[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
 DEPARTMENT OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT,

                                 AND

             INDEPENDENT AGENCIES APPROPRIATIONS FOR 2000 

                                

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS
                              FIRST SESSION
                                ________
            SUBCOMMITTEE ON VA, HUD, AND INDEPENDENT AGENCIES
                   JAMES T. WALSH, New York, Chairman
 TOM DeLAY, Texas                       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
 ROGER F. WICKER, Mississippi           ROBERT E. ``BUD'' CRAMER, Jr.,
 ANNE M. NORTHUP, Kentucky                Alabama
 JOHN E. SUNUNU, New Hampshire 



                                                                                                                                                                                      
NOTE: Under Committee Rules, Mr. Young, 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, Timothy L. Peterson, Valerie L. Baldwin, and Dena L. 
                                 Baron,

                            Staff Assistants
                                ________

                                 PART 6

                     DEPARTMENT OF HOUSING AND URBAN
                               DEVELOPMENT

                              

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
 57-719                     WASHINGTON : 1999




                        COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                    DAVID R. OBEY, Wisconsin
 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               STENY H. HOYER, Maryland
 TOM DeLAY, Texas                      ALAN B. MOLLOHAN, West Virginia
 JIM KOLBE, Arizona                    MARCY KAPTUR, Ohio
 RON PACKARD, California               NANCY PELOSI, California
 SONNY CALLAHAN, Alabama               PETER J. VISCLOSKY, Indiana
 JAMES T. WALSH, New York              NITA M. LOWEY, New York
 CHARLES H. TAYLOR, North Carolina     JOSE E. SERRANO, New York
 DAVID L. HOBSON, Ohio                 ROSA L. DeLAURO, Connecticut
 ERNEST J. ISTOOK, Jr., Oklahoma       JAMES P. MORAN, Virginia
 HENRY BONILLA, Texas                  JOHN W. OLVER, Massachusetts
 JOE KNOLLENBERG, Michigan             ED PASTOR, Arizona
 DAN MILLER, Florida                   CARRIE P. MEEK, Florida
 JAY DICKEY, Arkansas                  DAVID E. PRICE, North Carolina
 JACK KINGSTON, Georgia                CHET EDWARDS, Texas
 RODNEY P. FRELINGHUYSEN, New Jersey   ROBERT E. ``BUD'' CRAMER, Jr.,
 ROGER F. WICKER, Mississippi            Alabama
 MICHAEL P. FORBES, New York           JAMES E. CLYBURN, South Carolina
 GEORGE R. NETHERCUTT, Jr.,            MAURICE D. HINCHEY, New York
Washington                             LUCILLE ROYBAL-ALLARD, California
 RANDY ``DUKE'' CUNNINGHAM,            SAM FARR, California
California                             JESSE L. JACKSON, Jr., Illinois
 TODD TIAHRT, Kansas                   CAROLYN C. KILPATRICK, Michigan
 ZACH WAMP, Tennessee                  ALLEN BOYD, Florida
 TOM LATHAM, Iowa
 ANNE M. NORTHUP, Kentucky
 ROBERT B. ADERHOLT, Alabama
 JO ANN EMERSON, Missouri
 JOHN E. SUNUNU, New Hampshire
 KAY GRANGER, Texas
 JOHN E. PETERSON, Pennsylvania 


                 James W. Dyer, Clerk and Staff Director

                                  (ii)


DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND 
              INDEPENDENT AGENCIES APPROPRIATIONS FOR 2000

                              ----------                              

                                         Wednesday, March 10, 1999.

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                               WITNESSES

ANDREW CUOMO, SECRETARY

                    Chairman's Introductory Remarks

    Mr. Walsh. The hearing will come to order.
    On behalf of the subcommittee, which currently consists of 
Mrs. Meek and myself, we would like to welcome you, Mr. 
Secretary and your staff to the hearing today on HUD's fiscal 
year 2000 budget request.
    The President has requested a budget of $28 billion in 
budget authority and $32.5 billion in budget outlays for the 
Department of Housing and Urban Development. However, because 
of the Department's proposal to use $2 billion in excess 
Section 8 budget authority, HUD's actual budget request is $30 
billion.
    Now, with your indulgence, I would like to spend a couple 
of minutes discussing the President's overall discretionary 
budget in addition to HUD's specific budget request because the 
two are integrally related.
    As most of you know, VA, HUD, and Independent Agencies 
appropriations bill is the largest of the non-defense 
discretionary appropriations measures. Furthermore, next to the 
Department of Veterans Affairs, HUD's budget is one of the 
largest within the cadre of agencies and programs the bill 
funds. Therefore, when discretionary spending is slated to 
decrease, one can only expect decreases in many of this bill's 
programs, including HUD's.
    Some important decisions were made last week that seriously 
affect the VA, HUD bill at large and HUD in particular. The 
first decision was that the supplemental appropriations bill 
being drafted must be offset by decreases in spending, making 
rescissions necessary.
    Additionally, it appears the Budget Committee will draft a 
budget resolution that assumes retaining the existing 
discretionary spending caps. Complicating matters further is 
the Administration's decision to freeze veterans' medical care 
at last year's level, a decision that a bipartisan Congress 
will overwhelmingly overturn.
    Add to these considerations the fact that a hard freeze on 
discretionary spending will exceed the spending caps by $15 
billion in outlays. Suddenly, the budget realities facing 
Congress this year become pretty daunting.
    For example, the chances of providing additional public 
housing operating subsidies to offset the shortfall caused by 
inaccurate and misleading estimates by OMB and the 
Administration is virtually impossible, and, clearly, crafting 
the fiscal year 2000 bill is going to be a challenge that will 
require each member to make a difficult decision or two.
    One such decision will be whether HUD's core programs 
should take priority over any untested new initiatives included 
in this year's request. In addition to the $731 million 
requested to support 19 new programs and initiatives, several 
other items will be reviewed by the Subcommittee today, 
including a $4.2 billion advance appropriation for the Section 
8 program and the use of unexpended balances to offset HUD's 
request.
    Outstanding issues require oversight, too. For example, I 
am interested in following the negotiations on the rule for a 
new operating subsidy formula. In the implementation of the 
Native American Housing Assistance and Self-Determination Act, 
Mark-to-Market legislation, and public and assisted housing 
reforms, and in the continued refinement of the single family 
property disposition program enacted last year.
    On top of all these responsibilities, HUD continues its 
reorganization efforts with many offices just becoming 
operational. Despite the new offices, existing programs 
continue to suffer from ineffective monitoring. For example, 
the Grants Management Information System in Community Planning 
and Development is unreliable, making it virtually impossible 
to adequately track grants and grantees.
    Weaknesses continue to plague HUD's ability to administer 
contracts and monitor contractors' performance. These matters 
and others require HUD's concentrated attention that could be 
distracted by newly conceived programs.
    I realize that much of this recitation is sobering, but 
everyone may as well be fully apprised of the facts. I look 
forward to the Secretary's comments and his introduction of 
accompanying staff.
    Mr. Mollohan will not be in attendance today, so I would 
give Mrs. Meek the opportunity to make an opening statement on 
behalf of the minority.

                    Mrs. Meek's Introductory Remarks

    Mrs. Meek. Mr. Chairman, I am pleased to substitute for the 
ranking member, Mr. Mollohan. I don't have a written statement, 
but I am here to say that we are certainly in support of HUD 
programs and the progress that HUD has made in all areas. We 
followed very closely the Inspector General's look over the 
whole Department, and things are working out, it appears, well 
for all of us concerned. And I am here to say that the programs 
which we will hear today are probably good follow-ups to what 
HUD did in the past.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you very much.
    Mr. Secretary, proceed. Feel free to introduce any and all 
of your staff, please.

                       Introduction of HUD Staff

    Secretary Cuomo. Thank you very much, Mr. Chairman, and I 
am going to take you up on that offer. We do have the full HUD 
team here to see you today, Mr. Chairman, and I know many of 
the names you have heard before. Some of them you have worked 
with, but I would just like to take this opportunity to put a 
face with all the names.
    To my right is the CFO of the Department, Mr. Richard 
Keevey. To my left is William Apgar, who runs the FHA, which is 
the largest single division within HUD. Wethen have the Deputy 
Secretary of the Department, Saul Ramirez, who was the former Assistant 
Secretary for Community Planning and Development and now is 
spearheading the Management 2020 efforts as the Deputy Secretary. 
Cardell Cooper is the Assistant Secretary for Community Planning and 
Development. Eva Plaza is the Assistant Secretary for Fair Housing. We 
have Deborah Vincent, who is the Deputy Assistant Secretary for Public 
Housing. The Assistant Secretary is Harold Lucas, and he had a death in 
the family, Mr. Chairman, and that is why he is not with us today. 
Otherwise, all the Assistant Secretaries are here. Gail Laster, who is 
the General Counsel. We have Susan Wachter, who is the Acting Assistant 
Secretary for Policy Development and Research and Xav Briggs, who is 
the Deputy Assistant Secretary in Policy Development and Research. Hal 
DeCell is the Assistant Secretary for Congressional Relations. Rhoda 
Glickman, who works with me directly and helps us with congressional 
relations. George Anderson is the Vice President of Ginnie Mae. Mr. 
D.J. Lavoy runs the Real Estate Assessment Center, which I hope we get 
a chance to talk about later on. This is one of the new functions you 
referred to. It is assessing all of HUD's properties for the first time 
ever.
    We have Mr. Ed Kraus, who is a detailee from the FBI, 
Federal Bureau of Investigation, who runs our Enforcement 
Center, which is also a new function. We have Jacquie Lawing, 
who is the Deputy Chief of Staff, who has spearheaded this 
appropriations process for us, Mr. Chairman. John Connors is 
from the Office of the Inspector General. Joe Smith is the 
Acting Assistant Secretary for Administration. Mr. Ira 
Peppercorn runs OMHAR, which is the Mark-to-Market function. 
John Bohm from the Office of Congressional Affairs. Dave 
Gibbons is responsible for the Budget Office, so if the numbers 
don't add up, Mr. Chairman, it is Dave Gibbons' fault, and we 
will sacrifice him on the appropriations altar.
    Mr. Walsh. It could also be OMB's fault. [Laughter.]

                 Secretary Cuomo's Introductory Remarks

    Secretary Cuomo. Let me, if I might, make a couple of brief 
opening comments to give you an overview. You have my official 
opening statement for the record, if it pleases the Chairman.
    First of all, it is my pleasure to be back before this 
Committee. I have worked with Mr. Frelinghuysen and Mr. 
Knollenberg and Mrs. Meek before. I have worked with you on the 
Committee, Mr. Chairman, and I am proud and pleased to see you 
as the head of the Committee now.
    Mr. Walsh. Thank you.
    Secretary Cuomo. This Committee really was the prime mover, 
in my opinion, in the progress we made last year. We made 
extraordinary progress last year, historic progress, literally, 
at the Department of Housing and Urban Development in terms of 
budget and legislation. This Committee made it happen.
    On the Senate side, Senator Connie Mack was very involved 
with our issues, but this Committee made it clear that it was 
going to get something done. It was going to enact legislation. 
It was going to pass a budget. It was not going to get caught 
up in partisan politics. And, frankly, that motivation drove 
the entire process, and I look forward to the same working 
relationship that we had last year, Mr. Chairman, which is we 
focus on the issues and the practicality and the pragmatic 
approach to the issues and sidestep the partisan politics and 
bickering that can often derail the legislative train.

                             hud's mission

    The HUD mission is very simple. We provide economic 
development for areas that need it, and we provide housing for 
people that need it.
    It is almost incongruous because we have this great economy 
which is breaking all sorts of records, but at the same time, 
our mission is as essential, if not more essential, than ever 
before. The strong economy gives the suggestion that every 
place is doing well. As the Chairman knows from upstate New 
York, there are a lot of cities that are not doing well despite 
this great economy. A lot of the older cities, a lot of the 
manufacturing cities, are slow in this economic transition, and 
they are suffering.
    HUD, through its economic development programs, can make a 
real difference to bring those cities that are struggling, 
bring them further ahead, ease the transition from one economy 
to the next for them, and at the same time, bring up the 
economy for the overall Nation.
    The housing story is almost diametrically opposed to the 
story of the economy. In a cruel way, the strong economy hurts 
affordable housing because the strong economy drives up the 
rents, and those who are on fixed income or at the bottom of 
the income spectrum actually have more trouble finding 
affordable housing than ever before.

                      public housing waiting lists

    The numbers are staggering. The number of American families 
who need affordable housing is at an all-time high, 5.3 
million. The Department released a study last week called 
``Waiting in Vain--An Update On America's Rental Housing 
Crisis'' that says the waiting time for public housing, Section 
8 housing, is actually going up in the Nation over the past 
couple of years, not down, as one would expect. The numbers are 
going up.
    In the largest public housing authorities, the waiting 
lists are increasing in time by almost 50 percent, from 2 years 
to 3 years. For the Section 8 waiting lists, the average is 
actually up to 3.5 years from 2 years. So this is a dire 
situation.
    That is not to mention the number of homeless Americans, 
roughly 600,000, the number of disabled Americans who need 
housing, the number of mentally retarded Americans who need 
housing who are working with the Department and counting on the 
Department.

                             hud's progress

    So the need is there, Mr. Chairman. At the same time, the 
Department has proven itself over the past 2 years to be a more 
effective vehicle at serving this need. I am not coming before 
this Committee and saying we have reached perfection, we are a 
model of management expertise. We have a way to go, as most 
Federal departments do, as well as most private sector 
companies. But we have made extraordinary progress. Every 
objective source would agree. You can talk to Booz-Allen. You 
can talk to PriceWaterhouse. You can talk to David Osborne. 
Even the GAO, which has been a long-term critic of HUD, said 
that HUD is making significant changes and has made, I quote, 
``credible progress since 1997 in laying the framework for 
improving its management.''
    Not only have we worked on the programs, Mr. Chairman, but 
we have changed the fundamental posture of the Department and 
the fundamental culture and attitude of the Department. We now 
talk about community builders, and people from the Department 
who work with the communities and work with the groups, liaison 
rather than a passive bureaucrat, who are walking out into the 
community and making connections andmaking relationships to get 
things done.
    We talk about inspecting our portfolio. I mentioned in the 
introductions Mr. D.J. Lavoy and Mr. Ed Kraus, who are the 
Directors of the Assessment Center and the Enforcement Center 
respectively. Before we did our reforms, Mr. Chairman, as 
peculiar as it may seem, the Department did not systematically 
inspect its own properties and portfolio. In other words, we 
have about 44,000 properties which we subsidize. We did not 
have a systematic way of inspecting the physical condition or 
the financial condition.
    This year, for the first time ever, HUD will physically 
inspect every property that it subsidizes. We will go see and 
touch and inspect every property we subsidize. We will have a 
full financial assessment for the first time, a full 
assessment, and we will then manage the portfolio from there.
    Bringing in a detailee from the FBI to run the Enforcement 
Center sent a much, much different signal to the people who do 
business with us that HUD has zero tolerance for waste, fraud, 
and abuse. We have also forged a new partnership with the 
Department of Justice where we are doing a much accelerated and 
heightened enforcement program to achieve the zero tolerance on 
waste, fraud, and abuse stance that we have adopted.
    I was at an opening of one of the new HUD offices, the 
storefront offices that we have discussed, which really 
physically manifest the posture of the new HUD, and I was with 
Senator Domenici, who had been at one time a real critic of the 
Department of Housing and Urban Development. We were in the 
Albuquerque office, and we were joking in the comments at the 
ribbon cutting on the new office about who gets more credit for 
the reformation of HUD. And we made a complicit agreement that 
we would share the credit. But that just to me as a small 
vignette manifested the distance that this Department has 
traveled in the past couple of years in improvement.
    I can assure you, as one of the longest serving political 
appointees in HUD ever, 6 years now, that 6 years ago, 5 years 
ago, 4 years ago, 3 years ago, Senator Domenici would not have 
been looking for credit for the reformation of HUD. We have 
come a long way, Mr. Chairman. We have a long way to go, but we 
have come a long way also.

                  projected results of fy 2000 budget

    We also have real tangible results. We have four basic 
subdivisions which you will hear about today in HUD. Fair 
Housing, with the same number of staff, will double the number 
of enforcement actions we take--double the number of 
enforcement actions. That is real results.
    With the FHA, the bottom line on the FHA is we will do more 
mortgages this year and we will make more money than ever 
before. FHA returns money to the Treasury every year. FHA this 
year is projected to return over $2 billion--with a ``b''--to 
the Treasury and make more mortgages than ever before to 
Americans who didn't have an accessible vehicle in the private 
market.
    CPD, the third division, Community Planning and 
Development, which does a lot of the economic development which 
I have been talking about, also runs the homeless programs. 
With the homeless programs, we have tripled the budget and by 
some estimates we are helping more than 14 times as many 
people. That is real results. And Public Housing, we will have 
for the first time an assessment and management system for 
public housing where we will inspect the buildings, we will 
scrutinize the financials, and we will have a rating system for 
the first time where we can actually run public housing 
intelligently.
    Our budget then, Mr. Chairman, recognizing the budget caps 
and the pressure, seeks to minimize the number of new 
initiatives to areas that require new initiatives and invests 
in the core programs. The HOME program is up, the CDBG program 
is up, the Homeless programs are up, the 202 program for senior 
housing is up. You have a new approach where it is a continuum.
    Last week, there were discussions with the Authorizing 
Committee, and they were apparently mistaken on the numbers, 
suggesting that we were cutting the amount of housing for 
seniors in this budget. The opposite is true. This budget, the 
President's budget, increases the number of units for seniors. 
And the thrust of economic development, Mr. Chairman, Community 
Empowerment Fund, empowerment zones, the President has an 
exciting new initiative called APIC, America's Private 
Investment Companies, which can really help some of those 
cities and communities that are struggling.
    In closing, Mr. Chairman, the need is undeniable. Between 
the economic development need for cities and the housing need 
which is at record heights, the need is undeniable. This 
Department's ability to make a real difference in real lives is 
undeniable. And our ability in partnership to come up with 
sound legislation and a sound budget that does more good for 
more Americans is also undeniable given the progress we made 
last year.
    I look forward to replicating the relationship. I look 
forward to replicating the results that we had last year, and I 
want to thank you, Mr. Chairman, for your courtesy and 
cooperation in arranging this hearing.
    [The statement of Secretary Cuomo follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Walsh. Thank you very much for your opening statement. 
It was very effective.
    You know, if I might just editorialize a little bit, this 
agency has the ability to impact positively on people's quality 
of life probably more so than any other Department, if not the 
Health Department. So it is a wonderful opportunity for all of 
us, certainly for you and your staff, to make a difference in 
everyday lives of Americans.
    Mr. Mollohan has joined us. Alan, do you have any opening 
statement you would like to share with us?
    Mr. Mollohan. Mr. Chairman, I just welcome the Secretary to 
the hearing. I appreciate him being here, and I look forward to 
questions.

                      gao ``high-risk'' definition

    Mr. Walsh. All right. I will then begin, and we will 
alternate back and forth as people have arrived.
    Mr. Secretary, last May, you predicted that HUD would be 
off of GAO's high-risk list by this spring. However, GAO's 
January 1999 report on the status of HUD's high-risk 
designation indicated that while the Department is making 
credible progress, as you stated, in addressing its high-risk 
problem areas, considerably more time is needed to implement 
and assess the impact of the Department's current reforms.
    When can we reasonably expect HUD to no longer be a high-
risk agency? And what assurances can be provided to the 
subcommittee that the Department's goals will be met?
    Secretary Cuomo. Mr. Chairman, two points. First, the GAO, 
I believe, concurs with what I said to you in the opening 
statement and what we told this Committee last year, which is 
we are making real progress at reform. The quote from the GAO 
is, ``HUD is making significant changes and has made credible 
progress since 1997 in laying the framework for improving its 
management.''
    From GAO, I will take their classification of credible 
progress and significant changes. That is probably the most 
affirming thing that GAO has said of this Department in years.
    As far as high-risk definition, the high-risk 
classification, I have to be frank, Mr. Chairman I don't even 
know what the high-risk designation means by GAO. I have asked 
them for a written definition of what they mean by high-risk. 
What is the calculus that they bring to bear? What is the 
formula? Because it defies my understanding how HUD can be a 
high-risk Department but not the Department of Defense, not HHS 
which by GAO's numbers lost $22 billion, which is almost the 
entire HUD budget.
    I don't know what they mean by high-risk. They have not 
provided me with a definition of high-risk in quantifiable 
terms that we could actually verify. The Authorizing Committee 
last week talked to them about that definition. But the term--
--
    Mr. Walsh. It is not a flattering designation.
    Secretary Cuomo. It is not a good thing. I understand that. 
[Laughter.]
    And I understand the initial political realities at the 
time that first put HUD on the high-risk list when there were a 
lot of scandals about HUD, et cetera.
    I am less clear what the continuing definition is of that 
term, how they calculate it and how they have calculated it to 
put HUD on to the exclusion of other departments.
    But I will take as a great affirmation of the Department, 
which is saying what we are saying, Mr. Chairman, we are making 
credible progress.
    Mr. Walsh. We note that.
    Secretary Cuomo. Good.

                          new programs at hud

    Mr. Walsh. Mr. Secretary, the budget submission calls for a 
$2.5 billion increase in funding to $28 billion and as many as 
15 to 18 new program initiatives. My view has always been--and 
I was involved in city government before I came here--that if 
there are some problems in a department, you fix those first 
before you initiate new programs. And if there is a budgetary 
crunch, you face the reality of it and try not to initiate new 
spending. You have obviously not made that decision.
    In view of the conditions that are currently at play, would 
you like to just take an opportunity to explain why you are 
going forward with new programs?
    Secretary Cuomo. Yes, I can, Mr. Chairman, because my 
posture is the same posture as the Chairman lays out.
    What we did with this Budget is we said let's invest in the 
core programs that we know are working well. If you look at our 
budget, it is very even across the board with the increases. 
The main programs are increasing we kept to a bare minimum, the 
number of new initiatives.
    The number of 15 or 18 new initiatives I think is 
erroneous. We have three new initiatives in the opinion of the 
Department, which is a very small number for this Department, 
and they are initiatives that I believe are sorely needed 
because we want to do two things. We want to keep the 
management of the Department to a condition where it is as easy 
as possible, but we also want to be responsive to the needs of 
the Nation as they are posed today.
    I don't think I would be doing my job as the Secretary if I 
met with mayors and I met with community groups and they said 
we really need this, and I said, well, I understand you need 
that, but I am trying to manage the Department and I don't want 
to have a new program.
    So we have, maybe, three new initiatives, which is a bare 
minimum. But I believe they are essential. One is on a regional 
approach, working with cities and counties to come together, 
which, Mr. Chairman, if there is going to be a saving grace for 
our cities, it is if they start to work better with the 
counties. The Federal Government has very often frustrated 
that. The regional approach, the inter-jurisdictional approach, 
we want to encourage that. So we have a regional initiative.
    We have an initiative which would eliminate abandoned 
buildings in cities, which is a very real problem. As you know 
from Syracuse, many cities have abandoned properties; they 
can't handle them, and they don't have any funding to really 
take down the abandoned buildings. They want to take down the 
shell. So we have a program that would do that.
    Then the third is the APIC, which is the President's 
initiative, America's Private Investment Companies. That would 
provide seed capital, leveraging private money to bring jobs to 
underserved cities and underserved communities.
    Mr. Chairman, I think we need that like these cities need 
oxygen for the Lawrence, Massachusetts, the Chicopee, 
Massachusetts, the Garys, the East St. Louises, the Buffalos 
that are trying to get businesses back, but they need some seed 
capital. That is what APIC would do.
    Those are the only new initiatives in our Budget, and I 
think we need each and every one of them.

                      staffing for new initiatives

    Mr. Walsh. The additional responsibilities that those put 
on your staff in terms of not only implementing them but 
measuring their success, is that a burden that your folks can 
handle? Because these are going to require--they are not only 
going to monitor the existing programs and try to correct and 
fix those and get them out of this high-risk category, whatever 
that means. What about these new ones?
    Secretary Cuomo. The limited scope of the new ones I 
believe we can definitely handle, Mr. Chairman. APIC is going 
to be jointly done by HUD and SBA. The Regional initiative, we 
are basically doing that now. We are trying to push that 
discussion. We are trying to help jurisdictions come together. 
That is one of the state-of-the-arts, if you will, in Housing 
and Urban Development over the past 2 years. And the abandoned 
buildings program is a modest program.
    Mr. Walsh. Several of the new program initiatives fall 
within the purview of the Office of Community Planning and 
Development, the Abandoned Buildings Initiative, and APIC. 
However, a CPD field operations task force recently concluded, 
among other things, that CPD has incurred a significant loss of 
experienced personnel and that this has occurred at a time when 
CPD is faced with increasing challenges associated with the HUD 
2020 management reform plan and a major increase in the number 
and scope of its programs.
    Given this scenario, how is it possible for CPD to assume 
responsibilities for additional programs?
    Secretary Cuomo. Mr. Chairman, as the chairman recalls, I 
was the Assistant Secretary of Community Planning and 
Development. The Deputy Secretary was the Assistant Secretary 
after me. Cardell is the Assistant Secretary now. I can assure 
you that these initiatives would not be a burden whatsoever on 
CPD.
    CPD is working very, very well, in my opinion. It is 
working better than it has since I have been at the Department, 
and I am not the Assistant Secretary. I hope the two aren't 
related. And these would not be a burden whatsoever.
    Mr. Walsh. Would you care to comment?
    Mr. Cooper. Mr. Chairman, as the Secretary has pointed out, 
I think the obligation on the part of CPD, as we structure 
programs and we talk about initiatives is to view them through 
the lens as enhancers and programs that enhance existing 
programs--That does not necessarily require staffing-up. We are 
working within our FTEs and have people who are responsible for 
particular programs carrying out those details.
    With respect to the amount of work and volume of work 
within the organization, the question becomes one of workload 
and how we use our current staff. The CPD program area, as the 
Secretary mentioned in his opening remarks, has additional 
staff who are community builders within the organization, what 
role they play is distinct from the role the public trust 
officer will play which is to monitor--oops.
    Mr. Walsh. Let ``oops'' be shown on the record.
    Secretary Cuomo. And what it is in response to, by the way. 
[Laughter.]
    Mr. Walsh. Touche.
    Mr. Cooper. To monitor our existing programs and to make 
sure that they avail themselves to the current programs that 
are proposed, the three initiatives that the Secretary spoke 
of. So I believe that we can manage that, and we will work very 
diligently to do so.
    Mr. Walsh. I would like to welcome you to the team, and I 
compliment the Secretary on his choice for the important 
position.

          need for authorizing legislation for new initiatives

    Mr. Cooper. Thank you, sir.
    Mr. Walsh. Either of you, could you respond to how many of 
these new initiatives will require authorization?
    Secretary Cuomo. We believe those three would. Just to put 
it in focus, Mr. Chairman, those three initiatives amount to 
less than three-tenths of 1 percent of the Department's budget. 
So this is not a significant thrust in new initiatives.
    Mr. Walsh. I will cease and desist for right now, and Mrs. 
Meek was next to arrive.

          staffing needs for increased enforcement activities

    Mrs. Meek. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary, and members of your team. I have 
several questions. I will put most of them in the record.
    First, I want to compliment you for having sort of 
emphasized the Fair Housing unit, which you have mentioned, and 
the Public Housing unit. That brings me quite a bit of 
encouragement in that those are some of the areas that over the 
years we may have had some problems with and concerns about. So 
I am glad to see that.
    But I heard you mention that you are going to increase 
suggested enforcement activities, but my question relates to 
the statement you made that you are increasing the enforcement 
of fair housing, but you are maintaining the current FTE or the 
number of people you have.
    How are you going to do that, Mr. Secretary?
    Secretary Cuomo. Two ways, Congresswoman. Number one is we 
have increased the budget at Fair Housing. The number of FTEs 
has remained relatively constant, but the budget has gone up. 
One of the ways we are effective in Fair Housing is with our 
partnerships with what we call FHIP organizations, fair housing 
organizations and State organizations. So the funding has gone 
up, and more efficiencies and effectiveness within the 
Department.
    Mrs. Meek. Is that going to be FHIP or FHAP?
    Secretary Cuomo. Both.
    Mrs. Meek. The reason I said that, my colleague who is 
talking now that I had this little standing joke with, he is 
talking now on the other end. That is why I mentioned FHIP or 
FHAP on that end.
    Mr. Knollenberg. I didn't hear you.
    Mrs. Meek. They were talking about fair housing 
enforcement, and I remember we went around with those two 
acronyms, FHIP and FHAP, if you remember.
    Mr. Knollenberg. I surely do. [Laughter.]
    Mrs. Meek. So the Secretary has said that--my question was 
how will he--he mentioned that he would double the number of 
enforcement actions, and he went on to say how they would do 
that. I am very much interested in that. The data shows that 
the fair housing situation is worse than it was, and you will 
certainly need to be sure to focus in on that. That is 
particularly true in my State of Florida.
    Secretary Cuomo. Yes.

                              shop funding

    Mrs. Meek. And I do hope you will look at that.
    I have other questions, but my next one has to do--I notice 
that the SHOP program, which helps so very much in some of 
these low-income communities where they are able to get private 
partnerships to go hand in hand, one of our favorite programs, 
Habitat for Humanity, was able with your help to do some very 
good things in most of these low-income and urban communities. 
And I just want to put in a good word for that program because 
it does work very strongly with non-profits, and that 
partnership is very, very good for what we can do in housing, 
and I think that has been shown. But you didn't put any funding 
in the budget this time for the SHOP program.
    Secretary Cuomo. Congresswoman, it is funny you should 
mention that. Habitat for Humanity is also one of my favorite 
programs. We are going to send a letter where we are going to 
do an amendment on the budget and put funding in for the SHOP 
program.
    Mrs. Meek. Thank you, Mr. Chairman.
    Mr. Chairman, do I have a chance for one other little bit 
at the apple?
    Mr. Walsh. Yes, you do.

                       lead-based paint reduction

    Mrs. Meek. All right. There are so many things that we 
tried to do in the past year regarding the lead-based paint 
reduction program. I just wanted to mention that. I am not 
going to talk about it, but it is extremely important. It will 
be in the questions I ask you about. And you are rewriting some 
of your regs on that. I certainly would like to know what they 
are all about when you do get them written. The peeling lead 
paint and the contamination dust across HUD's programs, I have 
an affinity for that program as well. I have met with this very 
strong group that pushes the lead paint in the HUD program.

                    university partnerships with HUD

    We are very concerned over the years in trying to follow 
some kind of initiative, and that Omaha housing initiative 
which you have mentioned, it could provide over 1,000 houses 
during the next 2 years. I am interested in this because it is 
the kind of thing you are doing with local universities 
throughout the country. Would you comment on that, Mr. 
Secretary?
    Secretary Cuomo. Yes, Congresswoman, it would be my 
pleasure.
    First, on the lead-based paint, please rest assured we will 
respond to your questions when they are submitted, but know 
that the Department is going to very aggressively pursue its 
obligation and responsibilities on lead paint enforcement.
    On the university partnerships, there are many universities 
in communities all across the Nation which are distressed 
communities, and the university, if they got beyond their own 
walls, their own boundaries, could actually be a tremendous 
community asset. We are working to encourage that. We have a 
program we call the COPC program, which is an investment 
program for the university to be a community development 
anchor, if you will, in that section of town, and that is 
working very well.
    Mrs. Meek. Last question. Will the new manager of public 
housing be able to reach out to all of us around the country? I 
am watching her over there now, one of the females I am 
watching in your group over there. We need help.
    Secretary Cuomo. She is a Floridian, Congresswoman. That is 
why she caught your eye. And, yes, she will be available to 
help.
    Mrs. Meek. Thank you.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    Mr. Frelinghuysen?
    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Mr. Secretary, good afternoon. For a few minutes you had 
surrounded yourself by two gentlemen who had New Jersey roots. 
It is good to see Mr. Keevey again and, former Mayor Cooper, 
good to have you aboard working with the Secretary.
    Mr. Apgar. Sir, I pointed this out last year. I was born 
in----
    Mr. Frelinghuysen. I know you come from some outer land 
somewhere.
    Mr. Apgar. It is still New Jersey.
    Mr. Frelinghuysen. All right. [Laughter.]
    Let me put it this way: The fact that you have a good New 
Jersey contingent doesn't mean you have any immunity. 
[Laughter.]
    Secretary Cuomo. Then you are fired.
    Mr. Apgar. I am actually from Massachusetts. [Laughter.]

                           disability funding

    Mr. Frelinghuysen. You have got two strikes against you.
    Let me agree, first of all, not in any way to curry favor 
with the Chair, but I am one of those who believes in making 
existing programs work before we invent new ones. And unless I 
read the GAO report incorrectly, there are 19 new initiatives--
some may be under other umbrellas--and the price tag is 
somewhere in the area of $700 million. And I think you know, 
Mr. Secretary, from my focus last year, one of the programs 
that I am keenly interested in has to do with housing needs for 
individuals with mental and physical disabilities.
    So I was concerned when I saw your budget, and knowing what 
the President said in his November 28th radio address last 
year, announcing the Section 811 awards, the Section 811 
tenant-based rental assistance, the Section 8 tenant-based 
rental assistance for people with disabilities, dollars being 
added, I may say, by this subcommittee, he went on to thank you 
for your tireless efforts.
    I would think, since the President highlighted this as a 
priority, that you might give more deference in your fiscal 
year budget to these dollars, these needed dollars. And why 
haven't you?
    Secretary Cuomo. Congressman, the specific program, the 811 
program, as you know, is funded at $194 million, which is the 
same level that it was funded at last year.
    Mr. Frelinghuysen. What about Section 8?
    Secretary Cuomo. The Section 8, we are asking for 100,000, 
what is called the incremental vouchers, which is 100,000 above 
and beyond what we now have authorized, which is a significant 
increase.
    Mr. Frelinghuysen. For people with disabilities?
    Secretary Cuomo. No.
    Mr. Frelinghuysen. This is my point. Last year, somehow we 
managed to meld together the needs of people who were elderly 
with the needs of people who have disabilities, and I think we 
all know some older people do have disabilities. I am talking 
about waiting list issues. I am talking about--I am concerned 
that we continue to sort of subordinate this whole waiting list 
issue.
    Secretary Cuomo. Congressman, I understand the point, and 
we discussed this last year and the general parameters.
    We have two approaches in the Department, almost with any 
group or population, be it disabled, be it homeless, be it the 
elderly. Specific targeted programs, which in this case is the 
811 program, which is a targeted program, as you know----
    Mr. Frelinghuysen. And the current level is $194 million.
    Secretary Cuomo. Which is a carryover from the same level 
as last year.
    Mr. Frelinghuysen. So basically it is the same amount as 
last year.
    Secretary Cuomo. In the 811 program, and then the Section 8 
program, which is not targeted to any one population but can be 
used for any of the populations. So the Section 8 vouchers 
would go out to a housing authority, and that housing authority 
could use them to house the disabled, the mentally retarded, 
the seniors, homeless.
    Mr. Frelinghuysen. I think you as Secretary of HUD ought to 
be elevating these populations and giving them more 
recognition. It is bipartisan, the interest in this committee 
shown by not only Chairman Walsh but his predecessor, 
Congressman Lewis and Congressman Stokes. We are all unified in 
this committee in elevating getting attention to the needs of 
individuals with disabilities. And somehow I get the 
perception--and I am certainly not anti-senior--that somehow we 
are subordinating a huge waiting list and other types of 
housing problems that many disabled people are faced with.
    It sort of disappoints me that there is nothing in your 
opening statement or even in the longer summary that recognizes 
that the committee has been unified in a bipartisan way to sort 
of promote housing assistance for people with disabilities. Our 
committee directly worked to get the money that the President 
so proudly announced last November, yet there is zippo in here 
in terms of new dollars.
    Secretary Cuomo. Congressman, I must have miscommunicated 
in my opening statement because I mentioned that the needs of 
the disabled were one of the pressing needs.
    I am going to ask the FHA Commissioner to expand on the 
811, but if I might, just as a general context, because this 
question will come up in a number of contexts. I am 
disappointed also. I wish there were more funds for the 
homeless, for the disabled, for the elderly. We are not meeting 
the need on any of these populations.
    Mr. Frelinghuysen. The Section 8 program is authorized.
    Secretary Cuomo. The Section 8 program is authorized, and 
we are asking for an increase in the Section 8 program which 
would go to benefit people who are disabled also, as well as 
the 811 program. There is no program that we have at HUD that 
will address in and of itself the needs of any of the 
populations. Our 202 program doesn't address the needs of the 
elderly. Our homeless program doesn't address the needs of the 
homeless. And the disabled program, 811, doesn't address the 
full needs of the disabled. We would need multiples of these 
fundings in all of these programs to address the needs.
    Mr. Frelinghuysen. Well, let me go back to my initial 
comments. The issue of--you say there are three new 
initiatives. GAO, which is a fairly reputable bureaucracy, says 
there are 19 new initiatives. There is power behind those 
initiatives. Somebody has identified that there is a crisis out 
there in terms of getting rid of dilapidated buildings. The 
needs of people with disabilities are legend. The ARCs in New 
York and New Jersey areas that you and I have certainly some 
familiarity with, there are huge waiting lists of housing 
needs.
    I would think that at this point in our history we ought to 
be elevating our discussion and pinpointing ways that we can 
get more money in programs directed at all these backlogs of 
needs.

                            section 811 nofa

    Secretary Cuomo. Congressman, just so we are clear, on the 
811 program part of the--the NOFA is out for the 811 funding, 
and part of the 811 funds can be used through the Section 8 
program. For the year 2000, up to 50 percent can be used for 
Section 8 vouchers. That is a change that we made largely at 
the Congressman's suggestion. Last year it was 25 percent, as 
you will recall.
    So within the $194 million, more of that funding can go to 
the Section 8 vouchers, and we have more Section 8 vouchers in 
our budget proposal overall. Does that mean that we have enough 
resources to solve the problem? No.
    Mr. Frelinghuysen. It is not only a resource problem, but 
in the NOFA--and this is a survey that was done of the PHAs--28 
percent did not apply because they didn't have the capacity to 
administer the program; 12 percent did not apply because they 
could not understand HUD's Notice of Funding Availability. We 
discussed this issue last year. You have developed things that 
are so complex that those who are most needy don't have the 
ability, resources, or perhaps I should add sophistication to 
go get these funds even when this committee provides them. And 
that continues to be a problem.
    Is your staff aware of this reaction?
    Secretary Cuomo. Congressman, I hadn't heard those numbers 
before, but they are not surprising to me. These NOFAs are very 
often complicated.
    Mr. Frelinghuysen. The CDC task force came up with 
evaluations.
    Secretary Cuomo. Yes. Maybe one of the people who is with 
us would know the specifics on the CDC task force. But it is 
not surprising to me, Congressman. The NOFAs normally reflect 
the law. We will keep to a minimum the added bells and whistles 
that we add on besides the law. But the laws as they are 
written are often very complicated, and there are many laws 
that must be followed by a Federally funded program. I can tell 
you that from my experience on the outside before I ever came 
to HUD. These are very complicated because the laws are very 
often complicated.
    But the Deputy Assistant Secretary for Public Housing may 
have more familiarity. Have you heard, Deborah, about the CDC 
task force?
    Ms. Vincent. I am not familiar with that report, sir, but I 
will tell you that the NOFA this year that was just published--
--
    Mr. Frelinghuysen. Citizens with Disabilities Housing Task 
Force, are you familiar with their work?
    Ms. Vincent. I am not familiar with their report. I am 
familiar with their work, and we----
    Mr. Frelinghuysen. They have been in to see you, haven't 
they?
    Ms. Vincent. Not to me personally, but I am sure to our 
staff.
    Mr. Frelinghuysen. I thought they had met with the 
Secretary last year. The complexity of the NOFA, besides the 
issue of resources, is a major barrier.
    Ms. Vincent. We have made great attempts to simplify our 
NOFAs within the structure we are given. We are also spending 
more time this year on technical assistance to our customers. 
Finally, we have taken the recommendation of this Committee, 
and non-profits will be able to compete for these funds 
directly as well who have more experience sometimes directly 
with the clientele.
    Mr. Frelinghuysen. We are glad that you took the 
recommendation of the Committee in that regard.
    Thank you, Mr. Chairman. I hope to get back.
    Secretary Cuomo. Congressman, if I might, the NOFAs, 
although I will not say that they are simple, that the 
Department puts out are much more streamlined and legible than 
ever before. We have consolidated them. We put together 
something called the SuperNOFA now which tries to reduce the 
number of overall NOFAs and relates them one to the other so 
you don't have this maze of programs and you can put some of 
them together. We have written them in plain English, we 
brought the groups in to review them, and we have written them 
with the groups.
    So, again, the overall comment is we are not yet at 
management nirvana, but it is much better than it was.
    Mr. Walsh. Thank you, Mr. Frelinghuysen.
    Mr. Knollenberg?
    Mr. Knollenberg. Well, thank you, Mr. Chairman. I wasn't 
ready for that, but I am ready. I didn't hear anybodyon the 
left make a comment.
    Mr. Walsh. Well, I am trying to--I guess I should clarify 
what I am going to try to do. We have three separate hearings, 
today, tomorrow morning, and the afternoon. Everybody should be 
able to get in all the questions they need to get in, so what I 
have done is just taken you in the order that you arrived as 
opposed to the alternating back and forth.
    Mr. Knollenberg. No objection here.
    Mr. Walsh. So those of you who might want to plan your time 
with other subcommittees might keep that in mind. That is what 
I will try to stick to with HUD.

                  insurance investigations/enforcement

    Mr. Knollenberg. Thank you, Mr. Chairman.
    Mr. Secretary, welcome.
    Secretary Cuomo. Thank you.
    Mr. Knollenberg. And all your staff, assistants, et cetera.
    I have to do this, Mrs. Meeks. I have to get into that 
story----
    Mrs. Meeks. I knew you were going to.
    Mr. Knollenberg [continuing]. Of FHIP and FHAP for just a 
brief moment. But I want to cover, Mr. Secretary, as you know 
very, very well, the last 4 years in our committee reports, 
this subcommittee has addressed the use of funds for 
enforcement of the FHIP and FHAP. And repeatedly we pointed out 
that the Fair Housing Act, while expressly applicable to 
landlords, to real estate brokers, and mortgage lenders, it 
makes no mention of property insurers or their business 
practices. And in light of that, we have urged HUD to obviously 
not spend fair housing funds for that purpose.
    Is HUD, to your knowledge, using any funds for activities 
relating to the enforcement of the Fair Housing Act against 
insurers?
    Secretary Cuomo. Congressman Knollenberg, we have taken the 
position of the Congressman very seriously, and we have had 
extensive discussions at the Department about it. We do not 
fund any grantee exclusively for the purpose of insurance 
enforcement. But the Department's position is that insurance is 
a covered activity within the fair housing law, and if a 
complaint is made or a violation is alleged, we do investigate 
it, or one of the agencies that we fund could investigate it.
    Mr. Knollenberg. Well, I appreciate that answer, that 
response, and that was my next question, really, as to what is 
being done to comply and the grants are not used, to the best 
of your knowledge, for the purpose of making investigations.
    Secretary Cuomo. They are not exclusively used for 
insurance investigations or enforcement.
    Mr. Knollenberg. But they are then to some extent?
    Secretary Cuomo. To some extent they are.

                           fair housing audit

    Mr. Knollenberg. All right. Let's get into that.
    There was a nationwide audit that--actually, it was a 
nationwide audit which was a part of last year's bill. There 
was $7.5 million that were appropriated through that bill that 
was to--and I use the word ``audit'' the discrimination of 
housing sales and rental properties. This year I see that they 
are seeking another $7.5 million for ostensibly the same 
purpose, I presume.
    Are any of the funds, to the best of your knowledge, 
intended then to be use in activities aimed at property 
insurers or the investigation of insurers or agents?
    Secretary Cuomo. No, Congressman. The way the audit was 
designed, it was in three phases, 20 cities per phase, a 3-year 
program, $7.5 million per year for 3 years. That is about 
housing discrimination----
    Mr. Knollenberg. Pardon me. Have you selected those 20 
cities?
    Secretary Cuomo. No, sir. But insurance is not a covered 
activity within the audit.
    Mr. Knollenberg. Is there any kind of methodology that you 
are applying to select those cities?
    Secretary Cuomo. Yes. We are currently looking for a 
contractor to run the audit for us. They will design a 
methodology to come up with a random sample. We want to make 
sure we have all different types of cities reflective of the 
overall Nation, and one of the first tasks will be to design 
that methodology.
    But just to be clear, insurance will not be covered within 
that audit.

                         urban institute study

    Mr. Knollenberg. Let me turn to the Urban Institute study 
which I know that you are familiar with. There was apparently--
it was released in November of 1998, a study that was 
conducted, and I believe HUD spent some $650,000 to conduct 
that study through the Urban Institute.
    I guess I would ask you this: The quote--and I am just 
raising this from publications that are available. The quote is 
``found little evidence of a pattern of discrimination by home 
insurance agents.'' In other words, that study, which was 
conducted over a period of time--I believe it was initiated in 
1995--it was over, done, sometime in mid-1998, but it wasn't 
released until November of 1998.
    There are some views by some that the report was buried on 
the agency's Web site until it was discovered by some folks who 
had to kind of search for it to reveal that, in fact, there was 
no real pattern of discrimination in, I believe, four distinct 
areas, and those areas include--it kind of covers the 
waterfront, in quotations, in policy types, replacement 
coverage, optional coverage, and premiums. In fact, the data 
goes on, but it concludes very definitively--I could give you 
more data that would cover the bases even further that there 
was no discrimination noted.
    The question I guess I have for you: Do you think the 
$650,000 was a proper expenditure, and why?
    Secretary Cuomo. I am not familiar with the specific study, 
Congressman, and the Assistant Secretary is here, Eva Plaza, 
and the Deputy Assistant Secretary of Policy Development and 
Research, Xav Briggs, who may have some specific information 
about the Urban Institute study.
    Ms. Plaza. First of all, thank you, Congressman, for that 
question and for the questions related to property insurance. 
We don't believe that this study is representative of property 
insurance discrimination that exists in the country because it 
only studied two major cities, New York City and Phoenix, 
Arizona. I would invite the Deputy Secretary for Policy 
Development and Research to add any comments.
    Mr. Briggs. Thank you, Eva.
    Congressman, if I could just add the context for just a 
moment, the correct figure actually is $560,000, by the way, 
that the Department spent on the Urban Institute study. I 
should just give you a sense of what that study is and is not, 
very briefly.
    It was an over-the-phone methodology, calling up insurers 
to get quotations only, so it didn't progress to the level 
ofactually obtaining policies.
    Mr. Knollenberg. Well, can you tell me this? Can you tell 
me why they withheld the information?
    Mr. Briggs. We did not withhold it, sir. It was a pilot----

                         distribution of study

    Mr. Knollenberg. Can you tell me why the insurance industry 
did not get any reports, but other community groups did?
    Mr. Briggs. Actually, the Department puts out a wide 
variety of reports each year. Some we choose to do press 
releases on. Some we give the contractor the option of 
releasing and doing a press release on. The Urban Institute did 
its own release, and we provided via the Web site----
    Mr. Knollenberg. You weren't involved in the release of 
information? That was the Urban Institute?
    Mr. Briggs. No. We were involved in the release. I am 
saying that in addition to the release that we did, the Urban 
Institute sent out a press release to get a wider sort of all-
call on it, but we wanted it clear that it was a pilot effort.
    Mr. Knollenberg. I have been informed that the insurance 
industry did not receive results of the report. But, again, 
various community groups did. I just find that a little bit 
hard to understand why they wouldn't have completed the circle 
by sending everybody a copy of that report.
    Mr. Briggs. We didn't target either one, sir, either 
industry or groups. We simply made it available----
    Mr. Knollenberg. The insurance industry just didn't get it. 
Representatives from the insurance community didn't get theirs.
    Mr. Briggs. That may well be the case, although I did read 
some news stories from the industry, so I am not aware why they 
wouldn't have obtained the access.
    Mr. Knollenberg. So the record is that you don't know why 
they didn't get copies when others did?
    Mr. Briggs. No, sir. What I am saying is that we made the 
report publicly available to all. We did not target----
    Mr. Knollenberg. On the Web site.
    Mr. Briggs. On the Web site.
    Mr. Knollenberg. That was the only communication that you 
had.
    Mr. Briggs. That is right, because it was a pilot. We 
didn't see it as any sort of conclusive study on the insurance 
industry as a whole, in the way that, for example, the national 
audit that you mentioned will be, an exhaustive study.

                         methodology of reports

    Mr. Knollenberg. Let me just conclude by asking again the 
$650,000 was well spent in your judgment. I saw a head nod of 
the crowd, and yet I am getting the impression that maybe it 
wasn't that good a study because it didn't cover it to the 
extent that you would have liked to have seen it. Not you 
personally, but somebody has spoken--I just heard the words--
that it wasn't general enough, it was too specific to two 
cities, New York and Phoenix.
    So it had to have been designed presumably by the Urban 
Institute. Is that right?
    Mr. Briggs. It was designed by the contractor. Those two 
cities were well studied. If I could just give you a sense of 
what I mean when I say pilot. I don't want to put words in the 
mouth of Assistant Secretary Plaza, but HUD has built this 
field of discrimination testing over 20 years and is 
acknowledged as the leader among the agencies. However, the 
methods for studying realtors, for example, in the way that we 
will in the national audit, have a 20-year history to them.
    The Urban Institute study was to be the pilot to begin to 
develop that methodology, so it was a first step, and a good 
first step.
    Secretary Cuomo. Congressman, if I might just clarify, 
because I think I understand what the Congressman is inferring.
    We often do studies which are only, quote-unquote, pilots 
in that they are only testing a methodology. And they are, 
therefore, of very limited scope because you are testing a 
methodology. Once you come up with a methodology, then you will 
apply it to a larger universe.
    That is what this study sounds like it was. It was a pilot, 
two cities to test the methodology. Once you come up with a 
methodology that works, you can apply it. And it would not be 
unusual but, frankly, would be commonplace--if it was only a 
pilot, we would not largely disseminate the results.
    But if the Congressman's point is you would like to see 
larger dissemination of the report to the insurance industry, 
it would be our pleasure to do that.
    Mr. Knollenberg. I think that would be obvious. I think 
everybody should get a report if there is something being done.
    The other thing I would just say is that the Urban 
Institute is a reputable organization, and whatever activity 
they were conducting I am sure would be done in a fashion that 
would be reflective of what HUD wanted or HUD would have some 
input on the matter. But they would not conduct an 
investigation that wasn't done properly or appropriately.
    So I appreciate your interest in getting in the future 
those kinds of reports out. I think it might be in order to do 
that. And we will just continue to look at this, and I do very 
much appreciate your response to these questions.
    Thank you.
    Secretary Cuomo. Thank you very much, Congressman.
    Mr. Walsh. Thank you.
    Mr. Hobson?

                          management of pha's

    Mr. Hobson. Thank you, Mr. Chairman.
    I have a couple of questions on a little different thing, 
Mr. Secretary. I have two metropolitan housing authorities in 
my district. One seems to run pretty well. The other one, 
frankly, has been kind of a disaster. And I would like to know 
what criteria HUD might use to determine the viability of a 
metropolitan housing authority.
    Frankly, for the MHA that is in trouble, I don't think very 
much was being done until I got in and called the inspector 
general and put a little pressure on her to get out there. And 
I would like to know when does HUD step in, and what kind of 
procedure for a new board, because we are having difficulty in 
that particular community getting the total new board, which I 
think is going to be better than the board we have had, but we 
are having some problem getting HUD to take all the necessary 
actions to make that transition.
    I would just like some comment from you about how that 
works.
    Secretary Cuomo. Congressman, it would be my pleasure. I 
don't have any information on the specific housing authority, 
but let me give you the general, if I might. And then if you 
want some information on the specific situation, either I will 
get the appropriate person here or we will getthe information 
if it is back at the Department.
    One of the areas that we have really focused on is just 
your point, Congressman, the management of public housing. 
There was a rating system called the PHMAP rating where we 
would go out and we would grade every housing authority, and 
based on that grade you were either troubled, if you were 
basically failing, or you were not.
    There were a lot of concerns that the PHMAP system was not 
an accurate rating system. We looked into it and basically 
concluded that those concerns were well founded. For example, 
the PHMAP system rated public housing authorities but didn't 
include a physical inspection. How could you really conclude 
whether or not the housing authority was well run if you didn't 
look at the building? It seemed artificial to me.
    We threw out the old system. We have designed an entirely 
new system which will actually look at the physical condition 
of the building, inspect the physical building, by an outside 
independent contractor, by a set national protocol. They come 
in, they inspect the building; they then inspect the finances.
    Mr. Hobson. That is the most important one.
    Secretary Cuomo. The finances.
    Mr. Hobson. Because you don't know--it is hard to track 
some of this stuff.
    Secretary Cuomo. Right. So we go through the building, we 
go through the finances. We then add a number of management 
criteria, and we then do a, quote-unquote, customer survey 
where we actually ask the residents of the public housing what 
do they think. We take the four components. We add it up. That 
is the new score for that PHA.
    Mr. Hobson. When did you put that into effect?
    Secretary Cuomo. We are just putting it into effect now. It 
is a totally different--it is revolutionary for public housing.
    Mr. Hobson. I wish it had been in effect about a year or so 
ago.
    Secretary Cuomo. Well, it will be in effect as of this 
September, Congressman, and then what we have done is--because 
there was a second problem. Even when you came up with the 
score, what do you do with the troubled housing authorities? We 
didn't have a good answer for that, and what we were doing is 
we would literally take them over, which we didn't have the 
capacity to do, where we would then run local housing 
authorities.
    We have come up with a system that will also handle that. 
If you fail, you get a period of time to resolve it. If you 
don't, you go into sort of an intensive care unit at HUD for a 
limited period of time, and then we would recommend the housing 
authority be taken over most likely by a judicially appointed 
receiver.
    The point there is if it not going to work and it hasn't 
worked for 20 years, try something new, because just continuing 
the same isn't working. But the new system is going to be in 
place and the new management.

                         urban fraud initiative

    Mr. Hobson. Thank you. I have one other quick question, if 
I could, Mr. Chairman.
    As a result of this, I have been supportive of the Office 
of Inspector General, both in its current mission and the 
housing fraud initiative which Congress funded recently. In 
fact, I am looking forward to the OIG's activities in the 
housing fraud area. However, I see that HUD's fiscal year 2000 
budget request is $77.8 million for the OIG as compared to $82 
million that was authorized in fiscal year 1999.
    Is this reduced amount sufficient to carry out the OIG 
statutory mandate as well as to implement the housing fraud 
initiative? If not, what level would be necessary to satisfy 
these requirements? And, frankly, I will give you one other 
question I would like to know. When was the inspector general's 
office notified by HUD of this hearing today?
    Secretary Cuomo. Of this hearing? Let me do the first one 
first, and then I will refer to the CFO who may know about the 
specific budget numbers.
    First, Congressman, on the urban fraud initiative, I also 
support fighting waste, fraud, and abuse wherever it exists. No 
Secretary of the Department has been more aggressive than I 
have--the whole set-up of the Enforcement Center, the FBI 
detailee, zero tolerance for waste, fraud, and abuse, the first 
Assessment Center, the first Enforcement Center. So we are very 
aggressive on waste, fraud, and abuse.
    However, at the same time, I am anxious about targeted 
investigations, and we worked with this committee last year, 
Congresswoman Meek, Congressman Stokes, on how the cities were 
selected. Did you have some basis? Was there any political or 
racial motivation in the selection?
    Obviously everybody wants to confront waste, fraud, and 
abuse. No one wants politically targeted investigations or 
racially targeted investigations. And what criteria did we use 
to pick places to investigate? Before we spend taxpayers' money 
and send out law enforcement agents, what was the basis for 
selection? Was it fair? Was it defensible?
    We worked with this Committee. The initial decisions by the 
IG were thrown out, and we came up with new selections, and the 
initiative is going forward, and we support that.

                               oig budget

    As far as the overall budget, I will ask the CFO to respond 
to what the IG's budget is this year.
    Mr. Keevey. A couple of points, Mr. Congressman. We did not 
fund the IG for all of the request that was made. That total 
request asked in most program offices were not funded at the 
level requested by the specific programs.
    Mr. Hobson. But it is less than last year, right?
    Mr. Keevey. Pardon?
    Mr. Hobson. Less than previous?
    Mr. Keevey. Well, a couple other points. In the current 
year, the year in which they received the monies from the 
Congress, HUD is asking for $7 million to be carried over into 
the year 2000, meaning that the IG will not be expending that 
amount of money in this year. We have built that money into the 
year 2000 budget.
    So when you take out the $7 million, in effect, that they 
will not be spending this year and give it to them in the year 
2000, the actual spending power for 2000 will be greater than 
1999.
    It still represents less than the Inspector General 
requested, but in terms of dollars available, there will be 
more dollars expendable in the year 2000 than in 1999.
    Secretary Cuomo. Congressman, you should know----
    Mr. Hobson. Pardon?
    Secretary Cuomo. You should know, just so we are clear, 
without exception--every Assistant Secretary and office asked 
for more money than they received in this last budget go-round. 
They asked for more money for the 811 program, more money for 
the homeless program, so every officeasked for more than they 
actually got.
    Mr. Hobson. You know something, Mr. Secretary? That is true 
in about every agency.
    Secretary Cuomo. I know. [Laughter.]
    Mr. Hobson. Nobody seems to ask for less. [Laughter.]
    Does anybody want to answer the last part?
    Secretary Cuomo. I don't know how the notifications of the 
meeting was held. I can find out.
    Mr. Hobson. If you will submit that, I would appreciate it.
    I will suspend for this round. Thank you.
    Mr. Walsh. Thank you.
    Mr. Mollohan?

                    operating subsidies pfs funding

    Mr. Mollohan. Thank you, Mr. Chairman, Mr. Secretary.
    Secretary Cuomo. A pleasure.
    Mr. Mollohan. Mr. Secretary, there is a bit of angst out 
there among the community, your big constituent groups, which 
has been expressed a number of different ways in correspondence 
to me. With regard to the public housing operating subsidies, 
one letter wrote of, and I quote, a ``mean turn of events for 
operating subsidies for fiscal year 1999.''
    Speaking to that concern, last year HUD stated that the 
requested appropriation of $2.818 billion for the public 
housing operating subsidies would be sufficient to provide 
housing authorities with 100 percent of the amount specified by 
the performance funding system formula for fiscal year 1999. 
And I believe that amount was actually appropriated.
    Now I understand that HUD has issued a notice stating that 
the housing authorities will receive only 92.5 percent of PFS 
amount in fiscal year 1999.
    Are both of those correct? You represented that it would be 
sufficient, and now you are sending out notifications 
indicating that it might not be.
    Secretary Cuomo. I believe that is correct, Congressman. 
There are two things. First, there was a differentiation last 
year on what the anticipated expected operating subsidy was and 
what it actually turned out to be. There was also a question--
it reminds me of the GAO high risk. Exactly what is it? What is 
the definition of the operating subsidy?
    We are going to redo the entire formula this year in the 
negotiated rulemaking session that is going to begin this 
month, actually. So we will come up with what the operating 
subsidy number actually is because it is a very complicated 
formula, and it bounces around quite a bit.
    Last year, as it turns out, we were at 92 percent. I 
believe that is correct--unless I am corrected--and this year 
by the now adjusted formula, we believe we are at 100 percent 
in the request.
    Mr. Mollohan. When you say this year, you are talking about 
fiscal year 2000.
    Secretary Cuomo. Yes, 2000.
    Mr. Mollohan. Say that again. On what are you basing your 
judgment that your request represents 100 percent of the need?
    Secretary Cuomo. By our calculation of what we believe the 
operating subsidies will be. By the current formula, we believe 
in the budget we are discussing today for 2000 that we are at 
100 percent.
    Mr. Mollohan. Well, you don't have the new formula in 
place, do you?
    Secretary Cuomo. No. By the current formula.
    Mr. Mollohan. And is the current formula the one you used 
last year to compute operating subsidies?
    Secretary Cuomo. Yes, yes.
    Mr. Mollohan. So it was wrong last year, was it not?
    Secretary Cuomo. Well, there are variables that go into the 
formula. You anticipate what the utility rates are going to be, 
for example, what the----
    Mr. Mollohan. You think they would be better with the 
variables. Is that correct?
    Secretary Cuomo. It could be higher or lower. Last year it 
turns out to be lower.
    Mr. Mollohan. At the same time you are redoing the formula.
    Secretary Cuomo. It is a 25-year-old formula. We are going 
to redo it this month. It is one of the issues we discussed 
with the committee last year.
    Mr. Mollohan. So, to the extent the old formula didn't work 
last year, you may have problems this year?
    Secretary Cuomo. No, Congressman. If I might, just so we 
are clear. When we did the calculation last year, it was 100 
percent because we estimated the utility costs. It turned out 
the utility costs in public housing were 40 percent higher than 
we--4 percent higher than we expected. That 4 percent threw off 
the calculation, and that is why there was a differential.
    Mr. Mollohan. Well, they are asking--okay. You are 
reviewing it. You are hoping to get a better number next year, 
is what you are telling us?
    Secretary Cuomo. Yes, sir.

                      impact of shortfall on pha's

    Mr. Mollohan. Could you give us some appreciation of your 
attitude toward the impact of these funding shortfalls on the 
housing authority operations? They are very concerned about it.
    Secretary Cuomo. Yes. First I would like----
    Mr. Mollohan. They are asking us for a supplemental to 
address the problem.
    Secretary Cuomo. Yes, I know. We were involved in those 
discussions, Congressman.
    It is not easy--and I hate to give the same response to the 
Committee over and over, but almost any of these programs you 
can make the same claim, which is they need more money. Public 
housing needs more money. Congressman Frelinghuysen is right; 
the disabled need more money. Section 8 needs more money. The 
IG wanted more money. There is not enough funding to meet the 
need. That is the essential problem in all of these programs 
and the overall mission of HUD.
    So they were at 92 percent of actual operating. That means 
they had to figure out a way to handle the 8 percent.They could 
cut staff. They could make some resource allocation differences. They 
could save some money. But it is not easy to make the ends meet on that 
basis.
    By the way, Congressman, last year was not an anomaly 
either. Many years they weren't at 100 percent.
    Mr. Mollohan. How do you think we ought to address this? Do 
you think we ought to address the shortfall by housing 
authorities making adjustments in their operations? Do you 
think we ought to address the shortfall in a supplemental 
appropriation, making it up next year? What do you think?

                     negotiated rulemaking process

    Secretary Cuomo. I would be curious as we go through this, 
the next process, the negotiated rulemaking process, discussing 
what the operating subsidies should be, what should be in the 
formula, what is not in the formula.
    Mr. Mollohan. So you would like to have a more accurate 
number or a more dependable number before you----
    Secretary Cuomo. Yes.
    Mr. Mollohan [continuing]. Venture an opinion on it?
    Secretary Cuomo. Yes, because one thing I have learned, 
Congressman, there is no ``they.'' Public housing authorities, 
there is a range of sizes, a range of conditions. Some are 
actually making money. They have income-generating activities. 
So do they really need 100 percent?
    Mr. Mollohan. When is this rulemaking process going to be 
over, Mr. Secretary?
    Secretary Cuomo. It commences in March. I don't know when 
it is planned to be over.
    Mr. Mollohan. When do you expect to have a new formula 
fashioned?
    Secretary Cuomo. By October, we hope, fingers crossed, for 
it to be over. Negotiated rulemaking--we went through it a 
couple of times before--can be a very laborious process, but we 
commence it in March. We would hope it could be over in 
October.
    Mr. Mollohan. Are you thinking about whether you would 
support or not support a supplemental request? Is that 
something you would want to----
    Secretary Cuomo. That is something we would like to 
consider as we go through this negotiated rulemaking process.

                renewal of expiring section 8 contracts

    Mr. Mollohan. With regard to the housing certificate funds, 
Mr. Secretary, the outyear estimates in the President's budget 
project appropriations of $11.2 billion for the certificate 
fund for fiscal year 2001. Would that amount be sufficient to 
renew all of the Section 8 contracts expiring in 2001?
    Secretary Cuomo. As our budget is designed, Congressman, we 
believe that we can cover all the outyears contained within the 
budget. Every voucher historically that has been issued has 
been renewed certainly in the Clinton administration, I believe 
since the program was founded. And we fully expect that that is 
going to continue to be the case.
    Mr. Mollohan. Do you expect $11.2 billion to be sufficient 
to renew all of the contracts that expire in 2001?
    Secretary Cuomo. I will ask the CFO to respond to the 
question, if it pleases the Congressman.
    Mr. Mollohan. Sure.
    Mr. Keevey. A couple of points, Mr. Congressman. One, it is 
our policy to renew all the contracts. The outyear, I have to 
say, computations were created by the Office of Management and 
Budget.
    Mr. Mollohan. They are assuming some non-renewals?
    Mr. Keevey. They are assuming that within the overall 
budget as it evolves during the negotiation process with the 
Congress, there are some macro budget issues that need to be 
resolved, specifically revolving around surpluses, including 
the solution to Social Security. So their belief is that as 
those negotiations are being made and successful conclusions 
are rendered, the dollars that are necessary to fully fund the 
certificate fund will be made available.
    Mr. Mollohan. Okay.
    Mr. Keevey. That is the best answer that we can give you at 
the moment.
    Mr. Mollohan. Well, we will follow up.
    The outyear estimates in the President's budget seem to 
show outlays for Section 8 actually declining year after year, 
starting in 2001. For example, they decline from $16.4 billion 
in 2000 to $14.9 billion in 2001 to $13.1 billion in 2002. Let 
us just assume my figures are correct. I may be putting you on 
the spot to ask you that.
    Mr. Keevey. I think----
    Mr. Mollohan. You think they are?
    Mr. Keevey. I think you are basically following up on the 
last question, Mr. Congressman, because most of that decrease 
in outlays and decreases in the budget authority relates to 
Section 8. So the logic you are following is correct. My answer 
would basically be the same back to you: that as the budget 
evolves during the congressional review, that differential will 
need to be addressed, because it is our policy to fully fund 
all of the Section 8 renewals.
    Mr. Mollohan. Okay. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you, Alan.
    Bud Cramer, please?

                       community builders/fellows

    Mr. Cramer. Thank you, Mr. Chairman.
    Mr. Secretary, welcome to the committee, and I congratulate 
you on the excellent job you are doing. You preside over a very 
challenging bureaucracy.
    Secretary Cuomo. Thank you very much.
    Mr. Cramer. You have taken that bureaucracy on and made 
significant progress, and that doesn't happen very quickly.
    I want to ask you about the community builders fellows 
program. I believe in your testimony you state that you have 
hired and trained 400 community builders. How many do you 
ultimately intend on hiring and training? What role will they 
play? How do you assess their effectiveness? And how do you 
envision those builders, the role that they will play in 
accomplishing HUD's overall goals and objectives?
    Secretary Cuomo. A pleasure, Congressman. The Community 
Builders are an essential part of the change in the attitude 
and posture of HUD. One of the complaints that you will hear 
about HUD almost from any city, any not-for-profit, any housing 
authority is HUD is too regulatory, they are too bureaucratic, 
they are very good at saying no, they are not that good at 
saying yes, and they are not that good at telling you how to 
get to yes. All these complicated programs, 811, 202, HOME 
program, how do they work? How do you put them together?
    The Department never saw that as an essential function, and 
that then communicated, and HUD was very often an obstacle to 
housing and community development rather than a partner in it. 
We want to change that orientation. So we clarified the roles 
of HUD, and we say that the employees inHUD now wear one of two 
hats. You are either a public trust officer, which is the traditional 
regulatory role, making sure the money goes where it is supposed to go, 
do the monitoring, dot every ``i,'' cross every ``t.'' That is the 
public trust officer function.
    But at the same time, there is a second function which is 
liaisoning with the community, liaisoning with the elected 
officials to make the programs work. We call those community 
builders. That is a job description. And you are either a 
community builder, facilitator, liaison, or you are a public 
trust officer.
    You could think about it in shorthand in terms of Mr. 
Inside, Mr. Outside, or Ms. Inside, Ms. Outside.
    We have about 820 people on a workforce of 9,300 who will 
be designated as ``Community Builders.'' They are the liaison 
function.
    Mr. Cramer. So you are halfway there?
    Secretary Cuomo. We have within the 820--you asked about 
the community builder fellows, which are a specific sub-group 
of the 820 who are recently hired people from the outside, 
because we also wanted to get some new talent into the 
Department. We will have about 460 fellows, total 820 community 
builders.

                                hope vi

    Mr. Cramer. I see. I want to switch over to the HOPE VI 
grants. I have some concerns about the HOPE VI grants. It seems 
to me that they are going to larger cities, urban areas. Will 
these funds be made available for small- and medium-size 
cities? I don't believe any jurisdiction or city in my State 
has been approved for a HOPE VI grant.
    Secretary Cuomo. What happened with the HOPE VI program 
initially, Congressman, it was by design, by legislative 
mandate, it was driven towards the larger cities, the most 
severely distressed public housing. So it was pushed towards 
the larger housing authorities in the initial rounds.
    We have been working with the program to get to other 
housing authorities besides just the large ones. Deborah 
Vincent has been doing an extraordinary job, along with Elinor 
Bacon, who runs the HOPE VI program, but, Deborah, if you 
could, give the Congressman a sense of the recent awardees and 
how we are moving towards the medium-sized and smaller housing 
authorities.
    Ms. Vincent. Yes, thank you. This is a competitive program, 
as you are aware, and there are points given for the most 
severely distressed housing. There are housing agencies across 
the country, regardless of the size of the city, that have 
units that fall into that category. So this most recent award, 
we saw awards made in cities such as Lexington, Kentucky, as 
well as the Chicago areas with very large housing.
    Mr. Cramer. When were those awards made?
    Ms. Vincent. Those were made in--I believe we did that 
announcement just in October of this past year.
    Mr. Cramer. Okay.
    Ms. Vincent. August. I am sorry. August of 1998.
    Mr. Cramer. And your next awards?
    Ms. Vincent. The Notice of Funding Availability is out 
right now as part of our SuperNOFA, and they will be 
competitively judged and awarded approximately the same time, 
we anticipate.
    Mr. Cramer. Do you know how many of those will be awarded? 
If you just said it, I wasn't listening.
    Ms. Vincent. How many will be awarded? We anticipate around 
the same level as last year, which was approximately 26 awards.
    Mr. Cramer. Thank you. Thank you, Mr. Secretary.
    Mr. Walsh. Thank you, Mr. Cramer.
    Mrs. Northup?

             washington post article on affordable housing

    Mrs. Northup. Yes, thank you, Mr. Secretary. I am new to 
this committee and struggling to get my head above water and 
put all the pieces in place.
    Secretary Cuomo. I am old and struggling, Congresswoman.
    Mrs. Northup. I also have a concern about HUD playing a 
two-part game: number one, sort of blaming for not enough 
money, not enough going into low-income housing; yet, then the 
requests all come from how do we spend money in entirely 
different ways. We are here to get your advice, your direction, 
your insight. We are going to try to allocate the money. But 
when it changes or when criticism comes from one hand, when you 
ask for money from the other hand, it is a little difficult.
    You know, I have an article here. I will start with the 
article because it was 2 days ago in the Washington Post, and 
there are quotes from your agency. And, in particular, the 
writer said, ``The HUD report blames the Republican Congress 
for freezing housing aid in 1996.'' This is for the rising 
number of people that can't find affordable housing, affordable 
apartments. And I wondered if you specifically mentioned the 
Republican Congress when you talked to this reporter.
    Secretary Cuomo. I do not believe so, Congresswoman. I can 
get the exact report for you, and we can go through it.
    Mrs. Northup. Well, I have the report, but I was talking 
about the actual briefing on it, and the reporter--I haven't 
had a chance to talk to the Washington Post reporter, but I 
just wondered who briefed the reporter.
    Secretary Cuomo. I can find out for you specifically, 
Congresswoman. I doubt anyone would say ``the Republican 
Congress,'' but it was referring to a period of time where the 
Congress was controlled by Republicans.
    [The information on HUD briefing on rental housing crisis 
follows:]

                 HUD Briefing on Rental Housing Crisis

    The annual report to Congress, ``Waiting in Vain: An Update 
on America's Rental Housing Crisis'', was published in March, 
1999. Essentially, the report documents the ongoing shortage of 
affordable housing and does not attribute this shortfall to any 
political party. There was no formal briefing by a HUD 
representative to a Washington Post reporter on the shortfall 
problem.

    Mrs. Northup. Well, actually, when I look at this, I see 
that the first large cuts actually came while the Congress was 
still in the hands of the other party, that, in fact, the first 
cut came in the 1994 appropriations bills that applied to 1995. 
So that, of course, wouldn't be the Republican Congress. That 
would be actually the reflection of what the Democratic 
Congress thought was the proper place to save money. Am I right 
about that?
    Secretary Cuomo. That is not my understanding.
    Mrs. Northup. Well, I have the CRS report, and it shows 
that it went from $24 billion, I guess this is--it doesn't have 
the right number of zeroes on it, but I think it is $24 billion 
to $20 billion.
    Secretary Cuomo. Someone is--I want to check, 
Congresswoman. I think you may be incorrect that those funds 
were actually rescinded by the following Congress. And that is 
why the numbers actually went down, because they were rescinded 
funds.
    Mrs. Northup. But, in fact, by the year 1998 and 1999, the 
resources have increased pretty dramatically.
    Secretary Cuomo. Yes, the chart to your right, 
Congresswoman, tells the story that almost every year, 
historically, there was new production of affordable housing, 
either through the Section 8 program or the public housing 
program. And that goes back literally to the point that 
theybegan taking numbers.
    When you get to 1996, 1997, 1998, you see the number go to 
a net negative for the first time in housing history. That is 
what we are referring to. Last year, 1999, the number would go 
back up again, and that is what I was saying to the Chairman in 
the opening comments. Last year we went back into the housing 
business. But we had a 3-, 4-year hiatus where we were in the 
negative numbers, Congresswoman, across the board, and that is 
one of the reasons why we are seeing the spike in the number of 
people who need housing now.
    The business I am in is very simple. That is probably why I 
am the Secretary. The number of people who need affordable 
housing goes up when you produce fewer units. And we just went 
through a period where we produced fewer units, the fewest 
units in history.
    Mrs. Northup. Well, let me continue and say since all 
through this report that I have you are referring to the need 
for Section 8 and for public housing funds, and yet I have a 
whole list here of new programs that you want to start that, in 
fact, take away other programs. We know what the caps are. We 
know what we are looking at. But they take away from the total 
amount of money that you would have. Either you have started 
new programs or you have carved out earmarks out of the total 
amount of money that is available for certain programs.
    Secretary Cuomo. Congresswoman, I would like to see the 
chart because it is just not accurate. The core programs all go 
up including Section 8 goes up. We want more, not less, 100,000 
total new Section 8 vouchers. We also have a limited number of, 
quote-unquote, new initiatives which are not--they are needs 
that communities have, and they are asking for us to be 
responsive. They are asking us to----

               forging partnerships with new initiatives

    Mrs. Northup. Well, let me just go to those before my time 
runs out. One of them, the new needs that you have here, is the 
regional connections initiative. You have requested $50 million 
for the regional connections initiative, and you use as the 
example in your justification the forged cooperation in my 
district in Louisville, Kentucky. And it is the most outrageous 
example. It was done 10 years ago. Ten years ago. I believe 
that is what you are referring to.
    It was done by the State legislatures and the county judge 
and the mayor. I don't think anybody in my community is aware 
that you all played any role in that at all. And I guess my 
question--and I will tell you, it was a very difficult thing 
for Louisville and Jefferson County to go through, and it 
couldn't have been done by the Federal Government because it 
required the buy-in. It required the buy-in of the current 
aldermen and the county commissioners. It required the buy-in 
of the local State representatives. It required a change in the 
State law. I was in the General Assembly when we did it. And I 
have trouble understanding why you would decide that you need 
$50 million to come into my community and could have done that 
any better unless I misunderstand what you are talking about 
here.
    Secretary Cuomo. Well, maybe we miscommunicated, 
Congresswoman. What we are trying to do is precisely what 
Louisville and Jefferson did. It is not a Federal role. It is 
facilitating, incentivizing city-county coordination. Cities--
--
    Mrs. Northup. In housing? Is it just housing?
    Secretary Cuomo. No, no, no, no. It is a joint effort. We 
are trying to get cities and counties to work together. You 
look at the number on what is happening to cities almost across 
the board. Cities are getting smaller, poorer, and the poverty 
is more concentrated.
    Cities are on the decline as sustainable units. The 
surrounding counties are on the incline. Too many of them are 
at loggerheads, and the county growth has been at the cost of 
the city. We are trying to say, you know what, city, county, we 
have to start to plan together. It is not the city separate 
from the county. We have to start to plan together, be it 
housing, be it education, be it economic development. And we 
want to start to facilitate that.
    They will say, Congresswoman, your exact point, which is 
the Federal Government has been a hindrance. All the Federal 
programs work within the city boundary or within the county 
boundary. And they happen to be correct. We want to change that 
template, change that planning template, that governance 
template, and promote the regional cooperation. We could not do 
it. They would have to do it. But we want to give them a 
carrot, an incentive to do that type of thing.
    Mrs. Northup. We haven't finished going through this, and 
there are people on both sides of the aisle, both parties, that 
are city and county that have very diverse feelings about what 
departments we should combine and what departments we can't. We 
passed in the Kentucky General Assembly in 1988 a format for 
that. We are looking to have a grass-roots initiative again.
    If what I hear is correct, you want to get your hand in 
there and stir the pot or try to facilitate.
    Secretary Cuomo. No, to incentivize. I will give you an 
example.
    Mrs. Northup. It seems as if you know where they should go.
    Secretary Cuomo. No, I have no idea, but I know that I 
don't know, and I would never presume to know. But how about 
this? How about if we said here is an incentive, we now require 
the city to do a full plan for HUD, which is the current law. 
The city has to do a comprehensive 5-year plan for all its 
needs: housing, economic development, community development. 
The county has to do a separate plan, same thing: housing, 
economic development, community development, often 
transportation. Two separate plans as if they were two separate 
worlds. That is the current law.
    How about if we said we will give you a planning grant if 
you come in with one plan? You pick the plan or do it however 
you want to do it, but I understand you have separate planning 
departments and separate grants. We will give you a planning 
grant to come in with one plan.
    Mrs. Northup. So combine your authorities.
    Secretary Cuomo. No. Do it however you want to do it. Just 
talk to each other and coordinate to the extent you want to 
coordinate. But we encourage talking and coordination.
    Mrs. Northup. Well, we all encourage talking and 
coordination.
    Secretary Cuomo. Not HUD, not the Federal Government. We 
reinforce the boundaries.
    Mrs. Northup. If all the regional connections were in 
housing areas, I would be very eager to hear what you would do 
and how it would better serve the people that live in my 
district. But from reading your description of it, it seemsthat 
you are not just interested in housing, and I specifically asked that 
question, whether you are just talking about housing.
    But is it also going to affect whether we combine our 
police departments, whether we are going to have our paid fire 
departments that are in the city take over the volunteer fire 
departments? You have to be served by professional 
firefighters.
    Secretary Cuomo. No, Congresswoman, that is----
    Mrs. Northup. Okay.
    Secretary Cuomo. We require a consolidated plan, it applies 
only to our programs. Primarily our programs are housing 
programs. We have some, quote-unquote, community development 
programs: a CDBG program, we have economic development 
programs. But primarily we are housing department.
    The plans are primarily housing plans with community 
development, CDBG activities, and that was the example that I 
was giving you. But right now what we are saying to Louisville 
is you give us the plan separate from the county, and that is 
what we have done since the Department was founded. And I 
believe that has gone to reinforce the division between the two 
totally separate planning processes. And when you now tell 
them, well, try to coordinate, it runs contrary to all the 
regulations, and we were trying to incentivize that regional 
approach.
    The parts of the country that are doing best are the parts 
of the country that have more regional approaches, more city 
and county coordination. They are the strongest parts of the 
country, and we are trying to encourage that.
    Mrs. Northup. I know my time is up, Mr. Chairman.
    Mr. Walsh. The Secretary will be back tomorrow, so we will 
all have another opportunity.
    Mr. Price?

                       delay in issuing home nofa

    Mr. Price. Thank you, Mr. Chairman.
    Mr. Secretary, it is a pleasure to welcome you once again 
before our subcommittee. Your budget is probably the most 
complex one we consider in this subcommittee. There is a great 
breadth of programs, financing for low- and middle-income 
families, through FHA, construction monies, Section 811, other 
programs, supportive services for the homeless, basic housing 
through Section 8, urban development money, and so forth and so 
on. We all know that it is a dizzying array of initiatives to 
keep track of, but I want to raise a question with you today 
about one program that may have fallen through the cracks, or 
at least I want to assure myself that it has not.
    In the fiscal year 1998 funding bill, I worked very hard to 
have included in the HOME program a secondary market 
demonstration program. This program would allow three 
organizations--it was sufficiently funded to allow three 
organizations with experience in managing loan portfolios to 
purchase from banks portfolios of loans made to low-wealth 
borrowers.
    During last year's hearing when I asked you whether we 
should be in business with the three grantees this fall--that 
is the fall of 1998--you answered yes, we should. When I asked 
you when the Notice of Funding Availability would be issued, 
you said 5 or 6 weeks away. Yet as far as I know, that notice 
has yet to be published in the Federal Register, and we are not 
up and running. We are far from it.
    By the way, since enacting this legislation, the Ford 
Foundation has entered into a partnership in my district with 
the Center for Community Self-Help in Durham and with Fannie 
Mae to buy $2 billion in a similarly styled program. So the 
non-profit sector has apparently left HUD in the dust on this, 
and I want to know what the hold-up has been.
    Can you now give us a date certain when you will announce 
the funding for this program? And can you explain to us when we 
approve funding for a new HUD initiative that it takes over a 
year and a half to produce the regulations for a very simple, 
very straightforward $10 million program?
    Secretary Cuomo. Congressman, I would have liked to be able 
to inform this Committee that we moved the NOFA, Notice of 
Funding Availabilty, sooner. The Notice of Funding Availability 
is out now, literally as we speak. It is published today. So 
that is the specific answer.
    I wish we had done it sooner. Our normal cycle is we put 
out a Notice of Funding Availability within the year, several 
months after the appropriation for that year.
    Mr. Price. What created the slippage? It was going to be 
out, we understood last year, a month or so later.
    Secretary Cuomo. Yes. I would refer the question, with the 
Congressman's permission, to the Assistant Secretary for FHA.
    Mr. Apgar. Well, first of all, we should say the obvious, 
that your interest in this topic stimulated a lot of interest 
in this topic, and so we welcome that the Ford Foundation and 
others came in with resources.
    This low-wealth borrowing issue in the non-conforming loan 
has plagued the community development movement for some time. 
This effort to move that funding into the secondary market is 
critical. We put out an advanced notice of proposed funding 
last summer and got lots of comments on how to make this 
program better. We embedded those program comments into our 
NOFA to ensure that the program would work effectively.
    For example, there were a lot of comments of exactly what 
we mean by low wealth and how to calculate that. At that time, 
of course, there were other groups around like the Ford 
Foundation who were beginning to tackle those issues, and we 
wanted to make sure that our programs supported and 
complemented these other initiatives. So we built on that 
experience and put together a NOFA, and it is now out. Our 
expectation is that we will be taking applications for 60 days, 
and the money will be in the field by June or July.
    Mr. Price. How complicated is this notice? You say you put 
out--what do you call it, the preliminary notice?
    Mr. Apgar. Yes. In August, we announced our intention to 
fund this initiative, which is a common practice. We received 
commentary back on critical issues of how to define low wealth 
and other parameters of the program and, based on that 
commentary, put together a NOFA that is out today.
    Mr. Price. So the NOFA is out today.
    Mr. Apgar. It is.
    Mr. Price. And what happens next?
    Mr. Apgar. It will be out for 60 days. We will receive 
applications over that time period. We will review the 
applications with an expectation that funding awards will be 
made in late June or early July.
    Secretary Cuomo. Congressman, just so we can be clear, this 
was not the run-of-the-mill initiative, as you know, and that 
is what made it so special, the creativity. There wasan added 
step here where we had to go out for a comment to the public in advance 
of the publication of the NOFA to make sure we would get the right 
bidders and hit the right target that the law was drafted to reach.
    We received numerous comments, public comments, and then 
had to take those comments into consideration in the writing of 
the NOFA. And that was the added step.
    Mr. Price. Well, I don't want to rehash this. I mainly want 
to move ahead with this and get this program launched. But it 
is a puzzle to me why, if the process was going to be so 
complex and so protracted, why that wasn't evident when you 
were asked the question last year about the timetable, because 
at that point you didn't seem to anticipate any delay in the 
NOFA past 5 or 6 weeks.
    Secretary Cuomo. No, Congressman. I believe the change was 
when they went back to write the NOFA, given the concepts of 
low wealth and what did that mean and who could apply, the 
decision was made to go out for a public comment period. That 
public comment period then lengthened the amount of time it 
took to get the NOFA out. If we didn't go for public comment, 
that would have been the publication date. They would have just 
skipped the public comment period.
    Mr. Price. And so you determined that that kind of public 
comment period would be necessary after your appearance here?
    Secretary Cuomo. Yes.

                    public comment period for nofas

    Mr. Price. All right. Well, we will move ahead now, and we 
will hope for a prompt adherence to that timetable you just 
described and hope that this program can be successfully 
launched. I think it has huge potential and will potentially 
serve as an example for the non-profit sector and for many 
others.
    Mr. Apgar. It already has.
    Secretary Cuomo. And, Congressman, just so we are clear, I 
understand the Congressman's frustration. This is a tension 
that we face at the Department. By law, there is something 
called the HUD Reform Act, which is very limiting as to what 
communications we can have with outside parties about programs 
and NOFAs, et cetera. Under this law, you can't just call up 
someone and say, by the way, how do you think the best way to 
do this is?
    The only way to get public comment is by going through an 
official public comment period, which means you have to publish 
a register. You have to leave it open for a certain period of 
time. They have to send in the comments. Then you have to take 
them into consideration. That is a very exhaustive time period, 
and we often debate the benefits of public comment versus the 
cost, the time cost. And obviously public comment is very 
important, but on the other hand, you want to get things going. 
And that is a tension that we have to balance.
    In this case, they decided to go for the public comment to 
make sure everyone knew what we were talking about, and that 
does eat up a number of months, and it did here. And I 
understand the Congressman's frustration, but we will move with 
all due haste now.
    Mr. Price. All right. We will leave it at that. I do not 
understand the complexity in this case of a very simple and 
straightforward and modest program. It seemed to me at this 
time last year we were on a fast track, we should be on a fast 
track, and I am glad to hear that we can now get going.
    Mr. Chairman, do I have any time remaining?
    Mr. Walsh. Well, everybody is taking somewhere in the 
neighborhood of 10 minutes, and if that were the case, you have 
another 2.
    Mr. Price. All right. [Laughter.]

                         cdbg--disaster funding

    I will be very succinct about this. It has to do with the 
disaster recovery. You know, there has been a lot of debate on 
this subcommittee about the appropriateness of using CDBG 
monies for disaster recovery. But as you know, last year's 
omnibus bill did include $250 million for this purpose, and in 
addition, I believe HUD still has funds from last year's 
supplemental appropriations bills for this purpose.
    North Carolina is effectively using CDBG monies received 
after Hurricane Fran in concert with FEMA funds to accelerate 
the movement of citizens out of flood-prone areas.
    I am aware the Senate Appropriations Committee in this 
year's supplemental is trying to transfer some or all of HUD's 
CDBG disaster assistance funds over to FEMA.
    I wonder if you can confirm for us exactly what is 
happening to these funds, to these CDBG funds in your agency. 
Can you tell us, secondly, why it makes a difference, or if it 
makes a difference, for these funds to be coming from HUD and 
not from FEMA?
    Secretary Cuomo. Congressman, the reason we got involved 
with the disaster recovery through CDBG in the first place was 
CDBG is a very flexible funding stream, one of the most 
flexible Federal funding streams, and met more local needs than 
the FEMA eligibility activities.
    One of the first times we used CDBG was in North Dakota, 
Red River flood, because CDBG was so flexible. And that is 
still the case. The eligibility of activities under CDBG is 
very broad, and the local governments know how to use CDBG 
because they use it on an ongoing basis, and they are familiar 
with the regulatory framework. It is the same people. So there 
are a lot of administrative reasons why CDBG works.
    The immediate discussion is possibly rescinding the HUD 
money to transfer it to FEMA for FEMA's disposition. If that is 
the case, it is my understanding that you would lose the 
flexibility afforded under the CDBG funds when it is 
transferred to FEMA.
    Mr. Price. For example, when you say flexibility, 
concretely what might be funded under CDBG that would be 
excluded under FEMA's guidelines?
    Secretary Cuomo. I am not proficient with FEMA's 
guidelines, but CDBG can fund almost any activity as long as it 
is related to helping low-, moderate-income people in slum or 
blight or for the national interest. It is a very flexible 
funding stream.
    There has been discussion about the time it has taken us to 
allocate the funds, and there was actually an interesting 
differentiation that we have discovered here. FEMA allocates by 
funds in hand to disasters that have occurred. In other words, 
shorthand, FEMA allocates whatever funds it has to whatever 
disasters have occurred.
    As this was an annual allocation, the way we were 
considering it is we were waiting for the conclusion of the 
annual year before making the allocations, which, by 
definition, meant we were slower. When you do the sooner 
allocation, you get the money out the door faster, but then you 
need the supplementals. When a disaster occurs, you need a 
supplemental because you don't have the funds in hand.
    We are now prepared to follow basically the FEMA model, do 
the allocations for all the funds we have in-house, and we can 
do that as soon as this week.
    The Senate could still then legally rescind the money, even 
though we obligate it. We say North Carolina, to pick a number, 
is going to get close to $6 million, let's say. That would be 
our allocation to North Carolina.
    The Committee then could legally rescind the money anyway 
before we contractually obligate it. But we will do the 
allocations because one of the concerns raised by the Senate 
was we were tardy in the allocation process, which I just--not 
to repeat myself, but it was not that we were tardy. Our 
methodology was we had this pot for this year. We were waiting 
for the close of the year to make the allocation as opposed to 
saying, which is what FEMA and SBA do as a methodology, 
whatever funds we have today we are allocating today. A 
disaster that occurs next week, we will have to find the funds 
for that disaster.
    Mr. Price. All right. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you, Mr. Price.
    It is funny. You sit here for 2 hours. Sometimes your mind 
wanders a little bit, and you wonder what is the benefit to the 
taxpayer in all this give and take. And I was reminded when the 
Secretary announced the timing of the NOFA that there is some 
benefit to these hearings. [Laughter.]
    Secretary Cuomo. Coincidence, Mr. Chairman.
    Mr. Walsh. Duly noted.
    Mr. Sununu?

                      section 8 contract renewals

    Mr. Sununu. Thank you, Mr. Chairman.
    Mr. Secretary, the statutes that have been passed over the 
past few years dealing with expiring Section 8 contracts and 
the HUD regulations to implement these statutes have met with 
varying results throughout the United States in project 
housing. In particular, in many circumstances, the project 
owners that are faced with renewing their contracts at the HUD-
determined fair market rent that are perceived to be at below 
actual market levels have determined it is more attractive for 
them to opt out of the program rather than renew the contracts.
    This creates a problem in many districts, in my district in 
particular, where nearly all the Section 8 projects are 
occupied by elderly residents. If a project owner decides to 
leave the program in order to raise his unit rents, we face the 
potential problem of elderly residents being forced to move out 
of their unit. Unfortunately, this is becoming increasingly 
likely as more and more contracts expire.
    My question for you is: In general terms, how does the 
Department intend to address this situation?
    Secretary Cuomo. Two points, Congressman. It is a real 
situation. It is a real concern. And our ability to address it 
is going to be limited, with all due frankness.
    What this is, the Federal Government signed a contract with 
a developer for a 20-year period. The 20 years are up. The 
developer, the owner, now has no lingering contractual 
obligation with the Federal Government. That owner will look to 
the private market, and if that owner can make significantly 
more money on the private market, they can then choose to go to 
the private market.
    I believe that calculus, when it is stark--we won't be able 
to do anything about it because we don't have any legal right. 
If the contract has expired, and if the person can make 
significantly more money on the private market, my guess is 
they do that.
    If it is marginal, a marginal call, then maybe we could 
negotiate with that owner and say you have the option to what 
we call opt out, to leave the program, but give us a chance to 
negotiate with you and maybe we can raise your rent so that we 
can get it to a point where you would be willing to remain 
within the program.
    Mr. Sununu. Isn't the agency engaging in good-faith 
negotiations to re-establish the contract in essentially all of 
these cases?
    Secretary Cuomo. No. It is a question of funds for that 
differential to the market, what we call marking up to market. 
We are now working--we are going through--and this is a 
significant amount of money--to negotiate above the rents that 
we are now paying to keep an owner in the program.
    Mr. Sununu. It is not a question of negotiating higher 
rates than you are currently paying. It is a question of 
whether what HUD has determined to be market rates are 
sufficient to keep the project owner in the program.
    Secretary Cuomo. Well, it is more than what we are now 
paying, and----
    Mr. Sununu. What is more than what you are now paying?
    Secretary Cuomo. What we would have to pay to keep them in 
the program.
    Mr. Sununu. I don't believe that that is the case in many 
of these projects. It is not that it is more than what you are 
now paying. It is quite simply that it is what the owner would 
like is more than you are willing to pay. And there is a 
difference. You may be paying 150, 160 percent of market rate, 
which many would argue doesn't make good economic sense, and 
when you try to renegotiate at a fair market level, 100 
percent, 110 percent, 92 percent, whatever you may deem that to 
be, that doesn't create enough financial incentive for them to 
stay in the program.
    Secretary Cuomo. That is right. Well, first, we can only 
negotiate up to what we can afford.
    Mr. Sununu. I am sorry, but just to be clear, you are not 
talking about negotiating up from what your current payment 
level is. You are talking about negotiating a new contract, 
which may actually be lower than what HUD is currently paying. 
That may create an economic problem. Are you suggesting that 
HUD is only paying fair market level in all of these cases? Are 
you denying that HUD pays 140 or 150 percent of fair market 
level in some of these contracts right now?
    Secretary Cuomo. Some contracts we pay in excess of fair 
market rent. That is the exception and not the rule.
    On those projects, if the Congressman's concern are those 
projects that are below market, that is not a problem for us. 
We can negotiate with the owner and continue the contract.

              hud negotiations to renew expiring contracts

    Mr. Sununu. My question is: In those cases--and I think 
there are--although it is not the majority, it is not uncommon 
where you are trying to negotiate toward a--down to a fair 
market level, what steps are being taken to do your best job to 
ensure that the project owner stays in the program and that 
elderly tenants aren't put out on the street?
    Secretary Cuomo. We are trying to bring the rents down to 
market. We anticipate an entirely new negotiation. We created 
something last year that this Committee worked on, the Senate 
Committee, called OMHAR, Office of Multifamily 
HousingAssistance Restructuring, which is a unit that is put together 
to do just what the Congressman points to. We renegotiate the terms of 
the contract. Everything is on the table. Rents are on the table. 
Mortgages are on the table. Debt is on the table, maintenance costs. We 
renegotiate and we see if we can come up with a new financial 
configuration which would make the building work.
    Mr. Sununu. And that is obviously encouraging that you 
engage in that kind of thoughtful, substantive negotiation. 
What happens if the project owner then decides to opt out? What 
is your obligation, what are you doing to ensure consistency, 
stability in housing for those elderly residents that today are 
depending on that project?
    Secretary Cuomo. Worst-case scenario, Congressman, first, 
we do everything we can to keep the units within the portfolio, 
the hard units we call them, the buildings within the 
portfolio. However, they are privately owned, and there are 
situations where the owner is going to say, I am leaving the 
program. In those cases, we shift our obligation to the tenant. 
As opposed to the building, we are now concerned with the 
tenant. And we use the Section 8 program to make sure the 
tenants who are in those buildings still have safe, clean, 
decent housing.
    Mr. Sununu. And is it true that in many of those cases you 
are offering to provide the residents with vouchers?
    Secretary Cuomo. That is the normal recourse, the Section 8 
voucher.
    Mr. Sununu. How do you determine the value of those 
vouchers? Is fair market rent what is going to drive the value 
of the voucher for the recipient?
    Mr. Apgar. Yes.
    Mr. Sununu. In all cases?
    Secretary Cuomo. It is set by the fair market rent in that 
area.
    Mr. Sununu. Fair, as opposed to the current rent level of 
the project that they are in.
    Mr. Apgar. That is correct.
    Secretary Cuomo. That is right.
    Mr. Sununu. To go back to a point you made earlier, I am 
aware of a project in my district where the current rents are 
below market and where they feel that they are having trouble 
negotiating up to what is a fair market rent. Am I clear in at 
least taking your comments here, knowing that you don't know 
every project that is in the negotiation process, am I fair in 
interpreting your comments to indicate that they ought to at a 
minimum be able to negotiate renewal of a contract at fair 
market rent?
    Secretary Cuomo. Congressman, obviously there are often 
many variables that are at play in any particular negotiation. 
The building has to be a quality building. We have to make sure 
there are no financial irregularities. But as a general 
premise, yes, Congressman. Our only alternative is to provide 
vouchers. Vouchers would pay fair market rent, so obviously if 
you are in a condition which is below market, you would be 
saving money. Even if you go up to market, it would be a wash, 
so to speak, with the voucher. But you have a building.
    Mr. Sununu. But you would first try to negotiate the 
renewal of the contract----
    Secretary Cuomo. Yes.
    Mr. Sununu [continuing]. Without vouchers at a fair market 
rent.
    Secretary Cuomo. Yes.

                            sticky vouchers

    Mr. Sununu. What about--given that we are talking about 
senior citizens, the elderly, who for obvious reasons have a 
difficult time jumping out into the housing market, looking for 
new housing. I have heard some discussion about sticky 
vouchers, vouchers for those tenants that are at a higher than 
market rent to make this transition as smooth as possible and 
then obviously the premium on those vouchers would expire 
should they decide to move elsewhere or should the terms of the 
voucher expire. To what extent is the agency actively engaged 
in pursuing that sticky voucher option?
    Secretary Cuomo. Congressman, that is one of the main tools 
that we use in a situation like the one that you describe, and 
it has worked for us quite effectively.
    If it pleases the Congressman, it would be my pleasure to 
take the specific project that you are working on and to get 
the facts around that project, after this hearing. These are 
all done on a case-by-case basis.

                        contract administrators

    Mr. Sununu. I would be happy to do that. A couple more 
brief questions. There are $209 million in your budget proposal 
for contract administrators. What does that $209 million cover, 
and what are the responsibilities for project management of 
those contract administrators?
    Secretary Cuomo. I will ask Assistant Secretary Apgar to 
speak on the details of the contract administrators, but in 
general, Congressman, you heard a lot already this afternoon 
about waste, fraud, and abuse and the management of the 
Department. One of the, quote-unquote, material weaknesses that 
the GAO and the IG like to point to were how we administered 
our projects, who was overseeing the projects. And their point 
was we didn't have enough oversight on the administration of 
the contract, and, hence, the contract administrators where we 
are contracting out with private firms to manage these 
contracts for us.
    Mr. Sununu. What is the estimate----
    Mr. Walsh. Is----
    Mr. Sununu. Mr. Chairman?
    Mr. Walsh. If I could intervene just one second, John. Mr. 
Apgar was going to respond. Mr. Sununu has the time. We have 
about 8 and a half minutes to go. I would like to wrap this up, 
and we will come back tomorrow morning at 9:30.
    Mr. Sununu. Fine.
    Mr. Walsh. Rather than keep you all waiting.
    Secretary Cuomo. A pleasure, if it pleases the Chairman. 
Thank you.
    Mr. Sununu. If you could, feel free to respond and, in 
particular, could you evaluate the number of full-time 
equivalents of HUD employees that would be required to 
administer the project-based housing assistance program?
    Mr. Apgar. Okay.
    Mr. Sununu. Thank you.
    Mr. Apgar. First, what the contract administrators will do, 
we have over 20,000 Section 8 project-based contracts; 4,000 of 
them now are already under contract administration being done 
by State agencies or public housing authorities. So we have 
some experience with contract administration.
    The contract administrator does basic things like review 
the rents, review income determination, review the process of 
payments. They also coordinate the inspections. A whole lot of 
sort of just the day-to-day management of the contract relative 
to the particular owner. This is a function, as the Secretary 
suggested, that has been the source of continual concern by our 
oversight organizations and a significant material weakness in 
our operations.
    Quite frankly, we don't believe we have the expertise in-
house to do this. We are currently devoting 600 people, 
probably 125 full-time equivalents, to do this task. But they 
are not doing the job that we need. We think that we can more 
effectively secure the needed resources in the private open 
marketplace, especially given the fact that State housing 
agencies have quite a lot of expertise in this arena. We think 
that they will be able to handle this----
    Mr. Sununu. $209 million, if I assume $100,000 per head, 
that is over 2,000 full-time equivalents. That would seem like 
a pretty extraordinary number.
    Mr. Apgar. How many?
    Mr. Sununu. $209 million at $100,000 per head is 2,000 
full-time employees. That seems like a pretty big number.
    Mr. Apgar. Right. We would have to include computer 
systems, data processing, the whole bit. It is our expectation 
that this is roughly--a fee which will be roughly in the high 
2, 3 percent of rent level. I think it is commensurate with the 
degree of activity.
    We would like hopefully that the fees will come down. We 
have worked--we have a competitive contract out there which 
will provide a performance basing so that if we are able to do 
it for less, we certainly would----
    Mr. Sununu. Could you provide the committee with 
information as to the corresponding number of full-time 
equivalents for that $209 million? I am sure you don't have 
that on the top of your head.
    Mr. Apgar. I know how many we are devoting now, and it is 
not enough.
    Mr. Sununu. But under the proposal for $209 million in 
additional funds for contract administrators, could you provide 
us with information as to what that corresponds to for full-
time contract----
    Mr. Apgar. If HUD were going to take $209 million and run 
it ourselves, we could tell you how many bodies that would 
entail.
    Secretary Cuomo. Just so we have the same facts, 
Congressman, the $209 million is for 3 years.
    Mr. Apgar. No.
    Mr. Sununu. For fiscal year 2000.
    Mr. Apgar. Fiscal year 2000. It is a projection.
    Mr. Sununu. It is a request. I think it is more than a 
projection. It is a request.
    Mr. Apgar. It is a request. It is related to our estimated 
cost of the program.
    Secretary Cuomo. Also, as you know, Congressman, the GAO 
and the IG have looked at this issue extensively, and they have 
also been consulted on our plan to contract out because it is 
not always--as the Chairman pointed out, it is not always a 
question of the Department doing more. It is the Department 
doing what the Department can do well. And when the private 
sector can do a task better, we contract out and let the 
private sector do it well. We don't have to duplicate in 
Government those tasks that the private sector does 
extraordinarily well.
    Mr. Sununu. I certainly agree. But if----
    Mr. Walsh. We really are going to have to get over and 
vote.
    Mr. Sununu. Okay.
    Mr. Walsh. If you would like to wrap up, that would be 
great.
    Mr. Sununu. I absolutely will. Thank you, Mr. Chairman. I 
agree with that, but if the number of full-time equivalents 
today is 600 and the number of full-time equivalents you are 
getting with $209 million is 1,500, then maybe that is not an 
appropriate amount.

                         adjournment of hearing

    Mr. Walsh. Gentlemen, that is going to have to be the last 
word.
    Mr. Sununu. Thank you very much.
    Mr. Walsh. We will be back tomorrow, and we can continue 
where we left off.
    Thank you.
                                          Thursday, March 11, 1999.
    Mr. Walsh. The subcommittee will come to order. I would 
like to welcome everybody back.
    We all should know, since the Appropriations Committee will 
be marking up the supplemental bill this afternoon, we will not 
hold a hearing as scheduled. I see a lot of smiling faces of 
HUD who can go back and get some work done this afternoon.
    I am hopeful that we can finish up our work this morning. 
If we cannot, we may have to reschedule that hearing. 
Otherwise, we will submit questions in writing and you could 
respond in a prompt manner, I am sure.
    Mr. Secretary, welcome back.
    Secretary Cuomo It is a pleasure.

                       reduced section 8 funding

    Mr. Walsh. And gentlemen, ladies, thank you for coming this 
morning.
    I would like to begin by following up on a conversation 
that was held yesterday. HUD issued a report called ``Waiting 
in Vain--An Update On America's Rental Housing Crisis.'' It 
prompted a question from Mrs. Northup and a response from the 
secretary and I would like to talk about that a little bit.
    This report concludes that the number of families assisted 
with HUD's programs have decreased because of reduced funding 
since 1995. Before addressing that assertion directly, I would 
like to take some time to recall the condition of HUD's fiscal 
house in 1995.
    That year, when Congress convened to review HUD's budget, 
we discovered that HUD had little, if any, control over its 
financial management systems and accounts. For example, HUD had 
no idea how much money was available in the Section 8 program 
accounts. Today we know that more than $15 billion of unused 
appropriations were available.
    Likewise, public housing, new construction and 
modernization programs have more than $20 billion in 
unobligated balances. Literally thousands of families were not 
receiving assistance because HUD simply did not know how much 
money was available for expenditure in Section 8 and public 
housing accounts.
    Are these remarks not true? I ask rhetorically.
    In the last three years the subcommittee has been working 
cooperatively with HUD to improve its management position and 
to put its financial house in order. Why? Because a cabinet-
level department that neither operates its core programs 
effectively nor accounts for its funds with accuracy has 
credibility with no one, including the families who the agency 
purports to help.
    Thus while funds for programs decreased in 1995, the record 
shows clearly that HUD was an agency with major problems. 
Though a major rescission was made, not one family who received 
assistance at that time was displaced. And over the last 
several years, Congress has consistently and in a bipartisan 
manner decided that HUD should not receive additional resources 
until programs operate effectively and funding levels are 
justifiable.
    I said earlier the Congress was unwilling to provide funds 
to programs that could not account for their spending. We are 
more than willing, however, to provide funds to programs that 
establish they actually help families in need.
    For example, Congress has always funded the Section 8 
account at the level requested by the president. Furthermore, 
appropriations for the HOME program and the HOPE-6 program and 
public housing modernization program have exceeded the 
president's requests.
    Let me also note just for the record that documents 
provided to the subcommittee by HUD's budget office clearly 
show, and those are here, that the number of subsidies and 
units under payment increased in 1996, in 1998 and will 
increase in 1999. The number of Section 8 units has increased 
every year since 1994.
    So while everybody agrees with the premise of HUD's report, 
it is only fair to understand why programs were curtailed in 
1995.
    In conclusion, I hope as a result of major reforms in HUD's 
programs and continued diligence on management practices, that 
more families in need will receive better assistance than they 
would have had the 1995 rescission never occurred.
    One editorial comment. Mrs. Northup, a little defensively, 
protected or defended the Republicans because it looked like we 
had cut, dramatically cut the funding. I believe the secretary 
joked that while it may not have been Republicans that cut it, 
Republicans were in control of Congress at the time.
    I think it is only fair to note the obvious, that while it 
was not this secretary's watch at the time, it was a Democratic 
administration that did not have a good handle on the housing 
programs. So what is good for the goose is good for the gander.
    I do not know who that serves, that sort of debate, but the 
fact is that we have a very important job to do and I think we 
are all committed to the job. And we do believe that things are 
getting better at HUD and I think that was stated by GAO and 
clearly stated by the secretary yesterday.

                        disaster relief funding

    Having said all of that, I would like to hone in a little 
bit on disaster relief because that will be obviously a key 
issue in the future, in the current supplemental debate and it 
certainly relates to some work that we did, very extensive work 
that we did last year in the supplemental.
    The result of last year's supplemental, Mr. Secretary, to 
me was very disappointing because allocations were made last 
fall to the CDBG emergency supplemental funds that we had 
anticipated would help to support the Northeastern ice storm 
and the individuals and businesses that were damaged.
    I and other members from the Northeast worked very hard 
last year to ensure that there was adequate funding available 
to respond to the unprecedented utility infrastructure damage 
caused by that storm. The allocations were particularly 
surprising and disappointing in view of the fact that we worked 
so closely with your staff to ensure that appropriated monies 
could be used to respond to this damage.
    I have to tell you that I am extremely frustrated, as are 
other members of the Northeastern delegation, in our ability to 
impress upon HUD our intent in appropriating these monies. 
Clearly the Senate has concerns, too.
    Now I remember the vice president went to Maine. I do not 
believe he came to New York but he went to Maine and, I 
believe, Vermont, and said that the federal government would be 
there to help.
    We appropriated over $100 million that we thought would be 
targeted toward that disaster relief. The Senate, in the 
conference with the House, insisted that language be inserted 
that would make those funds available to all federally declared 
disasters. And we have a huge unmet need still in New York, 
Maine, Vermont, New Hampshire, that has never been dealt with. 
We may revisit that in this supplemental thisyear.

             new allocation procedure for disaster funding

    And in reference to what is currently afield, HUD just 
within the last day, made notice in the Federal Register of a 
change in their allocation procedure for CDBG emergency funds.
    As I understand it, this new notice establishes a maximum 
grant amount per disaster of $20 million. Whereas in the past 
there had been a minimum grant allocation, there is now a 
maximum. And the language suggests that in the case of the 
Northeast storm, for example, that resulted in disaster 
declarations in Maine, New York, New Hampshire and Vermont, HUD 
could ``deem it appropriate to consider this as one disaster, 
with a cap of the total amount of assistance to be received by 
the four states of $20 million for all four states.''
    I do not understand that. Perhaps you or the people in HUD 
who filed this could explain why that was done.
    Secretary Cuomo. Let me ask for Assistant Secretary Cooper 
to come up because I do not understand it, either. But if I can 
devote a moment to the general situation, Mr. Chairman, because 
I have the same frustration, I can assure you.
    What happened is this. The law that was passed, as you 
correctly stated, the intent of the prime movers in the 
Congress was that it go to the Northeast--Maine, Vermont, New 
Hampshire, New York. We worked very hard on the New York 
disaster also at HUD. We sent four people up, et cetera.
    Senator Collins, Senator Snowe recall the whole 
congressional debate the way you do, that this was going to be 
for the Northeast.
    The way the law is written, it never mentions Maine, 
Northeast, New York. It says any disaster during the year. We 
now have to take that pot, divide it by dozens of disasters. 
When you have that pot divided over that base, no one is 
getting the unmet needs. And literally you are in a condition 
where people are getting cents on the dollar--10 cents on the 
dollar literally.
    I worked at great length with Senator Collins, Senator 
Snowe, the entire Maine delegation because your distress, Mr. 
Chairman, is shared by the Maine delegation. And let me assure 
you they were very vociferous in expressing their displeasure. 
They had demonstrations. They visited us at the HUD building. 
They did press releases.
    But the law does not allow for any special consideration 
whatsoever for the Northeast. And when you take that, our pot, 
divide it by the eligible universe, people are getting 
literally cents on the dollar.
    Also, as I mentioned to the Chairman, HUD's methodology was 
slightly different than FEMA. FEMA will allocate whatever money 
FEMA has at the time for the disasters at that time. If they 
run out of money, they run out of money and then they come in 
for a supplemental.
    We took the one pot we had and were holding the pot for all 
the disasters that happened during the course of the year 
because that is what the law said literally. We did not have to 
come in and ask you for a supplemental but, on the other hand, 
the disasters are getting less on each dollar of unmet need.
    As far as that notice is concerned, we put a maximum cap of 
$20 million, which, by the way, would have no impact on any of 
the Northeast states, zero impact because there were other 
states that submitted unmet needs that were so astronomical 
that they would have taken up a disproportionate piece of the 
pie, and we wanted to make sure we had something for all 
disasters. That is why we put the cap there. But I can assure 
you none of the Northeast states would be affected by the cap.
    We do not have the official allocations yet but New York, 
for example, if we are talking about $12 million, we are in 
that range for New York, so we would not be up at that $20 
million cap.
    Mr. Walsh. Assuming that was the need, that was the right 
figure, $12 million, I think others might have an assumption 
that it would need more than $20 million, which in that case 
would affect us.
    Secretary Cuomo. Yes, I agree with that. Except we're 
saying just for the pot we have, if we take our pot and we 
divide it by the number of disasters that are now eligible, New 
York would get about $12 million. The cap of the $20 million 
would keep some states from taking a disproportionate amount 
because their unmet need, as they submitted, was much, much 
higher.
    Now if the law, Mr. Chairman, if the law is changed to say 
emphasis for the Northeast, priority for the Northeast, 
anything like that, then I think we could get to what was the 
original intent of the law. But the law just does not say that 
and we spent a lot of time with counsel's office trying to fix 
it.
    Mr. Walsh. I think we have covered it.
    Let me just ask you this, then. Will the unprecedented 
investor-owned utility infrastructure repair costs, which I am 
told were in excess of $180 million, which ultimately are borne 
by the utility customers, be properly recognized as unmet needs 
in the supplemental allocation?
    Secretary Cuomo. Yes. One of the reasons we discussed 
yesterday why do we use CDBG as opposed to FEMA, the reason 
CDBG got into this business in the first place was it was much 
more flexible. Under the Northeast ice storm, they had a need 
to help utilities. CDBG can do that and we intend to do that 
with CDBG funds.
    Also to follow up on what the Chairman was asking 
yesterday, CDBG, for example, can rebuild homes where FEMA does 
not. FEMA gives a one-time home grant at a cap of $13,000 for 
home repair. But if you have damages over $13,000, FEMA cannot 
help you. FEMA monies cannot rebuild businesses. CDBG can. CDBG 
can do public services. CDBG can do roads. CDBG can do 
infrastructure. So CDBG is much, much more flexible.
    Mr. Walsh. I will conclude my remarks just by saying that 
we do feel that the intent of what we passed last year in the 
House was to provide more support and more compensation for 
that Northeast ice storm and we will continue to work with you 
and with the Senate in conference on this supplemental to make 
sure that those needs are met.
    Secretary Cuomo. Mr. Chairman, any word, any writing that 
would suggest that to the Department, we would consider and we 
could act upon. Unfortunately, as I read the law now, literally 
it gives us no basis whatsoever to do anything for the 
Northeast.
    Mr. Walsh. Fair enough.
    Mr. Frelinghuysen.

                          need for nofa reform

    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Before getting back into some questions on the housing 
needs of people with disabilities, I would like to make a few 
observations based on yesterday's hearing with SecretaryCuomo. 
Good morning again, Mr. Secretary.
    Secretary Cuomo. Good morning.
    Mr. Frelinghuysen. Both Mr. Price and I, and perhaps other 
members of the committee, would share a view that we continue 
to need to work on what might be called NOFA reform, additional 
NOFA reform--notice of funding availability. It is still too 
complex, still too bureaucratic. It is somewhat of a 
strangulated process. I know you have tried to streamline it. 
For many groups it is totally incomprehensible, which makes it 
difficult for them to participate in it, but I hope that you 
will be able to work on that.
    I am appreciative of the fact that nonprofits now can apply 
for assistance and you have been helping them in that regard 
and I assume that they have been full participants.
    The other observation before a few questions, housing 
professionals that I respect in New Jersey, and this is from 
both urban centers as well as suburbia, tell me that your 
Community Builders efforts are draining badly needed monies 
from traditional housing programs and community development 
block grant efforts.
    I have to tell you that when I meet with people here in 
Washington and back home, this is not partisan; they are 
offended by this whole new layer of bureaucracy. Maybe it is 
because we have just a negative view of the HUD office in 
Newark. If that office is not working, maybe we ought to close 
it and give over the responsibility to the Community Builders.
    But from the people who I respect who have been working in 
the housing field for a long time, their take on this is that 
these Community Builders are operatives that are basically 
taking badly needed monies away from HUD's ability to manage 
traditional programs in our state.

            section 8 funding for persons with disabilities

    I would like to get back to the whole issue of Section 8 
tenant-based programs for people with disabilities. We 
discussed yesterday, Mr. Secretary, and you mentioned that the 
authorized level of funding for this program is $50 million?
    Secretary Cuomo. For the 811 program?
    Mr. Frelinghuysen. This is for Section 8 tenant-based 
programs, the money that this committee puts in.
    Secretary Cuomo. Section 8 tenant-based--no, it is not $50 
million.
    Mr. Frelinghuysen. What we put in last year. The set-aside 
for people with disabilities is 50.
    Secretary Cuomo. $40 million.
    Mr. Frelinghuysen. $50 million, isn't it? Authorized level 
is 50. More important than the authorized level is why haven't 
you requested more money in this year's budget? Any money.
    Secretary Cuomo. Just so we are clear, Congressman, because 
I want to make sure we understand----
    Mr. Frelinghuysen. We had a set-aside. This committee 
decided on a bipartisan basis that we wanted to do more things, 
provide housing opportunities for people with disabilities. I 
referred somewhat to the president's announcement last 
November, but this committee in a bipartisan way said we want 
to have a special initiative, a set-aside for people with 
disabilities.
    Having requested this in this budget three times previously 
and everybody cooperated in supporting of it, why, after three 
years of putting this money in, haven't you put in a similar 
request this time around?
    I say that because you have $700 million in the way of new 
programs, none of which are authorized, and yet this is 
authorized.
    Secretary Cuomo. I understand. And as we went through 
yesterday, I would dispute GAO's number and GAO's 
classification of what actually is a new program for them to 
get to the 19. I have a different----
    Mr. Frelinghuysen. Well, to the specific issue of dollars 
set aside in Section 8 tenant-based program for people with 
disabilities.
    Secretary Cuomo. Would you like to respond, Rod?
    Mr. Solomon. Good morning, Congressman.
    The number last year that the Committee appropriated 
specifically for that purpose in Section 8 was $40 million. We 
broke it up initially into two NOFAs, one which dealt in 
connection with public housing designations and the other, 
assisted housing. And, as I believe you know, if the money is 
not used in connection with those, then it could be used more 
generally----
    Mr. Frelinghuysen. More important than the NOFAs, which are 
complex and I have already referred to that, is why is there no 
money in this year's budget? Since the committee has been 
somewhat indicative of its interest in this area for the last 
couple of years, why isn't there any money in here, a similar 
set-aside. Or are you counting on us to put it in?
    Secretary Cuomo. Well, Congressman, within the Section 8, 
housing for the disabled, as we discussed yesterday, we have 
two approaches. One is the targeted housing opportunities, just 
specifically for disabled Americans. We have flat-funded the 
811 program at $194 last year and this year.
    Mr. Frelinghuysen. Which does not obviously recognize that 
costs escalate in that area.
    Secretary Cuomo. That is right.
    Mr. Frelinghuysen. And populations grow and there are huge 
waiting lists.
    Secretary Cuomo. At the same time, the disabled community 
is an eligible population for the mainstream housing programs. 
So when we raise the overall Section 8 account with incremental 
vouchers, specifically those incremental vouchers can go to 
help disabled Americans. When we raise the homeless funds, the 
homeless programs, those funds can go to help disabled 
Americans.
    Mr. Frelinghuysen. What I am saying is that a lot of 
disabled people are getting lost in the shuffle. We are not 
setting up a battle here between elderly and people with 
disabilities. But to my mind, we need to raise the potential 
for groups that work. ARCs and others in the developmental 
disability community need some hope that these waiting list 
issues are going to be addressed.
    Secretary Cuomo. Congressman, I understand and this is a 
balance between the elderly and the disabled and the homeless 
and families and children, and there is no good answer, since 
all of the needs outpace the resources.
    Mr. Frelinghuysen. But when the President made his 
announcement last November in that radio address, you followed 
up in the New York Times and I said this yesterday, that this 
was to be one of your priorities. So I thought there might be 
some proof in the budget pudding this year.
    Secretary Cuomo. It is a priority, helping the Americans 
who are disabled. It is also a priority helping the homeless 
Americans. It is also a priority helping those Americans whoare 
elderly and need housing. And we are trying to balance all of these 
priorities.
    When the Section 8 account goes up, that account 
specifically will go to help disabled Americans. When the 
homeless accounts go up, those specifically will help disabled 
Americans.
    Mr. Frelinghuysen. As I have said over the past four years, 
Congress has allocated funds for tenant-based assistance for 
people with disabilities who continue to be displaced from 
public and assisted housing through the designation of one or 
two-bedroom units as elderly-only. This is the elderly-only 
issue.
    Since your budget includes no funding for this program, how 
would your budget cope with the loss of accessible, affordable 
units for people with disabilities? Right now we have what are 
called elderly-only provisions.
    Mr. Apgar. As you know, at your directive, HUD has been 
studying this concern about the change in how elder facilities 
can designate elderly-only units. That could, as you suggest, 
have a significant impact on the availability of units----
    Mr. Frelinghuysen. It has had.
    Mr. Apgar. Okay. As you note and as the report that we 
submitted to your office suggests----
    Mr. Frelinghuysen. Just a few days ago.
    Mr. Apgar. Yes. And the GAO report, which was available in 
November, suggests that there is no evidence that this concern 
is leading to a significant change in the number of non----
    Mr. Frelinghuysen. What are all the advocates doing in my 
office and, on occasion, in the secretary's office saying that 
we have a housing crisis out here?
    Mr. Apgar. My guess is doing what the elderly advocates are 
doing, the family advocates are doing and all the other 
advocates who get into people's offices, suggesting that----
    Mr. Frelinghuysen. I am not sure I would classify that as a 
mischaracterization. I think it is a free country and people 
can advocate.
    Mr. Apgar. Absolutely. That was my point.
    Mr. Frelinghuysen. But your department represents housing 
professionals that ought to be able to answer a relatively 
simple question. Is the elderly designation that is used to 
designate units short-changing people with disabilities?
    Mr. Apgar. And again, based on the GAO study and our own 
work, the indication is no.
    Mr. Frelinghuysen. You cite the GAO. The GAO concluded in 
their report that they had--correct me if I am wrong--
difficulty getting figures from HUD and criticized your agency 
for poor recordkeeping. Is this the case?
    Mr. Apgar. Our records using the TRAC system, we are able 
to go back to 1994 and we suggest that the share of units in 
elderly-designated buildings that are going to non-elderly 
disabled has remained constant over that time frame.
    Mr. Frelinghuysen. You have to translate that into English 
for me.
    Secretary Cuomo. His answer is no, Congressman.
    Also, when we went to the elderly-only buildings, 
Congressman, as you know, this Committee was very aggressive in 
recommending that there is validity in the elderly-only 
buildings, also. It is not a totally unwise concept.
    When the Department instituted that move to elderly-only, 
we made it very clear that we wanted every disabled American 
protected and it was not a choice of housing the elderly at the 
expense of the disabled. That directive has gone out to every--
--

                 need for better data on housing stock

    Mr. Frelinghuysen. The problem that nobody appears to be 
sufficiently competent to evaluate the housing stock situation 
to determine what piece of the overall pie here is going to 
people with disabilities. Why couldn't we ascertain the number 
of HUD-assisted units that have been designated as elderly-only 
by asking the question of all HUD-assisted housing managers, 
irrespective of what were the designations prior to 1992?
    Secretary Cuomo. We can do that, Congressman. We are 
subject obviously to what the public----
    Mr. Frelinghuysen. Well, why hasn't it been done if 
Congress is somewhat mandated that you do it last year?
    Secretary Cuomo. That is what the TRAC--when we refer to 
the TRAC system, the TRAC system is that information coming up 
from the housing authorities.
    Mr. Frelinghuysen. Well, I cannot put it more emphatically. 
I am disappointed we cannot get these statistics. I am not 
setting up clashes between the elderly and people with 
disabilities but we have a serious problem out there.
    Mr. Apgar. Right, and that is why we have provided the 
report that you requested.
    Mr. Frelinghuysen. Yes, but GAO says you have not been 
particularly cooperative in providing the facts.
    Mr. Apgar. That is why we provided the report to your 
office in draft form, so that you could work with us on what 
are the data you think would be helpful to----
    Mr. Frelinghuysen. Well, I would be happy to work with you 
but my God, you have legions of people out there and you have 
people in----
    Mr. Apgar. We work with the advocacy community, also, who 
are suggesting to us also things that they perceive will be 
useful to collect. We are doing that through tracking at the 
building level, as you suggest, the number of units that are 
designated elderly-only, as well as tracking the outcomes, 
which is how many nonelderly disabled folks are actually living 
in these properties. And----

                   elderly only buidling designations

    Mr. Frelinghuysen. How many buildings have been designated 
as elderly-only, nationwide?
    Mr. Apgar. I do not have that.
    Mr. Frelinghuysen. Well, you know, these are things that--
--
    Mr. Apgar. I could get that number.
    Mr. Frelinghuysen. Well, with all due respect, you know 
that I am going to be on your case when you come before this 
committee, even if you have good New Jersey origins. There are 
a lot of people who are frustrated, exasperated that this 
situation exists and I am their voice in the wilderness here 
and I think that you do yourself a favor not only to put more 
money in, as the committee has directed you to do in this 
budget, this coming budget, but also to have some of these 
statistics at your fingertips.
    Secretary Cuomo. Congressman, I will make it a personal 
priority of mine to get the information in plain English and I 
will get it to you forthwith.
    [The information elderly designated buildings follows:]

                      Elderly Designated Buildings

    According to the GAO survey in their November 1998 report 
on assisted housing occupancy restrictions on persons with 
disabilities (RCED-99-9) 22 percent of the sampled projects 
reported considering for occupancy only elderly persons or only 
elderly and near-elderly disabled persons. This percentage is 
of 4,157 projects built primarily for the elderly, so, subject 
to statistical deviation, approximately 915 projects would fall 
into this category of ``elderly only.''

                              nofa process

    Mr. Cuomo. If I could just follow up on your point quickly 
on the NOFA, we had a discussion at the building yesterday when 
we left the hearing. I think what is happening with the NOFA on 
the disabled, especially with not-for-profits, these are groups 
who may very well have not dealt with the Department before and 
therefore are not familiar with HUD-speak or Federal-speak or 
the language of the NOFAs. We spent quite a bit of time making 
them understandable to normal Americans, but they do have to 
include a lot of bells and whistles that the law includes, and 
frankly, and they are tedious and sometimes cumbersome, 
especially if you have not dealt with the Department before, 
which is what is happening with some of the disabled groups.
    Mr. Frelinghuysen. Let me commend you for actually changing 
the deadline, as I understand it, after our meeting yesterday.
    Secretary Cuomo. Yes.
    Mr. Frelinghuysen. You have actually extended the deadline. 
What will it be if we are extending it?
    Secretary Cuomo. We are going to extend it an additional 30 
days, an additional month.
    But what I also want to do, because you raised a very good 
point yesterday, I think, we extended the deadline but I would 
also like to work to get those groups in, work through the NOFA 
with them after this competition closes, so we do not have any 
problems with the law.
    Mr. Frelinghuysen. There are quite a few prominent 
advocates for the disabled, several of whom were in the room 
yesterday. They are coming in to see me next week.
    Secretary Cuomo. Well, they came in to see me last week.
    Mr. Frelinghuysen. I am very happy to hear that.
    Thank you very much, Mr. Chairman.
    Mr. Walsh. Mr. Cramer.
    Mr. Cramer. Thank you, Mr. Chairman. Mr. Secretary, welcome 
back.
    Secretary Cuomo. It is a pleasure.

             america's private investment companies (APIC)

    Mr. Cramer. Today I would like to begin by asking questions 
about America's Private Investment Companies, APIC. This will 
be a jointly administered program or is a jointly administered 
program between SBA and HUD and it is modeled after the small 
business investment company.
    Could you give me some more detail about how you are going 
to coordinate that administration, what differentiates APIC 
from the SBIC program?
    Secretary Cuomo. Yes. First, thank you for the question, 
Congressman, because I think it gets to the heart of what the 
department has been pursuing as a main thrust.
    The housing issues which we basically discussed yesterday 
and thus far today are obviously a mainstay of the Department's 
portfolio. Housing is the first word in our name. But if you go 
to any of the communities we serve, if you go to Syracuse, if 
you go to Newark, if you go to Huntsville, the mayors, the 
county executives will want to talk about housing but they will 
also be quick to say if you really want to help me, help me get 
some jobs back into the city; help me stabilize my economic 
development base; that is where I need the help. If my people 
are working, they will pay their own rent. And if the people 
are not working, I do not care how many Section 8 certificates 
you come in with; there will never be enough.
    So the economic development portfolio is a major thrust for 
the department, and that is what the words UD, urban 
development suggested in the name. This is not new to the 
department. At one time we had the UDAG program, Urban 
Development Action Grant program, which was a phenomenal 
success story.
    The APIC is the economic development program for the new 
millennium, the way we see it. It is the America's Private 
Investment Companies. The logic is what we did so well for 
communities across the globe with OPIC, Overseas Private 
Investment Corporation, let us do for the untapped markets in 
this nation. Offer them low-interest loans. Work with the 
private sector to stimulate activity in distressed communities, 
poorer communities.
    We have a number of programs that do this at the 
Department. APIC would take it to a different level and through 
a different methodology. APIC would go to private companies. We 
would fund private companies, approximately five across the 
nation, who would, in return, leverage private capital for 
large-scale economic development projects. We are talking in 
the realm of the $50 million economic development project. So a 
very large project, which is different from what the SBIC does. 
They do smaller projects.
    We talk about funding five corporations, ventures across 
the country that could do this, targeted all to low-income 
areas, distressed communities. Bottom line, trying to create 
jobs by leveraging private sector capital in poorer 
communities.
    Mr. Cramer. It is targeted to inner cities and rural areas?
    Secretary Cuomo. Yes.
    Mr. Cramer. So we have a balance there, not just a phase 
one emphasis on urban or inner cities and phase two----
    Secretary Cuomo. No, sir.
    Mr. Cramer. There is no split there.

                performance funding system supplemental

    All right. I want to attempt to ask a question that I think 
I am prepared to ask about, the public housing operating fund 
and capital fund. We are not looking at a 100 percent or level 
funding for the program. You have just indicated or HUD has 
indicated February 25 that there will be 92.5 percent funding 
for that fund. Why? And do you anticipate a supplemental to 
that?
    I am worried about the impact, the disproportionate impact 
of a shortfall like that that would be harmful to small 
agencies or small housing authorities in rural communities.
    Secretary Cuomo. Congressman, it is a concern that we 
share. When we put in the budget last year, we estimated a 100 
percent operating subsidy. What happened was the utility costs 
were actually higher than we estimated, approximately 4 percent 
higher. When you take in that deviation, when you take that 
deviation into account, rather than funding 100 percent of the 
operating subsidies, we actually funded about 92 percent of the 
operating subsidies.
    We have been working with the public housing groups, 
talking to them about a supplemental, trying to find the 
additional resources and trying to find the resources in an 
area that the public housing authorities think would be a good 
shift. And we are going to continue to do that.
    Now I am receptive to the idea and I am open to it. I look 
forward to talking to the groups as we go through the 
negotiated rule-making process to come up with the new 
operating subsidy formula.
    But we are open to the idea of a supplemental. We have to 
find the money, which is always a question, and we would have 
to find where it is going to come from and agree that we are 
not doing more harm than good by the shift.
    Mr. Cramer. So the jury is still out on our ability to make 
that up.
    Secretary Cuomo. Yes, sir.

                        rural housing initiative

    Mr. Cramer. And I caught the tail end of, I believe, your 
more thorough comments yesterday about this gap there and I 
would appreciate and look forward to further dialogue with you 
over that.
    Last year's bill provided $25 million for the Office of 
Rural Housing and Economic Development. Could you comment on 
HUD's rural housing initiatives?
    Secretary Cuomo. Yes. One of the thrusts that I brought 
when I came into the secretaryship was opening the focus of HUD 
from not just urban areas but also rural areas. Poverty is hell 
in a city; poverty is hell in a rural area. And I believe the 
expertise that HUD has garnered over the years, working in 
cities, we could also be very helpful to rural communities. 
Many of our programs already work with rural communities.
    We wanted to open an office that brought that focus to 
bear. We call it the Rural Housing and Economic Development 
Office. It is going to be within the area of community planning 
and development but we are hiring a new head. We want to get an 
expert, national expert on rural housing and economic 
development issues and we are currently what we call posting 
for that position, where we are advertising to find a person to 
head that office.
    Mr. Cramer. We have had, in our rural areas, a small city 
that experienced a devastating tragedy with a gas explosion 
there and it occurred right in the heart of the city. Some 
housing was affected. The little historic downtown area was 
affected.
    Would a city like that be eligible for aid from a program 
like this?
    Secretary Cuomo. Yes, sir, Congressman. And we may have 
other programs that could aid them now. If you could give me 
the specifics afterwards, we would love to get on it.
    Mr. Cramer. Thank you.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    Mr. Sununu.

                             mark-to-market

    Mr. Sununu. Mr. Secretary, I just want to follow up on a 
couple of points that we spoke about yesterday and then move on 
to another subject and I am sure you and your staff will be 
happy to move on to some other subject.
    We talked about the renewal of Section 8 housing and then 
we talked about this project-based housing. We talked about a 
particular case where the current rent might be below market 
and that obviously if you are below market, paying a below 
market rent and you want to keep the owner in the program, you 
would need to mark the rents up to market and that would 
obviously have some costs but have some benefits for the 
tenants.
    And this may or may not happen in every single case but 
obviously in those cases where it does happen, it is going to 
require some resources.
    My first question is what have you estimated the size of 
the resources required to mark these below cost projects up to 
market?
    Secretary Cuomo. I will ask the FHA commissioner to give 
you the specifics on the budget, but just so we are clear, 
Congressman, it is very hard to come up with absolute rules for 
general application in this area because this is really a case 
by case determination. We have a number of tools at our 
disposal, depending on what we want to accomplish at that 
specific application.
    We do not have the posture where we will always bring that 
building up to market. We may not want to be in that market. 
The tenants may not want to be in that building. They may 
prefer vouchers. We may have problems with the landlord. The 
building may be in disrepair. There may be insect or rodent 
problems.
    So it is not a given that we always will take that owner 
up. Where there is a situation where we want that building 
because it is a valuable building, because the tenants want to 
stay in that building, then we have a number of tools at our 
disposal to accomplish that and I will ask the assistant 
secretary to give you a breakdown of the budget.
    Mr. Apgar. In terms of the number, how much additional 
project-based subsidy would be needed in order to bring all the 
below-market properties up to market-based rents, that number 
is estimated between $600 and $800 million.
    Mr. Sununu. And what did you request for fiscal year 2000?
    Mr. Apgar. As Secretary Cuomo suggested, many of those 
properties are ones that we would not choose under any criteria 
of----
    Mr. Sununu. I certainly understand that, but what did you 
request, though, given the $600 to $800 million cost? What is 
in the request for the fiscal year 2000?
    Mr. Apgar. The budget currently has a fund of $72 million 
for tenant protection expenses in the budget. In addition----
    Mr. Sununu. That is a pretty significant shortfall, is it 
not?
    Mr. Apgar. We estimate that that would do quite a bit 
toward this issue. You can break it out into various categories 
as to how you begin to peel off the characteristics.
    For example, some of the properties that have below-market 
rents are owned by nonprofits and their urge toopt-out is 
limited. We work with them in a different way than for-profits.
    In many instances the next critical issue is whether or not 
the market rent is above or below the fair market rent, and 
that is the key indicator as to whether or not the----

                    market rent vs. fair market rent

    Mr. Sununu. I am sorry; could you distinguish between 
market rent and fair market rent?
    Mr. Apgar. Market rent is street rent, what the owner could 
get if they put the building on the private marketplace. So in 
the building that you are speaking about in New Hampshire, we 
called the owner and got some details and, in fact, their 
street rent, what they estimate the rents would be in that 
particular building in that particular town, are 120 percent 
above the fair market rent.
    Now, what that does is cause problems for the residents 
because it means that if the building opts out, the voucher 
that we provide the residents would not be sufficient for them 
to remain in that building, or perhaps even in that immediate 
area because the area we are talking about is a hot submarket 
of that overall area.
    In that instance we would work with the owner and are 
working with owners like that to keep the property in the 
inventory. There are a couple of things we could do there.
    Mr. Sununu. I do not want to take too much of your time and 
I very much appreciate your understanding of the particular 
case we spoke about yesterday.
    Mr. Apgar. Sure.
    Mr. Sununu. And I will absolutely look forward to working 
to resolve that situation. But rather than have you go through 
all the different cases where different resolutions may be 
found, I just want to at least finish my questions about the 
general case. And the secretary has pointed out that working on 
these on a case by case basis is ultimately the way they have 
to be resolved.
    Mr. Apgar. Certainly.

                            opt-outs funding

    Mr. Sununu. You say you have $72 million in the budget to 
try to address this type of problem.
    Mr. Apgar. Right.
    Mr. Sununu. You see a total cost out there of $600 to $800 
million potentially but feel that given circumstances, $72 
million that has been requested in your budget is enough to 
begin addressing the concern?
    Mr. Apgar. Right. We have a framework for targeting that 
resource, which is a critical feature, and we are, quite 
frankly, looking for additional resources to the extent that 
the funding we have requested is inadequate.
    Secretary Cuomo. Congressman, I want to make sure you do 
not go past each other; you are talking about apples and 
oranges.
    The $600 to $800 million, we would wind up paying that from 
a different pocket anyway because if you use a voucher, the 
voucher is going to pay fair market rent in the area and the 
voucher would always wind up being the alternative ultimately, 
and it would pay fair market rent anyway.
    So the $72 million is an estimated cost of what you would 
need to do it building by building. But, at the end of the day, 
you have two pockets. You are paying out of either pocket but 
you have to fund both.
    Mr. Sununu. And maybe I was not clear on another point. 
When you said there is a $72 million request, I assume that 
that is associated with the line item in the budget. Is that 
correct?
    Secretary Cuomo. Yes.
    Mr. Apgar. Identifiable within the budget.
    Mr. Sununu. Under what?
    Mr. Apgar. Under the tenant protection accounts.
    Mr. Sununu. One of the specific remedies we talked a little 
bit about yesterday----
    Mr. Walsh. John, would you yield just for a second on that?
    Mr. Sununu. Certainly.
    Mr. Walsh. Are the tenant protection funds for all opt-
outs?
    Mr. Apgar. This one is for addressing particular concerns. 
There is other tenant protection money in the budget, tenant 
protection money related to the OMHAR program.
    Mr. Walsh. In addition to the $72 million?
    Mr. Apgar. Yes. In addition, there is tenant protection 
money relating to HOPE VI, other segments. This was a 
particular fund that was identified for addressing these 
critical projects and it is separate from the other tenant 
protection accounts.
    Mr. Walsh. I yield back. Thank you.
    Mr. Sununu. That was clear to you, Mr. Chairman? In other 
words, that $72 million is for opt-out tenant protection for 
Section 8?
    Mr. Apgar. Yes, it is designated to address this problem. 
There are other tenant protection accounts. I think there are 
four overall tenant protection accounts.

                            sticky vouchers

    Mr. Sununu. Reclaiming my time, we talked about a 
particular solution, which was referred to as an enhanced 
voucher, a grandfathered voucher, one that might stay with the 
tenants, may or may not be appropriate in various 
circumstances. I know the particulars are of concern.
    But my question is how much, if any, restriction, has 
Congress put on the agency in your discretionary ability to use 
those enhanced vouchers if you think it is appropriate?
    Mr. Apgar. Fair enough. Currently we only have the 
authority to do enhanced or so-called sticky vouchers in a 
limited number of cases. The prime example would be projects 
that participated in the so-called ``preservation program.'' In 
that instance we could use that approach.
    We are working to develop a broader list----
    Mr. Sununu. I am sorry; you can use it?
    Mr. Apgar. You can then.
    Mr. Sununu. Can you use it for project-based housing that 
is opting out?
    Mr. Apgar. In that instance we could. But in the general 
case, particularly the case that we are referring to of these 
privately financed Section 8 developments of the type that you 
mentioned in the Derry, New Hampshire case, that sticky voucher 
would not be an authorized----
    Mr. Sununu. You are not authorized to use the enhanced 
vouchers in privately financed, project-based housing?
    Mr. Apgar. Right, other than a few categories. Again for 
preservation projects.
    Mr. Sununu. Other than namely what categories?
    Mr. Apgar. Preservation projects, the things that came 
through the preservation program--those are eligible 
categories, but not the general case.
    Mr. Sununu. Thank you. We are getting there.
    Mr. Apgar. These are only the ones that are authorized by 
law, not by our choice.

                 fannie mae/freddie mac oversight fees

    Mr. Sununu. Here is the new topic. You have a fee proposal, 
a regulatory fee proposal regarding Fannie Mae andFreddie Mac. 
Could you describe that? I guess this is not your area of expertise.
    Mr. Apgar. If you are talking about the GSE fee to cover 
the cost of the regulatory oversight of them relating to 
mission? It is an up to $10 million request. Is that what you 
are talking about?
    Mr. Sununu. Yes. So $10 million. And that is a new fee? It 
is a new charge for regulatory oversight?
    Mr. Apgar. Right. A couple of points on that. We discovered 
that we were the only regulatory body that was not having the 
regulated entity pay for some of the costs of the oversight. 
For example, OFHEO, which is required to safety and soundness 
oversight----
    Mr. Sununu. I am sorry; what is that?
    Mr. Apgar. OFHEO, the Office of Federal Housing Enterprise 
Oversight. They do the safety and soundness regulation of the 
GSEs; the GSEs pay for that.
    In a more general way----
    Mr. Sununu. They pay you for that?
    Mr. Apgar. They pay us for that.
    Mr. Sununu. How much do they pay you?
    Mr. Apgar. How much do we get from them on the OFHEO 
oversight fees? I would have to check on that.
    Mr. Walsh. $16 million.
    Mr. Sununu. Pardon me?
    Mr. Walsh. $16 million.

                             ofheo staffing

    Mr. Sununu. $16 million. And how many full-time employees 
are you employing to regulate the GSEs through OFHEO?
    Mr. Apgar. What is their staffing number.
    Here we go. This is the director of OFHEO, Mark Kinsey.
    Mr. Kinsey. We have currently authorized 76 FTPs.
    Mr. Sununu. And what are their responsibilities in that 
oversight group and how would that be different than the new 
$10 million oversight group?
    Mr. Apgar. As you understand, the GSE legislation set up a 
dual oversight mechanism. OFHEO, the office that Mr. Kinsey 
directs, is responsible for safety and soundness regulation, 
among other things. They are the people that are producing the 
safety and soundness rule relative to the general requirements 
of the organizations. They review new programs for safety and 
soundness issues, focus in on safety and soundness activity.
    HUD retains the oversight relative to mission, making sure 
that these entities are engaged in appropriate public mission 
activities, working in pursuit of affordable housing goals, as 
directed by Congress.
    So there are two distinct oversight activities, one in 
OFHEO, one in my organization.

               strengthening of hud oversight over gse's

    Mr. Sununu. Has there been a specific problem in attaining 
the housing goals that has warranted or spurred a desire to 
strengthen or increase the size of this regulatory group?
    Mr. Apgar. Well, one impetus was a GAO report that was 
submitted to Congress last spring. That suggested that the 
mission regulation, the oversight that we do, should be 
strengthened. They cited a number of areas where we could do 
additional oversight work that they thought would be 
productive. And our point was that we agreed that----
    Mr. Sununu. Specifically in this area?
    Mr. Apgar. Specifically in this area. It was a report on--I 
think the title was HUD's oversight of the GSEs needs 
strengthening, GAO report of last April-May, anyway the 
springtime.
    Secretary Cuomo. Specifically, Congressman, if I might, we 
took our responsibilities seriously when Congress said that we 
should regulate the GSEs. I took it to mean that we should 
regulate the GSEs effectively.
    GAO said we should do more in terms of regulation; we 
should be doing it better.
    I think it is ironic that HUD would be one of the only 
agencies not to be reimbursed by the regulated entity, 
especially when in this case the regulated entity is Fannie Mae 
and Freddie Mac, which I do not believe in today's economy 
could qualify for a hardship exemption, and HUD is under 
tremendous budget pressures, as you have heard from Congressman 
Frelinghuysen, et cetera, where we are fighting to balance 
these needs and get more money into programs. Why we should be 
paying for the expenses of the regulation out of our pocket 
when no other department does made no sense to us, and then 
when you put on top of that GAO saying you should be doing a 
better job here.

                            regulatory fees

    Mr. Sununu. Aside from the $17 million, the fee you collect 
for regulating federal housing oversight there, who else pays? 
Who else do you collect fees from, regulatory fees for 
oversight?
    Secretary Cuomo. We do not regulate----
    Mr. Apgar. In the manufactured housing instance, of course, 
we collect fees from the manufactured housing industry to run 
our national manufactured housing program. But in other areas, 
of course, the OCC collects fees for their regulatory actions. 
The Office of Thrift Supervision collects money from the 
thrifts for their regulation. Common practice.
    Mr. Sununu. In the case of OFHEO, that is something we 
require you to do, right?
    Mr. Apgar. Yes.
    Mr. Sununu. There is a congressional statute. And I am sure 
from your perspective we have maybe put too many restrictions 
on you but that is one where it is statutorily required, 
correct?
    Mr. Apgar. That is correct.
    Mr. Sununu. Is there any statutory requirement for the new 
regulatory organization and regime that you are charging for?
    Mr. Apgar. Sure. From the beginning the original act, and I 
have now a copy in front of me of the guideline, set up these 
two oversight functions, one relating to safety and soundness 
and the other relating to provision of affordable housing.
    So it is not a new regulatory oversight mechanism. It is 
just one that based on the advice of GAO and others we are 
strengthening and enhancing.
    Secretary Cuomo. Congressman, if I might, the GAO report is 
entitled ``HUD's mission oversight needs to be strengthened.'' 
They speak about how large and sophisticated Fannie Mae and 
Freddie Mac are. Trillions of dollars weigh in the balance. How 
crucial our regulatory role is and how crucial it is that we do 
it well. And yes, the regulatory role was a congressionally 
mandated one.
    Mr. Sununu. Thank you.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you, John.
    We have a vote now and then there will be a 10-minute 
debate on a recommittal. We will have a vote on that andthen a 
vote on final passage and then three suspensions after that.
    So we will take a break. That probably is going to take 
probably 35 minutes or so. And we will return as soon as that 
last suspension vote is cast and Mrs. Meek, Mrs. Northup and 
Mr. Price will be up to bat when we get back.
    [Recess.]
    Mr. Walsh. We will readjourn, reengage or whatever the word 
is.
    Mrs. Meek is scheduled to go next. However, she is not 
here. What I would like to do, with Ms. Kaptur's permission, is 
yield to her to begin questions. When Mrs. Meek arrives I would 
ask her then to yield back to Mrs. Meek and then, when she 
concludes, Ms. Kaptur would finish.
    Ms. Kaptur. Thank you, Mr. Chairman. I have to get my book 
open here.
    Mr. Walsh. Okay, take your time.
    Ms. Kaptur. Mr. Secretary, I wanted to welcome you back to 
our committee and say how impressed I have been with your work 
and the excellent marks that you have gotten in trying to turn 
HUD around. It seems every administration tries to turn HUD 
around. I know in my part of the country HUD, over the years, 
has really made a very positive difference.
    So we really appreciate your energy and your enthusiasm and 
the creativity that you have devoted to this task of serving 
all the American people.
    I am looking for a memo. Ah, here we go.
    Mr. Walsh. Ms. Kaptur, would you yield for just one second?
    Ms. Kaptur. Sure.
    Mr. Walsh. As I explained, Mrs. Meek was next up and if you 
would withhold, let her proceed, then you are up next. Thank 
you. I want to reward that attentiveness this morning.

                       housing crisis in america

    Mrs. Meek. Thank you, sir.
    First of all, again I want to welcome the secretary, 
members of his shop who are here. I also want to applaud you 
for the tough job you have administering these programs and to 
say to members of the committee that because of the diversity 
of people and problems that HUD undertakes, it is really 
complimentary that you are able to face these problems.
    And I would also like to appeal to members of the committee 
who may feel that we do not need to get new ventures or new 
programs, that there is a crisis in HUD. There is a crisis in 
housing throughout this country, particularly in urban and 
suburban areas.
    I face it every day in my area and I want to submit for the 
record this morning, Mr. Chairman, an article that I took from 
the Miami Herald. It really explains the problem of housing in 
this country, particularly in South Florida, the area I 
represent.
    Mrs. Meek. I certainly want to applaud HUD for doing that 
and I am looking forward to more bold ventures because you are 
going to need them in the year 2000 and beyond. And if you 
stick with your old programs it will be hard to meet the new 
crises that we are facing.
    One particular example of it is that you have cut back on 
public housing. That is a new direction for HUD. Not only have 
you cut back; you eliminated it.
    Now you find that because of the many other problems, that 
people who work cannot even afford housing. And if they lose 
that job, many of the people I represent and other people 
represent here--I represent bus drivers; I represent the people 
who live in the trailer parks--many times they have a job 
making less than $14,000 a year and they are making the minimum 
wage. They are working. We call them the working poor. And they 
should be able to get a house but they cannot. So they are 
caught in the middle between those who should afford it and 
cannot and those who cannot afford it at all.
    So you are going to need, and that is why I want to appeal 
to the committee, to give some credence to the fact that you 
are looking to try to build some new initiatives to meet these 
needs.
    I have a few questions. I have so many always for HUD. As I 
told the chairman I would submit them for the record but I will 
ask one or two of them here and yield my time.
    I am concerned about housing for the elderly, as well as 
other housing.

                    visit from former chairman lewis

    Mr. Walsh. Mrs. Meek, would you yield for just a second? An 
old familiar face to this subcommittee is here and wants to say 
hello to the secretary.
    Hobson said he followed him home; can he keep him?
    Welcome, Mr. Chairman. It is good to have you here.
    Mr. Lewis. I will submit my questions for the record, Mr. 
Chairman.
    Mr. Walsh. Without objection. Is there any comment you 
would like to make at this time?
    Mr. Lewis. It is a great pleasure to be with you and I 
appreciate you letting me in the room. Now I will leave, Mr. 
Chairman.
    Mr. Walsh. Pleasure to see you. Pleasure to see you, 
Congressman Lewis.
    Mrs. Meek, I am sorry.
    Mrs. Meek. I just want to say hello to Jerry and say that 
our new chairman is doing a very good job. I have a report card 
on him. He is doing a good job.
    Mr. Lewis. Do not make any decisions too early.
    Secretary Cuomo. Proof is in the pudding.

                              section 202

    Mrs. Meek. In regard to housing for the elderly, the 
funding level in your proposal for 202, the budget says $660 
million. Does that all go to 202 senior housing or are there 
other programs that are funded from that $660 million, other 
senior citizens, other senior housing? Are there other 
initiatives within that category that would be taking part of 
that $660 million?
    And you provided in that same budget $87 million in 
mandatory funding for 15,000 tenant-based vouchers for the 
elderly. Does that come out of the $660 million?
    Secretary Cuomo. Congresswoman, thank you for the question 
because there was some confusion about this last week. The 
authorizing committee insists on saying that the President's 
budget reduces the funding for the elderly. That is just wrong 
on the numbers.
    The $660 million is for 202 funding. It is the same level 
as last year. In addition to the $660 million there is 
approximately $87 million for vouchers, for a total of $747 
million. So the $747 million is higher than last year's amount 
of $660 million.
    We have allowed more flexibility in the funding because we 
have heard this Congress say devolution is good, flexibility is 
good, federal mandate and dictation is bad. So there is more 
flexibility because we have listened to the groups and what 
they need.
    So we allow the $660 million to be used for 
newconstruction. We also allow it to be used for modernization of 
existing units because many of the groups will tell you they need to 
modernize units that were built. We allow it to be used for service 
coordinators because some of them need social service assistance.
    So they are more flexible but there is also a net increase 
in the amount of housing opportunities for the elderly.
    Mrs. Meek. Okay. And if I have a little more time, Mr. 
Chairman?
    Mr. Walsh. Yes, you do.

                   section 8 vouchers for the elderly

    Mrs. Meek. Part of your continuum of care that HUD has in 
its early initiative, one of your proposals would allow Section 
8 vouchers to be used for elderly people in assisted living 
projects if they are linked to Medicaid funding. I am concerned 
that that may create some problems because some of the various 
states, particularly Florida, the state I represent, they all 
have different criteria. You know, Florida's Medicaid criteria 
is low and the thresholds for Medicaid eligibility are 
different.
    Is this going to create problems?
    Secretary Cuomo. Congresswoman, just as a matter of fact, 
we do not require that the vouchers be linked with Medicaid. If 
it works, fine. It may be an intelligent linkage but we do not 
require it. It is just a housing opportunity for elderly 
Americans.
    Mrs. Meek. All right. That answers my question. Thank you 
very much.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you very much.
    Ms. Kaptur.

                       mental health initiatives

    Ms. Kaptur. Thank you, Mr. Chairman. I am always happy to 
yield to my distinguished colleague from Florida.
    I wanted to say to the Secretary I have a series of 
questions in different areas. One is when you were before the 
committee a year ago I asked you about considering convening an 
interagency working group on the subject of mental illness and 
gaps in many of our public housing programs that deal with the 
difficulties of both those who are homeless and mentally ill at 
the same time.
    I am wondering what you have been able to accomplish over 
the last year and then, looking forward to this next year with 
the planned White House Conference on Mental Illness, to what 
extent you and Mrs. Gore's staff have been able to work on the 
homelessness deinstitutionalization questions, including the 
inappropriate housing of many of these individuals in our jails 
across the country.
    Secretary Cuomo. As the Congresswoman has pointed out, not 
only to me but has made a hallmark of her tenure, bringing 
attention to the people who are mentally ill, mentally ill 
homelessness, which is, as the Congresswoman knows and I know 
from my previous experience when I actually ran a not-for-
profit that served the homeless, which is a very, very real 
problem.
    Our homeless programs under the continuum of care, we take 
just that into consideration. It was mentioned in the 
conversation with Congressman Frelinghuysen when we were 
talking about the mentally ill that the continuum of care says 
this is definitely a housing problem when a person is homeless 
but it is often more than a housing problem. Sometimes it is a 
substance abuse problem. Sometimes it is a domestic violence 
problem. Very often it is a mental health problem.
    And we are funding a significant number of facilities and 
beds through the homeless programs, which are for people who 
are mentally ill, because that is unfortunately all too often, 
a significant reason for homelessness. And when you do not have 
appropriate community mental facilities, which we do not have 
in this nation--they never were built; we deinstitutionalized 
but we never provided the alternative, the community-based 
mental health facilities--we actually are picking up a lot of 
that slack, filling that void with the HUD homeless programs.
    We have also worked, as the Congresswoman points out, on 
interagency efforts. We are coordinating with HHS. We are doing 
joint NOFAs with HHS, trying to put these program streams 
together. There is an Interagency Task Force on Mental Health 
and we have been working extensively with Mrs. Gore's office on 
the issue.
    Ms. Kaptur. Mr. Secretary, I would appreciate any 
additional information you could provide to the record on those 
initiatives. I will continue to push in this area because I 
think our states need to be pushed. We need to have good 
examples shared across the country. I understand the State of 
Wisconsin has some good examples--I do not know; I have not 
studied those--of how they have been able to implement more of 
the continuum of care.
    The other night I was going home here from the Capitol and 
this sad character walked across the road, very crippled, very 
sick. I just keep seeing this. I had a hunch that he, dressed 
in Army fatigues as he was, did not have a place to stay for 
the night.
    So I would just ask your continuing passion on this issue 
and giving us guidance as a committee, as a subcommittee, how 
we could be more helpful.
    I do not have a sense of how many people we have actually 
identified. What are the numbers we are working with? How many 
of them have Section 8 vouchers, if any? How many of them live 
in group living quarters? How have these relationships with HHS 
been fleshed out? NIMH, what has been done there?
    I would hope that as this White House Conference on Mental 
Illness moves forward with Mrs. Gore that HUD might have a real 
seat at the table there. You have part of the hardware answer. 
You do not have the software answer. But even on the hardware, 
I do not think we have a complete understanding of how we might 
do a better job.
    Secretary Cuomo. Congresswoman, if I might, the point is 
very well taken. It is always a hardware problem, to use the 
Congresswoman's term. And I think this is what Congressman 
Frelinghuysen was getting at before and he is correct. The need 
grossly outstrips the resources, whether it is for 
homelessness, whether it is for the disabled, whether it is for 
working families, as Congresswoman Meek points out.
    And Section 8, the Section 8 vouchers are in many cases the 
only solution. That is why the years that we went to zero with 
Section 8 vouchers, I believe will come back to haunt us. That 
is why we see this spike in the number of people who need 
affordable housing. We are at historic highs.
    Of course the Department has to work better, and we are 
working hard to do that. But this was the first time in history 
we went to zero with the number of Section 8 vouchers.
    The Department of Housing, as you point out correctly,you 
said many administrations have been trying to turn around HUD. HUD has 
had problems. HUD at one time has had real significant management 
problems. We never stopped funding Section 8 vouchers or public 
housing. And that void, that hiatus in housing is causing a problem now 
and the need is outstripping the demand.
    We have more vouchers in the homeless program, as you know, 
and we are trying to get to a continuum in all these efforts, 
so we have homeless programs that do transitional and then 
permanent housing through Section 8. Same concept on elderly--
202 and Section 8. But the Section 8 is necessary as the 
permanent housing resource.

                    affordable housing backlog need

    Ms. Kaptur. In reading your report, ``Waiting in Vain,'' 
that shows how many people have really been left behind, could 
you summarize for the record or verbally now the backlog of 
need that is there?
    Secretary Cuomo. We have approximately 5.3 million families 
who need affordable housing, the highest number in history. It 
is a cruel irony but the strong economy is actually reducing 
the affordable housing because the strong economy is driving up 
the rents, pricing them out of reach for those people at the 
bottom of the income spectrum or on fixed incomes. Highest 
number in history. The strong economy is doing it. It is 
exacerbated by the fact that we went out of the housing 
business.
    This business is very simple. When you do not provide 
affordable housing, the number of people who need affordable 
housing goes up. It is almost that simple. And then you can 
argue all day long what subgroup goes first--disabled, 
homeless, mentally ill, elderly. They all need the housing. 
There is no right solution. I would like to see more right 
across the board and we are trying to allocate a precious 
resource. We do not have enough. We need more is the bottom 
line.
    Ms. Kaptur. The backlog is 5.3?
    Secretary Cuomo. 5.3 million families would qualify. That 
is not the backlog. The backlog, if you want to consider the 
Waiting in Vain report talked about the number of families on 
waiting lists and how long they are on waiting lists.
    We have seen a spike in the length of waiting lists across 
the nation, worst cases in the largest cities. But you have 
seen an increase across the board over the past 2 years.

            establishment of credit unions in public housing

    Ms. Kaptur. Thank you.
    Mr. Secretary, when Secretary Cisneros was Secretary of 
HUD, I engaged in a conversation with him over a number of 
years regarding the public housing developments around the 
country and the access to financial services for those 
residents.
    We were just at the point of having real understanding on 
this issue and work having been done to try to provide services 
inside many of those developments for residents, including not-
for-profit financial intermediaries like credit unions, and he 
left his position.
    I would like to say to you that if there is any way I can 
encourage you to ask your staff in the public housing area to 
do a quick survey of many of these developments around the 
country where residents live in communities that have very 
serious check-cashing and other operations. I would be quite 
interested in knowing whether HUD, in the leadership transition 
that has occurred with your secretaryship, whether this 
question of providing services to residents so they can begin 
to establish credit and savings, even if on a small scale, has 
at all been an initiative of the Department.
    Secretary Cuomo. Totally, Congresswoman. I think that is 
the key to a lot of this. Increase the wealth, tap the 
entrepreneurial spirit, get out of the subsidy mentality where 
we are paying for the rent. Let people pay for themselves. Let 
them have opportunity and get jobs.
    However we can incentivize the private market, create jobs 
is what we are trying to do, whether it is community 
development banks, microenterprise lending, empowerment zones, 
enterprise communities, however we can create wealth, create 
opportunity, invest the community.
    I was thinking of the Congresswoman. There was an article 
last week, I believe, on a laundromat that opened up in a very 
poor community. The way they opened up the laundromat was they 
went to the people within the community and they basically sold 
shares in the laundromat. And the community itself owns the 
laundromat and the laundromat is doing very well, partially 
because they patronize the laundromat. They are making money 
and it is entrepreneurism, it is capitalism, it is vesting 
people in their own community, but you need that vehicle. 
Credit unions do it. Microenterprise loans do it. But public 
housing is the right venue and we are very interested in 
pursuing that.
    Ms. Kaptur. I would appreciate for the record if that 
division of HUD could provide for me, if it exists, the number 
of public housing developments across the United States and how 
many of those have established on-site, both with ATMs and 
without ATMs, maybe an office, that would provide on-site 
credit services of the not-for-profit variety to residents.
    And then if there are for-profit institutions that have set 
up ATMs, I would be interested in knowing that because one of 
my concerns is that, as I have talked about this across the 
country, you have perhaps one bank that goes in there and it 
ends up taking this captive population. I am very concerned 
about that. That is happening in a very small number of places. 
But I would be interested in knowing is HUD involved in 5 
percent, 3 percent? I cannot believe it is over 10 percent if 
financial services exist.
    But as I walk around Chicago and I look at all those check-
cashing operations, I have to believe there is a better way and 
I would like to know if HUD is into this or not.
    Secretary Cuomo. We will get that to you forthwith, 
Congresswoman.
    [The information on Financial Services in Public Housing 
follows:]

                  Financial Services in Public Housing

    Financial Services Companies, such as credit unions, are an 
eligible activity under the Economic Development and Supportive 
Services (EDSS) Program. It is anticipated that this category 
will remain an eligible activity in the future under the new 
program, linking services to public housing residents for 
economic self-sufficiency as provided by the HUD registration.

    Mr. Walsh. Marcy, if I could interrupt again, and I hate to 
do that, the mark-up of the supplemental bill is in this room. 
I am told they need to get in here around noon to start setting 
up. And Mr. Price and Mr. Hobson and Mrs. Northup have not had 
an opportunity to ask questions.
    So I hate to cut you off. What we will do is since we are 
not going to meet this afternoon, we will have to poll the 
subcommittee members to see if there is a desire to have that 
third hearing. If so, then we will have to find a time to 
schedule it.
    Ms. Kaptur. Very good. Thank you.
    Secretary Cuomo. Thank you, Congresswoman.
    Mr. Walsh. Mr. Price.
    Mr. Price. Thank you, Mr. Chairman.
    Secretary Cuomo. I will talk fast, Congressman.

                                hope vi

    Mr. Price. And I will try to ask my questions as briefly as 
possible.
    I first want to ask you about the HOPE VI grants and some 
information about how that program works. In my district we 
have had some experience with this. Two housing agencies have 
applied for three HOPE VI grants. One was awarded and the 
demolition and reconstruction have already begun.
    One of the other projects I understand is very close to 
receiving an award but I have some questions about some 
measures, criteria that may have counted against that housing 
authority. It seems to me maybe they were inappropriately 
applied. I want to just confirm exactly how you score 
applicants in this program.
    The first is a crime rate factor. The Raleigh Housing 
Authority has been working with Raleigh law enforcement 
agencies very successfully to bring the crime rate down, a lot 
of emphasis on community policing and other law enforcement 
measures.
    As I understand it, that would negatively impact the RHA 
application, the Raleigh Housing Authority application, because 
a high crime rate is a positive factor in awarding a HOPE VI 
grant.
    The second factor is upkeep. No one would say that the 
Halifax Court Development that we are talking about here is 
luxury housing but the housing authority here too has attempted 
to make some progress, keep the buildings clean and functional.
    And I understand the need to replace the worst housing 
first, but I just wonder are we inadvertently punishing housing 
authorities which attempt to keep their stock up to certain 
minimum standards?
    I visited this development in question. I can say from 
firsthand experience that the cramped quarters do need to be 
replaced. They are not conducive to building a vibrant 
neighborhood.
    So I wonder if you could tell me first are these crime and 
upkeep criteria actually used when scoring HOPE VI 
applications? And is it possible that this needs to be 
rethought? If the answer is yes, should this perhaps be 
rethought, lest we give a perverse incentive to allow a housing 
complex to deteriorate in order to obtain a HOPE VI grant?
    Secretary Cuomo. Congressman, I am going to take a look at 
the criteria. I understand your point and it is a provocative 
one.
    To win a HOPE VI, the distress of the community is taken 
into consideration. Crime rate may be one of the factors in 
determining distress and also the level of disrepair of the 
building. So the higher the state of disrepair, the more 
competitive the building for HOPE VI because we are trying to 
get at the worst projects with HOPE VI.
    On the flip side, you could say well, is there not an 
incentive to allow a building to go into a state of disrepair 
or a disincentive to improve the conditions in the community? 
You could argue that, except if they did that, they would also 
be failing their public housing score and therefore be 
penalizing themselves in the operating subsidies, et cetera 
because they would be reducing their score.
    So let me take a look at the exact criteria and how they 
are applied, if it is okay with the congressman, and I will get 
back to you on it.
    Mr. Price. I am not suggesting that this authority would do 
those irresponsible things to qualify themselves. My concern is 
actually the reverse, that in addressing these problems, they 
may have inadvertently hurt themselves with respect to their 
HOPE VI prospects.
    I understand the dilemma and perhaps some kind of longer 
time frame to apply the criteria or some kind of positive 
points for progress from a base point. I do not know, but I 
would appreciate your looking at that.
    [The information on Criteria for Hope VI Selections 
follows:]

                    Criteria for Hope VI Selections

    Applications are rated against the criteria listed in 
Notice of Funding Availability for the fiscal year funding. For 
fiscal years 1998 and 1999, the rating criteria have been the 
same for all HUD SuperNOFA programs, as follows: Need; 
Capacity; Soundness of Approach; Leveraging Resources; and 
Comprehensiveness and Coordination. When all of the 
applications are received by the deadline, HUD reviewers screen 
them for eligibility, and develop preliminary scores. Those 
with the highest preliminary scores are reviewed by a panel of 
HUD Senior staff, which assigns the final scores. Those 
applications with the highest scores are selected for funding 
within the constraints of available funds.

                          incremental vouchers

    Mr. Price. Let me pick up again on the Section 8 question, 
the question of the conversion of assisted housing units from 
the Section 8 program to market rate apartments. This also is a 
problem I can testify to firsthand, with elderly and disabled 
renters being told they have to find anew place to live and 
sometimes given vouchers but having often no place to apply them.
    While I was not in the Congress it is my understanding in 
July of '95 that Congress rescinded all funding for incremental 
vouchers which had been provided in the fiscal year 1995 
funding bill. Indeed until last year there was no additional 
funding for these vouchers or construction of new Section 8 
units.
    Now according to your statistics, approximately 100,000 
previously affordable apartments have been converted to market 
rate apartments over the past three years. The National Housing 
Trust has calculated the average rent rises 50 percent when an 
apartment leaves the Section 8 program. In my district, my 
constituents did experience this. They could not absorb the 
increase.
    In your own report, ``Waiting in Vain,'' which has been 
discussed this morning, the problem is expressed in chilling 
detail, as you have said, in terms of waiting lists or in terms 
of the waiting period. The national average time to wait for 
Section 8 housing has risen to 28 months, with more and more 
families showing up on the lists and often with no other 
options.
    So that leads to questions, some of which you may have 
touched on earlier. Do you think the 100,000 new incremental 
vouchers you have requested are sufficient to meet the current 
need?
    And then, in addition to vouchers, of course, we need to 
protect the current stock. Does the administration's 2000 
budget for HUD contain any program or specific funds to 
preserve HUD-assisted or -insured affordable housing? And is 
there funding to allow HUD to mark up to market any of this 
housing stock?
    Secretary Cuomo. Congressman, this Nation is facing a 
housing crisis in many ways of historic proportion, in my 
opinion. Number one, the economy is so hot, as we mentioned, 
that it is driving up the rents in many areas and we are losing 
affordable housing units.
    Number two, we had a hiatus from affordable housing for the 
past few years and we are going to pay for that. Trust me.
    Thirdly, as you mentioned, some of the projects are 
expiring and they can now ``opt-out'' of the program. And that 
has an effect. I believe that effect is much less than the 
other two factors that I mentioned.
    We propose 100,000 new vouchers with some categorization. 
Is it enough? No. Is it enough to meet the needs that Mr. 
Frelinghuysen is speaking about for the disabled? No. Is it 
enough to meet the needs of the homeless that Mrs. Kaptur is 
speaking about? No. Is it enough to meet the needs that Mrs. 
Meek is speaking about of working families? No.
    It is not enough in any of those categories. It is 
certainly not enough to meet the overall affordable need.
    It is the best we can do in this budget within tight 
constraints. The budget caps are tight constraints and the 
president takes them seriously and there are other things that 
we have to get done obviously--Social Security, Medicare, et 
cetera.
    So within the overall context, it was the best that we 
could do. But I would not sit before this Committee and say 
that it is enough. In the Chairman's home state and city, 
Syracuse, the waiting list went from like 7,300 to 7,800 just 
in a period of a couple of years. And Syracuse is not an 
especially tight housing market nationwide.
    So this is a problem coast to coast. We will make a dent in 
it but we will not resolve it.
    Mr. Price. And as to the preservation of existing stock?
    Secretary Cuomo. As to the existing stock preservation, we 
have a number of tools. As the FHA commissioner was discussing 
with Mr. Sununu, we could have more flexibility with the 
``sticky vouchers,'' which would allow us to preserve units.
    Right now the Congress has limited the applications for 
those vouchers. We can only use them in certain circumstances. 
If we had more flexibility with sticky vouchers, we could do 
better.
    Mr. Price. Thank you, Mr. Chairman. I know our time is 
constrained.
    Mr. Walsh. Thank you very much.
    Mrs. Northup.

                     drug elimination grant formula

    Mrs. Northup. Thank you, Mr. Chairman.
    First of all, Secretary Cuomo, I wanted to ask you about 
the new advanced notice of proposed rulemaking you have on the 
drug elimination grant formula. I understand that you are 
proposing a new formula. In my district, the housing authority 
believes that that would cut funding for our drug programs by 
30 percent.
    I should tell you that Louisville is struggling a great 
deal with gangs, drugs and an enormous increase in recent years 
in youth violence and actual murder, the murder rate, unlike 
New York, I might add, where I understand the new formula 
favors.
    So I just wondered how you explain that and why you are 
doing that.
    Secretary Cuomo. Congresswoman, I do not know how that 
could possibly be the case and I will ask the Deputy Assistant 
Secretary. What we are trying to do is this. You have heard a 
lot of discussion about the management of the department and I 
think there is general consensus that we have made strides, but 
we want to get even better.
    The competitions take a lot of time for us to manage. You 
have to put out the dreaded NOFA that we have discussed. You 
then have to have applications. We have to grade the 
applications, et cetera.
    When we can block grant the funds, it is easier 
administratively and the housing authorities often like it 
because they have reliability. They know they are going to get 
X amount of dollars every year.
    This would allow us to block grant the funds.
    Mrs. Northup. Well, I do not think we object to block 
granting. I think we just want the same amount that we have 
received in previous years.
    Secretary Cuomo. Well, you cannot. When you block grant, by 
definition, everyone will get less than some were getting in 
the competition. In other words, when we had $300 million and 
we did it competitively, we had fewer winners. When you have 
fewer winners, everyone gets more. When you block grant, more 
people get, but everyone gets less.

                   youth anti-drug diversion program

    Mrs. Northup. Well, considering that that is a problem, why 
would you then earmark $100 million out of that, take it out 
for the youth anti-drug diversion program so that you will 
reduce it further?
    In our district we have some pretty new initiatives that we 
have a lot of faith in. It seems like you are deciding that you 
know better how you would affect youth drug efforts by taking 
the money out and favoring certain communities, some of the 
larger communities, and affect Louisville even more negatively.
    Secretary Cuomo. Congresswoman, just factually, it would 
not favor larger communities. The Administration has an 
emphasis on helping the youth. The youth are most often the 
ones who are involved with drug-related situations to begin 
with.
    So all we've said is $100 million would be done 
competitively for youth-related drug situations. It is still up 
to the housing authority what they put in, what they do not put 
in, but we were trying to get an emphasis on programs that 
reached out to the youth, and that is what that set-aside was 
supposed to do.
    Mrs. Northup. Well, it seems like they are fairly 
contradictory. Number one, you are saying we are not going to 
do what we have always done, so programs that have depended on 
this money are going to be affected negatively because they are 
going to get less.
    Then you are going to earmark $100 million and there will 
be some winners and some losers.
    And if you decide that you do not want to be in the 
selection process, I think you can make a good argument for 
that, but what you are really doing is saying we do want to be 
in the selection process but we are also going to reverse it 
with most of the money.
    Secretary Cuomo. Congresswoman, just so we're clear, it was 
not a departmental thought that we go to the formula. It was 
the law passed by the Congress. So that's why we are going to 
the formula, because that is the law.
    And I do not know that they are inconsistent. We run both 
formula programs and competitive. The competitive have the 
advantage of targeting a priority. And under this scenario we 
will block grant $200 million or thereabouts. They will have 
that certainty. We will not have to compete that money.
    But $100 million, where we do have an administration, a 
policy initiative, a Federal initiative that says please focus 
on the youth, the way we get them to do that is by a 
competition.
    Mrs. Northup. Does the law allow you to earmark out $100 
million?
    Secretary Cuomo. Yes. Short answer is yes, Congresswoman.
    Mrs. Northup. Was that it in the housing law last year 
which required that the money must be block-granted?
    Secretary Cuomo. It is in the public housing law that was 
passed.
    Mrs. Northup. Mr. Chairman, do I have any time to ask a 
follow-up question?
    Mr. Walsh. Yes, you do.
    I want to clarify something here. The secretary makes the 
point that that was in the statute. Could you show us where? We 
cannot find it.
    Ms. Vincent. The formula base for the public housing drug 
elimination grant?
    Mr. Walsh. The set-aside for that $100 million.
    Ms. Vincent. The set-aside is in the budget for fiscal year 
2000.
    Mr. Walsh. No, the question was where is it in the statute 
that required HUD to do this?
    Mrs. Northup. What I think the question was--the answer was 
the formula is in the housing statute. I said does the law 
allow you to carve off $100 million?
    Secretary Cuomo. And that is a submission within this 
year's budget, is what we are saying.
    Mrs. Northup. So in other words, currently you could not do 
that without new authorizing laws.
    Secretary Cuomo. Let me see if I can get the answer, 
Congresswoman. I understand what you are asking.
    Do we need authorizing legislation to do the set-aside for 
the $100 million youth money? Do we know?
    We will check and I will get back to you, Congresswoman.
    [The information on Youth Programs Set-Aside follows:]

                        Youth Programs Set-Aside

    The Youth program can be authorized through appropriations 
language. The $100 million set-aside for Youth programs can be 
authorized through appropriation language.

    Mrs. Northup. I am just a little confused. On the one hand 
it is like the devil made me do it. I have to do it by blocking 
granting. And the next message I am getting is, but we do not 
have to do that; we can competitively award it if we want.
    Secretary Cuomo. I understand the Congresswoman's point. 
Would you like to respond?
    Ms. Vincent. The drug elimination program is under the law 
to be formula-driven. And also our advanced proposed notice is 
an intent to get comments back. So if there are comments from 
your constituent groups or from you, that is what we are 
looking for. We want a formula that is fair and equitable and 
achieves the same mission that you are achieving.
    The youth initiative, which is a new initiative, a subset 
out of our budget for the drug elimination grant, is not 
addressed in the public housing reform law because it did not 
exist at the time. This is our attempt to build on successful 
models across the country where housing authorities have 
directed drug elimination grants to youth prevention 
activities, our most at-risk population, and to build on that 
and encourage other housing authorities to go in that 
direction.
    Mrs. Northup. My concern is that you are ear-marking it out 
of a fund. It would be one thing if you came in with a new 
program and asked for $100 million for it, but I have a 
question in my mind about whether or not the $100 million can 
be taken from this fund without authorizing legislation. But I 
admit I am new on this committee.
    Mr. Walsh. Well, I think you have made your point very 
clearly. And if you would allow me to let Mr. Hobson finish up 
because they need to get us out of this room so they can set it 
up for the supplemental. Thank you.

                balancing local and demand-driven needs

    Mr. Hobson. I am going to give you a broad multiple choice 
question that you can run with however you want. And you can 
answer as much of it as you want now and maybe people can 
respond.
    Let me say this. I am sorry Ms. Kaptur left because 
Governor Celeste came to me when I was a state senator and 
asked me to write a revision of the mental health law in the 
State of Ohio, which we did together. It is a community-based 
mental health system today, trying to get away from the big 
institutions we had before.
    We did that and we funded it, but we still have a problem 
because most people who have mental health problems do not get 
well. What we do is treat them and put them back into society, 
as best we can, and many people cope very, very well, but there 
are still problems and people do not take their medicine. We 
have a system that says we do not put you in jail and we do not 
institutionalize you anymore, and I think that is probably more 
humane, but it is a continuing problem.
    The problem I have and what I am coming to is there is a 
mentality in federal programs, including many of the programs 
at HUD, sir, that one size fits all. And instead of allowing 
local communities to make their decisions, we try here to 
micromanage them.
    For example, in the 2000 budget you requested a $1.2 
billion increase in the Section 8 rental assistance program, 
with under half the increase to be used for 100,000 incremental 
vouchers.
    Now, instead of placing the vouchers in the local hands, 
giving local officials discernment to use them, you have a 
formula to use them.
    Similarly in other programs, you do the same thing. In five 
new programs, each requiring CDBG set-aside--Metro Job Links, 
home ownership zones, Easy Tech and other programs--there is 
this one size fits all.
    I guess my question goes like this. Would it not be better 
to allow local officials to distribute these funds to meet 
their local needs, letting them determine the eligibility based 
on current programs, rather than always introducing new 
programs? Would that not enhance your ability?
    And have you considered making program recommendations 
instead of program requirements and doing away with the 
earmarks? And does it not undermine the meaning of block grant 
program to have the federal government set aside funds and then 
direct how those funds are supposed to be spent?
    Secretary Cuomo. Congressman Hobson, it is a very 
interesting question that you pose and it is a philosophical 
dilemma, frankly, for the Department. And we pursue both prongs 
and we can get criticized and challenged from both.
    Congressman Frelinghuysen's point is actually the opposite 
of that point. We try to do two things. We try to block grant a 
certain amount of funds to allow for local flexibility. The 
Section 8 program incremental vouchers--use them how you see 
fit, local government. If you want to use them for the 
disabled, fine, homeless, fine, elderly, fine, mentally ill, 
fine.
    Our homeless programs: you tell us what you need. Total 
change that we put into place. We, on the homeless programs, 
used to say you shall do this many units for the mentally ill, 
this many for domestic violence, this many for singles. We 
flipped that and we now said you tell us. And that is a 
mainstay of our approach: block grant, local flexibility.
    At the same time, we say there are certain national needs 
that we want to make sure, as a matter of federal policy, that 
you take care of. We want you to take care of the elderly. We 
want you to take care of the homeless. We want you to take care 
of the disabled.
    Congressman Frelinghuysen is saying we are not prospective 
enough for the disabled. Why am I leaving it up to the local 
concern? Why do I not set aside more for the disabled, because 
they are not getting their fair share?
    That is the tension. Do you leave it all to the local 
discretion or do you say no, no, you must take care of the 
disabled?
    We try to do both, frankly. We have some programs that 
allow local flexibility block grant: CDBG, Section 8 
incremental, the HOME program. But then we have some programs 
where we say we will tell you that we want some national 
priorities met. 811, you must take care of the disabled. 202, 
you must take care of the elderly. Supportive housing, you must 
take care of the homeless.
    We do both. And is it the exact right blend? Is it the 
exact right ratio? I am not sure and it depends on the time and 
frankly, it depends on where we are as a nation. Do we believe 
more in national mandate or more in local initiative?
    Mr. Hobson. So much depends on the local community.
    Secretary Cuomo. Yes.
    Mr. Hobson. I live in a town that has never missed a mental 
health levy, never missed an MRDD levy. We have people moving 
into our community because of the services that the community 
provides. There are other communities that do not do that. And 
what we need to do is balance that.
    But my community is negatively impacted in some other funds 
that it may need because it does a good job on its own in 
certain areas.
    All I am trying to suggest to you is that you have a big 
job and you are looking across the country. It is a huge 
agency, but it also has to have a human touch when it comes 
down to delivering those services in the local communities, and 
we just have to keep working on how we get more money back to 
the local community so it can do its job?
    Each one is unique in how it delivers services. Some are 
better than others. I think, part of your job is oversight to 
see that your people are achieving these goals, so that in the 
end, we achieve those national goals that you and I agree upon.
    Secretary Cuomo. Congressman, with that philosophy, I think 
you would have taken the same actions that I have taken as the 
HUD Secretary. That is exactly where we are trying to go.
    Look at the communities, give them flexibility, but then 
make sure they are doing what we want to see them do. That is 
what our Community Builder approach is all about. These are 
Civil Service hired people, not political. They are all hired 
through the Civil Service. They come in. They are from the 
private sector. They are the liaisons with the community, work 
with the community to meet the needs that we are trying to 
reach.
    The overwhelming percentage of the HUD budget, by the way, 
is a locally driven budget--CDBG, $4.6 billion; HOME program, 
$1.6 billion. Those big programs are all locally driven. They 
have no Federal prescription to speak of. The disabled, the 
homeless, they are prescriptive but they are also the smaller 
piece of the budget.
    Mr. Hobson. I would add to that because you did a good job 
of answering my question so quickly.
    Secretary Cuomo. Thank you, sir.
    Mr. Hobson. The only problem I have is there are so many 
programs out there and we keep creating more and more of them.
    I would just encourage you to watch creating too many new 
programs as you move forward. I want to again say that I think 
HUD has done a good job, as I said yesterday, coming into my 
community and helping the community revitalize, because I 
cannot do it. I told them it is not my job. That is your job. 
And the Cleveland office coming in and being of assistance and 
the inspector general did a good job, as well. Thank you.
    Secretary Cuomo. Congressman, I thank you. The Community 
Builders have given us an entirely new capacity in the 
Department. We are actually talking to the communities. We are 
working with the communities. We are not just a regulator 
saying no. We are actually a facilitator, saying yes.
    Mr. Hobson. You mean you are user-friendly now?
    Secretary Cuomo. We are close to user-friendly. We are 
user-possible. We are fighting for user-friendly.
    Mr. Hobson. That is an upgrade.

                              adjournment

    Mr. Walsh. Thank you both for that dialogue.
    I think we will now adjourn and, as I said, we will poll 
the subcommittee to see if there is a desire to hold one more 
and if there is, we will let you know, try to give you enough 
notice, then figure out when we are going to have it.
    Thank you very much, all of you. The subcommittee is 
adjourned.


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                               I N D E X

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              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                                                                   Page
Affordable Housing Backlog Need..................................    75
America's Private Investment Companies (APIC)....................    62
Community Builders/Fellows.......................................    37
Community Development Grants Program:
    Disaster Funding 
    New Allocation Procedure for Disaster Funding................    55
Contract Administrators..........................................    50
Cuomo, Andrew, Introductory Remarks..............................     3
    Secretary's Statement........................................     8
Drug Elimination Grant Formula...................................    80
    Youth Anti-Drug Diversion Program............................    80
        Youth Programs Set-Aside.................................    82
Fair Housing                                                    :
    Audit........................................................    28
    Insurance Investigations/Enforcement.........................    27
GAO's ``High-Risk'' Definition...................................    18
HOPE VI 
    Criteria for HOPE VI Selections..............................    78
Housing Crisis in America........................................    71
HUD                                                             :
    Introduction of HUD Staff....................................     3
    Mission......................................................     4
    Progress.....................................................     5
Inspector General                                               :
    OIG Budget...................................................    33
    Urban Fraud Initiative.......................................    32
Lead-Based Paint Reduction.......................................    22
    University Partnerships with HUD.............................    23
Meek, Carrie                                                    :
    Introductory Remarks.........................................     2
Notice of Funding Availability (NOFAs)                          :
    Delay in Issuing HOME NOFA...................................    43
    Need for NOFA Reform.........................................    57
    NOFA Process.................................................    62
    Public Comment Period For NOFAs..............................    45
Project Results of Fiscal Year 2000 Budget.......................     6
Program Initiatives                                             :
    Forging Partnerships with New Initiatives....................    40
    New Programs at HUD..........................................    19
    Need For Authorizing Legislation for New Initiatives.........    21
    Staffing for New Initiatives.................................    20
Mark-to-Market...................................................    65
    Opt-Outs Funding.............................................    66
    Market Rent vs. Fair Market Rent.............................    66
Mental Health Initiatives........................................    73
Oversight Activities                                            :
    Fannie Mae/Freddie Mac Oversight Fees........................    68
    OFHEO Staffing...............................................    68
    Regulatory Fees..............................................    69
    Strengthening of HUD Oversight over GSEs.....................    69
Public Housing                                                  :
    Financial Services...........................................    76
    Establishment of Credit Unions in Public Housing.............    75
    HUD Briefing on Rental Housing Crisis........................    39
    Impact of Shortfall on PHAs..................................    35
    Management of PHAs...........................................    31
    Waiting Lists................................................     4
    Negotiated Rulemaking Process................................    36
    Operating Subsidies PFS Funding..............................    34
        Performance Funding System Supplemental..................    63
    Washington Post Article on Public Housing....................    39
        Waiting in Vain Report...................................    39
Rural Housing Initiative.........................................    64
Section 8                                                       :
    Balancing Local and Demand-Driven Needs......................    82
    Funding for Persons with Disabilities........................    58
    Incremental Vouchers.........................................    78
    HUD Negotiations to Renew Expiring Contracts.................    48
    Need for Better Data on Housing Stock........................    60
    Reduced Section 8 Funding....................................    53
    Renewal of Expiring Section 8 Contracts                      36, 47
    Vouchers for the Elderly.....................................    72
    Sticky Vouchers..............................................50, 67
Section 202......................................................    72
    Elderly Only Building Designations...........................    61
Section 202/811                                                 :
    Disability Funding...........................................    23
    Section 8 Funding for Persons with Disabilities..............    58
    Section 811 NOFA.............................................    25
SHOP Funding.....................................................    22
Staffing Needs for Increased Enforcement Activities..............    21
Urban Institute Study............................................    28
    Distribution of Study........................................    29
    Methodology of Report........................................    30
Visit from Former Chairman Lewis.................................    71
Walsh, James, T                                                .:
    Chairman's Introductory Remarks..............................     1

                                
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