, spend their time 
and make a living by ripping off the poorest of the poor.
    That is not what our appropriations should be about and in 
the past, I am just wondering how much a lot of it was about 
that.
    I would be interested in knowing, if you know, has the 
Department instituted disbarment or suspension proceedings 
against, specifically in this case, Mr. Marshal? Or his 
partners based on problems at other properties?
    Secretary Cuomo. Assistant Secretary Nic Retsinas is here, 
Mr. Chairman, and I would refer to him for that specific 
question.
    Mr. Lewis. Sure, come up, Nic.
    Mr. Retsinas. In the case of Mr. Marshal the Department has 
undertaken the full review of his entire portfolio as you asked 
before. We have completed that review and we are now 
instituting proceedings based on the results of that review. I 
do not want to undermine those proceedings, but the 
proceedings, we think, will be responsive to some of the 
conditions that are unacceptable, not at Clifton Terrace, but 
other parts of his portfolio. So that review has been 
undertaken, those proceedings are under way.
    Mr. Lewis. Well, Mr. Secretary, I ask you this by way of 
Mr. Retsinas and others who are your support personnel. Where 
there is the potential of abuse and misuse of Federal dollars 
that are designed for housing purposes, we have other resources 
within the Federal Government who should be exercised. So, it 
has not been the standard pattern in the past, but let me ask 
you for I do expect the answer to be, yes, at least over time 
if it is not now, have you enlisted the support of the FBI to 
investigate Mr. Marshal?
    Mr. Retsinas. We have consulted with the Justice Department 
on the review and, again, I only hesitate to tell you the 
conclusions of the review because I do not want to undermine 
that investigation.
    [The information follows:]

              Investigations of Rick Marshal and Partners

    The review of George S. (Rick) Marshal and his affiliates 
has resulted in proposed debarment, which includes immediate 
suspension from participation in Executive Branch transactions. 
Another letter has been sent requiring him to correct Housing 
Quality Standards violations in a Section 8 property he owns in 
Chicago, which does not have FHA insurance. If he fails to make 
those corrections, it could result in suspension or termination 
of his Section 8 contracts. Debarment would exclude him from 
participation in procurement and non-procurement transactions 
throughout the Executive Branch for a period of 5 years. Other 
on-going investigations may result in discovery of additional 
violations.

    Mr. Lewis. That is fair.
    Mr. Retsinas. But, yes, we have consulted with Justice.
    Mr. Lewis. But you are tapping other resources and 
recognize the breadth of those resources?
    Secretary Cuomo. Well, let me also say, Mr. Chairman--and 
again, I think that the Assistant Secretary's point is that we 
do not want to prejudice an ongoing investigation. The worst 
case scenario would be we would prejudice a case and, 
therefore, we cannot make that case. But, let me say as a 
matter of practice which we are going to begin literally--and I 
think we will have an announcement--in the next few weeks, it 
will be standard practice for the Department to team with other 
Federal departments--especially law enforcement departments--in 
all of these pursuits, not just the ``Mr. Marshals,'' where 
when it gets in the Washington Post, then we act.
    Mr. Lewis. Good.
    Secretary Cuomo. We want to make this a standard practice 
across-the-board. This is a different message. It will not just 
be a program review. It will not just be a HUD employee who 
calls on you. We will do the initial work, audit investigation, 
but if there are discrepancies we will be as aggressive with 
criminal prosecutions and will form the partnerships to do that 
ab initio.

             cost of defaults by rick marshal and partners

    Mr. Lewis. The committee is very much interested in that 
sort of effort. Can you tell me how much HUD has paid out to 
cover the defaults by Mr. Marshal and his partnerships?
    Secretary Cuomo. Would you know?
    Mr. Retsinas. No. I would have to look that up.
    Mr. Lewis. I do have the figures. It is a small figure. If 
it were not money that was supposedly going to the poorest of 
the poor it would not bother me so much. Our record indicates 
it is $28 million.
    Secretary Cuomo. I would disagree with the Chairman, that 
is a small number, with all due respect, that is a lot of 
money.
    Mr. Lewis. That is a lot of money.
    Secretary Cuomo. It is a lot of money.

              reasons for disbarment against rick marshal

    Mr. Lewis. Was Marshal debarred or suspended from 
participation in HUD's programs because of his activities at 
Clifton Terrace?
    Mr. Retsinas. No. In the matter of Clifton Terrace, Mr. 
Chairman, as you indicated, the Department concluded that the 
priority was taking control of that property. The conditions 
were intolerable. As part of the discussion with Mr. Marshal, 
he retreated under the bankruptcy provisions--as you may know 
the bankruptcy provisions put a stay on our regulatory ability.
    [The information follows:]

           Default Payments to Rick Marshal and Partnerships

    HUD has paid $33 million for defaults on 11 projects owned 
by Rick Marshal and partners. This sum includes payments of 
claims on insured loans, and the unpaid balance on the mortgage 
when HUD took a deed in lieu of foreclosure on Clifton Terrace.

    Mr. Lewis. Right.
    Mr. Retsinas. That is why, as Secretary Cuomo indicated, we 
are submitting legislation and we would earnestly seek your 
help with it, that would allow those regulatory 
responsibilities and authorities to continue in spite of the 
bankruptcy proceeding.
    In that particular case, we wanted to take control of the 
property, and we have done so. There are actions now underway, 
including a full security force and all the things you 
referenced.
    Regarding the debarment proceedings, the investigations 
really relate to the full range of the Marshal portfolio. Those 
are the actions we are taking.

         need for legislation to stop abuses in public housing

    Mr. Lewis. The committee will be very interested in 
reviewing with you, across the country, people who fall in this 
category who have systematically seemed to develop a pattern of 
abusing and taking advantage of existing opportunities to abuse 
the existing law.
    We are not interested in creating a gestapo here but, 
indeed, when you are talking about money that is supposed to go 
to the poorest of the poor somewhere you have to draw some 
lines.
    I have a question that says, why exactly are owners and 
management agents able to get away with abusing the program? 
You suggested some things but, clearly, it is long past due 
that we insist that we have a better pattern here.
    I will be interested in some specifics. We are not going to 
get to it today. But precisely what does HUD intend to do to 
stop these abuses? And I do want a report, at least for the 
ranking member and I, in this short time ahead.
    Do you require additional legislative authority to enable 
you to get rid of those people, who I find it difficult to 
describe as other than just plain crooks, before they cripple 
the development, abuse the families that live in these 
developments and rip off the taxpayers of the country?
    Secretary Cuomo. We will need, Mr. Chairman, legislation to 
increase the civil sanctions, to increase the criminal 
sanctions, to allow us to use more private sector expertise in 
managing this portfolio and the bankruptcy protections that 
Assistant Secretary Retsinas talked about.
    Mr. Lewis. Could you give us an indication, very soon maybe 
you can do it now, when you expect that sort of legislation to 
come to Congress?
    Secretary Cuomo. Again, that would be in the next several 
weeks, Mr. Chairman.
    Mr. Lewis. I am abusing my time terribly, Mr. Stokes.
    So, just use what time you might consume.

                 reduction in operating subsidy request

    Mr. Stokes. Thank you, Mr. Chairman.
    Mr. Secretary, according to the budget justifications, the 
request for public housing operating subsidies is 7 percent 
less than the amount HUD calculates is required by its 
performance funding system formula. The largest shortfall is 
only 5 percent projected for the current fiscal year. How do 
public housing authorities make up for these shortfalls in 
federal operating assistance?
    Secretary Cuomo. Mr. Chairman, the PFS is about 93 percent 
this year. It has been in the past as high as 100 percent. It 
has also been less over the past few years. The operating funds 
and the capital funds in this budget are just about flat from 
last year to this year.
    Again, in a perfect world, we would have a higher 
percentage of PFS, we would have more money for operating, more 
money for public housing capital. As I pointed out on the 
Section 8 numbers, to cover the Section 8 renewals, we are 
asking for $5.6 billion additional for the overall HUD budget. 
The rest of the HUD budget stays just about constant and public 
housing is also held about constant in that regard.

              effect of reductions in operating subsidies

    Mr. Stokes. Well, are these public housing authorities 
going to have to cut back on areas such as say, security, 
preventative maintenance, things of that sort?
    Secretary Cuomo. They would have to trim their budgets, Mr. 
Stokes. It would be up to them where they would make the cuts--
whether it is in administrative personnel; or it could 
potentially be in maintenance; or it could potentially be in 
security.
    Mr. Stokes. I guess the reason I am posing this question is 
because I am a little concerned that while at the same time 
that HUD is urging a greater mix in terms of housing, that this 
type of shortfall possibly makes public housing less attractive 
as a place to live.
    Secretary Cuomo. I do not know that the 93 percent is that 
dramatic from the past few years, Congressman. And if it is a 
couple of percentage points one way or the other, it is 
basically in that range. And, again, the budget from last year 
is just about flat, just about constant.
    So, I do not think it is a significant burden on the 
housing authorities this year as opposed to last year. Is it a 
good situation? No. Do we wish we could do better? Certainly. 
But there are budget realities overall, the balanced budget 
priority, as well as the Section 8 increase, which again brings 
us in at an additional $5.6 billion on the bottom line.
    So, it is not that HUD is being shy or bashful about asking 
for additional budget resources--as a matter of fact, I think 
we are being quite aggressive--but the Section 8 problem is 
eating up the majority of them.

           status of reducing backlog of substandard housing

    Mr. Stokes. Where are we today in terms of eliminating 
substandard housing, in terms of let us say, public housing 
modernization, capital improvements, all the kinds of things 
necessary to eliminate the backlog of substandard housing?
    Secretary Cuomo. Again, Congressman, we have consolidated 
over the past few years the modernization funds, the 
development funds into a fund we now call the capital fund and 
there is one capital fund and one operating fund.
    When you put the funds together, consolidate them, the 
funding this year is just about constant with last year.

              effect of welfare reform on housing programs

    Mr. Stokes. Mr. Secretary, in your charts that you utilized 
in your presentation this afternoon, you made reference to 
making welfare reform work. And, of course, as we now look at 
the fact that welfare reform will place additional pressures on 
public housing, as residents lose those benefits and rent 
payments, of course, are reduced, tell us what is going to 
happen there?
    Secretary Cuomo. I wish I could tell you what is going to 
happen with welfare reform. I do not know that anyone can tell 
you that today. We are optimistic that the welfare reform 
initiatives around the country will bring training, will bring 
support services, will be moving people from welfare to work.
    I think HUD can help by creating the jobs at the other end 
of the welfare reform transition, if you will. Many of the 
welfare recipients are in inner-city areas. There is not a lot 
of opportunity there now. There are not a lot of jobs. There is 
not a lot of training. And HUD is working to provide those, 
jobs, training packages, et cetera.
    Public housing is very often the site of residence for many 
welfare recipients, so, we can also work with them through 
housing authorities where they live. The Department will be 
cooperating with the States in implementing welfare reform.
    But how does it all turn out across the country? I do not 
know that we could say at this point.

                 public housing residents and ssi loss

    Mr. Stokes. Along the same line, Mr. Secretary, as you know 
under last year's legislation most legal immigrants will lose 
SSI and a number of children will lose SSI benefits, as well. 
Do you have any estimates of the number of public housing 
residents who will be affected by these and similar changes?
    Secretary Cuomo. Congressman, I would not want to offer 
estimates to the Committee at this time. I have heard estimates 
that cover a very, very broad range from tens of millions of 
dollars in impact to virtually nothing. Some scenarios say it 
could be a positive financial impact.
    It depends on how the welfare reform programs turn out. It 
depends on the States, it depends on the progress, it depends 
on the lack of job opportunities. So, I do not think it prudent 
to give a range of estimates.
    But we are watching it very, very closely. As this welfare 
reform is now implemented in States, we are monitoring it. 
Assistant Secretary Marchman had a seminar at the Department 
just the other week to bring in people to say how is this 
going, and what is the possible impact. So, we will be 
monitoring it as it goes and we will keep the committee 
informed.

                                hope vi

    Mr. Stokes. Mr. Secretary, the HOPE VI to rehabilitate or 
replace the most severely distressed public housing has now 
been under way for several years. What progress has been made 
so far, not just in demolishing unlivable housing but also in 
providing replacements?
    And could you also tell the subcommittee a bit about the 
kind of replacement housing that is under construction or in 
planning? That is, what sort of things are being done to 
develop a public/private partnership and the supplement HOPE VI 
assistance with other sources of government and private 
funding?
    Secretary Cuomo. Yes, Congressman. We have planned about 
100,000 units to be demolished between now and the year 2000. 
We will demolish some of the units that did not work as 
originally planned. As the Chairman said in his opening 
comments, some of the public housing projects were literally 
flawed from inception and doomed by design. There was too much 
density, they were too large.
    And with those units, sometimes the best thing you can do 
is demolish them and about 100,000 units will be demolished 
between now and 2000.
    In their stead, we will be applying the lessons learned 
over the past decades--smaller, less density, mixed income, not 
a lot of poor people in one place, integrated with economic 
development opportunities, building communities as opposed to 
institutions and doing it in concert with other resources, very 
often the low-income housing tax credit program, very often the 
HOME program, and private sector partnerships working with the 
market not against it.
    Those are the hallmarks of the new public housing.
    Mr. Stokes. Mr. Secretary, the housing units that have been 
demolished through the HOPE VI program, can you tell us how 
many have been replaced with new housing and how many have with 
housing vouchers?
    Mr. Stokes. Assistant Secretary Marchman has the numbers, 
the specific numbers for you, Congressman, if I could refer to 
him. In general, the one-for-one concept is being met between 
hard and what we call soft voucher replacement housing. But if 
you would like the specifics, if I could refer to Assistant 
Secretary Marchman or----
    Mr. Stokes. He can provide that for the record.
    [The information follows:]

          Demolition and Replacement of Units Through HOPE VI

    The HOPE VI Program has played a key role in the 
transformation of public housing both by driving the fast pace 
of demolitions across the country and encouraging innovative 
replacement strategies. The fiscal years 1993-1996 HOPE VI 
grantees will account for the demolition of approximately 
35,000 public housing units. Of this number, approximately 
7,600 units have been demolished so far. For the most part, the 
demolished units will be replaced with both ``hard'' and 
``soft'' units. The 1993-1996 grantees will develop 
approximately 18,000 new ``hard'' units; construction has 
already begun on 6,615 units. Of these units, 1,206 have been 
completed to date. An additional 13,400 Section 8 (``soft'') 
replacement units have also been assigned to these grantees for 
a total of 31,400 replacement units.
    While HOPE VI has been a catalyst for the removal of 
thousands of obsolete and distressed public housing units 
across the nation, the Department's goal to demolish 100,000 
units by the year 2000 will also be met in part by hundreds of 
non-HOPE VI housing authorities that have been encouraged to 
eliminate old and dilapidated units from their inventory. As of 
March 31, 1997, 26,300 units have been demolished since fiscal 
year 1993. The attached chart demonstrates the aggregate number 
of units (which includes HOPE VI units) to be torn down and 
replaced across the country between fiscal years 1993 and 2000. 
The chart shows that the Department anticipates replacing 
99,170 of the 100,000 units torn down with a mixture of new 
units and Section 8 certificates for an almost one-for-one 
replacement rate.

[Page 48--The official Committee record contains additional material here.]


    Secretary Cuomo. Okay.

                 displacement of families and vouchers

    Mr. Stokes. Let me just stick with you a little bit because 
I would like to know what efforts are being made to make sure 
that all families, displaced by demolition, have a new place to 
live and whether families receiving vouchers have had 
difficulty finding affordable housing in which to utilize the 
vouchers?
    Secretary Cuomo. Congressman, when we work through this 
process, obviously, any family that is being displaced needs 
new housing, be that a hard replacement public housing unit or 
a housing opportunity through a tenant voucher, it has to be 
one or the other.
    And the tenant program, as the Committee knows, works very 
well across the country. It has an excellent track record, 
works with the market, provides mobility. It is not to say that 
it is a perfect program. I have not come across a perfect 
program. Some of the jurisdictions that have tougher markets 
and less vacancies, the voucher program does not work in those 
situations as expeditiously. In those markets, we work with the 
people who receive vouchers. We counsel them to find available 
units.
    But either a hard unit or a voucher and a placement is the 
goal of any of these developments.

                             troubled phas

    Mr. Stokes. My next question sort of gets to one of the 
concerns that I am sure our Chairman has and that is 
withreference to troubled housing authorities.
    Where are we now in terms of some of the troubled housing 
authorities? Are we making any progress on reducing them or are 
they increasing or where are we?
    Secretary Cuomo. We are making good progress by and large 
on the troubled housing authorities. The number of troubled 
housing authorities, which to begin with, is a very small 
number in relation to the 3,400 public housing authorities that 
exist in the country. When the troubled housing authority 
inventory is high we are talking about in the range of 100 
compared to 3,400.
    So, the number of housing authorities that are actually 
troubled, again, is a small percentage of the overall 
inventory. But even among those, the number has been coming 
down. The Department has used a number of creative mechanisms 
to work with troubled housing authorities. We have some ideas 
on changing the way the Department deals with troubled housing 
authorities to reflect the downsizing that the Department is 
going through.
    In some, with the reduction in the work force that we plan, 
we have to change some of the businesses that we are in and we 
cannot be in the retail business of operating troubled housing 
authorities. In many cases, HUD is very aggressive in stepping 
in and then HUD staff are very helpful and influential in 
actually running the troubled housing authority.
    To accomplish the downsizing that the Committee wants us to 
and that we are hopeful that we can accomplish, we would have 
to get out of the business of running troubled housing 
authorities and we would need an alternative mechanism to do 
that.
    One possibility is giving the troubled housing authority a 
period of time to improve its performance under the so-called 
PHMAP system. If that does not work, we go to a receiver and 
let the receivers work through the management.
    But, by and large, we have had good success with troubled 
housing.

              incremental certificates and welfare reform

    Mr. Stokes. Mr. Secretary, in your budget you are proposing 
to fund 50,000 units of incremental Section 8 housing 
certificates to be used as part of a welfare-to-work 
initiative. Can you tell us a little more about that initiative 
and how it fits into the administration's strategy for 
implementing welfare reform?
    Secretary Cuomo. It would be my pleasure, Congressman.
    We are working very hard just to renew contracts. If we 
accomplish everything we discussed with Section 8 basically, to 
use a term, we break even, we house everyone who is currently 
housed and given the challenges we face even that would be an 
accomplishment. But not to strive to do more than just break 
even, we believe would be a mistake. You have five million 
people who are spending at least 50 percent of their income on 
housing. You have lists across this country for public housing 
that are way too long.
    For the Department to take a posture that says all we are 
trying to do is break even and house those who are housed, we 
do not think is the right goal for the Department. To that end, 
we say we would like to provide 50,000 incremental vouchers 
over and above those people we currently house, which again is 
just a fraction of the eligible population needing housing.
    And again, in keeping with the welfare reform movement, 
housing can be a valuable tool in helping to move a person from 
welfare to work. Often one of the problems in making the 
transition for a family is the location. And what we would like 
to do with the 50,000 welfare-to-work vouchers is to work 
through partnerships with housing authorities and States who 
are implementing welfare reform plans and make these vouchers 
available to them as part of their welfare-to-work strategy.
    So, if they can help move somebody from welfare-to-work by 
offering a voucher that moves them to a location where they can 
get a job, then we would make these vouchers available to those 
types of strategies and those types of partnerships.

                          preservation program

    Mr. Stokes. Now, Mr. Secretary, I note that you are not 
requesting funds to continue the preservation program that was 
funded in the current fiscal year. That program provided 
financial incentive for owners to keep buildings in use as low-
income rental housing rather than exercising their option to 
pre-pay subsidized mortgages and, thereby, avoid continuing 
affordability requirements. Why do you believe this program 
should be discontinued?
    Do you believe that many owners are likely to actually pre-
pay their mortgages without these incentives?
    Secretary Cuomo. Congressman, I do not believe that the 
preservation program is a program without merit. I think there 
is a lot of intelligence to the preservation program. 
Unfortunately, once again, this is a case of tough choices and 
this budget has a lot of tough choices in it.
    Does it make sense to preserve units, to preserve physical 
stock when you can, as opposed to using vouchers? Sure it does. 
But the cost of preservation is a multiple of the cost of a 
voucher. And in times of these tight resources, when we can 
provide a housing opportunity with a voucher at a fraction of 
the cost of preserving a unit, we are recommending using the 
voucher.
    But that is not to say that we do not understand the 
argument that says preserve hard units whenever you can.
    The question is the cost.

                   hud actions against bad landlords

    Mr. Stokes. Last question and then I will defer and yield 
back my time.
    I think everyone recognizes that there are some owners who 
have abused HUD programs, whether Section 8 or the older 
mortgage interest subsidy programs. But what are you doing to 
crack down on the bad owners who fail to maintain their 
buildings or skim off equity that is needed for operations and 
reserves or otherwise fail to live up to their obligations?
    When renewing project-based Section 8 contracts, what 
mechanisms are in place to review the owner's record of 
performance under the contract and avoid renewing those 
contracts that really do not merit renewal?
    Secretary Cuomo. Well, two points to the question, 
Congressman.
    First, on the Section 8 renewals, you would not renew a 
building unless you reviewed the building, you reviewed the 
financials, you reviewed the physical construction and you 
decided you wanted to renew the building. Just as the landlord 
does not have to renew with us, we do not have to renew with 
him or her.
    This is a reevaluation for both parties, owner and 
government. It is also an opportunity to take some of the 
lessons we have learned and bring them now to the housing 
policy that we will literally make for the next millennium.
    But you would do a case-by-case review, literally, of each 
building, each owner, each circumstance, decide if you want to 
renew. If you want to renew, at what cost, what is a fair 
bargain and sale for that transaction.
    As far as bad landlords are concerned, I refer back to the 
conversation with the chairman and Assistant Secretary 
Ritsinas. But I could not agree more, it is a priority for the 
Department.
    Frankly, as the Secretary of the Department I cannot tell 
you how damaging a story like the Clifton Terrace story is, 
because it is used by people to confirm a stereotype that they 
want to believe that too many of the housing programs are rife 
with waste, fraud and abuse and one case justifies an entire 
stereotype that damns the Department, frankly.
    So, we are going to be ferocious on this and, again, most 
of these instances are in the multifamily side, and you will 
see a three-part agenda from the Department literally in the 
next several weeks codified in proposed legislation. Number 
one, increased sanctions, civil and criminal, and criminal, 
which will be a very loud and different signal for this 
Department to send.
    Number two, we want to use private sector management 
expertise. Bring in asset management companies that do this for 
a living with private sector portfolios and do it very well. We 
will utilize their expertise.
    And, thirdly, as Assistant Secretary Retsinas was referring 
to, strip away some of those bankruptcy protections so a 
landlord and owner cannot say to us, in essence, if you come 
after me I will declare bankruptcy and then we will be in a 
judicial tangle for 4 years, 5 years, meanwhile the building 
goes down and HUD has no recourse.
    Mr. Stokes. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Stokes.
    I am going to be calling on members on the order in which 
they came to the committee and always first after Mr. Stokes is 
Mr. Frelinghuysen.

                   rental assistance for the disabled

    Mr. Frelinghuysen. Well, thank you, Mr. Chairman.
    I appreciate your doing that. Mr. Secretary, good 
afternoon.
    Secretary Cuomo. Good afternoon.
    Mr. Frelinghuysen. What a difference a year makes. Last 
year you were sitting over here and now you are sitting front 
and center.
    Secretary Cuomo. I do not know that I would not rather be 
sitting over there though, Mr. Congressman.
    Mr. Frelinghuysen. There is no getting out of it now. 
[Laughter.]
    Mr. Frelinghuysen. Good luck to you.
    Secretary Cuomo. Thank you.
    Mr. Frelinghuysen. As a result of your sitting there last 
year, I am sure you were listening very closely to the 
questions I asked your predecessor. If you were not, I will 
remind you with a few of my own.
    Last year, in a bipartisan effort, the Congress, I may say, 
led by this House and the Chair of this Committee, authorized 
and then appropriated $50 million in Section 8 tenant-based 
rental assistance specifically for people with disabilities.
    The Congress realized that these funds were a step towards 
trying to offset the loss of housing faced by non-elderly 
people with disabilities due to the designation of elderly-only 
public and assisted housing. As you may know, according to the 
report ``Opening Doors: Recommendations For A Federal Housing 
Policy for People With Disabilities'' by the Consortium of 
Citizens With Disabilities Housing Task Force people with 
disabilities will and have lost access to over 273,000 units of 
public and assisted housing between 1993 and the year 2000 due 
to the designation of elderly housing only.
    Already 66 public housing designation plans have been 
turned in to your Department for review and of these, 44 have 
been approved and 12 are pending. Between the 44 already 
approved plans, over 21,000 units of public housing have been 
designated as elderly units.
    My question is, since we have a demonstrated need out 
there, I cannot understand why you, Mr. Secretary, have not 
included in your Fiscal Year 1998 HUD budget this particular 
need that is out there and why there is not included funding 
for Section 8 tenant based rental assistance for people with 
disabilities? There is a big zero in your budget sheet here and 
I am wondering why that situation exists?
    We sort of crossed this bridge last year because there was 
nothing in the budget and the Committee insisted in adding--I 
think it was proper, it was bipartisan--$50 million for this 
critical need. Can you give us the rationale for not including 
this in the budget in this year?
    Secretary Cuomo. Congressman, we are sympathetic, 
obviously, with the need of the disabled population, especially 
in conjunction with what we're trying to do with the elderly 
housing and allowing public housing authorities the option if 
they would like to designate housing for the elderly only. And 
that means you need housing opportunities for the disabled, 
obviously.
    First, we do have the $50 million, as you pointed out that 
the Committee put in. A NOFA is going out for that funding. So 
that is one resource. Number two, the 811 program, which is the 
main source of funding for the disabledcommunity, we propose 
having 25 percent of that funding going to the disabled which would be 
roughly 2,000 units.
    So, we do have provisions for the disabled. Again, would we 
like to do more? Of course, we would. But given the size of the 
pie that we are cutting up we have had to make some tough 
choices. But we have the $50 million, thanks to this Committee, 
which is going out and 25 percent of the 811 request, which is 
about 2,000 units.

                     Certificates for the Disabled

    Mr. Frelinghuysen. Let me just say for the record, and 
correct me if I am wrong, that the 811 program was never 
designed nor intended by Congress to be the sole Federal 
response to the issue of designated housing, most particularly, 
for this important population.
    Where do we stand relative to these certificates? What is 
the timetable here?
    A lot of the organizations that most of our committee 
members are familiar with, you are familiar with, that 
represent people with developmental disabilities, mental 
illness, mental retardation, spinal cord injuries, they are 
wondering where we stand in that process and they want to know 
when the certificates are going to be out and if the public 
housing authorities who administer this assistance, will be 
required to consult with people with disabilities and their 
advocates in determining that allocation; where do we stand 
relative to that process?
    You have said that something is about to happen; where do 
we stand?
    Secretary Cuomo. I would make two points, Congressman.
    First, for the people who would suggest that the 811 is the 
only resource within the Department for people who are 
disabled, I would commend them to look at the HOME program, 
which is a very successful program of the Department, about 
$1.3 billion. The HOME program can be used to house the 
disabled. In the CDBG program, which $4.6 billion--some of that 
can be used too.
    Mr. Frelinghuysen. If the community development money is 
used for housing----
    Secretary Cuomo. If the community makes those decisions. 
But much of what we are doing in the spirit of devolution, is 
we are trying to give local communities control over their own 
communities and their own destiny.
    The Department believes, and I think the Congress shares 
the opinion, that rather than having a lot of Federal dictates, 
mandates, local flexibility, leave it to the local community. 
The HOME program, the CDBG program are designed just in that 
air. CDBG was created in 1974 and has a long track record but 
it was the same intent.
    So, if a community says we have a problem housing the 
disabled--and you are right, we leave it to the local 
community, which I would endorse--but CDBG then is an asset, 
HOME is an asset. Homeless funds, which are about $800 million, 
they could also be a potential resource.
    Mr. Frelinghuysen. They will only be a potential resource 
if, in fact, there is, I think, a combination of leadership 
locally and leadership on your part.
    From my understanding, and I understand because I come out 
of local government, that a lot of the Community Development 
Block Grant is being used to address access issues. The real 
problem is that since--and we are not pitting a battle here, 
you know, we are not pitting the elderly against the non-
elderly or the elderly against people with disabilities--the 
real problem is that unless your Department makes some plans to 
fill this zeroed out portion with a like amount that we put in 
last year, I fear that people with disabilities are going to 
get shut out of the process. They cannot only depend on Section 
811 or the HOME program or the Community Development Block 
Grants.
    I think they need, we need some specific action and 
leadership and I would like to know whether we can see some 
sort of another look at this, coming forward with these 
dollars?
    Mr. Lewis. Would the gentleman yield?

                        NOFA for section 202/811

    Mr. Frelinghuysen. Yes, Mr. Chairman.
    Mr. Lewis. Mr. Secretary, I think what Mr. Frelinghuysen is 
getting to here is that there is a very clear message that we 
want these monies to go out. There seems to be a reality that 
within the Department there are people who really do not have a 
lot to do with this program who are not letting it get out. And 
it may very well require your attention.
    Secretary Cuomo. It is my understanding, Mr. Chairman, that 
the notice will be going out literally in a matter of days. But 
I will check that immediately and if that is not the case, I 
will find out why and it will go out in as short a period of 
time as possible.
    Mr. Frelinghuysen. Is it for the entire amount or it is for 
$25 million or is it for the whole shooting match?
    Secretary Cuomo. It is for $50 million, for the full 
amount, sir.
    Mr. Frelinghuysen. Okay. In addition, Mr. Secretary, where 
is the notice of funding availability for the Section 811 
tenant based rental assistance which was also included in last 
year's appropriations bill?
    Secretary Cuomo. It is in the clearance process which means 
it is in circulation within the Department and it normally 
takes several weeks to complete. We will expedite that also, 
Congressman.
    Mr. Frelinghuysen. So, the timetable is that that will be, 
that notice will be expedited?
    Secretary Cuomo. Yes.

                  Use of CDBG funding for the disabled

    Mr. Frelinghuysen. Would you comment on the general 
utilization of the Community Development Block Grants and 
howthey, if you were to break down the spending to date, let us say in 
the last five years, how have those dollars been directly used for 
individuals with disabilities?
    Secretary Cuomo. I can get either specific numbers or 
estimates of the overall use of the Community Development Block 
Grants funds for the disabled. I do not believe that we would 
have that here this afternoon, but we can find that out.

              Need for additional Section 811/202 funding

    Mr. Frelinghuysen. Are there enough dollars in Section 811 
for programs for people with disabilities?
    Secretary Cuomo. Are there enough funds in the 811 program 
to solve all the needs of all the disabled in the country? No. 
Would I like to see more funding there, Congressman? 
Absolutely.
    [The information follows:]

         Direct Use of CDBG Funds for Persons With Disabilities

    There are three specific activity codes under which 
entitlement grantees report the direct use of CDBG funds to 
benefit persons with disabilities. These are: expenditures for 
centers for the handicapped; expenditures for public services 
for the handicapped; and removal of architectural barriers. 
Dollars reported spent on each of these three activities grew 
over the 1989-1993 5-year period:
    Funds expended for Handicapped Center grew from $7.9 
million to $11.1 million, an increase of 41 percent.
    Funds expended for Services for the Handicapped grew from 
$6.3 million to $9.8 million, an increase of 54 percent.
    Funds expended for Removal of Architectural Barriers grew 
from $15.8 million to $34.2 million, an increase of 138 
percent.
    In general, historical data show that five out of eight 
entitlement communities funded at least one activity providing 
benefit specifically directed to the disabled. Morris County, 
New Jersey, reported seven activities which specifically 
benefited people with disabilities for a total of $97,644.

    Mr. Frelinghuysen. What is the split there now for 811?
    Secretary Cuomo. Overall the split, Congressman, is 3,800 
units for the elderly and 3,100 units for the disabled.
    Mr. Frelinghuysen. Last year, is it true HUD requested $174 
million for Section 811 program and Congress added $20 million 
during the floor debate?
    Secretary Cuomo. Yes, Congressman.
    Mr. Frelinghuysen. Why are we not asking for more? I may be 
asking for a canned answer, but why are we not asking for more 
if we have a serious problem out there?
    Secretary Cuomo. As I said to Congressman Stokes, I would 
like to have more money for public housing, I would like to 
have more money for the homeless, I would like to have more 
money for the HOME program, CDBG, and I definitely would like 
to have more money for the 811. These are all tough choices, 
Congressman, and with that Section 8 crisis squeezing 
everything to begin with, and that means if you do not renew 
that Section 8 contract, you will put people into the streets. 
It makes a bad situation worse.
    Mr. Frelinghuysen. Well, as critical as that is, and think 
we realize that is the major problem facing us. I hope that in 
the final analysis that there will be a real identification on 
your part that people with disabilities need some special 
attention.
    I do not think we necessarily can buck a lot of these 
issues back to local residents. I do feel that specifying a 
certain dollar amount is a fairly good way of assuring that 
people with disabilities get their fair shake and I certainly 
would ask that you reconsider the non-elderly-disabled portion 
on Appendix B of your budget submission.
    Thank you.
    Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Frelinghuysen.
    Mr. Price.

               Disaster Relief Funding For North Carolina

    Mr. Price. Thank you, Mr. Chairman.
    I would like to add my thanks, Mr. Secretary, my 
congratulations and welcome to the subcommittee.
    Secretary Cuomo. Thank you, Congressman.
    Mr. Price. As probably will not surprise you, given that I 
come from central North Carolina, I would like to begin with 
some questions about disaster relief. Hurricane Fran devastated 
a large portion of North Carolina more than six months ago and 
there is still a lot of repair work to be done. Tarps still 
serve as roofs, sewer systems are still destroyed, much in the 
way of damage mitigation is still to be done.
    Mr. Secretary, I think you are familiar, or I know at least 
some of your staff are familiar, with the work of the North 
Carolina Disaster Recovery Task Force which Lt. Governor Dennis 
Wicker chaired. The report, included a set of recommendations 
for action issued on February 14th.
    One of the reasons for the report was to outline the unmet 
needs that still exist and that still need to be addressed. The 
report details a number of projects which would be appropriate 
for Community Development Block Grant funding.
    One of the things I would like to explore with you today is 
what is the possibility for that sort of funding through some 
kind of supplemental appropriation or otherwise?
    I assume you would agree that this kind of funding is the 
standard source of funding for disaster relief in a state 
ravaged by a natural disaster such as Hurricane Fran.
    What can you tell us about requests that you have pending 
for Community Development Block Grant funding in the Bosnia 
supplemental appropriations bill or any other request that 
would or could be applied to the remaining work in North 
Carolina? What is the status of those requests and what can you 
tell us about them?
    Secretary Cuomo. Congressman, the Acting Chief of Staff of 
the Department, Mike Stegman is from North Carolina and he has 
been----
    Mr. Price. I am well aware of that. [Laughter.]
    And we are happy to have him here with us today.
    Secretary Cuomo. He has been heading up the Department's 
efforts in response to the North Carolina disaster and I would 
ask him to respond to the question if it is okay with you, Mr. 
Congressman?
    Mr. Price. Fine.
    Mr. Stegman. Congressman, as you know, the Secretary 
granted a number of waivers to the State and the local 
communities that experienced damage in the hurricane last year 
and waived the local match requirements under the HOME program.
    One of the problems we had with the supplemental last 
yearand in trying to develop justifications for a community development 
part of a supplemental that may come forward this year dealing with 
storm, hurricane, flood damage, is that we have yet to receive on a 
project-by-project basis in North Carolina estimates of costs that are 
not covered by FEMA and that are not really included as local match for 
FEMA funds. That is to say, the Administration will not permit CDBG 
supplemental funds to be used to pay the State or local matching share 
of FEMA.
    So, what we need in order to make a case is damage 
estimates on a project basis that goes above and beyond that 
which FEMA pays for and above and beyond the local cost share 
that the State may come up for FEMA funds. Quite frankly, we 
have not yet received the kind of detailed cost estimates that 
would allow us to make a case for a CDBG supplemental. That has 
really been the case.
    We have damage estimates and so on, but it is not above and 
beyond that which is covered by and coverable by FEMA. It takes 
a long time for communities and the State to really aggregate 
those kinds of uncovered cost estimates so that they can be 
appraised for eligibility for CDBG.
    Mr. Price. Well, you are aware of the extensive work that 
has gone into this Disaster Recovery Task Force?
    Mr. Stegman. Absolutely.
    Mr. Price. And those estimates seem plausible to you? What 
kind of further work needs to be done?
    Mr. Stegman. Well, it is not a question of plausible. The 
estimates are real, but the question of whether or not and how 
much of them ultimately are coverable by FEMA is still yet to 
be determined. Two weeks ago I was looking with our staff at 
the estimates that were coming in and it is a matter of when 
they come in and timing and when there may be any kind of work 
to put together a supplemental. But as of now, we have not 
gotten costs that allowed us to get approval by OMB for a CDBG 
component to any supplemental that might come up.
    It is based on damage estimates that are not verifiable on 
a project basis that show above and beyond local costs shares 
for the FEMA funds. I mean it is as simple as that.
    Mr. Price. Well, will you be recommending that there be a 
CDBG component in whatever supplemental comes forward with 
respect to disaster assistance in general?
    Mr. Stegman. In conversations with OMB, we put together as 
good a case as we could for a CDBG component to a disaster 
supplemental. In the past Act we were turned down based on lack 
of verifiable costs, unreimbursed cost estimates above and 
beyond that which the State must contribute to the FEMA costs.
    Mr. Price. That applies to North Carolina and to other 
States?
    Mr. Stegman. The big focus on this, quite frankly, was 
Hurricane Fran, the rest of the flood damage and so on was 
largely not CDBG related in terms of what the components of the 
supplemental was. I mean most of what we were looking at was 
North Carolina for the CDBG component of the supplemental.
    And, so as of now there is no CDBG component.
    Mr. Price. We will want to follow-up with you to determine 
what----
    Mr. Stegman. Sure. I would be more than happy to in your 
office.

                  status of 1997 funding for disasters

    Mr. Price [continuing]. Further documentation is needed. 
North Carolina has been steadily working on making their case 
and I am sure they want to continue to do that.
    Back to your reference a moment ago about last year's 
supplemental request. I am puzzled about that and maybe you can 
clarify it. In your budget justification for Fiscal Year 1998, 
in the section referring to Community Development Block Grants 
there is a listing of $100 million appropriated for Fiscal Year 
1997 under disaster assistance.
    There is this footnote which says that funds requested in 
September of 1996 for assistance in the aftermath of Hurricanes 
Fran and Hortense were not enacted by the Congress. And what is 
the status of that $100 million?
    Mr. Stegman. It was not enacted. The $100 million for CDBG 
as part of the supplemental was not enacted.
    Mr. Price. So, you do not----
    Mr. Stegman. Again, based on just what I said before, if 
you think about that we still do not have the kind of 
documentation that OMB requires, we certainly did not have it 
in October and when that initial supplemental was being debated 
in the Congress and enacted. So, we were not successful in 
getting a CDBG component to that one either, although we 
requested it.
    Mr. Lewis. Mr. Price, would you yield?
    Mr. Price. Certainly.
    Mr. Lewis. It is my understanding that there is an effort 
going on for a supplemental next month in April. I certainly 
hope the work would be done so that this package would be a 
part of that.
    Mr. Stegman. It is. That is right. I am looking at the cost 
estimates that we have received in the last couple of weeks for 
the supplemental that the Chairman is talking about in April. 
We have not been successful in getting approval from OMB for a 
CDBG part at this point, based on that. I will be glad to 
follow-up with your office.
    Mr. Price. All right, but just to clarify this $100 million 
from 1997, that budget authority does not exist, you are 
saying?
    Mr. Stegman. The $100 million was not approved by the 
Congress.
    Mr. Price. Why is it listed in the budget estimate in this 
document?
    Mr. Stegman. If I might see that?
    We were fighting for the $100 million and we did not get it 
approved.
    Mr. Lewis. Which is a guesstimate.
    Mr. Stegman. It was an estimate. We were requesting it.
    Mr. Price. Requesting it a year ago and it was never 
approved so this money is not available?
    Mr. Stegman. That is correct.
    Mr. Price. This money is not available for disaster 
assistance?
    Mr. Stegman. That is correct.
    Secretary Cuomo. Congressman, if the Department can be of 
assistance in working with the State or the communities to 
assess the community development need in any way it would be 
our pleasure. As Chief of Staff Stegman said if we can do it in 
Washington and have meetings that would be helpful, it would be 
our pleasure. If it would be helpful to the Congressman to send 
the appropriate personnel on-site that would also be our 
pleasure.
    Mr. Price. Good. Well, I know there has been a cooperative 
relationship over the life of this task force. There is a 
detailed report in there on the remaining needs andthe extent 
to which they would appear to be eligible for CDBG funding. We do need 
to know what further work is necessary in order to fully justify the 
request and we will gladly follow-up with you on that.
    Secretary Cuomo. It would be our pleasure, sir.
    Mr. Price. Thank you.
    Mr. Lewis. I am going to call on members in the following 
order in which they came to the committee. It is a difficult 
thing for we traditionally kind of go back and forth but in the 
meantime there have been members waiting for considerable 
lengths of time.
    Mr. Wicker, Mr. Walsh and Mr. Knollenberg and Mrs. Meek.
    Mr. Wicker?

                ig report on rental assistance payments

    Mr. Wicker. Thank you, Mr. Chairman.
    Mr. Secretary, let me begin by referring to a semi-annual 
report by the HUD IG issued last year for the second half of 
Fiscal Year 1996, concerning rental assistance payments. The 
report says HUD currently spends more than $18 billion annually 
in rent subsidies to assist 4.4 million low-income households. 
A study by HUD's chief financial officer estimated 1995 excess 
rental payments at $839 million.
    Now, I understand that this term, excess rental payments, 
to mean payments which were made to people who were in excess 
of the amount to which they should have been entitled. But the 
report of the IG goes on to say that this estimate is based 
only on under-reporting of income from reported income sources.
    And that it did not even attempt to identify income from 
sources that were not disclosed at all. In other words, only a 
part of the non-disclosed income was taken into account. I 
wonder if you could comment on that? The CFO apparently, 
according to the IG report, believes that this represents an 
acceptable level of risk and I quote the exact language of the 
IG. I wonder if you could comment on that and if we have plans 
to include all of the types of undisclosed income rather than 
only part?
    Secretary Cuomo. Congressman, it would be my pleasure. 
Acceptable level of risk, my supposition is that is an 
accounting term or a management term that when you are dealing 
with budgets in the range of $9 billion or more that there is a 
level of ineffectiveness that I would suppose is to be 
expected.
    But maybe the CFO could speak to that terminology. Let me 
say this, though. Whatever the accounting or management 
expectations are, our hope and our goal and our expectation is 
to run as efficient and as effective an organization as 
possible on all levels. And that is not just for HUD Central, 
the Department of Housing and Urban Development, but also for 
its agents such as local public housing authorities.
    We have been working with them over the past few years to 
come up with the best mechanisms that we can verify income 
which is the situation that you refer to. Right now, local 
public housing authorities are charged with the responsibility 
of reporting the income of the tenants. And basically the way 
it works is a local public housing authority will have the 
tenant certify as to what their income is.
    One of the areas that the Department has been pursuing is 
how can we verify that income as it is represented by the 
tenant? That has posed a number of challenges. I know 
Congressman Knollenberg is familiar with some of them on the 
so-called income verification. We have been working with the 
Internal Revenue Service, for example, to see if we could get 
access to certain information that would allow us to verify the 
income of the tenants. That has raised certain privacy issues 
that we are trying to work through or around.
    But, in general, it is the responsibility of the local 
public housing authority to verify the income. The tenant 
certifies to the income and we are looking for additional 
information sources that would help us help the PHA to verify 
the income. And hopefully, over the next few months, we will 
have an even better system.
    Mr. Wicker. Well, I wonder though why an attempt would not 
be made to even discover a whole area of undisclosed income? Do 
you understand the distinction that I am making in this 
question? There is under-reporting of disclosed income. And 
then there is just not disclosing whole sources. And the IG----
    Secretary Cuomo. Yes. I do not see the distinction, 
Congressman, from a practical sense.

                        irs and income matching

    Mr. Wicker. I wonder if you could check on that and get 
back to me and the committee?
    Secretary Cuomo. Yes. Well, we have the IG here and the 
CFO. The CFO is John Knubel.
    Mr. Knubel. Congressman, I would add that since that 
estimate was made, we have embarked on a program of exchanging 
and comparing income information that is given to the Social 
Security Administration and as well with the IRS. Now, there 
are some legal problems with using the data that we get from 
the IRS and we are addressing those. We found that as a result 
of the comparisons with the data that we get from the Social 
Security Administration, our current revised estimate is that 
the number that you just quoted is between $400 and $700 
million with a 95 percent level of confidence. As a result, it 
is between 2 and 4 percent of this year's $19 billion figure. 
This is comparable to other means tested programs in 
Government.
    So, when I said, ``acceptable level of risk,'' I did not 
mean that we are not working to decrease it, and that we are 
not taking advantage of new opportunities to share data as they 
become available from other sources, to us legally, but that we 
have a number that is roughly comparable to the ``state-of-the-
art'' in dealing with this problem in other departments, such 
as Agriculture. I could name many others. If you would like we 
could follow-up with a written statement.
    [The statement of Mr. Knubel follows:]

[Page 62--The official Committee record contains additional material here.]


    Mr. Wicker. I would appreciate that.
    And I would just be interested if you included all 
undisclosed income what your estimate would be?
    Secretary Cuomo. If I could, Congressman, possibly clarify 
the question. We want to verify the income regardless of the 
source of the income. The best information that we can get to 
verify that income is what we want to avail ourselves of and 
the local public housing authority.
    We do not make any distinction between sources of income. 
Any income source that we can find is what we want to verify.
    Mr. Knubel. Absolutely. Of course, we are limited in not 
being able to access other sources of income or to distribute 
them and verify them. Except for Federal sources. And we are 
working on this issue with the IRS and others. That would be a 
major breakthrough but there are legal inhibitors to that but 
we are working on it.
    Mr. Wicker. Let us know what the Congress can do to assist 
you in that.

               implementation plan for trigger mechanisms

    Let me ask you about the President's long-term budget, Mr. 
Secretary, and the trigger mechanisms that will take effect if 
the balance is not reached by the year 2002.
    As you know, CBO has estimated the President's budget will 
have a $65 billion deficit by the year 2002. And if there is a 
$65 billion deficit CBO estimates that HUD wouldneed to reduce 
spending by 4 percent across-the-board. I know that administration 
disagrees with CBO's estimate on scoring the President's budget but, 
nevertheless, if the trigger mechanisms come into play, how will they 
affect you and, at this point, do you have a plan for implementing the 
trigger mechanisms? It would seem to me that you are not going to be 
able to cut across-the-board every program. Like, for example, Section 
8 housing contracts, you will not be able to cut them in the year 2002.
    Secretary Cuomo. Congressman, first of all, as you 
mentioned, we do have a disagreement about whether or not the 
President's budget is balanced. I am aware of the CBO 
discrepancy. But is there is a disagreement and have we planned 
for the shortfall as described by CBO? No.
    But let me say this, if HUD had to take a cut and I agree 
with the Congressman that certain things would be ``preserved'' 
not to displace people, such a cut would be very, very tough 
for HUD to take. I mean the discussion we have had on 811. Do 
you cut 811 further? Do you cut public housing further as 
Congressman Stokes was pointing out?
    So, these would be very, very tough decisions especially if 
you made the decision not to displace people and put them on 
the streets which I would agree would be a wise one.

                             1996 carryover

    Mr. Wicker. Okay. We had a discussion earlier between you 
and the chairman about budget authority. I am told that at the 
end of last year HUD found $1.6 billion in extra budget 
authority. And that the Department is carrying that amount over 
to Fiscal Year 1998. Can you elaborate on how this came about?
    Secretary Cuomo. Through better management, more efficient 
financial systems, we allow public housing authorities a 6-
month operating reserve for budget purposes. And the Department 
has become much more diligent about checking those accounts, 
checking the financial resources, checking to make sure local 
public housing authorities are in compliance with the 
regulations. Through those efforts, we found $1.6 billion in 
extra reserves that we carried over to this year.
    Mr. Wicker. So you have a policy of allowing the public 
housing authority to carry up to how much reserves?
    Secretary Cuomo. Six months operating reserve.
    Mr. Wicker. And do you have any figures on to what extent 
that is practiced? Do most of them do so?
    Secretary Cuomo. Most of them do so, yes, Congressman.
    Mr. Wicker. Thank you, Mr. Chairman.
    Mr. Lewis. Thank you, Mr. Wicker. I might mention that the 
Secretary is correct in his comments regarding administrative 
efficiencies, that the availability of more computer capacity 
has allowed for a search. That has allowed them in turn to find 
some of these reserves that just were not readily apparent. 
They are continuing that scrub, by the way, so your question is 
very appropriate in terms of follow-on.
    I just mention for the members who are interested that we 
are encouraging a no part because we know we are going to need 
every bit of authority we can find as we look ahead in the very 
difficult months ahead.
    Mr. Walsh.
    Mr. Walsh. Thank you, Mr. Chairman. I would just like to 
welcome the Secretary to this subcommittee again.
    Secretary Cuomo. Thank you, Congressman.
    Mr. Walsh. And as a New Yorker, we are all very pleased and 
have high expectations, and wish you all the best in your new 
capacity.
    Secretary Cuomo. Thank you very much.

                      cost of section 8 contracts

    Mr. Walsh. You are welcome. I have a Congressional 
Quarterly article here that estimates that the cost of 
fulfilling these Section 8 contracts in 1998 is $9.2 billion in 
budget authority.
    Secretary Cuomo. That is basically our estimate.
    Mr. Walsh. And you have proposed some savings that can be 
garnered, $2.4 billion?
    Secretary Cuomo. Yes, Congressman.
    Mr. Walsh. Which would provide $2.4 billion towards that 
$9.2 billion requirement under Section 8? Is that what you are 
proposing?
    Secretary Cuomo. The $2.4 billion would be savings. With 
$5.6 billion additional, that would cover the cost of renewal.
    Mr. Walsh. So with the 2.4 and the 5.6, you come up with 
what you need for Section 8?
    Secretary Cuomo. Yes.

                   public housing reform bill--h.r. 2

    Mr. Walsh. Now, just an opportunity for you to comment 
generally. Another one of our fellow New Yorkers, Congressman 
Lazio, has proposed a fairly all-encompassing measure, H.R. 2, 
aimed at overhauling the nation's public housing system. I just 
wondered if you would care to comment on that pending 
legislation.
    Secretary Cuomo. We had a hearing on it several weeks ago, 
Congressman, and I think that the thrust of Chairman Lazio's 
legislation is productive. A lot of it are things that we are 
now doing, that this Committee has continued from year to year, 
and public housing authorities have relied on. To have that now 
authorized I think would bring a sense of security to the 
industry, so they would know that some of these changes, which 
are major changes, will be around for a while and not only 
considered on a year-to-year basis. And I think many of the 
directions in Chairman Lazio's legislation are correct, and we 
support it.
    We also have differences with some of the aspects of the 
legislation, the Brooke amendment, the income targeting, 
etcetera, but I believe we agree on the thrust of the 
legislation. Many of the specifics we agree on. Those specifics 
where there are differences, I believe they will be overcome, 
and I think we will have a piece of legislation that the 
Administration can support.
    Mr. Walsh. Is there anything in that legislation that deals 
specifically with the Section 8 housing shortfall?
    Mr. Lewis. Good question.
    Secretary Cuomo. That is not the purpose of the public 
housing legislation. We would need a different piece of 
legislation to solve the so-called mark-to-market or portfolio 
reengineering problem legislation to get the kind of changes 
need.
    Mr. Walsh. So while he has proposed authorizing legislation 
to do an overhaul of the existing system, there really is not 
anything specifically targeted at your main problem which you 
identified early on as Section 8?
    Secretary Cuomo. Yes, that is correct. Do not get me wrong, 
Congressman. The reforms in the public housing are very 
important to the department, also, and will do a lot of good 
work in that public housing legislation. But does it solve the 
Section 8 problem? No.

                        portfolio re-engineering

    Mr. Walsh. This mark-to-market reform that you have talked 
about, this portfolio reengineering, could you give us sort of 
a sketch of how that will work? You look at otherexisting 
properties' comparative values and try to assess whether you are paying 
too much or not enough?
    Secretary Cuomo. In a nutshell, Congressman, you would look 
at the particular building that is expiring, where the contract 
is expiring. The owner would have to decide whether or not they 
want to continue the relationship with Government. Government 
would have to decide whether or not it wants to continue the 
relationship with the owner. Then you would have to come to 
fair terms.
    The Government is paying rents which are in excess of the 
fair-market rents. We want to get the rents down to where they 
are fair to the market place. In many cases, to do that we have 
to reduce the mortgage which is an FHA insured mortgage.
    Mr. Walsh. Is the government ever a mortgage holder in that 
case, first or second mortgage?
    Secretary Cuomo. Well, with FHA you are essentially 
responsible. You insure the loan. There is a private lending 
institution which made the loan, but you in essence hold the 
mortgage. And you are paying the rent. So you are paying out of 
both pockets. If you want to adjust the rent, you have to 
adjust the mortgage, and you have to keep the two in balance. 
The rent has to go to pay the mortgage and the operating and 
other costs, bona fide costs of the building.
    You would have to do that renegotiation for the monthly 
rent and the cost of the mortgage. The reduction in the 
mortgage would be an expense to the FHA fund. The reduction in 
the mortgage also causes a taxable consequence to the owner, 
and that is what the chairman was referring to when he said we 
need a piece of tax legislation. Because what the owners are 
saying is, ``I cannot do that renegotiation and have the 
mortgage reduced, because it is a very significant tax 
consequence when you reduce the mortgage. And unless you can 
help me with that tax consequence, the numbers do not work.''
    We are saying then, in exchange, we will do that, the 
Administration will support a tax legislation, tax fix, but 
what then will the owner do in reciprocity for that tax fix?
    Mr. Walsh. It is a fairly complex process. You have 
estimated $1.3 billion in savings. How did you arrive at that 
figure?
    Secretary Cuomo. When you consider the savings from the 
Section 8 rent, the cost to the FHA fund, and the number of 
buildings that would come in----
    Mr. Walsh. How did you estimate the Section 8 savings?
    Secretary Cuomo. You would be reducing the monthly rent 
after this renegotiation. The rents would come down, so you 
would save money by paying lower rents.
    Mr. Walsh. I understand.
    Secretary Cuomo. At the same time, the FHA mortgages would 
be reduced, and there is a factor called proactivity. 
Hopefully, we could encourage owners to come into the program, 
to come forward with their buildings and do the renegotiation, 
if we had an attractive enough financial package. So buildings 
where we are now contractually bound to pay high rents for 
years to come, we are trying to get those landlords in so we 
can renegotiate.
    Mr. Walsh. Do you think this is a pretty solid number? 
Would you say it is a conservative estimate?
    Secretary Cuomo. I think it is a solid estimate. These 
numbers were all scrubbed by OMB. Obviously, they will go to 
CBO, and then there will be another discussion. There have been 
occasions where CBO and OMB actually have a difference of 
opinion on numbers, so it would not be the first time. But I am 
confident OMB went through the numbers and they feel good about 
them.

                          manufactured housing

    Mr. Walsh. Two specific questions, one on manufactured 
housing. You mentioned that there are literally millions of 
Americans that are paying over 50 percent of their incomes on 
their housing. I think somebody told me a long time ago that 
you should try to keep your housing costs to about a quarter of 
your income. So that is a fairly substantial bite out of 
somebody's income.
    Manufactured housing--I am told you can buy a new 
manufactured home at about $36,000. Is there anything that your 
department can or should do to move people into that sort of 
housing, especially in rural areas?
    Secretary Cuomo. Congressman, if I could, just a quick 
point from the previous discussion.
    Mr. Walsh. Sure.
    Secretary Cuomo. On the numbers, OMB has certified them, 
and also the department engaged Ernst and Young, a private 
accounting firm. They also went through the numbers and helped 
us with the analysis. So that is a government number, and it is 
also E&Y number, which I think the Committee would agree is a 
reputable accounting firm, which has gone through the numbers 
also. So we feel confident in those calculations.
    On manufactured housing, the Department, as you know, 
regulates certain aspects of the manufactured housing 
construction business. It is a growing field, as the 
Congressman knows. In the state of New York, 10, 15 years ago, 
the manufactured housing business was a small fraction, and 
there has been an explosion of acceptability. And it also 
provides a very affordable product and, given the proper 
regulations, a good product.
    So do we promote manufactured housing? In concept, yes. In 
specifics, since we are the regulator, we do not really promote 
it over any other type of housing. But the concept of 
affordability, fast construction, makes total sense, especially 
given some of the pressing needs we have.

                         baldwinsville project

    Mr. Walsh. My last question, Mr. Secretary, is you and I 
have had several conversations and correspondence has passed 
back and forth regarding an initiative that you had developed 
on the Erie Canal, that commercial sector in upstate New York. 
And there is one particular proposal that just does not quite 
fit the small cities program that encompasses that development 
projects. And I know you are somewhat familiar with the 
specifics of it.
    We have not yet been able to meet the flexibility 
requirements that that project is going to take. Can you offer 
me any hope at this point, specifically, on that Baldwinsville 
project?
    Secretary Cuomo. Congressman, I had a conversation with the 
mayor after we spoke.
    Mr. Walsh. I know you did.
    Secretary Cuomo. And it was a good conversation. Frankly, I 
do not have a specific positive answer yet. I want to speak to 
a couple of the neighboring jurisdictions and see if we cannot 
form some partnerships there. Also there is an option, under 
the CDBG program where, you do not have to take the option that 
Baldwinsville did, which is they are a participating 
jurisdiction within the county. You could also be a ``small 
city'' and go the competitive route, ratherthan going within a 
county. And that is an option that is available to Baldwinsville. I 
want to make sure that they understand what that option would mean, but 
it is something that they may want to pursue.
    Mr. Walsh. Thank you very much for your responses.
    Secretary Cuomo. Thank you, Congressman.
    Mr. Walsh [presiding]. And since Chairman Lewis is not 
here, I will for the moment call upon Mr. Knollenberg.
    Mr. Knollenberg. Mr. Secretary, welcome, and 
congratulations on your move up. I enjoyed the association I 
had with your predecessor, Henry Cisneros, and look forward to 
getting to know you a little better.
    Secretary Cuomo. Thank you very much, Congressman. So do I.

                   promulgation of property insurance

    Mr. Knollenberg. In last year's hearing--not on your watch, 
but you were part of the grouping--Betsy Jullian, who was then 
the Assistant Secretary of Fair Housing, stated that the 
department had no plans to promulgate additional regulations 
pertaining to the application of the Fair Housing Act to the 
business of property insurance.
    This was reiterated just recently. I appreciate the 
response from Mr. DeCell in regard to my letter to Susan 
Forward. And I would like to enter that, Mr. Chairman, in the 
record, if I could, that letter in response to my question.
    Mr. Walsh [presiding]. Without objection, so ruled.
    Mr. Knollenberg. He wrote, and I quote: ``The department's 
position remains unchanged. HUD will continue to carry out its 
enforcement responsibilities, including investigating 
complaints and seeking their resolution.''
    The implication, as I see it, is that HUD would not 
undertake, or will not undertake, any proactive steps for the 
remainder of this fiscal year to involve themselves in this 
issue. And for the record, I just want to know, is that 
basically how you understand it?
    Secretary Cuomo. My understanding, Congressman, is that we 
have no plans to promulgate any insurance regulations. 
Obviously, it is the department's responsibility to investigate 
complaints.
    Mr. Knollenberg. Would that be true for fiscal year '98, as 
well? Any idea?
    Secretary Cuomo. That would be true for '98, as well, 
Congressman.

                   equal split of fhip & fhap monies

    Mr. Knollenberg. Now, on to a subject that has a bit of a 
ring to it, FHIP and FHAP. They could name that something else, 
I suspect, and we would still have trouble with it. But I know 
the difference between FHIP and FHAP, and I know that you do, 
too.
    In the fiscal year '98 budget proposal, HUD estimates in 
fiscal year '97 that it will spend $18 million on the FHIP 
program, the Fair Housing Initiatives Program. Currently, it is 
$6 million they are spending on the Fair Housing Assistance 
Program, or FHAP.
    In last year's bill, we appropriated $30 million. We 
appropriated $15 million for each, and our expressed intention 
was to split it evenly. And I guess my question is, how do you 
explain--and if you do not, would somebody else please come 
forward--the discrepancy between your estimate and the 
directions of the report language which was very specific about 
$15 million for each? I can refer to the budget that you 
submitted, in Appendix B.
    Secretary Cuomo. Congressman, in fiscal year 1997, we are 
doing as directed, which is the split as suggested by the 
Committee between FHIP and FHAP. And I agree with the 
Congressman: If we can come up with better acronyms, we will. 
But we are splitting the funds as the Committee directed for 
fiscal year 1997. For fiscal year 1998, our proposal is a 
different split, as the Congressman pointed out.
    Mr. Knollenberg. Well, again in the appendix that I see 
here, the actual estimate budget outlays--these are outlays, 
now--for the FHIP program was $18 million, and for Fair Housing 
Assistance it was six. So that does not mirror the direction in 
the report language. I guess I am interested in why.
    Secretary Cuomo. Well, Congressman, we now have three 
concepts. The outlays are not necessarily from 1997; as a 
matter of fact, probably are not 1997 funding. They are from 
previous years.
    Mr. Knollenberg. Was there a carry over?
    Secretary Cuomo. They are now carrying over and laying out 
at different rates. So that is the outlays which are a product 
of previous years' funding, then the Committee's split on 
fiscal 1997, and then our proposal going forward.

                   purpose of fhip funding to states

    Mr. Knollenberg. It is a little unclear. And I understand 
that when you talk about unspent balances and carryover 
balances and that kind of thing it does get a little bit 
difficult to understand. But do you intend to spend beyond the 
$6 million level in FHAP? Let me tell you in a moment why I am 
asking these questions.
    Secretary Cuomo. Please do.
    Mr. Knollenberg. The reason we did that evening-up last 
year was to speak to the problem--and you well know this. And I 
could ask you a couple of questions about how many states, 
frankly, right now are substantially equivalent in terms of 
their fair housing operations? Do you know what that number is?
    Secretary Cuomo. I do not, but we can find out. We have 
Deputy Assistant Secretary Susan Forward here, who could give 
us that information if you would like, Congressman.
    Mr. Knollenberg. Either that, or it could be submitted.
    My question really is, I know that somewhere in a draft of 
information that we received, it states that there are 18 state 
governments that do not qualify for financial assistance under 
the program because they lack fair housing laws that are 
substantially similar to what the Federal Government has.
    Secretary Cuomo. Right.
    Mr. Knollenberg. I do not know who those 18 states are, but 
I would like to have that information.
    Secretary Cuomo. We can provide the Congressman with that.
    [The information follows:]

     States With Laws Which are Equivalent to the Fair Housing Act

    Arizona, California, Colorado, Connecticut, Delaware, 
Florida, Georgia, Hawaii, Indiana, Iowa, Kentucky, Louisiana, 
Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, 
North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, 
South Carolina, Tennessee, Texas, Utah, Virginia, Washington, 
and West Virginia.

States With Laws Which are Equivalent on their Face, But Which Are Not 
          Participants in the Fair Housing Assistance Program

    Illinois and Kansas.

  States With Laws Actively Pending Legal Review or Legislative Action

    Alabama, Nevada, New York, Oregon, and Vermont.

   States With Laws Which Are Not Equivalent to the Fair Housing Act

    Alaska, Arkansas, Idaho, Maine, Minnesota, Mississippi, New 
Hampshire, New Jersey, New Mexico, North Dakota, South Dakota, 
Wisconsin, and Wyoming.

    Mr. Knollenberg. What I am really after I think is why the 
emphasis away from FHAP, because FHAP monies literally are 
there to bring up, I thought, those states that are out of 
compliance, out of level, out of being substantially 
equivalent, to a point where perhaps they would be, because 
that would take the responsibility off of HUD's shoulders and 
more onto the states'. And that was the belief that we had, and 
that is why we drove that point home about evening it up.
    And so I guess I would like to know, is FHIP money now 
currently being targeted to states that do not get FHAP money? 
And the answer is ``No''?
    Secretary Cuomo. No.
    Mr. Knollenberg. They are not?
    Secretary Cuomo. No.
    Mr. Knollenberg. Would there be perhaps a greater emphasis 
on FHAP spending in the future, let us say in '98, to bring 
those states up to compliance, up to a level?
    Secretary Cuomo. Let me ask the Deputy Assistant Secretary 
to step up, Congressman. I do not think it is a question of 
emphasis away from FHAP to FHIP. I think it is an emphasis, an 
affirmative emphasis, on what we are doing with FHIP, the 
testing we are doing with FHIP, the groups that are doing good 
work through that. And we want to encourage that and continue 
it, as opposed to a movement away from FHAP.
    But let me ask Deputy Assistant Secretary Forward to 
respond to the question.
    Ms. Forward. Thank you. I might add that with the FHAP 
program, the Department is doing everything we can to include 
as many jurisdictions as possible. We currently have 73. There 
are 29 states and 44 localities. We had at one point a pool of 
120 localities and states, and the Department is working very 
hard to assist those states and localities that would like to 
have laws substantially equivalent to the Federal Fair Housing 
Act. So I would suggest that, yes, the FHAP program will be 
spending out at a higher rate than it currently is.
    Mr. Knollenberg. The reason that a lot of my questioning 
comes into play is that on page 4 of Mr. DeCell's response, in 
question number seven, he indicates that the fiscal year 1997 
appropriations language established a minimum allocation for 
FHIP. The report language is very, very clear. It says 15. And 
so I do not want to make a big thing out of it. It is just that 
I want to know the direction for the future, if what you say is 
that you are moving in that direction.
    And if we can help you in our way, please let us try. I do 
not know what that would be, but I know, in fact, the Secretary 
mentioned for example H.R. 214, which is the income matching 
provisions, which we are trying to do. And there is also the 
question of the single asset bill, which I think you spoke to, 
Mr. Chairman, early on. And that has done some damage, I 
believe. I know Mr. DeCell has been kind enough to share some 
of his knowledge of that with our staff.
    And I will continue to work with you on that to assure that 
we come to some closure maybe in those areas that will help you 
reduce your cost, because I know it has been excessive. So 
essentially, if you are moving that way--And I guess that is 
what you are telling me? You are moving in that direction?
    Ms. Forward. Yes, we are.
    Mr. Lewis. In that event, he is looking ``forward'' to 
working with you. [Laughter]
    Ms. Forward. And I am looking forward to working with him.

                         status of detroit pha

    Mr. Knollenberg. Thank you, Mr. Chairman.
    There are several things I could ask you, but in an effort 
to give everybody a chance here I wanted to relate back to a 
conversation I had with Mr. Cisneros last year on Detroit. And 
at that time, he ranked Detroit--Out of 40, I think it was 
fourth from the bottom. That is a pleasant way of saying 36th, 
I guess.
    But he was optimistic about working with Mayor Archer. And 
I just wondered if you have any up to date information as to 
the status of the program that a year ago seemed to havean 
optimistic flavor to it. Do you have any current status report?
    Secretary Cuomo. Yes, I do.
    Mr. Knollenberg. On Detroit and the PHA situation there?
    Secretary Cuomo. Yes, I do, Congressman. The city of 
Detroit, which at one time was used in this country as the 
poster city for urban decay, really has been remarkable in a 
turnaround. And if it was a poster city for urban decay, I hope 
they now use it as a poster city for what is possible.
    They won an empowerment zone, as the Congressman recalls. 
And we did a report several weeks ago that said that Detroit 
was one of the most successful empowerment zone cities in the 
country. The public housing authority, which was troubled just 
a couple of years ago--and on which we came up with an 
agreement with the city and Mayor Archer to work with them on 
the housing authority--just last week passed the PHMAP score, 
the grading score, and is now no longer a troubled housing 
authority.
    So the housing authority is a success story. Indeed, the 
overall city's progress is a real success story, and a 
heartening one.
    Mr. Knollenberg. Thank you. That is the conclusion of my 
questions, Mr. Chairman. Thank you.
    Mr. Lewis. Thank you, Mr. Knollenberg.
    Mrs. Meek.
    Mrs. Meek. Thank you, Mr. Chairman. I would like to welcome 
Secretary Cuomo.
    Secretary Cuomo. It is a pleasure. Thank you, 
Congresswoman.

                     section 108 and CDBG programs

    Mrs. Meek. And I am pleased to see you and happy to work 
with you. I need some information and advice on Section 108 of 
the loan guarantees.
    Secretary Cuomo. Yes.
    Mrs. Meek. It has come to my attention that many--I get a 
little concerned about the local authorities and what they are 
doing with HUD monies; in that many times the local authorities 
may not be really equipped or aware of the many needs regarding 
economic development. And I understand that a lot of cities and 
counties are sitting on the 108 monies, the loan guarantees. 
Will you explain that to me?
    Several groups have come to me and said they have gone 
specifically to my county asking for 108 monies. They have 
discovered, to their discontent, that a lot of the 108 monies 
are being channeled towards some of the big, big infrastructure 
projects and stuff of that sort. Would you clarify some of that 
for me? I really do not know what is being done with 108.
    Secretary Cuomo. Congresswoman, it is an important topic 
for the entire Department. First of all, we are trying to 
emphasize HUD's economic development potential. We have an 
extensive housing portfolio, as we have discussed at length, 
but the Department also has some real economic development 
tools, empowerment tools that they can bring to bear to help a 
community which I believe are more critical than ever before.
    We are talking about welfare reform. We are talking about 
creating jobs. We are talking about creating jobs for people in 
very distressed communities, which is normally where the 
welfare recipients live. HUD can be of help in the economic 
development arena.
    One of the main weapons we bring to bear is the Economic 
Development Initiative Program or EDI. Economic Development is 
a CDBG-eligible cost, and the Section 108 loan program, which 
allows a local jurisdiction to take a loan for a CDBG purpose 
up to five times their annual CDBG allocation. So it could be 
used for economic development loans, or any other CDBG purpose: 
housing, social services, etcetera.
    Our experience has shown that, if anything, jurisdictions 
are somewhat reluctant to use it because the underlying 
security for the Section 108 funding is their CDBG.
    Mrs. Meek. That is right.
    Secretary Cuomo. In other words, they make a loan to a 
specific project. The first security is that project, itself. 
The project is supposed to generate income which will pay off 
the loan. However, if the project does not pay off the loan, 
then we can look to that jurisdiction's CDBG annual allocation 
to recoup the cost of the loan. And that makes jurisdictions 
nervous, because the CDBG money is so precious.
    So we have seen some reluctance to use the program because 
of that, until they understand it. We have capacity in the 
Department that we can make available to local communities. If 
the Congresswoman would like, we can send out people who work 
with this program and know the eligible uses. We can have a 
meeting in the district where we get the local jurisdictions 
and HUD personnel, to discuss how the program works and its 
potential uses. If that would be helpful, it would be our 
pleasure.
    Mrs. Meek. Mr. Secretary, they know the guidelines and they 
know how it can be used, but they will not loan it, because 
they feel that it is a threat to their CDBG monies. And as a 
result of it, the people I represent are going without some of 
these loans because of that. And local government makes that 
decision, that it cannot be used.
    Now, I do not know how to get around that. Maybe I will 
talk to you and some members of your staff a little bit later. 
But I wanted you to know that of all the monies that HUD has 
out there, the 108 is not really being utilized in the 
communities that really need community development funds. And 
it matches other monies. Am I correct?
    Secretary Cuomo. Yes.

                     usage of CDBG money in florida

    Mrs. Meek. And in that way, it prohibits a lot of growth in 
our communities. I am concerned about that.
    Also, the people I represent--and, of course, all kinds of 
people--we have a lot of concerns about CDBG monies, because I 
wish you could have someone tell me where CDBG money goes, 
particularly in the state of Florida; in that, the way it looks 
to most of us--and we do not have the figures; these are just 
speculations, having been around it a long time--that a lot of 
the CDBG monies go toward building the big infrastructures that 
are downtown, the large buildings.
    And when the people I represent get all upset, then they 
worry about, ``What happened to the CDBG monies?''
    Secretary Cuomo. Yes.
    Mrs. Meek. And they look at me. And I am looking at you. I 
want to know what happened to the CDBG monies.
    Secretary Cuomo. Well, I am going to look over here, then, 
Congresswoman----
    Mrs. Meek. Okay. [Laughter]
    Because it is very crucial. And we are going through a lot 
of throes in south Florida, as you know--quite a few. We have a 
very large immigrant population; welfarereform has come up; the 
legal immigrants need someplace to go, they need jobs; and everyone--
the ones who have been there all the time need it. So it is important. 
I wish you would help me with that particular piece, as to how we can 
work with local government with those funds.
    I am also concerned about the 202 programs for the elderly. 
I want to know, did OMB take your original request, or did they 
cut it down? Because you went from $830 million to $300 
million.
    Secretary Cuomo. Congresswoman, on your first point, it 
would be our pleasure to tell you where the CDBG funds go 
nationwide. We have all sorts of reports that detail the uses 
of the program, what percent of the money is going where on an 
national basis. We can also now show you where the CDBG money 
is going.
    Mrs. Meek. Good.
    Secretary Cuomo. One of the things we have done over the 
past 4 years is we have used the computer to have mapping 
software literally for the entire country. And jurisdictions 
now put on these electronic maps where the CDBG money is going. 
And we can make a map of a city, of a county, of a 
congressional district, and show you where in that district the 
CDBG money is going.
    We can do that for you. It is also on the Internet, so it 
is accessible to anyone who looks. And it really brings the 
CDBG program into a new light, because rather than just reading 
about percentages you get to actually see where the money is 
going in the district. And it would be my pleasure to follow up 
with you on that.
    Mrs. Meek. Thank you.
    Secretary Cuomo. On the 202 program, I agree with the 
Congresswoman that it is a good program. I wish that we could 
have gotten it more resources. As far as conversations between 
the department and OMB, we consider those basically 
conversations within the family, and we try to keep them that 
way. But I agree with the overall comment of the Congresswoman.
    Mrs. Meek. All right. If I may go further----
    Mr. Lewis. Was that a response?
    Mrs. Meek. No, it was not.
    Secretary Cuomo. Well, it was a within-the-family response. 
[Laughter]
    Mrs. Meek. All right. Local communities are the ones who 
are giving me problems, because cities that are operating in 
distress, like the city of Miami--I should not call it names; I 
love my city, but they are operating in distress. And my 
constituents are so concerned that in order for them to balance 
out and do what they need to do, that CDBG monies will be 
utilized primarily for that. And I think I have gotten that 
message across to you. And there is very little, it seems, that 
I can do, except to yell and shout about it, unless some new 
regulation or some new policy is placed in.
    I worry when all federal flexibility is taken off. I worry 
about it, because if we do not maintain something, we will go 
back to somebody blocking the school house door, and I am 
concerned about that. And I do not know whether we will ever 
get back to the stage where we realize that all ain't fair in 
this country. All right? And until we get to looking at some of 
these things from a federal level and taking some initiatives--
on the way, there have been a lot of abuses. I understand that. 
But I am concerned about it.

             preservation funding for jacksonville, florida

    I would also like to say I have got a lot of requests 
about--I think the Senator sent me a letter regarding the 
Jacksonville situation. And I do not want to talk about it if 
it embarrasses you in any way.
    Secretary Cuomo. I do not know if it does or it does not--
--
    Mrs. Meek. Well, suppose I tell you about it. [Laughter]
    Secretary Cuomo. Well, unless you do not want to tell me 
about it----
    Mr. Lewis. Just within the family.
    Secretary Cuomo. Yes, right. Yes.
    Mrs. Meek. This has to do with the preservation program, 
the low-income housing program, the preservation program. 
Because of something that happened in the regional office of 
HUD--And I do not really know all of the vicissitudes of what 
happened, but what happened, Florida, being a very large state, 
ended up because of some delays with very little monies from 
this low-income preservation fund.
    Now, they are writing me and calling on me, and they only 
had three--I think they had three grants funded out of this 
whole thing out of the Jacksonville field office. And the 
people are questioning as to how the fourth-largest state 
stands to receive only 1.6 percent of the total amount that was 
appropriated for this program over a two-year period. So I am 
taking a lot of heat on that.
    So I need to know the question that has been asked me, 
whether or not there can be some recompense for this. I 
understand the funding is short and it is going to go out soon, 
but I came here today to tell you my troubles.
    Secretary Cuomo. Okay.
    Mrs. Meek. I know you want me to listen to yours, but I 
want you to listen to mine. [Laughter.]
    So it is important. I hear that most of the money that you 
had in there, the $350 million, is almost gone. It is either 
gone, or it is fully committed. So you see where that leaves 
Senator Mack, Graham, Meek, and all the rest of us.
    Secretary Cuomo. Okay, Congresswoman, you raised two very 
important points. First, on the CDBG, the CDBG Program is a 
block grant. But that does not mean that it is a blank check 
from the Federal Government to the local communities. As a 
matter of fact, with CDBG there is a whole process of citizen 
participation, citizen communication, that the local 
jurisdiction has to go through before it determines its use of 
CDBG money.
    This is not a program where the city sits down and the 
founding fathers go in the back room and cut up the CDBG pie. 
They have to go through a citizen process. There has to be 
notice. There have to be hearings. Citizens have a right to be 
heard. And the jurisdiction has to account on those citizen 
concerns and what the disposition was thereof.
    If we don't think the process was fair, HUD can withhold 
funding. So if you have a question about how the process is 
going or how the jurisdiction is making decisions, we would 
love to hear that and check with the jurisdiction. Because, 
again, there is a process that has to be followed with CDBG. If 
it is not being followed, they should not be getting the 
funding.
    And on the whole new thrust for HUD of restoring the public 
trust, CDBG is part of that, and we would love to be helpful if 
we can.
    Mrs. Meek. All right.
    Secretary Cuomo. On the preservation, the demand for 
preservation was multiples of the available resources. For 
every one project that is in line to actually get funding, 
there must have been 15, 20, maybe more, requests.
    As far as the situation in the Jacksonville office, the 
information that I have before me, Congresswoman, suggests that 
the office performed adequately in the reviewing of the 
applications, that there was not an undue delay; therefore they 
were not unduly prejudiced, and there is no reason to move them 
up on the list.
    But I would like to check, with the Congresswoman's 
permission. Let me check the facts. Let me inquire, myself. And 
I will get back to you on whether or not that is the case.
    [The information follows:]

      Allocation of Preservation Funds to the Jacksonville Office

    There are 146 eligible projects in the State of Florida, 
but only 54 owners applied. Many of them either did not apply 
in time, or their offers did not meet program requirements, 
despite repeated efforts by HUD Jacksonville to bring the 
submissions of the owners, and in some cases of non-profits and 
owners, into compliance.
    If the owner did not apply in time to have an approved plan 
of action by September 30, 1996, HUD could not make a grant. 
Jacksonville's processing time from Initial Notice of Intent to 
Plan of Action approval (695 days) is actually below the 
national average (740 days).
    For 1997, HUD has allocated $5,669,323 for two Resident 
Homeownership Grants handled by the Jacksonville Office from 
Preservation funds. One project had already been approved from 
1996 funds. Five projects were given extensions in previous 
fiscal years.

    Mrs. Meek. All right. One last facet of this----
    Mr. Lewis. Before we leave that subject, Mrs. Meek.
    Mrs. Meek. All right.
    Mr. Lewis. I think the Secretary is being very delicate 
within the family. The fact is, there was $350 million that was 
appropriated. Remember, we zeroed that account in our bill, so 
it was through the conference.
    Mrs. Meek. Yes.
    Mr. Lewis. That money was available on a first-come, first-
served basis. The owners knew that they had to get their plans 
of action in. Other states' owners in a similar circumstance 
were more responsive, got up front. And if I were the 
gentlelady, I would have my owners sit down with me and say, 
``Hey, friends, next time this happens, you have got to get in 
line or you are going to find yourself in the same position.'' 
It is not your fault. They knew what the story was.
    Mrs. Meek. Well, beside that, Mr. Chairman, is that you 
allowed New York and Florida and somebody--not Florida, New 
York and some other states----
    Mr. Lewis. Ohio and California----
    Mrs. Meek [continuing]. To dip in. Had I been here, you 
would have had a dip-in for Florida. [Laughter.]
    That is right.
    Secretary Cuomo. They are not that delicate outside the 
family.
    Mr. Lewis. Mrs. Meek, clearly, as a member of this 
Committee you can deliver a message to your owners. They knew 
what the timing was. They knew they had to get in line. They 
knew it was first-come, first-served. And frankly, you ought to 
look them in the eye and say, ``Hey, friends, I can only do so 
much.'' I think that is right. We are just here to help, you 
know?
    Mrs. Meek. I see.
    Mr. Lewis. Okay.
    Mrs. Meek. Now, I think I heard the Secretary tell Mr. 
Price that that $100 million was not really $100 million? 
Someone on your staff said it, or did they?
    Secretary Cuomo. That was a proposal for funding that was 
not enacted.
    Mrs. Meek. So we cannot ask you for any reserves, can we?
    Secretary Cuomo. You can ask. We do not have any. 
[Laughter.]
    Mrs. Meek. All right. Mr. Chairman, I do not want to take 
all day.
    Mr. Lewis. You are doing well.
    Mrs. Meek. I have lots of questions, but I will submit them 
for the record. And thank you very much, Mr. Secretary.
    Secretary Cuomo. Thank you, Congresswoman.

                     oversight vs. over-regulation

    Mr. Lewis. As you can see, Mrs. Meek is very intent on 
making sure that her people are responsive to the process, and 
I am sure that they will hear from her.
    A couple of items. I want to spend a little time on HANO 
and New Orleans while the Secretary is available. Before going 
to that, as you know, I have been very interested in HUD's 
efforts to restructure its management from top down, 
centralized approach to one that recognizes the importance of 
local input and decision-making.
    Obviously, this approach requires a significant amount of 
monitoring and oversight, but a modicum of regulation. I am 
really kind of thinking in the back of my mind about what 
happened in Indian housing, but I don't want to raise that, per 
se. It reminds me of this. Just because we are talking about a 
modicum of regulation doesn't mean we don't have a serious 
oversight responsibility that we need to follow through on.
    Does HUD staff have the ability to understand the 
difference between oversight and over-regulation?
    Secretary Cuomo. Yes, it does, Mr. Chairman, and I think 
that is the balance. That is the balance that the Department, 
if successful, will find.
    I said in response to Congresswoman Meek, CDBG is a block 
grant. It is not a blank check.
    Mr. Lewis. That is right.
    Secretary Cuomo. Block grants, local flexibility, the CDBG 
program, the HOME program, I think those are the ways of the 
future. That does not mean that we hand over a check and 
whatever the local jurisdiction wants to do, it does. There are 
Federal goals that have to be met, and there is a monitoring 
responsibility. That is on one end of the spectrum.
    The other end of the spectrum is over-regulation and so 
much red tape that you constrain the local jurisdiction. So the 
truth, as usual, is somewhere in the middle. That is the 
balance the Department seeks to find in its reinvention of its 
mission. The second cut on that same issue, Mr. Chairman, for 
us is what is the best role for the Department in that 
scenario, and when there is a private sector task, or when we 
need private sector expertise such as construction management 
under HOPE VI, or have a very specialized task to oversee 
construction or need to know what is the appropriate fee 
structure between a construction manager and a subcontractor 
and a general contractor? When you have these specific private 
sector tasks, privatize them and get the private sector 
expertise in. For example, asset management on the multifamily 
portfolio and how to read those balance sheets that the owners 
put together; you have to really know your numbers and know the 
business. Let's get the private expertise in the places where 
it is appropriate. Let's remember our role, which is to oversee 
as opposed to strangle with regulations. Block grants don't 
mean blank checks. I think that is the balance that the 
Department needs to find.
    Mr. Lewis. I think I will probably be heard to say on many 
a occasion that that which you don't measure, you don't get 
very much from, and while I was going to ask will it be 
necessary for you to change the structure of existing programs 
in our management to assure that those programs are 
administered properly and at the same time protect the 
taxpayers' interests, it is pretty obvious by your comments 
today that there will have to be some adjustment and rethinking 
of what our appropriate role is here, but it is very important 
that we look to the end result and try to measure those 
results.
    Secretary Cuomo. Mr. Chairman, I think in all of these 
programs, performance has to be one of the first concepts we 
think of. I think you will see in the legislation that we put 
forward that there's a new emphasis on performance that you 
haven't seen before from the Department such as spend out rates 
on funds, whether they be formula or competition, are people 
spending the money, how quickly are they spending the money, 
what are we getting for the money. Those will all be essential 
criteria for the Department.

                    time frame for buyout authority

    Mr. Lewis. What is the time frame? HUD received buyout 
authority last year. So what is the time frame in which HUD 
must act to make the most of that authority?
    Secretary Cuomo. I don't follow the question, Mr. Chairman.
    Mr. Lewis. Last year, by way of this bill, by way of the 
comprehensive appropriations, HUD did receive buyout authority 
last year.
    Secretary Cuomo. Oh, buyout authority. I am sorry.
    Mr. Lewis. So what is the time frame within which HUD must 
act to make the most of that authority?
    Secretary Cuomo. The optimum time for the Department to 
act, the best position of the window, if you will, Mr. 
Chairman, is April.
    The Department is anticipating buyouts in a first phase of 
approximately 600, and the timing would be about April.

                            funding for hano

    Mr. Lewis. Okay. That fits with what I was talking about.
    Let's see. I have a number of questions that relate to the 
Chicago Housing Authority and Cabrini Green. I think, in view 
of the time, I would prefer to go forward to HANO and discuss 
that with you, and we may then come back to this.
    Let's see. Mr. Secretary, as you know, I was recently in 
New Orleans visiting a number of public housing developments, 
as well as touring local neighborhoods. Clearly, New Orleans is 
a city with significant challenges. The Federal commitment to 
the public housing authority is significant. Approximately $70 
million, including modernization and operation subsidies is 
directed at HANO every year. Yet, the condition of each 
development there, and there are 10--one of my staff people 
suggested that he has yet to find one in which a human ought to 
be asked to live.
    In addition to these grants, HANO has received about $60 
million in HOPE VI grants, about $50 million for DESIRE, and 
$10 million for St. Thomas homes. Based on what I saw while in 
New Orleans, I suspect that millions more dollars will be sent 
to New Orleans to clean up the remaining Section 8 locations.
    I must say in view of this recent history, the numbers of 
dollars, we understand that flow, et cetera. I just hardly see 
a stick relative to public housing dollars that can be 
reflected in places where people live. If you were with me on 
that trip, I think your hair would be my color.
    I am very impressed by the professionalism with which 
Tulane and Xavier Universities conducted the tour that I had of 
the public housing facilities. They put their reputations on 
the line by promising turnaround at the PHA, and it is a 
serious difficulty, a challenge that they are faced with, and 
filled with troubles.
    I do admire their confidence. I was very interested in the 
Campus Affiliates Program that Tulane and Xavier have created 
to cooperate in a cooperative fashion with the residents of 
C.J. Peat Development and applaud the determination of the 
students and the faculty who participate in that program. I 
hope the program can expand beyond the boundaries of the Peat 
Development to other public housing facilities in the city.
    HUD provides $2 million for this program a year. Therefore, 
the expansion should not be accomplished with Federal 
resources, but bolstered by donations from local nonprofits and 
foundations.
    I would be interested in the $2 million that is involved 
and this cooperative effort. Are you?
    Secretary Cuomo. Generally, I am, Mr. Chairman.
    Mr. Lewis. Well, I am really interested in some response as 
to why there would be no recommendation of additional Federal 
dollars.
    Secretary Cuomo. Beyond the----
    Mr. Lewis. The $2 million.
    Secretary Cuomo. I am not familiar that there was no 
recommendation against additional Federal funds. It was our 
opinion that the $2 million which HUD was funding the 
organizations was sufficient to accomplish the goals that we 
had set out for them.
    Mr. Lewis. The staff suggested that the reason she isasking 
why is because there ought to be local nonprofits getting involved and 
leveraging the money for more dollars.
    If you look at the history of the universities involved and 
if you look at the way other public housing dollars had been 
used in the community, I wouldn't ask why. The fact is, the 
university is looking at this flow of money for more revenue to 
do what they want to do with the revenue and aren't leveraging 
the dollars very effectively. I would ask why aren't we asking 
those questions and insisting that they leverage those 
nonprofits effectively.
    So I just lay that on the table, and that is kind of one 
small piece of my response from that very brief trip.
    Despite my admiration for the CAP program, I do not want to 
fool you by saying that conditions in New Orleans, public 
housing complexes will be improved substantially in the near 
future. I am very disconcerted by the amount of money that has 
been spent over the last several years, and as I have 
suggested, the lack of livability of the conditions in the 
community in terms of any real change.
    Can we afford more money to be directed to New Orleans? 
That is a question I have, and I wonder if you have a response 
to that.
    Secretary Cuomo. I think, in general, Mr. Chairman, we have 
made progress at the authority, if nothing but internal 
organizational progress, but I would agree that the Department 
isn't satisfied with the amount of progress we have made thus 
far in the lives of people, in the actual physical stock.
    I also agree with the Chairman that it is quite a 
significant undertaking and probably one of the most troubled 
housing authorities in the country.
    The amount of funding that is now going into the authority, 
$2 million for the Xavier Tulane, which is a good service, and 
a necessary service. We have HOPE VI money there that is not 
yet being spent, $44 million just on DESIRE, and I believe the 
Chairman's number of approximately $60 million is correct. So I 
don't know that our problem there is a problem of funding, per 
se.
    Mr. Lewis. Well, Mr. Secretary, let me be reasonably 
specific. Earlier on in this last year, there was a request for 
bids for the remodeling of some of the facilities at DESIRE. 
There were four or five local contractors that bid. The 
proposal was to remodel existing facilities or buildings.
    As I understand it, the bids came in between roughly 
$145,000 and $165,000 per unit, a reasonable square footage 
cost, I would suggest, maybe a very, very unreasonable square 
footage cost.
    Now the local authority has decided that instead of 
remodeling, they are going to demolish those buildings, at 
least if we sign off on Phase I. It was suggested that one of 
the reasons for the original bids coming in so high was that 
there were contractors who didn't feel safe doing work in the 
area, and any number of reasons, the Government doesn't deliver 
its checks in a timely fashion, et cetera.
    I was heard to ask, did you even suggest that maybe we 
should get some bidders who were from out of state or other 
people who are less busy or less frightened. I got no response 
from that, and in terms of the Federal HUD oversight, I don't 
see us kind of insisting that the marketplace work in 
connection with processes like that.
    At the highest level within HUD, you could make a very big 
difference if you suggested we are going to really suggest 
there be competition in that marketplace.
    Secretary Cuomo. Mr. Chairman, I have not heard those 
numbers before, $145,000 and $165,000 per unit, but before I 
came to this job, I did construct housing and operate housing. 
Those numbers are very high, and we will take a long hard look 
at that, but I believe they are in excess of what we believe 
the total development cost should be for a public housing unit.
    Mr. Lewis. You are very well aware that there are many 
executive directors of public housing authorities who have 
turned around troubled authorities.
    There is a new directorate, HANO, who seems to be on a 
pathway that, for me at least, provides a sense of hope, but 
people like Rick Gentry of Richmond, Virginia, Harold Lucas of 
Newark, Gregory Burn of Miami, and Miami--is that right? Miami, 
Dade, Florida? And of course, David Gilmore, here in 
Washington, D.C. There are nonprofit companies that have 
successfully partnered with housing authorities and HUD to turn 
around troubled developments. Kevin McCormack of McCormack 
Bairnes Associates. You know, there is a list of people that we 
have seen perform well.
    If we could ever find ourselves in a position where tapping 
the private sector, as well as nonprofit interest, that we 
could make a model out of revising a public housing authority, 
namely by way of HANO, indeed, there would be a signal that 
would go out there that would be very interesting.
    Clearly, the people who live in those buildings are exactly 
the same kinds of people with the same kinds of needs that we 
see David Gilmore getting results for and from right here in 
Washington, D.C.
    Secretary Cuomo. I couldn't agree more, Mr. Chairman. The 
challenge for the Department is how in a time of shrinking 
resources, shrinking staff, shrinking budgets, do you come up 
with a national strategy to handle troubled housing 
authorities.
    One thing is clear to me. We cannot on a retail level step 
in and run these troubled housing authorities. We don't have 
the staff resources. We don't have the financial resources to 
run 5, 10, 15 different troubled housing authorities all across 
the country. We just can't do it and do it well and do it the 
way it should be done.
    What then is the alterative? We are looking at some 
possibilities. We are looking at a period of time where once 
PHA becomes troubled, we try to work it out with them, let's 
say for a year. If we are unsuccessful in working it out, they 
are unsuccessful in improving their condition. Then we go to a 
receiver, like David Gilmore in Washington, D.C., which if you 
talk to many of these public housing professionals, they will 
say a receiver is in many ways the optimum performance 
situation from their point of view. The politics of the 
situation is gone, if there was politics. Many of the burdens 
are removed, and a receiver can be appointed from the best 
talent across the country, just with the purpose of running the 
PHA. It could be an individual. It could be a company. It could 
be a not-for-profit. It could be a combination thereof, but 
those are some of the solutions that we are searching, and I 
agree, if we can start to turn around these troubled housing 
authorities, the way we are with many of them--Detroit, 
Chicago, great success stories--a HANO is probably one of the 
loudest examples in many regards.
    Mr. Lewis. It is the example, but problems like Cabrini 
Greens and others very much raise question after question.
    I might mention that within HANO, there is a lot of 
positive to be said about this new environment that involves 
the two schools and their work.
    For example, an item I would bring to your attention, I was 
most impressed with the concerted effort, with almost no cost, 
that have young people from the universities going to the 
housing projects and serving as tutors for young people, 
changing the kind of atmosphere and environment for motivation. 
All of that stuff is very positive, very low-cost kinds of 
improvements.
    At the same time, when I look to any new facility, even 
though lots of money has flowed, I see the real results coming 
from partnership that are different than HUD partnerships, 
neighborhood reinvestment working with local banks, for 
example, two blocks from the main drag, St. Charles Street, new 
facilities being developed and suddenly available, but kind of 
outside of HUD's traditional work.
    Habitat is having some impact there, and that is impressive 
as well, but for the number of dollars flowing, very little as 
a result of our traditional programs.
    Mr. Stokes, I wanted to mention that we have asked the 
Inspector General to spend some time helping us look at that 
circumstance down there. I know that she has testified 
elsewhere and is very well prepared to involve herself here, 
but frankly, I don't intend to do that to Susan at this moment, 
for I haven't warned her of that, but in the meantime, as we 
move forward, we will be looking for their input and their 
assistance as well.
    Mr. Stokes?

              effect of mounting policies on the homeless

    Mr. Stokes. Thank you, Mr. Chairman.
    Mr. Secretary, earlier this afternoon, you mentioned that 
there are approximately 600,000 people that constitute the 
class of being homeless. This is a subject that you and I have 
discussed on numerous occasions before our subcommittee.
    I am concerned about the cumulative effects of a number of 
policies and circumstances on the availability of housing for 
the poorest of the poor. Funding for incremental units of 
assisted housing was essentially ended by the 1995 rescision 
bill, although I do note that you are once again proposing to 
restore some incremental Section 8 funds.
    Housing authorities are now being encouraged to move 
towards a greater mix of income levels in public housing. Many 
units of public housing are being demolished as result of 
efforts to get rid of the worst buildings and projects. Minimum 
rents are being established, and while many of these policies 
may be meritorious in and of themselves, should we be worrying 
about the cumulative effect on the lowest-income families? Is 
it conceivable that the unintended result could be an increase 
in homelessness?
    Secretary Cuomo. Congressman, I share a lot of the concerns 
that you mention. I think you see an effort by the Department 
to address it, given the constraints, again, 50,000 incremental 
vouchers which we have asked for before, but we ask for once 
again, and the increase in homeless assistance.
    On the public housing side, the Department is supporting 
the Brooke amendment, income targeting in public housing, which 
could really have a disastrous effect in our opinion if we now 
also change the income targeting in public housing, which 
would, in effect, preclude the poorest of the poor and leave 
them on the lists virtually forever.
    So I share the overall concern, and my opinion, the 
greatest challenge is going to be seeing how welfare reform 
turns out. That is why I am targetting it as one of the four 
priorities for the Department. I want to see HUD aggressively 
work with welfare reform because, depending on how that turns 
out in a specific context, it could be a net positive, or it 
could be a real negative. We are hopeful and we are optimistic, 
but it is going to take a lot of energy and a lot of work to 
make this turn out as a positive experience, which is what we 
all want.

                         brownfields initiative

    Mr. Stokes. I notice that you are requesting funds for a 
new Brownfields initiative. This is an area of a great deal of 
concern for me because, representing a large urban community, 
that is a very big problem with cities such as Cleveland.
    EPA selected Cleveland as a pilot project, in fact, for a 
Brownfields initiative, which is a very successful initiative. 
Can you just tell us a little bit how you are going to tie into 
EPA's Brownfields initiative and what your funding will go for?
    Secretary Cuomo. Congressman, I couldn't agree more with 
the importance of addressing the Brownfields in this country. 
All of these things start to tie together, welfare reform, lack 
of housing. The one thing that is clear is that we have to 
create opportunities in inner-city areas. We have to create 
jobs. We have to grow businesses. We have to get businesses 
back.
    One of the things you need, besides capital, besides 
financial expertise, and besides capacity, is the need for land 
for the buildings to locate on. Brownfields is the single 
greatest obstacle to economic development as cited by the 
Conference of Mayors. They will all point to the Brownfields 
problem.
    What the President has proposed is a joint effort between 
EPA and HUD, where EPA Administrator Browner does the cleanup 
portion, if you will, and HUD comes in and does the 
redevelopment portion. So those are the two sides of the 
equation. EPA will do the cleanup, then HUD comes in. We 
proposed $25 million per year to do the redevelopment of that 
Brownfields, and we will do it in concert with Administrator 
Browner.
    Mr. Stokes. Sounds very promising.
    Mr. Lewis. EPA does the cleanup and then certifies, is that 
right?
    Mr. Stokes. I do not know about the certification part, is 
that----
    Secretary Cuomo. That would be within their bailiwick.
    Mr. Stokes. Right. But they do the cleanup and then they 
come in for the redevelopment part of it.
    Mrs. Meek. Would the gentleman yield?
    Mr. Stokes. I would be delighted to yield to the 
gentlelady.
    Mrs. Meek. Does the Council for Environmental Quality, do 
they come into this type of situation you have just described 
or is it just EPA and HUD?
    Mr. Stokes. I do not believe CEQ has a function in this 
area. I think it is basically between the EPA and HUD, is that 
correct, Mr. Secretary?
    Secretary Cuomo. That is my understanding, Congressman.
    Mr. Stokes. Right.
    Mrs. Meek. I think it is going to run into problems, Mr. 
Stokes, for the residents.
    Mr. Stokes. Which phase of it, Mrs. Meek?
    Mrs. Meek. In terms of the environmental qualities, unless 
there is some substantive evaluation by HUD and EPA. It is 
going to take a lot of money. It is a good idea.
    Mr. Stokes. Well, I think if we look back for a moment to 
the EPA pilot projects around the country, and, of course, what 
they are trying to do really is to get at the problem of 
eliminating these contaminated lands from the inner-city so 
that we can begin utilizing the urban development there and 
make it economically profitable to cities.

                       lead-based paint abatement

    Mr. Secretary, another problem that I have had discussions 
with your Department on over a number of years has been the 
health hazards to children caused by lead-based paint. As your 
budget justification notes, the Centers for Disease Control 
estimates that 1.7 million children have elevated levels of 
lead in their blood, making lead poisoning the number one 
childhood environmental disease. In 1995, a HUD task force 
estimated that there are at least 500,000 units of privately 
owned low-income housing where the owners do not have 
sufficient cash flow to finance the necessary lead hazard 
abatement work.
    Can you summarize the progress that is being made in this 
area by HUD programs?
    Secretary Cuomo. Yes, I can, Congressman.
    First, on the HUD programs specifically, the funding for 
the lead base paint abatement initiatives were $60 million last 
year. We asked for an additional $60 million this year, so, we 
keep the funding constant. And as we have discussed at length 
this afternoon, constant funding for a program at HUD, given 
the budget constraints we are under, is an affirmative 
statement by the Department, because as we have heard there are 
tremendous demands for any available resources.
    I also believe, not only are we keeping the funding 
constant but I also believe on this problem we have started to 
make progress. HHS has done a report that suggests there is 
real progress in understanding the amount of the damage that 
has been done historically by lead especially among children.
    So, I think we start to have real results and we intend to 
continue the effort at last year's level.

              empowerment zones and enterprise communities

    Mr. Lewis. The Administration's budget, Mr. Secretary, 
proposes designation of a second round of empowerment zones and 
enterprise communities. Can you give us some idea of the 
results of that you are now seeing from the first round and 
give us some idea of what has been the program's effectiveness?
    Secretary Cuomo. Well, as the Congressman recalls, we 
designated 72 empowerment zones, and enterprise communities on 
the urban side--there were also rural empowerment zones and 
enterprise communities--but 72 on the urban side. There were 
over 300 cities which applied for those 72 slots, just to give 
the Congressman an idea of the need and the demand, and hence, 
the rationale for the second round.
    So, 300 cities applied for 72 slots. Of the 72 slots, we 
released a report last week which said of the 72 cities, 67 are 
already showing progress in just year two of a ten-year 
program.
    There are about five cities which were not showing progress 
and I was saying to the Chairman, with the new emphasis on 
performance what we are saying to those five is, if they do not 
start to show progress, we will actually revoke the designation 
from them and we will give the designation to other cities who 
had applied.
    But 67 of 72 cities are already showing progress. I think 
that is an overwhelming success.

                          homeownership zones

    Mr. Stokes. That certainly is. That is good news.
    Mr. Secretary, in 1998 you propose to use $50 million in 
CDBG funds for an initiative called Home Ownership Zones. How 
do you envision those funds would be allocated and how exactly 
would they be used?
    Secretary Cuomo. Home Ownership Zones, the concept there, 
Congressman, is that there are many communities which to do 
real revitalization you need to come in with a large scale 
housing effort. In dealing with distressed communities, where 
if you just come in and do scattered site, one house here, one 
house there, it is not going to work. You literally have to 
come in and rebuild the neighborhood.
    The concept we work on at the Department in community 
development is basically a critical mass notion. That in some 
communities if you do not come in with enough reconstruction 
and enough rehabilitation, you do not change the dynamic of the 
community, the community overwhelms what you went in to do.
    Too often jurisdictions cannot find that level of funding 
to do a large scale effort. The HOME program and CDBG program 
have a lot of demands placed upon them and there is funding for 
a few houses here and there. But if a jurisdiction came in and 
said, I want to do 25, 50, 100, 300 homes, they cannot find the 
funding from existing resources.
    This says for those instances where we need large scale 
housing, literally in the 50-to-300-house range, rebuild an 
entire neighborhood, the Homeownership Zones fund would apply. 
It would be a national competition, it would look for 
leveraging, creative architecture, partnerships with local 
communities but it would be for that large scale homeownership 
redevelopment.

                         section 8 outlay trend

    Mr. Stokes. It sounds very interesting.
    My last question, Mr. Secretary. Mr. Secretary, we are all 
aware of the budgetary problems created by the rising volume of 
Section 8 contracts coming due for renewal and your testimony 
this afternoon emphasizes the serious consequences for 
residents if these contractors are not renewed.
    But would it be accurate to say, however, that the 
budgetproblem largely involves budget authority rather than actual 
outlay? The growth in budget authority is substantial but it is outlays 
and not budget authority that determines the annual budget deficit.
    What would be the trend in outlays for Section 8 contracts 
and for the Department, as a whole, under your budget proposal? 
That is, tell us would outlays rise any where near as quickly 
as the budget authority which you showed us on these charts?
    Secretary Cuomo. Congressman, I would have made that point 
if I were not chastised for it earlier by the Chairman----
    [Laughter.]
    Secretary Cuomo. But now that you brought it up, the BA 
does go up dramatically. It goes up from about $4 billion in 
1997 to about $18 billion in 2002. And that is that big spike, 
that is a BA spike.
    The outlays from 1997 to 2002 go from $18 to $19 billion 
and I would almost say only one billion from 18 to 19 is the 
increase. But a billion is, obviously, a very significant 
amount of money.
    But it is from $18 billion to $19 billion in outlays. The 
BA is the big increase from $4 billion in 1997 to $18 billion 
in 2002. So, this is a BA problem primarily and not an outlay 
problem.
    Mr. Stokes. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.

                     epa and brownfields initiative

    Mr. Lewis. Thank you, Mr. Stokes.
    If the gentlelady would permit me, I am very interested in 
having the Secretary and his fine staff help clarify for me and 
maybe for Mr. Stokes, it may be very clear but Brownfields 
questions that Mr. Stokes was asking involves a $25 million 
pool. And that pool involves EPA essentially handling the 
cleanup that is necessary on these properties. I would assume 
that if we are going to have children living on those 
properties in HUD housing that, indeed, we would want to have 
some assurance that EPA had done its work.
    I am not sure how much experience they have in actually 
cleaning up themselves but, nonetheless, having said that, if 
EPA was not very timely and professional in following through 
on that part of the responsibility, then the $25 million might 
be available for some other kind of allocation to local 
governments to use, for example, to guarantee their 108 money, 
which then would allow those local communities to leverage 
their, let us say their CDBG dollars. They could have a 
guarantee, go to the bank, get money for CDBG to expand that 
activity. That may or may not provide funding flows for housing 
for poor people and that concerns me.
    And I think that we have got to have a pretty clear 
understanding of what we are doing here if we go forward with 
these funds because there is a great deal of activity that 
needs to take place to guarantee that Brownfields work and we 
have to have follow-through that assures that there is going to 
be housing flows.
    Now, CDBG can be used for housing in some circumstances, 
but that is not necessarily what local government does.
    Mr. Stokes. Mr. Chairman, would you yield?
    Mr. Lewis. Certainly.
    Mr. Stokes. I concur with you that these questions are 
certainly raised by this but we ought to let the Secretary try 
to answer that for you.
    Secretary Cuomo. If I may, Mr. Chairman, on the Brownfields 
initiative, the Brownfields initiative is about economic 
development and the anticipation is while you could clear a 
site to do housing, my estimation is that it would not be the 
predominant use of this program; it would be clearing a site to 
locate businesses.
    That is what we are trying to do is get businesses back 
into cities. Businesses cannot find the available land so we 
want to clear the land so that we can get businesses back, with 
a tax base and jobs.
    EPA and HUD will have two separate functions. EPA will do 
``the cleanup.'' They will provide funding to local governments 
to allow the cleanup. It is not my understanding that EPA is 
going to actually go in and perform the cleanup operations. But 
that they will fund through local governments the cleanup. 
Private contractors will come in and adhere to whatever the 
certification process is, be it city law, State law, Federal 
regulation. That will happen through EPA funding.
    HUD funding then would allow the anticipated reuse of the 
site being economic development reuse. But just as we would not 
do the redevelopment side of it, EPA will not do the actual 
cleanup. But they would be funding the cleanup side, we will be 
funding the redevelopment side.
    And, again, the primary purpose businesses.
    Mr. Stokes. If the Chairman would just yield for a moment?
    Mr. Lewis. Sure.
    Mr. Stokes. That was my understanding of their purpose. Not 
coming in necessarily for housing but to supplement what is a 
very real problem in terms of trying to get businesses to 
relocate back in the inner-city. And when they come in to the 
city and run into this contaminated land in there, they, of 
course, immediately throw up their hands. And, then, of course, 
what you have are many businesses who can come into that area 
but who do not have the proper funding to be able to do so. 
Given the aid in that respect, they would be able to function 
as businesses.
    Many of them are small businesses and many of them minority 
businesses and this is a combination between these two agencies 
to try and help facilitate bringing that type of economic 
revitalization back so that we start adding this land back to 
the tax base.

              need for guidelines for brownfields funding

    Mr. Lewis. If we are using Brownfields in an effective way 
to make these lands available for economic development or for 
housing it seems to me that there needs to be some pretty 
careful guidelines, since we are talking about Federal monies 
that are being used to do this.
    And, indeed, short of our becoming the authorizing 
committee, I am very concerned that there are no guidelines out 
there that really give us a clear idea that these objectives 
are going to be reached.
    And I am not sure how rapidly we should move forward unless 
there are authorization guidelines.
    Secretary Cuomo. Well, Mr. Chairman, the----
    Mr. Stokes. It is a legitimate concern. You might want to 
address it, Mr. Secretary.
    Secretary Cuomo. It is two-fold. First of all, the need 
here it is tremendous, as I mentioned earlier.
    Mr. Lewis. Yes, I can see that.
    Secretary Cuomo. And I bet you the Conference of Mayors 
would say that this is their number one concern. Whenever they 
have a conference, Brownfields is at the top.
    As far as the spending money, the $25 million from HUD 
isgoing to be a drop in the bucket on this need. In the practical 
context, what you have are sites in cities all across the country which 
were factory sites, industrial sites. You have a great rusting steel 
skeleton of a factory. The site has been contaminated over the years by 
use. It now sits fallow because nobody has the funding to come in and 
clean up.
    And a business that would come and locate there, does not 
want to be responsible for the cleanup either financially or 
legally. So, it is a standstill. The site is there, the site is 
empty. The city cannot redevelop the site because it cannot get 
it cleaned up and you cannot get any business in.
    The Brownfields initiative will let EPA help with the 
funding of the cleanup. Once the site is clean, HUD will fund 
an economic development related new enterprise.
    There is pending Brownfields legislation now, which will be 
very specified about how the EPA portion of it would be funded.
    On the HUD side, Mr. Chairman, we believe we can do this 
within existing authority, that is why we do not suggest 
authorizing language. However, if the Chairman would prefer, we 
could write up the full specifications on how this program 
would be administered, what the criteria for competition are, 
what the selection criteria are and present them to the 
committee for your review.
    Mr. Lewis. I think that would be very valuable. And we 
might even share it with the authorizing committee.
    [The information follows:]

                    Brownfields Redevelopment Grants

    As part of the Administration's Brownfields Initiative, the 
Department proposes $25 million for the Brownfields 
Redevelopment program. This is the first of four annual funding 
requests, for a total of $100 million to be dedicated to this 
initiative between 1998 and 2001.
    This program will make competitive Economic Development 
Initiative (EDI) grants in conjunction with Section 108 loan 
guarantees for qualified brownfield projects. Grants would be 
focused on community and economic development activities, and 
could also be used for environmental remediation. Grants would 
be used to enable brownfields to be returned to productive, 
job-creating uses and to address the economic development needs 
of communities in and around such sites. All activities carried 
out under these grants must be CDBG-eligible activities that 
support the cleanup and economic redevelopment of targeted 
brownfields sites. CDBG-eligible activities include: (1) 
acquisition of property; (2) clearance, demolition, removal and 
rehabilitation of buildings and improvements; (3) 
rehabilitation of buildings or construction of real property 
improvements carried out by public or private organizations; 
(4) assistance to private, for-profit entities for economic 
development projects; (5) infrastructure improvements, 
including construction, reconstruction or installation of 
public or and other site improvements; and (6) the 
investigation and cleanup of environmental contamination in 
connection with any of these other eligible activities.
    Grants will be made on a competitive basis in accordance 
with Section 108 (q) selection criteria. In making these 
awards, HUD will give priority to communities that will 
emphasize the use of grant funds for redevelopment activities, 
and will require communities to carry out project activities in 
accordance with sound environmental practices. The selection 
criteria are the following: (1) level of distress in the 
community to be served and in the jurisdiction applying for the 
assistance; (2) quality of the proposed plan; (3) financial 
need for assistance; (4) demonstrated capacity to conduct a 
program for the cleanup and redevelopment of brownfields sites; 
and (5) demonstrated capacity and commitment to coordinate 
project activities with appropriate environmental regulatory 
agencies. Priority will be given to projects located in 
designated Empowerment Zones or Enterprise Communities.

    Mrs. Meek. Mr. Chairman.
    Mr. Lewis. The gentlelady.

                         epa efforts in florida

    Mrs. Meek. Mr. Chairman, I just would just want to add a 
comment to that. I think, as I said before, that it is a very 
serious project and it is one that will work but what has 
killed that in the State of Florida for so long is EPA's 
slowness to implement any of these things.
    I have been hearing about underground storage tanks, I have 
been hearing about EPA cleanup for the last 10 or 15 years and 
we still have those sites that are in those communities because 
there is no money, Mr. Secretary.
    Secretary Cuomo. Well, I think that----
    Mrs. Meek. And that is the problem.
    So, you think there will be? I know the $25 million will 
not do it.
    Secretary Cuomo. Well, as I said to the Chairman, the $25 
millions is a drop in the bucket. But, on the Congresswoman's 
point about the frustration that exists in local communities, 
let me just put an exclamation point on that statement. I do 
not believe it is the dilatory tactics of the EPA. Quite the 
contrary. Administrative Browner and I have spoken about this 
problem and she is raring to go, to use an expression. The 
problem is that the funding was not previously available.
    Mrs. Meek. That is what I said.
    Secretary Cuomo. Where is the funding for the cleanup? EPA 
has not had the funding, local governments have not had the 
funding for this program, and HUD has not had the funding. 
Theoretically you can now do this through CDBG, through the EDI 
program----
    Mrs. Meek. What is CDBG?
    Secretary Cuomo [continuing]. But there is too many demands 
on the CDBG. So, this would be additional resources to do this.
    Mrs. Meek. Excuse me, Mr. Secretary. Excuse me, Mr. 
Chairman.
    Mr. Lewis. Sure.
    Mrs. Meek. I just want to say they are going to beat a good 
horse to death. CDBG.
    Secretary Cuomo. You could use CDBG to do Brownfields if 
you could figure out a way to meet all the other needs. The 
problem with CDBG is that it is almost too good. There are so 
many needs that the program can address you have to balance all 
those competing needs on the local level. Much the way we are 
having a discussion here today trying to balance the needs 
between the disabled and public housing, et cetera. So, there 
is not enough CDBG funds to go around.
    Mr. Lewis. If I could just partially share with you my new 
understanding of some of this. It is my understanding that the 
last couple of years EPA has requested funding for Brownfields.
    Mrs. Meek. Yes.
    Mr. Lewis. And in the year before last we gave them 
somewhere in the neighborhood of $30 million, last year $39 
million, whether or not any of that money is actually being 
spent at specific locations or not we have yet to hear. You 
will have the opportunity. In fact, I commend you this 
opportunity for asking EPA that question, what precisely have 
you done with that $69 million and what kind of jobs are we 
going to get out of that in the next ten years or two years or 
three years?
    Mrs. Meek. Thank you, Mr. Chairman.
    Mr. Chairman, I do know that they have a grant program out 
but I do not know very much about the rest of it.
    Mr. Lewis. Okay.
    You have still more time. We have been----
    Mrs. Meek. Well, sir, I have a lot of questions but I 
want--Lou is training me; he has asked a lot of questions I had 
an interest in.
    Mr. Lewis. All right.
    Mr. Stokes, do you have any further questions?
    Mr. Stokes. No, Mr. Chairman.
    Nothing further for me, thank you very much.

               timely submissions of 1998 justifications

    Mr. Lewis. I am going to ask that you respond to the 
Cabrini Green, Chicago's Housing Authority stuff for the 
record. We may want to have some exchange with you in 
connection with that. I did want to mention one other item. 
This is only my third season in this responsibility and it is 
the first time that I can say that I have had this experience 
and I can say it is the first time in most people's memory that 
we have had this experience, that is that HUD--and you are to 
be congratulated, Mr. Secretary--actually provided 
justifications to the committee. And that is a pattern that we 
commend and encourage. And I want to congratulate you and 
express my appreciation for it, it is very helpful.
    Tomorrow we will come back in the morning if you will, and 
we will have some questions regarding Indian housing and then 
we will go from there and you and I can talk tomorrow morning 
about what your schedule really involves and we will try to be 
as cooperative as possible with your schedule.
    Secretary Cuomo. Thank you, very much.
    Thank you, very much, Mr. Chairman.
    Mr. Lewis. With that, we are adjourned until tomorrow.
                                         Wednesday, March 19, 1997.

                  seattle times article--tulalip tribe

    Mr. Lewis. The meeting will come to order.
    Welcome, Mr. Secretary.
    Secretary Cuomo. Thank you. Thank you for having us back, 
Mr. Chairman.
    Mr. Lewis. I would apologize at the beginning for the 
ongoing conflict of meetings. Members are in Appropriations 
Committees all over the place. So Mr. Stokes and I just 
generally agreed that we will move forward in order to get our 
appropriate questioning done, and in the meantime, try to keep 
all of our schedules reasonably sensible.
    Louis, before I start out on Indian housing questions, do 
you have any comments? Or should we just proceed?
    Mr. Stokes. Why don't we just proceed, Mr. Chairman?
    Mr. Lewis. Look at this. Someone wants me awake, even. 
[Laughter.]
    Mr. Lewis. That is dangerous.
    Good morning. Mr. Secretary, I would like to continue this 
morning with an area that has been receiving a fair amount of 
attention in recent months, largely because of the series of 
articles which ran in the Seattle Times last December. The 5-
day series raised serious questions as well as allegations 
relating to improper and in some cases potentially illegal use 
of taxpayer dollars by tribal governments and Indian housing 
authorities.
    These articles raise a troubling portrait of mismanagement 
of Indian housing programs that should be and I believe is now 
being investigated fully. It is my understanding that the HUD 
inspector general was notified of these allegations, and she is 
presently conducting a thorough investigation. I also 
understand that HUD remains committed to a policy of zero 
tolerance towards the abuse of Federal housing programs.
    That being the case, Mr. Secretary, I think you would agree 
that we must insist upon full accountability in the manner in 
which Indian housing programs are carried out.
    Having said that, Secretary Cuomo, when can we expect the 
final report of the inspector general? And can you give us some 
insights into the types of conclusions we might expect from 
that report?
    Secretary Cuomo. Yes, I can, Mr. Chairman, and thank you 
once again for your time and attention and for having us back 
this morning.
    I share the Committee's concern about the Seattle Times 
series. I do not know that it is tremendously important to go 
through on a case-by-case basis all the cases reported. Were 
they all accurate? Was HUD behind the eight ball on all of 
them? Were they all fraud?
    I do not know that it is necessary to debate it, and we 
would have some differences with some of the reports in the 
paper. But overall if the thrust of the story was HUD did not 
do an adequate job in oversight, the stories are correct. 
Assistant Secretary Marchman has said repeatedly that in his 
opinion the Department's position is we should have done a 
better job on oversight and there are lessons to be learned 
from the entire situation.
    To remedy what has transpired, the Inspector General, as 
you know, is doing a full review, full audit. She has made some 
findings basically on the Tulalip Housing Authority situation, 
and is continuing with a full review.
    The program office is also doing a full review. We are 
looking to recoup funds, again, specifically from the Tulalip 
Housing Authority, which is a situation that is getting the 
most attention right now from the Department.
    Following the Inspector General's review and the program 
office review, we will then reassess the entire situation, and 
if there are any possible criminal sanctions, we will make 
those referrals and we will cooperate with the enforcement.
    As we discussed yesterday, restoring the public's trust is 
a high priority for the Department. The Department cannot be 
aggressive enough, not just in the traditional means--program 
letters, audit letters, Inspector General renew--but also on 
the criminal side. And if there is that possibility, we want to 
pursue that route. I think that will also send a different type 
of signal to the people who use HUD programs.If you misuse 
these funds, sure, you are going to get an audit letter and, sure, you 
are going to get a program letter. But we will also make the referral 
to the criminal agencies. And we are serious about it. That will be a 
different signal and a loud signal and an effective signal, I believe.
    So that is the overall position of the Department on this 
situation thus far, and, again, that is retrospective. 
Prospective, we have the new legislation that is a tremendous 
opportunity to correct these wrongs and learn those lessons and 
make sure it never happens again.

         oversight responsibilities to protect indian families

    Mr. Lewis. I appreciate that response, Mr. Secretary.
    I would like to make some preliminary comments. These are 
largely just off the top, because sometimes I best communicate 
with my friend, Louis Stokes, where I am coming from on issues 
like this by that. It is my concern that we are addressing a 
very unusual Federal relationship here. The Bureau of Indian 
Affairs generally is responsible for a variety and mix of 
oversight that relates to Indian programs and Indian problems. 
At the same time, where there are Federal dollars flowing that 
come from HUD, we have got very clear and very serious 
responsibilities.
    Mr. Stokes, I might mention that the Seattle Times article 
focused upon a housing authority, an individual responsible for 
housing funds flowing into the tribe, where those funds 
apparently were diverted, to some extent, and that led to that 
individual family building a 5,000-, 5,500-square-foot home for 
themselves. To say the least, some would suggest that diverted 
monies from the poorest of the poor within the Indian tribe or 
the Indian country circumstance.
    Now, shifting gears, going to my own district, where there 
is a local tribe, I will not even name that local tribe, but 
nonetheless has fewer than 100 families. That tribe has 
revenues from gambling in the neighborhood of $100 million a 
year. Each of their houses in the mountainsides of my territory 
is about the size we are talking about here, which raises a 
very interesting specter. If one is going to have a separate 
country and one is going to be a separate nation, one ought to 
begin to say what is our responsibility in terms of the poorest 
of the poor within our States, if you will.
    My point is that there is plenty of responsibility to go 
around here. If there has been a misuse of Federal housing 
dollars, we need to focus clearly upon that. But in turn, I 
raise the other questions because the sphere is one that we 
have not--I have not seen addressed around here in a clear way, 
and it is about time we are willing to ask very delicate 
questions.
    So with that, it is my belief that HUD must exercise proper 
oversight to protect not only the taxpayer but to ensure that 
Indian families have a decent chance at a decent life. I 
recognize that the U.S. Government and the Indian Nation have a 
unique relationship that is based on tribal sovereignty and the 
preservation of Indian culture. Self-determination is 
important. This relationship requires mutual respect and 
working together towards the common goal of making life on the 
reservation more productive for every Indian family.

              balance between oversight and overregulation

    Before we go any further, let me ask a very straightforward 
question. Does this administration have an Indian housing 
policy? And if so, can you give me your sense of what it is?
    Secretary Cuomo. I think, Mr. Chairman, as I said in my 
response to your first question, the retrospective view is very 
important here, not just in what HUD did, but I think the 
Chairman's point is very well taken as well. The entire history 
of the relationship between the Federal Government and Indian 
tribes in this country is really unique in the way it has 
developed, and that history, I think, plays a large role in the 
situation that we saw reported in the Seattle Times. But the 
retrospective is important. What worked? What did not work? And 
how do we correct it?
    Going forward, I think we bring those lessons. The 
legislation that was passed by the Congress, the Native 
American block grant, gives us an opportunity that we have not 
had before. This literally wipes the slate clean, takes the 
1937 Housing Act as it applies to these areas and says let's 
start over, let's redesign. We are going to a negotiated 
rulemaking, and I think it is an opportunity to do it right. As 
the Chairman said, the need is profound--gambling aside and the 
issues that are raised. But the need for the vast majority of 
these Indian tribes is probably the most severe housing need in 
the Nation.
    So recognizing that, it is our obligation to try to do this 
and do it right. The block grant and the new legislation and 
the negotiated rulemaking gives us an opportunity. I think 
there are a couple of hallmarks that we have to keep in mind 
going forward. Block grant does not mean blank check. We use 
that block grant----
    Mr. Lewis. I have heard that phrase.
    Secretary Cuomo. Yes, I have heard it myself. I cannot 
remember where, Mr. Chairman.
    Let's bring that forward. When you say block grant, 
different people hear different things. And too often local 
governments hear; they get the funding; the Federal Government 
is a pass-through; HUD is a conduit. It is a pipeline, both 
ends open. The funds come in one side, they go out the other 
side, and then the local government does whatever it wants to 
do with the money.
    That is not the purpose of any block grant. We have to make 
sure when we say block grant that we all understand what we are 
talking about--performance measurement as opposed to 
regulations for the sake of regulations. What do we want the 
money to do? Let the Federal Government set the goal. Let the 
local government determine the means to meet that goal, but 
let's have performance measurement so we all know what we are 
doing, what we are talking about, and where the money is going, 
bringing that forward.
    We have also learned, painfully, that there is a lack of 
capacity in many of these housing authorities and with many of 
the tribes. Part of HUD's role has to be to increase that 
capacity, to bring the technical assistance to the table, so 
that the local governments can actually use the funds and use 
them effectively. Because as good as we are on our side of the 
table, HUD's side of the table, as intelligent a system, as 
clear a system, as performance-driven a system, if you do not 
have the capacity on the other side of the table with the 
Indian tribes, it is not going to work. And a lot of what the 
Seattle Times was talking about I think reflected lack of 
capacity as much as it reflected lack of oversight.
    I think those will be the balances that we have to reach. 
The Chairman said it well when you said the distinction between 
oversight and over-regulation. And that is what we have to work 
through on this block grant.

                        hud interaction with bia

    Mr. Lewis. I appreciate that response. I gather that the 
general response would suggest that, insofar as this Secretary 
is concerned, Indian housing is a very high priority in terms 
of your overall, this administration's overall housing 
priorities.
    Secretary Cuomo. Yes, it is, Mr. Chairman. I would say one 
of the highest, most acute housing needs in the Nation exists 
on Indian lands.
    Mr. Lewis. As you know, HUD bears ultimate responsibility 
for the disbursement of taxpayer dollars. You have indicated 
that. And for the use of tribal governments and Indian housing 
authorities, while it is not traditionally Congress' role to 
micromanage specific housing programs, you are suggesting that 
you are going to insist that we have a mechanism for measuring 
results at the other end.
    Secretary Cuomo. Yes, Mr. Chairman, exactly.
    Mr. Lewis. We have found over time that the Bureau of 
Indian Affairs from time to time seems to operate in a fashion 
that they would just as soon we did more than keep arm's 
length, that we stayed out of their business; and indeed, that 
if we begin asking questions, we may be interfering with their 
responsibility.
    I would like to get a sense from you what kind of 
interaction you have with BIA in connection with these 
problems.
    Secretary Cuomo. I can ask Assistant Secretary Marchman 
what the day-to-day interaction is, but the concept that we 
bring to the table is, the question of congressional 
jurisdictions and authority aside, we are responsible, HUD is 
responsible for administering these funds; we are responsible 
for the accountability and the protection of the public trust; 
and we will exercise that with all due diligence and report to 
this Committee on it.
    As far as the interaction with the Bureau of Indian 
Affairs, Assistant Secretary Marchman may have a better idea.
    Mr. Lewis. Welcome, Mr. Marchman. We appreciate it.
    Mr. Marchman. We work with the Bureau and we work with 
other Indian agencies, but primarily we work with the tribes. 
The Secretary is absolutely correct. What we see in the current 
program, and certainly in the new program, is to make sure that 
there is accountability. There had been some confusion that we 
have taken too much of a hands-off approach and perhaps that 
has given us some----
    Mr. Lewis. It has been suggested that that might be the 
case.
    Mr. Marchman. Yes, painfully suggested. But it is the 
balance, as the Secretary talked about, of oversight and the 
over-regulation, and I think the new legislation, as we put 
together the rules and the regulations, has to strike that 
balance. And we are working, even as of today as the negotiated 
rulemaking is ongoing, to make sure that we have that balance 
in the new program.

                  funding for indian housing programs

    Mr. Lewis. Mr. Secretary, we await the IG's report, but the 
GAO draft report notes that from fiscal year 1986 through 1995, 
HUD provided $3.9 billion to approximately 189 housing 
authorities to develop and maintain affordable housing and 
assist low-income renters. Nevertheless, as you know, the 
conditions on the reservations remain extremely difficult.
    In your view, Mr. Secretary, are we spending too much, too 
little, or just about the right amount of dollar flow to Indian 
housing authorities?
    Secretary Cuomo. I think, Mr. Chairman, that we are not 
spending enough. We had this discussion yesterday. If you said 
are we spending enough to meet the entire need, the answer is 
no.
    Mr. Lewis. There is still a line.
    Secretary Cuomo. Yes. And the line exists almost across the 
board. CDBG is not meeting all the needs that it could meet. In 
public housing, the lines exist, obviously. In the HOME 
Program, the line exists, 202, right across the board, 811 as 
it was made clear yesterday.
    At the same time, we are in a balanced budget environment. 
We are trying to reach that balance by the year 2002, and we 
are making many, many tough choices. But is there enough 
funding to meet the need? No.

                           tulalip tribe case

    Mr. Lewis. Of particular concern to me is that some of the 
neediest people within some tribes are being deprived of decent 
housing, while others either in a position of authority or with 
high incomes are living in homes far more extravagant than most 
people, presumably the people that those funds are intended to 
serve in the first place.
    In one particular case I am aware of, a large home was 
owned by the executive director of the Indian housing authority 
and her husband, the very people who were responsible for 
administering housing dollars for the benefit of the entire 
tribe.
    Mr. Secretary, I am looking for a little guidance here. Is 
this an example of laws being broken, or is this just a case of 
extremely poor judgment? Do regulations exist to oversee the 
size of homes built on reservations? You know, if not, should 
there be, et cetera?
    Secretary Cuomo. Mr. Chairman, first of all, I will have 
the full report from the Inspector General by the end of May, 
which will give us a clear sense of what happened in all of 
these cases. The specific matter that the Chairman refers to 
was with the Tulalip tribe. A 5,200-square-foot house was 
built. The executive director of the authority later married 
the director of development of the authority. They lived in the 
house together.
    It raised many questions: conflict of interest, obviously, 
between an executive director who then marries the director of 
development, so literally there is no check and balance. 
Conflict of interest was there. The size of the house was 
obviously excessive. It violated existing regulations, Mr. 
Chairman. This is not a situation where we did not have a 
regulation. We had the regulation. The purpose of these funds 
and programs is to build ``modest'' homes. No one would argue 
that the house that was built by the Tulalip tribe was a modest 
home. So it violated the regulations.
    So I think you have, again, both sides. You have more 
capacity, education, that we need to get to the tribes; 
conflict of interest, what is acceptable, what is not; better 
oversight of our regulations. It is not that we did not have a 
regulation. We had it. It did exist.
    To give the Committee comfort on our actions since, we are 
pursuing vigorously this specific situation. We are looking to 
recoup approximately an additional $45,000 that went to the 
house for infrastructure work. The couple paid about $215,000 
for the house. They did not pay for the infrastructure 
development to get to the home. We are now looking to recoup 
those funds. We have sent out what we call a corrective action 
letter. So we are moving aggressively after the fact.
    Mr. Lewis. I must say that this illustration raises the 
public concern about oversight. You have suggested that now 
after the fact we are looking back to oversight. Was there or 
has there been a problem of some suggesting within the 
Department that we transferred that responsibility to the 
tribes, given them more flexibility, so our oversight 
responsibilities thereby are relieved?
    Secretary Cuomo. The Department would not take that 
position at all. Again, deregulation, I do not think this is an 
issue of deregulation. We had the regulations. They were 
violated, and then there is a question as to whether or not we 
were diligent enough on the oversight to find those violations. 
And that is the question that we have to address going forward.
    Mr. Stokes. Would the Chairman yield?
    Mr. Lewis. I certainly would.
    Mr. Stokes. A point of clarification here. How many such 
homes are there in this category of being in violation up there 
on this reservation?
    Secretary Cuomo. On the specific reservation, we could 
check, Mr. Stokes. But overall we are talking about the vast 
minority. We have a handful of cases here in years of 
operation. So this is obviously the exception and not the rule. 
Most of the homes that are built are modest homes. We have 
regulations as to the expense, the cost of the homes.
    The Seattle Times, the entire series, is trying to 
characterize the entire program with a handful of bad players 
and bad examples, which we will accept responsibility for. But 
that does not stereotype or characterize the entire program.

                    impact of seattle times article

    Mr. Stokes. That is why I pose the question. I am getting 
the impression here that we are talking about something that is 
relatively widespread, when what you are saying to me is that 
this is not widespread.
    Secretary Cuomo. No, no. The dilemma for the Department, 
Congressman, is that this, literally a handful of cases over 8 
years, is what the Seattle Times is reporting on.
    Mr. Stokes. And approximately how many housing----
    Secretary Cuomo. Oh, thousands and thousands of units, and 
they have a handful.
    Most of the cases that the Seattle Times reported on, HUD 
is the one who disclosed them, turned them over to the Seattle 
Times. Many of them were already being investigated by the 
Inspector General. So they did not even tell us, by and large, 
anything that we did not know in the first place. We knew this. 
We were making the cases. They put it in the newspaper. They 
get headlines out of it. But most of these cases we knew. And, 
again, these are the perverse exceptions to what normally 
happens.
    Having said that, the Department has to be diligent to make 
sure this never happens, because literally if it happens once, 
it is used against the entire program, which is what is 
happening here.
    Mr. Lewis. Which is exactly what is happening here.
    Secretary Cuomo. Yes.
    Mr. Lewis. And it is of great concern to me. The report 
makes the point that this Committee constantly is attempting to 
make sure we have oversight about. That is, as we shrink 
resources in the discretionary pool, there are only so many 
dollars to go around. And an illustration like this literally 
highlights the reality that some people will abuse the process 
for their own purposes, and they are really in another location 
in the country taking monies that deservedly should be flowing 
to the poorest of the poor and using it for their own purposes.
    Mr. Stokes. If the gentleman would yield?
    Mr. Lewis. Sure.
    Mr. Stokes. I totally agree with you, Mr. Chairman. I think 
the Secretary touched upon something but did not elaborate on 
it. But those of us who follow housing in this country realize 
that, as bad as housing is in many urban communities, probably 
the worst housing in America is Indian reservation housing.
    Mr. Lewis. Correct.
    Mr. Stokes. And you really compound what I think is a 
national tragedy when you think of the fact that virtually we 
still have people on reservations in this country. We are 
talking about the people who were the Native Americans before 
anybody else came here. We still have them up on reservations. 
And we compound problems now by the kind of situation you have 
highlighted where they are being taken advantage of, whether it 
is one instance or ten instances. It is still bad, and it is 
wrong.
    Mr. Lewis. Correct.
    Mr. Stokes. And, you know, you are certainly justified in 
highlighting it, but we did put the whole thing in context and 
understand what the whole picture is like. In almost anything 
in American life, we find some bad apples in everything. We 
have got to highlight the real problem, and I think some 
emphasis needs to be put on the tragedy of what is happening to 
Indians.
    Mr. Lewis. I frankly agree with that, and I believe, I 
sense that the Secretary feels the same way. We have had a flow 
to these Indian housing authorities of $3.9 billion over the 
period of time that we are talking about. There are 189 housing 
authorities. But within that mix, the conditions of the average 
Indian family are conditions that we do not want any human 
being to have to live in. And the reality of that is that an 
awful lot of money seems to be flowing in a direction that 
never quite gets to the poorest of the poor.
    That happens in our urban centers, but tragically, it would 
appear this is happening within Indian reservations as well. 
And we are really trying to get to the heart of this in--this 
room--nobody will report on what goes on here, and that is 
fine. The reality is that we have got a responsibility for 
oversight, and we want to make sure that we are doing that 
together.
    Secretary Cuomo. If I might, Mr. Chairman, I think 
Congressman Stokes raises a very important point. The context 
here is important. And in some ways, to typify the Indian 
problem or the efforts that the Federal Government has made on 
Indian reservations by the Seattle story, and to be responsive 
to that, really is a perversion of the reality.
    I understand the damning effect that the Seattle story had, 
as we discussed yesterday, when we are fighting for credibility 
on these programs and we are looking for more funds, how 
damaging a story like that can be. That is why I want to make 
sure that I am responsive to that story, and I do not want the 
Committee to think that we do not take that seriously. Even if 
it is one, it is one too many, and we are going to ferret it 
out.
    But at the same time, the context that Mr. Stokes points to 
I think is very true. These are literally a small handful of 
what is otherwise a program that has done tremendous, 
tremendous things. And these are really unique situations where 
you have an executive director of an authority who winds up 
marrying the director of development of the authority. They 
build a 5,200-square-foot house together. It is inexcusable. 
But it is also one in tens of thousands.
    If I might, one other second, as we have seen the Tulalip 
picture, I do not want that to typify, the 5,200-square-foot 
house to typify what we are now out there doing with federal 
taxpayers' money. These pictures are the majority, obviously, 
and these represent the types of housing that we are building 
in these places with these funds, modest homes, three-, four-, 
five-bedroom homes, $80,000, $76,000 total cost. This is the 
kind of housing we are building with federal monies.
    The Tulalip example is really an aberration and one----

                number of homes built without violations

    Mr. Stokes. If I can ask a question, Mr. Chairman, give us 
some idea of the number of homes in that category that HUD has 
assisted the community in putting up, where you have no 
violations or irregularities of any kind.
    Secretary Cuomo. Assistant Secretary, how many homes would 
you say overall?
    Mr. Marchman. I think some 60,000 homes. I think that is 
the number.
    Mr. Stokes. Sixty thousand homes fall in this category.
    Mr. Marchman. Yes.
    Mr. Stokes. Where there are no violations or irregularities 
of any kind.

                       hud actions to stop abuses

    Mr. Lewis. Mr. Stokes, if I could make a point for the 
Seattle Times, this is a picture of a woman who is standing in 
front of the home that she is living in, a condition that she 
should never have to live in, and she has been on a waiting 
list for 10 years.
    So the question in this series, at least, is working 
together we need to figure out--this illustration is the kind 
of homes we should--I must say that far outstrips anything that 
I saw in New Orleans. Not to return to a sore subject, but it 
is a subject with me.
    But in the meantime, Indian housing continues to be one of 
our most difficult challenges. So I ask you, Mr. Secretary, I 
am interested in how we can better help these people of tribes 
help themselves, how we can better make sure our service is 
delivered to ladies like this one, and what steps HUD is taking 
to make sure that abuses like this--they do illustrate an 
extreme, but nonetheless it is an important illustration.
    Secretary Cuomo. The point is well taken, and the point of 
setting the context was we just do not want to throw out the 
baby with the bath water, if you will, because there was one 
bad actor.
    Mr. Lewis. Yes.
    Secretary Cuomo. We are now going to----
    Mr. Lewis. It was a human being who saw an opportunity and 
say, hey, friends, it may require a marriage, but let's take 
advantage of it. Made the supreme sacrifice.
    Secretary Cuomo. They literally were in bed together, Mr. 
Chairman. [Laughter.]
    Mr. Lewis. Excuse me, ladies and gentlemen. We do not want 
to make light of this. It is very important.
    Secretary Cuomo. But, going forward, as I mentioned----
    Mr. Lewis. Going forward, yes.
    Secretary Cuomo. Moving right along, the opportunity now is 
to do it right, because I agree with the Chairman that if it is 
once, it is once too many. What is the balance? The block grant 
gives us the opportunity to do it. The negotiated rulemaking 
gives us an opportunity to try to do it. Through that process, 
hopefully we will be successful, and I think the two hallmarks 
will be creating the capacity on the side of the tribes to make 
it work, and the Federal Government finding the balance between 
oversight and over-regulation. And that is where we will be 
working.
    Mr. Lewis. That balance is important.
    Mr. Stokes, I am going to yield to you at this point, and 
then we will go through the balance of our colleagues. Then I 
will have a few more questions, and we will try to keep the 
Secretary on his schedule. So, Mr. Stokes?

                      complicity of hud officials

    Mr. Stokes. On this same point, I guess one of my concerns 
is on the Seattle situation, there was no complicity of HUD 
officials in what transpired here, was there?
    Secretary Cuomo. No.
    Mr. Stokes. This was just----
    Secretary Cuomo. None has been alleged. None has been 
suggested. None is being investigated.
    Mr. Stokes. Right. That was one of my concerns.
    Over the years, you and I have been through a lot of things 
here on this Subcommittee, and, of course, one of the things 
that was very disturbing a couple years back has been 
complicity of HUD officials in scandals of this sort. This is 
something that took place in which HUD officials has no 
involvement. There may have been some laxity in catching this 
before it occurred, but that is the extent to which HUD was 
involved.
    Mr. Lewis. The local authorities were not HUD officials 
but, rather----
    Secretary Cuomo. Yes, yes. I think that both points are 
very well taken. Number one, there was no allegation of 
complicity by any HUD official. We are talking about actionsby 
local housing authorities, not HUD officials. The worst allegation made 
against HUD is lack of oversight.
    Having said that, as I review the facts and circumstances 
in the Seattle Times story, again, this is a handful of cases. 
Again, these are cases that happened over 8 years. And most of 
these cases, if not all of these cases, HUD was already dealing 
with.
    One thing that we definitely proved here was lack of press 
management and handling a story effectively, because if you 
read the Seattle Times, you would think they came in and 
discovered something and HUD was asleep at the switch and that 
they went out and did all this research and they found out 
things that we should have known.
    That is not the case. That is not the case.
    Should we have been more diligent? Should we have moved 
faster? That is a discussion we could have. But we were not 
asleep at the switch, and we were certainly not involved in any 
of the actions which are being discussed. And even on those 
actions, there is a range from mismanagement, lack of capacity, 
lack of oversight. So there is no one, clear-cut, demonstrable 
flaw in the system. These have to be corrected, but, again, I 
do not think they speak----
    Mr. Lewis. Mr. Stokes, I wonder, could we have the 
Secretary--you suggested that maybe there was some lack of 
press management in that.
    Secretary Cuomo. Yes. In my opinion, for that story to be 
written the way it was, to give that impression, was more than 
the normal sensationalism that a paper is due.
    Mr. Lewis. I only wanted to follow up on that because the 
Speaker wanted me to follow up on that. [Laughter.]
    I do not think the story fairly accounts for the reality of 
the situation.

                  housing assistance from bia and hud

    Mr. Stokes. Let me understand a little more clearly, where 
BIA comes in and where HUD comes in, in terms of providing this 
type of housing to Indians who are required to live on a 
reservation. Can you speak to that?
    Secretary Cuomo. I will turn to Assistant Secretary 
Marchman.
    Mr. Stokes. Mr. Marchman, can you clarify this for me?
    Mr. Marchman. Unfortunately, I cannot. I can offer this 
clarification or a little bit more enlightenment on it. Under 
the programs which we run from HUD, we do the CDBG for Tribes, 
we do renter programs and in this particular case, 
homeownership.
    We work very closely with the BIA and other groups in an 
interagency council, if you will. But we take the lead with 
this. There may be other programs which the BIA runs which 
assist in housing but I am not familiar with them. But I can 
get that for you.
    [The information follows:]

                  BIA Programs Which Assist in Housing

    The Department of the Interior, through the Bureau of 
Indian Affairs (BIA), operates only one program which provides 
housing assistance to Native Americans. Called the Housing 
Improvement Program, it allocates funds to Indian tribes for 
repairs to existing dwellings, down payments or closing costs 
to purchase dwellings and, under certain limited circumstances, 
new housing construction. The program has an annual 
appropriation of approximately $16 million which includes the 
cost of salaries and expenses for the BIA staff who work on the 
program.

    Mr. Stokes. Have you ever visited the site?
    Mr. Marchman. Not this particular site, no. I have seen 
sites in Indian country. This is probably typical of the 
program and most of the cases, particularly as you know for the 
renter programs, it is much less than this. This is one of the 
programs in which the housing authority is able to fashion 
homeownership programs for the Native American and they suit 
that to the local need, they suit that to the local terrain, 
and they suit that to local resources.
    This is a very strong program and that is why we are so 
disheartened to see it so maligned in the press.
    Mr. Lewis. Mr. Stokes, could I just ask a question?
    Mr. Stokes. Sure.
    Mr. Lewis. Those pictures are an illustration of what we 
want to see as a result of the HUD programs but I do not think 
you would suggest that that is the typical HUD housing project 
within an Indian reservation.
    Mr. Marchman. Oh, no.
    Mr. Lewis. They are largely square boxes from what I have 
seen.
    Mr. Marchman. And the homeownership program, let me make 
that distinction. No, this is not typical at all of the overall 
housing that is in Indian country.
    Mr. Lewis. I mean I would not live in the houses I have 
seen even when they were new. This is maybe okay but----
    Mr. Marchman. Again, that shows the tremendous need.
    Mr. Stokes. Then this represents a special type of project 
as it relates to Indian housing?
    Mr. Marchman. Yes, sir.

                          indian family income

    Mr. Stokes. And what type of income would the typical 
Indian family have that puts up this type of a home?
    Mr. Marchman. It would probably move from a median income 
to a moderate. Maybe 120 percent of median. The housing 
authority is able to fashion the homeownership program to meet 
a greater range of incomes. So, they would be typically lower 
than what you would find in other homeownership programs.
    Mr. Stokes. Well, give us some idea what we are talking 
about?
    Mr. Marchman. Maybe we are talking $30, $40, to $50,000 a 
year.
    Mr. Lewis. Twenty-five to 60 maybe?
    Mr. Marchman. Yes. The average would be about $20,000 for a 
mutual help family.
    Mr. Stokes. I see. But this represents something that is 
not atypical. That the average Indian family does not have 
housing of this kind.
    Mr. Marchman. No, that is correct, sir.
    Mr. Stokes. The average Indian family on reservations, can 
you give us some idea of what their typical family income is 
and what kind of housing they reside in?
    Mr. Marchman. I will struggle with some of my statistics. I 
think the average would be between $5,000 to $15,000 a year.
    Mr. Lewis. A year?
    Mr. Marchman. A year.
    Mr. Stokes. That is income?
    Mr. Marchman. Yes. And most of the housing is substandard 
by any measure without a doubt.
    Mr. Stokes. Probably even when new?
    Mr. Marchman. Yes, sir, correct. For a variety of reasons. 
It is, as the Secretary mentioned earlier and I just struggle 
to repeat, some of the worst housing I have ever seen in 20 
years in public housing is in Indian country.
    Mr. Stokes. I just hope, Mr. Chairman, we put this whole 
thing in its proper perspective because I feel very strongly 
about the fact that what I think is still a national disgrace 
is that we even have reservations in this country for people 
who are required to live up on a reservations and particularly 
in the context and history of what has happened to those people 
in this country.
    And for us to rely upon media type of bashing of a whole 
group of people because of the transgressions of some small 
group, I think, would be wrong for us to concentrate on in that 
manner.
    And I just want to put it in its proper perspective.
    Mr. Lewis. Mr. Stokes, if I could share with you. It is my 
concern that this become the norm if we are going to have 
federal programs that flow. Instead we are dealing with 
families not at $25,000-to-$60,000 of income but we are talking 
about $5,000 of income and the programs are delivering housing 
that you would not live in and I would not live in and they are 
reservation housing.
    So, you know, somewhere there is a disconnect between what 
our goal is and what is being delivered out there and I kind of 
have a sense that it is somewhere in between us and the 
reservation.
    We can discuss reservations but there are reservations of 
choice and that is of concern to me, I must say. At the same 
time, the BIA kind of stands in the middle there and HUD 
programs have very little to do with BIA programs and vice 
versa. It is hard to get through that maze, if you will, and, 
yet, oversight is necessary.
    Mr. Stokes. Thank you, Mr. Chairman.
    I yield back my time.
    Mr. Lewis. I have taken about half your time.
    Mr. Stokes. That is all right.
    Mr. Lewis. Mr. Price.

                          home funding request

    Mr. Price. Thank you, Mr. Chairman.
    Mr. Secretary, I appreciate your returning today.
    Secretary Cuomo. It is my pleasure.
    Mr. Price. I wanted to return as well because my time 
yesterday, understandably, was taken with reference to disaster 
assistance. I do appreciate the exchange we had at that point 
with Mr. Stegman, as well, and the exchange we have had in the 
ensuing hours. I think we all have a better understanding now 
of the need for North Carolina and HUD to work together and 
clear whatever hurdles need to be cleared at OMB in order to 
get the kind of assistance that we need.
    I want to do a couple of things quickly this morning. 
First, I want to commend you for the decisive action that you 
have taken in the matter of reverse mortgages. Going after 
these so-called estate planners who, I understand, have cheated 
older Americans out of thousands of dollars for services that 
are available free from the government. I am one of the 
original sponsors of the reverse mortgage program from my time, 
years ago on the Banking Committee. It is a promising program 
and it is too important a program for its success and 
performance to be marred by this kind of fraudulent practice.
    And if we have time, I would like to return and ask you a 
little bit more about the extent of these problems.
    I want to move on to the HOME Program. The HOME Program has 
not been discussed or focused on in great detail in these 
hearings. From the standpoint of my State, in my district, I 
think it is one of the most important programs we have going.
    You said yesterday, that you regarded the HOME Program as 
the wave of the future in housing programs. That is certainly 
the way that it looks from North Carolina.
    It is a flexible program and it facilitates partnerships 
with other levels of government, with nonprofits, with the 
private sector, and it takes a relatively small amount of 
Federal money and leverages contributions from other sources. 
We get far more bang for the buck. It is a program that has 
been very important in my District and in my State and I trust 
across the country, where these Federal grants of minimal size 
leverage all kinds of participation from other players.
    It seems to be one of the most efficient means for public 
funding to provide affordable housing.
    Now, we are faced in our area with some decline in the 
availability of this assistance. I am told that in the Research 
Triangle area of North Carolina we have seen a decline from 
about $23 million in HOME funds available four years ago to 
just over $14 million in the current Fiscal Year. And I notice 
in your budget request that you really are talking about a real 
cut nationally in this program.
    Now, this budget request, overall, is an increase of about 
30 percent. But this is a program which you regard as the wave 
of the future, which I think by all accounts is a successful 
program and you are proposing a cut of something like 7 
percent, nearly $100 million from last year's level.
    I know you are in a tight situation, I know that lots of 
programs have taken hits, but I wonder, relatively speaking, 
how you would account for the funding request for HOME and, of 
course, I would be interested in what your original request was 
before OMB got a hold of it, in terms of----
    Mrs. Meek. They will not tell you that. [Laughter.]
    Mr. Price [continuing]. What your original request was for 
in terms of where this program was in your overall list of 
priorities?
    Mr. Lewis. Are you asking the Secretary to give us his 
heart of hearts?
    Secretary Cuomo. Thank you very much, Congressman Price.
    First, thank you for the kind comments about our action on 
the reverse mortgage program. It is a great program and I 
commend you for the initiation of it. It does a lot of good for 
a lot of people. And as we have been discussing yesterday and 
today, in our zeal to bring HUD's credibility to a point higher 
than it has ever been before, to restorethe public trust to a 
point higher than it has ever been before, we have been very aggressive 
in making sure that the reverse mortgage program is operating and 
operating well.
    There is a whole new little industry of scam artists that 
are out there. They call themselves estate planners. They 
charge senior citizens literally for nothing. There is no 
value-added, no service added. They charge up to 10 percent to 
get a mortgage when the senior citizen could have picked up the 
phone and called HUD directly.
    So, the Department moved very quickly. What we said was, if 
we find one of our lenders, an FHA-approved lender doing 
business with one of these scam artists, we will disqualify 
them not just from the reverse mortgage program but they will 
not do any HUD business period.
    This was a very tough stance for the Department to take and 
we got that word out.
    And if the Congressman would like to discuss it further, it 
would be our pleasure.

                     approach used for home program

    On the HOME program, the approach of the HOME program is, 
in my opinion, the wave of the future. That is what I stated 
yesterday. The HOME program, CDBG, the Empowerment Zone 
Program, and hopefully where we get with this Native American 
block grant, is the Federal goal, with local means. It is not a 
blank check. We need to measure the performance and tell the 
world what the performance is of that funding with local 
jurisdictional focus.
    Mr. Price. And create partnerships, bring in other players.
    Secretary Cuomo. And create the partnerships, private 
sector, public sector, partnerships.
    That is the approach. And that is the approach we want to 
follow across the Department, the HOME program does that. It 
manifests that basic approach.
    Also, we have little special pride with the HOME program, 
it is a program I administered in my former position as 
Assistant Secretary for Community Planning and Development. 
When we took office a little over 4 years ago, one of the main 
issues in the confirmation hearing of Secretary Cisneros and my 
confirmation hearing, was that the HOME program did not work. 
Too many regulations. There was no spend-out. At that time the 
spend-out rate was about 2 or 3 percent.
    Four years later, the spend-out rate is about 92 percent, 
and we've built 110,000 units with the HOME program. So, the 
approach has been vindicated.
    You stated that the HUD budget has gone up 30 percent.
    Mr. Price. I was talking about your proposals for next 
year.
    Secretary Cuomo. Right.
    It goes up 30 percent, that is true. It goes up 30 percent 
in budget authority. The 30 percent is almost exclusively to 
take care of the Section 8 problem. If you look at the rest of 
the budget besides the Section 8 renewals, it is flat at best, 
down a little bit.
    The HOME program, we put in at 1309 down from 14, a $70 
million cut, after shifting $21 million to the New Native 
American Block Grant Program, which is in keeping with 
basically where the rest of the Department is after you get 
past the Section 8 which is where you have the 30 percent 
increase.
    I do not understand though how those numbers would get your 
State or any district from $23 million to $15 million.
    Mr. Price. Well, the $23 million to $15 million has been a 
four-year progression. And the $23 million is a figure from 
Fiscal Year 1993.
    Secretary Cuomo. Fiscal Year 1993.

                     home funding in north carolina

    Mr. Price. That is what I am told by local housing 
authorities.
    Secretary Cuomo. Do we have a number for North Carolina for 
1996, 1997, 1998 request at 27, 27, 26. So, I would be 
interested in looking at the situation with you because the 
budget numbers would not justify that.
    Mr. Price. Mr. Secretary, if you would yield.
    It may very well be, talking about credit, a lot of 
activity has gone on around the country, it may very well be, 
Mr. Secretary, that nonprofits have come in and played a role 
in filling that gap, leveraging the money. I am not sure that 
it is the case in my State but it could very well be.
    Secretary Cuomo. The Chief of Staff, Mike Stegman, who 
again is familiar with North Carolina and looks out for North 
Carolina in the Department, Congressman, knows the numbers on 
North Carolina off the top of his head.
    Mr. Stegman. Part of it is the entitlement part of it of 
which gets a lot of it. But there is also the State portion 
which you have applied for the non-entitlement part, and the 
consortia. And that is the competitive relationship with the 
States. So, the decline in the actual appropriation is less 
than the decline that you are talking about, Congressman.
    Mr. Price. Yes. And I was not meaning to suggest there was 
any particular problem in our part of the State. All I am 
reflecting is the view of local housing authorities and those 
working in nonprofits that number one, this has been a uniquely 
valuable resource. And, number two, that the resource has not 
been as available as we would have liked. And there has been 
this kind of decline in our portion of North Carolina. But I am 
really speaking to the overall commitment that nationally you 
are making and just asking you to reflect on that commitment 
relative to the other demands in this budget.
    Secretary Cuomo. Congressman, again, the funding for the 
State as a whole, $27 million, would be down to about $26 
million under the proposal, which is a $1 million reduction.
    I would have liked to see the numbers go up. No doubt about 
it. The HOME program is a good approach and uses the money 
well. And I am proud of the way it uses the money and I would 
have liked to have been able to come before the Committee and 
suggested an increase. But as we have also heard, the balance 
of needs here leaves one with no good answer.
    Funding for the HOME program, the Section 811 housing 
program, the homeless, and Native Americans as we just 
discussed, were all tough choices made more difficult by the 
press and the crush of the Section 8 renewals.
    Mr. Price. What was your original pass back request to OMB 
for this line?
    Secretary Cuomo. With all due respect, Congressman Price, 
as I said to Congresswoman Meek yesterday, the conversations 
that we have been having at OMB and the Department we consider 
to ``inside the family conversations.'' And I found it best not 
to comment on what the actual discussions were. We stand by the 
Administration proposal which was the result of that process.
    Mr. Price. Well, we often do get those figures in the 
hearing context, though, and it is not an unusual request.
    Secretary Cuomo. No, I understand that. And I understand 
that there are often discussions public and private about what 
a Department asks for and what OMB saidand what the Department 
said back. I am saying my practice would be that I would prefer not to 
comment on the discussions and how we arrived at a conclusion. But I 
stand by the conclusion.
    Mr. Price. It is safe to assume that you would have desired 
more for this program?
    Secretary Cuomo. That is a safe assumption, Congressman.
    Mr. Price. I thought so. Thank you.

                           reverse mortgages

    On the matter of reverse mortgages, I know we have other 
people who want to ask questions. Whatever information you have 
by way of backup to the action that you took a couple of days 
ago on this in terms of your estimate of the extent of this 
problem. Perhaps also some information about the kind of 
outreach you are undertaking to make certain people know about 
the availability of this program, so that the are less 
vulnerable to those who purport to have exclusive information.
    I think that kind of background would be helpful. I commend 
you for the decisive action you have taken. This is a program 
that can mean a lot to a lot of older people. We do not need a 
bunch of scam artists messing the program up for these senior 
citizens.
    Secretary Cuomo. Thank you very much, Congressman, we will 
get you the information today.

                    Fee Abuses In Reverse Mortgages

    Information from AARP and several wholesale lenders who 
participate in the Home Equity Conversion Mortgage (HECM) 
program indicated that there were several companies charging 
exorbitant fees (up to 10 percent of the loan amount) for 
providing information on HECM's to seniors that was otherwise 
available for little or no charge. The Department issued a 
mortgagee letter, and the Secretary held a press conference 
denouncing and implementing procedures prohibiting such 
practices on FHA insured loans.
    Subsequently, Patriot (one of these companies) petitioned 
the court for a Temporary Restraining Order (TRO) and an 
injunction which would prohibit the implementation or 
enforcement of the mortgagee letter. The court granted the TRO 
and the hearing on the injunction is April 9.
    It is difficult to determine the number of borrowers 
affected by the abuses, because the offending companies are 
interrelated and distributors. An attorney for the lender in 
the court action stated that there were about 115 cases a month 
since September and 279 in the pipeline. We hope that this is 
most of the cases.
    HUD has tried to get visibility to better inform borrowers 
of the problem. The Secretary's Press Conference got extensive 
coverage, including NBC National News as part of the ``Fleecing 
of America'' series. AARP has also cited the problem twice in 
its publications, including the magazine which goes to 20 
million households. Since the temporary restraining order, HUD 
has been more circumspect.
    The Elderly Homeowners' Loan Protection Act is being 
proposed by a bi-partisan group of Senators and Representatives 
to end this scam. The legislation would make permanent the 
actions taken by HUD against these companies.

    Mr. Price. Thank you, Mr. Secretary.
    Mrs. Meek [presiding]. The Chairman had to step out. Mrs. 
Meek, he wanted you to be recognized next.
    Mrs. Meek. Thank you so much.
    Thanks for coming back, Mr. Secretary.
    Secretary Cuomo. Thank you for having us.

                   code enforcement issues in florida

    Mrs. Meek. I receive quite a few comments from the 
community based corporations in my district. They have some 
very healthy ones there and they are doing a very good job in 
housing. Some of the things they are concerned about, however, 
is that they are not able to get money for the internal code 
enforcement that is due when you are building or you have 
housing. And there are so many conditions that are very, very 
bad in some of these areas, particularly areas like West 
Perrine where the hurricane was, there has really been no 
sufficient clean up there, yet and down in Northwest end of my 
district.
    They are saying to me that they cannot get help from HUD in 
terms of trying to meet the code enforcement standards that 
Dade County is insisting on. Do you know anything about that?
    Secretary Cuomo. Congresswoman, I have not heard of that 
specific issue. We have many program resources that could be 
used to ameliorate code problems. Now, again, as we have heard, 
are there enough HUD funds? No. But we have programs that could 
be helpful. And if the Congresswoman would like it would be our 
pleasure to discuss HUD's resources and programs with the 
community groups who are having trouble doing it.

                  delinquent fha mortgages in florida

    Mrs. Meek. All right.
    They also said that the lenders need better incentives from 
HUD on delinquent FHA mortgages. Maybe some kind of reward or 
some kind of penalty, the lenders who provide little to no 
assistance to the homeowners. Is that a familiar trend, have 
you heard about that?
    Secretary Cuomo. We have had some discussions about that, 
Congresswoman, and Assistant Secretary Nic Retsinas is here and 
when you chat with him, which you will later on today, I am 
sure he will talk to you about the reforms that we are making 
with FHA to ameliorate that situation.

             need for master community planning assistance

    Mrs. Meek. I also have another big problem. There needs to 
be, there are communities in my district and in Miami, as well, 
that are totally isolated, totally dilapidated because of 
Federalism, an example, Overton is one.
    When urban development came in and moved all the people out 
and ran these big trains through there, then there is East 
Little Havana that looks as bad as any third world community 
would look and the same with Liberty City. These are cess pools 
of confusion, and alienation. And they are saying and I agree 
with them, HUD does not think about monies for master planning. 
For example, Mr. Secretary, if I had myway, which I do not seem 
to be able to get here lately----
    [Laughter.]
    Mrs. Meek [continuing]. I would go into Overton and try to 
build a community, just in that one area. And people are 
saying, well, you need to get a community redevelopment, what 
is it, trust or whatever. That is very difficult to get because 
of the politics there. Is there any way HUD could help 
communities that really want to plan and have a master 
community so that the sense of community which has been 
decimated there could be returned to some extent?
    Secretary Cuomo. Congresswoman, we can do it on a limited 
basis. We do not really have--I agree with your concern, and I 
wish I could say, yes, we have a planning grant program that 
gives grants to communities just to do planning. But we do not. 
We can do it on the margins.
    We have technical assistance funding which works in 
conjunction with programs where we can send in expertise and 
advisors to work with communities around putting together a 
plan for one of the programs and applications et cetera. And we 
have some programs that would work just like that, the 
homeownership zones which we discussed yesterday, large-scale 
redevelopment, several hundred homes. You can redo an entire 
area.
    The second round of empowerment zones, enterprise 
communities which is comprehensive redevelopment and got 
communities excited all across the country, where they came 
together, came up with a comprehensive plan, what their 
community is going to look like in the year 2020. And that 
planning process, in and of itself, is a product.
    So, homeownership zones, empowerment zones and the planning 
that goes around those programs and we have technical 
assistance that we can offer a community and it would be our 
pleasure to do that if you would like to.
    Mrs. Meek. I have one or two more questions.
    Mr. Lewis [presiding]. Well, you have got just one or two 
more moments.
    Mrs. Meek. All right, good. [Laughter.]

                   drug elimination in public housing

    I have been really on a mission for this session and that 
is I am so concerned about the influx of drugs, particularly in 
the inner-city communities. I have gone to the floor and I have 
gone to various committees talking about this. I want to know 
if HUD is going to be able to help in any way with these drug-
related communities?
    Most of my drug crimes are in the housing projects. Most of 
the drug deals are made in the housing projects and I always 
said the stork did not bring those deals there, they came from 
the outside. And we are trying so hard to stop drug selling and 
drug usage in the housing projects.
    Many times it is caused by the sons or daughters who are 
selling drugs right out of the projects. Now, we have all kinds 
of legislation in Florida about that. But you did not get much 
money for that this year.
    It is the same as last year, 1998 in your budget is the 
same as 1997 for drug elimination. I want this committee to 
know that most of this drug trade is done in the housing 
projects. And it is because of the way they were built at the 
very beginning and they still exist in Miami. And those that do 
not exist have been sort of--what do you do when you clean them 
out--you know, you are ready to tear them down and you relocate 
the people. But you leave those houses there. There are nothing 
but crack dens. That is all they are.
    We need a lot of help. We have--and I am sure there are 
other urban areas with similar problems as I have--but when I 
come before HUD I know that if we are ever going to stop the 
kind of quality of life we have in those communities, it is to 
fight hard in terms of the drug assistance.
    Now, you are not the only Secretary I am talking to about 
this. But I did want you to know that it is sort of 
concentrated in the housing projects. And you are going to 
need--I feel like this as I do about the Indian programs--if we 
have a problem let us do something about it.
    I mean we can philosophize forever about the need in the 
Indian housing and the need in the housing units. But unless we 
focus and perhaps have some kind of theme or initiative that 
goes in there, we will be back here next year with the same 
thing.
    So, I am appealing to you and to your staff, you need some 
hungry on your staff that are really advocates, you know, and 
that they see what is going on and they will keep needling you, 
Mr. Secretary, until they become real extreme advocates, you 
either get rid of them or you will listen to them.
    Because we have those two problems. Drugs in the housing 
projects and certainly I am concerned about the Indians. But 
the Chairman is looking at me and I have very good peripheral 
vision. [Laughter.]
    Mrs. Meek. And it is not because I look like Jada Pinkett. 
But he is giving me the eye. So, what I am trying to say to 
you, please, help us out. You are a good-looking man but I 
see--
    Mr. Lewis. A thing of beauty is a joy forever. [Laughter.]
    Mrs. Meek. Do we have enough time, Mr. Chairman?
    Mr. Lewis. We will get back to you, Mrs. Meek.
    Mrs. Meek. All right, thank you.
    Secretary Cuomo. Congresswoman, if I may respond quickly 
because I know that the time is short but the issue is a very 
important one. I would say three things very quickly and itwill 
be a long conservation. It is a topic that deserves a long discussion.
    First, enforcement, we have drug elimination grant which is 
at about $290 million, which is not constant but it is a large 
sum of money for the Department and we heard Congressman Price 
about the 811 Program yesterday, these are all the tough 
demands.
    Operation Safe Home, which is an enforcement program has 
actually doubled in the budget this year. The one strike policy 
which the President announced a couple of years back is working 
very well getting the drug dealers out of public housing.
    So, the first point is we have that enforcement cluster.
    Second is, I think the Congresswoman is exactly right when 
you said part of the problem is the way we built a lot of these 
public housing complexes. They concentrated people with 
problems, isolated them on one side of town, on the other side 
of the tracks, literally in many cases, on the other side of 
the freeway, but put a wall between them and the rest of the 
community. And in many cases the rebuilding, the HOPE VI 
Program, the demolition, the renovation, gets at a part of 
that.
    [The information follows:]

          Demolition and Replacement of Units Through HOPE VI

    The HOPE VI Program has played a key role in the 
transformation of public housing both by driving the fast pace 
of demolitions across the country and encouraging innovative 
replacement strategies. The fiscal years 1993-1996 HOPE VI 
grantees will account for the demolition of approximately 
35,000 public housing units. Of this number, approximately 
7,600 units have been demolished so far. For the most part, the 
demolished units will be replaced with both ``hard'' and 
``soft'' units. The 1993-1996 grantees will develop 
approximately 18,000 new ``hard'' units; construction has 
already begun on 6,615 units. Of these units, 1,206 have been 
completed to date. An additional 13,400 Section 8 (``soft'') 
replacement units have also been assigned to these grantees for 
a total of 31,400 replacement units.
    While HOPE VI has been a catalyst for the removal of 
thousands of obsolete and distressed public housing units 
across the nation, the Department's goal to demolish 100,000 
units by the year 2000 will also be met in part by hundreds of 
non-HOPE VI housing authorities that have been encouraged to 
eliminate old and dilapidated units from their inventory. As of 
March 31, 1997, 26,300 units have been demolished since fiscal 
year 1993. The attached chart demonstrates the aggregate number 
of units (which includes HOPE VI units) to be torn down and 
replaced across the country between fiscal years 1993 and 2000. 
The chart shows that the Department anticipates replacing 
99,170 of the 100,000 units town down with a mixture of new 
units and Section 8 certificates for an almost one-for-one 
replacement rate.

[Page 112--The official Committee record contains additional material here.]


    And thirdly, I think that it is also important to remember 
the carrot and the stick. Yeah, all these great penalties, we 
will put you in jail forever, but we also have to have some 
incentives. And people have to feel that there is a light at 
the end of the tunnel and that there is a job, that there is 
hope for a productive life and a productive course and I think 
we also have to focus on that.
    We are not going to do it by just the enforcement efforts, 
just the criminal justice efforts, there has to be a positive 
incentive and a belief that if you do everything right and you 
play by the rules and you do everything you are supposed to do, 
that life can be better and that there is an alternative.
    And I think we have to do all of those things 
simultaneously, none of them alone will work.
    Mrs. Meek. Thank you, thank you, Mr. Chairman.

                chairman's comments on reverse mortgages

    Mr. Lewis. Thank you very much, Mrs. Meek.
    Mr. Secretary, when I left abruptly a while ago it was with 
news that my best friend's father passed away. You were 
commenting on the reverse mortgages when I came back in and I 
was reminded that my first venture in public affairs involved 
my own industry which is the health insurance industry in part, 
where suede-shoed salesmen in Southern California were going 
into old people's homes and selling them products on a headline 
and a promise that the care would be there when they needed it.
    As far as I am concerned, we cannot tolerate in public 
affairs those kinds of operatives. And, so, I, too, wanted to 
commend you for your reverse mortgage program. A lot of the 
illustrations that were in the media regarding that had to do 
with Southern California one more time.
    Secretary Cuomo. Yes.
    Mr. Lewis. And if this committee can be of assistance in 
any way, shape or form we intend to do that. I also mentioned 
that yesterday we will be attempting working with you and your 
people trying to evaluate those programs that work, and fund 
the ones that have delivered well and maybe be tougher on ones 
that have not delivered so much.
    I must mention to you that among those programs that have 
priority with me, as well as the Secretary, happens to be the 
HOME program where money has been leveraged. There is a 
significant cut there, and we will be looking at those relative 
priorities as we go forward. I hope we do not find ourselves 
testing the line item veto in that process but I will work very 
closely with you in connection with that.
    But, indeed, there is an illustration of one of those 
programs that has had a positive impact for, especially the 
poorest of the poor and home opportunity for people.

                    native american housing program

    Returning to Indian housing for a moment, Mr. Secretary, as 
you know, a new Native American housing program was passed by 
the Congress last fall. That legislation requires HUD to 
provide block grant assistance to each of 550 Federally 
recognized tribes rather than the 189 housing authorities.
    To receive assistance, the tribes must submit housingplans 
for HUD's approval. In the meantime, the President has requested $485 
million for this new program. I am very concerned about this level of 
funding for according to a May 1996 report by the Urban Institute the 
population of Native Americans rose by six times over the past 4 
decades to over two million in 1990.
    There are probably some questions about family planning 
that relate to that, but that is another subject, I guess on 
another day. And 60 percent of those persons live on tribal 
areas or in surrounding counties. Compared to non-Indians, 
Native Americans are more family oriented. Thirty-seven percent 
are married couples with children versus 28 percent of non-
Indian householders.
    Native Americans have a higher unemployment rate, 14 
percent versus 6 percent for the rest of the country; a smaller 
number of workers in for-profit firms per thousand people, 225 
versus 362; and a higher share of households with very low 
incomes, 33 percent versus 24 percent.
    Moreover, Indian housing conditions are much worse than 
housing conditions in other areas of the country. Forty percent 
of Native Americans in tribal areas live in over-crowded or 
physically inadequate housing compared with 6 percent of the 
U.S. population.
    These statistics--and they can go on and on--are startling 
and I think the point that in many ways my colleague, Mr. 
Stokes was making earlier--that an even greater concern is the 
statement included in HUD's justifications that it will take 
more than 100 years before the housing needs of the eligible 
Indian families can be met.
    You know, Mr. Secretary, I realize that there are some 
serious problems with the Native American housing program and I 
have reservations about providing substantial amounts of 
taxpayer dollars to tribes that are self-sufficient through 
gaming or other resources, particularly, after being apprised 
of the serious needs of other tribes.
    And that question is a tough political question for us to 
even begin to consider addressing. But I am wondering about 
sovereign nations in connection with all of this.
    We have each got a responsibility for the poorest of the 
poor within our countries as it were. Any comment you might 
have in connection with that, I would be interested in.
    Secretary Cuomo. Mr. Chairman, I agree with the thrust of 
your comments and again, I do not mean to be repetitive before 
the Committee but this really has been a balancing of needs 
with the present condition that the pie is not large enough to 
feed everyone who is at the table and who is hungry.
    The $485 million which is requested is about constant with 
1997.
    Mr. Lewis. Correct.
    Secretary Cuomo. It is actually, if one were to go line-by-
line because it is a consolidation, about 10 percent higher 
than the 1996 funding. So, constant with 1997, 10 percent up 
from 1996 is a major accomplishment in the Budget as we have 
been discussing the past 2 days.
    But once again, is it enough funding? We would be the first 
to say that the need outstrips the resources.
    Mr. Lewis. The population of these tribes and we know the 
explosion in numbers is a very real problem and I hope that we 
would be taking that into consideration as we look at these 
funding levels.
    I am concerned that the President's budget request may just 
be sufficient only to kind of ensure, possibly ensure failure 
of these Native American programs. And it is that item that I 
want us to focus on as much as we can.
    Secretary Cuomo. We can do good things with the funding 
that we have. We cannot do enough with the funding that we 
have.

                  capacity of tribes to administer nap

    Mr. Lewis. Can you tell me do the tribes have the capacity 
to administer this new program given the relatively loose 
structure?
    Secretary Cuomo. I think there is a capacity issue. I think 
that is one of the issues that we saw, again going back to the 
Seattle Times, ``expose.'' Lack of capacity is a big element 
within that. I think when we design this program we have to 
take that into account and we have to have a solution to the 
capacity issue. And hopefully, the capacity issue will be 
alleviated because this program is simpler to administer than 
past programs.
    Mr. Lewis. Is there any funding that has been made 
available to the tribes in this request or in other HUD 
accounts, like CDBG, to build the capacity of tribes to 
administer the effective housing programs?
    Secretary Cuomo. We will have funding in the new block 
grant that can be used to build capacity.
    Mr. Lewis. Can the nonprofit housing community be helpful 
to the tribes to build their capacity in the same manner in 
which nonprofits operate in the urban center?
    Secretary Cuomo. Oh, undoubtedly. I think the best 
practices work, with sharing of information. Nonprofit private 
sector technical assistance to the tribes is going to be one of 
the main features of a technical assistance program.
    Mr. Lewis. How many nonprofit organizations work in Indian 
country, do you know?
    Secretary Cuomo. I do not know but I can get the Committee 
that number.
    Mr. Lewis. All right, for the record.
    I have a number of other questions regarding Indian housing 
that I think in view of the time and circumstance, we will ask 
you to respond to for the record.
    Secretary Cuomo. Absolutely.
    [The information follows:]

      Number of Non-Profit Organizations Working in Indian Country

    There are 14 non-profit organizations doing business in 
Indian country. The primary ones are the National American 
Indian Housing Council (NAIHC), the Housing Assistance Council, 
and Habitat for Humanity. In addition, there are nine regional 
Native American housing organizations with the technical 
capability to assist tribes. In addition, the Neighborhood 
Reinvestment Corporation and Fannie Mae are also involved in 
the provision of financial services for Indian businesses and 
individuals. However, very few of these organizations offer the 
kind of technical assistance and housing expertise that is 
generally available and as conveniently located to the Indian 
populations as the Indian housing authorities.

    Mr. Lewis. And I want to not take too much of Mr. Stokes' 
time.
    Mr. Stokes.
    Mr. Stokes. Thank you, Mr. Chairman.
    I have just one or two more questions.
    Mr. Chairman, you might clarify this for me and then I will 
know whether I have a question or not.
    But you were posing some questions relative to population 
control and I do not know where this comes in, in terms of HUD.
    Mr. Lewis. Well, HUD does not have the responsibility but 
the interesting note to me was that I had not, until I had 
looked at this material, I had not really had the sense that 
there has been a very sizable population growth within the 
tribes that has far outstripped the country. In the meantime, 
they live in the poorest of conditions and, so, interaction 
with that reality is kind of a part of our responsibility when 
we are looking at a shrinking discretionary pot.
    So, I just want it before us that the number of people to 
be served are increasing more rapidly than the country. It is 
not something that we traditionally deal with HUD about except 
that we do have some responsibility to see that children are 
housed.
    Mr. Stokes. I just wanted to understand, you know, from 
what perspective we were approaching that.
    Mr. Secretary, before you leave today, let me ask you, I 
have just seen a United States General Accounting Office report 
here on HUD's Fiscal Year 1998 budget request. Have you had a 
chance yet to see this?
    Secretary Cuomo. I have not, Mr. Stokes.
    Mr. Stokes. That is what I needed to know whether or not 
you had seen it.
    I think, Mr. Chairman----
    Mr. Lewis. Mr. Stokes, maybe we will put it in the record 
at the end of the day. Is that okay with you?
    Mr. Stokes. Well, I think I would want some chance to--is 
someone coming over from GAO to testify on it?
    Mr. Lewis. Not today.
    This is just their preliminary information to us.
    Mr. Stokes. I just thought maybe we ought to have some 
chance to question them about some of the things in here.
    Mr. Lewis. Okay. We will have that opportunity.
    Mr. Stokes. Okay, thank you, Mr. Chairman.
    Mr. Lewis. Mrs. Meek.
    Mrs. Meek. I yield to my senior member, my time, Mr. 
Chairman.
    Mr. Lewis. He has got all the time he needs. [Laughter.]
    Mr. Stokes. I have run out of questions.
    Mrs. Meek. All right.
    If I may go ahead with one?
    Mr. Lewis. Certainly.

                         health of FHA program

    Mrs. Meek. I received quite a bit of interest and inquiries 
regarding your FHA loan program, in terms of how healthy is 
that program and what do you see, how is it working?
    Secretary Cuomo. Well, the program--actually the FHA 
homeownership program from an auditing point of view, an 
accounting point of view is actually at one of its most healthy 
financial states ever. Congress had set a goal for financial 
health of the year 2000. We have already met that goal ahead of 
schedule. So, the fund, itself, is in very good financial 
shape.
    As far as the issue, homeownership, President Clinton has 
made it a priority for him, Secretary Cisneros worked 
diligently on getting a homeownership rate up. The President 
wants to see the homeownership rate higher than ever before.
    And the Department will take that as a major priority over 
the next coming years.
    Mrs. Meek. The reason why I am interested in that program 
is that traditionally FHA does not even lend money to people 
who really need it, the real low-and-moderate income families. 
And I am just concerned that I think you are going to increase 
their loan limit, are you not? You are going to increase it?
    Secretary Cuomo. We have a proposal to increase the loan 
limit, yes.
    Mrs. Meek. Do you think that will have any impact in terms 
of would it continue to be a detriment to the lower-income 
people? You see if you have money you can get FHA money and you 
can build and your people can have housing. So, I am concerned 
about whether or not there is a negative impact or detrimental 
impact from increasing the FHA program?
    Secretary Cuomo. Interesting point, Congresswoman.
    First, the FHA insures mortgages but as you correctly point 
out, the family, the individual needs resources to be able to 
make those payments because the borrower has to be in a 
financial position to make the payments. And if they are very 
low-income they may not be in the position.
    Having said that, the loan limits which would increase the 
FHA loan limit will have no impact on the lower end of the 
financial spectrum. You could even speculate and argue that it 
would have a positive impact because as you raise the FHA loan 
limits, the fund actually makes money on the higher end of the 
spectrum because it is a lower risk and if the fund was 
healthier, theoretically, they might be able to do even more 
good for the rest of the income spectrum.
    Mrs. Meek. Thank you.
    Mr. Lewis. Thank you, Mrs. Meek.
    Mr. Secretary, you and I had discussed the fact that we may 
go back to some other issues that I think most of those can be 
handled by your very fine staff and the time you have spent 
with us is very much appreciated.
    But I wanted to mention to you, Mr. Secretary, that over 
the years that Congressman Stokes and I have worked together we 
have shared a great interest in seeing the Federal Government 
play every role possible to have our agencies, for which we are 
responsible, look as much as possible, a good deal like 
America. And I must say that from my perspective, the audience 
today is a reflection that there is progress being made at HUD 
in connection with that.
    Those who have responsibility do reflect a different mix 
than even we saw not so long ago. We continue to encourage 
those views. It is very important that we have people of 
African-American descents in positions of responsibility. It is 
very important that, from my perspective, that women have a 
chance to demonstrate capability in this process. I have every 
sense that you understand that.
    But, above and beyond that, the only hole I see in the 
audience at this moment--and I have been looking around all day 
and I have not been able to find it--I do not see a Native 
American out there. But, in the meantime----
    Secretary Cuomo. You will the next time we are here, Mr. 
Chairman. [Laughter.]
    Mr. Lewis. But in the meantime, I do appreciate your time.
    We are going to return to the Cabrini Green questions that 
are part of the Chicago Housing Authority. I think that may 
fall in Secretary Marchman's category.
    Secretary Cuomo. Yes, it does, Mr. Chairman.
    Mr. Lewis. But, in the meantime, Mr. Secretary, we do 
appreciate the time you have spent with us and look forward to 
a growing and continuing positive relationship.
    Secretary Cuomo. Thank you very much, Mr. Chairman.
    It has been my pleasure.
    Thank you.
    Mr. Lewis. You can stay as long as you would like. 
[Laughter.]
    Secretary Cuomo. I do not want to take too much time from 
the Assistant Secretary.
    Mr. Lewis. Okay, thank you again.
    [Secretary Cuomo leaves the hearing.]
    Mr. Lewis. Secretary Marchman, you are up, I guess.
    How are you, it is good to see you.
    Mr. Marchman. I am fine, thank you, Mr. Chairman.
    Mr. Lewis. We spent a little time discussing my concerns 
about HANO yesterday. While we did not spend as much time as we 
might, I must mention that Mrs. Meek's questions earlier where 
she was focusing upon the presence of drugs and that kind of 
activity within the projects, I certainly experienced that by 
way of exposure when visiting Desire Homes in New Orleans.
    And to say the least, that is a major, major challenge if 
we are concerned about the impact that that is having upon 
young people in housing programs across the country.

                    Number of hope VI Grants Awarded

    Turning briefly to the Chicago Housing Authority, the 
President has requested $524 million for severely distressed 
public housing programs, HOPE VI, to secure the demolition of 
approximately 20,000 obsolete public housing units and the 
construction or rehabilitation of approximately 4,100 units, as 
well as to provide Section 8 rental assistance to approximately 
10,000 families.
    The program is designed so that funds can be used in 
creative manners and leveraged with other forms of assistance 
to revitalize entire neighborhoods. How many HOPE VI awards 
have been made since HOPE VI began?
    Mr. Marchman, I will have you identify yourself for the 
record.
    Mr. Marchman. Kevin Marchman, Acting Assistant Secretary 
for Public and Indian Housing.
    There have been just over 100 awards in three different 
categories. There were 59 awards for the revitalization of 
major developments. There were 24 for grants for demolition 
only. And there were 35 grants for planning purposes. So, there 
were 118 grants awarded since 1993.
    Mr. Lewis. I presume that where we are talking about awards 
for demolition only that we are operating under, that relief of 
one-to-one ratios?
    Mr. Marchman. Yes. The temporary repeal of the one-for-one 
certainly did accelerate demolition applications that we have 
received. And in our last funding, which was the first time we 
funded for demolition only, it would have met some of those 
particular needs.
    Mr. Lewis. It is my understanding that in some 
circumstances--I do not want to be pointing fingers but I was 
very impressed with what we may not have done over the years. 
These questions have absolutely nothing to do with partisan 
politics. There are plenty of questions to be passed around on 
these issues. But as I understand it, and frankly it was an 
educational process for me, Desire Homes in New Orleans, for 
example, was built out of town but moving towards where 
shipbuilding was taking place. We built these units in a 
fashion that hopefully we would never replicate, but we brought 
in families down from the south to come work and live in those 
facilities. Not very far away and in the meantime, Desire has 
gone forward.
    Desire Homes now has a whole array of highly intense living 
conditions, very dense circumstances, buildings that have 
become nests, for the drug dealers know how to get in and get 
out and the law enforcement officers, in many instances, live 
in fear of their life if they should go in.
    So, taking down those units becomes a very, very important 
item if we are going to get a handle on the problems that we 
are dealing with. And fundamental to getting a handle on that 
involves the impact that the residents face every day and 
especially the children face every day.
    So, I am interested in how many of the awardees have signed 
their agreements?
    Mr. Marchman. From last year's allocation, fiscal year 
1996, no one has signed. We have been busy reconstructing the 
grant agreements to include much more stringent cost protection 
measures.
    There were 34 housing authorities that have signed grant 
agreements for 34 implementation grants and these are under 
progress in one phase or another.

                    Revitalization of Cabrini Green

    Mr. Lewis. I had the impression that maybe we had signed an 
agreement at Cabrini Green.
    Mr. Marchman. We have, sir.
    Mr. Lewis. Okay.
    Mr. Marchman. I hesitate on that.
    Mr. Lewis. Well, you said there had been none signed. So, I 
am kind of----
    Mr. Marchman. No, no, I was speaking of last year's 
allocation which we have changed.
    Mr. Lewis. All right.
    Mr. Marchman. I think that there has been, just to 
elaborate, starts and stops to Cabrini since its inception.
    Mr. Lewis. So, there was a signing in 1993 I am hearing and 
that was one of the starts.
    Mr. Marchman. The grant agreement was signed in November 
1994. Then we stopped the Plan in early 1995. I would be more 
than glad to repeat any aspect of it that you would like.
    Mr. Lewis. When do you expect that the Chicago Housing 
Authority will sign their agreement?
    Mr. Marchman. I would imagine we will receive the revised 
Revitalization Plan within the next several months. It is now 
combined with the process of the city for the revitalization of 
that Near North Side. And we expect to get underway with the 
Cabrini Green and the near North Development. I would hope 
before the summer is out. There are continuous conversations 
with neighborhood groups and with the residents who have been 
into court several times to stop the process.
    I think it is safe to say that if there were three 
developments in our overall HOPE VI portfolio, Desire and 
Cabrini Green have been the most challenging.

                  Distrust by Cabrini Green Residents

    Mr. Lewis. I gather there is a lot of interaction between 
the local residents, the media and otherwise, regarding what is 
going on at Cabrini Green. Can youdescribe to me what that is 
about?
    Mr. Marchman. Yes, I can.
    At least one aspect of Cabrini Green, when first signed in 
1994, the residents were promised any number of different 
things for their participation and their cooperation. Some of 
what was promised by a prior housing authority administration 
could not be delivered and residents are balking at that.
    Secondly, there is a great fear as we have seen in a lot of 
developments, that if Cabrini Green----
    Mr. Lewis. What they were promised could not be delivered?
    Mr. Marchman. Could not be delivered.
    Mr. Lewis. Understandably, you know, when you go out to the 
projects and you talk to people in the neighborhood that you 
can just sense it, no better way, it is a lack of trust. You 
know, I have heard this before, ``Are you shining me on 
today?'' kind of stuff.
    Mr. Marchman. Exactly. There is great mistrust, historical 
mistrust between the residents of Cabrini Green, the Housing 
Authority and the City. The feeling is that if much demolition 
takes place at Cabrini Green, what is rebuilt will not be 
affordable to the residents of Cabrini Green.
    And, therefore, they have in many different ways been in 
contact with HUD, and with the press in order to make sure 
their issues get a fair hearing.
    Mr. Robinson. Mr. Chairman, if I may respond?
    Mr. Lewis. Certainly.
    Mr. Robinson. That feeling that exists at Cabrini Green 
and----
    Mr. Lewis. Excuse me, Dwight.
    Dwight Robinson.
    Mr. Robinson. Dwight Robinson, Deputy Secretary.
    I apologize.
    Mr. Lewis. That is all right.
    Mr. Robinson. That feeling that exists that Kevin rightly 
speaks to, goes beyond simply Cabrini Green. It is a distrust 
that exists in far too many cases between the residents of 
public housing and the public housing authority and by 
extension, HUD.
    Because in all too many cases there have been promises 
made, in some cases over-promises, but promises made that 
people either had no ability to deliver on or no intention to 
deliver on.
    And, so, as we work through this process, it is clearly a 
responsibility on our part and one that I think the public 
housing authority under Kevin's leadership and then the 
leadership of the Secretary that we are mending, that needs to 
be developed. That trust needs to be rebuilt and the two that 
you point to, Cabrini Green and Desire, are at the top of the 
list.
    Mr. Lewis. Mr. Robinson, one of the most significant 
impressions I have had since I have had this responsibility 
involves the time I spent with former Secretary Cisneros, where 
we went out to some of these projects and especially where the 
receiver is concerned in Washington, D.C. I mean when those 
mothers look you in the eye and they say literally, for the 
first time, I believe in this person. You know, small steps, 
promises made and promises delivered.
    I mean if we are going to rebuild that credibility that is 
so fundamental it is awfully important that we work at that.
    Mr. Robinson. Absolutely, Mr. Chairman.
    And I would add that I, too, have been out to the sites and 
spoken to mothers in the similar circumstances, and I know both 
you and Mr. Stokes share that feeling.
    And one of the things we want to make sure we do and I know 
it is happening under Mr. Marchman's leadership, is the fact 
that we are, in fact, honest with the people that we are 
dealing with and make sure that they understand what it is that 
we are attempting to do, when we expect to do it, and how we 
expect to do it.
    Mr. Lewis. Okay.
    Mr. Marchman, is the entire Cabrini Green part of a 
redevelopment plan?
    Mr. Marchman. It eventually will be, Mr. Chairman.
    Currently we are talking about four buildings that are just 
south of Division Street. And let me be a little bit more 
expansive. What is going on in that entire north side is a 
revitalization. And the residents are also concerned that not 
only will they be moved out but they will not even be able to 
afford to revisit and this is part of the problem.
    Cabrini Green consists of some 3,600 units. And we are 
talking about 725 units that would be impacted by this 
redevelopment.
    Mr. Lewis. So, they are expressing the classic concern, do 
not tear down my building or my home or I may not be able to 
get back in.
    Mr. Marchman. Yes.
    Mr. Lewis. And they do not want to move?
    Mr. Marchman. That is exactly what we are talking about. As 
bad as those buildings are, I am sure you are familiar with the 
condition, they said this is better than nothing.
    Mr. Stokes. It is home to them.
    Mr. Lewis. It is home to them.
    Mr. Marchman. Right.
    Mr. Lewis. It should be a part of the redevelopment plan 
that involves those residents so that one more time, small 
steps, building a different kind of confidence than the history 
here has allowed.
    Mr. Marchman. And if I could add to the small steps taken 
since 1993. As recently as 2 weekends ago, there were meetings 
with the Cabrini Green residents, the Mayor's office, the 
planning office, and the public housing authority to see what 
small steps can be agreed to.
    But to say that there is enormous distrust between the 
residents and the housing authority is an understatement. And 
now it is more than the housing authority; it may be residents 
who live on the west side who are familiar with urban renewal. 
Many of the things which the housing authority and the city are 
saying in 1997 they heard back in 1967 and they are having a 
hard time with the concepts.

                        hope v. leveraging plan

    Mr. Lewis. Before I turn to Mr. Stokes, let me ask you the 
big question.
    Mr. Marchman. I hope I have a good answer.
    Mr. Stokes. Are you ready? [Laughter.]
    Mr. Lewis. How has the $50 million HOPE VI grant been 
leveraged with local and state resources?
    Mr. Marchman. It looks to be leveraged with the overall 
city development plan. The mayor's office, and private 
developers have committed to making sure that the $50 million 
is leveraged. They have not finished a complete plan yet, but 
this is where they are headed.
    We felt very early on that the $50 million, as much money 
as that seems, would just be a drop in the bucket and would not 
address the total need of that neighborhood. So, I believe, 
once that plan is done then you will see it is leveraged. I 
think it is a condition of what is being planned for Cabrini 
Green now.
    Mr. Lewis. Well, Mr. Stokes, here what I am really trying 
to get at is that there are $50 million that are flowing in the 
direction of Cabrini Green and I am very interested in knowing 
what is the State commitment, what is the local commitment, 
what kinds of nonprofits are involved to make sure we leverage 
that to a maximum. So, that this, too, can become an 
illustration of a successful project rather than just repeating 
history here.
    And the committee wants to stay on top of that, we are 
asking our Inspector General to help us stay on top of issues 
like this. No small part of the design is to follow through on 
questions about money flows that go to communities like Chicago 
or like New Orleans and then how many of those dollars actually 
get down to providing living space for the people we, at least 
in this Committee, pretend that we want to serve?
    Mr. Marchman. I would suggest that Cabrini Green would be 
the prime site among maybe three or four I can think of in the 
country that has the absolute ability to be leveraged given its 
location.

                     need for better pha directors

    Mr. Lewis. Mr. Stokes.
    Mr. Stokes. Thank you, Mr. Chairman.
    You know, I might say at the outset, Mr. Chairman, I share 
fully your concerns relative to these type of troubled housing 
authorities, Cabrini Green and New Orleans and others. And, you 
know, I have been under the same thing in my own city for a 
number of years with one director after another until we got 
the right director of the housing authority. If you do not have 
the right director, a person who really is concerned and 
committed to those people who live in public housing, it will 
never work.
    And fortunately, out in Cleveland, we are fortunate to have 
a woman like Claire Freeman, who is probably--
    Mr. Lewis. When are you going to take me to visit one of 
these?
    Mr. Stokes. I really want you to come out there just to see 
what can be done when you have, not only someone who is 
professional and knowledgeable, but who has the commitment and 
desire to really do what is right by those people.
    Mr. Lewis. I must say, I was kind of----
    Mr. Stokes. And we have something to show off out there.
    Mr. Lewis. I was kind of concerned that you did not want me 
to go near Cleveland for some reason.
    Mr. Stokes. Oh, listen, Mr. Chairman, we can go out there 
this afternoon if you can get a plane. [Laughter.]
    Mr. Lewis. I will talk to Jay about that.
    Mr. Stokes. I do not know about that flying first. Let us 
for a moment kind of move toward what I am talking about. We do 
have to spend time talking about the bad ones. But we also have 
to balance that and show what is being done to show places like 
Cleveland and other places in the country. Give us some idea, 
Mr. Robinson or Mr. Marchman, what are some of our success 
stories?
    Mr. Marchman. I will jump into that one, Mr. Stokes. I can 
speak of two which are success stories. Cleveland is one of 
them. We have used Cuyahoga County Housing Authority, and what 
Claire has been able to do, all around the country. We have 
asked her to meet with housing authority executives and staff 
so she can tell them what sort of systems you need to put in 
place in order to run these housing authorities.
    You are absolutely correct, you need the commitment but you 
also need the systems behind you.
    Mr. Stokes. Right.
    Mr. Marchman. As an aside, the fellow who is running her 
systems, Mr. Ronnie Davis, we took him to San Francisco, and 
he---
    Mr. Lewis. Where they need a lot of help by the way.
    Mr. Stokes. Yes, I am sure they do, but he is the guy to 
take out there.
    Mr. Marchman. I think that many people in San Francisco 
also share that thought, there is no question about that. He is 
currently serving as the Acting Executive Director for the San 
Francisco Housing Authority. And Atlanta is another good 
example. Techwood Homes, which is currently under construction 
which leverages, as the Chairman has mentioned, private sector, 
public sector, resident involvement to completely remake that 
housing authority.
    One of the things which we are looking at and propose 
legislation on is what can we do for the well-run housing 
authority. So much of our attention is on the poor ones, and 
are we able to give them more flexibility in order to pursue 
some of these programs.
    I agree with you 100 percent. It is these examples that we 
talked about earlier this morning which seem to do the wrong 
thing and get the press attention. We are really trying to make 
sure that the well-run housing authorities, those that have 
turned around like Cuyahoga, are used as examples throughout 
the country. Ronnie Davis is just one example of an Executive 
Director who is able to achieve positive results.
    I would ask the Deputy Secretary to add anything.
    Mr. Robinson. Yes. I would echo what he said and note, as 
you had noted earlier in the hearings, that I would be remiss 
if I did not add Detroit to that list. What we have been able 
to do working in, I think a unique partnership with city, 
through the auspices of the mayor's office to turn that one 
around, to bring it off the troubled list for the first time in 
many, many years. That is not to say, however, in any of the 
cases that there do not continue to be problems but it does say 
that when you focus your management effort, you get the right 
people, executive director very important, that you can be 
successful in this endeavor.
    Mr. Stokes. I am glad you mentioned the mayors of the 
cities because Detroit is a good example of a mayor who has 
helped begin to turn that situation around and, of course, in 
Cleveland we are fortunate to have good working relationship 
between Mayor White and Claire Freeman and the HUD officials 
there.
    And it takes all of that, everyone working together, to 
really turn things around. But when it is done that way, it is 
a beauty to see what occurs. People in Cleveland take pride in 
living in public housing because they have been made to feel 
that they are some very special people. And, so, Mr. Chairman, 
I do think that it would be good if we get a chance to go out 
and look at some of those successful ventures and see what 
really could be done with these troubled places if people were 
really committed to it.
    Mr. Lewis. Mr. Stokes, I think you make a very goodpoint. 
As you know, I have kind of started on a series of urban-centered trips 
around the country to look at projects firsthand. And as we do that, we 
should absolutely look at success stories, not just negative stories. 
There is enough negative to go around, obviously.
    But years ago when I was on a school board, I dealt with my 
own children where we were in, when my third child was born it 
turned out to be twin boys. So, all of a sudden, I was out of 
the apartment business. And, excuse me, Mr. Stokes, but it 
forced us out of the apartment business and we bought our first 
home in a neighborhood where obviously good education could not 
take place, Mr. Stokes, because they were portable buildings 
there, World War II buildings.
    And then suddenly I found myself living in that 
neighborhood, much, much longer than my business would have 
necessarily required me to stay. The reason we stayed was 
because fantastic things were happening with my kids at that 
school. And my preconceived notions were somewhat shattered and 
it came down to a principal who encouraged excellent teachers 
who made a difference. So, that director is very important in 
terms of our success story here.
    Mr. Stokes. Sure.

               failure of phas to sign hope vi agreements

    Mr. Lewis. I am interested in a couple of more questions on 
this subject area. Have other housing authorities failed to 
sign their grant agreements despite being awarded HOPE VI 
grants in the past?
    Mr. Marchman. There have been those which we have not let 
sign grant agreements because we found their plans inadequate.
    Mr. Lewis. Can you give us an indication of who some of 
those are?
    Mr. Marchman. The best case to date is the Camden Housing 
Authority. It has struggled as a city for years and more 
acutely in the last couple of years. The Memphis Housing 
Authority also comes to mind. One plan after another that just 
would have rebuilt that which we do not want. So, we have 
prevented some of those housing authorities' plans. In other 
cases, we are imposing program management. If you cannot do it 
as a housing authority, we will find someone to do it.
    Mr. Lewis. Would it make any sense to implement, let us 
say, a two-year requirement like the HOME program that housing 
authorities obligate the funds to a developer over extended 
period of time?
    Mr. Marchman. Yes, sir. We are exploring just those types 
of guidelines. I hope they will be reflected in legislation 
this year.
    Guidelines will not only exist for HOPE VI but for 
modernization as well.
    Mr. Lewis. You know, I was startled to learn that in Hano, 
for example, where there is some struggling going on in terms 
of reevaluating where they have been but, nonetheless, in this 
case, Mr. Stokes, outside of neighborhood reinvestment and some 
Habitat For Humanity work, absolutely no living circumstances 
changing, no bricks and mortar that reflect new space, et 
cetera and, yet, unless I am mistaken that authority has today 
over $150 million in their bank account.
    There is something wrong with that.
    Mr. Stokes. Right, I agree.
    Mr. Lewis. The Secretary ought to know about that dollar 
item which I almost dropped my teeth and I do not have false 
teeth.
    Clearly, HOPE VI program is directed to the most distressed 
sites in our country and many of which are located in urban 
cities and poverty stricken neighborhoods that require major 
redevelopment. Often the apartments, themselves, are terribly 
dilapidated and must be entirely demolished, rebuilt or 
rehabilitated with significant capital funds.
    The cost of revitalizing entire neighborhoods is, in these 
cases, beyond the means of federal housing programs. Two 
examples of these types of projects are Cabrini Green and 
Desire in New Orleans.

            partnerships between state and local governments

    If the costs of completing a total neighborhood 
redevelopment are beyond the capacity of Federal pocketbook, 
should local governments and States become partners?
    Mr. Marchman. No question about that, sir. No question at 
all.
    Mr. Lewis. Are you finding them to be responsive in that 
connection?
    Mr. Marchman. More and more we are. Particularly with my 
example of Techwood. What is being built is just not public 
housing but private housing as well and cities are 
participating. We are finding universities and colleges 
participating. We are finding service providers participating. 
It has been a long way to get there. I think, as you mentioned 
earlier, it is just not the residents of public housing that 
are distrustful of the housing authority but other institutions 
and groups as well.
    And now that that is changing, they are more than likely to 
be responsive to our outreach.
    Mr. Lewis. Should Congress consider requiring a match 
component for this program similar to the match required in the 
HOME program? Particularly when circumstances are such that it 
is clear that the HOPE VI grants will not be sufficient to 
carry out the necessary revitalization requirements?
    Mr. Marchman. I believe in some cases that a match can work 
and should work. In other cases, when it is really distressed 
property and there is very little hope of leveraging the 
dollars, it may not get done if there is a match requirement.
    Mr. Lewis. Mr. Stokes, that is the balance of my questions 
in this subject area. I think we are going to go, at least I 
intend to go on to more general questions from that point. 
First, I will turn to you for any questions you might have in 
this area and then maybe we will let these people have a 
reasonable lunch and come back this afternoon.
    Mr. Stokes. Mr. Chairman, I have just about exhausted my 
questions in this particular area. I will have some general 
questions too when you get to that section.
    But I do not think I have anything further in this specific 
area.
    Mr. Lewis. We will try to move quickly this afternoon if we 
can and in the meantime would you share with the Secretary both 
Mr. Stokes' and my appreciation for the cooperation that you 
have extended to us today. We will see you at 2 o'clock and 
good to see you.
    Thank you all.
    [The report from GAO follows:]

[Pages 127 - 142--The official Committee record contains additional material here.]


    Mr. Lewis. The meeting will come back to order, Secretary 
Robinson and friends.
    Mr. Robinson. It's my ``neighborhood.'' [Laughter.]

                 cost of tenant-based contract renewals

    Mr. Lewis. Not a bad neighborhood.
    We are going to proceed as expeditiously as possible. We 
will have probably a number of questions for the record, if you 
would be responsive to those. And while Mr. Stokes and I will 
be with you, we're going to try to move through this process 
and even perhaps complete today. Especially if my colleagues 
continue with conflicts with other meetings, it will move right 
along.
    The President has requested a total of $10.7 billion for 
the housing certificate fund, encompassing $9.2 billion for 
contract renewals, $850 million for contract amendments, $305 
million to support 50,000 incremental units, $265 million to 
fund 34,215 units for tenant protections, and various other 
activities. This request exceeds the 1997 appropriation by 
almost $6 billion.
    Before getting to the issue of Section 8 contract renewals, 
how did HUD arrive at the average per unit cost to calculate 
tenant-based contract renewals?
    Mr. Robinson. Mr. Stegman.
    Mr. Stegman. Mr. Chairman, essentially----
    Mr. Lewis. You need to identify yourself for the record.
    Mr. Stegman. I'm sorry. Mike Stegman.
    Essentially, we start with the average cost of the current 
year. Building up from that current cost, we added a two-week 
reserve to account for unexpected declines or changes in tenant 
income, or unexpected changes in rent, since the Department is 
accountable for paying the difference between 30 percent of 
income and what that rent is. We added the administrative fee 
of the housing authority, which again is a formula-based 
amount, an average. That is about $561. We inflate that. The 
OMB rate of inflation expected for 1998 is 2.2 percent.
    We then made an adjustment to that amount based on an 
estimate of what may occur as welfare reform begins to play 
out, and a certain number of children who have been receiving 
SSI in their households are declared ineligible. We think there 
are about 40,000 SSI households with disabled children that 
will not be eligible any longer under the welfare reform bill 
and so on.
    For 1998 our rough estimate of that was $92 per unit. So we 
add that to the 1998 cost. It is then weighted by the different 
programs, certificates, vouchers, the mod rehab. That is how we 
get to the average of $6,386 per unit.
    I might say, with all of the 2-week reserve and so on, I 
should bring the committee's attention to the fact that, in 
1995, fiscal year 1995, we had an estimate of $8,000 per unit 
for renewals. The improvement in our HUDCAP system, in our 
estimating and in our models, allows us to really get a better 
and more accurate assessment, although it is still not perfect, 
which is why we end up with a certain amount of reserve. So 
that is basically how we arrived at that.
    Mr. Lewis. Okay. That's really what we were looking for, 
the two-week reserve, the administrative fee, the welfare 
reform factors, including--I had the same number, $92 for 1998, 
and an adjustment for inflation. So you're attempting to be 
responsive to that new world within the limits that are 
available to us?
    Mr. Stegman. We are trying as best we can. Clearly, the 
adjustment for welfare reform certainly would be the greatest 
approximation and grossest, because this is a world that is 
really unfolding in front of us, and it really depends on 50 
different State plans, different time limits and so on.

                 number of renewals in fiscal year 1998

    Mr. Lewis. Right.
    Can you tell me how many certificates and vouchers will be 
renewed this year?
    Mr. Stegman. About two-thirds of the 1.8 million renewals, 
I think, are for tenant-based. 1.8 million Section 8 units are 
expiring, but that is both project-based and tenant-based 
certificates and vouchers.
    Mr. Lewis. If you will help us complete the record there, 
we're interested especially in knowing the numbers dedicated to 
elderly and disabled residents.
    Mr. Stegman. I have that in my book as well.
    What we have is 32,000 for what we call ``opt-outs'', that 
is, landlords that are opting out of the program, 914,000 
certificates, 305,000 vouchers, roughly 47,000 mod rehab units, 
and that gives roughly the 1.8 million.
    Mr. Lewis. Can you tell me if those families face the 
limits of welfare reform in every instance?
    Mr. Stegman. I'm sorry? You're talking about----
    Mr. Lewis. Whether the elderly and disabled families face 
the limits of welfare reform.
    Mr. Stegman. No, we estimate that--if I'm not mistaken--
over 20 percent of the expiring project-based Section 8 are 
elderly, and about 11 percent or thereabouts are disabled.
    That is really not a welfare reform issue. A welfare reform 
issue would be for legal immigrants and elderly and aged legal 
immigrants that may be facing termination of SSI that would 
affect their rent-paying ability, or their eligibility for 
housing.
    Mr. Lewis. You were focusing on the $92, you know----
    Mr. Stegman. Oh, I'm sorry. I'm sorry.
    Essentially what we're looking at is the cost across all 
units, not just the elderly or the disabled, but the cost of 
welfare reform. It averages out to $92.
    Mr. Lewis. Let's make sure we complete that for the record 
so that it is clear.
    Mr. Stegman. Fine.
    [The information follows:]

[Pages 145 - 146--The official Committee record contains additional material here.]


                       contract renewals reserve

    Mr. Lewis. I know you're in the process of trying to deal 
with 50 different states, so we'll have to massage that as 
information flows to you.
    Last year HUD identified $1.6 billion in Section 8 reserve 
funds at the appropriations level, and this was passed by both 
Houses of Congress and signed by the President, and has 
continued to scrub the PHA reserve funds.
    When will this reconciliation process be finished?
    Mr. Stegman. We expect to have the latest scrub the end of 
March of this year, and we'll know how much additional reserves 
that we can contribute to the renewals.
    Mr. Lewis. So you're going to continue to scrub that and 
provide that information for the record as well?
    Mr. Stegman. That's correct.
    Mr. Lewis. On what basis did HUD determine the reserve 
accounts needed to maintain 50 percent of the annual budget 
authority?
    Mr. Stegman. We are revisiting that issue right now, Mr. 
Chairman. I think what keeps us at around 50 percent is the 
problem of the continuing resolution and the fact that we 
actually have a whole lot of obligations, even when we were not 
able to do renewals and so on. The question really is, how much 
below can you go and make sure that full renewal activity can 
take place quite apart from the unexpected change in income 
that I talked about. There is some cushion. We are re-examining 
that cushion, how many are at and above 50 percent, how much 
below 50 percent on average can we get when we scrub it all. We 
will have that information for you.
    Mr. Lewis. Relating to that, we are interested in what are 
the differences between the needs for the reserve accounts and 
the $161 million line item for contingencies, as well as the 
two-week reserve----
    Mr. Stegman. That's right. There are a series of what some 
have argued are redundant contingencies, and we're looking at 
all of that right now.
    Mr. Lewis. One more point there. If the worst case 
scenarios do not occur, what will happen to the remaining 
funds? Will the unused funds remain unobligated, or in the 
contract reserves?
    Mr. Stegman. We will use everything that we can that is not 
needed to contribute to the renewals, but the issue of how much 
should remain in the reserves for contingencies is what we're 
currently going to be looking at.
    Mr. Lewis. According to GAO's budget scrub, one field 
office in Texas had reserve funds with considerable amounts of 
funding. In fact, over 70 percent of the programs had 100 
percent or more of their annual budget authority in their 
reserve accounts.
    Are those findings accurate?
    Mr. Stegman. I don't have any information to----
    Mr. Lewis. It might be behind you.
    Mr. Stegman. I mean, we have never seen that information. I 
don't have any reason to either question it or confirm it. We 
have not----
    Mr. Lewis. Maybe you can help us with that, so we can look 
at it as well.
    Mr. Stegman. We certainly will. If it's true, it's 
excessive. You can quote me on that. The point is, we only 
received GAO's testimony on Friday.
    [The information follows:]

                           GAO's Budget Scrub

    According to GAO's budget scrub, over 70 percent of the 
programs in one field office in Texas had 100 percent or more 
of their annual budget authority in their reserve accounts. 
Assuming that the GAO was referring to the Texas State Office, 
we disagree with that statement. Although it appears that a 
majority of the programs in the Texas State Office have 
reserves which are 100 percent or more of their annual budget 
authority, a large portion of those reserves have been 
committed to support previous contract extensions. Amounts 
previously committed are not available to use for 1998 
expirations and must be subtracted from the HA's reserve 
account balances to determine the amount of reserves actually 
available.
    The Texas State Office analyzed the reserve accounts of 20 
large HAs and determined that total reserves for these HAs 
totaled $135 million. Of this amount, $54 million of reserves 
was restricted to support previous contract extensions, leaving 
a net reserve balance of $81 million. The total annual budget 
authority for these HAs is $142 million; therefore the reserves 
as a percentage of annual budget authority is 56.83 percent, or 
just over the amount that HUD currently believes should be 
maintained.
    For example, the Dallas HA's voucher Program reflects 
reserves of $27 million; however, $12 million of that amount 
has already been committed to support previous extensions, 
leaving an uncommitted reserve balance of $15 million. Since 
the annual budget authority for this HA is approximately $31 
million, the HA has approximately six months of funding in its 
reserve account, which is currently the amount the HAs are 
permitted to maintain.

                     SECTION 8 CONTRACT AMENDMENTS

    Mr. Lewis. Section 8 contract amendments. What is HUD's 
justification for its $850 million request to fund Section 8 
contract amendments?
    Mr. Stegman. Generally what we're talking about here are 
20-and 30-and, in some cases, 40- year contracts, that we try 
to estimate what the approved rents are going to be, over a 20-
, 30- and 40-year period. So when contracts that we are legally 
obligated to pay run out of money, that's basically what the 
$850 million in amendment money is for.
    As we go to 1-year renewals, ultimately, as these cascading 
renewals finally level out, where everything is basically on 1 
year, we will be able to estimate much more precisely what the 
needs are and we will not have the need for those amendments.
    Mr. Lewis. Only Congress could construct such a thing.
    Mr. Stegman. We certainly had many hands----
    Mr. Lewis. As we said yesterday, there's plenty of blame to 
go around in the meantime.

                   PROJECT-BASED SECTION 8 ASSISTANCE

    Project-based Section 8 assistance. HUD has devoted two 
years and a substantial amount of its financial staff's time to 
identify and quantify program reserves in its tenant-based 
Section 8 program. This effort was fruitful, allowing HUD to 
reduce increases in budget authority.
    Do the same kinds of reserves exist in the project-based 
Section 8 programs?
    Mr. Stegman. Not in the same way. Nic, do you want to 
respond?
    Mr. Retsinas. We have our own difficulty, of course, coming 
up with accurate estimates in terms of a database. But in most 
of our cases, the project rents are set at whatever the Section 
8 grants are. As we have said before, rents are often 
artificially inflated because of their original design, which 
leads us back to the familiar topic of ``mark to market'' that 
we're trying to make a dent in. We hope this year to make such 
a dent.
    Mr. Lewis. Are you going to, by chance, make such a dent by 
way of authorization?
    Mr. Retsinas. As you correctly pointed out yesterday, and 
as you predicted last year, it is a difficult task. We have 
certainly concluded, even though we would have wished it 
otherwise, that the task cannot be completed without 
appropriate tax legislation. The taxable implications of the 
financial restructuring are barriers to reform.
    As Secretary Cuomo pointed out yesterday, we have been 
working with the Treasury Department on a tax proposal. We 
intend to work with the authorizing committees, but clearly,. 
it has a substantial impact on appropriations.
    Mr. Lewis. Mr. Stokes, I would point out that, in our 
mutual interest, that while others are discussing thesethings 
in the newspapers, there is little doubt that there are portions of the 
Tax Code that do need to be addressed this year, and Section 8 kind of 
highlights the most delicate as well as difficult of those. So I would 
hope that the administration understands that there's room there where 
real movement--that real movement needs to take place, but also there 
are real people involved.
    Mr. Retsinas. There are, and certainly we would earnestly 
solicit your help in clarifying and illuminating the case, 
because it's important to achieving a broader public policy 
objective.
    Mr. Lewis. Correct.
    Mr. Retsinas. Certainly anything you could do, Mr. 
Chairman, and Mr. Stokes, we would appreciate.

                           INCREMENTAL UNITS

    Mr. Lewis. Incremental units. HUD's fiscal year 1998 budget 
justification calls for an increase in Section 8 units. The 
President requested $307 million in budget authority to support 
a total of 50,300 incremental certificates. 300 of these units 
will fund the witness relocation program and the remaining 
50,000 will be used for welfare work initiatives to address 
worst case housing needs and help eliminate the administrative 
burden PHAs have when families move between jurisdictions.
    Has HUD projected how many of these certificates will be 
used to address worst case housing needs, and how many will be 
used to eliminate administrative burdens?
    Mr. Stegman. Basically, Mr. Chairman, if you think about 
the challenge that awaits housing authorities in the post-
welfare reform world, the incremental Sec. 8 certificates are 
the only mobility-enhancing tool that communities and welfare 
departments will have in helping families connect from kind of 
welfare to work.
    A part of that actually does relate to the issue you just 
mentioned, and that is the portability issue. If folks are 
going to use certificates where the jobs are, and move out of 
one jurisdiction into another, there has to be a mechanism for 
reimbursing the receiving and the sending housing authority, so 
that they don't build administrative barriers to limit 
mobility.
    We don't know exactly at this point what that trade-off is 
going to be, but it's very important to make sure that all 
housing authorities understand that if they are going to use 
these certificates to help connect people to work, that crosses 
jurisdictions, that they're not going to be penalized.
    Mr. Lewis. Currently I think there are policies and 
procedures in place at local levels that allow families to move 
from one jurisdiction to another, isn't that right?
    Mr. Stegman. There are, but the reimbursement mechanism is 
very cumbersome. We want to make sure there are certificates 
for those housing authorities that are lowering the barriers, 
that are really working on behalf of their families, that they 
are reimbursed for those certificates.
    Mr. Lewis. So that we reward people who are performing for 
people and----
    Mr. Stegman. That's correct, to reward the institutions as 
well as families who are doing the right thing.
    Mr. Lewis. I think it's very important for all of us to 
address the authorizers in connection with this, for clearly 
there is impatience with the Appropriations Committee doing too 
much of this, and yet it is often important that both bodies 
recognize that there are real people involved.
    Mr. Stegman. We are hard at work on authorizing 
legislation.
    Mr. Lewis. Mr. Stokes, there is about five minutes left on 
a vote. Do you think we should go up, and then I will yield to 
you?
    Mr. Stokes. Why don't we do that.
    Mr. Lewis. I'm sorry, Mr. Frelinghuysen. Do you want to 
take over?

                      REGIONAL MOBILITY COUNSELING

    Mr. Frelinghuysen. That's up to you, Mr. Chairman.
    Mr. Lewis. I think we can have you ask questions while 
we're away, so we can move right along.
    Mr. Frelinghuysen [presiding]. Good afternoon. It's nice to 
see you all.
    Mr. Robinson. Good afternoon. It's good to see you.
    Mr. Frelinghuysen. I'll try to keep myself under control. 
[Laughter.]
    Relative to regional opportunity counseling, HUD has 
requested a $20 million set aside for tenant protections to pay 
for special counseling conducted by public housing agencies, in 
partnership with local nonprofit agencies, to expand housing 
opportunities and to deconcentrate the number of families 
living in poverty.
    Is this program a new initiative and, if so, when does HUD 
expect to have legislation introduced to authorize it?
    Mr. Stegman. Regional mobility counseling is really an 
extension of the responsibilities that housing authorities have 
to provide advice and help to families, to find housing that 
meets the Section 8 criteria.
    All we're doing here is adding an element to that which 
provides for housing authorities operating in a metropolitan 
context to partner with a nonprofit that is providing a whole 
bundle of services. It is not, in our justification, a new 
program, is not a new programming activity that requires 
separate authorization.
    Mr. Frelinghuysen. Is it the same title?
    Mr. Stegman. I'm sorry?
    Mr. Frelinghuysen. Are you using the same verbiage as you 
have in past years, or is this under a new label?
    Mr. Stegman. We have been doing it--it's not a new 
activity.
    Mr. Frelinghuysen. It's a new title to us, a new 
description to us.
    Mr. Stegman. It's a new description of mobility. We have in 
a variety of ways been trying to provide the same kind of 
support to families.
    Mr. Frelinghuysen. If you can clarify it for the committee, 
whether it is a new title or not. I know we're in the business 
of reinventing government, but sometimes we would like to see 
less titles and more action.
    Is HUD in a position to spend the entire $20 million in 
fiscal year '98?
    Mr. Stegman. Yes. Let me just clarify.
    Part of the responsibilities of administrative agencies, 
who receive an administrative fee for administering the 
program, is to provide outreach and support for families using 
the program. That is where we see the authorization for 
providing this kind of assistance to families.
    We will take under advisement certainly your caution about 
whether or not it is a separate program, but that is really 
where the authorization is and we fully expect to be able to 
utilize----
    Mr. Frelinghuysen. It's not the same as family self-
sufficiency?
    Mr. Stegman. No, sir.

                    family self-sufficiency program

    Mr. Frelinghuysen. Tell me, how does it differ from the 
family self-sufficiency program, where we have a $24 million 
expenditure?
    Mr. Stegman. The family self-sufficiency program, which is 
attached to both conventional public housing and tenant-based 
assistance, requires housing authorities to provide a range of 
assistance for families, preparing them basically to move from 
dependence to independence. It can take a whole range of 
activities.
    The money that is in the budget for that is for self-
sufficiency coordinators, actual managers, if you will, of the 
self-sufficiency program.
    Mr. Frelinghuysen. And the economic development and 
supportive services for families, is that----
    Mr. Stegman. I will ask Assistant Secretary Marchman to 
talk about that, but that is for training and social service 
support.
    Mr. Marchman. In that particular program we are looking to 
assist residents in training and to prepare them for work. To 
add to that, anticipating other questions about the TOP 
program, we are looking----
    Mr. Frelinghuysen. Anticipating what?
    Mr. Marchman. The Tenant Opportunity Program. We are----
    Mr. Frelinghuysen. You might anticipate my next question 
may be on measuring the performance issue.
    Mr. Marchman. I will do that.
    In this particular program, we are looking to assist 
residents in training and educational programs, as they get 
ready for work. It is an outgrowth of what we have seen from 
the TOP program. We believe it will help with respect to 
welfare reform.
    Mr. Frelinghuysen. How does HUD expect to measure the 
performance of PHAs and nonprofits that administer the program?
    Mr. Marchman. We would be looking for PHAs and resident 
groups who participate in the program, looking in terms of the 
programs they hope to put together and what the objectives are 
going to be. Are they going to target 20 percent of the 
population, 30 percent, and after some period of time, who has 
completed training programs, who has completed educational 
programs, who is ready to work.
    It is essential to the program that we move people through 
the system, and oft-times we have not seen that sort of 
measurement before. We are looking for housing authorities and 
resident groups to do that.
    We also have a PHMAP, a measurement performance system for 
housing authorities, to grade them in seeing how they implement 
these particular programs as well.

                    flexibility and waivers for PHAs

    Mr. Frelinghuysen. Let me toss in a few questions of my own 
here.
    One thing I hear continually from my housing authorities is 
that the Department needs to be more flexible. For example, 
currently waivers are required to do community housing 
effectively. Any time this occurs, it leads me to believe that 
the Department or agency needs to provide more flexibility.
    I was wondering if you would comment on this whole 
flexibility issue and the whole need for waivers. I understand 
there's a difference between these large public housing 
authorities, where certain things may occur, and out in the 
less populated areas, where they are also performing some 
valuable services.
    My housing people tell me--and they're a very energetic and 
outspoken group--that they need a lot more in the way of 
flexibility. Would you comment on the whole flexibility issue 
and the waiver situation?
    Mr. Marchman. We are trying to put the housing system in a 
position that you don't have to ask for the waivers as you have 
had to in the past. We are looking for housing authorities to 
submit, at the beginning of the year, 1-year plans, what is it 
that you hope to do, both on the capital side as well as the 
service side. If those plans meet the needs, then you are able 
to implement those particular things.
    What we have seen, particularly in the cases of the service 
programs, is that the local HUD staff believes that they will 
have to approve each and every step and thereby frustrate the 
efforts of the housing authority. But as we move to less 
regulation, we are looking at the 1-year plans and 5-year 
plans, to see what direction the housing authority is moving 
in.
    Mr. Frelinghuysen. What's the timetable for less 
regulation? I mean, it sounds good, but in reality, a lot of 
these people have been asking for flexibility for years.
    You know who the good operators are, and you know who the 
poor performers are. Why isn't there some way to reward people 
for coming up with some ingenuity, some innovation, some 
dynamism?
    Mr. Marchman. Congressman, we are working on these 
particular issues as we speak. As we look at H.R. 2, as we look 
at our version of a bill, we are looking to put these things 
into practice. We are crafting what we think will be included 
in a 1-year plan. There looks to be anywhere between six and 
seven different items which we will be reviewing. I would hope 
we would have something available before the end of the fiscal 
year.
    [The information follows:]

                     Timetable for Less Regulation

    Before a timetable can be completely developed the public 
housing reforms must become part of permanent law. The 
Department will move to expeditiously implement administrative 
provisions. The Department will work with Congress to codify 
and make permanent the basic statutory changes needed to 
continue improvements in public housing.
    Additionally, the Department is proposing further 
streamlining to substantially deregulate the PHAs plan 
requirements for well-managed PHAs and limit HUD approval to 
the areas of greatest funding or program risk. HUD approval 
would be required only for capital plans, demolition or 
disposition including disposition for homeownership, 
designation of housing for use by particular populations such 
as the elderly, and certifications that citizen participation 
and other processes are followed. Additional basic information, 
notably admissions policies including local admissions 
preferences, cooperation efforts with welfare and employment 
agencies and security plans, would be included and subject to 
the citizen participation process, but reviewed by HUD only for 
completeness in the event of a challenge. HUD would retain 
authority for audits, collection of essential information and 
enforcement of legal requirements such as rent rules and 
consistency of admissions preferences with local needs. A 5-
year strategic plan would be required. Instead of annual 
updates, however, high performing PHAs that have scored at 
least ninety points on PHMAP for at least 3 years, would submit 
only one interim report to HUD. Various annual reports would be 
consolidated into one performance report.
    For smaller agencies, those with less than 250 units, the 
Department proposes a number of reliefs. These include: 
allocation of modernization funds by formula rather than 
competition; full fungibility between capital and operating 
funds; a less complicated Public Housing Management Assessment 
Program (PHMAP) with fewer factors; and only one interim 
update, instead of annual, to a 5-year strategic plan for non-
troubled agencies.
    Additionally, HUD proposes to consolidate the Tenant 
Opportunity Program (TOP) and the Economic Development and 
Supportive Services Program (EDSS), and convert the Drug 
Elimination Program from a competitive to a performance-based 
formula program.

    Mr. Frelinghuysen. Keep us posted. I mean, 1-year plans are 
fine, but if there's a whole bureaucracy under this these plans 
float and sit on people's desks, you're not going to reward 
people for running a good ship, if they feel these plans go 
into one office and never come out.
    Mr. Marchman. I forgot the second half of your question.
    Mr. Frelinghuysen. Maybe my question was more of a 
statement than a question, so if you've forgotten it, it will 
be in the record. [Laughter.]
    Mr. Marchman. I was just going to say we look to lessen 
the----
    Mr. Frelinghuysen. There's some great people who are 
involved in these public housing authorities. I do think 
sometimes just a few people who do things in an improper manner 
blacken the whole process, but in reality, I do think there's 
some really good people out there who would like to try 
something. People tell me that there's a huge bureaucratic 
structure that strangles their desire to innovate.
    Mr. Stegman. For small housing authorities, we are also 
talking about combining the operating funds with the capital 
funds, and modernization to give far more flexibility and 
remove burdens and restrictions, on housing authorities with 
less than 250 units.
    Also for smaller housing authorities, we will propose 
changing what is an application process for modernization money 
to a formula process that will really reduce a lot of 
restrictions. So, for the smaller housing authorities, we 
really are talking about a great deal of simplification and 
more flexibility.

                        earned-income exclusion

    Mr. Frelinghuysen. Simplification and, hopefully, some 
sympathy.
    Moving right along, relative to the public housing 
operating fund, the President has requested $2.9 billion for 
operating subsidies. HUD calculates the housing authorities 
will receive approximately 93 percent of their PFS subsidy 
eligibility with this level of funding. Incorporated into the 
fiscal year 1998 operating subsidy is an earned income 
exclusion proposal.
    Can you explain the earned income exclusion? I apologize 
for not being here earlier, but I had two other committee 
meetings and only two cups of coffee and a candy bar to sustain 
me. [Laughter.]
    Mr. Stegman. The Department and housing authorities across 
the country have really been working very hard to think about 
ways that we can remove both barriers to work and provide 
incentives to work, and to put families that are in public and 
assisted housing on a par with families whose rents don't go up 
because they work more or go from being unemployed to employed.
    The proposal that is in the current Budget would provide 
for a simple-to-administer exclusion of $400 per worker for 
work-related expenses, essentially, so that before your rent is 
calculated, you would have this deduction, which would help 
level the playing field, if you will, between families who 
receive welfare or transfer payments and those who are working.
    The Department currently, as we look to authorizing 
legislation and so on, is really working very hard to think 
about what would be the most effective ways of offering 
incentives to work.
    Mr. Frelinghuysen. There's some benefits, but there are 
also some weaknesses. What would be some of the weaknesses for 
implementing the exclusion?
    Mr. Stegman. Well, in some cases, there are administrative 
burdens. The question of any given level, is it true that if we 
deduct $400 will it change the incentive? Is it enough? Are you 
giving it to families who are already working, as well as 
families who are not? I mean, this is a very, very difficult 
problem.
    But one of the most serious obstacles to us, quite frankly, 
is cost. Ultimately, if you ``incent'' work, and people have 
more money, they can pay more rent and everything is fine. But 
when you start that process, this is a proposal that costs 
money.
    Mr. Frelinghuysen. Does it affect operating subsidies?
    Mr. Stegman. It would.
    Mr. Frelinghuysen. And how much?
    Mr. Stegman. It's $40 million in 1998.
    Mr. Frelinghuysen. We got that figure out on the table, 
right, Mr. Chairman?
    Mr. Lewis [presiding]. That's right.
    Mr. Frelinghuysen. Does the proposal require an 
authorization?
    Mr. Stegman. I would assume this is not regulatory.
    Mr. Marchman. I believe any changes to the PFS is 
statutory.
    Mr. Frelinghuysen. So you're going to need to--are you 
going to be introducing legislation?
    Mr. Stegman. Well, there are two things. The current 
proposal in the 1998 Budget we are really dealing with as a 
regulatory change, the deductions from income. It is currently 
at OMB.
    We are looking longer term in our public housing reform 
authorizing legislation. In the authorizing legislation that 
goes to the Hill, a work incentives authorization will be 
requested.
    This particular change, which we think is a modest change, 
is being dealt with through the regulatory process.
    Mr. Frelinghuysen. So to move ahead with the earned income 
exclusion, you will or will not require----
    Mr. Stegman. This earned income exclusion in the 1998 
budget we're dealing with as a regulatory change. So it will 
not require authorization.
    We are exploring a wide range of work incentives that, when 
we make the decisions, will require authorization.
    Mr. Frelinghuysen. It's going to cost some money, as you 
said earlier. You're going to have to pay for this exclusion.
    Mr. Stegman. That's correct.
    Mr. Frelinghuysen. I would think that we would require some 
authority here, wouldn't we?
    Mr. Lewis. Income adjustments do require--they are 
statutory.
    Mr. Stegman. My understanding is the difference between 
deductions from income and exclusions, one is regulatory and 
one requires authorization.
    Mr. Lewis. As you expand your discussions with the 
authorizing committee, make sure you get to that point.
    Mr. Stegman. We sure will.
    Mr. Frelinghuysen. And would you be good enough to tell me 
whether the PFS calculation includes the inclusion of 20,000 
units that HUD expects to demolish over the next fiscal year?
    Mr. Stegman. In the regulation dealing with the 
continuation of operating subsidies, there is a 3-year phase-
out of operating subsidies following demolition. So the PFS 
does include funds that are involved in that phase down. That 
is the current regulatory practice of the Department.
    Mr. Frelinghuysen. So that might be described as a 
transition funding period for PFS?
    Mr. Stegman. That's correct.
    Mr. Frelinghuysen. And the cost of this transition period, 
is that amount times three or what? What's the dollar amount?
    Mr. Stegman. It is phased-down over 3 years, so it's full 
for 1 year, it goes to about half the second year, and then a 
third the third year. It's phased out completely in the third 
year. I'm not sure what the 1 year estimate is. Do we have 
that?
    We will get that to you for the record.
    [The information follows:]

                   Phase-Down of Operating Subsidies

    Recent regulatory changes adds a provision to the PFS to 
provide a short transition funding period for some HAs that 
receive approval to demolish. This encourages and supports 
efforts by an HA to reduce its overhead costs in a planned and 
orderly manner when its inventories of units are reduced by 
demolition. Once demolition approval occurs, units that have 
been vacant for 12 months, before approval, will receive 20 
percent of the allowable expense level (AEL) for operating 
subsidies for 12 months. Units that were not vacant 12 months 
prior to demolition approval would receive full AEL for 12 
months, then would receive two-thirds of the AEL for the next 
12 months, and finally one-third of the AEL for the last 12 
months. After that point, the subsidy is eliminated. Units that 
are replaced by Section 8 tenant-based assistance are not 
eligible for transition funding. The following is an annual 
estimate of this phase-down cost:

                          [Dollars in millions]

        Fiscal year                                               Amount
1997.............................................................. $17.4
1998..............................................................  19.0
1999..............................................................  25.4
2000..............................................................  28.9
2001..............................................................  28.7
2002..............................................................  17.0
2003..............................................................   9.0
2004..............................................................   5.1
2005..............................................................   5.3
2006..............................................................   5.5

                       operating subsidy increase

    Mr. Frelinghuysen. Despite the demolition of tens of 
thousands of obsolete public housing units, and the rent 
reforms included in previous appropriations measures, operating 
subsidies have increased or have remained at a steady level.
    When should we expect to see operating subsidies diminish?
    Mr. Marchman. I think we can begin to see operating 
subsidies decrease in perhaps the next year or two. I think, in 
1999, they received over 2.8 billion. The issue simply is, with 
fewer units to manage, fewer units to operate, the costs ought 
to go down.
    The thinking also is, with newer units in the system, they 
will be cheaper to manage than the old stock. So I think the 
number goes down in 1999 and 2000. We should begin to see a 
difference in what it takes to operate the system.
    Mr. Stegman. I might add that the biggest driver in the 
need calculatives is the income of families in public housing. 
There has been a reduction, in real terms, in those incomes. 
Our public housing transformation initiatives--the elimination 
of Federal preferences, the ability of housing authorities to 
diversify the population--and these are related--will have as 
much to do with the kind of formula-driven needs of housing 
authorities as demolitions or anything else.

                         rental income increase

    Mr. Frelinghuysen. My last question.
    Rental income increased slightly in fiscal year '96, making 
approximately $134 million available. Is this funding available 
because of rent reforms including in previous appropriations 
measures?
    Mr. Stegman. The rent reforms have been in existence for a 
very short time, because they've been authorized in 
appropriations which have been 1 year and have to be renewed. 
It is not clear that many housing authorities actually have 
enacted fundamental changes in their rent rules, not knowing 
that these are going to be permanent or not. So I would suggest 
that they are not a reflection of a significant change in rent 
rules across the country.
    That's one of the reasons why it is so important for us to 
have an authorizing bill, to make that future much more 
certain.
    Mr. Frelinghuysen. Thank you for your responses.
    Thank you, Mr. Chairman.
    Mr. Lewis. Thank you for your help, Mr. Frelinghuysen.
    Mr. Stokes.

                             troubled phas

    Mr. Stokes. Thank you, Mr. Chairman.
    Secretary Robinson, how many housing authorities are there 
throughout the United States?
    Mr. Robinson. I believe the number is 3,400, is that 
correct?
    Mr. Marchman. That's correct.
    Mr. Stokes. Of the 3,400, how many would fall into the 
category of being troubled, as you would categorize it?
    Mr. Robinson. I'm going to refer the question to Mr. 
Marchman, but it's a very small percentage.
    Mr. Stokes. Do you know, Mr. Marchman?
    Mr. Marchman. Yes, sir. Currently, there are 12 large 
public housing authorities that we consider troubled, large 
being those that have 1,250 units and above. It is anticipated 
that at the end of this year there will be nine on that large 
troubled housing list.
    There are roughly 60, what we call the small ones, on that 
list, and we look for that number to go down as well.
    Mr. Stokes. That's out of a total of 3,400?
    Mr. Marchman. Yes, sir.
    Mr. Stokes. What is the criteria for being categorized as 
troubled?
    Mr. Marchman. Generally it's the inability to do management 
and maintenance on a timely basis. It is the absence of 
financial systems to report information. It is lack of 
communications with the residents and the community. It runs 
mostly to the issues of maintenance and management on the 
particular housing site.
    Mr. Stokes. Would it be true that, in most instances,you 
have the resources to be able to help those who are categorized as 
being troubled, provided that you can get the local help that is also 
required?
    Mr. Marchman. Yes, sir.
    In this year's bill we asked for some $45 million for 
technical assistance, and it is that money which we use to, 
among other things, deal with the troubled housing authority 
stock.

                             welfare reform

    Mr. Stokes. Let me shift now to the housing and welfare 
reform area. A major challenge, it seems to me, in implementing 
welfare reform would be eliminating barriers to employment and 
trying to make sure there are realistic employment 
opportunities, with everyone wanting to work and expected to 
work. One problem in this regard is that people often have real 
difficulty finding affordable housing in areas where the good 
jobs are located.
    Does HUD have a role in this and, if so, tell us what it 
is.
    Mr. Robinson. Sure. We have a specific request in our 
budget, Mr. Stokes, to provide opportunities for welfare 
recipients who live in public housing, or in HUD housing, to 
have the opportunity both to move to areas where work might be, 
in terms of our voucher requests, the 50,000 vouchers, and 
secondly, as it relates to transportation. I believe there's a 
$10 million line item in there that is related to opportunities 
for transportation for people to meet a very critical need, as 
you point, to have the opportunity to go to where the jobs are.

               certificate and voucher recipient problems

    Mr. Stokes. Mr. Secretary, when you mention vouchers and 
certificates, one aspect of vouchers and certificates we have 
not talked about is whether or not there are any problems 
relative to vouchers and certificates for some of the persons 
who go out and seek housing. Particularly, let's say inner city 
residents who seek housing in suburban areas, in some cases 
where the suburban areas do not have many minorities and the 
minorities go out seeking housing.
    I think the record ought to show whether or not there are 
some problems related to vouchers and certificates. Are there?
    Mr. Robinson. Mr. Stokes, I would ask my colleague, Miss 
Forward, to perhaps speak to this, or Mr. Marchman. But let me 
give you my sense.
    Clearly, as it relates to Section 8 and the vouchers that 
are made available, there have been difficulties that exist 
across the country, as it relates to consolidation of Section 8 
vouchers in particular areas, a disproportionate use, 
oftentimes people are discriminated against and not allowed to 
utilize their vouchers in particular areas. All these things 
exist.
    None of these things speak to the fact that the Department 
believes that the program ought to somehow be brought into a 
troubled status, but it speaks to what I believe is the fact 
that we ought to make sure we meet all of the tenets of our 
mission, which includes discrimination and includes making sure 
that these things are available across the country.
    Let me turn to my colleagues for a more specific response.
    Ms. Forward. Thank you for that question.
    It is something that we are proposing to address in our 
friends initiatives program this year. We have set aside $5 
million proposed for community tension activity for those folks 
who are moving from inner city neighborhoods into suburban 
communities. There will be fair housing counselors available to 
help with the community, to help with the transition of those 
folks, and allay any concerns that might occur in the 
communities. So that is a pilot program that we proposed in our 
1997 fair housing initiatives program, and we will test how 
that works in some of these communities and propose even beyond 
the '98 appropriations as well.
    Mr. Stokes. Actually, you're taking me into an area that I 
did want to talk about a little bit, the manner in which you 
answered my question.
    Do you have any objection, Mr. Chairman, if I move into the 
fair housing questions?
    Mr. Lewis. No objection, except that you and I should go 
upstairs and vote and then come right back down.
    Mr. Stokes. Okay. I'm sorry. I didn't realize we had a 
vote.
    Mr. Lewis. We have about three minutes, so we'll be right 
back.
    [Recess.]
    Mr. Lewis. The subcommittee will come back to order.
    Mr. Stokes.

                  increase in fair housing complaints

    Mr. Stokes. Thank you, Mr. Chairman.
    Turning to the subject of fair housing, your budget 
justifications indicate that the number of housing 
discrimination complaints received by HUD seems to be rising 
steadily, from 10,945 in 1996, to an estimated 12,000 in 1997 
and 13,200 in 1998. The justifications also indicate a 
substantial increase in all categories of complaints involving 
HUD programs.
    I would like for you to first comment on these trends, and 
then tell us whether we're making any progress in combating 
discrimination in housing; that is, whether the problem is 
getting worse, and are you seeing any trends in terms of the 
kinds of complaints you are receiving and the kinds of 
violations that you're finding?
    I know that question is rather compounded, but if you can 
just answer that.
    Ms. Forward. I will try to address all those questions, Mr. 
Stokes.
    We have recently redesigned our Title VIII program. We 
engaged the services of Price Waterhouse and our Title 8 has 
gone under a business process redesign. So the numbers that 
you're quoting, projected numbers, are a little bit higher than 
some of the numbers that I have here in front of me.
    What we were doing at one point, before the business 
process redesign, was taking in a lot of complaints that we now 
call ``claims'', that fell into a nonjurisdictional area, that 
may or may not have been exactly discrimination complaints. If 
you count those along with the complaints we are currently 
taking in, in '96 we accepted almost 11,000 complaints.
    I would suggest that our efforts with the Fair Housing 
Assistance Program agencies, or FHAP, local and state, are 
succeeding given we have more coming into the fold. I know that 
was a concern of Mr. Knollenberg's in yesterday's questioning. 
We have 73 agencies now, and each time an agency comes into the 
fold, we receive more complaints than we might have from their 
States. When the States are not substantially equivalent, 
oftentimes the complaints are just being handled by the State 
and folks don't find their way into the FederalGovernment 
process or have their rights processed under the Federal Fair Housing 
Act. So it's a state or locality remedy only.
    For example, if the State of New York were to come into the 
fold, then we would have a lot more complaints than we are 
currently receiving from complaintants in that state. So given 
that we don't yet have the State of New York in the FHAP 
program, we're close. We hope to have New York in the next few 
years and some of our other larger states--New Jersey as well--
where we don't have substantially equivalent laws. These states 
would bring in additional complaints. So it's likely complaints 
will increase because of the FHAP presence.
    I mean, this is a devolution, and we've had this program 
for a number of years. The State and localities have been 
investigating the complaints and doing the education and 
outreach in their communities. They know what is needed most, 
whether it is community tensions surrounding folks moving from 
inner cities to outlying communities, or whether it's lending 
discrimination or discrimination in residential rental or sales 
housing. The FHAP agencies have been doing a good job of 
education and outreach.
    But they bring to us more complaints, so we anticipate 
that, in 1998, we will have 80 FHAP agencies, local and States, 
in the fold, with a total potential pool of 120. That answers 
the rise, I think, in complaints.
    The trends we are seeing are still based on race. The 
predominance of our complaints are race and national origin 
discrimination.

                   types of discrimination complaints

    Mr. Stokes. Just so the committee can get some 
understanding of what the complaints consist of, give us some 
idea.
    Ms. Forward. They consist of race discrimination 
predominantly. That is still the protected class where we 
receive the greatest number of complaints. National origin 
complaints, new immigrants, Latinos, Mexican-Americans are on 
the rise, as well as disability complaints--complaints by 
persons with disabilities. That has increased greatly, as well 
as families with children, complaints filed by those who have a 
child in the household under the age of 18.
    The Fair Housing Initiatives Program is a program that 
augments our enforcement efforts and our education and outreach 
efforts. Those are performed by the private, nonprofit 
organizations. We have had a lot of success in partnership with 
those organizations. They have partnered with the FHAPs in the 
local communities to provide education to the local 
communities, to provide outreach to community members, who may 
wish to file complaints butt who otherwise wouldn't find their 
way into the Federal Government process; HUD offices are hard 
to find throughout the country.
    They have a more grassroots approach. They do testing, 
mortgage lending testing. They have done insurance testing, and 
they have done residential real estate related transaction 
testing, where the predominance of our complaint testing has 
been done, and consistently have found high levels of 
discrimination against African-Americans, families with 
children, and Latinos.
    There have been recent studies in the greater Washington 
area, one published only a few weeks ago by the Greater 
Washington Fair Housing Council on discrimination in rental and 
sales housing. I don't know if any of you read have about that, 
but I can supply copies for you. It was widely publicized in 
The Post. That was a Northern Virginia study, and there was one 
actually on Capitol Hill, where high levels of discrimination 
against minorities were found, again African-Americans and 
Latinos.
    What they found in the Northern Virginia study a few weeks 
ago is that discrimination against African-Americans had gone 
down a little bit from the years prior. However, the 
discrimination against Latinos had increased in Northern 
Virginia.
    The Capitol Hill study showed a wide range of types of 
discrimination against African-Americans, in terms and 
conditions, and the number of units they were shown, the types 
of units and the prices of units. I can provide those studies 
for you. They're very informative on our efforts to target 
enforcement and where we would need to geographically target 
our resources.
    That is a key component of the FHIP program as well. They 
serve areas where there are no FHAP agencies, where there is no 
local HUD office, perhaps; those are communities that have fair 
housing problems, have a minority population, but don't have 
the resources they would need to support a fair housing group; 
and that's where FHIP groups can partner with us and help us 
with our enforcement effort, since we can't be everywhere.
    Mr. Lewis. If you could supplement the record on that, we 
would appreciate it.
    [The information follows:]

[Pages 162 - 179--The official Committee record contains additional material here.]


    Mr. Stokes. Now, the Chairman was saying you could 
supplement the record, and we would appreciate receiving those 
additional materials.
    Ms. Forward. I would be happy to.
    Mr. Stokes. But this is the area in which you are 
requesting a $9 million increase, is that correct?
    Ms. Forward. Yes, sir.
    Mr. Stokes. So, you are going to address what you have just 
told us about.
    [The information follows:]

                    Fair Housing Initiatives Program

    The fiscal year 1998 Budget increase of $9 million will be 
used to address the following:
    Fair housing education in communities experiencing 
heightened tension arising in connection with persons seeking 
to expand their housing opportunities. Such tensions have been 
evident in communities where HUD recently settled litigation 
alleging racial segregation in public housing and communities 
which were the site for new group homes for persons with 
disabilities.
    There are numerous advantages to utilizing FHIP to address 
community tensions: permitting multiyear projects assures long-
term effectiveness; the wide pool of entities eligible to apply 
for these funds will allow both private and public organization 
to propose projects that address community tensions; these 
issues are best addressed at the community-based level but may 
require governmental support as well; grantees can leverage 
their receipt of FHIP funding to gain support from other 
sectors of the community; projects which promote coordinated 
efforts between the public and private sectors will enhance 
their effectiveness since public groups have wide ranging reach 
while private groups have extensive experience in providing 
fair housing education and with working with victims of 
discrimination and local housing providers; this use of FHIP 
funding supports other HUD programmatic thrusts such as 
consolidated planning and vacancy reduction in public housing.
    Multiyear enforcement projects for more communities, 
targeting the continuing problems of discrimination in the 
rental and sales markets, such as demonstrated by the recent 
rental audit in Greater Washington area, which revealed that 
Blacks and Hispanics face discrimination more than two out of 
five times when they try to rent an apartment. The advantage of 
funding multiyear projects is that grantees have long-term 
support for addressing fair housing issues, ensuring that fair 
housing complaints can be fully investigated and processed 
through litigation or other administrative avenues.

                    fair housing in-house activities

    Mr. Stokes. Now, in addition to FHIP and FHAP, HUD has its 
own in-house fair housing activities, does it not?
    Ms. Forward. Yes, it does.
    Mr. Stokes. As distinct from FHIP and FHAP?
    Ms. Forward. That is exactly right.
    Mr. Stokes. In light of what appears to be the type of 
increased workload that you have just described, what, in your 
budget, addresses the in-house activities?
    Ms. Forward. Well, as I mentioned, our business process 
redesign of our Title VIII program provides that we handle all 
of the complaints where there are no substantially equivalent 
agencies, nor a FHAP office. That is not in every jurisdiction 
in America, so we handle those complaints ourselves.
    We have in this past year undergone a study so that we 
could improve the effectiveness of our complaint processing, 
given that we are under congressional mandate to process 
complaints within 100 days. We have become more timely as a 
result. We have just rolled out our new business process 
redesign which will tell us that if we continue on the track 
that we are on, we will be processing complaints within the 100 
day time frame, well within it.
    These are some of the measures that we have taken given the 
downsizing and limited resources. It is also screening the 
complaints more carefully so that we will be accepting 
complaints of discrimination as opposed to some landlord/tenant 
claims or folks that find their way to us that may not exactly 
have a discrimination complaint. So, we are scrubbing down the 
complaints a little bit better.
    A big piece of this is technology. We have invested a lot 
in our computer system so that we can have paperless files. We 
do not have to rewrite our final investigative reports or our 
interviewer notes at several different stages. We can take 
laptops out into the field when we investigate, when we 
interview parties to a complaint, and then plug it right into 
our final investigative reports Aogram.
    This is proving to be very successful and we are very 
excited about being able to process complaints more 
effectively, efficiently and timely, and to improve service to 
our customers.
    Mr. Stokes. I guess the bottom line if I would try to sum 
up, the sum and substance of your testimony would be that 
discrimination in America is still a very expensive past time.
    Ms. Forward. Unfortunately, I think it is.
    Mr. Stokes. Thank you, Mr. Chairman.

                      public housing capital fund

    Mr. Lewis. Thank you, Mr. Stokes.
    I will spend a few moments on the public housing capital 
funds.
    The President has requested $2.5 billion for the public 
housing capital fund, a fund which merges the development and 
modernization programs into a single comprehensive formula-
driven program based on need.
    GAO has reported that the current unobligated balance of 
modernization funds is $925 million, a decrease over past 
years. However, some public housing authorities, for some of 
them the pipelines have actually increased. Can you tell me 
why?
    Mr. Marchman. Those particular housing authorities are 
troubled. We have withheld our approval of further expenditures 
out of those funds until they have in place necessary systems.
    I believe that New Orleans and Washington, D.C. are among 
the four that are mentioned in the GAO report.
    Mr. Lewis. Okay.
    The HOME program has a two-year time frame in which 
participating jurisdictions must obligate their funds for 
capital programs. Would such a time frame be appropriate for 
public housing authorities and would you explain your response?
    Mr. Marchman. Yes. Such a time line would be appropriate. 
We are currently looking at time lines for the modernization 
program. After a particular period of time, either you will 
lose the money or lose the ability to spend the money yourself.
    Mr. Lewis. HUD has the authority to withhold or recapture 
modernization funds from authorities that have not obligated 
them. Several authorities have unobligated balances that date 
back more than several years. I mean are these authorities 
troubled. I think of that pool of money at HANO I was worried 
about.
    Mr. Marchman. HANO is perhaps the best example of that.
    Mr. Lewis. Has HUD considered recapturing these funds?
    Mr. Marchman. Not to date, but we are----
    Mr. Lewis. Should we?
    Mr. Marchman. We should consider it, in some cases, yes.
    Mr. Lewis. I certainly think that we should and as we 
address the question of rewarding those who produce results 
versus those who do not, I think that message was delivered to 
the Secretary, but I think all of us would believe that serving 
people might be in a priority way addressed by such a path.
    Would private management development companies be more 
efficient and effective spending the funds, than troubled 
public housing authorities?
    Mr. Marchman. Yes, sir. In some cases we will have that 
happen.
    Mr. Lewis. Should public housing authorities with large 
backlogs of funds, which have been designated as troubled or 
near troubled, continue to receive their annual allocation 
orshould they be spending down what they have before we give them more 
funds?
    Mr. Marchman. It would be my opinion that they should be 
spending down what they have. We should exclude them from the 
formula allocation for giving them more funds.

                       tenant opportunity program

    Mr. Lewis. Well, we will just watch that with care.
    Last year, the subcommittee decreased funding for the 
tenant opportunity program, noting that the program had 
suffered from wasteful spending practices and allegedly 
fraudulent activities.
    Has HUD investigated the allegations which surfaced about 
this program and, if so, what were the results?
    Mr. Marchman. The staff is currently finishing up their 
review of the program. What we have found is that the 
recipients of the TOP programs were, in many cases, ready to 
expend the funds and sometimes did not have the capacity to 
manage them well.
    I believe that the recommendation that will come to me 
would be to change the nature of the tenant opportunity program 
to combine it with the EDS program to work on welfare reform.

                         capital fund set-aside

    Mr. Lewis. Another set aside within the capital fund is $45 
million set aside for technical assistance, intervention funds 
and lease adjustments. How much of the set aside is dedicated 
to each of these categories and what kinds of technical 
assistance is provided under Section 6(j) of the U.S. Housing 
Act of 1937?
    Mr. Marchman. I am not sure I can remember exactly what has 
been set aside from each. But specifically the money set aside 
for assistance to troubled housing authorities, this is the 
money with which we, as you mentioned yesterday, paid for the 
Campus Affiliates program. This is where we have independent 
contractors come to help work out systems for housing 
authorities. In some cases, technical assistance funding will 
help housing authorities move their modernization pipelines 
along as well.
    Mr. Lewis. Okay. Let us make sure that is correct.
    Mr. Marchman. I will get that to you.
    Mr. Lewis. Okay. Which housing authorities have received 
this type of assistance and what level of spending has been 
provided to them?
    Mr. Marchman. Again, I do not know if I can, off the top of 
my head, say for sure. But housing authorities, such as New 
Orleans, Chicago, District of Columbia, San Francisco, and 
maybe half a dozen more.
    Mr. Lewis. I have a couple of other questions for the 
record that I would like to have you address.
    [The questions of Mr. Lewis follows:]

[Pages 184 - 185--The official Committee record contains additional material here.]


    Mr. Lewis. Taking myself recently close to home, last year 
HUD and Mayor Willie Brown announced that the San Francisco 
housing authority was in extremely bad shape and they were 
launching a joint recovery effort. I am concerned about reports 
that permanent professional leadership is not in place. We had 
some discussion of that this morning, that maybe HUD's helping 
out. Would you elaborate a bit on that?
    Mr. Marchman. We look to make a decision with respect to 
the permanent management of the San Francisco Housing Authority 
in the next several weeks.
    In fact, I think it is the end of this month in which 
staff, HUD central staff, the Housing Authority staff and the 
mayor's office, and his housing departments are going to put 
together a six-month plan for the next six months and it will 
be based on that information of the program management. So, I 
hope that will be resolved in the next several weeks.
    Mr. Lewis. Mr. Stokes, Catlin Rose lives right across the 
Bay from that location. Do you know who Catlin Rose is?
    Mr. Stokes. No, I do not.
    Mr. Lewis. She is my granddaughter.
    Mr. Stokes. Is that right?
    Mr. Lewis. I want one more granddaughter.
    Mr. Stokes. Isn't that nice. We will have to go out and 
take a trip and see her, too. [Laughter.]
    Mr. Lewis. I note that HUD entered into a similar 
partnership with the city of Philadelphia in 1993, and 
significant taxpayer dollars have been expended in that housing 
authority. What has been accomplished with the authority and is 
the authority off HUD's troubled list?
    Mr. Marchman. No, it is not off the troubled list. They 
have improved their expenditure of the modernization program. 
They were once what we call moderately troubled, Mod Trouble. 
We have seen improvement at the agency in terms of its systems. 
I think they struggle primarily with a very old housing stock. 
But, no, they are not off the list.
    Mr. Lewis. Will you update the record so that we really are 
up to speed relative to Philadelphia?
    Mr. Marchman. I will do that.
    [The information follows:]

                     Philadelphia Housing Authority

    The current Public Housing Assessment (PHMAP) score for the 
Philadelphia Housing authority (PHA) for the fiscal year ending 
March 31, 1996, is 48.90 percent. Although PHA remains 
classified as a troubled housing authority, this year's PHMAP 
score is an increase of 39 percent from the previous PHMAP 
score of 35.15. PHA will submit its PHMAP certification for its 
fiscal year ending March 31, 1997 to the HUD field office 
shortly.
    On January 14, 1997, the Office of Inspector General 
released an Assessment of Progress Report on PHA that indicates 
some progress in maintenance delivery for scattered sites, 
expediting obligation and expenditure of the modernization 
pipeline, obligating funds in accordance with the 
implementation schedule, improving staff training and 
professionalism, and increasing safety and security. However, 
there are remaining concerns in the areas of routine 
maintenance and high vacancies.
    It is anticipated that a new Memorandum of Agreement (MOA) 
with PHA will be executed by May 1, 1997. The new MOA will 
reflect actions to address the recommendations provided in the 
Inspector General's Assessment.

    Mr. Lewis. Shall I just keep moving along here?
    Mr. Stokes. Sure, Mr. Chairman, go right ahead.

                              cdbg program

    Mr. Lewis. Community planning and development, CDBG. In 
1996, Congress appropriated $4.370 billion to HUD to make 
grants to cities, counties and States for the purpose of 
developing viable urban communities by providing decent housing 
and a suitable living environment and by expanding economic 
opportunities principally for persons of low- and moderate-
income. Activities are limited to those which carry out one of 
the following broad national objectives.
    Benefit low- and moderate-income persons; aid to the 
prevention or elimination of slums or blight; meet other 
particularly urgent community needs. Would you tell me what are 
the percentage of funds used for each of these categories and 
how many jobs were created that benefit low- and moderate-
income persons?
    Mr. Robinson. Mr. Chairman, let me introduce you to, if you 
do not already know, Assistant Secretary Howard Glaser who will 
answer that question.
    Mr. Lewis. Howard, welcome to the Subcommittee.
    Mr. Glaser. Mr. Chairman, it goes to the issue really of 
performance measurement for the Community Development Block 
Grant program which is one of our highest priorities. To go 
directly to your question withpercentages, approximately 94 
percent of the funds are spent to benefit low- and moderate-income 
persons with a relatively minor distribution for the other areas, for 
removing slums and blight and a very small percentage, about half a 
percent for dealing with imminent threat to urgent public health and 
safety issues.
    The CDBG is a relatively unique program in certain ways. We 
talked about the HOME program and CDBG in these hearings as 
models for the Federal role, where the Federal Government sets 
clearly broad parameters, like the ones that you suggested, but 
allows the local governments to set specific goals as to what 
they want to accomplish in a variety of areas.
    Whether they seek to produce jobs, or to remove slum or 
blight, is their own local decision. On the other hand, while 
it is a flexible program, as the Secretary said earlier today, 
it is not a blank check to the communities. And we have worked 
very hard over the last four years to introduce performance 
measurement into the program and to link funding to 
performance.
    Four years ago, we probably could not have told you how 
CDBG money is spent in any given area, in a city, in a district 
or in a county. Today, we are well on our way to being able to 
do that.
    Through the consolidated planning system and now an 
automated reporting system linked to the Federal Government, 
communities lay out, in advance, their priority spending for 
the HOME program and the CDBG program together and then draw 
the money down as they actually begin to spend money on those 
accomplishments.
    We can provide you with some examples of what is right now 
a work in progress, as a matter of fact. I brought with me, 
just as an example, a draft for the State of California which 
gives you an example of what we could not have done four years 
ago.
    Mr. Lewis. Interesting State. [Laughter.]
    Mr. Glaser. Interesting State and it was on top of the 
pile, alphabetically. [Laughter.]
    Mr. Glaser. And if you want to know what is happening, for 
example, in Rancho Cucamonga, California, you turn to page 41 
and you will see that they are doing an economic development 
loan program for local businesses. This is just a sample of the 
kind of thing that we can do. We can provide additional 
information on that for you.
    Mr. Lewis. We are interested though in items, you know, 
information such as the retention rate of those jobs, what the 
average income is for people who are so employed, et cetera.
    Mr. Glaser. Jobs is really the number one tracking item for 
us. And just to give you an example, from a recent year, with 
$411 million used specifically for job creation activities 
approximately 115,000 jobs were produced.
    I think the interesting thing is that of those jobs, 89 
percent were still in existence 4 years later. And 96 percent 
of the jobs were full-time, and 90 percent were over the 
minimum wage.
    And, largely those are small business.
    Mr. Lewis. That was 90 percent?
    Mr. Glaser. Yes, 90 percent were over minimum wage.
    The bulk of that money also goes to small businesses, small 
business development. And 99 percent of the assisted businesses 
with that piece of money had under $6 million in annual gross 
revenue, and over 50 percent had fewer than five employees.
    That is, we think, a typical figure. There have only been a 
couple of really academic studies done on this. One has been 
done by PD&R, and one by the Urban Institute and they bear out 
those figures.

                          use of cdbg funding

    Mr. Lewis. Could you give us an illustration of some of the 
particularly urgent community needs that were cured by these 
funds?
    Mr. Glaser. There, again, it is a local decision how they 
use the funds. There has been more emphasis in the last few 
years on using the funding for economic development. We 
introduced regulations a couple of years ago to make it easier 
to use the funds for economic development. So, we see an 
increase in revolving loan funds for small businesses.
    The more traditional use of the funds gets to some of what 
they call urgent needs, if we are using that terminology. Sewer 
systems, public infrastructure, and improvements to water 
supplies all fall into that category most often.
    Mr. Lewis. I am very interested in your scrubbing that for 
us so that we can get an idea of how communities are using 
those funds. I know that there is a variety and mix, but as the 
pool shrinks we have to look more closely.
    I have been involved, for example, in local YWCA drives. 
But I am not really certain the Federal Government ought to be 
involved in YMCA drives when there are people, you know, who 
are affected in other ways, their housing needs and otherwise.
    I do not want to, by any matter or means, separate one 
category from another but I would like to know what these funds 
are being used for.
    Mr. Glaser. It would be helpful to us if the Committee 
wants to give us some categories they are particularly 
interested in because since they are so broad, we can come up 
with some preset categories that work but if there are 
someparticular areas, we can scrub it in a way that helps you.
    Mr. Stokes. Would the Chairman yield?
    Mr. Lewis. Sure.
    Mr. Stokes. I have the same concerns that the Chairman has. 
And the Chairman perhaps may be thinking about the fact that a 
few years ago we found that certain communities were getting 
CDBG grants that really did not need the money. And they were 
utilizing the money for things like band uniforms, and things 
of that nature, which are not economic development in nature or 
job producing in nature.
    Has the Department done much to eliminate that type of 
thing over the years?
    Mr. Glaser. We have improved our monitoring in the field 
through this performance system. Under the consolidated plan--
these are formula grants so the city does get them upfront. 
Before the cities can draw down their money, they must tell the 
Department what they are going to do.
    We do not direct them on what they should do but they do 
need to tell us and we then approve the consolidated plan in 
advance; so, we have an opportunity to see before the funds are 
drawn down what they are going to be used for and to ensure 
that they are consistent with the statutory purposes for the 
funding. And we have weeded out some things here and there that 
had been the subject of abuse before.
    [The information follows:]

[Pages 190 - 208--The official Committee record contains additional material here.]


    Mr. Stokes. Thank you, Mr. Chairman.

                            cdbg set-asides

    Mr. Lewis. Several initiatives and demonstrations that are 
requested as set-asides in CDBG, in that account, deal with 
welfare reform and its impact upon HUD's low-income housing 
programs including Moving-To-Work, Bridges-To-Work, 50,000 new 
certificates and vouchers aimed at families who are moving 
toward self-sufficiency. This was touched on by Mr. Stokes 
earlier but would you describe the differences between each of 
these programs for the record, so that we have some 
clarification of your response?
    Mr. Glaser. If I might defer to Mike Stegman on that, 
although those are funded through CDBG they are demonstration 
programs and operate through PD&R.
    Mr. Stegman. Mr. Chairman, the 50,000 incremental 
certificates are not a set-aside from the Community Development 
Block Grant request.
    As to Bridges-To-Work, we have $10 million that is a 
follow-up to a demonstration that is already underway. The 
Rockefeller Foundation and the Department have been jointly 
funding this with $8 million from the Department and $5 million 
from Rockefeller and matching funds from the localities to 
create partnerships that train, support and help people get to 
jobs in the outlying growing economy in the metropolitan area.
    The $10 million is to expand that six-site demonstration 
and, as a matter of fact, even though it is only $10 million, 
it will be used in conjunction with the $100 million urban jobs 
mobility initiative that is contained in the Department of 
Transportation's budget. This is truly an administration 
initiative that crosses departments.
    But, essentially, if you were to look at the 50 largest 
metropolitan areas in the country, you would see more than 20 
of them with unemployment rates in the suburban rings of under 
3 percent. There is more of a commitment to invest in work 
force development, in recruiting, and retaining employees. 
These partnerships are designed to support, train and help 
people connect to work while living in the inner cities.
    So, that is what Bridges-To-Work is. We are also----
    Mr. Lewis. Is HHS involved in that?
    Mr. Stegman. HHS is not directly involved in Bridges-To-
Work but may be indirectly. The Department of Labor is involved 
and maybe HHS is, because essentially the job training partner 
is receiving funds and these are experienced nonprofit 
organizations that are receiving funds from other agencies.
    The value-added is Transportation and HUD in these 
partnerships. Basically, we are trying to deal with two kinds 
of problems. One is the spatial mismatch--and that is what 
Bridges-To-Work is all about, that is what Moving To 
Opportunity is all about--how to connect people to where the 
jobs are, with the right kinds of support and help.
    But we are also involved very much in human capital 
development and in-place economic development strategies.
    The Jobs-Plus demonstration is an effort to connect public 
housing residents to work in the local community. And we are 
carrying out a demonstration, again, jointly funded--by HUD 
dollars, with support from the Rockefeller Foundation, the 
Manpower Development Research Corporation and lately Chase Bank 
has joined the partnership--to put together state-of-the-art 
saturation job training, changing the culture of public housing 
developments so that every able-bodied adult will be engaged in 
learning and work and connecting to the world of work with 
jobs.
    The Jobs-Plus demonstration for the first time would allow 
HUD under Congressional authorization to change rent rules, 
remove the work disincentives to work, and combine that with 
job training and support for public housing families.
    Mr. Lewis. I just have a couple of more questions in this 
area.
    Mr. Stegman. Sure.

                          homeownership zones

    Mr. Lewis. In 1996, HUD initiated a new homeownership 
initiative using Section 108 loan guarantee programs as its 
statutory authority. To start the program HUD directed $30 
million from EDI, Economic Development Initiative Program, to 
the initiative in spite of what appears to be questionable 
authority. Therefore, the Congress knows very little about 
these programs and what it's designed to accomplish.
    So, I have a series of questions in connection with that, 
like what is the purpose of the initiative and who is it 
designed to assist, are families with certain income levels 
targeted and so forth?
    Mr. Glaser. I will address that, at least in part, Mr. 
Chairman.
    The basic concept behind Homeownership Zones is that 
nothing can transform a neighborhood like homeownership. 
Homeownership on a scale that is not simply scattered through 
the neighborhood but blocks and blocks of homeowners.
    These are activities which are done now under the Economic 
Development Initiative and other programs that HUD has but not 
on a scale that often brings a real impact to a community 
because of the pressures, the local pressures on spreading 
these funds out.
    And all the Homeownership Zones Program really does, 
through the Economic Development Initiative as the source of 
funding, is to give communities an incentive to bundle together 
thingsthat they would otherwise be doing through the program.
    The types of communities that this is targeted to are the 
same ones that are eligible under statutory authority for the 
Economic Development Initiative--highly distressed communities, 
communities with over 20 percent poverty and indications of 
need such as poor housing stock.
    That is where we are with it. We did do a competition last 
year which was based on some of the successes that we have seen 
in the country. Last year, I had the opportunity with Mr. 
Stokes to do the opening of Bicentennial Village, which has 
used some of those disparate sources to do what we hope to 
encourage through the Homeownership Zone program.
    We are seeking specific appropriations this year for the 
program based on the kind of success that we have seen in 
communities around the country.
    Mr. Lewis. Are any of those funds designated for Indian 
tribes?
    Mr. Glaser. These funds would not be designated for Indian 
tribes.
    Mr. Lewis. Okay.
    Last year, Congress agreed to reallocate $20 million from 
the Nehemiah Housing Program to fund a second round of 
Homeownership Zones to targeted areas. This initiative has even 
fewer parameters and nothing is known about how it operates. 
So, a series of questions in connection with that.
    What are the criteria you intend to use to determine which 
areas are awarded one of these grants? When do you intend to 
issue the notice of funding availability, the NOFA? Are these 
funds leveraged with non-Federal resources and a question about 
HOPE VI, as well.
    Mr. Glaser. On the last question, private leverage is a 
significant component. It was in the first round by statute and 
will be again in the second round. In truth, we are seeking 
private developers to step to the plate who are looking for a 
little extra incentive to do work in a community that they 
would not otherwise be into.
    We are doing development work on the NOFA now. I think we 
are probably at least 60 days away from issuing a NOFA. We want 
to see how the process of the first round went and we are 
seeking input from a number of private sector partners that 
have been involved in Secretary Cisneros' original 
Homeownership Initiative, including the National Association of 
Homebuilders, mortgage bankers and a number of national 
designers. We will be seeking their input as we design the 
second round. And we will be glad to advise the committee on 
how that is going.
    [The information follows:]

         Private Sector Input on NOFAs for Homeownership Zones

    HUD consulted with a panel of expert advisors in making 
selections for the first round of Homeownership Zone grants 
announced on April 8, 1997. They represented the different key 
disciplines in large scale urban development projects. Two 
represented the planning/architecture field: Peter Calthorpe, 
Calthorpe Associates, Berkeley, CA; and M. David Lee, Stull and 
Lee, Inc., Boston, MA. Two were home builders: James Irvine, 
The Conifer Group, Portland, OR; and Joseph Singer (retired), 
Jupiter, FL. Two represented the lending community: Michael 
Mantle, Bank of America Community Development Bank, Walnut 
Creek, CA; and Michael Pitchford, Nations Bank, Charlotte, NC.
    They provided outstanding advice on such matters as quality 
of design, reasonableness of costs, and strength of financial 
commitments. In addition, HUD has consulted with this same 
group for advice on developing the Homeownership Zones program.

    Mr. Lewis. Mr. Frelinghuysen.

                        cdbg operating expenses

    Mr. Frelinghuysen. Just a couple of cleanup questions here. 
On Community Development Block Grants, can you give me the 
figures on what the overall figure is relative to communities 
spending money for capital purposes versus operating? What you 
would consider to be operating expenses?
    Mr. Glaser. There is a limit, a statutory limit, on the 
amount of money that cities can spend on planning and 
administration. That cap, I believe, is 20 percent of the great 
amount. While some communities typically go right up to the cap 
if they are that cap is waived in some cases, such as disaster 
assistance, where you can use more money. But this is probably 
a pretty good yardstick for the amount of the annual funds that 
go to services, versus capital or pass-throughs to local 
organizations to do programmatic work.
    Mr. Frelinghuysen. So it is fair to say that you would not 
find more than 20 percent unless there was some sort of a 
federal disaster that would have required that?
    Mr. Glaser. Correct.

                             field offices

    Mr. Frelinghuysen. I understand the ranking member has made 
reference to the March 18th GAO. I am still recovering, Mr. 
Chairman, from the last March 27th GAO report. And so I would 
like to ask some basic questions relative to the progress made 
from last year.
    I would like to know for the record--and you do not need to 
give it to me orally here--based on last year's GAO report, 
which was entitled ``Limited Progress Made on HUDReforms,'' 
give me the ten major reforms accomplished to date by Housing and Urban 
Development. And within that component, assuming you consider these to 
be reforms--certainly, I would--how many programs were merged? How many 
programs were eliminated?
    In a more specific nature, how many field offices do you 
currently have? How many field offices does HUD currently have?
    Mr. Stegman. We have a total of 81 offices across the 
country.
    Mr. Frelinghuysen. And how many did you have two years ago?
    Mr. Stegman. Eighty-one.
    Mr. Frelinghuysen. So that is not an area where we have 
seen any consolidation or elimination.
    Mr. Stegman. There has been a change in the number of 
employees. The Deputy Secretary can talk to that. But there 
have not been any office closures.
    Mr. Robinson. I was under the impression you wanted us to 
provide you a written response to the question in general.
    Mr. Frelinghuysen. One of the benefits of serving on this 
committee is that I still want at some point in time into the 
record what you consider to be the ten major reforms 
accomplished to date.
    Mr. Robinson. I understand. I did not intend to be non-
responsive.
    Mr. Frelinghuysen. But I would like to know your oral 
response relative to this specific.
    Mr. Robinson. About the number of offices?
    Mr. Frelinghuysen. Yes.
    Mr. Robinson. We currently have 81 field offices within 
HUD's structure. We have, however, significantly over the past 
4 years changed the relationship that these offices have to the 
organization, and have plans that exist over time to continue 
that change.
    First and foremost, of course, we eliminated our regional 
structure and recreated what we call Secretary's 
Representatives in the field. Secondly, we have consolidated 
our operations in a number of areas, most notably in our 
single-family operation, and developed first in the Denver, 
Colorado, office a single-family home ownership center. We are 
in the process of unveiling two additional centers which will 
continue the consolidation of single-family and change 
dramatically the relationship that the offices have to that 
particular program.
    We are with our legislation suggesting that we see even 
more consolidation as it relates to our other program areas, 
and that will be reflected in the way we utilize our offices 
across the country.
    And then lastly, I would point out that we have, in 
changing the relationship that the offices have to the 
Department, had a downsizing in our organization at the 
Washington level, and increased our overall ability to be 
responsive to decision makers and other constituents on the 
ground in the field. And so we will see a dramatic increase in 
that as we go forward.
    We began that under Secretary Cisneros. Secretary Cuomo has 
made that one of his top priorities, and we will be moving 
forward in that regard.
    Mr. Lewis. And with that succinct response, we have one 
minute to code.
    Mr. Robinson. Oh, I am sorry.

                     consolidation of hud programs

    Mr. Frelinghuysen. Thank you, Mr. Chairman. Where is the 
department in its efforts to consolidate more than 20 existing 
programs into three performance-based programs?
    Mr. Robinson. Well, Mister----
    Mr. Frelinghuysen. FRE-LING-HUY-SEN. [Laughter.]
    Mr. Robinson. Mr. Congressman. [Laughter.]
    Mr. Frelinghuysen.
    Mr. Frelinghuysen. Four syllables, like a Chinese name: 
FRE-LING-HUY-SEN.
    Mr. Robinson. I apologize, Mr. Frelinghuysen.
    Mr. Frelinghuysen. That is all right. That is fine.
    Mr. Robinson. We have, in fact, as you know, over the past 
several years made various proposals in terms of reducing and 
changing the programs that we have had. We expect to continue 
those efforts with the legislation that has been discussed 
here, H.R. 2 and our own independent legislation, including 
legislation that we expect to present as it relates to 
affordable housing or FHA housing.
    All of these efforts are aimed at consolidating and 
reducing the number of programs. And while we have been 
unsuccessful to this point to get specific legislation, we have 
made a number of administrative changes reflected in both FHA 
and PIH, as well as in CPD, in terms of consolidating our 
efforts.
    So while we will document specifically programs that have 
been consolidated and reduced, to you in writing, I believe our 
efforts can be documented and, given the fact that we have not 
achieved legislative closure, meet the goals that have been set 
out not only by the GAO but by Secretary Cuomo and formerly by 
Secretary Cisneros.
    Mr. Frelinghuysen. So where do we stand relative to the 
whole movement towards three performance-based programs? I 
mean, have we started in that direction?
    Mr. Robinson. Well, there is no question we have proceeded 
in that direction. It is not necessarily clear that we will end 
up with three performance-based programs as was laid out in the 
document. I believe you are referring to blueprint one. What is 
clear is that the trend is in that direction, and our proposals 
consistently have been aimed at both consolidation and reducing 
programs.
    Mr. Frelinghuysen. We like to see a general direction. And 
you certainly have the right to change your goals, but at some 
point in time this committee was sort of assured this is the 
direction in which we were going.
    Mr. Robinson. And I intend to relay that we are on that 
path, and we believe that we have consistently made proposals 
in that direction.
    Mr. Stegman. I just wanted to mention that for the last 2 
years we have proposed, and would propose again, the 
consolidation of the McKinney homeless program into a single 
fund. We have, and our Budget reflects, the creation of a 
public housing capital fund consolidating our modernization 
program, the development program, and a variety of smaller 
capital programs.
    Assistant Secretary Marchman talked about a consolidation 
of the social service funds for public housing, along with the 
Tenant Opportunity Program we will be proposing. So there is a 
substantial amount of consolidation that is being proposed and 
that has been included in authorizing legislation that has not 
been enacted, and we will continue to move in that direction.
    Mr. Frelinghuysen. I think it is fair to say that at a 
certain point in history here in the last couple of years, 
there was a certain amount of momentum anticipation that we 
were literally going to see some reinventing of HUD. And you 
are telling me that we are part of the way there but we are 
not----
    Mr. Stegman. Well, I am telling you that we are saying that 
authorizing legislation is very critical to us this year to 
really move us along.
    Mr. Frelinghuysen. Well, I know sometimes people say you 
need authorization. Certainly, we would like to be involved in 
that process. But in reality, sometimes things can move ahead 
without any.
    Mr. Robinson. And that was the point I was making.
    Mr. Frelinghuysen. Well, I want to see the specifics.
    Mr. Robinson. Sure.

                             overhead costs

    Mr. Frelinghuysen. And I would like specifically to know if 
you would make some comments relative to the whole issue of 
overhead costs in administering your program, what you have 
done to lower those costs and, if you would be good enough to 
provide a breakdown for the committee on a program-by-program 
basis, how you address the overhead issue, maybe some general 
comments on the overhead costs.
    Mr. Robinson. Congressman Frelinghuysen, we have in fact 
consistently over the past 4 years reduced the operating costs 
of the Department. I would point out that our operating cost is 
in the range of about 3 percent of our Budget.
    We have reduced the total number of employees that work at 
the department by about 20 percent over that period of time. We 
continue to project in our current legislation and Budget a 
glide path that will take us down to 7,500. And we have done 
some very intensive work with Secretary Cuomo to refocus our 
priorities so as to match up not only the fact that we are 
reducing our overhead and reducing our number of employees, but 
in fact matching that up with program revisions. And that will 
be reflected in our legislative package.
    Mr. Frelinghuysen. Well, I think it is admirable and 
courageous that you are reducing your payroll and you are 
trying to minimize overhead. But for the record, if you can 
give us a breakdown by program I would like to know what the 
specific overhead costs are.
    Mr. Robinson. Sure. We can do that.
    [The information follows:]

[Page 516--The official Committee record contains additional material here.]


               tenant notification of contract expiration

    Mr. Frelinghuysen. Going back briefly to Section 8 
renewals, current law requires that tenants be notified a year 
before their Section 8 contracts are due to expire. Since we 
have now gone to annual renewals, is there a need to change 
this requirement, or how do you propose that this issue be 
addressed?
    Mr. Retsinas. As we move toward annual contracts, clearly, 
technically speaking, every year there is a risk if Congress 
does not appropriate sufficient funds that the Section 8 
contracts will not be renewed. To date, the Administration and 
the Congress have agreed that at a base we ought to renew the 
contracts that we have.
    The particular provision was put into place because 
historically the Federal Government used to enter long-term 
contracts. Some contracts were as long as 40 years, 20 years, 
and 25 years. As those contracts have come up, under terms of 
the assistance from the Federal Government, owners had the 
option to renew the contract or not.
    So, yes, I think it is an area we need to look at. We need 
to balance honesty--which is, yes, we cannot guarantee 
appropriations will be there next year--with some sense of 
proportion. I do not know what that balance is. I think we need 
to think through together that language, because none of us 
wants to over-promise. I certainly would not want for the 
Congress to make a commitment that you cannot keep because you 
only appropriate year to year. That is a problem we have to 
deal with, so we ought to be thinking together of some 
language.

                  number of section 202 units in 2002

    Mr. Frelinghuysen. Lastly, Mr. Chairman, an issue I visited 
yesterday: housing for the disabled, but most particularly 
today relative to senior housing. I know you are proposing a 
reduction in the 202 program from $645 million to $300 million. 
And then you are planning level funding at $300 million?
    Mr. Retsinas. Essentially, yes.
    Mr. Frelinghuysen. Until, basically, the year 2002. Can you 
provide for the record how many units you plan to fund in 
fiscal year '98?
    Mr. Retsinas. I can provide it for the record, and I can 
tell you right now.
    Mr. Frelinghuysen. Well, tell me right now, and how many 
you did last year.
    Mr. Retsinas. About 8,500 in fiscal year '97. We are 
currently in the process of soliciting applications. We have 
funding for 8,500. Under the fiscal '98 budget, if you were to 
approve it at the level we requested, it would be approximately 
3,800.
    Mr. Frelinghuysen. How does it go from 8,500 to 3,800?
    Mr. Retsinas. Less money.
    Mr. Frelinghuysen. That remarkable drop?
    Mr. Retsinas. Oh, sure. From $645 million----
    Mr. Frelinghuysen. All right, 654, all right.
    Mr. Retsinas [continuing]. To 300, yes, absolutely.
    Mr. Frelinghuysen. So on an annual basis, would you 
anticipate somewhere in the neighborhood of 3,800?
    Mr. Retsinas. Yes, sir.
    Mr. Frelinghuysen. All right. Thank you, Mr. Chairman.

                            increase in fte

    Mr. Lewis. All right, Mr. Frelinghuysen. Among other 
things, Mr. Frelinghuysen has asked what I described as the 
David Hobson question, since he was not able to be here today 
in part, but also because of his interest.
    Just to visit that for a moment, for fiscal year 1998 the 
requested appropriation is $1,005,826,000 to support 9,961 
full-time staff. It is suggested that I should be the first to 
congratulate you all for submitting a budget that reflects a 
decrease in 486 staff positions, FTEs--almost 500 of them--but 
has a budget that reflects an increase of $28,986,000.
    Mr. Robinson. The reason for that, sir, is because under 
that line item we have our multifamily enforcement program. The 
$50 million that we are requesting there falls into that line 
item.

                           youthbuild program

    Mr. Lewis. Yes. Thank you. Youthbuild: How many 
organizations currently operate HUD-funded Youthbuild programs?
    Mr. Glaser. Mr. Chairman, on Youthbuild we currently have 
made 294 grants to date. We are currently awarding an 
additional 41 grants in 1997, for a total of 335. There are 
currently 235 organizations operating in the Youthbuild 
program.
    Mr. Lewis. And the number of people?
    Mr. Glaser. The number of participants that are involved is 
approximately 5,353. I am including what we anticipate having 
from the current 1997 round of funding.
    Mr. Lewis. What is the average cost? Well, I guess I can 
divide that and figure it out, but tell me the average cost per 
participant.
    Mr. Glaser. We would have to figure that out for you. We 
also have to look at--if I can do it quickly--not just the 
participants, but the units that are constructed. And the 
unique thing about Youthbuild is it brings together two needs. 
One is for low-income housing availability, rehabilitation 
especially in distressed communities; and the second is the 
need for good jobs for young people and an opportunity to work. 
The young people are trained in the construction trades, and 
then put to work in their own communities building housing. So 
the two pieces fit together.
    So the number of units which we need to have, the full 
equation is about 3,000 units; 5,353 participants in the 
program working on it. It's approximately about $20,000 per 
trainee, and I think some additional money for the hard costs 
for the unit itself.
    Mr. Lewis. I have questions like what was the demand for 
Youthbuild funding in 1996?
    Mr. Glaser. I will have to come back to you with the exact 
number. The demand, without question, is exceeding the capacity 
that we have had in the past. Communities have really taken to 
this program.
    Mr. Lewis. I have got some follow-on questions that are 
similar that you can provide for the record.
    Mr. Glaser. All right.
    [The information follows:]

                 Demand for Youthbuild Funding in 1996

    HUD received 412 applications in response to our 1996 
Notice of Funding Availability. A total of 29 grants was funded 
under this round.

    Mr. Stokes. Mr. Chairman, before you leave that, can I just 
go to one question?
    Mr. Lewis. Sure.
    Mr. Stokes. In the past, Youthbuild has been funded under 
the CDBG. You are proposing in this budget to fund it 
separately. Tell us what the reason is?
    Mr. Glaser. We are trying to minimize the amount of set-
asides that have come out of CDBG in prior years. CDBG has been 
used for all sorts of reasons. And over the years the amount of 
set-asides has gone up and the total amount of funding that 
actually goes to the communities through CDBG has tended to go 
down. It has eroded the CDBG program.
    This year, for the first time, we hold the line on the 
amount of money that actually goes to the communities. One of 
the ways we did that is we took the Youthbuild program out of 
the CDBG and requested it as a stand-alone program.
    Mr. Stokes. Thank you, Mr. Chairman.

                          habitat for humanity

    Mr. Lewis. Thank you, Mr. Stokes.
    The budget requests a set-aside within the CDBG, that 
account, for $10 million for a grant to Habitat for Humanity, 
to acquire land and to finance the costs of infrastructure 
improvements. In 1996 a grant of $25 million was made for these 
programs. HFH plans to leverage this grant with private 
donations that will reach between $75 million and $100 million. 
The result is that 2,800 homes will be built and sold to low-
income working families at an average cost of $40,000.
    How many local Habitat affiliates requested this money, and 
was the $25 million sufficient to cover the applications?
    Mr. Glaser. We will have to come back to you on that 
answer.
    Mr. Lewis. All right. For the record, then.
    [The information follows:]

           Number of Habitat Affiliates That Requested Funds

    Habitat International had requests for applications from 
more than 700 affiliates. This is more than half of the total 
1,300 affiliates at that time. Of these, 336 applications were 
actually submitted and contained requests for $51.4 million in 
funds. Habitat International approved 257 applications for $23 
million, and 10 applications totaling $2 million and on the 
``waiting list.'' Habitat has indicated to HUD that they now 
receive approximately six calls a week from affiliates 
inquiring into the availability of funds.

                                  ncdi

    Mr. Lewis. And there are some additional questions relative 
to Habitat. You may note for your own interest that the 
Congress is taking quite an interest in Habitat for Humanity, 
and you will see a deal of activity surrounding that in the 
near term. I hope both Mr. Stokes and I will participate in 
some of that, as we look at the shining city on the hill and 
other programs.
    The budget requests a $10 million set-aside within CDBG to 
provide NCDI to build the capacity of community-based 
development corporations and housing development organizations. 
What has NCDI agreed to accomplish with these funds?
    Mr. Glaser. NCDI is a consortium of organizations that 
provides assistance to Community Development Corporations 
(CDCs) in 23 cities to increase their capacity to plan and 
carry out neighborhood improvement projects and to pay for 
related things. Funds from HUD and other funding organizations 
have leveraged additional funds more than 10 times the original 
investment.
    We have tried to privatize, or to join with the private 
sector, on things like how to build a revolving loan fund, how 
to do infrastructure work locally and how to put a financing 
package together to do it. NCDI is one of the organizations we 
use to do so.
    Mr. Stegman. And with NCDI, our $10 million is matchedby 
eight or nine foundations and some private sector contributors, to 
really strengthen the capacity of proven community development 
corporations to get them to that next level so that they can go from 
building individual units to really more neighborhood development work, 
larger-scale work.
    More of them are in economic development. More of them are 
in now not just building one unit at a time. It is trying to 
get the scale for the proven community development 
corporations.
    Mr. Lewis. There are a number of follow-on questions that I 
have for the record in that category.
    Mr. Stegman. Fine.

                                 hopwa

    Mr. Lewis. Briefly, I want to touch on HOPWA, and then turn 
to Mr. Stokes if he has additional questions. The President has 
requested $204 million for Housing Opportunities for Persons 
with AIDS, funding in 1998. This request represents an increase 
of $8,000,000 over 1997. The number of eligible jurisdictions 
has grown each year as the HIV/AIDS epidemic continues to 
spread.
    The budget assumes incremental funding will continue to be 
required to keep pace with the number of jurisdictions that 
become eligible for assistance under the formula programs. How 
many persons are assisted under these funds, and is it more 
cost-effective to assist people in their homes?
    Mr. Glaser. This level of funding will provide some sort of 
housing assistance to approximately seventy thousand people, I 
do not know that we have studied the cost-effectiveness, but 
clearly the total social cost of treating people in their homes 
is less than what it would be to go into facilities. People are 
often unable to make that move, and prefer to remain in their 
own homes.
    One of the issues that you have raised is making changes to 
the HOPWA formula. It has also come up in staff discussions at 
HUD is an issue that we would like to have further discussion 
about.
    Mr. Lewis. Some of the very early funding for questions 
that surround the problems that face people with AIDS came in 
this Committee when I was a brand-green member on the 
Committee. And I would be interested in your expanding on the 
record to hear what some of that history has been, and how 
effective we have been in meeting the challenges of clearly 
what is an endemic and endless epidemic.
    Mr. Glaser. I want to clarify the record. That 70,000 
figure is an annual figure, not a cumulative figure. Just to be 
sure on that.
    Mr. Lewis. Annual. All right.
    Mr. Glaser. I would like to come back to that issue for the 
record at a later time.
    Mr. Lewis. If you would.
    [The information follows:]

[Pages 222 - 231--The official Committee record contains additional material here.]


                           homeless programs

    Mr. Lewis. The Secretary and I have talked personally about 
homeless assistance grants and problems surrounding the 
homeless. Because we had a very extensive personal discussion 
relative to the homeless and some of the past public policies 
that have impacted this whole subject area, after consulting 
with the Secretary I would appreciate it if you would expand on 
that for the record, as well. We do want to spend some time 
focusing, but maybe it would be better done in the record.
    Mr. Glaser. We are working with the Congress. We certainly 
have made some significant changes over the past four years in 
the way that we deliver our homeless programs, and we have gone 
to what we call the continuum of care which took a number of 
separate initiatives which were not linked to each other. We 
had situations where communities were competing against 
themselves, in essence, and coming up with an irrational system 
of emergency housing, transitional housing, and permanent 
housing.
    Just because we put the money out there for emergency 
housing, especially early on in these programs, communities 
tended to come in for emergency housing when there really might 
have been permanent or transitional housing needs.
    What the continuum of care did, really, is revolutionize 
that process by saying to a city, ``Come together with all your 
non-profits; assess your needs, the assets you have; and then 
come to us to fill in the gaps.'' And that is how we use the 
funds, to fill in the gaps in this continuum of care, to move 
people off the streets and into permanent housing.
    And it has been successful, certainly, in terms of the 
process; and in terms of the outcome, as well. We at one point 
tripled the amount of funding for the program compared to what 
we had in 1992. A Columbia University study indicated that we 
have been serving up to 14 times as many people through HUD 
programs with a three-fold increase in funding. The funding 
level has come back down again a little bit at this point, and 
we have asked for the same funding this year as we had last 
year.
    The remaining issue for us really at this point with 
homelessness is to move away from the competitive system, which 
from a management point of view takes up an incredible amount 
of staff time not only for us at HUD but also for the local 
communities, and move to a performance-based formula grant in 
which communities would receive a grant that is like CDBG and 
HOME, based on the performance that they are actually 
accomplishing. The number of homeless persons they are serving 
is the amount of money that they would receive under the 
performance-based formula.
    Mr. Lewis. I think it is important that the Committee hear 
more of that. Clearly, the problem is complicated by a cottage 
industry that has kind of expanded out there, wherepeople are 
interacting and responding, in part because the money is there. But 
fundamentally reviewing the public policy implications, how we got 
where we are and so on, is very important. And so I will appreciate 
that.
    Mr. Frelinghuysen.
    Mr. Frelinghuysen. I think most of us are familiar with the 
terminology ``continuum of care.'' The definition of 
``homeless,'' does that include individuals who are mentally 
ill? I am just wondering whether those who are advocates on 
behalf of the mentally ill, those who are advocates on behalf 
of people with developmental disabilities, are they into this 
mix, or are they excluded in some way? This gets back to the 
whole issue of the disabilities community. I mean, are they 
eligible?
    Mr. Glaser. They are very much in the mix, but in a 
different way than they were, again, when we first started 
going down this path of homeless assistance when we treated it 
as though it was simply an issue of not having a place to live. 
When you look at the sub-populations and the reasons for people 
being homeless, mental illness is one of the major concerns, 
particularly with some of the social policies of the late '70s 
and early '80s.
    So that is a discrete category that is eligible and gets 
quite a lot of special attention through the homeless programs.
    Mr. Frelinghuysen. Thank you, Mr. Chairman.

                     empowered and enterprise zones

    Mr. Lewis. Thank you, Mr. Frelinghuysen.
    Questions about empowerment zones and enterprise 
communities: The President has said that he plans to grant $1 
billion to 100 communities within a second round of the EZEC 
program; yet HUD's budget request only mentions $200 million 
for this program: $100 million in fiscal '98, and $100 million 
in 1999. Where will the remaining $800 million come from?
    Mr. Glaser. The remaining $800 million will come from other 
agency appropriations. In the first round----
    Mr. Lewis. A small amount of money.
    Mr. Glaser. Yes. I think the Department of Transportation 
is a big player there. I am not sure who else is. USDA has a 
significant piece. In the first round, all of the money came 
through HHS Title XX dollars in one lump sum. In this second 
round, we have proposed going to individual agency 
contributions. HUD's contribution would be $100 million in the 
first year, and $100 million in the second year.
    Mr. Lewis. All right, you just responded to that. Why do 
you need funds in FY '98, if the process to implement the 
program is likely to extend to '99?
    Mr. Glaser. We believe the process will be done in 1998. I 
saw this morning the statement by Judy England-Joseph in which 
she suggested that we would not get the money out the door 
until 1999. I absolutely don't think that's true. It took us, 
the first time around, in a major start-up program which 
required that regulations be written; and distributed to the 
communities and packages together, about 10 months to get that 
package out.
    We have had a lot of experience and it's all in place now. 
In essence, the NOFAs are similar. I don't anticipate seeing 
more than about a 120-day time limit. And we would obligate the 
funds on day one, as we did in the first round of empowerment 
zones.
    I also think it is important, for the credibility of the 
competition, to have the dollars in hand when we actually 
conduct the competition. Communities are not going to want to 
put forth the effort to put their strategic plans together, as 
they did in the first round, if they don't know that the money 
has actually been appropriated for the fiscal year.
    Mr. Lewis. I'm sorry, Mr. Hobson, but Mr. Frelinghuysen has 
asked your questions already. [Laughter.]
    This initiative would require authorization, wouldn't it?
    Mr. Glaser. Yes, it would.
    Mr. Lewis. So, one more time, that's an additional reason 
we need authorization.
    HUD recently reported that five communities are being 
notified that they could be dropped from the program if they 
don't improve their performance. What specific problems are a 
part of that communication?
    Mr. Glaser. There were five communities that received 
notification last week. We went through a fairly extensive 
process, using HUD site visits, and with 20 universities around 
the countries who did research on site. We used Price 
Waterhouse and GAO reports as well, and reports from the states 
and cities themselves.
    The major problems in the five cities is simply that there 
has been no progress, and no progress for different reasons. 
Sometimes it's simply a failure of the locality, the city, to 
make it a priority; in other cases, they have gotten kind of 
bollixed up with tensions between the community and city hall 
that they've been unable to resolve, whereas in a large 
majority of the programs, in the other 72 cities, they have 
resolved those tensions and are spending their money and doing 
good work.
    We have HUD and joint agency teams going out this week, as 
a matter of fact, to each of the five cities to review their 
progress and put together a plan of action that will get them 
off of that list over the coming months. This is an investment 
that we have made and we want to see it work. The purpose here 
is not punitive but to send a warning signal that some action 
needs to be taken.
    Mr. Lewis. Mr. Stokes.

                    administration of HOPWA program

    Mr. Stokes. Thank you, Mr. Chairman. Just a couple of 
questions.
    To go back for a moment to the HOPWA program, where I 
understand you are currently serving about 70,000 people--is 
that correct?
    Mr. Glaser. A year. That's correct.
    Mr. Stokes. In any of the communities where the HOPWA 
program is being funded, are there problems relative to the 
program not being effectively administered?
    Mr. Glaser. Not that I'm aware of. I'm not aware of any 
administrative problems with the HOPWA program. It has not come 
to our attention.

                           continuum of care

    Mr. Stokes. Let me ask you about the continuum of care 
program. I believe that a recent evaluation of the program 
found it was allowing HUD programs to serve considerably more 
people without a proportionate increase in funding; is that 
correct?
    Mr. Glaser. Without question. That was the Columbia 
University study. It demonstrated that up to 14 times as many 
people are being served with about twice as much funding.
    Mr. Stokes. Are you going to need further legislative 
changes in order to put this strategy totally into effect?
    Mr. Glaser. We will. As we referenced earlier, the key move 
for us to make now is to formally consolidate thedifferent 
pieces. It's not just a good idea from a policy point of view, but also 
for HUD's own management. We will be seeking legislation very shortly, 
as we have in the past, to go to a performance-based formula system.
    Mr. Stokes. Thank you.
    Mr. Chairman, I think I've exhausted my questions.
    Mr. Lewis. We're getting close, Mr. Stokes.
    Mr. Hobson.

                 funding for domestic violence shelters

    Mr. Hobson. I have two questions--unless I think of some 
more. No, I won't do that.
    Over the past several years there has been an increased 
national awareness about domestic violence and abuse, and 
recently I became concerned about the adequacy of services for 
domestic violence victims in my district, particularly the 
availability of shelters. Because of the demographics of my 
district, many families dealing with domestic abuse are 
desperate and really don't have anyplace else to go. I went out 
and visited a couple of places and talked to them about their 
problems.
    The Department of Housing and Urban Development, and Health 
and Human Services and Justice, all provide funding for 
domestic violence programs to state and local governments, but 
there doesn't seem to me to be any funding sources available 
for the construction of shelters, the actual brick and mortar.
    When I went to one of these in my district, it took them 
about eight years to find funding sources to get people out of 
terrible situations that they were existing in. And when they 
got the funding sources, it mainly came from a group of loans 
and private philanthropies. If you look at the funding sources 
for these, they must have put a board together because--I mean, 
there are so many different little sources here and there to 
try to fund these things.
    I guess my question is, what are we going to do about it? 
Are there CDBG or emergency shelter grant dollars available for 
construction or renovation of domestic violence shelters, or 
are there other programs which we could tap? In my district, 
when I go around and visit these places, many of them are 
substandard, and they have existed that way for a long time. 
Their funding is just a hodge-podge of little bits and pieces. 
It's a real problem.
    Do you have any answer for that?
    Mr. Robinson. Mr. Hobson, I'll have my colleague, Mr. 
Glaser, answer the specifics in relation to the CDBG. But let 
me just say this in general.
    Many of our programs, for the most part, have moved to a 
leveraging circumstance. I don't believe that you can point to 
more than a handful today that are programs where HUD goes in, 
from start to finish, and goes through the program. Most of 
them, in my experience, have taken us to a point where, when I 
go to a closing, I'm sitting on the rostrum with 35 different 
people all putting in a little bit to get the project done.
    Mr. Hobson. I don't mind leveraging. It's just that somehow 
there's no leverage for real estate in these things. The 
operating budgets are all leveraged. I like leverage to a 
degree, but there is a thing called negative leverage that 
happens, too.
    You know, I knew these HUD programs when we made money in 
HUD. That's how old I am. I used to be an old mortgage banker a 
long time ago. I would just like to have somebody look at this, 
because it's a real problem in these communities. And it's in 
all districts, not just my district.
    Mr. Robinson. I understand.
    Mr. Glaser. Congressman, on the specifics of the question, 
there are two ways to do that. The Community Development Block 
Grant program can be used for acquisition and rehabilitation 
and construction for domestic violence shelters, and are used 
that way in a number of communities. When I was flipping 
through the California Consolidated Planning Summary today, I 
was surprised at how many groups are doing this--the House of 
Ruth is one that does that, apparently, throughout the State. 
Also, the supportive housing program, which is under the 
homeless programs, can do the same, including construction and 
acquisition.
    We would be pleased to send our folks out to meet with you, 
and if your staff wants to give us the information, we can put 
a technical assistance team together and see what kind of 
resources we can put together for you.

                   services of real estate licensees

    Mr. Hobson. Thank you.
    I have one other question. The realtors generally show up 
to see me because I still have a real estate license, and so 
they discuss some of their problems with me. One you might 
suspect--and I don't know if anybody has asked about this 
already, so if it's repetitive, just say so. This is the right 
of real estate licensees to receive fees for a full range of 
real estate-related services, basic requirements such as 
written disclosure--has somebody asked this already?
    Mr. Robinson. No, sir.
    Mr. Hobson. They want to develop controlled business 
arrangements or affiliated settlement service arrangements, 
designed to provide greater choices to consumers of real estate 
related services, and undue entanglement by HUD in the 
compensation arrangement of employees.
    There has been a lot of chances since the days when 
everything was separate out there. When I first started out, 
nobody wanted to do it. The banking business wanted to do a HUD 
mortgage and that's why mortgage bankers even came into 
existence, because nobody wanted to fool with the paperwork.
    That's all changed. Everybody is in it today and everybody 
is providing a range of services. But there are problems, and I 
understand the problems. But what are we going to do to address 
the overall situation?
    You've probably looked at it.
    Mr. Retsinas. Very much so. It is under an act that was 
passed by the Congress in 1974, the Real Estate Settlement 
Procedures Act.
    Congressman, in your question you went right to the nub of 
the issue. It's 1997, not 1974. In 1974, this Act was 
promulgated for a very good purpose, which is to prevent kick-
backs. The Congress wanted to avoid, in 1974, the situation 
where someone who buys a home and--Perhaps only once or twice 
in a lifetime--is being referred to someone inappropriately. So 
RESPA is essentially an anti-kick back statute.
    Twenty-five years have passed, and the mortgage transaction 
business is fundamentally different than it was in 1974. We, as 
administrators of this Act, apply those regulations to a very 
different world. Indeed, last year we promulgated a rule on 
control business arrangements that essentially said under what 
situations it would be appropriate to receive a fee.
    It is a very controversial issue. The Congress, last year, 
decided to require us to hold off on the implementationof that 
rule, until July of this year. I wish I could say that I had comfort 
that we were closer to the fundamental issue, but it is now March. We 
are prepared to go forward with the rule, but the difficulty is really 
the underlying statute. It's a hard one to deal with; but that's what 
the rules spell out, what are appropriate responsibilities, what is 
appropriate compensation.
    If I were to indicate what is the key issue, it ought to 
begin with disclosure, disclosure, disclosure. Then the 
consumer could make an informed choice. But in the mortgage 
transaction business, there are all kinds of fees and 
transactions that are not readily----
    Mr. Hobson. I have to tell you--and I don't want to prolong 
this--but I have been on both sides of this issue. I have been 
a builder and I've been a mortgage banker. I have also been a 
``consumer of lenders''----
    [Laughter.]
    I've been a ``borrower'', okay? I've been a borrower. Most 
borrowers have no idea what is going on in this transaction. 
They show up, and when you look at the volume of paper, they're 
told ``you sign here, here and here, here's what your monthly 
payment is, and if you have any questions, it's done. We'll 
talk about it later.'' You can't find anybody to talk to.
    Now, anybody who tells you the normal situation is 
different than that ought to go through it. But we have to find 
a way to protect those people, many times against their own 
lack of interest in doing that, until they have a problem, and 
at the same time make these transactions so that they're 
financially sound.
    That's not easy to do, but you need to help us, too, in 
this statute, to get it right, and to work with the people in 
the industry that are responsible to get it right. I think 
you've got people scared enough. They're frightened enough so 
that reasonable people can come together on this. We need to 
get moving on this, and we'll try to help you out.
    Mr. Retsinas. We would appreciate that.
    Mr. Hobson. I'll try to help you, and I'm sure the chairman 
will.
    Mr. Lewis. We appreciate that very much, Mr. Hobson.
    I'm going to ask just a couple more questions, and then I 
would ask the Inspector General to come up for a few moments. 
We're getting close to the end of this.
    I couldn't help but think--just a minor item that an 
average homeowner would wonder about, and they probably don't 
have any idea. What is this mortgage insurance premium that 
they're paying, and who tells them that they're going to have 
to pay that premium? There are items like that----
    Mr. Hobson. I'll give you another one. I had this years ago 
in the mortgage business. Show up and don't have your insurance 
with you, your certificate for your insurance that you picked 
up, and figure out which one you get. I know who you get, and 
you know who you get.

                         implementation of GPRA

    Mr. Lewis. In the area of policy development and research, 
the 1996 budget proposes an appropriation of $39 million for 
research, policy analysis, and for work supporting HUD's 
transformation plan. This proposal represents an increase of $5 
million. The increase is to accelerate the development and 
implementation of useful performance measures, including 
measures of programmatic outputs, customer services, quality, 
intermediate and long-term socio-economic outcomes.
    How long do you believe it will take before the performance 
measures can be implemented?
    Mr. Stegman. Mr. Chairman, under the GPRA legislation, we 
are now actually required to adopt performance measures in all 
of our major core programs and we are doing that. The most 
difficult areas to deal with are the more flexible programs 
that give local communities the broadest choice in how to spend 
the money. And we will be spending a good deal of our 
developmental money working with our program offices, with our 
CFO, and our customers in the Community Development Block Grant 
area and areas that provide the most flexibility to define 
outcomes include those in our information systems.
    All of our programs now have performance measures. But we 
are trying to get them less process-oriented and more geared to 
end products, if you will, and outcomes of what you are buying 
for the money, not just that you are receiving technical 
assistance or counseling 100 families. We want to move to where 
we can actually measure the jobs, measure the actual purposes.
    And this is going to be a gradual process. If we have the 
$5 million, we are going to make substantial improvements 
moving from process to kind of outcome measurement in some of 
our key areas. Some of it involves new data collection, quite 
frankly.
    Mr. Lewis. I frankly commend the movement in this direction 
that the line that suggests that that which you do not measure, 
you do not know very much about or get much result from. I am 
interested in knowing if you are going to be using people in 
the private sector who have got experience in terms of this 
kind of measurement.
    Mr. Stegman. We are. We actually just went out for the 
first time with the competition to bring on, under contract, 
organizations and firms that actually have been involved in the 
private sector in the development of performance indicators and 
measures.
    We have not had that certainly as a part of our research 
policy contract.

              HBCUs, HSIs, and Community Outreach Programs

    Mr. Lewis. Beyond administering the R&D budget this office 
is responsible for a number of university programs including 
the Section 107 grants which provide funding to three 
university programs, historically black colleges and 
universities, hispanic serving institutions and the Community 
Outreach Partnership programs.
    Would you describe each of these programs and some of the 
community involvement work that the universities have 
undertaken?
    Mr. Stegman. Absolutely. Let me just start by saying that 
you would not have seen the kind of partnership in HANO with 
the role that Tulane and Xavier are playing if we did not have 
an office of University Partnerships with the President of 
Tulane. A great university came to see a Secretary of Housing 
and Urban Development. The idea that we now have a door through 
which these large major institutions, anchor institutions, can 
come to HUD to talk about how they can partner with their 
neighborhoods, with their communities, with their housing 
authorities, would never have happened without a small $7.5 
million program for Community Outreach Partnerships Centers.
    We now have partnerships with about 60 universities that 
are bringing students, faculty and resources to the table with 
community-based organizations leveraging dollars in a variety 
of ways, providing direct services, helping them develop 
economic development strategies, doingpre-development work in 
real estate, helping them learn how to use the low-income housing tax 
credit, you name it.
    That is what this little $7.5 million a year program does. 
As to work study programs, there were two. One of the work 
study programs has been in existence, with bipartisan support, 
since the 1970s, funded at about $3 million a year, for 
disadvantaged students to get support for graduate education in 
housing and community development and planning.
    Two years ago, with substantial support and leadership of 
your own, for the first time, a work study program was funded 
for Hispanic serving institutions. We now have a partnership 
with a number of these institutions. It is focused largely on 
community colleges and we have never had that kind of 
partnership before. And, in reality, it is community colleges 
that work most closely, in many cases, with communities and 
private sector employers for work force development.
    So, we have that program now for the first time. It has 
been funded and a second round of funding is underway right 
now.
    [The information follows:]

   FY 1996 Grantees--Hispanic-Serving Institutions Work Study Program

          (each will receive funding to assist eight students)

    Compton Community College, Compton, CA.
    Fresno City College, Fresno, CA.
    Los Angeles Harbor College, Wilmington, CA.
    Los Angeles Trade Technical College, Los Angeles, CA.
    Ranch Santiago College, Santa Ana, CA.
    Otero Junior College, La Junta, CO.
    Miami-Dade Community College, Miami, FL.
    St. Augustine College, Chicago, IL.
    Hudson County Community College, Jersey City, NJ.
    Northern New Mexico Community College, Espanola, NM.
    Bronx Community College, Bronx, NY.
    Hostos Community College, Bronx, NY.
    Fiorello LaGuardia Community College, Long Island, NY.
    Colegio Universitario del Este, Carolina, PR.
    Southwest Texas Junior College, Uvalde, TX.

    Mr. Lewis. It is dangerous to have members sit around and 
listen because now he has a question about historically black 
colleges. So, Mr. Hobson, you are recognized for three seconds. 
[Laughter.]
    Mr. Hobson. Since I have the oldest one in my district, I 
would like to know what ones are getting? Just put it in the 
record, which schools.
    [The information follows:]

        1996 Historically Black Colleges and University Grantees

    The following Historically Black Colleges and Universities 
received funding under this program in 1996:
                                                                  Amount
Philander Smith College.......................................  $300,000
Johnson C. Smith University...................................   300,000
Albany State University.......................................   300,000
Howard University............................................\1\ 640,028
North Carolina Central University.............................   300,000
Elizabeth City State University...............................   300,000
Jackson State University......................................   300,000
N.C. A&T State University.....................................   300,000
Wiley College.................................................   300,000
Xavier University of Louisiana................................   300,000
Texas Southern University.....................................   300,000
Coppin State College..........................................   300,000
Langston University...........................................   300,000
Alcorn State University.......................................   300,000
Stillman College..............................................   300,000
St. Philip's College..........................................   300,000
Talladega College.............................................   300,000
University of the District of Columbia.......................\2\ 389,169
Norfolk State University......................................   300,000
St. Augustine's College.......................................   300,000
Kentucky State University.....................................   253,794
Spelman College...............................................   200,000
                    --------------------------------------------------------------
                    ____________________________________________________

    Grand Total............................................... 6,929,197

\1\ Includes $90,000 in Community Development Work Study funds and 
$250,028 in Research and Development funds.
\2\ Includes $89,169 from the Department's Office of University 
Partnerships for Community Development Work Study Program.
\3\ Includes $429,197 in non-HBCU funds (see footnotes \1\ and \2\).
---------------------------------------------------------------------------

                         multifamily insurance

    Mr. Lewis. Thank you, David.
    Multi-family housing, GI, SRI insurance funds, the 
President's budget requests $81 million in credit subsidy to 
support the origination of multi-family mortgages. In addition, 
$71 million exists in carryover funds as part of the baseline.
    Is there an effort on the part of the Department to create 
a multi-family insurance program that is self-sustaining and 
does not require credit subsidy?
    Mr. Retsinas. Yes, there is; Understanding that 
particularly when we are trying to deal with the worst case, 
that is those most in need, it becomes very, very difficult to 
design programs that can truly be self-sustaining.
    We have made some progress. As a matter of fact, the credit 
subsidy levels are significantly down in terms of overall 
levels and even for individual programs, in part because we 
found other sources of funds.
    Each individual program has a particular credit rate 
assigned to it. There are a couple of exceptions, but for most 
of those programs, the rate has turned to neutral, that is not 
positive. We are making progress but the difficulty is if we 
are dealing with the worst case, we are, by definition, dealing 
with the riskiest. So, the efforts to make it self-sustaining 
will be difficult.
    Mr. Lewis. We are interested in those questions that 
surround negative subsidy and the risk and so forth, so, if you 
will help us out.
    Mr. Retsinas. If you will identify the particular program, 
we will do that, Mr. Chairman.
    Mr. Lewis. Okay.
    HUD's budget reflects the introduction of three new multi-
family products using existing legislative authority, mortgage 
insurance for small projects, pool insurance for loans 
originated by non-traditional community lenders and loan 
consortia, and mortgage insurance for mixed-income housing.
    Has HUD estimated the level of credit subsidy necessary to 
satisfy the requirements, credit reform for each of these new 
products?
    Mr. Retsinas. Yes, we have. They generally track the credit 
rates of the programs under which they are authorized. In some 
cases, particularly the case having to do with mixed income--
and I can walk through a couple of them if you like--that rate 
has been adjusted because of the risk involved. But let me give 
you an example.
    The one that is literally off the ground is really 
expedited processing for small projects. We have found 
historically one of the greatest credit gaps that exists in 
this country are the single owners of small properties--
properties of under 20 units--who have serious capital needs 
but lenders are less likely to respond to those needs.
    So, we have designed a program--we are literally in the 
middle of training right now, and we hope to have it underway 
in April--that will allow an expedited processing of the FHA 
insurance for those small properties. It will be capped. No one 
project could exceed 20 units or $1 million whichever is less; 
so, it is essentially aimed at small projects.
    The mixed income is an initiative that we believe is 
consistent with the HOPE VI effort, as my colleague, Assistant 
Secretary Marchman indicated before. A number of those HOPE VI 
developments involve market rate housing. In a couple of areas, 
particularly Atlanta and St. Louis, we have been involved with 
FHA insurance on the market rate units. That has provided a 
challenge because it is a different kind of underwriting. This 
program would give us a capacity to deal with market rate 
limits on a broader scale. It will be limited of the number of 
units, but that is the direction that we think is appropriate.
    Mr. Lewis. Additional illustration for the record will be 
helpful, just so we understand where we are going.
    Mr. Retsinas. Yes, sir, I will be happy to.
    [The information follows:]

[Pages 243 - 270--The official Committee record contains additional material here.]


                      fha single family insurance

    Mr. Lewis. How many, in the area of single family programs, 
how many home buyers utilize the FHA single family insurance 
program just this last year?
    Mr. Retsinas. In Fiscal Year 1996 we did about 800,000 
insurance endorsements. And 17 percent were for refinancing, 
the rest were purchase originations, about 663,000 and of those 
we had an all-time high level of 73 percent for first-time home 
buyers about a half a million first-time home buyers.
    Mr. Lewis. What do you think about this year?
    Mr. Retsinas. Whatever interest rates are going to do. 
[Laughter.]
    We basically expect essentially sort of a flattening. 
Obviously as a function, it is highly interest-rate sensitive. 
But we have been, in answer to the question from one of your 
colleagues, we have found that----
    Mr. Lewis. Is not the Fed meeting just this next week?
    Mr. Retsinas. Yes, it is March 25th.
    And we will be watching that closely, as will all 
Americans.
    Mr. Lewis. Indeed. Okay.
    I do not want to ask those questions. [Laughter.]
    I have a number of questions here that will be responded to 
for the record.
    Mr. Retsinas. I will be happy to respond to them.

                                fha fund

    Mr. Lewis. Addressing the increasing FHA loan limit, the 
President has proposed increasing the maximum mortgage amount 
for single family FHA insurance loans to equal a conforming 
loan limits on Fannie Mae and Freddie Mac.
    If Congress were to authorize this change, what would the 
maximum mortgage amounts for single family FHA insured loans 
become and did HUD propose the increase you might describe?
    Mr. Retsinas. The increase would go to the conforming loan 
limit which is around $214,000, which is the Fannie and Freddie 
conforming loan limit, if the Congress were to approve that 
legislation. The administration has proposed that for three 
different reasons. One is that it would be an expansion of 
homeownership opportunities.
    That is to say, particularly in high-cost areas, the 
current ceiling which is 75 percent of the conforming loan 
limit or around $160,000. In some areas, in high-cost areas 
that level----
    Mr. Lewis. Like this one?
    Mr. Retsinas. I do not want to say but there are----
    [Laughter.]
    Mr. Retsinas [continuing]. Certain coasts; those two coasts 
where housing prices are so high that $160,000, indeed, does 
not address the needs of the classic FHA first-time home buyer, 
which is the municipal worker and the like. That is one reason.
    The second reason is it produces money. The FHA single 
family program is a revenue raiser. Our estimates are that even 
with a modest use of the program that is we expect that if this 
program were to be adopted, an increase in FHA origination of 
less than 10 percent, it would raise over $200 million in new 
revenues for the government. That is the second reason.
    And the third reason it would lead to a healthier FHA 
insurance fund. The FHA insurance fund has historically been 
able to cross-subsidize, that is use the income from the less 
risky and allow us to assist and reach out to the more risky.
    Those are the three reasons that the proposal was put 
forward.
    Mr. Lewis. Recognizing the areas of the country that are 
largely affected, one would ask, do you intend to introduce 
authorizing language that will enable these changes?
    Mr. Retsinas. Yes, we do and it would require authorizing 
language.
    Mr. Lewis. Does it make sense to limit this type of 
proposal to certain high-cost areas?
    Mr. Retsinas. That is something that is worth considering. 
In many cases, certainly. The actual amount of FHA insurance is 
limited more by the ability of the borrower to repay than by 
the loan limit: Which becomes really the limit.
    Mr. Lewis. Well, is the FHA insurance fund adequately 
capitalized?
    Mr. Retsinas. Well, according to the requirements of 
Congress it is more than adequately capitalized. Congress has 
suggested that we reach a capital ratio of 2 percent in the 
year 2000. Last week we released the audit from Fiscal Year 
1996, the current capital ratio was 2.54 percent. So, according 
to that standard, it is adequately capitalized.

           proposed legislation to eliminate fraud and abuse

    Mr. Lewis. Just to show that we are going to keep this all 
in the family, I would now ask Susan Gaffney, the Inspector 
General, to come and join the family.
    Let the record show that we have already spent a good deal 
of time trying to get a handle on how we, as a committee, can 
get a better understanding of the difficulties of a HANO, what 
appear to be very real problems with monies that are 
appropriated by this Subcommittee, along with the other body, 
with major questions that are out there as to how much of that 
money actually gets down to the people that we all want to 
serve and, if not, why not?
    I would expect that the Inspector General will be of great 
assistance, both to those in HUD, who have similar concerns, 
but also to this Committee as well.
    So, Ms. Gaffney, do you have any suggestions for 
legislation which would enhance HUD's ability to combat waste, 
fraud and abuse?
    Ms. Gaffney. We have compiled 20 legislative proposals, 
which would add enforcement capability to HUD; and we are now 
proposing a series of adjustments to the Native American 
Housing Assistance and Self-determination Act, which was 
discussed in the Seattle Times articles. We believe strongly in 
self-determination but we also believe that, in the Act's 
accountability aspects, there could be some tightening up that 
would help a lot as the Act is implemented.
    I think another thing that you could do to help the fight 
against fraud, waste and abuse is consider what the Office of 
Inspector General has been doing over the past years and what 
we need to be doing, and whether we are doing everything we 
need to be doing.

                          increase in ig staff

    Mr. Lewis. Well, frankly, have the very strong impression 
that there is a lot of work to be done here. That the budget 
requests an increase to pay the cost of hiring 49 new 
investigators for the Office of Investigation to operate the 
operations of the Safe Home Initiative.
    Why would you need that kind of increase in staff?
    Ms. Gaffney. When Operation Safe Home started in 1994, we 
had 100 special agents, criminal investigators. Operation Safe 
Home started because Secretary Cisneros asked what are the 
major abuses, wrongdoing that undermine HUD programs? Why do 
you not target them?
    We answered that drugs and gangs, as Mrs. Meek said this 
morning, are destroying our $90 billion investment in public 
housing. And that, generally, law enforcement was not 
addressing that.
    So, we said that was the first priority and that our agents 
would get involved.
    We are now devoting 50 of our 100 special agents to doing 
nothing but violent crime. When we started Operation Safe Home, 
all of those 100 agents were doing white collar crime. We had 
never been involved in drugs and gangs before. So, what that 
meant was that our capability on white collar crime was being 
reduced by 50 percent.
    What has happened this year and next year if we get these 
additional agents is that we will be back to where we were in 
1994 in terms of capability on the white collar crime aspect.
    Mr. Lewis. The answer is obvious, but could you use more 
investigators and auditors effectively?
    Ms. Gaffney. Absolutely. We cannot keep pace. You have been 
very helpful in demonstrating to me a couple of things. We have 
major task forces under way that are looking into significant 
allegations, but we are still in a reactive mode. We are not 
equipped or staffed to do white collar crime analysis trends.
    We are in a position where, for instance, we went into 
Camden, New Jersey, and did a major audit of both the public 
housing and CDBG funding. We said for instance, that there were 
absolutely no controls over CDBG funding in the City of Camden. 
No controls at all. No records, no one knew how it was being 
spent.
    You would think under a circumstance like that, that we 
would send a team of agents in, right----
    Mr. Lewis. Correct.
    Ms. Gaffney [continuing]. To find out who took the money. 
We had no agents left to send in. Now, we are doing a major 
audit of HUD contracting and we have 30 auditors assigned. I 
have absolutely no doubt that we are going to find big problems 
in HUD contracting. You know, HUD staffing keeps going down and 
down.
    And the answer is not as easy as contracting out. We still 
have to oversee all those people who are in business to make 
money. And if we were doing this right, we would not just 
assign 30 auditors whose focus is management, not fraud. We 
would also have a complement of agents working right with them. 
But we do not have the agents to assign.

                          operation safe home

    Mr. Lewis. It occurs to me that first the Department has 
responded in a number of ways that indicates they are very 
serious interest in measuring the results we are getting at the 
other end of this delivery system.
    And there is no doubt in my mind that an Inspector General 
can be very helpful in connection with that effort. But, also, 
where there really are serious indications of fraud and abuse 
there are other agencies where federal monies are crossing 
state lines, the Federal Bureau of Investigation clearly is a 
tool that can be used effectively.
    I certainly had that impression when I visited HANO. 
Tobacco and Firearms has an interest in crime and can be of 
assistance there. In the final analysis, I hope you would be 
focusing upon ways and means of helping us be assured that that 
which we appropriate gets to where we had hoped it would go in 
the first place.
    How many fraud probes have you conducted through that 
program known as Operation Safe Home?
    Ms. Gaffney. I would expect at this point we probably have 
done 60 or 70 at public housing authorities.
    Mr. Lewis. Have we had any indictments returned?
    Ms. Gaffney. I think there have been a few, but the problem 
with the fraud probes as we have done them is that they have 
essentially been audit exercises and that is not the way that 
one really gets to criminal referrals.
    At Camden, for instance, our audit resulted from one of 
these probes. So, we uncovered problems. But I do not think the 
audit focus alone is the way to get at wrongdoing.
    Mr. Lewis. It is broader than that and, indeed, a totally 
different approach----
    Ms. Gaffney. Let me give you an example of where it does 
work. We knew we were going to have agents undertaking violent 
crime work. And, we knew, with respect to the illegal taking of 
money out of multi family insured housing, that there is a 
civil statute--called the equity skimming statute, essentially. 
And you do not have to prove intent. All you have to do is 
prove that an owner or an agent was taking money out of a 
project when it was in a non-surplus cash position. The 
auditors can do that. Because they do not have to bother about 
intent.
    So, we have engaged something like 25 percent of our audit 
staff in doing those cases and we have had enormous success.
    Mr. Lewis. Mr. Hobson mentioned before he left that he is 
very interested in seeing the State Attorney Generals are 
involved and seeing how they can cooperate with our agencies. I 
would mention that currently a question is developing in my own 
office that swirls around a thing called methamphetamines.
    It would appear as though this is, you know, the drug of 
choice among many of our young people, and that the delivery is 
being exercised by a combination of gangs in places like 
California et cetera. But it is a huge problem that is going 
to, if it is not already across the country, certainly is 
beginning to impact many of our facilities that are public 
facilities.
    Ms. Gaffney. I should tell you that our thought in doing 
Operation Safe Home was always leveraging the resources of 
other law enforcement agencies and the extent to which that has 
happened with respect to violent crime in public housing is 
almost unbelievable. And it is largely attributable to the 
Attorney General, who has truly engaged the U.S. Attorneys in 
bringing in all the Federal and local law enforcement agencies 
and saying, okay, now we are going to focus on public housing. 
This never happened before.
    The problem is that to get that kind of engagement, wehave 
to do our part. We have to have people to carry our fair share or the 
other agencies do not engage.
    Mr. Lewis. I can tell you, Ms. Gaffney, that my 
communication up to this point with this HUD Secretary 
indicates rather clearly that we are on the same wavelength in 
connection with these concerns.
    I mean we are going to do what we can. First, we have 
addressed earlier the need for help from the authorizing sides 
of this process. But efforts like Operation Safe Home are not 
insignificant efforts, they are very, very important. For, in 
the final analysis, it addresses that underlying presumption 
that Mr. Stokes and I share, that is that we do expect these 
monies that we appropriate to get to the people that we would 
hope to serve.
    Mr. Stokes, do you have any additional comments or 
questions?

                  role of ig in crimefighting efforts

    Mr. Stokes. Thank you, Mr. Chairman.
    Ms. Gaffney's testimony just raises one or two little 
questions in my mind and I would like her to clarify them for 
me.
    In terms of the violence, tell me how you get into it and 
what you do?
    Ms. Gaffney. We go to the United States Attorney. The U.S. 
Attorney typically calls in the housing authority, the local 
police, the State police, the FBI, the DEA, the HUD OIG. Now, 
the work involved often falls on the HUD OIG because we are the 
people who care most. The rest of the law enforcement people 
care about law enforcement but they are not focussed on public 
housing. That is our focus.
    Mr. Stokes. Sure.
    Ms. Gaffney. So, we do the leg work and we get these folks 
together and we start an education process. And it involves the 
residents and the housing authority management and all these 
different forms of law enforcement.
    The law enforcement people break off and do a law 
enforcement plan which typically involves undercover work for 
six to nine months, or sometimes 12 months; a series of law 
enforcement operations which are then buttressed by management 
improvements at the housing authority, resident involvement and 
follow-up law enforcement, security.
    Our intention is a holistic approach so we do not have the 
typical situation of a big raid but 2 months later, you have 
the same condition.
    You see, to law enforcement, public housing is just the 
projects. They do not get it.
    Mr. Stokes. That is right, you are right.
    Ms. Gaffney. They do not understand our tremendous Federal 
investment.
    Mr. Stokes. Right.
    Ms. Gaffney. So, we are educating; we are bringing the two 
sides together and in the best of all possible worlds, if we do 
this right, in the end, we will not need to be there. Because 
local law enforcement and the housing authorities will 
understand that they have to be allies and they have to get 
this done.
    Mr. Lewis. Mr. Stokes, dwelling on the positive, which you 
mentioned earlier today, one of the very positive items that we 
experienced at HANO, it got my attention because I heard that 
this guy who is living in Desire Homes or his office is in 
Desire Homes, had just come back from the FBI Academy.
    Well, those people are not selected lightly and here is a 
guy who is living, essentially living on the facility, who is 
the head of law enforcement there, but who is playing 
basketball with these young people, and the presence makes a 
very, very big difference. And I think we can learn from that 
and it is a learning process without any question
    Mr. Stokes. Sure.
    That is why I wanted to get clarification as to your role 
in terms of violence in these public residences.
    And I applaud you for the approach that you are taking. I 
think it is absolutely necessary. You know, if we are really 
going to ferret out waste, fraud and abuse, the single thing 
that hurts Federal programs or any type of governmental 
programs that are aimed towards helping the poor in our 
society, the dispossessed, the disadvantaged, are the ripoffs 
that take place.
    Ms. Gaffney. Oh, absolutely.
    Mr. Stokes. You know, whether it be through the agencies 
administering it or whether it be through the contractors or 
whoever. And there is a tendency throughout government to do 
that. You know, the whole welfare reform movement came about 
because all of us understand that there is a lot of waste, 
fraud and abuse in that program.
    And there is waste, fraud and abuse in any government 
program. And taxpayers and the recipients of programs are both 
entitled to have the money go where it is supposed to go.
    Ms. Gaffney. Mr. Stokes, I do not think this country 
understands. They think they are being ripped off by poor 
people. They do not understand that they are being ripped off 
by wealthy people.
    Mr. Stokes. That is right. You are absolutely right. Right 
on target.

                               Adjourment

    Mr. Lewis. This is only the first step of our process for 
the 1998 fiscal hearings for this Committee and we will be with 
you from this date forward all the way through conference and 
hopefully a bill the President can sign. But in the meantime, I 
think it was a very excellent couple of days and the Secretary 
will be relieved to know we are not going to ask him back 
tomorrow. [Laughter.]
    Mr. Lewis. In the meantime, Ms. Gaffney, thank you very 
much for your help and we look forward to working with you.
    Ms. Gaffney. Thank you, Mr. Chairman.
    Mr. Lewis. Thank you all.

[Pages 278 - 1081--The official Committee record contains additional material here.]




                               I N D E X

                              ----------                              

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                                                                   Page
Baldwinsville Project............................................    67
Brownfields:
    EPD and Initiative...........................................    86
    EPD Efforts in Florida.......................................    89
    Funding for Initiative.......................................    83
    Need for Guidelines for Funding..............................    87
    Redevelopment Grants.........................................    88
Buyouts, Timeframe...............................................    78
Carryover, 1996..................................................    63
Certificates:
    Disabled.....................................................    53
    Incremental Certificates and Welfare Reform..................    50
    Recipient Problems...........................................   158
Community Development Block Grants:
    Benefits to Low-and Moderate-Income Persons..................   187
    Direct Use of Funds for Persons With Disabilities............    55
    Homeownership Zones.........................................85, 210
        Private Sector Input on NOFAs............................   211
    Operating Expenses...........................................   211
    Section 108..................................................    72
    Set-Asides...................................................   209
    Uses.........................................................   188
    Use of Funding for Disabled..................................    55
    Use Money in Florida.........................................    73
Continuum of Care................................................   234
Contract Renewals:
    Averting a Crisis............................................     8
    Cost of Section 8 Contracts..................................    64
    Increase in Request..........................................     2
    Outlay Trend.................................................    85
    Renewals and Tax Policy Proposals............................37, 38
    Reserves.....................................................   147
    Tenant Notification of Contract Expiration...................   217
Cuomo, Andrew:
    Biography....................................................    24
    Opening Remarks..............................................     5
    Statement of.................................................    11
Disabled:
    Certificates.................................................    53
    Direct Use of CDBG Funds for Persons With Disabilities.......    55
    Rental Assistance for........................................    52
    Use of CDBG Funding..........................................    55
Disaster Relief:
    North Carolina...............................................    56
    Status of Funding for........................................    58
Domestic Violence, funding for...................................   235
Downsizing:
    Integrity and HUD............................................    10
Drug Elimination Grants..........................................   109
Empowerment Zones and Enterprise Communities....................84, 233
Fair Housing Activities:
    Equal Split of FHIP and FHAP Monies..........................    68
    Discrimination Complaints....................................   160
    Fair Housing Index...........................................   162
    Fair Housing Initiatives Program (FHIP)......................   180
    Increase in Complaints.......................................   159
    In-House Activities..........................................   180
    Purpose of FHIP Funding to States............................    69
State Laws:
    Equivalent to the Fair Housing Act...........................    69
    Pending Local Review/Legislative Action......................    70
    Not Equivalent to the Fair Housing Act.......................    70
Family Self-Sufficiency Program..................................   151
FHA Program:
    Health of Program............................................   116
    Increase in Loan Limit.......................................   271
    Multifamily Insurance........................................   240
    Single Family Insurance......................................   271
Florida:
    Code Enforcement Issues......................................   107
    Delinquent FHA Mortgages.....................................   108
    Need for Master Community Planning Assistance................   108
    Use of Preservation Funding in Jacksonville..................    74
Government Performance Results Act (GPRA)........................   238
Habitat for Humanity.............................................   219
    NCDI.........................................................   219
HOME:
    Approach Used for Program....................................   105
    Funding in North Carolina....................................   105
    Funding Request..............................................   103
Homeless Programs:
    Effect of Mounting Policies..................................    82
    Policies.....................................................   232
HOPE VI..........................................................    46
    Demolition/Replacement of Units.............................47, 110
    Failure of PHAs to Sign HOPE VI Agreements...................   125
    Number of Grants Awarded.....................................   118
    Partnerships Between State and Local Governments.............   126
Housing:
    Effect of Welfare Reform.....................................    46
    Importance to Americans......................................     4
    Status of Reducing Backlog of Substandard Housing............    45
Housing Opportunities for Persons with AIDS (HOPWA)..............   220
HUD:
    Actions Against Bad Landlords................................    51
    Actions Against Rick Marshal.................................    42
    Balancing the Budget.........................................     7
    Consolidation of Programs....................................   213
    Downsizing and Integrity.....................................    10
    Field Offices................................................   212
    GAO Report on Budget Request.................................   127
    GAO's Budget Scrub...........................................   148
    Increase in FTE..............................................   218
    Implementation Plan for Trigger Mechanisms...................    63
    Introduction of Principal Staff..............................     5
    Priorities of.................................................7, 26
    Overhead Costs...............................................   214
    Review of Investments........................................     3
    1998 Congressional Justifications............................   278
Indian Housing:
    Balance Between Oversight and Overregulation.................    93
    Capacity of Tribes to Administer NAP.........................   115
    Complicity of HUD Officials..................................   100
    Funding for Indian Housing Programs..........................    95
    Housing Assistance from BIA and HUD..........................   101
    BIA Programs which Assist in Housing.........................   101
    HUD Action to Stop Abuses....................................    99
    HUD Interaction with BIA.....................................    94
    Indian Family Income.........................................   102
    Number of Nonprofit Organizations Working in Indian Country..   115
    Number of Homes Built without Violation......................    99
    Oversight Responsibilities to Protect Indians................    92
        Tulalip Tribe--Seattle Times Article.....................    91
        Impact of Article........................................    97
    Tulalip Tribe Case...........................................    96
Inspector General:
    Increase in Staff............................................   273
    Operation Safe Home..........................................   274
    Report on Rental Assistance Payments.........................    59
    Role of IG in Crimefighting Efforts..........................   275
IRS and Income Matching..........................................    61
Justifications, timely submission of.............................    90
Lead-Based Paint Abatement.......................................    84
Legislation:
    Elimination of Fraud and Abuse...............................   272
    Need for to Stop Abuses in Public Housing....................    44
    Public Housing Reform Bill--H.R. 2...........................    65
    Proposals for Bad Landlords..................................    41
Lewis, Jerry:
    Welcoming Remarks............................................     1
Livingston, Bob (Chairman), Introduction of......................     6
Marshal, Rick:
    Cost of Defaults.............................................    43
    Default Payments to..........................................    43
    HUD Actions Against..........................................    42
    Investigations of............................................    42
    Reason for Disbarment........................................    43
Manufactured Housing.............................................    66
Mispayment of Subsidy Issue......................................    62
Native American Housing Program..................................   113
    Capacity of Tribes to Administer NAP.........................   115
Operation Safe Home..............................................   274
Operating Subsidies:
    Earned Income Exclusion......................................   154
    Effect of Reduction..........................................    45
    Phase-down of Operating Subsidies............................   156
        Operating Subsidy Decrease...............................   156
    Reduction in Request.........................................    44
Oversight vs. Overregulation.....................................    77
Policy Development and Research:
    Hispanic-Serving Institutions Work Study Program 1996 
      Grantees...................................................   239
    Historically Black Colleges and Universities, 1996 Grantees..   240
    Outreach Program.............................................   239
Portfolio Reengineering..........................................    65
Preservation Program:
    Allocation of Funds to Jacksonville Office...................    76
    Elimination of Program.......................................    50
    Use of Preservation Funding in Florida.......................    74
Property Insurance:
    Promulgation of..............................................    68
Public Housing:
    Capital Fund.................................................   181
        Set-Aside................................................   182
    Clinton Terrace, Washington Post Article.....................    39
    Drug Elimination Grants......................................   109
    Failure of PHAs to Sign HOPE VI Agreements...................   125
    Flexibility and Waivers for PHAs.............................   152
    HANO--Funding for............................................    78
    Need for Better Directors....................................   123
    Need for Legislation to Stop Abuses..........................    44
    Partnerships Between State and Local Governments.............   126
    Philadelphia Housing Authority...............................   186
    Reform Bill..................................................    65
    Rental Income Increase.......................................   156
    Residents and SSI Loss.......................................    46
    Revitalization of Cabrini Green..............................   119
        Distrust by Cabrini Green Residents......................   120
    Timetable for Less Regulations...............................   153
    Troubled PHAs...............................................49, 157
        Status of Detroit PHA....................................    71
Public's Trust, Restoring........................................     9
Real Estate Licensees, Services for..............................   236
Regional Mobility Counseling.....................................   150
Reverse Mortgages................................................   107
    Chairman's Comments..........................................   113
    Fee Abuses...................................................   107
Section 108 and CDBG Programs....................................    72
Section 202/811:
    Need for Additional Funding..................................    55
    NOFA.........................................................    54
    Number of 202 Units in 2002..................................   217
Section 8:
    Averting a Crisis............................................     8
    Contract Amendments..........................................   148
    Contract Renewals............................................     2
    Cost of Contracts............................................    64
    Incremental Units............................................   149
    Outlay Trend.................................................    85
    Project-Based Section 8 Assistance...........................   148
    Reserves.....................................................   147
    Tax Policy...................................................37, 38
    Tenant Notification of Contract Expiration...................   217
Stokes, Louis:
    Welcoming Remarks............................................     4
Tax Policy:
    Congressional Action.........................................    39
    Section 8 Renewals...........................................37, 38
Tenant Opportunity Program (TOP).................................   182
Tulalip Tribe:
    Assistance from BIA and HUD..................................   101
        BIA Programs which Assist in Housing.....................   101
    Case.........................................................    96
    Complicity of HUD Officials..................................   100
    HUD Actions to Stop Abuses...................................    99
    Indian Family Income.........................................   102
    Number of Homes Built Without Violation......................    99
    Seattle Times Article........................................    91
        Impact of Article........................................    97
Vouchers:
    Displacement of Families.....................................    49
    Recipient Problems...........................................   158
Welfare Reform:
    Effect on Housing Programs...................................    46
    Incremental Certificates.....................................    50
    Making it Work...............................................     9
Youthbuild Program.............................................218, 219