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




                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS
                             SECOND 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
 ANNE M. NORTHUP, Kentucky           ROBERT E. ``BUD'' CRAMER, Jr., 
 JOHN E. SUNUNU, New Hampshire       Alabama                        
 VIRGIL H. GOODE, Jr., Virginia     
                                    

 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,
          Dena L. Baron, and Jennifer Whitson, Staff Assistants
                                ________

                                 PART 6

                     DEPARTMENT OF HOUSING AND URBAN
                               DEVELOPMENT

                              

                                ________
         Printed for the use of the Committee on Appropriations
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 64-678 O                   WASHINGTON : 2000





                       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              MICHAEL P. FORBES, New York
 RODNEY P. FRELINGHUYSEN, New Jersey CHET EDWARDS, Texas
 ROGER F. WICKER, Mississippi        ROBERT E. ``BUD'' CRAMER, Jr., 
 GEORGE R. NETHERCUTT, Jr.,          Alabama
Washington                           MAURICE D. HINCHEY, New York
 RANDY ``DUKE'' CUNNINGHAM,          LUCILLE ROYBAL-ALLARD, California
California                           SAM FARR, California
 TODD TIAHRT, Kansas                 JESSE L. JACKSON, Jr., Illinois
 ZACH WAMP, Tennessee                CAROLYN C. KILPATRICK, Michigan
 TOM LATHAM, Iowa                    ALLEN BOYD, Florida              
 ANNE M. NORTHUP, Kentucky
 ROBERT B. ADERHOLT, Alabama
 JO ANN EMERSON, Missouri
 JOHN E. SUNUNU, New Hampshire
 KAY GRANGER, Texas
 JOHN E. PETERSON, Pennsylvania
 VIRGIL H. GOODE, Jr., Virginia     
                                                       

                 James W. Dyer, Clerk and Staff Director

                                  (ii)

 
DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND 
              INDEPENDENT AGENCIES APPROPRIATIONS FOR 2001

                              ----------                              

                                          Wednesday, March 8, 2000.

              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                               WITNESSES

ANDREW CUOMO, SECRETARY
SAUL RAMIREZ, DEPUTY SECRETARY
DEBORAH VINCENT, DEPUTY ASSISTANT CHIEF OF STAFF FOR POLICY
DOUGLAS KANTOR, DEPUTY ASSISTANT CHIEF OF STAFF FOR PROGRAMS
GAIL LASTER, GENERAL COUNSEL
JACQUIE LAWING, DEPUTY CHIEF OF STAFF FOR POLICY AND PROGRAMS
HAL DECELL, ASSISTANT SECRETARY FOR CONGRESSIONAL AND INTERGOVERNMENTAL 
    RELATIONS
CARDELL COOPER, ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND 
    DEVELOPMENT
HAROLD LUCAS, ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING
JACQUELINE JOHNSON, DEPUTY ASSISTANT SECRETARY FOR NATIVE AMERICAN 
    PROGRAMS
JOSEPH SMITH, ACTING ASSISTANT SECRETARY FOR ADMINISTRATION
WILLIAM P. APGAR, ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING 
    COMMISSIONER
IRA PEPPERCORN, DIRECTOR, OFFICE OF MULTIFAMILY HOUSING ASSISTANCE 
    RESTRUCTURING
GEORGE ANDERSON, EXECUTIVE VICE PRESIDENT, GOVERNMENT NATIONAL MORTGAGE 
    ASSOCIATION
SUSAN WACHTER, ASSISTANT SECRETARY FOR POLICY DEVELOPMENT RESEARCH
EVA PLAZA, ASSISTANT SECRETARY FOR FAIR HOUSING AND EQUAL OPPORTUNITY
DAVID JACOBS, DIRECTOR, OFFICE OF LEAD HAZARD CONTROL
DAVID GIBBONS, ACTING CHIEF FINANCIAL OFFICER
EDWARD KRAUS, DIRECTOR, ENFORCEMENT CENTER
DONALD J. LAVOY, DIRECTOR, REAL ESTATE ASSESSMENT CENTER
STEPHEN CARBERRY, CHIEF PROCUREMENT OFFICER
GLORIA PARKER, CHIEF INFORMATION OFFICER
ELINOR BACON, DEPUTY ASSISTANT SECRETARY FOR PUBLIC HOUSING INVESTMENTS
ARMANDO FALCON, DIRECTOR, OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSITE

                       Chairman's Opening Remarks

    Mr. Walsh. I would like to call the Subcommittee hearing to 
order. Welcome, everyone, Mr. Secretary, your assistants. 
Ladies and gentlemen, this morning it is my pleasure to welcome 
you to the hearing to discuss the fiscal year 2001 HUD budget. 
Secretary Andrew Cuomo is testifying today and I would like to 
extend from the Subcommittee a welcome to him and all of his 
staff. I would also like to note that the HUD Assistant 
Secretaries will appear before the Subcommittee on March 23rd, 
for the purpose of reviewing their budget requests.


                       SUMMARY OF BUDGET REQUEST


    This year, HUD's budget is increased by $6 billion. The 
largest increase of the 13 Appropriations Subcommittees. 
Section 8 renewals show proposed increases by $2.4 billion, 
CDBG is to be increased by $1.2 billion, housing for the 
elderly and disabled is to be increased by $78 million. The 
budget includes funds for several new programs: $50 million to 
make vouchers work better, $50 million in vouchers to be used 
in conjunction with low-income housing tax credits, $50 million 
for a new elderly housing construction program.
    Other new initiatives include a $22 million set-aside for 
the Mississippi Delta, and $20 million for the creation of a 
faith-based program. Otherwise, all existing programs receive 
normal increases. Obviously, it is too early to know whether 
our allocation will support these increases but we will 
certainly evaluate them carefully.
    This evaluation will extend to other budget issues, like 
programmatic spend-out rates, Indian housing subsidy rates, 
Section 8 recaptures, and out-year projections. All of these 
areas, though technical in some respects, have direct 
consequences on the discretionary spending amounts we 
appropriate from year-to-year.
    Like most of us here today, I am serious about trying to 
get the funds we appropriate to their intended beneficiaries as 
quickly as possible. Sometimes the answer to a problem doesn't 
mean increasing funds; sometimes it means making existing 
programs work more efficiently. Take Section 8 vouchers, for 
example. It took more than a year to get vouchers to the 
families who needed them. The problem persists, as is evidenced 
by CBO's intention to decrease the program's fiscal year 2001 
spend-out rate from 6 percent to 1 percent. That may help us 
with budgeting but it is not helping the people that need the 
vouchers.
    Closely related to spend-out rates is HUD's incapacity to 
track programmatic performance. Every program at the Department 
should have empirical data detailing accomplishments including 
how Federal funds have leveraged private dollars. Adequate 
tracking systems would enable HUD to provide this information, 
it would eliminate the material weakness cited in audit after 
audit and would liberate HUD from GAO's high-risk list. 
However, without adequate information systems, these conditions 
are likely to continue to plague HUD.
    For that reason, I plan to probe HUD's requested funding 
level for the Working Capital Fund, particularly the funds 
directed at improving and integrating its information systems. 
Obviously, tracking compliance and monitoring programs requires 
staff and this year HUD plans to hire 700 people. I plan to ask 
questions about HUD's resource management assessment plans so 
that we can be sure that new staff will be used where they are 
most needed.


                             DEG RESCISSION


    Before we begin the hearing, I want to address an area that 
is potentially controversial. As most of you know, I 
recommended a $718,000 rescission from the Drug Elimination 
Grant's technical assistance account. Some may attempt to 
portray this rescission as an attack on the efficacy of the gun 
buy-back program. I can state categorically that is not so. 
After reviewing the underlying legislation authorizing the Drug 
Elimination Grant Program, I am convinced that HUD does not 
have the legal authority to spend appropriations for that 
purpose and is in direct violation of Title XXXI of the Code 
despite HUD's assertions to the contrary.
    If you have an opinion on gun buy-back programs, then it is 
relevant to the fiscal year 2001 request, which includes new 
authorizing language. The rescission, however, is related to 
previous year appropriations and shouldn't be confused with 
that request.

                           Affordable Housing

    Lastly, I am pleased to report some very good news. Last 
year, HUD provided the Committee with charts that indicated a 
drop in the number of affordable housing units made available 
since 1995. These charts were based on CBO numbers. After 
reviewing the charts with CBO, however, it became apparent that 
HUD's presentation did not show the entire picture. By 
narrowing their definitions and by failing to include pertinent 
information, other housing programs outside of HUD's purview, 
HUD was able to argue that affordable housing opportunities had 
diminished since 1995, while the total number of units has, in 
fact, steadily increased.
    Even the data that we present today is conservative because 
annual data is not available for many HUD programs including 
HOME, HOPE VI, HOPWA, Shelter Plus Care, and CDBG programs. I 
refer you to the chart in the front of the room, titled, 
``Housing Units Under Payment.'' The graphic line in red at the 
bottom were the HUD estimates, and the graphic line at the top 
in blue are the GAO revised estimates; a very different 
picture. Consequently, the number of affordable housing units 
provided from these programs that I mentioned is not included 
in the total.
    Furthermore, HUD's presentation did not include the number 
of affordable housing units constructed under non-HUD 
administrative programs like low-income housing tax credits and 
the NeighborWorks housing. After adding units produced under 
those highly successful programs, the supplies of affordable 
housing increases significantly. Much remains to be done. But 
as our data show, there are far more available housing units 
than we were led to believe.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Walsh. Mr. Secretary, we welcome you and we are glad 
you are here this morning. After Mr. Mollohan offers his 
opening remarks, we will ask you to introduce your associates, 
summarize your testimony; all of your testimony will be 
included in the record.
    And, so, at this point, I would like to call upon my 
colleague, Mr. Mollohan for comments.

                     Mr. Mollohan's Opening Remarks

    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Secretary, welcome back to the Subcommittee. I would 
like to join the Chairman in that welcome. I want to compliment 
you on your leadership of a large agency with many diverse 
programs. You have brought renewed confidence to your 
Department's ability to carry out its important missions.
    You, and your colleagues in the housing and community 
development area, and we, on this Subcommittee, face a number 
of interesting and important challenges. As you and others 
rightly keep reminding us, there continues to be a serious 
shortage of affordable housing in this country; a problem that 
affects many ordinary working people, as well as the very poor.
    We still have a serious problem of homelessness and we 
still have areas, both urban and rural, at risk of being left 
behind in the general tide of prosperity. While the 
relationship your Department and parts of our Subcommittee may 
not always have been calm and placid I think in the end it has 
proven productive.
    Last year some good things were accomplished: Expansion of 
the housing voucher program, measures to reduce loss of 
assisted housing through opt-outs, and new initiatives in 
housing for the elderly, for example. These accomplishments 
came through the combined efforts of you, your Department, our 
Subcommittee, our authorizing colleagues and many others in the 
housing community.
    Your new budget provides us with a good starting point for 
this year's deliberations. Needless to say, we won't be able to 
do everything you propose but I do hope we will find a way to 
continue expanding the availability of Section 8 vouchers, 
given the tremendous unmet need that still exists, and I hope 
we will be able to act favorably on your initiatives aimed at 
production of low-income housing as well as some of your 
proposals involving homeless assistance and housing and 
services for the elderly, to name just some high priority 
examples.
    We have an interesting year ahead of us and I look forward 
to your testimony and to a productive relationship in the 
coming months.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you, Mr. Mollohan.
    Mr. Secretary?

                       Introduction of HUD Staff

    Secretary Cuomo. Thank you very much, Mr. Chairman, and 
other members of the Committee. Congressman Mollohan, it is 
once again my pleasure to be here. We have had a very 
successful working relationship with this Committee. I would 
agree with Congressman Mollohan, it has not always been calm 
and placid, but we got things done and I think that is more the 
test than the level of calm that we necessarily enjoy. We had 
calm and placid for many years and we weren't getting anywhere.
    Let me take this moment, with the Chairman's permission, to 
introduce some of the HUD's senior staff who are with us today, 
Mr. Chairman.
    Mr. Walsh. Please.
    Secretary Cuomo. At the table, as you know, Deputy 
Secretary Saul Ramirez, and FHA Commissioner William Apgar. FHA 
is the largest single part of the Department of Housing and 
Urban Development and it is a major factor in today's 
presentation.
    We have Assistant Secretaries with us and I will call out 
their name and if they could just stand for the Committee's 
pleasure. Assistant Secretary Harold Lucas, Public Housing; 
Assistant Secretary Cardell Cooper, Community Planning and 
Development; Assistant Secretary Hal DeCell; Director D.J. 
LaVoy, REAC; Assistant Secretary Eva Plaza, Fair Housing; 
Director Ira Peppercorn, OMHAR; Acting Assistant Secretary for 
Administration Joe Smith; Assistant Secretary for Policy 
Development and Research Susan Wachter; Mr. Ed Kraus, FBI 
Detailee heading the Enforcement Center; Gail Laster, General 
Counsel; George Anderson, Acting President of Ginnie Mae; Susan 
Gaffney, Inspector General; Mr. Stephen Carberry, head of 
Procurement; and the Acting Chief of Staff, Jacquie Lawing.
    Mr. Chairman, I would ask the Committee to look at several 
charts as I make a few brief points as a summary and with the 
Chairman's permission, the formal testimony can be entered into 
the record but as much time as we can spend on the dialogue, I 
think would be most helpful for the Committee.
    Mr. Walsh. Without objection.

                      HUD Back in Housing Business

    Secretary Cuomo. The first chart, Mr. Chairman, is 1996, a 
cover of the ``New York Times Magazine'' that year, which sort 
of summed up where we were. To the extent housing as an area 
gets much coverage, this was a very significant story and it 
was entitled, ``The Year That Housing Died.'' This is 1996. 
Because what they were saying was that year the number of new 
vouchers went to zero for the first time in housing history. 
Hence, ``The Year That Housing Died.''
    We have come a long way from that point, there is no doubt. 
The GAO says that we have made significant, credible, 
management progress at HUD. Every objective analysis, Mr. 
Chairman, from Booz Allen to Price Waterhouse-Coopers to NAPA, 
to Ernst & Young, any credible source verifies the progress 
that the Department has made and much of that concert is due to 
the cooperation with this Committee.
    HUD is now definitely back in business. And our budget 
presentation this year took that ``Times'' cover story and 
mocked it up because we have a little journalistic envy as to 
what the story would be now. And the story would be the rebirth 
of housing, HUD back in business. And after those 5 years of 
being at zero vouchers, which you can see, which was after 
``The Death of Housing'' and then zero, zero, zero, zero, zero, 
we have gotten to 50,000 vouchers, then 60,000 vouchers, and 
then the President has proposed this year 120,000 vouchers.
    So, you can see that we are now back in the housing 
business, we are coming up to scale once again. This year's 
proposal of 120,000 vouchers actually brings us up to scale and 
we did much of the management work that had to be done to get 
us here.

                Calculation of Affordable Housing Units

    Now, on the numbers, Mr. Chairman, you quoted GAO numbers. 
We talk about the worst casing housing needs numbers. I would 
like to make two points. One is an apples-and-apples point and 
then one is a context. Apples-and-apples. When we talk about 
housing numbers and production numbers, we are talking about 
HUD specifically. You are correct that if you want a broad 
Federal number of all affordable housing units produced, you 
would then have to look outside of HUD and add primarily low-
income housing tax credit and agriculture programs, which your 
number did. I don't dispute those numbers; they are just 
different numbers. The number of units that HUD produces versus 
the number of units that HUD produces, plus the United States 
Department of Agriculture.
    The context, however, I do dispute. Factually when you say 
the number of affordable housing units has not gone down, I 
think that is misleading, because that leaves out the number of 
units being lost in the private market. In other words, you 
need two factors in this equation. How many units did the 
Government provide? Your numbers take HUD, add agriculture, et 
cetera. But then you need to deduct the number of units we lost 
from the private market. The economy is so hot it is driving up 
rents every day. That is the problem. It is not that the state 
of play is zero and every unit we produce is a net positive 
unit; you have to deduct from that number what the economy is 
doing to us.
    Now, it is sort of a curse of riches. The economy is so 
strong it is actually driving up the rents and reducing the 
amount of affordable housing. But that is the problem we have 
as a nation today. So, to sit in this hall in Washington and 
say, well, we are producing this many units of affordable 
housing, therefore, we must be providing more affordable 
housing is misleading unless you deduct the amount lost.
    Mr. Walsh. May I just ask you a question, Mr. Secretary?
    Secretary Cuomo. Certainly.
    Mr. Walsh. If you are just counting HUD programs, why don't 
you count HOME, HOPE VI, HOPWA, and the others, in your base?
    Secretary Cuomo. I don't know that we--we do.
    Mr. Walsh. You do count them?
    Secretary Cuomo. Assistant Wachter, who does the numbers, 
says we do.
    Mr. Walsh. So, all of HUD programs are accounted for in 
that report?
    Secretary Cuomo. Yes.
    Mr. Walsh. Okay.
    Secretary Cuomo. But the big difference is, Mr. Chairman, 
the number of units being lost in the private sector. That is 
what makes this a crisis. So, your numbers, by the way, don't 
dispute that fact. The GAO doesn't take into consideration the 
lost units from the private sector. So, we have an affordable 
housing crisis in this nation by my numbers or by your numbers. 
It is a marginal difference between the two but we still, 
because of what the private sector is doing--and again no fault 
to the private sector--it is because of the strong economy, we 
have probably an affordable housing crisis of historic 
proportions.
    Mr. Walsh. If I could interrupt just once more. The concern 
that we had was that the presentation that was made drew a 
picture that the Federal Government's commitment to affordable 
housing had diminished over the past several years and I think 
what you have said is that changes have occurred in the private 
sector, that is true. But in the public sector, the Federal 
Government's commitment to this has grown over the past several 
years.
    I just want to draw the distinction that I think there is a 
difference and a distinction that the Federal Government's 
commitment over the past several years has not only been strong 
but has increased in its commitment to affordable housing 
through these various programs.
    Secretary Cuomo. Mr. Chairman, I don't think you can 
evaluate the Federal Government's response without considering 
the time you are in. Our disaster programs have gone way up. 
Yes. Because there are many more disasters--the Government 
response to the current circumstance, we have an affordable 
housing crisis because the economy is so strong it is drying up 
affordable housing. Well, the Federal Government increased. 
Yes. But the question is, did you increase at all relative to 
the size of the problem? And as a matter of fact, the Section 8 
voucher, which is the main way we have been providing housing, 
notably--and we have discussed this with the Committee--it is a 
Republican program, the Section 8 vouchers. This is the first 
time in housing history that number went to zero and it stayed 
there for 5 years. So, there is no doubt that----
    Mr. Walsh. Are you saying there were no vouchers or there 
is no increase in vouchers?
    Secretary Cuomo. No new vouchers.
    Mr. Walsh. No new vouchers?
    Secretary Cuomo. Yes.
    Mr. Walsh. But there were thousands of vouchers.
    Secretary Cuomo. We have renewed the vouchers.
    Mr. Walsh. Right.
    Secretary Cuomo. But the number of new vouchers went to 
zero for the first time.
    Mr. Walsh. Fair enough.
    Secretary Cuomo. And also when you define affordable, many 
of the programs you have included in your definition of 
affordable housing, it is a question of how you define 
affordable. Affordable for whom? Affordable at what salary 
limit? Is it affordable housing if you are making $40,000 a 
year or is it affordable if you are making $5,000 a year? Many 
of the programs you include as affordable housing, people would 
argue, doesn't really provide low-income affordable housing. 
The tax credit program, for example, which is a very good 
program--which I worked with when I was in the real world--
provides affordable housing but for higher income people who 
need affordable housing.
    When you get to very low-income people, public housing 
income people, many of these programs don't go that low--is the 
expression in the business--to provide that subsidy. So, we 
could debate, Mr. Chairman, are these really affordable 
programs, are they really going low enough? On the margin, how 
many units is the Federal Government producing? But I think by 
any measure compared to the need, if our job is to sit here and 
do what the people need today in this condition, in this 
economy, compared to the need, we are nowhere meeting the need. 
The 120,000 vouchers that the President proposes today would be 
a good step in the right direction, from 50 to 60 to 120 and 
would make a major step forward.

                       Summary of Budget Request

    Briefly, Mr. Chairman, the HUD budget is divided into four 
main categories: Affordable housing, which we just touched on; 
economic revitalization; discrimination in housing and safe and 
livable communities. Under the affordable housing, as we 
mentioned, 120,000 vouchers would start to make a real 
difference. We want to invest more in our homeless programs, 
which have been working extraordinary well, Mr. Chairman. We 
have won the Harvard Award for our approach called ``The 
Continuum of Care.'' It turned over a lot of authority to local 
government. And we are requesting to increase that up to $1.2 
billion.
    We are also seeking an increase in the 202 program and the 
Assisted Living and Service Coordinators, also additional funds 
for HOPWA and 811.
    On the economic development side, the President has done a 
lot of work on what he calls the New Markets Initiative. This 
is the economic development agenda, if you will. It says let's 
go to the places that are not doing as well in this new 
economy, invest in them, and bring them up; helping not only 
those areas but helping the overall economy. It is a private 
sector-oriented program. It is incentivizing the private 
sector. The key of the President's New Markets Tour is the 
APIC, American Private Investment Corporation, which would 
leverage $1.5 billion in private capital.
    We are also seeking funding for round two of the 
Empowerment Zones and extending the tax incentives to all the 
Empowerment Zones, as well as $100 million more for the EDI 
program and $250 million more for CDBG, which is a mainstay of 
the Department.
    As you know, Mr. Chairman, we have been very aggressive in 
the area of fair housing. Discrimination is alive and well in 
this country. I could share stories with this Committee that 
you would not believe happened in this country in the year 2000 
from cross burnings, to a case we are recently doing where the 
Ku Klux Klan was chasing a woman across the country from just 
50 miles outside of Philadelphia, as horrendous and graphic as 
any situations we have ever faced in discrimination. And as a 
Cabinet Secretary who is charged with enforcing the Fair 
Housing Laws, which were passed 1 week after Martin Luther 
King's death and basically inspired by his death, as a 
response, we take that very, very seriously. We have been very 
aggressive. We need to do more and part of that is with the 
FHIP and the FHAP programs and we have asked for an additional 
14 percent funding there, an additional $50 million.
    The mainstay of the Department is our homeownership 
efforts. We are pleased to be able to celebrate with the 
Committee the highest homeownership rate in history, which I 
like to say, it's not a coincidence that HUD's budgets have 
been more aggressive and the homeownership rate has gone to the 
highest point in history. I am more than willing to share some 
of that credit with this Committee for the high homeownership 
rate, Mr. Chairman. But we do have a record homeownership rate 
and it is something we should be proud of and we can do more.

                                FHA Fund

    FHA has had the best year in its history last year--1.3 
million loans, and thanks to working with this Committee. The 
FHA is actually making more money than ever before. Part of it 
is that the economy is doing better. But that doesn't really 
explain the turnaround in FHA. When we came in, FHA was near 
bankruptcy. It is now the turnaround story of the Federal 
Government. We automated the FHA. We streamlined the FHA. We 
privatized the property disposition which was slowing down the 
Department. And the recent financial statement for FHA shows 
that it will have made $5 billion, more than the estimate, 
which means it will have gone from a negative $2.7 billion to 
$16.6 billion in value. This is a phenomenal success story that 
this Committee should feel very good about. You have worked 
hand-in-glove with FHA to make the changes that we had to make. 
They were not easy--the privatizing of the disposition, the 
automation of the system. And I want to thank the Committee and 
point to the evidence of what our collaboration and cooperation 
has actually produced.

                    Property Disposition Initiative

    We did an event with Congressman John Kasich 2 weeks ago 
over at the Department where we incorporated one of Mr. 
Kasich's ideas, actually, for FHA's property disposition to 
complete the disposition process, where if FHA owns a home, 
which means we took it back on foreclosure, and has not sold 
the home in 6 months, we will give it to the local government 
for $1. You hear sometimes anecdotal stories of HUD owns a home 
which is problematic in the neighborhood. Up until now, our 
answer has been we are doing everything we can to expedite the 
sale. Congressman Kasich's idea was--if you don't sell it 
within 6 months, give it to the local government. We went back, 
we considered the suggestion and we actually are doing it. And 
I think in many ways that is the final chapter on the FHA 
reform and the numbers speak for themselves.
    This also presents a great opportunity for affordable 
housing in this country. We turned around FHA. FHA now made $5 
billion more which would allow FHA to do much more of what we 
need to do which is the very affordable housing we are talking 
about this morning, without, Mr. Chairman, raising more tax 
dollars. This is a Government reinvention story. It is 
literally doing more with less.
    I would urge the Committee--I know there have been 
proposals from the other side, authorizing, to sell or 
privatize FHA--I cannot express more strongly our opposition to 
the sale of FHA. It would be a one-time budget hit that would 
cost this Nation forever. You could, now that FHA is making 
money, say, well, good, now let's sell it and we will get a 
one-time budget hit. I think that would be very short-sighted. 
I disagree with the other side of the authorizing Committee and 
I would urge this Committee not to entertain that thought.
    The President sent a letter to myself and OMB Director Lew 
yesterday asking for our ideas on how we can best use the $5 
billion for more affordable housing. It is a good position to 
be in to have the quandary of what is the best way to provide 
affordable housing in this nation, through vouchers, through 
production, et cetera. And I am also gratified that the 
President took the time to acknowledge the success of FHA and 
the President took the time to acknowledge the need for 
affordable housing in this nation.
    When we have the President of the United States 
acknowledging housing in this country and the affordable 
housing crisis, it is the best advocate that we could have and 
I am proud, as the HUD Secretary, that he is taking an active 
interest in this.
    We are also working on safe and livable communities. This 
is our environmental and regional activity. Cleaning up 
Brownfields. We propose a $25 million increase for a total of 
$50 million. Regional connections, helping cities work with the 
outlying suburbs, $25 million.

                              Gun Buy-Back

    And on your point, Mr. Chairman, on the gun violence and 
our gun buy-back program, I again cannot disagree with the 
Committee more strenuously. Guns are a phenomenal problem in 
society, also in public housing. Thirty-thousand deaths, 
100,000 injuries, it is a $1 billion economic problem in public 
housing.
    It is a particular problem for us because of where we are, 
physically, geographically, where we are located. We tend to be 
in neighborhoods of high crime. That is where public housing 
tends to be. We tend to have a vulnerable population in public 
housing.
    The gun buy-back initiatives work well. This is not a 
Democratic or a Republican issue. You will get Republican and 
Democratic police chiefs across the nation to stand up and say 
these gun buy-backs work well. They are not the solution, in 
and of themselves, but they go to the very problem we are 
trying to resolve: guns lying around the house that may be 
accessible to children.
    And if you can offer an incentive to get that gun out of 
the house, by all means do it. We don't run these programs 
Federally. They require local partnerships, local police 
agencies to come forward, local public housing authorities. We 
only do it if the local government wants. We only do it if the 
local housing authority or the local mayor comes to us.
    But our Congressional mandate is decent, safe housing, safe 
housing. That is what this Congress has spoken about since 1937 
when it came to housing--safe housing, safe communities. You 
know guns are unnecessarily killing young children, you know 
that this country has a disproportionate deaths and accidents 
by gun violence; we are higher than any other industrialized 
nation. You know that we are not doing enough. You know that 
the legislation has been deadlocked for the past 2 years. The 
President, once again, yesterday, called on Congress for some 
action and to stop one program that is working does not make 
sense to us.
    And, in closing, Mr. Chairman, we do come to you with the 
best budget in 20 years: $32 billion, $6 billion increase, 
every program increased. It is, Mr. Chairman, a vindication of 
the work that this Committee has done, in partnership with HUD. 
The Department is working better. The programs are working 
better. We are addressing a need. We want to keep building on 
the progress that we have made together.
    Thank you for listening and thank you for the opportunity 
to be here once again.
    [The information follows:]

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    Mr. Walsh. Thank you, Mr. Secretary.
    We have many members of the Subcommittee here and I would 
like to move us along as efficiently as we can. There are lots 
of questions, some complex, some not so complex. But what I 
would like to try to do is give everybody about 10 minutes. If 
we keep our questions short, hopefully we will get short 
answers and we can get more questions in. [Laughter.]
    There is a great way to kill a hearing--give long answers. 
[Laughter.]
    Secretary Cuomo. Thank you for the suggestion, Mr. 
Chairman.
    Mr. Walsh. I have been on both sides of the table. 
[Laughter.]

              Unobligated Balances and Section 8 Renewals

    I will begin and I will probably take a little bit longer 
than that but I have another member who asked me to ask a 
couple of questions for him, which I will do.
    As I said in my statement, Mr. Secretary, HUD's programs 
have extremely slow spend-out rates. Let me give you a few 
examples. There is $3.2 in public housing modernization 
account; $2.6 billion in Section 202 housing for elderly; $738 
million in Section 811 housing; for the disabled, $347 million. 
These are all unobligated balances. This money was budgeted and 
was not spent. We are talking $3.2 billion, $2.6 billion, $738 
million, $347 million for Section 8 incremental assistance, 
$555 million in drug elimination grant programs, $68 million in 
FHIP and FHAP accounts, $1.1 billion HOPE VI account.
    As these numbers demonstrate there are lots of significant 
pipelines in all the HUD programs and accounts. Furthermore, 
the out-year spending projections do not assume renewals of all 
Section 8 expiring contracts or of the new vouchers and 
certificates requested in this fiscal year. Does the 
Administration expect to renew all Section 8 vouchers' 
contracts?
    Secretary Cuomo. Yes.
    Mr. Walsh. They do assume that? Why don't they assume it in 
the budget request?
    Secretary Cuomo. We believe we do.
    Mr. Walsh. It's not reflected in your budget request. It is 
not reflected in the out-year spending projections. While that 
makes the books look good, it is really a lack of commitment to 
these programs. If what we are trying to do is provide more 
Section 8 vouchers each year, and I think you have made that 
very clear by your graph, they need to be funded.
    Mr. Apgar. Well, there are a couple of things. We believe 
that the 2001 budget as projected does include all the needed 
outlays and are assumed and included in the out-years.
    Mr. Walsh. For simply the out-years.
    Mr. Apgar. Any out-years. Now, the other thing is a 
proposal that we have to sort of solve this problem once and 
for all. We are proposing a modification of the Budget 
Enforcement Act of 1990, so that once new Section 8s are 
booked, the out-year funding is built right into the baseline. 
So, we won't have this problem every year about whether the 
numbers are in or not in the out-year spending. And we believe 
that would fix the budget accounting on this difficult issue.
    Mr. Walsh. But the fact is that we have these rather 
conservative out-year estimates to stay under the budget caps 
but, in fact, we know we are going to spend more than that if, 
in fact, the commitment is to fill these contracts.
    Mr. Apgar. Right. That is why it is important to build them 
into the baseline because every year we have new estimates of 
rents and other things that will affect the out-year spending 
patterns and we ought to be treating those in the baseline and 
not through the way we handle the out-years under the 
appropriation process.
    Secretary Cuomo. Mr. Chairman, if I might just add on the 
spending on your point about the spend-out rate. We have made 
very good progress on the increasing the spend-out. We now have 
something called a Super NOFA, which put together all of the 
applications in the Department. We put them out at one time 
rather than scattering them out throughout the years and the 
process has gotten much better. We are moving the HOPE VI money 
much faster. But I would caution the Committee, as I caution 
the HUD people, the entire emphasis should not be on moving the 
money fast. It should be moving the money well. If it takes 
more time to do it right, do it right. I don't want to come 
before this Committee and answer questions about waste, fraud 
and abuse and why are we paying such high prices. And I say, 
well, Mr. Chairman, but I got it out fast. Because then the 
Committee would say, well, that wasn't the only criteria, Mr. 
Secretary. The criteria was to spend the money well and 
efficiently and effectively and if it took you a little bit 
more time to get the right bid or to do the designs, then that 
is what you should have done.
    So, I think there is a balance between moving the money 
fast and doing the job well, and that is the balance we are 
trying to strike at the Department.
    Mr. Walsh. I agree. I think that the object of the game 
here is if we are appropriating money to get it out there in a 
fiscally responsible way and as expeditiously as possible.
    Secretary Cuomo. Yes, sir, that is what we are trying to 
do.

                           Super-NOFA Process

    Mr. Walsh. On the Super-NOFA, which as you pointed out, 
announces the availability of funds for any fiscal year and was 
just published at the end of February. It was published almost 
six months into the fiscal year, leaving six months to complete 
the award process. Using new vouchers, as an example, please if 
you would, walk the Subcommittee through the award process.
    Secretary Cuomo. Well, the NOFA goes out. We cannot prepare 
a NOFA until we have the final law, obviously, because we are 
awarding funds pursuant to the law. So, we have to get the law. 
We very often have to then design a program around the law. 
That then has to be codified, it has to be concurred with, we 
have go through OMB. We then put out an application. In this 
case, it took six months. But, Mr. Chairman, that has been the 
earliest publishing date ever. So, we are actually much faster 
in the process than past years and it is the nature of the 
process.
    Mr. Walsh. Could you split the program so that the core 
programs, the ones that are statutory and regular and don't 
vary, and get that out early on so that the communities can 
respond back and the process begins sooner and then the less 
predictable programs do a second?
    Secretary Cuomo. Oh, yeah. In short, Mr. Chairman, that is 
what we do. If it is a block grant kind of formula program and 
there are no bells and whistles or competitions, then you know 
your number and as soon as we get the Appropriations Act and we 
know what the number is, we notify them of what their number is 
and then it is basically on a draw-down basis.
    The NOFA is more for the competitive programs, homeless 
programs, economic development programs, that change from time-
to-time.
    Mr. Walsh. But there have been some fairly substantial 
delays, even in the provision of those so-called predictable 
funds, CDBG and so forth. I have had communities contact us 
late in the year that say we haven't received these funds yet.
    Secretary Cuomo. Now, I don't think that they wouldn't--I 
would be surprised, Mr. Chairman, if they didn't know their 
numbers.

                        Unexpended CDBG Balances

    Mr. Walsh. For example, as of December 31, 1999, there were 
over $5 million of CDBG funds that hadn't been awarded yet.
    Secretary Cuomo. Yes. but this is--two things. First, the 
CDBG becomes available to them as soon as we know what the 
number is going to be. We get the overall $4.6 billion, divided 
by the formula, so, now, Syracuse knows their number. They have 
to give us a plan on how to spend it on their calendar year. We 
then hold the money until they spend it. So, the balance you 
are referring to is the balance that we are holding because the 
cities haven't spent it yet. And that, again, is the tension of 
spending fast, spending well.
    We are telling the cities, you can't just spend this money 
on what you want to spend it on; there are certain laws within 
CDBG et cetera. And we say to the grantees, that they can't 
hold more than one-and-a-half times their annual allocation. 
That is the benchmark we try to set.
    We tell the grantees, you should not have, HUD should not 
be holding a balance for the grantees in excess of one and one-
half year's allocation. So, if we are running the program at 
about $5 billion, we should have about a $7 billion balance not 
to go in excess of that one-and-a-half years.

                    Homeless Assistance in Illinois

    Mr. Walsh. You have been a good witness and the answers 
have been nice and succinct. I can't fault you for that.
    Let me ask these questions. These are from Congressman 
Weller, who is from Illinois. He asked some very specific 
questions about homeless assistance and the President announced 
the homeless grants around Christmas Eve this year. Over 70 
percent of the funding was for new initiatives, leaving 85 
existing programs unfunded. He has one of those unfunded 
programs, 110 persons involved in this Continuum of Care 
Homeless Assistance Program and they are running out of money 
and it is an existing program providing program. There are 
people currently in the program, people who will be on the 
street if the program isn't funded. He has come to your 
Department on a number of occasions asking for information on 
this and still has questions about the situation for these 
people.
    Secretary Cuomo. What this is, Mr. Chairman, and we are 
trying to work it out with Congressman Weller, because there is 
no doubt that he has a legitimate problem. But just so you 
understand the systemic approach here, we give a local unit of 
government a target amount that if they are successful in the 
competition this is what they could expect to win. In this case 
the targeted amount was about $326,000.
    They then put in an application and they rate their 
priorities. In this case, they didn't win $326,000. They won 
over $800,000.
    Mr. Walsh. This county?
    Secretary Cuomo. Yes. So, they won double, more than double 
what they could have expected to win and the program that 
didn't get funded wasn't the top priority and wasn't the second 
priority; it was the third priority. We tell the local 
government, here is your target and you prioritize the programs 
you want funded: One, two, three, four, five, six, seven. They 
got more money than they expected and they got their top two 
priorities funded. And what they are saying is, well, we didn't 
get number three funded and we also need number three.
    Truly they had no reasonable expectation that that would 
have been funded because they knew the target range would never 
take that. Having said all of that, we still understand that 
this is a good program, according to the Congressman, that 
needs funding and we are trying to work out a way to fund that 
particular program.
    Also, the change you have which would take the Shelter Plus 
Care grants and move them over to Section 8 would help this 
type of issue, because what is happening on the local 
government side is that they have to apply to renew the 
existing homeless program and at the same time they want to do 
new programs. The Shelter Plus Care to Section 8 would take 
some of those renewals off the list so they would have more 
room.
    Mr. Walsh. There is some logic to his argument. If you have 
an existing program that works and it is serving people, and 
you go through another competitive round and 70 percent of the 
funds go to new initiatives, what happens to those people who 
are in the old programs?
    Secretary Cuomo. This is--actually we came to this point 
from earlier conversations with this Committee--the tension. 
First of all, we don't have enough money to fund all the 
programs. The homeless budget we would have a big increase to 
$1.2 billion, but you could spend literally twice that number 
and not fund all the applications we get.
    Mr. Walsh. I believe that.
    Secretary Cuomo. Then there is a constant tension for the 
local grantee. They have a good program that is running that 
they want to continue but they also have a new initiative. How 
do you balance those two? We don't. We say to the local 
government, you make the decision. If you want to renew the 
project, then put the renewal project at the top of the list. 
If you want the new initiative, a new program, then put the new 
one at the top of the list.
    Mr. Walsh. So, what you are saying is that you always honor 
the local municipalities?
    Secretary Cuomo. Yes, yes.
    Mr. Walsh. Except in the case of New York City, of course. 
[Laughter.]
    I wasn't going to bring it up, but----
    Secretary Cuomo. Well, now that you handed it, I appreciate 
it. [Laughter.]
    Except in the case where a Federal judge says, the city has 
distorted and politicized the process and has penalized good 
groups because they weren't favorites of the city. Except for 
breaking the law----
    Mr. Walsh. And that decision was on appeal.
    Secretary Cuomo. Yes. And they lost on appeal, Mr. 
Chairman, by the way, now that you brought that up. [Laughter].
    Mr. Walsh. But your action preceded the denial of the 
appeal.
    Secretary Cuomo. I said, we will do it and we will wait for 
the appeal and then if they win the appeal, we will give them 
the funding back the next day. Unfortunately, the city was very 
confident that they would win the appeal but actually they lost 
the appeal and the court went out of their way to say that they 
were not reversing the lower court's determination, as a matter 
of fact.
    Mr. Walsh. In the case of Mr. Weller's situation, you are 
working with his office and with that program?
    Secretary Cuomo. Yes, yes. We are working with them to try 
to find a specific solution to this specific problem because it 
is, Mr. Chairman, don't get me wrong, I want you to understand 
how the system works, but just on a very practical basis you 
have a good program that might have to close its doors. We have 
this problem in Buffalo also. Mr. LaFalce has put in a bill 
that would try to fund the renewals that weren't, that didn't 
win, because you just have a practical problem of, do you close 
down a good program? And we can sit here all day long and say, 
well, the local government made the decision but it is still a 
hardship on the local level.
    Mr. Walsh. Thank you very much.
    Mr. Mollohan?

               Nonrenewals of Homeless Assistance Grants

    Mr. Mollohan. Thank you, Mr. Chairman.
    Let me just follow-up on that question because there are 
problems in addition to Mr. Weller's district, and it is all 
well and good to work to solve his problem but the problem 
exists nationwide with these renewals, and each year we are 
hearing more and more about homeless assistance grants not 
being renewed in the annual funding competition. What is HUD 
doing to minimize the disruption caused by nonrenewals of 
homeless assistance grants?
    Let me pose another question before you answer that. Is 
this simply a problem of lack of money; it's a good program and 
you don't have enough money. If the answer to that is yes, then 
how much funding do you need, and in your priority of things, 
do you feel that you should be requesting more money for this 
program?
    Secretary Cuomo. Yes. We do not have--it's an interesting 
problem, Congressman Mollohan--we do not have enough money to 
take care of this situation across the country institutionally. 
In other words, if you said, how much money does it take to 
fund all the renewals of all good programs and still do the new 
initiatives that local government wants? It would be twice our 
budget, three times our budget.
    If the question is, well, after the fact and after we go 
through the competition and some of these good programs just 
weren't included by the local government, but would have to be 
closed down, can we cover those? We would need a legislative 
change, it would be about $37 million is our estimate to go 
back and fund those renewals even though they lost the 
competition.
    And we could take that from an existing account, which is 
what Mr. LaFalce wants to do in a bill. Mr. LaFalce has a bill 
that would answer this, that would fund the renewals that lost 
and take the money out of the Section 8 account basically.
    Mr. Mollohan. What is your attitude towards his legislative 
proposal?
    Secretary Cuomo. We don't have an official Administration 
position but I personally would support it. OMB will probably 
send me nasty notes, but I personally would support it.
    Mr. Mollohan. Would you support the funding source that he 
recommends?
    Secretary Cuomo. Yes.
    Mr. Mollohan. Would that allow you to approve the renewals 
that merit renewal on whatever basis, whatever criteria you 
use?
    Secretary Cuomo. Yes. Yes.
    Mr. Mollohan. And to fund the new approvals?
    Secretary Cuomo. Yes. Mr. LaFalce's bill takes care of the 
specific problem of renewals that weren't funded, renewals that 
lost, let's say. And that number is somewhere between 12 to 18, 
not including the Shelter Plus Care. He would take it from the 
Section 8 account and I would support that.
    Mr. Mollohan. I have some additional questions on that I 
want to submit to the record, but I don't want to spend all my 
time on this. But I can see where it is an excruciating 
problem. You have a good homeless shelter program which is the 
first line of defense for housing, but you don't have enough 
money to fund them and people have to shut down good shelter 
programs.
    Secretary Cuomo. That is right. And Congressman, again, we 
can say, well, the local government made that decision and the 
local government, if they were here at the table would say, 
yes, but that was a very tough choice for us.
    Mr. Mollohan. The local government may have Hobson's 
choices like you have.
    Secretary Cuomo. Yes.

                            Unused Vouchers

    Mr. Mollohan. Section 8 housing assistance vouchers have 
been popular for helping low-income people afford a place to 
live. I understand that some recipients have a great deal of 
trouble making use of these vouchers because little or no 
housing is available at rent levels which vouchers would allow 
or because landlords are not interested in taking vouchers. Can 
you tell roughly what percentage of vouchers are turned back, 
unused, because the recipients were unable to find a place to 
rent?
    Secretary Cuomo. Section 8, by and large, works well across 
the country. There are pockets where it is not working well. 
Eventually all the vouchers are used because even if one person 
can't find an apartment within theeligible window, the voucher 
gets turned in and somebody else on the list gets it and eventually 
they are all used. But you have a small, I would say, but growing 
number of jurisdictions where the Section 8 vouchers are not working 
well. The market is so hot that you cannot find an apartment with a 
Section 8 voucher.
    Senator Bond interestingly talks about this on the Senate 
side and says, Section 8 vouchers aren't working, that is why 
we need a ``production program.'' We have to build units 
because you can't find them. It is a supply issue. That number 
is small. I can get the Congressman the number but it is 
growing. I think the number, the current number underestimates 
the situation.

                          VOUCHER SUCCESS FUND

    Mr. Mollohan. What is your Voucher Success Fund?
    Secretary Cuomo. The Voucher Success Fund would answer 
exactly this. It is $50 million to work with localities where 
the voucher isn't working. You could supplement the voucher so 
that it could pay a market rent and actually get an apartment. 
You know, we set the vouchers at what we call 40 percent, which 
means theoretically, it should pay for an apartment within that 
40 percentile in that area.
    But there are many neighborhoods where it is not working 
and I hear stories all day long from people who say I have a 
voucher but it just doesn't get me a unit. It doesn't get me an 
apartment. It doesn't pay enough. Nobody will take it. And the 
market is so hot they don't have to take it. And some landlords 
aren't that eager to get involved with a Section 8 program. And 
that is what this Voucher Success Fund would do.
    Mr. Mollohan. Is this Voucher Success Fund a new proposal?
    Secretary Cuomo. Yes.
    Mr. Mollohan. It is a proposal this year?
    Secretary Cuomo. It is a proposal because this problem is 
developing now. That was my point to the Chairman. We have to 
respond to the situation as it exists today and as this market 
is getting hot, the Section 8s are becoming less effective in 
some areas.
    Mr. Mollohan. Do you need any additional authorizing to 
implement this fund?
    Secretary Cuomo. It is submitted with the budget.
    Mr. Mollohan. An authorizing request for the fund that you 
are proposing?

                        IMPACT OF WELFARE REFORM

    Secretary Cuomo. The short answer is, yes.
    Mr. Mollohan. When welfare reform was enacted several years 
ago there was real uncertainty about its implication for 
housing assistance programs. How, now that welfare reform has 
been in place for a few years, what are you finding about its 
impact on HUD programs?
    Secretary Cuomo. It is somewhat different in different 
places, Congressman, but by and large we think our part of it 
is working well. We have not had any critical issues that we 
haven't been able to address.
    Mr. Mollohan. Would rent subsidy needs decrease as earnings 
rose for former welfare recipients or would rent subsidy needs 
actually increase as people lost welfare benefits and earnings 
failed to make up the difference?
    Secretary Cuomo. We have speculated on both scenarios. If 
people actually moved from welfare to work, they got a job, the 
earnings went up, you could argue that the subsidy would go 
down. If, however, people got kicked off welfare because they 
violated the time limit, then the subsidy would actually go up.
    Mr. Mollohan. Precisely. And what has been the experience?
    Secretary Cuomo. We have not had a significant deviation 
either way.

                          REGIONAL CONNECTIONS

    Mr. Mollohan. You are again proposing a new initiative 
called Regional Connections. What exactly would this proposal 
do and why do you consider it a priority?
    Secretary Cuomo. Because many of the problems of urban 
areas, central core areas, cannot be addressed within that 
core. Likewise, problems of the surrounding suburbs can't be 
addressed within those suburbs. The environmental issues, the 
sprawl issues, by definition, will include them both--city and 
suburb. Having said that, everything we do as a government 
reinforces the separation between the city and suburb. And then 
rhetorically we say, oh, you should work together.
    The Regional Connections is a way to actually foster, the 
Federal Government would be in a role of fostering city/county 
relations, thinking regionally rather than locally.

                       COMMUNITY EMPOWERMENT FUND

    Mr. Mollohan. Please explain your Community Empowerment 
Fund initiative.
    Secretary Cuomo. Community Empowerment Fund, there has been 
a lot of emphasis in the Department on the economic development 
of the areas left behind. It is the New Markets Tour by the 
President, the APIC, and the Community Empowerment Fund is an 
economic development fund which would provide funding for 
large-scale economic development activities that generate jobs 
in poorer communities.
    Mr. Mollohan. Is it biased toward urban versus rural?
    Secretary Cuomo. No. It qualifies by poverty, the 
percentage of poverty et cetera.

                              BROWNFIELDS

    Mr. Mollohan. Your budget proposes to double Brownfields 
redevelopment grants from $25 to $50 million. What 
accomplishments of this program so far justify your requesting 
an increase of that nature?
    Secretary Cuomo. Congressman, if we could double the 
homeless budget we could quadruple the Brownfields budget. 
There are very few projects that any city, any older 
manufacturing industrial area is trying to undertake now days--
you know very well from your district--that don't require some 
remediation, some cleanup. And if we want a Brownfield to be 
competitive with a Greenfield, someone has to get that 
Brownfield up to zero. Because the Greenfield is always much 
more attractive to a developer because they don't have any of 
these issues.
    Our Brownfields program says we will at least make that 
site competitive with the Greenfield site by helping with the 
remediation. So, the fact that it was an older site is not a 
detriment, and it can actually foster and promote what we are 
trying to do which is recycling land rather than using new 
land.
    We have stellar examples in the city of Chicago; Bethlehem, 
Pennsylvania; one in Syracuse, New York; Crosslands Commercial 
Park used a Brownfields Economic Development grant. So, very 
major economic development activities are only happening 
because we provide the subsidy to do the cleanup.
    Mr. Mollohan. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    We will go to Mr. Hobson.
    Mr. Hobson. Thank you, Mr. Chairman.
    Mr. Secretary and I had a nice conversation because we were 
the only ones here at that point, we were early. [Laughter.]
    I was telling him about Hobson's choices at that point. 
[Laughter.]
    Mr. Walsh. I bet you were. [Laughter.]

                           VOUCHERS/OPT-OUTS

    Mr. Hobson. On the Kasich initiative, I am very intrigued 
by that because I think it is a neat thing having been in the 
housing business. I am concerned that there is some outreach on 
that because I think two of them are in my hometown and the 
people in the local area didn't really know about it, yet. So, 
I hope your people are getting the word out to everybody.
    I have got a rather long question on Section 8 that I want 
to read to you because I had, earlier in the year I had some 
people come and meet with me about the renewal of their 
contracts and beginning in 1999 the regional HUD office in the 
Columbus area began to refer all comparability studies on 
contract renewals to the Office of Multifamily Housing 
Assistance Restructuring for review and decision. This created 
a big backlog and burden on its local contractor, the Higher 
Housing Finance Agency as well as the property owners. And they 
warned me that something was going to happen when I met with 
these people and it happened.
    A multifamily complex in my district, Jeffrey Place, was 
one of those projects in which the comparability study was 
referred to OMHAR. Almost 9 months after submitting his 
comparability study to a regional HUD office in Columbus, the 
project owner finally received an appraisal setting rents at 
$65 per unit below his current rent.
    After a difficult evaluation the owner concluded that he 
could not meet his costs with a rent decrease of approximately 
11 percent. Subsequently they informed us he is opting out of 
his Section 8 contract.
    Now, I have got a concern about this for several reasons 
because I had a number of people come to me explaining that 
this was going to happen. While ultimately this is a business 
decision, I want to be certain that HUD is prepared to provide 
assistance to these project-based tenants so they are not going 
to be displaced from their housing. Also, under the Housing 
Certificate Fund Tenant Protection Set Aside Justification you 
state that HUD is rectifying the opt-out situations by 
including funding in the Tenant Protection request to provide 
vouchers for tenants living in multi-family projects where they 
opt out.
    Will these vouchers be funded through the $199 million 
requested for Tenant Protection? Two, how do you estimate the 
number of vouchers local public housing authorities may need to 
distribute and would these vouchers need renewal each year?
    I mean these guys really--this thing is getting--a $65-a-
month reduction is a lot of money as a landlord.
    Secretary Cuomo. Congressman, on the specifics, I am going 
to ask the FHA Commissioner to respond. But on the context, 
because this is very important, Congressman Sununu hit on this 
last year. We have made phenomenal progress on this Section 8 
crisis, opting-out, also the marking up to market problems. One 
of the key decisions always comes down to, what is the fair 
rent today? What is the fair price today? And many landlords 
are saying, well, the market is so strong, I could go to the 
market and get $1,000 a month and HUD, unless you are willing 
to pay that, I am going to opt out.
    And we have a tremendous desire to keep that stock 
affordable, we don't want to lose any units. But on the other 
hand, we don't want to get ripped off either. The way we do it, 
by setting the fair rent, is we do a comparability study: What 
would it cost to go and get a comparable unit down the block, 
et cetera? The landlords often disagree with the comparability 
study because their argument is, I want to get paid higher, 
that is not a comparable unit.
    And we are trying to once again walk the balance where we 
don't want to lose the units, we don't want to lose any 
affordable stock but we don't want to have any horror stories 
of the old days where HUD is getting ripped off and paying 
$1,000 for an apartment that you could get down the block for 
$500. And that is why the comparability studies are so key.
    But let me ask the Assistant Secretary to respond to the 
specific question.
    Mr. Apgar. Right. First of all, if a building was referred 
to the Office of Multifamily Housing Assistance Restructuring 
or OMHAR, it meant it must have all had an FHA-insured contract 
on it. And, so, there are many properties of that type which 
had rents well above market but those rents were necessary in 
order to support the mortgage. And, so, that is why we created 
the OMHAR Office to both restructure the mortgage while we 
reduced the rents to market levels. Many owners do not want to 
go through that process and, so, that can be a trigger opting 
out. But I don't know the details of this building.
    But let me just tell you generally about our opt-out 
situation. When we were here last year and we were having 
conversations, Secretary Cuomo was talking with Congressman 
Sununu and others, we had an opt-out crisis. Owners were coming 
in at a rapid rate talking about leaving the program. As a 
result of the initiative, we began in May and then it was 
actually enshrined in legislation in the Appropriations bill, 
we have dramatically turned around the opt-out situation.
    From what it was running in the spring of last year, the 
number of units opting out is down by almost 70 percent.
    Mr. Hobson. But I would like to look at the Columbus thing, 
because the Columbus office is an--I understand an--anomaly, 
when I talked to these people and the Columbus office started 
referring everything. So, I would just like to----
    Mr. Apgar. Okay. If there was inappropriate referrals then 
we need to check that.
    Mr. Hobson. I don't know if they were inappropriate. I am 
not casting if they are inappropriate. I am just saying that I 
have got 5 or 6 people that all of a sudden are complaining.
    Mr. Apgar. Okay.
    Mr. Hobson. And they claim there is a change in the 
Columbus operation. I would just like somebody to look at that 
and tell me----
    Mr. Apgar. Will do. We have heard some other comments about 
the Columbus office and we can talk about what we are doing. We 
believe that a lot of the issues there arefrom a lack of 
communication. So, we have set up regularly scheduled meetings with the 
leadership of the various trade associations in the area. Every two 
weeks they are coming in to meet, to trouble-shoot so that small 
problems don't turn into large problems like it sounds like it did for 
this particular landlord.
    Mr. Hobson. Right. They will wind up in my office.
    Mr. Apgar. Yes.

                       Enterprise Data Warehouse

    Mr. Hobson. Let me ask one other one. This is on 
information technology. One of the most critical and costly 
challenges facing all Federal agencies is keeping their 
technology and infrastructure current. I was pleased to hear 
that last year you addressed this issue in part by developing a 
plan to store and improve data quality, consistency and 
management processes agencywide called the Enterprise-Wide Data 
Warehouse, EDW, initiative.
    Although the EDW initiative has been underway for over a 
year, and approximately $4 million has been invested in this 
warehousing project, I understand that the Department is now 
considering foregoing the integrated approach in favor of an 
entirely new procurement of a more narrow scope. Two weeks ago 
I wrote to Deputy Secretary expressing my concern that the 
Department is terminating the EDW project to develop a cross-
functional data warehousing program.
    In a letter which I received late last night, it states 
that HUD is fully aware of the implications of redesigning this 
project. I am concerned that the Department is moving in a new 
direction, essentially abandoning the EDW project; and why are 
you now including empowerment information systems and 
geographic information systems tools in your IT planning? Isn't 
this a waste of $4 million which the Department spent to 
develop the EDW?
    Secretary Cuomo. Congressman, first, we have spent quite a 
bit of time on the IT systems and I believe that what the 
Congressman has heard is correct. We have received compliments 
from GAO, OMB, NAPA, on what we are doing with this empowerment 
financial system integration. We have no plans to abandon the 
track that we are on. It is working, it is working well. And 
you have had correspondence on this and I will ask the Deputy 
Secretary, who is in charge of the project to respond.
    Mr. Ramirez. I thank the Congressman for the question and 
the opportunity to respond to what we are currently doing. What 
has happened is that the GIS system and the additional 
enhancements to the warehouse has always been planned in the 
original scope of trying to integrate our financial systems, 
going from over 89 financial systems into a handful of systems.
    The difficulty that we have run into in the current 
configuration is that the detail of the cleanup of the data is 
such that it requires that it goes through an intense program-
by-program review and does not start to cut through, through 
some basic elements, to create certain aspects of homogeneous 
information that is out there that we can already tap from. 
What we are looking to do is to create quicker access to the 
more basic information that is already there, that has been 
standardized, and that is currently not being held.
    We are working to make sure that the track that we are on 
of cleaning all the data that goes into these warehouses is 
clean, but at the same time we need to make sure that the 
utilization of this system is enhanced by being able to tap 
into across departments, which is already happening in the 
consolidation effort.
    Mr. Hobson. I still don't--are you killing the EDW?
    Mr. Ramirez. No, sir.
    Mr. Hobson. So, the short answer is, no?
    Mr. Ramirez. No. That is correct.
    Mr. Hobson. You are not going to waste the $4 million?
    Mr. Ramirez. No, sir. In fact, that system greatly enhances 
our ability to go into our expanded efforts, sir.
    Mr. Hobson. Okay. Thank you very much.
    Secretary Cuomo. It is our pleasure.
    Mr. Walsh. Thank you.
    Mrs. Meek?

                                  CDBG

    Mrs. Meek. Welcome, Secretary Cuomo and your entire HUD 
staff. My first concern is with CDBG, the block grant program. 
I sometimes have problems with block grant programs by the mere 
fact that it is very difficult for HUD to keep a handle on 
block grant funds. In my area and a lot of other areas across 
the country, CDBG funds are being used to fund governmental 
service expenses in a way similar to the old general revenue 
sharing. And we all know that that is not the purpose of CDBG 
funds.
    In my community and in several other communities, local 
governments are engaged in what they call substitution. They 
use CDBG monies in place of funds in low-income areas for the 
payment of general governmental purposes. They use these funds 
that are needed so badly in these poor communities to put roof 
on a fire house, or put a roof on something that they should be 
using general revenue funds for.
    I have talked to HUD about this before. It appears to me 
that your hands are tied. Once the money leaves you it goes 
into the hands of the mayors and sometimes they are just a 
little bit greedy in terms of how they utilize the money. 
Something has to be done about that. If these reports I am 
hearing are true, and I have heard them since I have been on 
this Committee--and each time I have reported it--do you see 
this as a problem, Mr. Secretary, to the future viability of 
this program? And one other aspect there is a bill going 
through Congress at this time that would allow much wealthier 
neighborhoods and high-income persons, to become eligible for 
CDBG funds.
    If that is successful, plus the run that the mayors are 
already taking on that money, do you see this as being a threat 
to the utilization of CDBG funds for low-income and moderate-
income people?
    Secretary Cuomo. Congresswoman, thank you, very much for 
that question. That actually gets to a debate we have quite 
often at the Department. There is a Hobson's choice, if you 
will, to stay with that metaphor. We believe in flexibility, we 
believe in local government, but on the other hand, we believe 
in national objectives and we believe that this is not a blank 
check when we say, block grant. That there are certain national 
goals that we want to accomplish and we try to weigh local 
flexibility versus national objectives.
    The CDBG program has national objectives. It is not a blank 
check. It must either go to benefit low- and moderate-income 
people, address slum or blight, or meet what we call an urgent 
need. And if it is not doing that we can audit a local program 
against those needs.
    Now, 90 percent of the CDBG money goes to benefit people of 
low- and moderate-income. So, I don't think this is a 
widespread problem but I do believe there are specific 
situations where we can and should be doing more.
    Governmental substitution is not allowed, Congresswoman. 
They cannot do that. And, in terms of your point about raising 
the income eligibility for CDBG, I would be against that and we 
are going to be doing more monitoring this year on specific 
CDBG programs than we have done before, 300 more specific 
audits of CDBG programs
    Mrs. Meek. That sounds good. I think that is very much 
needed. I will go to one other question and, Mr. Chairman, I 
will yield back some of my time that is, if I get some back. 
[Laughter.]
    Mr. Walsh. Let's see how much you yield. [Laughter.]

                          CDBG Spendout Rates

    Mrs. Meek. I think, too, the problem of the low spend-out 
rates, makes it even harder for people in low- and moderate-
income areas to receive housing. And not a lot has been said 
about housing throughout the country for some reason. The 
Washington Post just indicated this as being of low priority to 
the people who are seeking office in this country. I could say 
a lot about that but I don't have timebut I think that we need 
to make this a stronger issue.
    The Secretary talked years ago about reducing public 
housing units, which you have done already. And, in doing so, 
you diminish the stock you have in public housing on one hand. 
On the other hand, you are adding more vouchers with few places 
to take them and you see what a dilemma it puts poor people in.

                           HOPE VI Transition

    There is a lot of hysteria in low-income communities about 
the good HUD programs and HUD has some very good programs. And, 
particularly in my area where there is a HOPE VI program coming 
aboard and it looks very good. There is a lot of hysteria 
regarding what is going to happen when the people are moved. It 
is very hard for you to do anything about that. I wanted to 
bring it to your attention but what I want to ask the 
Secretary, what safeguards are you building into your programs 
to try and help some of the psychological and emotional needs 
of these people?
    I have people who will be moved and they have been in 
public housing for 20 years. Now, they will be moved down South 
where the people are in a much higher income level and they are 
in different schools and the State of Florida is already under 
a lot of duress to administer these social programs. What I am 
trying to get at, Mr. Secretary, has HUD thought of something 
other than the physical involvement of people when they are 
moved from one community to the other? It is an important 
facet.
    Secretary Cuomo. Congresswoman, once again, you raise very 
poignant issues. Two points. First, I am going to have a press 
conference this afternoon on the point you raised in the 
beginning, which is the dialogue that I had with the Chairman 
earlier. We can count the number of affordable units produced 
different ways and we can add different departments and include 
the tax credit or not include the tax credit or argue about the 
affordability gap. But even with all our contortions on the 
numbers, the clear reality is we are nowhere near meeting the 
need that is out there. That the loss in the private sector is 
wholly overwhelming all our efforts.
    On the HOPE VI program I can say to you, well, we don't 
lose any units that way if you count a Section 8 voucher as a 
new unit. Many people would argue with that saying, no, a 
Section 8 voucher is not the equivalent to a hard unit and I 
would agree with that.
    In the context of HOPE VI, I think it is justified because 
these buildings didn't work in the first place and I would 
rather have a Section 8 in a unit that works than a hard unit 
that didn't. But that does not answer the ultimate question 
which is we need to produce affordable housing in this country. 
Section 8 vouchers is not a production program. HOPE VI is not 
a production program; it is at best a break-even program and we 
need to get back in the production business.
    We have a small start in our current budget but the $5 
billion in FHA and what the President put his finger on 
yesterday, that is the home run that we need for affordable 
housing in this nation, $5 billion. And let's use that $5 
billion that FHA made--it is not a call on the budget, it is 
not going to the taxpayers, FHA made that money through better 
management--let's use that $5 billion in a production program; 
produce affordable housing. We know how to do it, we have done 
it very well. We know we need to do it. We have found the $5 
billion. Let's just go at it.
    And on the specific question on the transition on the HOPE 
VI, this is not just about bricks and mortar, it's about 
people's lives. We understand that. We just resolved Chicago 
and bringing down the Chicago Housing Authority after 40 years 
and there was no public housing worse in this nation. But still 
the residents say, I know you think it is a bad building, but 
it is my home. And when you ask someone to leave the home that 
they have been raised in and lived in for 20 years and go to a 
different part of the town that maybe they never visited, that 
is not easy and we have to work them through that transition 
and we understand that.
    Mrs. Meek. Thank you, Mr. Chairman.
    I will yield back my last 10 minutes.
    Mr. Walsh. The gentlelady used 15. [Laughter.]
    Actually, no, you didn't.
    Mrs. Northup.
    Mrs. Northup. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary.
    Secretary Cuomo. It is good to be here.

                           Section 8 Vouchers

    Mrs. Northup. First of all, if I may, before I ask some 
questions that concern me, I would just like to say in the big 
picture I am very appreciative of HUD and its evolving effort 
to meet the changing needs in this country. In my community 
they are somewhat different than in Ms. Meek's. I do believe 
there are people that will always want to live in public 
housing and that the need for that will always be there. 
However, we currently have a 10 percent vacancy rate and it 
would grow if we had the Section 8 vouchers.
    I meet every 6 months with all of the providers that are in 
any way connected to the community that is going from welfare 
to work: What are the problems, what are the needs, where are 
we short money, where do we have more money, what programs help 
us. They started out by talking about training, transportation. 
The last meeting I had was wholly focused on housing because in 
truth, what people--now that they have a job, they don't want 
to live in public housing and have transportation out to where 
their jobs are. They want a Section 8 voucher and they want to 
move out there. There were a lot of concerns about what the 
challenges were in that.
    But I will tell you my next meeting was with the Apartment 
Owners Association and I asked them what they could do to help 
solve that? And they told me that some of your rules have 
helped ease that, particularly elimination of the Take-One/
Take-All. Many of them would like to be able to do background 
checks, to be inclusive, but the fact that all of their 
building units would then go to Section 8 was a concern.
    So, I want to thank you. I have the feeling that maybe 
politically there was some opposition to that and I think that 
that was a good move. And it was particularly good because we 
are too divided in this country. We are too divided 
economically, we are too divided racially. And if we don't 
allow people to benefit from having a job, and move to the 
neighborhood they want to, put their child in a school that 
they have chosen, be closer to their work so that they have 
less time away from home, then what is the benefit of going to 
work?
    And I think that we all have to put our preconceived ideas 
about what is good for this country and for people on the table 
and reexamine them. And I think that some of what you are doing 
has really helped in that and I want to thankyou for that.
    I would say, though, that I think that sometimes in HUD 
there must be this terrible feeling as the economy gets better, 
almost because, oh, no, it will be harder to sell our program. 
I mean what if everybody does have housing, then what do you 
do? And, so, there is this tendency to create as big a need as 
you can with all the numbers so that every program stays at 
full steam ahead and that, in fact, it is important that you 
prioritize and not just say, we are short everywhere, we need 
double everywhere, but instead help us prioritize for what we 
really need.

                           HOUSING COUNSELING

    Let me start with a couple of specific questions. 
Homeownership in my mind is the next most important thing that 
we make available to people who are in their first job if they 
want it. That it brings stability, it brings a confidence. 
There are days when I think of when I was 23 and my husband and 
I had this tiny little new house, we probably got up on Monday 
morning when we didn't feel like it because, you know, that 
sense of permanence. It brings neighborhoods together and, yet, 
it seems to me as you have put more money into that, that you 
have reduced the counseling money that is available for 
homeownership.
    There are more and more first-time buyers that will need 
some help. They don't have a parent that owned a house that can 
tell them about the steps and it is not a one-morning 
counseling service. It is a before, it is a process of 
establishing credit, it is a process after you are in the home 
and something goes wrong.
    And specifically in my area the people that provide this 
counseling the best feel that cutting these funds has not only 
reduced the number of people they can serve but the quality and 
the amount of counseling they are able to give all the way 
through the process. Let's face it, changing your life or 
changing what you have done is not something you read about for 
an hour and change it. It is an ongoing process; it takes time.
    Secretary Cuomo. Congresswoman, I couldn't agree with you 
more. First of all, thank you for the good words about what we 
have been trying to do. And we have been open to change at HUD 
and we have made many of the changes that I think we needed to 
make. We have more do to. And also your point, Congresswoman, 
is profound that the needs are different in different areas. 
And they can be almost diametrically opposed. In some areas, 
referring to your area, public housing is basically fine and 
you need the Section 8 vouchers. In some cases it is the exact 
opposite. So, we try to stay flexible and it really is 
community by community.
    I also agree with you on homeownership, homeownership, 
homeownership; Jack Kemp used to read from the Bible of 
ownership and I agree with that: That there is no substitute 
for ownership. It changes your mentality, it changes the 
incentives. It changes the sanctions. And we are trying to 
drive everything up to homeownership.
    Mrs. Northup. Well, could you see your way clear to 
allowing a little more of the homeownership money to be used 
for counseling families before and after the process?
    Secretary Cuomo. Yes. The confusion there is we think that 
we are going up $9 million in the counseling money, from $15 
million to $24 million.
    Mrs. Northup. Was it reduced last year?
    Secretary Cuomo. It was reduced last year. We learned the 
error of our ways and we have corrected it this year, 
Congresswoman.
    Mrs. Northup. Well, as we negotiate and there have to be 
tradeoffs, I ask you, please, not to give in there so that you 
reduce what is really the enabler money for homeownership.
    Secretary Cuomo. I couldn't agree more, Congresswoman.

                           community builders

    Mrs. Northup. Let me also ask you about the Community 
Builders. There is some bad feeling in my district--and let me 
just tell you, specifically from a HUD employee. He states that 
he has read H.R. 2684, under Management and Administration, and 
it specifically states that the Secretary is prohibited from 
using funds under this heading for any other heading in this 
Act to convert any external Community Builders to career 
employees. Then he looked at the HUD website and he points out 
that in your website the fifth bullet says: Initial suggestions 
to eliminate Community Builder function and politically 
motivated criticism backfired and we actually gained more than 
we could have hoped. We are now able to make the Community 
Builders program and their functions permanent.
    I wonder now, why are regular employees--your long time 
employees upset about this because they were interested in 
applying to be Community Builders. They accept that you 
specifically said Community Builder positions wouldn't be 
permanent. And, so, they didn't avail themselves of the 
training at Harvard and other places. They didn't get into that 
program. Now, first of all, I have to say when I read this I 
sort of wonder if I need to go back to basic reading or if 
there is a conflict between the bill and your bullet point.
    But, secondly, I wonder if there is a lack of morale that 
has been created by the Community Builders who have been able 
to compete more effectively because of this special training 
for these really good jobs, leaving other HUD long time 
employees behind, if that morale problem exists other places? 
And if there is a conflict between the budget language last 
year and your website?
    Secretary Cuomo. Congresswoman, this is an interesting 
issue and I know the Committee staff has been quite active on 
this. First, the short answer is, we will compete all the 
Community Builder programs, the competition is open to 
everyone.
    Mrs. Northup. But they have an added benefit because they 
were trained at Harvard and so forth.
    Secretary Cuomo. The Harvard training doesn't count in the 
competition. And I understand that some senior--the career HUD 
employees say, if there is a higher grade they want, why 
shouldn't the higher grades go to the current HUD employees? I 
understand that logic. Many of the Committee staff are 
sympathetic, many of the Committee staff are former HUD 
employees, frankly, and they are very sympathetic with the 
current career staff getting the higher grades.
    The problem with that theory is everything you have heard 
up until now. I am trying to change an organization, I am 
trying to change the culture, trying to bring in the new skills 
that I need to make the Department work. I have one of the 
longest tenured work forces in the Federal Government. And I 
think bringing in some new people from the private sector is 
good for the organization, brings a change of skill set, brings 
a new energy.
    Mrs. Northup. But doesn't your website practically 
guarantee? I mean it says, we're going to--I mean the----
    Secretary Cuomo. No, Congresswoman----
    Mrs. Northup [continuing]. Information given in my local 
community was, is that Community Builders--that permanent jobs 
would be available to them. How many Community Builders did get 
the permanent jobs?
    Secretary Cuomo. We are in the middle of the merit 
staffing. But what it said is and I believe what we did last 
year as a ``compromise'' was that the Community Builder 
positions would no longer be fellowships, two years, in and 
out, which by the way I thought was a good thing, rather than 
lifetime bureaucrats. Let people come in, do their Government 
service and then let them get out. It was like a Peace Corps. 
Before they become institutionalized and before they know the 
acronyms better than they know--so, the two years in and out, I 
thought was a good thing. But the Committee said, we don't want 
to do the 2 years, make them permanent civil servants, which 
was a little inconsistent, make the positions permanent. And 
now everyone is competing for the permanent positions.
    I think that is fine, also, it is different than a 
fellowship. But now they are permanent. But in terms of who 
should compete, let the best person win the job, not a 
preference for an existing career employee. Not a preference, 
frankly, for a Community Builder who served there for two 
years. Get the best talent. The taxpayer is paying the salary. 
Doesn't the taxpayer deserve to have the best talented 
individual in that slot?
    Mr. Walsh. The gentlelady's time has expired.
    To this point, I think we are going to have to have some 
discussion with the Secretary regarding this issue of Community 
Builders because I think the intent of the Congress in last 
year's appropriations bill was somewhat different than it has 
been interpreted by the Department. I think it is a serious 
issue that we really need to sit down with the Senate or the 
Chairman of the Senate and see if we can get this difined 
correctly rather than discuss at this point. I think there are 
some real questions right now as to the future of that 
Community Builder title.
    Secretary Cuomo. You think it is a title issue?
    Mr. Walsh. Well, it is an interpretation of last year's 
bill and report language that I think is in question.
    Mrs. Meek. Mr. Chairman?
    Mr. Walsh. Yes.
    Mrs. Meek. Don't we run into some inconsistency when we 
begin to define areas within a given Department? Don't we run 
into micro-management kind of problems when we say to the 
agency we must look at a program which you initiated and 
define? It is sort of like the university--I come from higher 
education and when people go out and get better training, 
through a fellowship or a scholarship or some kind of 
initiative, they come back into that system and they are better 
for it.
    I think when our Committee begins to go into that area, we 
get out of an area in which we are trained as professionals.
    Mr. Walsh. Well, I am sure that everybody has a comment to 
make on this. I think the best thing to say at this point is 
that we need to have some discussion about this issue regarding 
the Community Builders.
    Secretary Cuomo. It would be my pleasure, Mr. Chairman. We 
have a merit staffing process which is the way the Federal 
Government hires employees and it doesn't prefer existing 
employees, it doesn't prefer Community Builders. It is on the 
merits.
    Mr. Walsh. Suffice it to say there's controversy here and I 
think if would be best to address it outside of the hearing.
    Secretary Cuomo. That will be my pleasure, whenever you 
would like.
    Mr. Walsh. Thank you.
    Mr. Price.

                                  fhip

    Mr. Price. Thank you, Mr. Chairman.
    Mr. Secretary, welcome. Once again, I am glad to see you. 
Let me start today by following up on a process which this 
Subcommittee last year asked you to put into place at my urging 
and as I understand, you have the process well under way. It 
has to do with the Fair Housing Initiative program and access 
to housing by persons with disabilities. The process that you 
have undertaken, I should add, has the strong support of the 
home builders, and also advocates for the disabled. People with 
varying roles and stakes in this program, nonetheless, agree on 
the need to make the rules clear so that everyone knows what 
they are dealing with in trying to meet these requirements for 
access to housing by people with disabilities.
    In last year's House report, HUD was requested to issue a 
policy statement on its review of a technical matrix comparing 
fair housing accessibility guidelines with the accessibility 
provisions in various State model building codes. That involves 
translating the guidelines, which are regulatory in nature, to 
the terms of building codes and I realize that is not a simple 
task.
    The second part of the request was to come up with a 
program that would educate all the interested parties in what 
was required of them. Now, all indications I have point to a 
very positive process undertaken by the Department, working 
constructively with builders and advocates alike. So, I wonder 
first if you could tell the Subcommittee how that initiative 
that we requested is progressing.
    And then secondly, a component of this is an educationplan, 
as I said, and you have sent the Committee a document detailing how 
that education plan is shaping up. Do you think to implement that 
education plan you are going to need some additional resources? And 
also let us know, please, how the proposed project for Accessibility, 
Training and Technical Assistance will fit into this overall effort?
    Secretary Cuomo. Thank you, Congressman.
    It is my pleasure and let me take the opportunity to thank 
you for all the help you have been with the Department on these 
issues. It has been a substantial asset for the Department.
    This issue, Congressman Price, we have worked very closely 
with the home builders and also the fair housing community 
because the two sides of this equation are the home builders 
want certainty on what the building code is, so that if they 
build to a specific code, they don't have to worry about 
lawsuits or actions. The fair housing community wants to make 
sure the units are accessible.
    And in truth I believe the home builders are correct that 
there is significant uncertainty now in the code where there 
are situations where a builder has built a home or a complex to 
code, certified by an architect and they are still subject to a 
suit after the fact. We have been working with the Department 
of Justice and the home builders. We are very close to having a 
model code done that the fair housing community signs off on as 
well as the home building, the building community. They are 
agreeing on a code. And then we can say for the first time if 
you build to this code, you will be meeting the guidelines. We 
then need the Department of Justice to be involved to sign off 
on this agreement because one of the main problems now is the 
litigation stemming from this situation. The Department of 
Justice has been working with us.
    We are within weeks of finalizing the code. And I believe 
having a constructive outcome with the Department of Justice.
    Mr. Price. Could you elaborate on the education component 
of this and the kind of resources it is going to take to move 
forward on that and how this project for accessibility training 
fits in?
    Secretary Cuomo. We have an educational component within 
the fair housing plan. I was speaking to a member of the home 
builders last week on this with Commissioner Apgar, and I think 
the good news here, Congressman Price, is it has been such a 
controversial issue and it is such a hot topic that as soon as 
we have a resolution it would be like fire through dry grass, 
because this is on the top of everyone's mind. We will have an 
educational component but I think word will travel quickly on 
this
    Mr. Price. If it does have implications for the 
appropriations process though and the kind of decisions we will 
be making on resources, I would appreciate your following up 
for the record.
    Secretary Cuomo. Will do

                     homebuyer's mortage insurance

    Mr. Price. Let me now turn to a different topic. This has 
to do with secondary or pool mortgage insurance. You probably 
are aware of the press reports from late last year on secondary 
mortgage insurance; that is the insurance that lenders take out 
in addition to the primary or buyer's insurance to lower their 
risk in the case of a default.
    Concerns have been raised that in some cases, we hope 
isolated cases, mortgage insurance companies might be 
underselling, that is selling below cost, this pool insurance 
in exchange for that lender funneling all of their buyers to 
that insurance company for their buyer's insurance. The 
insurance company then would sell the primary insurance to the 
buyer at a price that allowed for a larger profit margin part 
of which, of course, would be given back to the lender in the 
form of lower cost to the pool insurance.
    Now, I am aware you have issued a policy statement on this 
back in September of last year with regard to whether this 
arrangement violated RESPA. I wonder if you could elaborate on 
that statement on Department policy and tell the Subcommittee 
what you are doing to ensure that lenders and insurers are not 
violating the law and particularly are not victimizing people 
taking out buyer's mortgage insurance?
    Mr. Walsh. Mr. Secretary, since Mr. Price's time has 
expired, if you could elaborate briefly that would be helpful 
to the Committee.
    Secretary Cuomo. Brief elaboration. We are aggressively 
investigating this situation. We are very troubled by the 
allegations. We have subpoenaed lenders, including those on the 
Internet. As you know, Congressman, the RESPA requires that a 
service be provided, otherwise the fee could be considered a 
kickback. And we are going to be continuing the investigation 
and are looking for an expeditious conclusion to that 
investigation and we are going to be putting more resources 
behind it to make sure we get it completed in a timely way
    Mr. Price. Thank you.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    Mr. Sununu.

                 fha property disposition--limitations

    Mr. Sununu. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for taking the time to indulge 
the Subcommittee. I would like to talk about the FHA inventory, 
the proposal that you talked about with Chairman Kasich. I 
think it is very interesting, very exciting. As I understand it 
those over 6 months will be sold to local municipalities for a 
dollar. Are there any--when that happens--are there any 
restrictions on the ability of the municipality to use the 
properties and are there any restrictions of the 6-month or 
older properties that would be sold?
    Secretary Cuomo. Congressman, we are excited by it also. We 
believe that we have done a lot on the disposition process--God 
bless you, Mr. Chairman--basically privatizing the process and 
we have accelerants in there also. The Officer Next Door 
Program, selling it to the police officers at a discount, 
selling it to teachers at a discount. This is the final, if you 
will, back door which is if none of this works within six 
months, we give it to the local government for one dollar.
    Mr. Sununu. Are there restrictions on their ability to use 
it?
    Secretary Cuomo. Any profit must be, continue to be used by 
the local government for a housing-related purpose
    Mr. Sununu. And are there any--it is all single family 
homes that have been in the inventory for more than 6 months?
    Secretary Cuomo. Yes.
    Mr. Sununu. Are there any qualifications to that?
    Secretary Cuomo. No.

                             fha inventory

    Mr. Sununu. How many properties are in the inventory now?
    Secretary Cuomo. Forty-six thousand.
    Mr. Sununu. How many have been in there for more than 6 
months?
    Secretary Cuomo. Three thousand today.
    Mr. Sununu. Three thousand. The GAO has indicated that at 
least as of January the 6-month inventory was more like 40 
percent, which would be ball park, 18,000 homes.
    Secretary Cuomo. We would disagree with GAO. And it was an 
old report prior to this--the report was done prior to our 
revision of the disposition process, which is a fundamentally 
different process now, Congressman. We basically privatized the 
disposition.
    Mr. Sununu. I understand. And I know that it is a dynamic, 
there were problems with In-Town, et cetera.
    Secretary Cuomo. Yes.
    Mr. Sununu. But you would claim right now of the 40,000 
plus properties, only 3,000 have been there for more than 6 
months?
    Secretary Cuomo. Yes. Let me ask the--with your permission, 
Assistant Secretary Apgar, to respond on the specifics.
    Mr. Apgar. Sure. There are currently in the inventory about 
46,000 properties. Almost 50 percent--I think it is 46 
percent--are actually under contract, so they have a buyer who 
is just waiting to go through the process. That brings us down 
to something in the range of about 25,000 properties that are 
available for sale. Of those, 3,000 have been on the market for 
more than 6 months, and those are the ones we are talking about 
that are eligible to move into those properties.
    Mr. Sununu. And when you say ``under contract'' you mean 
they are about to be sold?
    Mr. Apgar. Yes. They have a buyer. The contract has been 
sold. They are in the process of securing financing and moving 
into the final disposition.
    So the homes that are available for sale now are far less 
than 40,000, because many of the homes have already been sold 
or have a buyer identified.
    Mr. Sununu. Okay. If that is the case, then why has the 
inventory been growing? Never mind. The answer to that question 
would be largely the default of In-Town, I take it, the 
problems associated with the accumulation of inventory.
    Mr. Apgar. Actually, the inventory peaked, I think, about 
52,000 sometime last summer, and been coming down steadily ever 
since.

                        HOUSING CERTIFICATE FUND

    Mr. Sununu. I understand. Recapture, in your budget you are 
suggesting there is going to be about 1.3 billion--$1.2 billion 
in recaptures in the housing certificate fund. How do you 
arrive at that estimate?
    Secretary Cuomo. Let me ask Dave Gibbons to respond to this 
question, Congressman, who is most familiar with the recapture 
procedures.
    Mr. Sununu. Thank you.
    Mr. Gibbons. In the year 2001, we would expect about 
$700,000,000 of it to come from the tenant-based side, and the 
remainder come from the project-based side from long-term 
contracts that are expiring in that year.
    Mr. Sununu. That would seem to be dramatically different 
than the past history. I look at the figures for 2000. I look 
at the figures for 1999, and the recaptures are over $4,000,000 
and in one case over $5,000,000,000. Why the dramatic 
difference?
    Mr. Gibbons. There is going to be, and we are anticipating, 
and actually, we are seeing a dramatic drop in the tenant-based 
recaptures. The project-based recaptures are--we pretty much 
know exactly when they are going to expire, when those 
contracts are going to expire and what is going to be 
available. On the tenant-based side it is a lot less certain 
from year to year, but there are certainly fixes that had been 
put into place, which are bringing down the amount of 
recaptures on the tenant basis.
    Mr. Sununu. What kind of fixes? Well, when you say 
``fixes'' what do you mean? I mean things that can be good or 
things that can be bad?
    Mr. Gibbons. Just the amount of recaptures.
    Secretary Cuomo. It means ``improvements,'' Congressman. 
[Laughter.]
    Mr. Sununu. What have been the problems that have resulted 
in so many of the certificates or so much of the funding being 
returned in the past?
    Mr. Gibbons. Well, there is a number of potential factors, 
not the least of which is that tenant incomes may be rising 
much more quickly than we estimated when we put our budgets 
together using national inflation factors, and that means that 
the amount of funds that we are going to recapture are there, 
but the actual number of units being used are all being used, 
so it is just a matter of the pricing of the vouchers.
    A second problem is that you have tight markets, and if 
they are not being used in extremely tight markets, those funds 
would actually be recaptured. We are required to capture at the 
end of the fiscal year of the public housing authority, each 
and every public housing authority, we are required to 
recapture at that time, so you are taking a snapshot of what 
exists in a public housing authority at the time they close 
their books for the year.
    Secretary Cuomo. Congressman, also, because this was an 
issue that was recurring and causing concern with the 
Committee, because the number kept bouncing, we have put a lot 
of energy behind cleaning up the accounts at HUD and clarifying 
the procedures for the Public Housing Authorities, because we 
are reliant on them to identify their balances, and we then 
tallied the balance, so we clarified exactly what they were 
allowed to do with the Section 8s, what the cushions were, what 
the time periods were, how they should do their calculation, 
and I think you just see tighter numbers in general coming out 
of the department.
    Mr. Sununu. I appreciate those points. I just think--it 
appears to me that the anticipated change is dramatic, to say 
the least. I was struck by the original size of the recaptures 
of $5,000,000,000, similar to the unspent balances. I 
appreciate that you do not want to spend too fast, that you 
want to spend wisely, but at the same time, we are not talking 
about movement of $10 million or $100 million, we are talking 
about the movement of billions of dollars, and it seems like a 
big discrepancy.
    Secretary Cuomo. And, Congressman, part of it is--in this 
program, part of it is that do not spend money--it is not just 
a question of fast--but well. The manifestation of that in this 
program is the tight-markets phenomenon in places where they 
are not using the Section 8. I think what we have done here is 
we have clarified for the housing authorities exactly what they 
can keep as a balanceand what they cannot, and they have much 
more clarity from us. There was----
    Mr. Sununu. Does that mean they are going to keep higher 
balances now to minimize the recapture?
    Secretary Cuomo. No, they come down. They are being 
reduced, the balances that they can credibly claim, and we have 
brought a lot of specificity to exactly what they can hold and 
what their reserves are, and we have reduced them, frankly, so 
the numbers are now much tighter across the board.

                       USE OF BROWNFIELDS FUNDING

    Mr. Sununu. A very different question. I appreciate the 
concern, especially in the areas where you have housing 
authorities and public housing for environmental cleanup in 
Brownfields, but I really fail to understand the logic of 
arguing that HUD is more adept than EPA at administering these 
sites. Why do we have separate Brownfields funding in HUD? Why 
not give these funds to the experts that administer this 
through EPA's relatively successful Brownfields Program?
    Secretary Cuomo. In many cases, Congressman, these projects 
are pursued jointly between HUD and EPA, but EPA is one half of 
the equation, and very often the HUD project is both ends of 
the equation. In other words, HUD is talking about the reuse of 
the land, where EPA is basically focused on the cleanup of the 
land.
    Mr. Sununu. What are you using the money for then?
    Secretary Cuomo. The Brownfields funding? We will use it as 
basically an economic development incentive to enter into that 
transaction in the first place. You want to put a shopping 
center in a city, in an older county setting, and you cannot 
redevelop the site. Nobody will do a shopping center because 
the land is dirty. Someone makes us the shortfall. We come to 
the table and say, ``We will make up the shortfall in that 
economic development transaction through the Brownfields 
program.''
    Mr. Sununu. But cannot EPA bring the money to bear to 
cleanup in addition to the liability provisions that they bring 
to Brownfields sites?
    Secretary Cuomo. If it was also an EPA site and it was 
eligible and you could win, yes. And very often they will do 
both. They will use our economic development funds with EPA. 
They are not exclusive, and I would argue that when it comes to 
a development project, very often this is the one-stop shopping 
that we are looking to get done.
    Mr. Walsh. The gentleman's time has expired. Could you wrap 
it up? I know you have a million questions.
    Mr. Sununu. I don't have a million, by any stretch. Can I 
ask one more question? I think you will appreciate me asking 
the question, at least to a certain extent. [Laughter.]
    Mr. Walsh. That is usually the case.

                          INCOME VERIFICATION

    Mr. Sununu. Could you talk about the income verification 
pilot? What is the status of the pilot? How many notices did 
you send out? What was the response?
    Secretary Cuomo. Thank you. Let me turn it over to the 
Deputy Secretary, who has been working very aggressively on 
this project.
    Mr. Ramirez. What we have done, Congressman--and thank you 
for the opportunity to talk about this--is that for the first 
time ever, we have actually gone out and done a real survey of 
our residents out there that are either directly or indirectly 
subsidized through our program. So over 4 million income 
verification hits were made through a collaborative effort with 
Social Security and IRS. Out of that, and based on the targets 
that we have set up, there was approximately 260,000-plus that 
showed some differences.
    We are currently in the process of sending out notices to 
these individuals as well as the project managers in the 
housing authorities to go back and get their recertifications 
and explain the differences in income.
    Yesterday, in fact, I met with industry leaders from all 
sectors--the landlords, the housing authorities, and the 
tenants--to work through this process. So it is moving along 
quite well. We anticipate the notices going out sometime later 
this month, towards the end of the month, and----
    Mr. Sununu. Notices haven't gone out?
    Mr. Ramirez. No, sir. No, we haven't sent the notices out 
because they are not programmed to go out until in about 
another 10 days or so.
    Mr. Sununu. Thank you, Mr. Chairman. I appreciate the time.

                        UNUSED SECTION 8 FUNDING

    Mr. Walsh. Just before I go to Ms. Kaptur, who is next, 
just to read into the record, on the issue of recapture, HUD's 
budget office has conducted some in-depth analysis into Section 
8 recaptures, and their findings are pretty startling.
    First, of the 4,803 vouchered certificate programs 
administered across the country, 3,235 programs return unused 
Section 8 funds to HUD. More than $550 million was returned by 
132 PHAs in 1998; $600 million was returned by the same PHAs in 
1999, accounting for 41 percent of the total recaptured in 
those years. Annually, ten PHAs--Chicago, Washington, D.C., 
L.A. County, San Mateo County, New Orleans, the State of 
California, San Francisco, Puerto Rico, the State of 
Massachusetts, and New Haven, Connecticut--return $272 million 
in unused Section 8 funds.
    Finally, the largest 50 recaptures equal close to half a 
billion dollars, representing more than 200,000 unused Section 
8 vouchers and certificates.
    Ms. Kaptur?
    Ms. Kaptur. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary and gentlemen. Glad to have you here 
today. I apologize for being in and out. We had a competing 
hearing simultaneous with this one.
    Secretary Cuomo. Thank you very much. A pleasure to be 
here.

                  FINANCIAL SERVICES IN PUBLIC HOUSING

    Ms. Kaptur. Mr. Secretary, let me ask you or any of your 
able staff members who are with you, to what extent have your 
Public Housing Authorities, to your knowledge, embarked upon 
financial services for the people who live there, for example, 
the establishment of credit unions and credit union services 
for the residents?
    Secretary Cuomo. Well, Congresswoman, I know this has been 
an issue that you have brought attention to nationwide, and it 
is very much a real issue, not just for public housing but for 
impoverished communities, as the Congresswoman knows, just no 
financial services.
    After the Congresswoman's suggestions, we have been 
aggressively pursuing training and informing public housing 
residents, public housing authorities, about using HUD funds 
for these types of initiatives. Specifically, the Resident 
Opportunity and Supportive Services program, what we call 
theROSS program, allows the specific establishment of credit unions as 
a way of delivering banking services for public housing residents. 
Also, the Capital Grant program, our HOPE VI program, operating funds 
can now all be used to establish credit unions. And we see activity in 
this area also.
    Columbus Housing Authority Bank One, for example, comes 
into the elderly departments to provide banking services on 
site. Stark Housing Authority in Ohio is going to be creating a 
credit union with HUD EDSS funds, which are economic 
development funds. Paterson, New Jersey, the Paterson Community 
Credit Union will be opening a credit union for public housing 
residents in Paterson this March. In Atlanta, Georgia, Sun 
Trust Bank is facilitating public housing residents of Carver 
Homes to cash checks, et cetera.
    So the point is, Congresswoman, you raised the issue, you 
are exactly right. We don't have a specific program that can do 
this, but what we did is we went back and we made the existing 
programs eligible to do this, and as you thought and as I 
concurred, public housing residents are moving in this 
direction. Public housing authorities are moving in this 
direction. And it is working.
    Ms. Kaptur. Mr. Secretary, I want to thank you for 
listening to us on that, and I want to encourage you on in your 
efforts there. I know when the President delivered his State of 
the Union address, he talked about these IDA accounts. And I 
would hope that HUD would be able to be a partner in whatever 
might occur with that legislation as well. But I would just 
urge you at the national meetings and so forth to continue your 
full cooperation.
    I still go into so many communities in this country, and 
your testimony talks about people--in spite of this economy, 
housing, it seems, is less affordable. The people at the lowest 
ends of the income spectrum are dropping lower, and financial 
services are exploitative in so many of the communities in 
which these individuals reside.
    So I just want to say hear, hear, and if there is anything 
else we can do there, maybe the Interfaith Partnerships 
Initiative can link some of these church-based credit unions to 
some of the developments that are affected with the lack of 
decent and affordable financial services. So I just want to 
thank you very much on that.

                     MENTALLY ILL CONTINUUM OF CARE

    Another area that you know I have a concern about, as do 
you, and that is the question of homelessness, and certainly 
the subset of homeless that are mentally ill. And with your 
leadership, the Department has been able to help to provide 
shelter across this country.
    I am wondering if any of the people who are with you today 
might be able to speak directly to this Committee about the 
extent of the national need, how it is being met for the 
various categories of mentally ill that we have in this 
country. Some are more easily able to be housed. The others 
need this continuum of care that you are very well aware of and 
of which you have been a champion. But is there anyone at HUD--
or could we prepare information that would help the country 
understand our report card on this? How well are we doing? What 
more could we do? What do we need to know in this budget cycle 
in order to address this remaining population among the most 
tragic inside our borders?
    Secretary Cuomo. Congresswoman, it is my pleasure, and I am 
very proud of what we have been able to do together on the 
homeless--not saying that we don't have much more to do. But I 
remember when we first came to HUD, the homeless budget was 
about $400 million, something like that, and today we are 
talking about $1.2 billion.
    We have an entirely new approach, the continuum of care 
that is going to the local governments. It is working. Coast to 
coast you will get Democrats, Republicans, county officials, 
State officials all talking about it. It won the Harvard Award.
    But having said all of that, we are not doing enough. 
Probably one of the people who knows this issue as well as 
anyone in the Nation is Fred Karnas, and he has had all sorts 
of experience on this issue. And we have also just done a 
number of reports on it to further define homelessness and what 
it is about. And we worked on one of the most extensive studies 
ever done, which was just released several months back, and I 
will ask Fred to talk to you about that.
    Mr. Karnas. Yes, as you may be aware, the Interagency 
Council on the Homeless sponsored a survey that was funded by 
12 different Federal agencies. It looked at homelessness and 
provided a snapshot of the issue. Clearly, one of the 
significant issues identified by the survey was the needs of 
persons living with mental illness.
    Ms. Kaptur. May I ask what percent of the population that 
you would define as homeless would be mentally ill?
    Mr. Karnas. The number in the survey was approximately 30 
percent.
    Ms. Kaptur. Do you know how many of those homeless are 
veterans?
    Mr. Karnas. Not within the mental illness category----
    Ms. Kaptur. In general.
    Mr. Karnas. The survey verified that it was about a third. 
Thirty-three percent of the homeless men are veterans. About 23 
percent of the overall homeless population are veterans.
    I think basically, if you look at the programs that we 
fund, you will see that last year several hundred were directly 
targeted to serve persons with mental illness. It is a high 
priority in communities. We have also provided additional 
information and technical assistance to communities to help 
them develop Safe Havens, a program that is designed to be a 
bridge for people from the streets to mainstream programs. The 
Safe Havens program is a result of several years of 
programmatic experiments, and we have found it to be a very 
successful program at the front end of the system to help get 
people into mainstream programs.
    Ms. Kaptur. I would just like to say, Mr. Secretary, I am 
sure that the Department of Justice serves on this interagency 
working group. Does it?
    Secretary Cuomo. Yes, it does.
    Ms. Kaptur. Just looking at my own community, we have a 
marvelous county sheriff who has now devoted the entire third 
floor of the jail to this population because there is no place 
else for them. They really don't belong in jail. We are paying 
a terrific annual occupancy rate for these individuals.
    I have asked myself, how could we transform those dollars. 
Those are local dollars. They are not Federal Department of 
Justice dollars. But how could we use those to create a more 
appropriate setting for this population? Are there 
demonstration projects that we could embark upon across the 
country where we are transitioning these peopleout of these 
jails into a more appropriate setting?
    Secretary Cuomo. Congresswoman, I couldn't agree more. The 
situation that Chairman Walsh brought up earlier with New York 
City, their solution was at one time--and they have backed off 
this. They wanted to arrest the homeless who were on the 
streets, the predominant number being people who were mentally 
ill. And all too often our jails have now become a mental 
health system for the very poor. And it is not as if this is 
even cost-effective. Forget being humane. Forget being 
intelligent. Forget being helpful for people who are mentally 
ill. It is not even cost-effective. A jail cell costs more than 
a mental health bed.
    So while it may seem swift and sure and resolve the 
situation the way you would clean trash from the streets, long 
term it does nothing for you because it is revolving door. You 
are in a jail cell, but you can't keep a person in a jail cell 
long. They do have constitutional rights. And then they are 
back on the street, and you do it over again. And it is a much 
more expensive process.
    I don't think we need a demonstration program, frankly, to 
do it. I just think we need the acknowledgment of the reality 
that mentally ill people should not be in a jail cell. They 
should be in a mental health bed. And, by the way, we know how 
to provide a mental health bed. We do it all across the 
country. We do it with not-for-profits in community-based 
settings, and it is cheaper than a jail cell.
    Ms. Kaptur. I completely agree with you, Mr. Secretary. I 
just have trouble getting my arms around this one because, for 
instance, I was in one veterans facility in Illinois, and a 
particular individual was being readmitted for the 17th time. 
They would get the person on their meds, put them out, and 11 
months later they were back again. And yet that very same 
veterans' facility had housing that they were decommissioning 
right next door that had been hospital space, low-rise hospital 
space. I said, Why don't we take some of these Federal dollars 
and turn those into transitional units, at least, for some of 
these individuals? The answer at the time that was given to me: 
Well, you know Congresswoman, housing is on the fourth floor of 
the VA in Washington, and medical is on the second floor. And 
you know what? It is really hard for them to cooperate.
    So I guess I am making a plea with you, Mr. Secretary, that 
I would love to do something more in getting these agencies to 
cooperate, be they Justice Department or local corrections 
facilities, our Veterans Department where we can, obviously 
HUD. Somehow those connections aren't always happening at the 
local level.
    Secretary Cuomo. Congresswoman, you are exactly right. And 
as you mention this, in some ways as a Nation I think we are 
backing into the realization that there really is no mental 
health system for the very poor. We all say after 
deinstitutionalization there was no community-based 
alternative, but we haven't really appreciated that fact and 
the import of that fact. And the housing system in this country 
now is evolving into the safety net for many mentally ill 
people.
    We have 790 projects that we now fund as HUD projects that 
are mental health facilities. They are community-based mental 
health facilities. But we call them homeless projects because 
we are at least a funding source that is available.

                        mental health conference

    I was going to mention when I spoke with Congressman 
Frelinghuysen, we are planning to do a mental health conference 
to address specifically housing needs of mentally ill people, 
because it is an area that we have been working on the edges of 
but I don't think we have really come to grips with. And I 
think we should just put in the mental health providers, who 
tend to be social service providers or medical providers, put 
them in the same room with the housing providers and start to 
marry these two. But I think----
    Ms. Kaptur. And the corrections people.
    Secretary Cuomo. I think, Congresswoman, I would love to at 
that conference put this component into that conference and 
bring in the law enforcement officials across the country and 
let them know that there is an alternative. You want to get a 
homeless person off the street? You don't have to go to a jail 
cell. Let's start to think of it as a mental health problem and 
getting people into the mental health system.
    So I would love to work with you on that and making it part 
of that conference.
    Ms. Kaptur. Thank you. I know the chairman has an interest 
in this as well, and I would really enjoy working with him on 
it.
    Mr. Walsh. I think it is an important topic that we don't 
seem to have our arms around. I would agree with that.
    Mr. Goode?

                     gun violence in public housing

    Mr. Goode. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for the opportunity to ask you a 
few questions. When I first came in, you were mentioning gun 
violence in public housing and also gun violence in this 
Nation. And I wanted to share with you what I was told by a 
family that had a Swiss exchange student in their home. In that 
country he said nearly every family had at least one or several 
guns, and he felt that that was a big factor in Germany not 
overrunning Switzerland in World War II.
    What are the factors that you think in public housing cause 
violence with guns?
    Secretary Cuomo. I think gun violence is due to a number of 
factors. You have a number of different types of violent acts 
with guns. You have a high number of safety accidents with 
children, because a gun is in the house and it is in an unsafe 
place.
    Mr. Goode. Why do you think they don't have those accidents 
in Switzerland?
    Secretary Cuomo. I am not familiar with the situation in 
Switzerland.
    Mr. Goode. Let me ask you this: Do you know James R. 
Tabron?
    Secretary Cuomo. No, sir.
    Mr. Goode. Are you familiar with the Public Housing 
Authorities Directors Association?
    Secretary Cuomo. The trade group, yes, sir.
    Mr. Goode. Let me read you this paragraph, and you comment 
on it.
    ``PHADA members are dismayed that the Administration's 
highly publicized focus on the lawsuit''--meaning the lawsuit 
against gun manufacturers--``has had a negative impact, 
although unintentional, on public housing's image. This is 
unfortunate given all of your good efforts the past 3 years to 
alter misconceptions about the program. Still, many media 
reports and some of the Administration's own issuances and 
public statements paint unflattering and unfair 
characterizations of public housing. The perception is that gun 
violence is pervasive in public housing when this clearlyis not 
the case in most communities.''
    Do you disagree with that?
    Secretary Cuomo. I understand what the trade association is 
saying is they don't want public housing to be perceived as a 
place of gun violence because it may be a derogatory comment on 
public housing.
    I don't think it is a derogatory comment on public housing. 
I think it is a fact. And there are 30 cities across this 
country that are now suing the gun manufacturers for damages. 
There are hundreds and hundreds of housing authorities who have 
sent letters of support to the Department in this area.
    Mr. Goode. Is the suit being instituted on behalf of any of 
the housing authorities, or is it on a local basis, or is HUD 
doing it? Are you all participating?
    Secretary Cuomo. There are currently about 30 suits in 
action, some threatened, about 28, I believe, currently active 
in litigation. HUD's position is we are trying to negotiate 
with the gun manufacturers for what we believe are very 
reasonable measures.
    If we are unsuccessful at the negotiation, then HUD as a 
housing authority would commence a suit. I understand the 
comment--just to specifically answer the public housing trade 
group's point, we have a study that says gun violence is twice 
as likely in public housing, for obvious reasons. It is nothing 
about public housing directors, by the way. I understand that 
is the Public Housing Directors Association and they could take 
this to mean that they are not doing a good job. I don't think 
it has anything to do with the public housing directors. They 
may or may not be doing a good job, but it is just a fact of 
the residents of housing authorities, where they are, what the 
conditions are, and the report says it is two times as likely.
    Mr. Goode. Does each local public housing authority have 
the determination on whether a person that is a resident of a 
public housing authority can have a weapon for self-protection?
    Secretary Cuomo. I do not believe it is a housing 
authority's right to tell a person in the housing authority 
whether or not they can own a gun. You have the relevant laws 
which will govern ownership within the housing authority.
    Mr. Goode. In other words, if it was in Washington, D.C., 
you could not. But if you were in Martinsville, Virginia, you 
could.
    Secretary Cuomo. That is right, Congressman. It is subject 
to the local laws. We don't have any Federal laws that would 
govern.

                          use of fhip funding

    Mr. Goode. All right. To jump to another area, you 
mentioned the FHIP program, Fair Housing Initiative Program.
    Secretary Cuomo. Yes, sir, I did.
    Mr. Goode. Have any grants under that program or any funds 
been utilized in cases of discrimination against insurers?
    Secretary Cuomo. There may be use of FHIP funds in cases 
against insurers. It is not a primary purpose of the program, 
and we do not fund grants exclusively for insurance 
discrimination. But courts have held that insurance 
discrimination is covered by the Fair Housing Act.
    Mr. Goode. Could you for fiscal year 1998, if you would, 
give me a list of funds expended by FHIP and the entities that 
received them?
    Secretary Cuomo. I can do that, sir.
    [Clerk's Note:--The agency has provided the information 
requested directly to the Member's office.]
    Mr. Goode. Thank you. No more questions.
    Mr. Walsh. Thank you, sir.
    Mr. Knollenberg?
    Mr. Knollenberg. Chairman, thank you.
    Mr. Secretary, welcome, and your staff as well. There is 
one very quick thing I wanted to mention to you, and I think 
your staff is alert to this, and it is reaching out to seniors. 
I know that is one of the things that you believe in as a part 
of your policy, obviously.
    Secretary Cuomo. Yes, sir.

                     pilot--section 8 and medicare

    Mr. Knollenberg. But I want to recognize something here and 
have you briefly respond to a potential pilot program that 
involves the Medicaid waiver with a Section 8 voucher. It is 
something new, but I understand it is being talked about among 
your staff, and it is something that I think would certainly 
help the seniors of this country because, number one, it would 
enable them to stay in their home rather than going to some 
other facility, and via this Medicaid waiver, it would be taken 
care of on two fronts, the ultimate end result, the success, I 
believe, is that it will save money and, number two, it will 
certainly make it better and more convenient for the seniors.
    So I would just ask, if you would, I would be interested in 
pursuing this on a small-scale basis. I would like to have your 
assurance that you would work with me in bringing about 
something that would involve that kind of a combination.
    Secretary Cuomo. Congressman, it would be my pleasure. I am 
very excited about this. You know, we all talk about the 
growing, quote-unquote, graying of America and the growing 
senior population and the impact on the health system, Social 
Security, et cetera.
    We have spent less time focusing on the impact on the 
housing system. If seniors are going to live longer and they 
need health care longer, obviously they also need some place to 
live during that period. But, Congresswoman Meek's point, 
housing isn't really up on the radar screen even in this issue. 
And I think the way to really address it is to get past these 
artificial distinctions between housing and health care, 
understanding that you need both. And if we could make Medicaid 
work with our housing programs, Section 8, et cetera, that 
would really be a major advancement. That is what we are 
working towards, and I would love to work with the Congressman 
on it.
    Mr. Knollenberg. I am glad to hear you say that. We would 
be happy to entertain doing that.
    Let me go to another case that is very bothersome to me. It 
involves an example, I believe, of waste, fraud, and abuse. And 
I think it is a classic example because there is a settlement 
in Detroit, which is akin to my district, called the Village of 
Parkside. You probably heard about it.
    Secretary Cuomo. Yes, sir.

                       oversight of hope vi funds

    Mr. Knollenberg. It, in effect, has become, I think, a 
poster child for mismanagement and cost overruns. There have 
been numerous stories in the local papers, the Detroit Free 
Press obviously being one that on different occasions has put a 
story before the public. That concerns us greatly for these 
reasons. There are three solid concerns that I have and I think 
that the people that are next to this issue must have.
    Number one, there is the idea of cost. The cost onthese 
units--this is a HUD HOPE VI initiative. The cost of those units, 
which, incidentally, started out at around 217--217,000 went pretty 
quickly, to as much as 297. Now, there are builders--there are people 
in the community that believe they could build that piece of property 
for $150,000. You can argue that, but already with these cost overruns 
we have a problem on our hands.
    The other thing, number two, is that contractors aren't 
being paid, and in many cases, the Detroit Housing Commission 
has misspent the funds so they can't pay them. There is a 
contractor--I can give you--I have heard from several of them, 
one story after the other, as to being put on hold. This 
concerns me a great deal, and there are many contractors having 
this kind of a problem.
    Thirdly--and this has to do with the bid process--we have 
on good record an individual contractor that was going to 
present a bid. He happened to realize the time, the curfew was 
going to be at 5 o'clock, and he managed to get the phone call 
through to the people, got the assurance that if you bring it 
over we will accept it. When I say ``accept it,'' accept it for 
consideration. There is a difference.
    Anyway, what happened, though, is a few days later this 
particular contractor got the package back. It was sealed, it 
was unopened, and upon inquiry, he was told, well, it was here 
too late.
    Now, what is interesting about this is that that particular 
bid was 10 percent below the bid that actually won the case. 
That concerns me a great deal.
    I can tell you that it has turned into a debacle. I think 
as recently as the 16th of February an article appeared, the 
title--and this got some decent exposure--``Housing rehab plans 
crumbling.'' It details how the Villages of Parkside are $7.5 
million over budget and is so badly mismanaged that the whole 
thing has to significantly now be scaled back. And the very 
people that we are trying to help, the people that, frankly, 
need that housing, aren't getting it.
    My question--and I have got several questions, but maybe I 
can lump them together so you can respond. It really boils down 
to what kind of mechanism does HUD have to really look into 
this. For example, what specific oversight mechanisms do you 
have for the HOPE VI funds? And what oversight is being done 
right now, if any, with respect to the public housing at 
Parkside? And then, finally, I would just ask you, if that 
isn't enough or not enough is being done, what should we in 
Congress do or what additional oversight should Congress do 
with respect to what is HUD's intent for the spending of these 
funds?
    So there are three or four questions there, but I think 
they all connect. But what is your thinking on this situation? 
It certainly doesn't look good from our perspective. We would 
like to know what you can do about it.
    Secretary Cuomo. Congressman, first, I agree with the 
thrust of the concerns. I am the first HUD Secretary who has 
ever built housing, which I thought was just a novel line the 
first time I heard it. But it actually makes a big difference, 
and this was a good demonstration of that. I built multi-family 
housing, basically. We did about 1,000 units, about $120 
million worth of construction, before I came to HUD.
    When I first looked at the HOPE VI program, none of what I 
considered basic systemic controls were in place. We have since 
then done an extraordinary amount of work. The person who runs 
this program is named Eleanor Bacon, who has done great, great 
things. But we revamped the entire way we do business.
    We put in cost controls on the hard costs, the development 
costs. We put in cost controls on the, quote-unquote, soft 
costs, architects, attorneys, et cetera. We put in cost 
guidelines for demolition, community revitalization. We hired 
our own contractor advisers, in other words, somebody who would 
go verify the information submitted before we allowed a 
drawdown, the way a bank would do it on a construction loan, 
and we basically modeled the private sector's construction and 
permanent loan system onto the HOPE VI program.
    Mr. Knollenberg. Is that being done now?
    Secretary Cuomo. Yes, it is being done now. This specific 
Parkside could not happen today----
    Mr. Knollenberg. Well, this has been--you say it can't 
happen today. When was this put in place?
    Secretary Cuomo. This has been put in place on my watch. 
So, ab initio, Parkside could not happen. We now have to fix 
the situation. I agree. We have stopped--HUD halted the 
contractor payments, any contractor draws in April 1999, except 
for 1998 payments. And no draws have been allowed until HUD is 
signing off on them, and we have the public housing authority 
hire an accounting firm to verify all expenditures.
    It is my understanding that the interim executive director 
who did this has resigned after we started to look into it, and 
we have sent in KPMG to audit the situation, monitor the books, 
and tell us what we should be doing.
    Mr. Knollenberg. Do you think that you have in place the 
right kind of machinery to bring about the proper disclosure on 
all of these? See, it is the past sins that we are looking at 
here, too. Those things ought to be evaluated as a part of this 
audit so that those people will ultimately get paid, I presume. 
Isn't that the intention?
    Secretary Cuomo. Yes. Institutionally, we have the right 
controls in place. We have brought in the contractors. We have 
put in the guidelines. We have put in the cost controls. We 
hired a staff that is competent in just this area. And we are 
running the program well. I feel good about that. And from what 
I have before me, Congressman, it suggests that we are in 
control of the specific at Parkside, but I will make sure that 
we do.
    Mr. Knollenberg. That I would appreciate, and obviously we 
are going to look at it very closely ourselves because we are 
concerned about what is taking place. And it appears as though 
the more we dig, the worse it gets, and maybe you are getting 
the same impression from your analysis.
    Secretary Cuomo. Yes.

                         good neighbor program

    Mr. Knollenberg. It is frustrating, and it is also very 
upsetting to an awful lot of people.
    Let me go to another quick question. I know Mr. Sununu had 
a series of questions, and he covered pretty much what I think 
I was going to cover. But there is one that he did not cover 
relative to the Good Neighbor program. You know, I am not going 
to suggest to you that I don't have doubts about a lot of 
things. This is one thing I do have some doubts about because 
it almost looks too good to be true. They say if something 
looks too good to be true, then maybe it is too good and maybe 
it just isn't true.
    My concern is this: Under the Good Neighbor policy,does 
your agency, upon putting a house into the hands of a given city for 
$1, retain the debt on that property? Explain why you don't. What 
happens to that debt?
    Mr. Apgar. As part of our FHA program, of course, we insure 
the mortgage. When the house is foreclosed, we pay off the 
mortgage lender and now own the house outright. We sell the 
houses back in order to recover against the cost of our claim.
    Mr. Knollenberg. But not for $1.
    Mr. Apgar. Not for $1. We actually have under our new 
program raised the average sales price sufficient so that we 
are recovering more of the claim----
    Mr. Knollenberg. Say that again. You are raising the sales 
price?
    Mr. Apgar. Yes, we have been able to increase the sales 
prices, speed the time of the sale so our holding cost during 
the sales period is less. We estimate that we are getting back 
at least $4,500 more per house net to the Government on our 
sales process----
    Mr. Knollenberg. Than you did before.
    Mr. Apgar. Than we did before. When we sell 50,000 homes, 
we realized almost $255 million worth of savings as a result of 
this program.
    But as you keep going through the inventory, some of the 
homes just don't sell. They are either in very----
    Mr. Knollenberg. What do you do with those?
    Mr. Apgar. That is the dollar program. After----
    Mr. Knollenberg. What about the maintenance on those homes? 
You are in the process of paying for a variety of things to 
keep those houses at least----
    Mr. Apgar. Right. We secure the homes to protect against 
further vandalism. We don't upgrade them. We just maintain them 
at the current level as part of the sales process.
    Invariably, the homes that we are talking about, though, 
that don't sell are in markets where almost no homes are 
selling. We have programs in many smaller cities in the 
Northeast where the homes are in neighborhoods that just won't 
sell. We need to have the city involvement with other resources 
besides just trying to sell the home. They could bring their 
block grant funding together. They could bring neighborhood 
improvement services, other features.
    In addition, in many instances the right answer to these 
homes is tearing them down so that you get the land back into 
some productive use, maybe give the two neighbors a little bit 
more side yards. But after our ordinary sales processes don't 
work, we find it best to partner with the city or with the non-
profits they will bring in to figure out how best to do it.
    Secretary Cuomo. If I could, Congressman, I know the time 
is short, but if I could just follow up, because I understand 
your skepticism about sometimes it looks too good to be true. 
And having been at HUD for 7 years, I can second that.
    But in this case, Congressman, it is what it appears to be, 
but it may be more apparent. What this is saying is, as the 
Commissioner said, we get back the house--we take back the 
house in foreclosure. We pay off the mortgage. We now own the 
house. We have to pay to maintain it. We are trying to sell it. 
And we are constantly discounting our price. We are dropping 
our price. We are dropping our price as we attempt to sell it.
    What we are saying is, at the end of 6 months, if we have 
not been able to sell the house, despite all the reductions in 
the sales price, we give it to the city debt-free--to answer 
your specific question, debt-free. We eat the cost at that 
point.
    Mr. Knollenberg. That is the part that interests me is the 
eating of the cost.
    Secretary Cuomo. We eat the cost because, look, it means we 
couldn't sell it, and at least we are stopping the 
hemorrhaging. We are stopping the costs that we were paying to 
carry the house because we want to maintain it, we want to keep 
it right, we want it to be a good neighbor, and we are just 
saying at that point we will cut our losses and we will get 
out.
    And if we have to eat the cost, I would rather--I would eat 
the cost in the name of being a good neighbor because, for the 
few dollars we could get back on that house, I wouldn't want to 
have to burden the locality with it. And FHA is so strong right 
now, Congressman, the $5 billion valuation. We can be in a 
position where we can be a good neighbor.
    Mr. Walsh. The time has expired.
    Mr. Knollenberg. Thank you.
    Mr. Walsh. Mr. Frelinghuysen?
    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Mr. Cuomo, good afternoon. When you use the expression 
``take back the house,'' we get quite anxious on this side. 
[Laughter.]
    Secretary Cuomo. Well, you can take it any way you want to 
take it, Congressman.
    Mr. Frelinghuysen. What I did miss--and I have to tell you, 
I came from a hearing with Secretary Richardson, and he seemed 
to be ever present, bobbing up and down behind the Vice 
President last night. I was looking for you. [Laughter.]
    Secretary Cuomo. Well, I was doing HUD work, Congressman.
    Mr. Frelinghuysen. Absolutely. How he got back from the 
Middle East to get to Tennessee so quickly, I don't know.
    Secretary Cuomo. Those flights are tricky.

                section 8 for persons with disabilities

    Mr. Frelinghuysen. I gave him a good grilling on the oil 
issue. I think he thinks he is over the hump, but for those of 
us who love the Northeast and New York and New Jersey, we are 
not going to let him get away with just saying LIHEAP is going 
to do it for our constituents.
    I would like to concentrate for a few minutes on some 
traditional areas that I question on, specifically people with 
disabilities. I also have some particularly Section 8, tenant-
based rental assistance, Section 811 and, if time, I have some 
issues that relate to the Shelter Plus Care program, also the 
public housing assessment system and things that relate to the 
HFA down payment simplification system. This will enable your 
staff to start ripping things out of notebooks in anticipation 
of my asking some questions.
    First and foremost, let me congratulate and thank you for 
submitting a fiscal year 2000 HUD budget which includes up to 
$25 million for Section 8 tenant-based rental assistance for 
people with disabilities. All of us are thrilled by that 
number. We hope we can increase it and we know that it builds 
on some of the things that we have done in a very bipartisan 
way with Chairman Walsh's leadership and his predecessor on 
this committee.
    However, I do wonder if the purpose of these funds 
issomewhat, and I would like a clarification on this, mischaracterized 
in your document, ``HUD Back in Business,'' and I quote. ``As set-aside 
for nonelderly disabled tenants living in public housing projects that 
convert to elderly-only projects, the nonelderly disabled tenants are 
given vouchers so that they can find housing elsewhere.''
    To me as a layperson, it makes it sound like Public Housing 
Authorities, PHAs can use these vouchers as an incentive to 
make younger people with disabilities move out of public 
housing. As you are aware, such an action would be prohibited 
by law. The vouchers are intended for those people with 
disabilities who have been waiting for units in PHA buildings 
and Federally assisted buildings that converted to elderly-
only. Is my understanding correct?
    Secretary Cuomo. I do not believe so, Congressman.
    Mr. Frelinghuysen. I do not have the page there but there 
is a bullet there that actually states that.
    Secretary Cuomo. We will check the bullet but that is not 
my understanding, Congressman. And if I might on your opening 
comment?
    Mr. Frelinghuysen. Yes.
    Secretary Cuomo. This is the most aggressive budget that we 
have put forth in the seven years that I have been at HUD on 
this issue and I want to thank you for your work and your 
persistence in this because I agree it is another manifestation 
of what we have done together. And your insight and advocacy, 
frankly, on this issue has done great things for the disabled 
community and for the department and I thank you for that.
    We will look for the specific in the budget document, 
Congressman, but again the answer is no.
    Mr. Frelinghuysen. Well, thank you for that recognition. 
And thanks go to Chairman Walsh and all members of the 
Committee and particularly the Consortium of Citizens with 
Disabilities Housing Task Force that I guess has been meeting 
with some of your men and women on a fairly regular basis.
    Secretary Cuomo. Yes.
    Mr. Frelinghuysen. Getting back to the Section 8 tenant-
based rental assistance for people with disabilities, your 
request does not appear to address at all the loss of access by 
younger people with disabilities to units in Federally assisted 
housing. As you know, for the past several years I have been 
trying to get HUD to undertake a study of what federally 
assisted units formerly open to elderly and nonelderly people 
with disabilities have become elderly-only. I have asked HUD to 
make available an inventory of the assisted housing units that 
remain open to people with both mental and physical 
disabilities. As of yet, we do not have that record. We do not 
have that inventory.
    Does it exist? Is there a record of what assisted housing 
projects have been lost to younger people with disabilities?
    Secretary Cuomo. Congressman, we do not yet have the final 
numbers on that and the only numbers we do have are from a 
November 1998 GAO study that showed about 22 percent of the 
assisted housing stock or 915 projects had an elderly only 
policy.

                      housing for disabled report

    Mr. Frelinghuysen. For what it is worth, and obviously if 
we serve on the Committee we think it is worth something, our 
Committee report had a deadline of the end of February for this 
information to be forthcoming. I would just like to put that 
into the record. Obviously if there is a slippage, we would 
like it sooner rather than later. Would you comment?
    Mr. Apgar. In terms of the study, we contracted with Abt 
Associates last year. The study design is complete.
    Mr. Frelinghuysen. Not Apgar Associates, was it?
    Mr. Apgar. No, Abt Associates, one of the----
    Mr. Frelinghuysen. You are from New Jersey, are you not?
    Mr. Apgar. I am from New Jersey. We talked about that 
before.
    Mr. Frelinghuysen. Thank you very much. Mr. Cooper,as well?
    Mr. Apgar. Yes, Mr. Lucas and a few others that have 
managed to turn out okay.
    Mr. Frelinghuysen. You got rid of Keevy, though.
    Mr. Apgar. We did. Mr. Keevy went on to greener pastures.
    But the Abt Associates consulting firm is under contract to 
do the study and we have been working closely with the 
Coalition of Citizens with Disabilities on the study design. 
The study now is in the field, as you know. It is going to be 
looking at 50 case studies to understand what are the 
conditions under which this conversion to elderly only may 
occur and what are the situations surrounding that. That will 
give us good, hard reason as to not only the number----
    Mr. Frelinghuysen. A good, hard reason but when is it 
coming?
    Mr. Apgar. We believe it will be ready this summer.
    Mr. Frelinghuysen. This summer. All right, we have a date. 
June, July?
    Mr. Apgar. Actually it is late summer. October.
    Mr. Frelinghuysen. Oh, late summer. October, November? When 
you have come from the Richardson hearing you are not always on 
your best behavior.
    Mr. Apgar. And in terms of the data, we have modified our 
data systems so we can understand which buildings on the whole, 
working with our field managers, have elderly only policies. We 
will tally that data on a continuing basis in the future.
    We are also doing more extensive data modifications which 
also require the cooperation of the building owners to get 
unit-by-unit accounts of who is living in particular units and 
their disability status. Both of those are in process.
    Mr. Frelinghuysen. Well, we will not hold our breath. This 
is a serious--we may laugh here about the slippage.
    Mr. Apgar. These are serious issues and we will be able to 
get the indication on the buildings as a whole because we have 
all our field managers working with the building owners to 
identify and enter that data into our existing systems. In 
order to do a unit-by-unit assessment so that we will really be 
able to track this on an ongoing basis, we need to do 
significant software modification that also not only involves 
the department software but the software that all the vendors 
supply to the building managers. So that work is underway.

                         Vouchers for Disabled

    Mr. Frelinghuysen. I am glad it is underway.
    Relative, Mr. Chairman, to the requested 120,000 new 
incremental vouchers, you have some new voucher requests?
    Secretary Cuomo. Yes, sir, 120,000 new vouchers.
    Mr. Frelinghuysen. This is the first time we have had a 
request for new incremental vouchers, is it not?
    Secretary Cuomo. No, sir, we did 60,000 last year. We did 
50,000 the year before. It went 50, 60, this year 120.
    Mr. Frelinghuysen. How many people are you targeting in 
that number that may be disabled?
    Secretary Cuomo. Well, besides the 811, we have 5,000 
vouchers for 2001, which would be specifically targeted. But we 
have also done something, Congressman, which is the process by 
which all the vouchers are allocated is a semi-competition. And 
in this coming NOFA we will offer extra points for anyone who 
comes up with a strategy targeting the disabled community. We 
think it will be 20 extra points on the competition, which is a 
significant number of points, and we think that will have the 
effect of steering more vouchers to more people with 
disabilities.
    Mr. Frelinghuysen. What about younger people with 
disabilities? This is sort of what I have been harping at each 
and every year. At times, and I got myself in trouble in the 
past, I said something the system favors elderly people.
    Secretary Cuomo. But this is all people with disabilities. 
It does not draw a distinguish between younger people with 
disabilities and older people with disabilities.
    Mr. Frelinghuysen. But what specifically are we doing to 
assist younger people with disabilities?
    Secretary Cuomo. They would be eligible for all of these 
activities, but we do not have a specific activity geared 
toward younger disabled.
    Mr. Frelinghuysen. What about the needs, the housing needs 
of people that are disabled that are young? How are their needs 
being met?
    Secretary Cuomo. Well, they would be met the way the 
programs are addressing them and again this year we have gone 
further than we have ever gone before, but within those 
eligible activities. We do not have a set-aside for younger 
disabled in any of these programs.
    Mr. Frelinghuysen. The thing that I am sure you are aware 
of, I think sometimes HUD and many of us fail to realize how 
many poor people with disabilities--how poor many people with 
disabilities are and how current Federal policies often force 
them to remain in poverty. The numbers here are outrageous.
    In 1998, the Social Security Administration SSI program 
provided an individual with a disability with a monthly income 
of $498 or only $5,928 per year, as expressed as an hourly 
wage, $3.09 an hour. To make matters worse, the number of 
Federally subsidized apartments available to nonelderly people 
with disabilities continues to decrease due to elderly only 
policies. I need to have some sort of satisfactory explanation 
as to why this is occurring and whether there is a way to 
thwart it and to get more reasoned an assistance to younger 
people with disabilities who, in fact, obviously are going to 
be living longer and do need a fairer share of the housing 
stock.
    Secretary Cuomo. Congressman, I hear you and when you look 
at what we are going to be doing this year besides the normal 
programs, 811 is up $9 million; we have a 5,000 voucher set-
aside.

                              Section 811

    Mr. Frelinghuysen. How did you, for instance, come to the 
dollar level for the Section 811 program?
    Secretary Cuomo. It is allocating scarce resources among 
competing needs, but we came up with what we believe is a 
balanced approach. 811 goes up $9 million. 5,000 vouchers set 
aside for the disabled. $25 million and then the extra points 
for the overall competition, which we believe is going to make 
a difference; never done before. And, through the normal fair 
share, we estimate about 10,000 more vouchers would go out 
that.
    Mr. Frelinghuysen. I am told my time is up. I hope I get a 
second round. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you, Rodney.

                                  PHAS

    We will continue. What I would like to try to do is limit 
to five minutes and that should finish us out. We may get 
members coming back.
    In January of this year HUD announced it would implement 
the public housing assessment system on March 31, 2000. The 
system was developed to replace the existing PHMAT system. It 
is a test run conducted over the last 12 months. It was plagued 
by many problems, problems which led Congress to direct HUD to 
delay implementation pending meeting several conditions. One 
can argue about whether the conditions were actually met.
    Today, however, I would rather focus on whether the system 
is capable of adequately measuring the physical and financial 
conditions of 3,400 public housing authorities.
    If you would, describe some of the problems associated with 
this assessment system.
    Secretary Cuomo. Mr. Chairman, first, not to lose the 
reality for the acronyms, this system for the first time in 
HUD's history, we will have inspected every property we 
subsidize. It is almost that simple--44,000 properties. We went 
out and inspected every building with a private contractor by a 
set national protocol. And believe it or not, HUD had never 
done this in the past. And we were getting so many complaints 
about well, the HUD building in my neighborhood. The truth is 
we did not know.
    The PHAS is the public housing side of the inspection 
system. The same system also applies to the multifamily, the 
assisted side, as it is called, but it is basically a physical 
inspection system where a private contractor goes out with a 
protocol and inspects a building.
    We have done all the buildings once nationwide. And, by the 
way, the results are outstanding and positive. Seventy-four 
percent of the residents of public housing say that their units 
are either satisfactory or very satisfactory. Only a small 
handful of the units actually failed the inspection. So the 
results are very good. And we have been working with the public 
housing authority.
    However, you will have some housing authorities who just do 
not want to be inspected by this inspection system and----
    Mr. Walsh. I understand that and I think there are some who 
just feel that they were scored with different criteria, so it 
did raise some issues.
    What sorts of problems did you encounter and how do you 
respond to those? If there were no problems, we need to know 
that, too.
    Secretary Cuomo. We sat down for an extended period of time 
and went point by point through the inspection system. Should 
we be looking at the sidewalks in front of the building? Yes or 
no. Should we be looking at the windows? Does it matter whether 
or not there is landscaping around the building? And we 
literally worked our way through those issues. And then we had 
to decide well, if we say the sidewalk counts, how important is 
it if there is a crack in the sidewalk? Literally to that 
level, Mr. Chairman.
    And I think we have gotten to the point where it is fair to 
say that by far the majority agrees with the system. I cannot 
say everybody is happy with everything, but I do not know that 
that happens all that often in life.
    Mr. Walsh. Well, there is some anecdotal evidence. 
Obviously you get anecdotes and they are not always flattering. 
One of them was that the inspectors really did not know what 
they were doing and that people were coming into units that 
were being painted or rehabilitated and because there were not 
light switch covers on, they were being scored negatively for 
that.
    Secretary Cuomo. Yes, but not having a light switch cover--
they used the same example with me. ``I did not have the light 
switch cover and I failed.'' Not having a light switch cover, 
if it is a switch that a child is touching, and when they say 
no light switch cover, they mean no light switch cover. The 
wire is exposed and you can put your finger right in and touch 
the wire. That is not a good thing. It sounds trivial to say no 
light switch cover----
    Mr. Walsh. But you have to take the light switch covers off 
to paint a wall.
    Secretary Cuomo. Yes, but you should put them back 
afterwards.
    Mr. Walsh. Certainly, but if the wall is being painted, you 
do not----
    Secretary Cuomo. Yes, obviously. But look, these are 
private contractors who we contract with outside. They are 
experts. If they are not qualified, we will just hire a new 
expert. We have a uniform training. We have a quality assurance 
that goes afterwards. We have worked through with them 
extensively what the actual criteria are. And I think by and 
large--well, I know by and large, people are comfortable with 
the system and by and large, the success rate is in the 90 
percentile. So the system is working and 90 percent of the 
people think it is working well because they are passing with 
the system.
    Those who are failing though, Mr. Chairman, you know, we 
can debate whether they are challenging the system because they 
fail or whether it is a bona fide challenge on the system.

                          PHAS Appeal Process

    Mr. Walsh. I think taking inventory of your physical plant 
is an excellent idea. It has to be done. It is surprising that 
it had not been done in the past. The key to this is making 
sure that it is fair to the tenant, fair to the authority, and 
that the taxpayers are getting their money's worth.
    So when you have an issue of a PHA who says, ``Hey, we are 
better than this; this is not an accurate reflection of the 
quality,'' what is the appeal process?
    Secretary Cuomo. The appeals process is if the public 
housing authority says we think we have a bad score, we will 
send up a different inspector; we will regrade it. If they 
still have a problem we will send up a quality assurance 
inspection. And we can review it in-house if it comes to that.
    Mr. Walsh. And there is an appeal board?
    Secretary Cuomo. Well, Commissioner Apgar does the assisted 
side, which is similar, and I will ask him to respond.
    Mr. Apgar. On the public housing side, they can appeal all 
the way up to the assistant secretary, who makesthe final 
determination. So that is the ultimate judge.
    But in terms of some of these other things you mentioned, 
we understood that a unit is being painted, you know, in the 
process of modernization, so now the housing authority can 
notify the field office because they know the inspector is 
coming and we can designate certain units that are not to be 
inspected because they are under repair.
    There was some confusion among the housing authorities 
exact how the protocol worked. We have done extensive training 
and outreach to make sure everyone understands what is expected 
of the authority and their residents.
    So the first year through, it was new to everybody, but we 
built on that experience and literally in December we held 
week-long meetings going over the details of what was working 
and what was not, so we can benefit from that experience before 
we go into the second round. We virtually rewrote the entire 
dictionary of definitions to reflect the experience of maybe 
this little nick should not count as heavy; let's change that 
definition.
    Secretary Cuomo. But do not get me wrong, Mr. Chairman. 
There are some buildings that are going to fail and they should 
fail. The purpose of this system is to isolate those ones that 
are bad and let's address them. And that is what we are 
finding, also. It tends to be the ones who failed who are 
complaining, and we will work it through. We want to make sure 
that it was a fair score but if you fail, you fail at one 
point, and we should not be using taxpayer dollars to subsidize 
housing that nobody should live in.
    Mr. Walsh. You would not get an argument from here.
    Mrs. Meek.

                    Fair Housing Enforcement Efforts

    Mrs. Meek. Thank you, Mr. Chairman.
    Mr. Secretary, last year I asked you about enforcement for 
fair housing and you mentioned that although FTEs remain about 
the same, funding had gone up and your people were doing a 
better job in that particular area, working with--I hate to 
even use this acronym--working with FHIP, fair housing 
organizations and state agencies.
    I have a two-pronged question. How well is HUD doing in the 
enforcement area? I note that fair housing violations are as 
high as ever but you have decided in your enforcement that you 
are taking money out of FHIP to place into research, which 
takes it out of enforcement. Can you explain your reasoning for 
doing this?
    Secretary Cuomo. First Congresswoman, we do not have a 
priority higher than fair housing. We actually have gone 
through a process recently where we said everyone in the 
department is a fair housing officer. In other words, fair 
housing is an overriding priority for the department and 
whether you are in the Housing Division or the Public Housing 
Division, everyone should be a fair housing officer because it 
is a national mandate.
    Having said that, within fair housing, our goal is to 
double the number of enforcement actions during my term, just 
as a metaphor for more aggressive enforcement, zero tolerance 
policy for fair housing violations.
    We are proposing the funds to go up in the FHIP and FHAP 
budget. The funds that you see transferred are funds that would 
go to a study, a national study on discrimination to find out 
where it is and how it is being manifested, which we believe 
would help us do more enforcement, better enforcement. Where is 
this happening? Is it happening in the broker's office? Is it 
happening in cities? Is it happening in counties? And the study 
would actually make us more efficient and effective.
    Mrs. Meek. Well, subsequently, after the research is 
conducted, will you have the kinds of funds you need for 
enforcement?
    Secretary Cuomo. We think the budget at this point is 
adequate. It is not a question of perfect, obviously, as we 
have been discussing this morning, but we think it is adequate.
    Let me ask the Deputy Secretary----
    Mr. Ramirez. May I also add something to that? In our 
efforts, Congresswoman, this past year, what we did was we have 
now worked with the entire Department and we are working with 
FHEO to help train the entire workforce and now our capacity is 
built to be able to have our entire workforce in a sense 
deputized to receive complaints on fair housing and what those 
procedures are.
    So we have expanded our intake of folks having access to 
reporting discrimination to us and be able to facilitate that 
information directly to FHEO.
    We have also set up a review of programs with the different 
program areas in the protocol now that FHEO handles with these 
program areas to run through different items to make sure that 
if there are issues that are not answered in those items, it 
goes into a more detailed review to see if those programs have 
not been crafted at the local level to inadvertently or 
directly try to discriminate in fair housing.
    So we have expanded our efforts in that regard and we have 
gone department-wide in that activity.
    Mrs. Meek. So the ultimate result of this will not be a 
diminution of enforcement of fair housing initiatives?
    Mr. Ramirez. No, we have actually broadened our scope and 
our effort as a department to bring everybody within the 
department knowledgeable in how to receive complaints, how to 
document those complaints and forward them for effective action 
through FHEO.

                             PHAS Standards

    Mrs. Meek. My last question has to do with we have gotten a 
lot of response from people who are concerned about the 
performance standards that you set up and the Chairman 
mentioned these in terms of you have one set of criteria 
obviously for the public housing authorities and a little bit 
different criteria for Section 8.
    Am I correct in that assumption?
    Secretary Cuomo. We have two different programs to deal 
with the nuanced differences between the two, but the physical 
condition of the unit is essentially the same. People need a 
safe, clean, decent place to live, whether it is through the 
Section 8 program, public housing program or whatever it is 
through.
    So not on the physical condition, Congresswoman. Maybe on 
the financial, audits, et cetera, but not on the physical 
condition.
    Mr. Walsh. The gentlelady's time has expired.
    Mrs. Meek. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    Mr. DeLay.
    Mr. DeLay. Mr. Secretary, it is good to see you here.
    Secretary Cuomo. It is nice to see you, sir.
    Mr. DeLay. Welcome to the committee.
    Secretary Cuomo. Thank you.

                       Housing Fraud Initiatives

    Mr. DeLay. I would like to discuss an issue that isvery 
important to this Subcommittee and most of the Members of the House, 
and that is waste, fraud and abuse in Federal Government. HUD's Office 
of the Inspector General, working with the Justice Department, the DEA 
and the FBI, has uncovered substantial fraud in its first 6 months of 
operation. In fact, I have a chart here that lists the number of 
investigations and so forth that have been done and I would like to 
read a couple of the items off this chart. Keep in mind that this 
program has only been operating for six months.
    This chart shows that 207 investigations have been 
initiated and have already resulted in 76 indictments and 36 
convictions. For asset forfeiture it lists 46 houses, currency, 
vehicles, all totalling over $5 million. More details on to 
success of this initiative also means that in December of 1999, 
one HUD employee pleaded guilty to fraud and conspiracy. 
Subsequently, 39 mortgage loan brokers, real estate 
professionals, escrow agents were accused of obtaining more 
than $10 million of fraudulent FHA-insured loans.
    Mr. Secretary, I know that when this Subcommittee back in, 
I think, '98 or '97, first discussed this initiative, you were 
hardly a strong supporter of this program. In fact, I have an 
article here from the New York Times that says you were 
``critical of the original inquiry.''
    I am just interested to know what your opinion of this 
program is now.
    Secretary Cuomo. Sure. Congressman, first, on the topic of 
waste, fraud and abuse, I could not agree with you more. As a 
matter of fact, what I did when I got to the Department is I 
reviewed the history of the Department in terms of fighting 
waste, fraud and abuse and you have a spotted history with 
these herky-jerky fits and starts, task force starts, task 
force stops. I said forget these ad hoc efforts; I want to 
institutionalize the most aggressive effort ever at HUD to 
fight waste, fraud and abuse. And we actually have done that, 
beyond even the original expectations.
    Part of it is what you were just hearing the dialogue on. 
We are going to go out and we are going to inspect every 
building out there. And then we are going to audit every 
financial out there. And then, if there are irregularities, we 
are going to turn it over to an enforcement center that we set 
up within the department, headed by an FBI detailee, full-time, 
not ad hoc, task force. That is the way the place now operates, 
and it has been doing that for the past four years.
    The numbers are way up. Twenty-one million dollars 
recovered in FY '99, five times the money recovered over the 
previous year. Over 800 suspensions and debarments. Anyone who 
does business with HUD nowadays will say it is a different HUD 
and they have gotten a different signal and the enforcement 
center, the FBI, institutionalizing it makes a big difference.
    What you are referring to, Congressman, however, is there 
was discussion last year--at that time it was Chairman Jerry 
Lewis--about targeting cities for selective investigation and 
prosecution and it raised some troubling questions on how the 
cities were selected and it raised some troubling legal 
questions. No one wanted to be in a position where anyone could 
say they were personally targeted with investigation, as a 
political motivation.
    And what I said was I am all for fighting waste, fraud and 
abuse but let's not do it as a political tool; let's do it as a 
governmental enterprise. And we, Congressman Jerry Lewis and 
the Department talked through the matter and we came to a 
mutual and amicable resolution to it.
    Mr. DeLay. Are you saying that your own IG is targeting 
people for political reasons? Is that what you are saying?
    Secretary Cuomo. No. At this time, I believe it was last 
year, 2 years ago, it was an effort started by the committee to 
target waste, fraud and abuse, but then there was much 
discussion about how the places were selected and who selected 
them and on what basis. And that was the discussion and the 
Committee decided to come up with a set criteria or change the 
criteria so it was an objective selection; in other words, so 
the selection of places to investigate was based on HUD 
criteria. That was the resolution of it.
    Mr. DeLay. I do not want to be argumentative but it was 
based upon this Subcommittee directing the OIG to get together 
with the FBI, DEA and others in order to do these 
investigations you are taking credit for. It is the IG's Office 
that is doing this work that you are talking about.
    Secretary Cuomo. No.
    Mr. DeLay. You mean you have your own separate operation 
going on?
    Secretary Cuomo. Yes.
    Mr. DeLay. Under whose direction and what office and how 
are you paying for it?
    Secretary Cuomo. That was my point. Four years ago when I 
started, I said I want to have the most aggressive 
institutionalized effort to fight waste, fraud and abuse. In 
other words, we should not have to wait for a task force to be 
created, especially at HUD, frankly.
    So I said I want to set it up and begin it on day one. That 
is now our enforcement center, which we term the enforcement 
center, which works with an assessment center. So we go out; we 
assess properties; we assess contracts, physical and 
financials. Referrals are to the enforcement center.
    Who runs the enforcement center? I went to the Department 
of Justice and the FBI and I said please detail an FBI official 
to HUD to head the enforcement center, and we started that four 
years ago. And the numbers I gave you were a product of the 
enforcement center working with the assessment center.
    Mr. DeLay. Well, what has the IG's effort done to make a 
difference?
    Secretary Cuomo. Well, the IG, the Inspector General 
institutionally pursues basically criminal activity where the 
enforcement center at HUD does civil liabilities. Most of HUD's 
problems are civil types of problems. Landlord is getting paid 
but he is not repairing the windows, et cetera. They are more 
civil liability than criminal liability. The really egregious 
cases obviously can rise to criminal. Buy day in, day out, we 
are talking about civil liability-type issues, and that is what 
the enforcement center does.
    If it is a criminal activity then obviously the IG does it.
    Mr. DeLay. Now do you support what the IG has been doing 
and the results of their efforts?
    Secretary Cuomo. I supported the conclusion with Chairman 
Lewis at that time.
    Mr. DeLay. But do you now, looking at the results ofwhat 
the IG has done, support continuing this initiative?
    Secretary Cuomo. I am not familiar with what you are 
referring to, the specifics you are referring to, Congressman.
    Mr. DeLay. All the investigations that have been initiated, 
the indictments that have been held down just in a six-month 
period--76 indictments, 36 convictions, 207 investigations.
    Secretary Cuomo. I supported the conclusion reached by 
Chairman Lewis and on that basis everything went forward and I 
agree with it, yes.

         COMMUNITY GUN SAFETY AND VIOLENCE REDUCTION INITIATIVE

    Mr. DeLay. I know, Mr. Chairman--I apologize.
    I will just take a couple more minutes. I know Mr. Goode 
has looked extensively into gun issues as it deals with HUD but 
I am interested in the budget part of this. I noticed in the 
President's budget you identified $30 million for Community Gun 
Safety and Violence Reduction Initiative. As I understood the 
request, this initiative is tasked with funding programs to 
address youth violence within public housing complexes, in 
addition to funding media campaigns targeting gun violence.
    How is this program different from the five separate 
programs that the Department of Justice is requesting funding 
for next year and will HUD be working with DOJ in implementing 
the program? And how is HUD better equipped to address violence 
than the Justice Department?
    Secretary Cuomo. Thank you for the question, Congressman. 
We do have a particular problem with gun violence in public 
housing. Our studies show that gun violence is two times as 
likely to occur in public housing as opposed to another place 
in society. We spend about $1 billion now in public housing 
fighting these types of activities.
    Also, we are under Congressional mandate. If you look at 
any of the housing laws, going back to 1937, they always talk 
about the safety of housing, that we always understood it as an 
essential component to the program of housing was safe housing, 
where they were tearing down tenements, et cetera, to try to 
make it safe. And we have a particular problem.
    DOJ focusses again on the criminal aspect of guns. That is 
not the only aspect of gun violence. A lot of the gun violence 
is safety-related violence. Gun in the home accessible to a 
child, no trigger lock and you have a tragic accident. A gun in 
a home--not a child, a young person who does not understand 
that just because a bullet is not showing does not mean that 
there may not be one in the chamber.
    So these types of safety-related gun incidents. And that is 
where we think we can make a difference. Not on a media 
campaign but on targeted efforts to talk about gun safety in 
the home, cut down on gun violence in the home, get guns that 
should not be around the house, unwanted guns out of the home. 
Also bringing some technology to this area and working with 
local housing authorities, local police departments to provide 
money to map where the gun incidents are happening, because 
they tend to happen in certain areas and do that for the local 
housing authority officials and local law enforcement to 
actually make a difference.

                              GUN TRACING

    Mr. DeLay. One more question, Mr. Chairman, if you will 
just bear with me.
    In the President's budget, you also requested funds to fund 
state-of-the-art computerized gun violence tracking and gun 
tracing efforts to close the knowledge gap and assist 
communities and law enforcement agencies in planning gun 
violence reduction initiatives. That is your words in the 
budget.
    Can you explain what is meant by ``gun tracing efforts?'' 
It is my understanding that the Bureau of Alcohol, Tobacco and 
Firearms conducts all gun tracing through the National Drug 
Tracing Center. And how would your efforts be any different 
than BATF, and how is HUD better equipped to do this task than 
BATF?
    Secretary Cuomo. Two quick points, Congressman, one just a 
follow-up on the previous question.
    I believe you can keep a gun in a home safely. I do. But I 
keep it in a carrying case that is locked with a trigger lock, 
with the ammunition in a different place, and have young 
children at home, so I do not think this is something that 
cannot be accomplished. I think it can be done, but I think it 
has to be thought through, and if you can inform about the 
potential dangers and the devices that are available, you 
should, especially in public housing.
    As far as the specific question the Congressman asked, the 
thrust of what we are talking about is to work with housing 
authority personnel, local police, who happen to be in these 
areas of a predominance of this activity, to have technology 
available--the mapping I mentioned before--and train them to 
work with ATF officials on the other laws that are available. 
We are not looking to replicate, obviously, what ATF does, but 
mapping technology can help and can work. The local housing 
authority police do not always know how to work with the ATF. 
The local police often do not know how to get to and work with 
the ATF, and to the extent we can facilitate those 
collaborations, we would.
    Mr. DeLay. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary.
    Mr. Walsh. Thank you. We have four members left. If you 
could stick to one question and one response, we can finish 
before we need to be out of here. Mr. Price.

                           PREDATORY LENDING

    Mr. Price. Thank you, Mr. Chairman.
    Mr. Secretary, there has been a good deal in the press 
lately about your efforts to influence Fannie Mae and Freddie 
Mac to increase in their portfolios the number of loans to 
minorities. I am pleased that in your Department this secondary 
market demonstration program that we worked together, I worked 
with you to insert in the fiscal 1998 appropriations bill, has 
now gotten the funding out to the grant recipients, so we will 
soon begin collecting the data that I think can assist you in 
this effort and demonstrate that these are indeed worthy 
borrowers, these low-wealth people who will be targeted by that 
program. So this is an important effort, and small changes in 
the way Fannie and Freddie look at loans could dramatically 
increase the amount of capital available to banks to give home 
ownership opportunities to minority families, many of which 
perhaps never had the capital or credit ratings necessary for 
such a commitment. So it could be a very powerful force for 
good.
    But I want to ask you about how it would intersect with 
some other efforts we have under way with respect to predatory 
lending, because it seems to me that this effort could go 
astray if HUD is not careful in the kind of loans it encourages 
the GSEs to purchase.
    In North Carolina we have just recently passed predatory 
lending legislation that we hope will end the practice 
oflenders preying on unsophisticated borrowers, stripping away any 
equity that may have accumulated and so forth. I know Assistant 
Secretary Apgar is well acquainted with this new law because he was in 
our district last month to hold a forum to get information about the 
best ways HUD might proceed in setting new low-income lending goals for 
the GSEs.
    So I wonder if you or Secretary Apgar could comment on how 
this process is proceeding, and also reflect on whether the 
concerns I have expressed regarding restricting the type of 
loan the GSE purchases is being looked at. Will HUD count loans 
that fall under this definition of predatory lending when you 
are considering whether Freddie and Fannie are increasing their 
loans, and what kind of standards will you impose in 
encouraging this kind of activity on the part of the GSEs?
    Secretary Cuomo. Thank you for the question, Congressman 
Price, and I will refer to Secretary Apgar on your specific 
request about the predatory lending.
    But on the general Fannie Mae--and again when we--we are 
very good at HUD and this committee at realizing what needs to 
be done, but just so we do not lose focus of what we have done. 
This Fannie Mae/Freddie adjustment on the affordable housing 
goals is going to have a major, major impact. Actually, we will 
do more affordable housing through the increase in those goals 
over 10 years than the entire HUD budget. We are increasing the 
affordable housing goals for the GSEs from about 42 to about 50 
percent of the portfolio over the years, and recent numbers 
that have been released show that Fannie Mae and Freddie Mac 
can do this. They do a lot now, but they can do more. And we 
believe they can do more in keeping with the safety and 
soundness guidelines, and we believe we have hit the right 
balance.
    Significantly, Fannie Mae and Freddie have agreed to these 
goals, so we are not setting the goals in opposition to them, 
we are setting them in collaboration with them. And I think 
they will both say they are aggressive goals and they are going 
to have to stretch, but they believe they can make it, and I am 
very, very pleased with the outcome on that.
    And let me ask Secretary Apgar to speak to predatory 
lending.
    Mr. Apgar. Well, one of the themes of the conference we had 
in North Carolina was exactly that, how, as the GSEs expand 
their reach into communities, they do not become inadvertently 
supportive of the predatory lending efforts?
    We have in the rule that is going forward a section asking 
guidance on how best to identify predatory lending activities 
that may be present in the GSE portfolios so we can of course 
then not give credit for that. I think that the GSEs are 
supportive of this. The operational issue is how to define 
predatory lending, and then how then again, to monitor the 
presence of any possible predatory loans in their portfolios, 
so that we can deny credit in reducing any incentive they might 
have to engage in in that lending.
    Already, just as a result of our forum, I believe that 
there has been movement on this. Freddie Mac announced an 
initiative to not buy high-cost loans, which is a start. I know 
Fannie Mae is looking at that. So we need to work together to 
make sure that the goals do not in any way stimulate support 
for predatory lending.
    Mr. Price. Thank you.
    Mr. Walsh. Thank you, David.
    Mr. Frelinghuysen.

                           SHELTER PLUS CARE

    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    It has been reported to me that certain jurisdictions, Mr. 
Secretary, intend to renew expiring Shelter Plus Care in 
support of housing program rental assistance grants with 
Section 8 vouchers designated for a different purpose, 
specifically, Section 8 vouchers which this Committee and 
Congress funded primarily for people with disabilities who are 
on waiting lists for housing that was substantively closed to 
them when the housing was designated as elderly only. The need 
for Shelter Plus Care renewals is a serious one which must be 
addressed for supporting housing for people who are homeless. 
The need to house people with disabilities is equally serious, 
I am sure you would agree.
    However, there already is a solution, the Section 8 
vouchers created for those with disabilities originally on 
waiting lists, but then closed out when the housing was 
designated as elderly only, to my mind, allowing local 
communities and housing authorities to use elderly only 
designation vouchers to make up for the non-renewal of expiring 
Shelter Plus Care amounts to robbing Peter to pay Paul and pits 
two very deserving housing needs in competition for funds.
    I recently wrote you, very recently, about this situation, 
and I would like today to get you on the public record, some 
assurance that this situation is not occurring.
    Secretary Cuomo. Congressman, the situation is not 
occurring. This is the situation that was referred to earlier 
by Congressman Hobson, and was a discussion about Congressman 
LaFalce's bill.
    We need to renew Shelter Plus Care programs that are good, 
that are competing now with the other homeless programs. The 
suggestion would be to renew them from funding within the 
Section 8 account, but not Section 8 vouchers. The money that 
we would need, $12,000,000, $18,000,000, depending on whose 
estimate you use, would come from the Section 8 renewal account 
in terms of cash dollars, but not in terms of vouchers.
    Mr. Frelinghuysen. So you are not taking--you are not 
invading the $40,000,000 that we set aside for people with 
disabilities?
    Secretary Cuomo. Right. No, we are not taking the vouchers 
out of this year's account, and next year we would hope to take 
funding--we have identified funding from that account, but it 
would not take vouchers.
    Mr. Frelinghuysen. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    Ms. Northup.

                  POOLING OF COST EFFECTIVE RESOURCES

    Ms. Northup. Thank you.
    Mr. Secretary, this is a bigger question than just HUD, but 
as we talk about changing needs, evolving needs, certainly the 
homeless is one of the big issues. I magistrate lot of the most 
creative solutions, and as you identified in your statement, 
and well-recognized solutions, have been funded by HUD under 
their homeless programs. They are uniquely targeted to 
populations that are under-served or unserved completely. They 
build on the non-profit community's expertise. They tend to 
match the talents of the communities--but they still are 
inadequate in terms ofthe amount of funding.
    At the same time, I also see the mental health/mental 
retardation centers that are often the billing agents for 
Medicaid money, and who are primarily responsible to provide 
mental health services, and there probably is no greater need 
in any area than what is provided to the homeless community, 
becoming providers themselves. And so in a sense they compete 
with our best programs.
    And it seems to me, like too often, you know, we have got 
our, ``This is not HUD's problem because they do not fall under 
HUD's jurisdiction,'' so we go right along, and you see on the 
side the mental health/mental retardation community centers in 
a sense becoming castles, spending an enormous amount of money 
with their sort of groups of people that they have spent it 
with, and not providing or prioritizing the need so that the 
mental health services and the billing agents' ability that 
they have reaches down to our most creative and effective 
programs. I believe this is a pretty widespread program. I have 
talked to people in other communities that see the same 
program. Is your agency doing anything outside of the HUD 
community to try to engage these resources that cost us an 
enormous amount of money and far less services, in my opinion, 
to try to bring them in as collaborative partners?
    Secretary Cuomo. The short answer is yes, Congresswoman, 
but a lot more needs to be done. We have worked with--this is 
more of an HHS issue, not to punt the problem, but----
    Ms. Northup. But they are not going to give up the money 
unless somebody puts pressure on them. I mean----
    Secretary Cuomo. Yes, but my point to HHS is fine, then do 
not give up the money, but just make sure that we are serving 
the greatest mental health need, which in my opinion is a 
mentally ill person who is on the street. Homelessness is a 
very misleading term. We use that word ``homelessness,'' it 
starts to sound like a housing issue, and everybody comes and 
looks at HUD. It is a mental health need, and what greater 
mental health need than a person who is literally homeless? How 
do you identify a greater mental health need than that, and why 
shouldn't the HHS social service block grant dollars be going 
there first? And HHS understands this. They have been working 
on it. We have been working in collaboration with them.
    Ms. Northup. Would it work better if we transferred all 
those programs over to HHS so that it all resided in one 
cabinet?
    Mr. Walsh. Mr. Goode has to have his last opportunity. So, 
if you could finish that up and we will go right to Mr. Goode.
    Secretary Cuomo. Congresswoman, I think it would be worse, 
because the problem is the homeless are in many ways the 
hardest population to serve. That is why they are the homeless. 
And that is why they are the homeless. And just funding it 
through the normal provider mechanism, these people fell 
through the provider mechanism. That is how they got here in 
the first place.
    Mr. Walsh. Mr. Goode.

                       Gun Manufacturers Lawsuit

    Mr. Goode. Thank you.
    Just one brief question, Mr. Secretary. You stated in a 
previous answer to a question, that you are negotiating with 
the gun manufacturers, and if you did not reach a settlement, 
you were going to bring suit. Out of what area of your budget 
are you going to use funding for that suit?
    Secretary Cuomo. We would not bring suit as HUD. HUD is not 
bringing the suit. Any suit against the firearms industry would 
be brought by Public Housing Authorities, including those 
controlled by HUD.
    Mr. Goode. Why are you negotiating for them if they are the 
ones that would be the plaintiffs in the suit?
    Secretary Cuomo. A Public Housing Authority controlled by 
HUD would be a plaintiff, could be a plaintiff if we got to 
that stage.
    Mr. Goode. But I want you to answer why you are doing the 
negotiating instead of them doing the negotiating with the gun 
manufacturers.
    Secretary Cuomo. ``Them'' being who?
    Mr. Goode. The local Public Housing Authorities.
    Secretary Cuomo. Oh, any local housing authority would have 
to make its own decision. We are not speaking on behalf of the 
local housing authorities. They would have to make their own 
decision whether or not they want to enter a suit and under 
what terms.
    Mr. Goode. So when you said you were negotiating, you did 
not mean you personally, you meant you, the housing 
authorities; is that correct?
    Secretary Cuomo. HUD can only speak for the housing 
authority that they would control. We are not speaking for 
housing authorities as a class.
    Mr. Goode. You have not called them up on the phone and 
talked to them; is that what you are telling me?
    Secretary Cuomo. I have not called them up and----
    Mr. Goode. Have you talked to them, the gun manufacturers, 
you personally?
    Secretary Cuomo. Have I personally talked to the gun 
manufacturers? I have not personally spoken with--well, I have 
had conversations with gun manufacturers, yes, about this issue 
generally. This is, obviously, a very big topic, and I have had 
conversations with anyone who would talk to me about it, 
frankly, because I think it is very important, and I have said 
to gun manufacturers across this country that something has to 
be done about this situation, yes.

                              Adjournment

    Mr. Walsh. Well, that concludes the questions. We will have 
the Assistant Secretaries in later in the month. We thank you 
very much for your responses, and for your attention, and for 
your time, and for your effort preparing for the meeting. Thank 
you very much.
    Secretary Cuomo. Thank you. Thank you, Mr. Chairman.
                                          Thursday, March 23, 2000.

                       Chairman's Opening Remarks

    Mr. Walsh. The Subcommittee hearing will come to order. 
Good morning, everyone.
    I would like to welcome all of you here this morning. As 
you know, we had the Secretary in earlier. We thought this 
would be a good way to delve into issues a little bit more 
thoroughly with all of you, and Members will be invited to ask 
questions of any or all of you, and hopefully we will get a 
good venting of issues and a good opportunity to learn more 
about what you do and what the programs are and how they work.
    When I complete my statement, and Mr. Mollohan completes 
his, I will let Mr. Ramirez introduce everyone at the table for 
the record, and then we will begin to proceed.
    Rather than make a lengthy statement, I intend to move 
quickly to questions. I do have several areas I plan to pursue. 
The first is Section 8 recaptures. As you know, billions of 
dollars are recaptured every year. We need to understand why. 
Are Section 8 vouchers not being issued by PHAs? If not, why 
not? Another possibility is that HUD is overestimating the 
level of budget authority needed. CBO's re-estimate of the 
President's budget surplus supports this possibility. According 
to CBO's re-estimate, budget authority for Section 8 increased 
by $4.5 billion this year. However, outlays only increased by 
$34 million. This estimate is very curious, and we need to 
understand it before we provide funds for this account.
    Another area of concern is the Department's inadequate 
tracking systems. Without a better long-term strategy in this 
area, HUD is very likely to remain on GAO's high-risk list, and 
will likely continue to have major material weakness in its 
financial audits.
    I know my colleagues have many questions. I will call on 
Members as they arrive, alternating between Republicans and 
Democrats, and that is normally the way we proceed, and I think 
we should continue to do that. To the greatest degree possible, 
if you all could keep your answers concise, that will give us 
more of a chance to ask questions.
    Now, I would like to ask Mr. Mollohan if he has any 
comments.
    Mr. Mollohan. No, Mr. Chairman.
    Mr. Walsh. All right, we will begin. I would like to direct 
these questions to Secretary Lucas. First of all, Mr. Ramirez, 
why don't you go ahead and introduce everyone?

                       Introduction of HUD Staff

    Mr. Ramirez. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here this morning with the Subcommittee.
    And to start to my left, your right, we have Assistant 
Secretary for Congressional Affairs, Hal DeCell. Next to him we 
have the General Deputy Assistant Secretary for Administration, 
Joe Smith. Next to Mr. Smith we have Susan Wachter, our 
Assistant Secretary for Policy Development and Research. And we 
have our FHA Commissioner, Assistant Secretary, Bill Apgar. We 
have Dave Gibbons, who is our Deputy CFO and Acting CFO. We 
have Assistant Secretary Harold Lucas of Public and Indian 
Housing. We have Assistant Secretary Cardell Cooper, Community 
Planning and Development. And to his right we have Eva Plaza, 
Assistant Secretary for Fair Housing and Equal Opportunity.
    And also joining us in case there are some additional 
questions, we have the Acting President for Ginnie Mae, George 
Anderson; we have our General Counsel, Gail Laster. We have 
also from OFHEO, Armando Falcon. We have our CIO, Gloria 
Parker; our Chief Procurement Officer, Steve Carberry; our 
Enforcement Center Director, Ed Kraus; and Mr. D.J. LaVoy, who 
runs our Real Estate Assessment Center. And with that, we would 
like to welcome any questions you have, and hopefully be able 
to answer them to your satisfaction, Mr. Chairman.

                          section 8 recaptures

    Mr. Walsh. Thank you very much. At the last hearing we 
discussed a significant amount of Section 8 certificates in 
voucher recaptures that annually go unallocated to poor 
families on a waiting list. To recap the figures, in fiscal 
year 1999, more than $1.4 billion was returned to the Federal 
Government. If you divide that number by 6,000, which is the 
average price of a voucher, more than 230,000 vouchers and 
certificates were not issued last year. I am extremely 
concerned about this, especially in light of the number of 
families on waiting lists who are not being assisted with funds 
provided. Furthermore, as an appropriator, I am concerned that 
scarce budget authority on outlays are not being spent for 
their intended purpose.
    As I said, these are directed to Mr. Lucas. How muchSection 
8 tenant-based subsidies do you project will be recaptured during 
fiscal year 2000?
    Mr. Lucas. Well, I would start by saying that we started 
out at a very large number a couple years ago, about $7 
billion.
    Mr. Walsh. In recapture?
    Mr. Lucas. Right. That has been reduced to $1.3 billion. We 
expect to have a lot less this year, under a billion, and I am 
advised it is $350 million.
    Mr. Walsh. In fiscal 2000?
    Mr. Lucas. Right. And I believe we have instituted a few 
factors that will help us to continue to reduce that amount. We 
raised the payment standards up to 110 percent from what it was 
before. We have a proposed Voucher Success Fund that will help 
us assist tight markets.
    Mr. Walsh. I am going to get to some questions on that in a 
second. If I could proceed with these, I think we will give you 
the opportunity to get all those responses out.
    Mr. Lucas. Okay, thank you.

                           Section 8 Vouchers

    Mr. Walsh. Regarding the magnitude of recaptures, what is 
HUD doing to insure that PHAs spend their money to provide 
their Section 8 vouchers?
    Mr. Lucas. We are implementing now the new SEMAP program, 
which will rate housing authorities and how they perform their 
Section 8 programs, and we will have a better handle on how 
they are performing so we can have some intervention before 
these things happen.
    Mr. Walsh. That will be a factor in their scoring, how they 
spend out these Section 8 funds?
    Mr. Lucas. That is correct.
    Mr. Walsh. Isn't it true that the problem of not spending 
these Section 8 vouchers cannot be attributed only to high-cost 
areas and low vacancy rates, because PHAs like New York City, 
for example, have no trouble spending all their Section 8 
allocation?
    Mr. Lucas. Well, what we have done in that area is that in 
our negotiated rule process, we have come up with a solution 
where we will be able to monitor housing authorities that are 
doing better than others that are not leasing up as well, and 
we will be able to transfer, we believe, low spending dollars 
to higher need places, which will help us to really close the 
gap on these recaptures.
    Mr. Walsh. Do you know now which PHAs are not doing a good 
job of getting the Section 8 vouchers out, and which ones have 
the longest waiting list, and is there a corollary?
    Mr. Lucas. Yes. We have general information, but our SEMAP 
program will really put the real official list together for us.
    Mr. Walsh. So you don't know right now?
    Mr. Lucas. That is right.
    Mr. Walsh. How long ago were you getting $7 billion in 
recaptures? When was that?
    Mr. Lucas. 1997.
    Mr. Walsh. So since 1997 billions of dollars in Section 8 
vouchers have been returning, and you don't know which public 
housing authorities are having the biggest problem getting this 
money out?
    Mr. Lucas. Yes. At the end of the year we do know the----
    Mr. Walsh. Is it generally the same PHAs?
    Mr. Lucas. Generally the same ones.
    Mr. Walsh. And which ones might they be?
    Mr. Lucas. There are about a dozen of them. Chicago, 
Washington, Los Angeles, New Orleans, San Francisco, and 
Massachusetts are some of the larger ones.
    Mr. Walsh. These PHAs are always on the list of these major 
recapture funds?
    Mr. Lucas. Pretty much.
    Mr. Walsh. Do they also have long waiting lists for people 
who are looking for Section 8 vouchers?
    Mr. Lucas. Yes, some do, and they are also in very tight 
markets as well. And the lease-out in Section 8 in these tight 
markets in these larger cities is a very complicated issue, and 
that is the absorption rates, there is the availability, there 
is a lot of things that cause us to have some concerns. And 
that is one of the reasons why we are asking for the Voucher 
Success Fund, to help us to cure that problem, and also to 
transfer funds that are not being used in some areas to other 
areas that need it.

                      Recaptures and New Vouchers

    Mr. Walsh. Well, in this budget request, there is a request 
for 120,000 new vouchers. The current allocation that will be 
recaptured would provide for 200,000 plus vouchers. Why are we 
adding more vouchers if we are not spending the existing funds?
    Mr. Ramirez. Mr. Chairman, may I?
    Mr. Walsh. Yes.
    Mr. Ramirez. I would like, if I may, have our CFO talk to 
the number of vouchers, the actual recapture, and the mechanics 
of those recaptures, and the dollar amounts.
    Mr. Walsh. All right.
    Mr. Gibbons. Thank you. Let me talk to the mechanics first. 
It is very easy--we have a very high degree of confidence about 
the amount of funds that we are recapturing from the project-
based side. That is because those are long-term contracts that 
were funded many, many years ago based on a certain amount of 
inflation over the ensuing 25, 30 years. Those contracts have 
come to expiration. And they shift over to becoming annually 
funded in the renewals pot thereafter. We know those contracts. 
We know when they are going to expire. We know exactly how much 
extra funds are on those contracts when they do expire. We 
cannot recapture them before they expire. Legally, we cannot go 
out and get those funds, even though we know that they will not 
use all the funds that we have on those contracts.
    The majority of what we predict and what we use as offsets 
in each of our budget submissions to you comes from that 
project-based recapture estimate. In the year 1999, $1.3 
billion was recaptured in the project-based program. And in the 
year 2000 we have already recaptured--$1.6 billion in the year 
2000 in project-based funds. So when a contract expires, we do 
the audit on the contract, and we sweep the excess funds that 
are left that were not used.
    On the tenant-based side things are very different. The way 
we do a sweep on the tenant-based side is after the end of the 
fiscal year for the public housing authority, we close their 
books. We do that individually one by one. Most of the public 
housing authorities have fiscal years that are the same as the 
calendar year, so they don't close until the 1st of January. It 
takes us a few months before we can go in, close all those 
books, reconcile the books with the PHAs, estimate the amount 
of a 2-month reserve, and then sweep the rest.
    So when we go into a year--and in the case of the year 2000 
and 2001, it is very hard for us to predict ahead oftime, 
unlike the project-based side, it is very difficult for us to predict 
what amount of recaptures we are going to get and where we are going to 
get them from. In 2000, I think, out of the 4,300 public housing 
authorities, we actually did some sweep of about 3,500 of them, maybe a 
little bit less than that. But we won't know definitively how much we 
can recapture in 2000 from public housing authorities until a few 
months from now. And so we don't use very much in the PIH side, in the 
tenant-based side, as part of our projections of offsets when we send 
our budgets up to you.
    Mr. Walsh. Do you think that PHAs are not spending the 
money or is there just an estimation problem?
    Mr. Gibbons. Well, we have been looking at this for about a 
year. And there are sort of two groups of issues I guess. One 
are those factors which are leading us to over estimate what 
our real costs are, and the two that are most--seem to be the 
largest factors within that category are tenant income. We use 
national figures and estimates for future cost based on what 
the increase in tenant income has been, and in some cases 
tenant income has risen more than what we are using in our 
estimate. That would lead to an actual use of less subsidy than 
we had budgeted for.
    The other is rents, what is actually happening to rents? 
And we did an analysis of rents nationwide, which says--skips 
over a whole lot of other things, but nationwide rents have 
been fairly flat for the past 3 years. Yet we have used an 
estimate of a 2 percent increase in rents each year in our 
projections. Now, 2 percent doesn't sound like a lot, but 2 
percent of $15 billion is $300 million, so it all kind of adds 
up pretty quick. So you have those things that are potentially 
occurring on the over-estimation side.
    Then there is the under-utilization category. And we are 
still slugging it out with the database, trying to come up with 
the underlying causes, if there are any sort of systemic 
underlying causes for under utilization.
    As Assistant Secretary Lucas said, there seem to be a few, 
a dozen or so PHAs, which for the last 3 years from which we 
have recaptured some significant amount of funds, in the order 
of $300 million or maybe slightly more from that group. I am 
not sure what that tells you, and I am not sure what that tells 
you about next year. If the improvements that we have put in 
place actually kick in and work in time, we would predict that 
the utilization rate would increase.
    And one last point before I put everybody to sleep. You are 
taking a snapshot of a public housing authority on a day, 
January 1st, and you are sweeping funds that have not been used 
as of that time. It does not say that a month later that they 
would have the funds available to fully lease-up and do fully-
lease up. You just don't know that at the time you do the 
recapture. What you do know is that they were not using the 
funds that were provided last year.
    Mr. Walsh. It seems counter-intuitive though to add 
additional vouchers into the program when we are going back 
every year and taking a billion dollars back out of the program 
and reallocating it.
    Mr. Ramirez. Well, the situation is that we have--and I 
think we all agree that there is a widening gap in 
affordability for housing out there. We are trying to set up 
the system, as Assistant Secretary Lucas mentioned, to 
encourage greater utilization at the local level by these 
housing authorities, but also other methods to employ 
utilization by other housing authorities that are in essence 
over subscribed based on what currently exists to meet the 
demands that they have. We have growing waiting lists out 
there. The biggest problem we have found is to be able to find 
a unit that is willing to take the voucher as a subsidy to get 
a family of low- and moderate-income into that unit, and that 
is why both on the housing side and on the PIH side, we do 
have, in this year's budget request, to deal with an actual new 
construction of units as well in that regard to create a 
greater supply of that. But the demand is out there, and we are 
not filling that demand, and the demand continues to grow. And 
so that on its face it may seem counter-intuitive, but the 
underlying dynamics and actual elements that go into the 
request are sound and based on an actual need that is existent 
throughout the country.
    Mr. Lucas. Mr. Chairman?
    Mr. Walsh. Yes.
    Mr. Lucas. Can I add one or two more points? You know, we 
are basically required to fund these contracts at 100 percent 
at the beginning of the year so that we don't wind up short 
funding and having to come back. So we go out with the 
assumption that each contract will be at 100 percent because 
that is what we have to do if it is already out there.
    Then we have all kinds of other factors. We have 
relocations that are waiting for demolitions, that we have 
these things in reserve because we have tenants that need these 
things. So there are a lot of factors that go into why the 
number tends to be at the end a recapture. We would certainly 
hate to be in a situation where we are under funded, because 
then we would have to come back and say, ``Well, we under 
funded it,'' and we would have to get more money on a 
supplemental which might be worse than having the dollars ready 
to get them out.
    Mr. Walsh. I might understand if we were talking tens of 
millions, but we are talking hundreds of millions.
    Mr. Ramirez. I was going to say that it is our goal to 
better calibrate that estimation, and we know that it has been 
an underlying problem that the Department has had over the last 
couple of decades and the numbers have been considerably worse. 
We are happy though to report that we have made substantial 
progress, more so on the public housing side, where we have now 
honed it down to less than two-thirds of what it was--the 
amount is actually a third of what it was, say, 2 years ago, 
and what we were estimating. And on the project-based side, 
recognizing that there are some long-term dynamics that come 
into play that statutorily require us to carry in excess of 
what is actually being utilized till the expiration, our goal 
is that upon expiration to quickly sweep those accounts and 
work that money back into the system. And so we know we are not 
there yet, but we are much closer to calibrating that number to 
a more effective level, Mr. Chairman.
    Mr. Walsh. I will conclude just with sort of a postscript, 
that we are going to have a very difficult allocation this 
year. I don't think there is any question about that. 
Expectations are huge for HUD, a 20 percent increase in HUD's 
budget. People are looking to us to meet those expectations. I 
don't see how we can. And one of the things that we are going 
to have to look at is this request for additional vouchers, and 
funding in the budget authority versus the outlays figures just 
don't make any sense. So we are going to have to look very hard 
at therequest. I think Section 8 vouchers are very popular in 
the Congress, but how can we fund them, given the budget constraints, 
with the recapture situation and the estimation situation?
    Mr. Ramirez. Well, on the recapture and estimation 
situation, we are closer to hitting the mark on that one better 
than we ever have, and we feel very confident that during the 
course of this year, with additional initiatives that are 
ongoing, that we will be even closer for estimating it next 
year. And we also believe that the utilization of these 
vouchers will increase as a result of the different policies 
that we have implemented.
    I would like though to have our Acting CFO talk a bit about 
the out years and that estimation, if it is your pleasure. If 
not, we will move on.
    Mr. Walsh. We will go to Mr. Mollohan. I will ask more 
questions later on.
    Mr. Ramirez. All right, thank you.

                        tenant-based initiatives

    Mr. Mollohan. Mr. Chairman, let me just pick up there if I 
might. You indicate additional initiatives. Detail for us what 
additional initiatives you are undertaking.
    Mr. Ramirez. Okay. I would like to ask Assistant Secretary 
Harold Lucas to address those initiatives that they are 
implementing to work to create greater utilization, and then I 
will have--on the housing side, it is a bit different, the 
dynamics, so there are other issues that we have to deal with, 
that I am sure Commissioner Apgar would be glad to address, but 
that is prospectively in dealing with the actual supply of 
affordable housing out there.
    Assistant Secretary Lucas?
    Mr. Lucas. Thank you, Mr. Secretary.
    As I began to say before, that we are now able to raise the 
payment standards from the 100 percent of FMRs up to 110. Now, 
what that does for us is that it opens up more units we believe 
that will be available to people who are searching for vouchers 
and getting more landlords into the system, thereby using more 
vouchers, and with the 110 percent, it may cost a little bit 
more, but it will use the money, we think, a little more 
effectively.
    We also have a proposed Voucher Success Fund, which will 
assist us in tight markets. There are good running housing 
authorities that are still having some trouble trying to find 
places for their voucher holders. We believe this success fund 
will help us do some innovative things, help out with security 
deposits, incentives to landlords to join the program, more 
counseling for housing authorities in trying to get out their 
business properly on the street, and getting the word out to 
the universe at large that this is a good program which we 
probably haven't done so far.
    HUD is also in the negotiated rule process. In our new rule 
making, we have come up with a concept where we can now 
transfer dollars from low-performing housing authorities to 
higher-performing housing authorities on the voucher process, 
thereby calibrating better in getting these dollars where they 
need to be. So we think that is going to also help us reduce 
that recapture amount.
    And then finally, when our SEMAP program and our evaluation 
program of the Section 8 program of PIH is done, we will have a 
better way of telling who is working better, who is not working 
better, put the proper resources the way they should be, and 
then really have a report card that helps us to determine how 
to get this program back on track.

                       project-based initiatives

    Mr. Apgar. If I may have, just quickly. On our side of the 
ledger, of course, one of the complaints is that in some areas 
vouchers don't work because we need to have more affordable 
housing supply. We have a couple of things we are working on. 
Having during the last year, addressed the crisis of pre-
payments and opt-outs, we are now moving to expand our menu of 
new production stimulus. We are not proposing a big new 
program, but to take existing resources and repackage them in a 
way that they will do good for expanding affordable housing 
supply.
    A flagship here is our tax credit linked to vouchers 
program. Tax credits, of course, are an ongoing program. They 
work wonderfully well, but they don't really reach down in many 
instances to the very poor, the 30, 40 percent of income folks. 
By packaging the vouchers together, we are able to expand the 
supply of housing affordable to very low-income people. That is 
part of a broader issue we have of trying to make the whole 
project basing of vouchers work. In many communities, when they 
are not able to place their vouchers, the right thing for them 
to do is to project-base those vouchers into a new production 
unit. We have done that on an ad hoc basis in many communities, 
because that authority exists, and we are trying to expand the 
project basing of vouchers where that makes sense, to put those 
vouchers to work through a direct link to affordable housing 
supply.
    And in order to make all of this work, we are trying to use 
the FHA insurance. Some people worry about the renewal risk of 
vouchers and other things. The FHA insurance, I think, will 
make the developers brave enough to use the tax credits, use 
the vouchers and out together affordable housing in good 
locations.

                      section 8 estimation process

    Mr. Mollohan. Thank you. Mr. Gibbons, let me return to the 
estimated amounts needed for Section 8 contract renewals, 
amounts unused and recaptured funds. You described a scrutiny 
process that you have undertaken in order to come up with 
estimates for recapture. Is that new? How many years does it go 
back?
    Mr. Gibbons. I actually brought the database with me so I 
can tell you that precisely. It goes back to 1996--1997, sorry. 
1997 is when the first recapture took place. We instituted a 
new methodology for estimating and for actually conducting the 
recaptures last year in 1999. This is the second year. The 2000 
recapture will be the second year that we are using the 
methodology. The methodology isn't particularly sophisticated. 
I mean, we basically do every single public housing authority 
and every single contract.
    Mr. Mollohan. You go out and audit them?
    Mr. Gibbons. Well, after the fiscal year closes for that 
public housing authority, then we actually go out and work the 
books, and close the books, reconcile the books. What we 
actually do, is then we sweep everything that is not used and 
then replace a 2-month reserve.
    Mr. Mollohan. If I asked you what changes you could make in 
the program, or in the way you administer it, to make it easier 
to estimate the annual contract renewals, would you say that we 
should continue doing what we are doing?
    Mr. Gibbons. I think that the improvements that the program 
has put in place have got to kick in and work, and once they 
do, I think you will see a dramatic drop in the amount of 
recaptures in this program over the long run. Ithink there is 
always going to be some slack in the system. I mean, I don't think you 
can count on getting the recapture number down to zero. There are going 
to be cases, for example, if we have a HOPE VI voucher that goes out as 
part of a grant award, then when I estimate the amount of voucher 
renewals the next year, I assume that that HOPE VI voucher is now in 
place, and then I renew that. And if that HOPE VI voucher is not 
actually used during that period of time, then I will have over 
estimated what the renewal is by that amount. So I mean, always we are 
going to have something in the system where you are going to generate 
some sort of overage. We should not ever under estimate the need and 
have to come back for a supplemental, because we are trying to estimate 
at 100 percent of all the contracted units that are out there, so we 
don't assume a large vacancy rate.

                        section 8 rent estimates

    Mr. Mollohan. Are there any other changes that you 
contemplate in this scrutiny process?
    Mr. Gibbons. I have concentrated on trying to get on top of 
the sort of underlying rationale and reasons, and trying to 
make sure that HUD has absolutely confident and complete 
knowledge about what is going on out there. I left it to Mr. 
Lucas to do whatever improvements he thinks are necessary.
    Mr. Mollohan. You referenced some systemic problems. Could 
you bullet them for us?
    Mr. Gibbons. Yes. The two systemic problems that I am 
concerned about on the over-estimation side are whether we are 
accurately estimating tenant income and the extent to which we 
are over estimating because we are assuming tenant income is 
not rising in fact as fast as it does. And the second one is 
rents. We are assuming a certain inflation rate in rents every 
year, and we project that out, and on a $15 billion basis, even 
a small percentage increase accumulates very quickly. I am 
concerned about getting a more accurate estimate of knowledge 
and information about what's really happening with rents 
nationwide.
    Mr. Mollohan. Is your concern that they are being over 
estimated?
    Mr. Gibbons. We are over estimating the rents, yes.
    Mr. Mollohan. And that is inflating your estimates?
    Mr. Gibbons. That is inflating our estimates by as much as 
$300 to $400 million a year.
    Mr. Mollohan. And when will that stop inflating your 
estimates?
    Mr. Gibbons. Well, we are shifting to local inflation 
factors this year, part of the public housing bill----
    Mr. Mollohan. So are those adjustments reflected in this 
year's budget request?
    Mr. Gibbons. No, they are not. No. We used a national 
estimate that we got from the Office of Management and Budget 
on rents, and it was like 2.3 percent per year.
    Mr. Mollohan. What would you imagine, if you haven't done 
the exact arithmetic, the correct number to be taking into 
account your feeling, as you just testified? How would that 
affect your request to this committee?
    Mr. Gibbons. If I looked at the last 3 years----
    Mr. Mollohan. If you were to apply this correction factor.
    Mr. Gibbons. Yes. Based on the last 3 years of data, I 
would probably have held rents at a 1 percent or less inflation 
factor.
    Mr. Mollohan. What factor did you use in your estimates?
    Mr. Gibbons. 2.3.
    Mr. Mollohan. That is a pretty big difference, I think, 
isn't it?
    Mr. Gibbons. Well, it would be about a $100 million 
difference.
    Mr. Mollohan. So you are estimating that your request is as 
much as $100 million off?
    Mr. Gibbons. I don't know that, because----
    Mr. Mollohan. I know.
    Mr. Gibbons. I mean, there is no way to know what is 
happening to rents out there now. I mean, it may well be that 
that inflation factor is absolutely accurate.
    Mr. Mollohan. Is that literally true, there is no way to 
estimate what is happening to rents out there in some real 
time?
    Mr. Lucas. I would like to add that before we did our 
renewals based on the FMRs. Now we are actually going to be 
doing renewals based on actual rent. So the housing authorities 
will be--the floor will be the actual rent that was paid, not 
the estimated FMR. So that way we think we will bring down that 
gap just by doing the actual rents. Then we will apply the 
inflation factor that Mr. Gibbons was talking about.
    Mr. Mollohan. How timely will the information that you use 
with regard to actual rents be?
    Mr. Lucas. Well, as the years close out, we will have the 
actual rents in their final report, and that will be the basis 
of the new renewals.
    Mr. Mollohan. I think you are looking real time. I mean, 
you will know what they are at the time.
    Mr. Lucas. The actual rents.
    Mr. Mollohan. There won't be a lag of a year or----
    Mr. Lucas. No.
    Mr. Gibbons. There is going to be a lag of a year. There 
has to be a lag of a year, 1 year, because we are doing next 
year's fiscal budget, fiscal year budget. But I think what you 
are asking for is an ability to project actual rents 18 months 
from now, and I can tell you, I can't do that.
    Mr. Mollohan. I am not asking for that. I am asking how you 
are doing it. I mean theoretically.
    Mr. Ramirez. Congressman, if I may, could I have 
Commissioner Apgar address a bit about the rents and what we 
have on his side of the shop that might be able to bring them 
more light?
    Mr. Mollohan. Sure.
    Mr. Apgar. The forecasting of rents, of course, is tricky 
business, and again, the budget is set at a time in which we 
are talking about events 18 months out. But I would remind 
Congressman Mollohan, we are at a particular time now, after 
several years, maybe 8 years of relatively flat rents. Now all 
the indications are that rents are rising rapidly. We have 
issued a report that shows, that, as of today, rents are rising 
faster than income.
    Mr. Mollohan. When did that trend start?
    Mr. Apgar. About 2 years ago we had to switch over. There 
is a detailed report that Susan Wachter's group put out on this 
accelerating pace of rents. We here it back all the time. And 
that is on the most latest Consumer Price Index, market area by 
market area. So we are at a turning pointnow, and I dare say, 
three years from now the Committee will come back to HUD and say, ``Why 
did you under estimate rents so substantially?'' You know, our models 
and our OMB guidance tends to work with a little bit of a lag, and so 
for a while, when rents were not accelerating, we were probably a 
little bit ahead of the curve, but I think all the indications are that 
rents are going to rise faster than the past, and we want to be 
cautious not to short fund these individual contracts.
    Mr. Mollohan. So all of this is scientific guessing?
    Mr. Apgar. Just that. A good forecaster writes those 
estimates off very often and at relatively broad levels 
because, quite frankly, it is hard to predict. But I am saying 
in a world in which we know there is a turn in this equation of 
setting rents, and we are definitely in a period of more 
dramatic inflation in almost every area--many market areas in 
the country. I think this is a particularly difficult time to 
get the rent forecast accurate.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you. Mr. Hobson.
    Mr. Hobson. Thank you, Mr. Chairman.
    I think also the rapidly increasing oil prices are going to 
start reflecting themselves in people's expense factors as they 
look at their rents, having been a realtor in my previous life.
    Mr. Apgar. You are not in mourning for OSU, are you, Ohio 
State, are you?
    Mr. Hobson. I am. It really is mourning.
    By the way, your relative tells me that you are the one who 
really knows about real estate.
    Mr. Apgar. I see.
    Mr. Hobson. I am dealing with him in another three days.
    Mr. Apgar. Sandy?

                       Enterprise Data Warehouse

    Mr. Hobson. With Sandy.
    I have written a couple letters on a subject that I think 
you are aware of, but I am going to read this letter so that I 
get the language out right, and we will give you a copy.
    Mr. Apgar. Okay.
    Mr. Hobson. Frankly, I am still not clear as to why the 
Department is considering abandoning its effort to establish an 
integrated data warehousing system, which is currently called 
the Enterprise Data Warehouse, or EDW. I might, frankly, ask a 
few more comments about it and questions.
    As you well know, HUD has enormous amounts of data which 
need to be warehoused and combined. In my office, all official 
documents which my staff and I prepare are warehoused on a 
central database and can be accessed by anyone in my district 
and Washington offices. This makes it easy to track case work 
and files so as to provide timely service to my constituents as 
well as to make my office more efficient. The EDW program to 
integrate HUD's data across the enterprise will result in 
similar efficiency. In fact, the department has already spent 
$4 million to purchase hardware and software to start compiling 
and integrating all of your data into one repository. This 
seems to be a critical advancement in making HUD more 
efficient. However, according to Hal DeCell's response to my 
February 28th inquiry about the status of the EDW project, you 
are, ``redesigning,'' the data warehousing program to 
incorporate ``additional enhancements'' like geographical 
information systems, GIS, and empowerment information systems, 
EIS. Well, frankly, this is all well and good, and I want to 
know why you are redesigning the project instead of adding 
these new sources to the existing EDW platform. Is the concept 
of developing a single repository for integrated data no longer 
valid? Additionally, it is my understanding that it is 
difficult and time consuming for the Department to provide 
answers to specific multi-faceted questions such as, ``How much 
of Springfield's CDBG funding for fiscal year 1998'' ``was 
directed to minority families with low- and moderate-income?'' 
A cross-enterprise integrated system would enable you and your 
staff to answer such multifaceted questions quite efficiently. 
Will HUD be able to easily provide answers to such questions 
under your redesigned system?
    Mr. Ramirez. Okay. Congressman, thank you for bringing this 
issue up. It is one that we have been working through. I have 
here at the table the General Deputy Assistant Secretary for 
Administration, Mr. Joe Smith, and our Chief Information 
Officer, Gloria Parker, who will----
    Mr. Hobson. She doesn't look like Hal DeCell to me. 
[Laughter.]
    Mr. Ramirez. Better looking than Hal. And what I would like 
to do is I would like to have our Chief Information Officer try 
to respond to your questions, and also have our General Deputy 
Assistant Secretary for Administration talk about the hardware 
itself.
    Ms. Parker. Thank you. The Clinger-Cohen Act requires us to 
integrate our systems and to make much better IT investments to 
come up with a more effective IT portfolio, which would save 
HUD and the taxpayers money, and to design our systems in a 
much more efficient manner than what we have done in the past. 
The Enterprise Data Warehouse gives the exact benefits that you 
just described, and that is why HUD ventured down that path to 
developing and implementing an Enterprise Data Warehouse. 
However, the Enterprise Data Warehouse must have access into 
that warehouse, so that questions can be answered, decisions 
can be made based upon the integrated data across all programs. 
The entry into that data warehouse for executives or for 
knowledge workers is called--we call it an empowerment 
information system. That is the access into the data warehouse 
to respond to questions. And if you have an integrated data 
warehouse across all programs, you are going to get one answer 
and one source for the truth.
    So what we did through our capital planning process, we 
scrubbed--and we basically take a very strong look at all IT 
investments to insure that we are doing a proper job of 
integrating our systems and that we are spending the right 
amount of money to get the results that we are looking for. The 
way we were proceeding down this path in the past, before we 
made a change, was we were developing the enterprise data 
warehouse separately from the empowerment information system 
and GIS, all of which actually should be integrated together as 
really one solution. All of that is the information thatneeds 
to be under one umbrella for us to have access to.
    So what we did was, through the capital planning process 
and our project management reviews of all IT projects, we 
determined that it made a heck of a lot more sense in HUD to 
integrate these systems because they all do the same thing 
anyway. To keep them separate would have meant that we would do 
the same identical design, development, implementation for each 
system separately, spending twice as much money as we would if 
we pulled them all together and developed and implemented as 
one integrated system.
    Moving down this path, we are going to save, by 
redesigning--and when we say ``redesign,'' we are not 
redesigning what we already did, we are bringing the three 
systems together under one umbrella for development. In doing 
so, we are going to save the taxpayers and HUD over $36 million 
over the life cycle of these projects.
    Mr. Hobson. What is the life cycle?
    Ms. Parker. The life cycle is about 5 years. One of your 
specific questions was: are we throwing away $4 million we have 
already invested? The answer is about $3.3 million of the $4 
million covered such things as business discovery, all the data 
modeling, all the data definition, work that we had to do, data 
loading, report generation and those kinds of things. That work 
is solid, is there, and we can move that work from any platform 
to another platform.
    The thing that possibly could change would be the hardware 
structure which under the separate implementations, that 
hardware structure is proprietary. That means that we cannot 
use that hardware across all the programs. For example, the 
Departmental Grants Management System is a system that uses 
Oracle and an open-data structure as well as an open platform. 
We cannot integrate the proprietary hardware with the DGMS or 
the Departmental Grants Management System, so we cannot share 
platforms and cannot share data if we stay that route. By 
moving that to an open architectural environment, we will not 
only be able to move information freely across those platforms, 
but we will also be able to share the platforms across 
different functions.
    In addition to that, a proprietary hardware platform 
requires special maintenance because it doesn't fit into our 
standard structure and architecture. If we stay the course 
where we were, we are going to have separate maintenance costs 
for the proprietary platform. If we consolidate these together 
and change the platform, then we are going to end up with a 
system that can be maintained under the current architecture. 
So we are going to save HUD and the taxpayers over $36 million.
    I think, as a CIO, it is worth possibly changing a million 
dollar platform, $600,000 to a million dollar platform, to a 
platform that is open and integratable, and we then save $36 
million. Otherwise, the life cycle is going to cost us an 
additional $36 million to complete.
    Mr. Hobson. Well, let me ask you a couple questions on what 
you stated. When you get done, are you going to be able to 
answer my question?
    Ms. Parker. Which question?
    Mr. Hobson. The one about----
    Ms. Parker. Oh, absolutely. Yes, because all of that 
information will be in the enterprise data warehouse, all 
integrated, and we can bring you one answer. And anybody who 
asks that question will get the exact same answer.
    Mr. Hobson. But wouldn't you have been able to do that 
under the way you were going?
    Ms. Parker. We would have been able to do it the way we 
were going, but it would have cost us $36 million more to do 
the same thing, and take much longer to do it.
    Mr. Hobson. Well, Mr. Chairman, I have a lot of serious 
questions about the direction in which the Department is moving 
concerning data warehousing, and I want to make sure that HUD 
adopts a system that is cost effective in the long run, and I 
am concerned about the overall information technology in HUD. I 
stressed these to Mr. Cuomo when he was here the other day. I 
know it is a difficult problem. I went through this in the 
State of Ohio when we did some things where they used to tell 
me if I called up, it took 90 days to 6 months longer if I 
called. They had to find shoe boxes where the stuff was, 
literally, where the disability claims were filed in different 
areas. I saw a number of attempts to not do it correctly, so 
that is why I am concerned about this. I do want you to know 
that we are looking at this, and we want to make sure that it 
is correct, because when you start down a road and you switch 
it, it can be very costly either way. And it is in the record 
that you tell me that you are going to save this money, and I 
am going to be around here for a while, and you know, I look 
back at these things. I go back and read testimony. There are 
some guys in the Army and some Navy guys that I am after right 
now, because I did go back and read their testimony, later on.
    And I just want to make sure, Mr. Chairman, that when we 
get down road, we do do the right thing, get the right 
information and save the money, and I am concerned about we 
have spent $4 million, and now we are switching. So thank you 
for that. And I have some questions I will submit for the 
record later on.
    Mr. Walsh. Thank you. Mrs. Meek.

                                  CDBG

    Mrs. Meek. Thank you, Mr. Chairman. I would like to welcome 
all of the Assistant Secretaries here today, and I have quite a 
few questions. I don't have time to ask a lot of them, because 
it is time to go out and make a vote, but I will start out with 
my most significant concern, and that is the CDBG program.
    Most of the complaints I get in my district--and I come 
from a large urban district with lots of public housing, one of 
the oldest public housing units in the whole HUD is located in 
my district. I don't get that many complaints about the public 
housing. We need more vouchers. When we have natural disasters 
and have other kinds of problems in that area, we need quick 
capability in getting housing, and usually HUD has responded to 
our plight, so I appreciate that, and you never can tell when 
there is going to be a problem in that area. We have a large 
influx of immigrants, and they all need housing, and thanks to 
HUD, we have been able to meet it. Not to say that we don't 
need more, and I'm not saying that we cannot improve the 
system. I think that we can, particularly in the area of 
providing guidance and counseling to people who call in about 
housing.
    But my major problem is with CDBG in terms of this program 
having been designed for low- and moderate-income people, and 
now being used in many instances for other reasons. We have 
quite a strong coalition of community development corporations 
in my state, and in many other states, and we are finding that 
CDBG funds, many times, they are stretched at the wiles of the 
mayors and administrators who are over these programs. What 
they do is use CDBG monies, in many instances, to do what 
general revenue should be doing. So the effect of that is money 
is taken away from poor people and the other people who deserve 
these funds.
    Now, there is a bill going through Congress now that will 
perhaps try and add 10 more jurisdictions to CDBG funding, so 
that they can sort of help people who have a higher income 
become eligible for CDBG funds. That is a problem. I don't know 
how we can resolve it, in that we do have some high-income 
areas where people need housing. And many mayors are trying to 
look out for the families and the teachers and all those 
people. They are good people. But many of them are not low-
income.
    So my question is--and I ask this question each time you 
come here--about what is going to be done in terms of CDBG and 
HUD? The monies can't be stretched over so many jurisdictions 
for just so long.
    Mr. Ramirez. What I would like to do is I would like to ask 
our Assistant Secretary for Community Planning and Development, 
who is responsible for the day-to-day administration of these 
funds, to reply to that question, Congresswoman. And that is 
Cardell Cooper.
    Mr. Cooper. Thank you very much, Mr. Deputy Secretary, and 
to the Chairman of the Committee, and to Congresswoman Meek.
    You have raised that concern, and we take that concern very 
seriously because the law in CDBG requires that 70 percent of 
all CDBG funds are used for activities that principally benefit 
low- and moderate-income people. On the whole of the program we 
find even upwards of 85 to 90 percent of money is being used 
for low- and moderate-income people. The law itself that 
provides that 30 percent of those funds may be used for 
activities to address the following two national objectives, as 
laid out in the law, and those objectives are the elimination 
of slum and blight, and/or meeting other community development 
needs having particular urgency and conditions posed as 
immediate threats to those communities. But within the scope of 
the law and the regulation, it is clear that 70 percent of that 
money must go to low- and moderate-income people.
    What we are finding is that there are programs that are in 
place, for example, facade programs in a commercial district, 
whether it be in your neighborhood or mine, that the benefit to 
the community, eliminate slum and blight, applies.
    I think the other issue that you raise is whether or not 
communities which are substantially better off than others 
would qualify, and I think that is where the heart of the 
question is going. What we may have is a community that overall 
substantially has higher-income people, but within that 
community there are pockets of poverty that meet the particular 
70 percent low- and moderate-income requirement, and the 
decision on how to use the CDBG funds should be geared around 
them at the local level, that we not only encourage, but it is 
required by the law, that 70 percent of those dollars go to 
benefit low- and moderate-income people.
    Mrs. Meek. I think that HUD has a good handle on that 
particular perspective, but what concerns me is what kind of a 
monitoring system does HUD have to be sure that people don't 
vary or abuse this particular policy?
    Mr. Cooper. In fact, this past year in our monitoring 
efforts, we monitored roughly 400 communities for their 
performance, including the expenditure of those dollars, the 
projects, making sure they met eligibility standards and so 
forth. And in this case--I might have raised this with your 
staff, I am not sure--if there is a specific issue that we need 
to pay attention to that you might be aware of in a part of the 
community, we certainly will do that. We normally pick up in 
the monitoring reports clearly whether the CDBG dollars in that 
community have been spent on eligible activity. The issue 
really surrounds eligible activity as defined by the law.
    So I will work with you if there is a specific matter that 
we may not have touched upon. I know in your district 
specifically the commercial facade program, for example, that 
operates, has been used to benefit--I mean to really address 
the issue of slum and blight in communities. We know that in 
the commercial code compliance, which affects the citizens who 
live in that community, that it is an eligible activity in the 
district.
    I would like to point out though, again, we had this 
issue----
    Mrs. Meek. May I add something just a moment?
    Mr. Cooper. Yes, ma'am.
    Mrs. Meek. Sometimes the governing bodies of these 
municipalities use CDBG money as their little cash cow, so that 
they will be able to issue out little turkeys to--you know, we 
get turkeys up here too. [Laughter.]
    But they do use that, Cardell, as their little calf, and 
when we go back home, it makes us look like we aren't doing 
anything for the citizenry.
    Mr. Cooper. Well, I will assure you. I have been in your 
district with you, and I can assure the citizens there of the 
work that you are doing. In this budget, the money that comes 
from here comes through this committee, and I recognize that. 
Let me just make a point----
    Mr. Walsh. Could I interrupt, sir, just for moment?
    Mr. Cooper. Yes, sir.
    Mr. Walsh. We are going to have to go vote now.
    Mr. Cooper. I will personally look into her matter. Is that 
good for you?
    Mr. Walsh. Yes, sir.
    [Recess.]

                            lead-based paint

    Mr. Price [presiding]. Can we come to order, please?
    As members come back from the vote, we are going to pick up 
with the questions. We will yield to Mrs. Meek, to let her 
finish her remaining questions when she arrives.
    But meanwhile, let me get under way. And I would like to 
ask whoever the appropriate person is to respond to a question 
about lead-based paint for apartment owners, and how the 
department is dealing with that? I was recently visited by 
constituents who are members of the Multi-Housing Council and 
the Apartment Association, and they seem to have some 
legitimate concerns about the way that HUD and EPA are 
regulating buildings that may have lead paint. And I believe 
also the Public Housing Authority Directors Association has 
registered some concerns about this issues. So let me just ask 
you to clarify how this in fact is being handled.
    We all know it is important to protect the health of our 
citizens, and lead-based paint, when it is removed, the dust 
particles that are formed, can be extremely dangerous. At the 
same time, having requirements that are unnecessarily costly or 
onerous could lead owners not participating in the Section 8 
voucher program. So we need to have a sensible policy here that 
does the job, but is not overly restrictive.
    In my part of the country this is a serious matter because 
of the shortage of affordable housing. It makes it harder for 
apartment owners to participate in the Section 8 voucher 
program--if we make it harder for apartment owners to 
participate in the Section 8 voucher program, it could simply 
increase that shortage.
    Now, I am aware that HUD has issued a new regulation on 
lead-based paint, which will take effect on September 15th of 
this year for federally owned and federally assisted housing. 
It is my understanding that this rule creates and enhanced 
compliance burden for property owners who participate in the 
federal housing programs, especially property owners who 
participate in the tenant-based Section 8 programs. That burden 
occurs because of the new inspection requirement.
    Can you help me understand the necessity for this new 
regulation, and what your rationale is for the regulation, and 
whether you in fact do expect a decrease in the number of 
apartment owners willing to participate in the Section 8 
voucher program because of this rule?
    Mr. Ramirez. Well, thank you for your question, 
Congressman. Let me first say that our program has been very 
effective and we do see light at the end of the tunnel in 
dealing with this serious issue of lead-based paint 
contamination. And we appreciate the support that we have 
gotten through the years in this program, and have made an 
additional request for funding to be able to accelerate our 
efforts in a more comprehensive way to deal with the problem 
more expeditiously.
    I would like to have Dave Jacobs give you an explanation as 
to the new rule and why we feel that it is necessary for us to 
get the job done, and the impact that this rule may or may not 
have on the individuals that would be required to meet the 
standards that we have set, sir.

                      lead-based paint inspections

    Mr. Price. Well, I would appreciate that, and let me just 
ask you, in the course of that answer, to talk about the 
assistance that might be available to communities to deal with 
the problem. I know that you do have a grant program. It is my 
understanding that program is aimed more at housing authorities 
than at private owners who may be participating in the voucher 
program. If you could clarify what kind of programs you are 
putting in place to help owners, especially non-project-based 
Section 8 housing providers to obtain inspections in a cost-
effective way.
    Mr. Ramirez. We would be more than glad to, and to also 
outline our current program and additional initiatives within 
those programs that we are currently undertaking. Dave?
    Mr. Jacobs. Thank you, Congressman Price.
    Let me answer the last question first. The grant program 
that the department administers through my office is in fact 
for privately-owned low-income housing, and therefore, tenant-
based Section 8 owners are in fact eligible to receive 
assistance under that grant program. That grant program has 
grown since it was first started in 1992. It is now operational 
in about 200 cities across the country. And the intent of it 
was to build capacity so that there would in fact be enough 
inspectors and contractors to do the work in a way that did not 
in fact poison children.
    The new regulation that will take effect this September was 
crafted very carefully to insure that it did not have an 
adverse impact on the supply of affordable housing. So, for 
example, the requirement that we have implemented involves 
clearance testing, which is not the same thing as a lead-paint 
inspection. A clearance test simply makes sure that if lead-
based paint is repaired in a property, the cleanup that follows 
is done adequately, and that is based on new scientific 
information that the major route of exposure for children is in 
fact from dust that is generated from paint repair, not from 
ingestion of paint chips. So in recognition of the increased 
burden, we have proposed a 50 percent increase of the grant 
program to provide the assistance needed.
    We have also, in this year's budget justification, done 
some new analysis which shows what the impact of other trends 
in housing will be over the next 10 years to actually eliminate 
this problem. The Deputy Secretary is correct, the problem has 
been reduced, but there are still too many children at risk--
the latest estimates from CDC, the Centers for Disease Control 
and prevention, indicates there are 890,000 children poisoned 
annually. So the analysis that we have done is to look at 
demolition rates, housing rehab rates, and what it would take 
to eliminate the problem by the year 2010.
    In your State--I did some homework on this--in terms of 
capacity building, in North Carolina there are 300 certified 
individuals who can, right now, do these kinds of clearance 
tests that the rule requires. There are 80 firms capable of 
also doing the work, and there are also 10 training providers 
that are accredited by the State of North Carolina, so that 
when we do need to train more people the system is in place to 
do so.
    Mr. Apgar. And if I might, just to add something on the 
project-based inventory. A lot of the project-based inventory, 
especially the older assisted stock, has lead paint issues, as 
you are aware. And we know that these new rules will raise the 
cost in some instances, and so we have a number of initiatives 
to help the owners manage that cost increase while still 
dealing with the lead paint issue.
    For example, the cost of lead removal is an eligible 
expense under project-based rent increase, so they can get a 
rent increase that will be covered by the cost. It won't be a 
rent increase to the tenants, but it will allow the owner to 
get a rent increase to cover the cost of the cleanup. 
Theproject has available reserves for replacement. Those are eligible 
funds to use. And we also have our grant program under the 236 Project, 
where older projects can come in, and lead paint removal is part of 
that grant restructuring process, so we do recognize the fact that 
owners will bear some of the costs. We want to make sure that we do 
everything we can to cover those costs so they can do the right thing 
and clean the lead out of these units where it's a problem for 
children's health.
    Mr. Price. Well, on the question of the kind of inspections 
that will be carried out and the rationale for those, can you 
just clarify what the owners should expect in that regard, and 
exactly what we should anticipate in terms of the inspections 
to which they will be subject, and the reason for that 
requirement.
    Mr. Ramirez. I would like Mr. Jacobs to answer that 
question for you, sir, if I may.
    Mr. Jacobs. Let us look at the tenant-based program, which 
is I think where your question is coming from. In a house where 
there is no deteriorated paint, there is no requirement for any 
additional testing. That is a current housing quality standard 
that is already in place. If there is deteriorated paint above 
a certain de minimis level, then the cleanup and the clearance 
testing would be needed.
    We have had clearance testing in place now for 8 years in 
both the public housing program as well as the grant program. 
And we have found that it is feasible and cost effective, and 
also, I would add, is an important liability shield for owners 
as well as the Department because a clearance test indicates 
that the home is in fact lead safe in the event that a lawsuit 
is brought by a poisoned child. In other words, the exposure 
that the child got came from a unit other than the one which 
had passed a clearance test. But there is no testing 
requirement at all if there is no deteriorated paint.
    Mr. Price. Thank you. Mr. Chairman, how is my time? I know 
we are--I have another line of questioning if I could.
    Mr. Walsh [presiding]. You may.

                        Risk-Based Capital Model

    Mr. Price. All right. Let me get into this next line of 
questioning. We will do the best we can with it. It has to do 
with the impact that OFHEO risk-based capital rules will have 
on the willingness and the ability of the GSEs to support 
affordable housing and to create more low-income and minority 
homeowners. There are two specific areas of concern I would 
like you to comment on.
    First, it appears that the proposed model penalizes high 
loan to value loans by imposing severely high capital 
requirements on these loans. Now, that may be a problem since 
low-income families simply often cannot come up with high down 
payments.
    Secondly, the proposed model appears to impose a huge 
capital penalty on the GSEs when they share credit risks with 
third parties that are not triple A rated entities. There are 
cases where a third party understands these markets well enough 
to provide protection to the GSEs by sharing the risk on 
affordable loans. We know in our area very well of one such 
arrangement with the partnership between the Self-Help 
Organization and Fannie Mae. Now, these types of innovative 
partnerships that further community lending would seem to me to 
be something that we ought to be encouraging, rather than 
discouraging.
    So my question is: have you considered the impact of your 
model on affordable housing lending? With HUD pushing for the 
GSEs to have portfolios with 50 percent affordable home loans, 
will these regulations allow for carefully thought-out 
innovations for the reasons that I have suggested?
    Mr. Ramirez. Let me have Commissioner Apgar address the 
bigger question that you have asked, Congressman, but we also 
have here at the table the Director for OFHEO, Armando Falcon, 
who can also provide some additional response.
    Mr. Price. All right.
    Mr. Apgar. With respect to the details of the risk-based 
capital model, we will have Armando give you correct answers on 
that. But with respect to the larger picture, my office, which 
is responsible for setting the GSE affordable housing goals, 
works closely with OFHEO. We want to, of course, challenge the 
GSEs to do as much as they can in affordable lending. We don't 
want to have them pushed into unprofitable activities or expose 
them to safety and soundness and risks. So as we were 
developing our aggressive new goals of 50 percent low-mod and 
all the other features that were announced in our framework 
last summer, we carefully evaluated that. And so first and 
foremost, we do believe that there is no conflict between these 
goals and the safety and soundness requirements that are 
contained in the risk-based capital role. We think they can 
meet both standards well, and so we are confident that the 
higher goals can be met.
    With respect to the details of the risk-based capital, I 
will just turn to Armando to respond to the detailed question.
    Mr. Falcon. Thank you, Congressman.
    I am aware of the organization which you mentioned. They 
did submit a comment letter to OFHEO regarding the risk-based 
capital rule, and so there is not a whole lot I can say because 
we are in the rule-making process. But I do want you to know 
that the way our risk-based capital rule has been structured, 
we do intend that the final rule will allow for adequate 
innovation for the enterprises, so that organizations, such as 
Self-Help, which you mentioned, are able to take advantage of 
the liquidity that the enterprises provide for affordable 
housing.
    Mr. Walsh. Please, finish your statement and then we will 
have to go to Mrs. Meek.
    Mr. Falcon. Let me conclude then just by saying that I am 
aware of the organization that you mentioned. I am certain that 
the rule, when it is final, will provide adequate flexibility 
for those types of situations and those loan programs.
    Mr. Price. Good. I think it is important that it do so. 
Thank you.
    Mr. Walsh. Thank you. Mrs. Meek.

                        CDBG and High-Cost Areas

    Mrs. Meek. Thank you, Mr. Chairman. I must indicate that 
Assistant Secretary Cooper has been very cooperative with my 
office relative to these problems we are having. But I did not 
want the group here to think that these problems are just 
centered in Dade County. They are throughout the country, in 
that the people from my district are in organizations and 
federations when they meet yearly with all of the community-
based organizations, and that still is a widespread problem. So 
I am happy to know that you are addressing it.
    I had one other question, Mr. Cooper, with reference to 
that. There is a bill, as I have said, that is moving through 
the Congress. We don't know whether it will getanywhere or not, 
but it has passed on the committee level. And that bill talks about 
granting municipal employees in high-cost areas and who make 150 
percent of the area's median household income, and they want to offer 
them the opportunity to receive home ownership assistance under the 
CDBG program.
    I would just like to know how does HUD define high-cost 
areas?
    Mr. Cooper. Thank you, Congresswoman. Just a point, I 
believe H.R. 1776 is the bill you are addressing.
    Mrs. Meek. Absolutely.
    Mr. Cooper. The Offices of Block Grant Assistance and 
Affordable Housing have registered opposition to raising income 
eligibility as it relates to CDBG and HOME funds. There are, I 
believe, ten additional jurisdictions that were at issue, that 
are metropolitan cities or urban counties affected by that. 
These provisions are contained in sections for both sections of 
CDBG and HOME. The opposition was that the changes proposed in 
H.R. 1776 would weaken opportunity for current CDBG 
beneficiaries by raising the threshold. Allowing greater 
flexibility in terms of home ownership is good, but raising the 
income eligibility would serve to dilute the purpose of the 
programs.
    The administration has not finalized its written position 
on the matter. As the Assistant Secretary, I have garnered that 
data in preparing my comments, and am discussing the matter 
with the Secretary and the Deputy Secretary. We are formulating 
a final opinion in writing, hopefully soon.

                        HOPE VI and Scott Homes

    Mrs. Meek. Thank you. My last question is for Assistant 
Secretary Lucas. And there was a situation--this is 
specifically in my district, where HUD, in its new policy, 
recognized some of these very congested public housing areas, 
and incidentally, I have the best housing agency in the 
country. Our Director is the best. And he cooperates with us 
all the way, a typical good example of a housing HUD director. 
But in the oldest and largest housing project there, Scott 
Carver Homes, that now is being broken down and the people are 
moving out so that HUD can thin out the congestion in that 
area. You may be aware of that, Hal. But what is giving me the 
problem is the residents do not want to move. Many of them have 
been there 20 and 30 years, and they are moving them into new 
areas, areas with different ethnicities where they have never 
been placed before, and they are beginning to feel all kinds of 
social and I would say psychological problems.
    Now, I know no one in Washington would ever think that this 
could happen, but it is happening. And I am asking what kind of 
assistance can we give to those residents, who now will be 
moved and probably dispersed throughout this very large county 
in various ways? And I wonder if you understand what I am 
saying, Mr. Lucas.
    Mr. Lucas. Congresswoman, I certainly understand exactly 
what you are saying, and I believe that Scott Homes is a HOPE 
VI program.
    Mrs. Meek. It is.
    Mr. Lucas. And I can only gather some of my own 
experiences, because I ran the Newark Housing Authority, which 
was also a very large housing authority that had many, many 
HOPE VIs--not many, but we had several, plus we had a great 
relocation program. We did a lot of demolition, and we did some 
other things, and some new construction. And I think I met Ms. 
Baldwin when this process was just getting started. And the 
issue of relocation is a very serious issue, and residents have 
across the country, have concerns about how they will be 
relocated, how they will be dislocated, perhaps, is a word that 
they use. But we are here to say that some of these older 
projects under our HOPE VI program need to be revitalized or 
replaced. And the issue is that we are trying to provide safe 
decent sanitary housing for all of our low-income people.
    But the relocation issue though, we take great strides in 
making sure that residents understand their options, that 
housing authorities do what they are supposed to do, and that 
every opportunity to place a resident where the resident needs 
to be is done. The housing authority has to submit a relocation 
plan to local HUD offices. The residents are required to be a 
part of that planning process when that happens. They are also 
supposed to be a part of the HOPE VI process, so that they will 
be instructed as it goes along the way.
    Hopefully, at the end of the day residents will not be 
forced to move to places where they don't want to be. So 
sometimes that takes us a little longer to get the programs 
done, but we do pay special attention to making sure that the 
residents understand where they are going, and that they worked 
with us. And that what we have been finding though after the 
initial shock has passed and that we work closer and closer 
with our resident leaders, that they all begin to understand 
that this is still the best thing for them, and in most cases, 
that they can come back once the HOPE VIs are finished.
    Mrs. Meek. Yes. And I won't take any more time, but does 
HUD have any specific targeted programs, programmatic kinds of 
things that can assist these residents, or should they just 
rely upon the housing authority?
    Mr. Lucas. No. Well, under the HOPE VI program, there are 
dollars in that program that guarantee that the relocation 
process is carried out.
    Mrs. Meek. All right, thank you. Thank you, Mr. Chairman.

                   1999/2000 Section 8 Voucher Awards

    Mr. Walsh. Thank you.
    I would like to refer to the Section 8 voucher program for 
a minute. I guess that would mean Mr. Lucas. The 50,000 new 
Section 8 vouchers in fiscal year 1999, when were they awarded?
    Mr. Lucas. I believe that they have all been--they are all 
out, I think back in November 1999 they have been assigned to 
the--they have been awarded.
    Mr. Walsh. November 1999?
    Mr. Lucas. November 1999.
    Mr. Walsh. So that would have been after the end of fiscal 
year 1999?
    Mr. Lucas. Right.
    Mr. Walsh. So they were not awarded during that fiscal year 
for which they were appropriated?
    Mr. Lucas. Right. They were out in November 1999.
    Mr. Walsh. Is that normal?
    Mr. Lucas. I think that it is sooner than it used to be. So 
it is an improvement.
    Mr. Walsh. Sooner than it used to be before 1999.
    Mr. Lucas. Yes.
    Mr. Ramirez. Mr. Chairman, may I have our CFO address the 
issue of the spend-out and the commitment and it beingmade----
    Mr. Walsh. Briefly.
    Mr. Ramirez. Yes.
    Mr. Walsh. Very briefly.
    Mr. Gibbons. I think the 50,000 in 1999 were Welfare-To-
Work vouchers.
    Mr. Walsh. That is right.
    Mr. Gibbons. That is the first time we had ever done 
Welfare-To-Work vouchers, and it not only required an 
extraordinary amount of coordination at the Federal level, but 
before an application could come in and be awarded at HUD, the 
local agencies, the local public housing authorities and the 
welfare agencies, had to come up with a joint plan, submit a 
joint plan. It was the first time that they had gotten 
together. And I think that that was a unique period and a 
unique instance that would probably not be repeated again.
    Mr. Walsh. Well, for fiscal year 2000, 60,000 new Section 8 
vouchers were provided on a fair-share basis. Are those out?
    Mr. Lucas. Let me get that answer for you. Yes, they are 
out.
    Mr. Walsh. The right answer. I see a big smile back there. 
[Laughter.]

                         public operating funds

    Good, that is good. Let me switch fields a little bit. Let 
me ask this question. This is regarding public housing 
operating funds. The economic assumptions for PFS forecasts a 
4.9 percent decrease in utility rates. Last year there was a 6 
percent increase in utility rates. Has HUD developed any trend 
lines? Do you know something that everybody else doesn't know, 
because I think everyone expects utility numbers to go up?
    Mr. Lucas. No, I believe we get our projection numbers for 
DOE, and that is the basis of our projections. We do not have 
any choice in that.
    Mr. Walsh. Do you have any faith in these estimates?
    Mr. Lucas. Well, we are guided by their----
    [Laughter.]
    Mr. Walsh. So you don't have any faith; you are just guided 
by their estimates. Well let me ask you this: if, as we all 
assume, utility rates will go up, and they are budgeted a 5 
percent decrease, who is going to pay for that, PHAs, out of 
their own hide?
    Mr. Lucas. Well----
    Mr. Walsh. Or will you go back and take a look at this and 
help them out at the end of the year?
    Mr. Lucas. Yes. We have committed to going back and taking 
a look if this extraordinary thing continues to happen. But I 
might want to add that during our negotiated rule making, the 
industry groups, we came to an agreement that the conservation 
of utilities was very important as well, notwithstanding the 
increase of this peak period that we are experiencing right 
now, and we concluded that we would change the 50/50 formula 
that we used to have in PIH or PFS, where the housing 
authorities were 50 percent and HUD was 50 percent. So what we 
have now is a 75/25 split, where if there is conservation, 
housing authorities can keep up to 75 percent of the savings, 
and also, they would be responsible for 75 percent of the loss, 
where it used to be 50/50, and they seemed to think that was an 
appropriate way to go forward.
    Mr. Walsh. I can understand why you would reward 
conservation, but the difference is this is not based on 
consumption; this is based on an estimate of a decrease in the 
utility rates, which I think is very unrealistic. Maybe I am 
wrong. Mr. Ramirez?
    Mr. Ramirez. No, sir. Again, we get our number, on which we 
have really no control over the number that is sent on this 
particular category. I will note though that it is somewhat 
comparable to our 1999 number that was more in line with what 
occurred in 1999, but again, we depend on this number from 
other sources, and they are the source.
    Mr. Walsh. Well, given that utility bills make up 20 
percent of the total operating costs of the public housing 
authorities, is your request realistic? I mean, do you have 
faith in your overall request for funding?
    Mr. Ramirez. Yes, as presented by PIH and put together in 
its comprehensive estimate of all expenses that would be 
incurred by PHAs, and at 100 percent funding, we are confident 
that we will be able to hit our targets. Now, this does not----
    Mr. Walsh. I don't understand how you can say that.
    Mr. Ramirez. Well, this is how we can say that. We can say 
that based on current assumptions. If we have a continued 
shortage and an increase in fuel expense in this nation that 
triggers a rapid increase over the next several months, those 
kinds of forecasts we have not made, sir. But based on prior 
year experience, our estimates are that we feel confident we 
will hit those targets. And Assistant Secretary Lucas has 
worked to put together a comprehensive budget to get us to 100 
percent of funding for public housing authorities, and we think 
we can get there.
    Mr. Walsh. What did you request from OMB?
    Mr. Gibbons. We will have to get that information. I don't 
remember. That was a long time ago.
    Mr. Walsh. Let me just say, let the record show that the 
Department's deputies and assistants did not express any faith 
in the energy cost estimates, but they did in the overall cost 
of the budget request for operating fund. It is 22 percent of 
the budget.

                    fha single family insurance fund

    Let me ask, Mr. Apgar, on this credit account surplus for 
FHA, as we understand it, the FHA single-family insurance fund 
generated a $5 billion surplus in its credit account. Isn't a 
credit account like an IOU account which can only be tapped in 
the event that HUD incurs a liability?
    Mr. Apgar. Yes. Let me just describe what happened. Our 
actuarial review, which we released a couple of weeks ago, 
showed that our economic value of the fund was up $5 billion. 
The economic value of the fund is composed of two pieces. One 
is cash and real securities on hand at Treasury, and then the 
economic value of the current book of business. And again, we 
highlight the fact that compared to 10 years ago, when we had 
some money on hand at Treasury, but the value of our economic 
book of business was negative because we had so many loans that 
were going to go bad, that we were net under water, almost $2.7 
billion.
    Over the 10-year period, we have turned that around. We 
have doubled the amount of money on hand at the Treasury, and 
this year the actuarial study said that rather than expecting 
that the current book of business will pay out more in claims 
than it covers in additional premiums, we actually have--are 
going to continue to make money off of the loans we already 
have on the books.
    Mr. Walsh. I think that is to your credit. I thinkyou 
responded well. The account is in, obviously, much better shape than it 
was a few years ago, so you should be commended for that.
    Your understanding of this credit reform, can these funds 
be tapped for any purpose like Section 8 vouchers?
    Mr. Apgar. What President Clinton said to do is that 
consistent with this higher actuarial report, it is also true 
that the credit subsidy rates that will be scored in the out 
years are higher because of the revised assumptions that are 
based on this report. That money is locked in the year 2001 
budget, and so it cannot be spent in 2001, but starting in the 
years from 2002 to 2006, we believe there is as much as $5 
billion additional money that will come from these higher 
credit subsidy rates that is available for spending.
    The central issue here is what we do with the fact that the 
FHA is now safe and sound and projected to generate revenues 
far in excess of its cost. The idea was to create a walling off 
of those funds, and put whatever extra funds were available in 
these out years back to use in housing as opposed to continuing 
to feed other parts of the government.
    Mr. Walsh. Can you use this money for Section 8 vouchers?
    Mr. Apgar. This funding, when it shows up in the budget 
projections, is available for all sorts of funding. The idea we 
have though is that we should use it for housing purposes of a 
new and innovative type. Rather than paying for the base 
programs, we could put to use for new production programs, for 
additional down payment, and of course, one of the options is, 
is to lower the premiums, because in fact, one of the options 
would be to cut the premiums on the FHA insurance programs 
itself.
    Mr. Walsh. Would you be scored at it if you used it for 
something like Section 8 vouchers?
    Mr. Apgar. Once it is projected and put into your budget, 
it would be net additional revenues that are available for use. 
This year I think we are projecting--I would have to get the 
exact number--but $3 billion of money. As you know, some of 
that money goes directly back into HUD. It pays a good share of 
our S&E accounts. Other portions of that money are available in 
the budget as part of the overall budget package. I have the 
exact numbers if you would like them.
    Mr. Walsh. I think we have exhausted that. I do not think 
that you have really answered the question, but you have 
answered, I think, to the best of your ability.
    Mr. Apgar. Well, I must not have heard the question. The 
money is not available in 2001 because of credit reform. It is 
available in 2002 to 2006. Congress could act to develop a 
trust fund that projects these additional revenues over and 
above what is necessary to keep funds safe and sound, and put 
that money to work.
    Mr. Walsh. Well, if the funds were used for purposes 
unrelated to the FHA single-family program, wouldn't that 
expenditure result in direct spending and then be scored?
    Mr. Apgar. It would generate revenue which would offset the 
spending, just like when we proposed an additional programmatic 
change to FHA which produces scorable savings, this would also 
produce then revenues that can be reutilized in the budget.
    Mr. Walsh. All right.
    Mr. Ramirez. Mr. Chairman?
    Mr. Walsh. Yes?

                        operating subsidies--doe

    Mr. Ramirez. Just a bit of cleanup work on this whole issue 
on the energy costs just for the record, we did fight tooth and 
nail to get DOE to take into account that housing authorities 
do get charged more than the surrounding neighborhoods and we 
wanted to get a separate adjustment. That did not happen.
    Mr. Walsh. In the northeast, it is ridiculous to argue that 
these rates are going down.
    Mr. Ramirez. I just wanted to state that for the record, 
sir. It was not because of lack of effort on our part to try to 
change that.
    Mr. Walsh. Okay. I think I am going to stop right here, and 
I will submit additional questions for the record or if we are 
back this afternoon, I will ask them then. At this time I yield 
to Mrs. Kaptur.

                          units under payment

    Mrs. Kaptur. Thank you, Mr. Chairman, very much. And 
welcome again, to all of the Assistant Secretaries who are with 
us this morning. Let me thank you for the work that you do for 
our country, for the people of our country, and to commend you 
for spending part of your life in the important arena of 
housing and community development for our nation.
    I wanted to ask you, just so I understand the numbers. I 
have got the HUD budget, fiscal year 2001 in front of me, and I 
have read several documents, including the Secretary's 
testimony. I am trying to understand the total number of units 
that are under payment you have got there, but there are no 
charts that I have found yet that relate to that in the book 
that I have. Maybe I just haven't located it, but I am 
wondering--and if you can't answer it this morning, I would 
love it for the record--does that include the low-income 
housing tax credit units? I am not quite sure who to ask.
    Mr. DeCell. I believe the Chairman's chart came from the 
committee.
    Mrs. Kaptur. Oh, it came from the committee. All right. I 
am trying to gain a sense of--if you look at the total number 
of units in the United States that are either units that are 
home ownership or rental units, I am trying to get a fix in my 
mind, Federally, of how many of those are actually receiving 
some type of Federal support. And I have always been an 
advocate for housing, but I would like to understand the 
magnitude of this. We certainly have public housing units; the 
low-income housing tax credit, since the mid 1980s has provided 
some subset of stock in this country; Section 8, obviously; the 
elderly. I notice you have got a proposed Welfare-to-Work 
voucher. Could some one of you or could combined, could you 
provide me with some numbers and tell me what that volume is, 
and then compared to the housing stock of the country and what 
you see as the need?
    Mr. Lucas. Right. First off, there is a difference of 
opinion on the numbers themselves, as they were pointed out by 
the chairman, but there is no debate that the supplyis 
shrinking as far as affordability is concerned, and the gap for 
Americans continues to grow to find affordable housing. We have over 5 
million Americans that are paying more than 50 percent of their income 
on rent alone, as far as the expense that is incurred. And there is a 
growing demand for affordable housing.
    So regardless of where the number falls as to the 
difference of opinion that we have on that number, the 
indications are that the demand continues to grow even more. 
But on the specific numbers that we currently have and how e 
can address those, I would like to have our Assistant Secretary 
for Policy Development and Research to come up and say a few 
words. Susan Wachter.

                        AMERICAN HOUSING SURVEY

    Ms. Wachter. Thank you very much.
    Based on the American Housing Survey, there are more than 
5.3 million households who have worst-case needs, which is 
defined as paying more than 50 percent of their income as rent, 
or as living in severely substandard housing.
    We will shortly have an update of the American Housing 
Survey with the most recent data. And as part of that report, 
we will also have a careful trend analysis of housing 
assistance and families who receive housing assistance, and I 
will be very pleased to provide that directly to you and any 
other additional information that you would like for the 
record.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mrs. Kaptur. I am one of those people that operates better 
within a context, so if I know a general sense of what that is, 
I think it makes me a better member and more effective on the 
committee, so I would greatly appreciate that, and I am very 
interested, for example, in the Section 8 or low-income housing 
tax credit, and looking at the volumes under each, so we get a 
sense of which programs are relatively more important. I am 
sure you will have that in the report. And what income bands 
those programs serve. And I know you talked about the 
affordability crisis, which I think has to do with people's 
wages not rising. And if we look at the actual purchasing power 
of families today compared to 20 years ago, wages have not 
risen commensurate with productivity, so I would expect that 
there would be an affordability crisis. So I really would 
appreciate those numbers very, very much. And what time would 
you say those would be available, how soon?
    Ms. Wachter. They will be available within the next few 
weeks, in fact, probably shorter than that, perhaps within the 
next week or so.
    In addition to that, we have updated information available 
on rents and incomes, and consumer price index overall, and I 
will be glad to provide that to you as well.

                          HUD TRAINING ACADEMY

    Mrs. Kaptur. Thank you. Now let me ask any of you this 
question on the training of housing professionals to work for 
HUD, to work in our local housing authorities, to work in our 
local community development corporations. How concerned are you 
about the stream of talent that is coming up behind you to meet 
America's needs in the 21st century?
    Mr. Ramirez. That is a very good question, Congressman. We 
have a unique challenge there at HUD. We have the longest 
tenured, or close to the longest tenured civil servants within 
the Federal Government, and so we have a wealth of experience 
that has matured through the organization over the years. We 
also have an interesting dynamic. Many of these are now 
becoming eligible for retirement. What we have done is we have 
reconfigured our internal training mechanism within our 
training academy, to create a continuing education process 
for----
    Mrs. Kaptur. Excuse me, sir. Could I ask you, how long has 
that Training Academy existed now?
    Mr. Ramirez. The Academy has been in existence for quite 
some time, but the difference was that it handled training more 
on an ad hoc basis, depending on the demand for a specific 
program that was instituted by Congress or policy changes that 
dealt with regulatory activities. And so that a lot of that 
training was ad hoc as a result of it.
    What we have done is that over the last year and a half, we 
have created a core of competencies that are within the 
Training Academy that is a base of education for the work 
force, and then move on to specific program training, depending 
on the activity, whether it is housing, community development 
or others, and use those as a vehicle to not just create 
opportunity for advancement within the organization, but add a 
value to that education by way of creating our credits for 
that, and so we are partnering with and expanding our 
partnerships with local universities and colleges to help us 
with our continuing education efforts, and these courses that 
are offered through these colleges or universities are open to 
the general public as well. We also have our work with the 
universities through the PD&R, that we bring in students that 
are geared towards housing and learning how to deal with the 
needs, but it is a unique challenge that we face, and we are 
trying to focus our efforts to make sure that the staff that is 
coming in at the lower grades has the opportunity to move up 
the career ladder, but with the kind of training that affords 
them the maximum mobility within the agency and not just within 
a program area.
    Mrs. Kaptur. Do local public housing authorities qualify to 
send their staff to that?
    Mr. Ramirez. I would have to have Assistant Secretary Lucas 
answer that. I do know that they put a lot of technical 
assistance training dollars out there for housing authority 
staffs and others, but he can provide you the detail. Assistant 
Secretary Lucas?
    Mr. Lucas. Yes. The HUD Training Academy that the Deputy 
Secretary is talking about, that is basically for HUD 
employees, but in our budget we have technical assistance funds 
that we give out all around the country all the time, and we 
give TA to our HUD staff in the field as well as the housing 
authorities as well. We do it on all our programs, and we do it 
around the country all the time.
    Mrs. Kaptur. Well, I will tell both gentlemen who have 
replied to me, this is an area I have been interested in for my 
entire adult life. I was greatly advantaged in that I was able 
to go on and study in this field myself, but I spent a long 
time, almost as much time working in my own field, which is 
city and regional planning, as I have now spent in Congress. 
And I am convinced we have not solved the problem of housing 
and community development professionals to the extent that I 
would like to. And I am not clear on where in the budget the 
Training Academy efforts are lodged, which line items I will 
ask you to specifically provide that for the record.
    Mr. Ramirez. I would be glad to.
    [The information follows:]

                          HUD Training Academy

    Information concerning the activities of the HUD Training 
Academy is located on Page H-2 of the Departmental 
Congressional Justifications for Fiscal Year 2001.

                     EXPANSION OF TRAINING EFFORTS

    Mrs. Kaptur. But I do not come from New York City, where we 
have got Columbia, or northern New Jersey, you have Rutgers 
turning out people every year to work at the community level. 
When I was first elected, our public housing authority was at 
the bottom of the heap, and only through imported talent were 
we able to clean it up and get it to a point where it has a 
very good record, last time I looked, with HUD. But the problem 
continues across this country. There are many communities that 
are derivative communities. They are not communities that 
automatically have this talent, and I would really plea with 
you and urge you to look at your training activities and ask 
yourself the question: how can we put an umbrella across this 
country, were it is not ad hoc at the community level, where it 
is part of some experience that helps people build up in this 
housing area. I would ask the same question on CDCs. I have 
literally had to haul people from my district around the 
country to show them how you do things. And then when they go 
back home, they are so overwhelmed with what they have seen, 
they don't know here to start. And I think that HUD has got to 
figure out a way to make it easier. Why should every community 
have to reinvent the wheel? We have people of goodwill out 
there, trying to make a difference, and I think this training 
and education piece is extremely important, so I am going to 
prevail upon you to provide detailed information to me on how 
you currently view, not just HUD personnel, but also what 
options we could make available to people working in this field 
at the community level, and how we might even do better in the 
future.

                    COMMUNITY DEVELOPMENT WORK STUDY

    Mr. Ramirez. If we could just quickly hit a couple of 
points in that area and get you the detail that you are asking 
for, Congresswoman. I would like Susan Wachter, our Assistant 
Secretary for Policy Development and Research, to make a few 
points, and then I would like to conclude that line of 
questioning.
    Mrs. Kaptur. Just very briefly.
    Mr. Knollenberg [presiding]. Before you begin, Ms. Wachter, 
make a conversation as short as possible. We are trying to get 
through the rest of the folks that have not offered questions 
yet, and then you can conclude very quickly, Mr. Ramirez.
    Mr. Ramirez. Yes, I will.
    Ms. Wachter. Thank you, Mr. Chair. We have a $3 million 
initiative for a development work study program. We ask 
universities to educate graduate students in planning policy 
development and community building. We would be glad to inform 
you about and provide further details on that. We also have an 
evaluation program and community curriculum building program 
ongoing at this moment. We would like to inform you about that 
as well.

                         BEST PRACTICES SEMINAR

    Mr. Ramirez. And finally, in a more holistic sense, we have 
now had three best practices conferences in which we bring in 
the best practitioners of the different activities that we 
carry out with our partners, and we spend approximately 3\1/2\, 
4 days highlighting and going through the mechanics of those 
best practices with other partners that we have out there. It 
has been very successful. This last one we had over 3,000 
attendees to the best practices conference. And besides sharing 
those ideas, and as you say, going back and feeling overwhelmed 
with the information, we include a network-building element to 
that, so that there is a link that is made with those best 
practices and those that are looking to employ them to better 
understand the delivery of activities there. But on the detail, 
we will be glad to get that to you to further elaborate on your 
questions on training.

                           CDCs and Training

    Mrs. Kaptur. Right. Could I ask you also for community 
development corporations; how effectively are they included in 
any of your training programs?
    Mr. Ramirez. We have Assistant Secretary Cooper here who 
can address that, but I do know that we do have some technical 
assistance money that goes to them.
    Mr. Cooper. Yes, and I know we have a brief time to get to 
the questions. On the community development side we have worked 
with a number of organizations, national organizations that are 
geared towards community development, who in their own right 
have reached to the core of what you have raised, getting young 
people interested in knowing that public service is a noble 
profession. We need people who areskilled and trained, who 
believe in moving communities forward.
    The Secretary, when he was here, spoke about the value of 
universities that are located in communities, and partnering 
between those local communities and universities, encouraging 
young people to be involved. We use our technical assistance 
money in that way, working with CDCs, and we have had success 
in terms of having them, not only learn what we do, but look 
where we need to be in the future. I think creating that type 
of work force opportunity for young people is most important to 
the agency, and certainly the country. So I will provide you 
the data on those programs.
    As a final note, through our HBCU program and other 
programs we are working with universities and students who are 
now engaged in activity as it relates to community and economic 
development.
    Mrs. Kaptur. Mr. Chairman, I don't know how you are going 
to handle me here, since this is my first round of questions.
    Mr. Knollenberg. Well, I haven't had my first round yet. 
Here is what we are going to do. Let me tell you the whole 
story. The drill is going to be as follows: I am going to go on 
next, and your time has expired--we have given you a couple of 
extra minutes--there will be another round. I am going to go 
next, and Mr. Mollohan will finish off before we have a break 
for a vote. I have been told there is a vote coming. And then 
we will reconvene at 1:30. That should be acceptable to 
everybody, so that is the drill for right now. So we will get 
back. You have an opportunity certainly later.

                   Rental and Health Care Assistance

    Let me as briefly as I can, get into a couple of questions 
that--and this really isn't so much a question as it is to 
thank Secretary Cuomo for working with me and visiting a 
problem that we think will bring a lot of satisfaction to a 
whole lot of people. I am talking about the health care and 
rental assistance, which will be provided via the Medicaid 
waiver and the housing voucher, and there are people, I know, 
on your staff that are well aware of this, and I want to 
applaud anybody and everybody that had anything to do with 
coming forward, working with us, having meetings, et cetera, to 
bring about what I think will be an appropriate solution to a 
problem. It allows seniors to stay in their homes and to 
continue living in surroundings that they are familiar with, 
and so I would just tell all of you, thanks for your help 
there.
    I understand that we have a little bit of a wrinkle or two, 
but I want to get from you today, if I can, the assurance that 
the only differences at this time that I am aware of, that 
would hold up the logistics of this, would be just a little bit 
of time, and I would look for an answer from somebody as to--
from your side, overlooking maybe the State of Michigan in this 
case--and several states are interested--but I am focusing on 
my own state. It looks to me like everything is pretty much in 
order from your perspective, and I would just like to get an 
affirmation of that. Yes?
    Mr. Ramirez. And it is just a matter of time, and I don't 
know, but Assistant Secretary Lucas would like to just 
elaborate a little bit more as to why it would take some time 
to get it done.
    Mr. Lucas. Yes. Congressman, we believe that, you know, we 
are right there, and we agree with you that this is certainly 
something that can occur. As you know, we have been working 
with the State, and we have a conference call next week, 
members of your staff. We have a conference call next week that 
hopefully we will work out some of their--not reticence, but 
their concerns. But certainly on this side of the table, we 
believe that this issue is something that we need to do.
    Mr. Knollenberg. Well, I appreciate that. I just want to 
make sure that from your perspective, this agreement is close 
to being fulfilled, and if there is anything that we can do 
from our perspective, let us know, because we think it is in 
our interest and your interest to bring about a successful 
conclusion of this.
    Mr. Lucas. That is correct.

                          Villages of Parkside

    Mr. Knollenberg. I want to get a status report on the 
Villages of Parkside in Detroit. You are all aware, I know, of 
the situation there. I spoke to the Secretary when he appeared 
before this subcommittee a few days ago, and as you also 
probably know, this particular--just very briefly, the cost 
estimates are hugely out of round with what originally was 
pegged to be the cost of one of these HOPE VI projects, and as 
you also know, the Inspector General has announced that there 
will be an audit of the Villages of Parkside, and the results 
will likely be available to us in the fall, and I just want to 
make sure that HUD isn't standing still in any fashion. I 
understand that the agency has been eagerly awaiting a report 
by Ziner & Associates on the books of Parkside, and what I 
would like to know is what specifically is HUD doing to remedy 
the situation at Parkside?
    Mr. Ramirez. I would like, if it is your pleasure, Mr. 
Chairman, to have Assistant Secretary Lucas address the bigger 
picture, and then specifically to the project itself, I would 
like to then turn over the rest of the response to Ms. Elinor 
Bacon, who is our HOPE VI specialist for the Department.
    Mr. Knollenberg. And one thing I want whomever it is to 
relate to as well is that is there something symptomatic about 
the problems of Detroit that link to other communities? I guess 
I am looking at what else is out there besides what we have 
here?
    Mr. Ramirez. And I think you will hear in greater detail 
from Ms. Bacon, but we have taken some very proactive steps 
over the last few years to remedy that situation, so that it 
does not occur with existing HOPE VI projects that have been 
awarded since those changes.
    Mr. Knollenberg. And they can be fairly concise in their 
responses.
    Mr. Ramirez. Yes.
    Ms. Bacon. Yes.
    Mr. Lucas. No, I would just add just one point, that the 
disconnect in some of these HOPE VI concerns were--we can find 
them in the earlier HOPE VIs. Since those early HOPE VIs have 
progressed, we have put in place a number of things that will 
cause this not to happen again. Ms. Bacon, of my staff, I 
believe has been working closely with your staff specifically 
on Parkside, and I believe Elinor can talk more about what we 
plan to do on Parkside, as well as how we plan to make sure 
that this does not happen again across this country.
    Mr. Knollenberg. Very good.
    Ms. Bacon. Thank you very much. The Secretary, I believe, 
discussed when he was here, the kind of costcontrols, 
management controls and systems that we have put in place to assure 
that we have very, very strong controls over the HOPE VI use of funds 
so that we can continue to promote the sort of local creativity and 
innovation which makes the program so unique. So we are on the one hand 
being sure that we are using the kind of controls that we must to 
assure that we have fiduciary responsibility and on the other, setting 
the framework to create exciting and new projects at the local level.
    With regard to Parkside, we did bring the housing authority 
staff and their attorneys to HUD Central. We have discussed 
that with your staff. We have been in touch with the Inspector 
General's Office as well. And I believe that we do have some 
very good procedures in place, both to pay off the contractors, 
who have been waiting for many, many months for their payment, 
and also to make sure that to the extent possible, the gap can 
be filled with additional tax equity raise in the next phase. 
So we are going to closely, closely monitor this. We have a 
very, very good expediter, a private sector gentleman who is 
working with us to assure that they keep the project on track, 
and that they are doing what they need to do. But I do believe 
that we do have in place the kinds of controls that are 
necessary to assure that this does not happen on other 
projects.

                       Detroit Housing Commission

    Mr. Knollenberg. Thank you. Also could you tell me--I 
understand last week, I believe it was, there was a discussion. 
What was the nature of that discussion with the Detroit Housing 
Commission last week?
    Ms. Bacon. They came to us because we requested that they 
come in and sit down and talk with us. My staff has been out 
there on a regular basis, and as you know, we stopped any 
funding last year pending resolution of what these problems 
were. There is apparently a gap of approximately $6.2 million. 
That is what we are told. We want to know what the exact number 
is through the Zyner report. We have been waiting for some time 
to get that report, and when we do receive that, we will know 
exactly what the outstanding amount is.
    Mr. Knollenberg. Do you know when that report would be 
available?
    Ms. Bacon. I wish I could tell. We continue to be told it 
will be tomorrow and soon and this afternoon, and we still 
don't have that. And so we are holding up any release, but we 
are in touch directly with Zyner to see when in fact they will 
be releasing the report.
    Mr. Knollenberg. But it should be imminent?
    Ms. Bacon. It should be, yes.

                     Puerto Rico Housing Authority

    Mr. Knollenberg. Thank you very much. Let me go to another 
quick one before we break to Mr. Mollohan. I seem to be on a 
thread here about troubled housing authorities. I wanted to 
talk about Puerto Rico. And I know this is an example of waste, 
fraud and abuse right under your nose, the agency's nose, and 
it is one that produces I think some problems in that some of 
these numbers just don't lie. I understand that at least 9 
individuals have been indicted on charges ranging from 
embezzlement and conspiracy to defraud HUD to money laundering 
and bribery. And this is the Puerto Rico Housing Authority 
numbers that we are talking about here, and these people were 
apparently trying to swindle the taxpayers out of millions of 
dollars. I understand more investigations are being conducted. 
The IG apparently warned HUD some 5 months before the 
indictments were handed down, and yet it appears that HUD did 
nothing; and the IG's warning was apparently a full 10 months 
before the second round of indictments, yet once again, the 
agency apparently did nothing. By the way, to add onto that, 
the FBI and the IG are investigating 5 other major cases of 
potential fraud within that housing authority, and I understand 
that even to this day--and tell me if I am wrong--that the 
Puerto Rico Housing Authority, while being on a trouble list, 
there is no indication that HUD has intervened. Can you tell me 
if this is true, and if it is true, we must be sending a wrong 
signal. But can you give me an indication of any kind of 
oversight over this situation? From the headline it doesn't 
look very good, so I will turn to Mr. Ramirez.
    Mr. Ramirez. Sure. Let me start off by saying that the 
housing authority operation in Puerto Rico has, through the 
years, convoluted its operations in a way that has created for 
a great deal of lax internal controls. We have worked pro-
actively to try to resolve these with the housing authority 
officials of Puerto Rico. We appreciate also the diligent work 
that the Inspector General has done to investigate those areas 
that have now resulted in indictments, and depending on where 
it goes, probable or possible convictions.
    I would like to have our Assistant Secretary for Public and 
Indian Housing address specifically the questions that you 
asked on the IG's reports, as well as what specific actions we 
have taken to try and remedy it, and we will try to be brief in 
our responses.
    Mr. Knollenberg. Yes, be brief. But could you also respond 
to why you didn't heed the IG's warnings?
    Mr. Lucas. Okay. Well, we did heed the IG's warnings, to 
start off with. And I want to start by just saying that the 
Government of Puerto Rico, as well as the housing authority and 
HUD, we have been working closely with the IG and the 
Department of Justice in this very serious matter. And a lot of 
the things that we are finding out today were in fact brought 
to us by the Secretary from Puerto Rico.
    Back in June of 1999, I personally went to Puerto Rico with 
respect to these concerns after meeting with members of the IG 
staff, who had concerns about how the Puerto Rico Housing 
Authority was progressing. We, in fact, made it clear that the 
accounting, the procurement and the other things that the 
housing authority was having some troubles with, had to be 
corrected. We have sent our TA staff. Our Deputy Assistant 
Secretary, Ms. Houser, has been down many times. We have had 
our HOPE VI people down there as well.
    And one of the things that we see though, is that based on 
the old conditions of Puerto Rico over the last couple of 
years, they have made some improvements. Then when the near 
trouble status of their mod--in their mod, but the other parts, 
they are making much, much, much better strides. They have a 
unqualified audit now. Before they did not have an audit at 
all, but the last two years they had an unqualified audit, and 
we are working with them to keep them improving.
    The IG's report, in final, just came out last week or maybe 
2 weeks ago, and we do see in the IG's report some concerns 
that we now can act on. It is pretty tough to act on these 
things before they become official. We are going to be sitting 
down and making sure that we address these issues in the most 
appropriate way, and the additional reports that will be coming 
out will give us further guidance on how we need to deal with 
these issues.
    Mr. Knollenberg. Well, thank you very much. And I dowish we 
would get some kind of an indication that would be solid and 
forthright, that would tell us what is exactly happening, because there 
appears to be some lagging on that. Thank you very much.
    I am prepared now to yield to the ranking member, Mr. 
Mollohan. I know we have been joined by Mr. Price, who may have 
to wait in turn for a bit, but we will get to you.
    Mr. Mollohan.

                 rural housing and economic development

    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Cooper, 3 years ago, the Subcommittee allocated funds 
to be used specifically for housing and economic development in 
rural areas, and we funded that out of CDBG. I don't know what 
Carrie would have thought about that, but that is what we did. 
But then later we funded it as in its own program with a 
separate appropriation. You have had a couple of years of 
experience administering that program.
    I am vitally interested in the relationship between rural 
housing and economic development. I understand very intuitively 
how intricately entwined they are. We have had the economic 
base that has supported our economy in the past eroded 
seriously, the traditional economic base. And that has created 
all kinds of problems for housing, not having an economic base 
to support the housing stock that we have. I am sure there is a 
similar relationship in urban areas, and heavily populated 
areas. I just don't have a familiarity with that as I do the 
practical familiarity I have in rural areas.
    So you have had a couple years to administer this program, 
and I would like to explore how you are thinking about it. Let 
me ask you how do you think about that, particularly in terms 
of the necessity of taking into consideration viable housing 
stock as you look at economic development in areas that 
economic development equals economic diversification, trying 
not to move away from your old economic base, but to supplement 
that economic base and to try to make up for the part of the 
traditional base that has been eroded?
    Mr. Cooper. Thank you very much, Congressman. Clearly the 
issue of rural housing and the impact of lack of investment in 
rural housing and economic development around the country has 
been a major problem. Our experience has been that the $25 
million that was appropriated by the Congress for rural housing 
in 1998 and 1999 accomplished a number of things. But we 
recognized that the rural housing conditions in the country 
demand assistance, but the stiff competition that they faced 
within the normal context of our programs made it difficult, 
for many to compete. We found, for example, that the need in 
this country is great. For our last round of funding $25 
million, we anticipated roughly close to 300 applicants but 
received over 800 applicants. Clearly, this was not enough to 
go around to impact on the overall efforts. But the goal was 
that the grants would be targeted to increase the number of new 
jobs, hitting on the economic issues that rural areas face. The 
1999 funds will result in 230 new jobs approximately 1,300 
housing units that would benefit as a result of either 
rehabilitation or construction or bringing them up from 
substandard homes to homes that are within standard, and 
roughly 60 new housing sites.
    Within the additional accomplishments included in the home 
ownership and financial management counseling areas, job 
training for those individuals, overall we believe it was the 
right way to go. Now, of course, in the rural housing area, the 
funds themselves have actually only been out for approximately 
4 months after the competition was completed. So for the actual 
accomplishments, I believe, Congressman, we will probably need 
an additional 6 months to assess the total impact and outcome 
of that. We are now about 4 months shy of that 6-month deadline 
to give you the numbers.
    The first competition, as I said, 749 applications for 
roughly $25 million, says a lot about the need in this nation. 
We are working closely with USDA, taking in mind that we do not 
duplicate the work that they do, but work in concert to expand 
the opportunities in rural areas. And finally, we worked with 
USDA in their preparation of our NOFA, to have their input so 
that we are not working at cross-purposes, but adding to the 
ability to create new economic engines in those areas, and in 
addition to that, making sure that home ownership and rental 
housing is improved.

                      mississippi delta initiative

    I might add there is one initiative that is new in our 
budget, and it is the President's request for the Mississippi 
Delta funding. This may be separate and apart perhaps from the 
part of the country that you are from, but in 1999 rural 
housing $25 million competition, only one application that came 
out of that most needy region in the Delta was successful. And 
what we have found is that because of the lack of the capacity, 
it is difficult for those areas to compete with other rural 
housing areas in the country. I do believe that the Delta 
Initiative will help us get to the critical problems in the 
Delta, and that the rural housing funding, Congressman, that 
you spoke of, can be targeted in a way that it would not 
necessarily reduce the impact that we would have. So if you 
combine, I think, the efforts there, you will see an 
improvement overall in economic opportunity, and shifting, if 
you will, the attention to growth and job development in those 
regions. We can build all the housing in the world, but if we 
can't create jobs to help people stay in those homes, it is 
going to be most difficult by the end of the day.
    Mr. Mollohan. You indicated that you had 749 applications 
for $25 million. That would suggest to me, and the point I 
think you are making, is that you had a far greater number of 
applications----
    Mr. Cooper. The need factor was far greater, and there were 
only 91 grants, by the way, awarded out of that total around 
the nation.

                     quality of grant applications

    Mr. Mollohan. Do you have an assessment of how many of 
those grants were of sufficient quality, that if you had had 
funding, you would have awarded them?
    Mr. Cooper. At the cutoff line, I would suggest that we 
could have gone further down if dollars were available because 
they were very competitive. We held a number of broadcast 
trainings for groups to understand what the requirements were 
for the program, so I think that if we had additional dollars, 
we would have clearly been able to fund additional programs. 
But our experience also told us that, given the technical 
assistance and capacity needs of certain organizations, we 
could use some technical assistance money to help those who did 
not do very well in competition.
    Mr. Mollohan. They didn't do well because they didn't know 
how to fill out the application. I understand that problem, 
because we, in the early days of my career, had that problem, 
but I think we have addressed it. We have organizations now who 
are really capable of preparing the applications. Was it an 
application preparation problem or was it the underlying 
proposal, a merits of the proposal problem?
    Mr. Cooper. A combination it seems. One, the underlying 
merits of proposal means that if someone ranked poorly and just 
missed the target in terms of what the NOFA called for, that is 
a separate issue. What we found was that the technical 
assistance and capacity issue to make sure that those groups--
and most of these are not-for-profits and some of them are new, 
some of them have experience. The ones that are new may not 
have the expertise, internally, to address the issue. So I 
think the technical assistance would have brought that game up 
as well. And you would have had organizations again, that if 
the funding line had not stopped at $25 million, those programs 
would have been funded based upon their applications. There 
were some great applications that came in to us for the 
program.

                           capacity building

    Mr. Mollohan. How much are you asking for Capacity 
Building?
    Mr. Cooper. The dollar amount for Capacity Building is 
included in the $25 million figure. The request for 2001 is $25 
million on the rural housing side, with the Mississippi Delta 
Initiative being separate and apart.

                     rural housing funding request

    Mr. Mollohan. How much are you requesting in 2001 for this 
program?
    Mr. Cooper. In 2001, we are requesting $27 million for 
Rural Housing and Economic Development and $22 million for the 
Mississippi Delta, the new initiative the President has been 
speaking of.
    Mr. Mollohan. So you are asking for $22 million focused on 
the Mississippi Delta, and $27 for the rest of the country?
    Mr. Cooper. Seven States are included in the Delta that----
    Mr. Mollohan. You are asking for $22 million to be focused 
on seven states?
    Mr. Cooper. Yes, Congressman, that is correct.
    Mr. Mollohan. Twenty-two million dollars you are asking to 
be focused on seven states, and you are asking $27 million, 
which was last year's request, for the rest of the Rural 
Housing Economic Development Program?
    Mr. Cooper. Yes, sir.
    Mr. Ramirez. Twenty-five million dollars.
    Mr. Cooper. Twenty-five million last year, $27 million this 
year.
    Mr. Ramirez. It is a total request, if I may, Congressman, 
of $49 million, including funds, for technical assistance and 
capacity building, sir.
    Mr. Mollohan. Okay. So you are proposing that 43 states 
would use the $27 million, what is it, 27, 25?
    Mr. Ramirez. Twenty-seven million dollars.
    Mr. Mollohan. $27 million that you are targeting under the 
Rural Housing Economic Development Program. You are asking for 
a total of $49 million, $27 million of it for 43 states, and 
$22 million targeted for seven states; is that right?
    Mr. Gibbons. Well, let me----
    Mr. Mollohan. Well, is that right, yes or no?
    Mr. Gibbons. It is in total, but the Rural Housing and 
Economic Development Program is a separate account, and that is 
for $27 million. And I think what Assistant Secretary Cooper is 
saying is in addition to that, there is an initiative for the 
Mississippi Delta, which is set aside in the CDBG program.
    Mr. Mollohan. So let me repeat it then. The $27 million is 
for 50 states, and then there is an additional $22 million for 
the same purposes under the same program targeted for seven 
states; is that correct?
    Mr. Gibbons. For the Mississippi----
    Mr. Mollohan. Is that correct?
    Mr. Ramirez. Yes, sir.
    Mr. Mollohan. Okay. Now, do you want to elaborate on that? 
Well, let me ask you to elaborate on that. Can you justify 
that?
    Mr. Cooper. Let me make clear that these are two separate 
programs. I think that distinction needs to be made. The fact 
is that the Mississippi Delta is the poorest region in this 
nation, and has been so for a very long time. There are other 
communities across this country that are in need, who will be 
competing equally, versus the Delta itself, where as I pointed 
out, only 1 out of the 91 grants awarded in this past round, 
went to the Mississippi Delta.
    Mr. Mollohan. I mean, I am sympathetic to that. Now that I 
think I understand how you are proposing to apportion this, I 
am suggesting that that is a little unbalanced. I would be 
supportive of spending more on this, much more in this program, 
and I would be supportive of spending a whole lot more down in 
the Mississippi Delta. I am just trying to get some handle on 
your thinking of the relative need that prompted you to ask for 
what I consider to be a disproportionate request.
    Mr. Cooper. If you measure the request, the issue of the 
request is whether or not more money should go directly to 
rural housing versus----
    Mr. Mollohan. No. I am asking why are you targeting so much 
money in one area. I will follow up with this and talk with you 
outside the context of this hearing.
    Mr. Ramirez. I was going to just say that the $22 million 
that is requested is part of the President's New Markets 
initiative. The $22 million that he is targeting for the 
Mississippi Delta is to go in there with funds from other 
Departments to build the kind of structure and infrastructure 
to be able to allow for the new market's initiative to hit the 
ground running in those areas.

                   new vs. rehab under rural housing

    Mr. Mollohan. I don't have any problem with that, per se, 
but I suppose my feeling is that we need to hit with the same 
sort of concentration poverty in rural areas across the nation. 
Some might come back and say, ``Well, we need to hit with the 
same sense of concentration in urban areas across the nation,'' 
all of which I would be sympathetic. I look forward to 
following up on that a little bit.
    Just one more follow up. I would like to hear you talka 
little bit more about your thinking between building new housing under 
this program versus reconstituting old housing stock that is connected 
to pre-existing infrastructure.
    Mr. Cooper. Well, I think the issue, particularly in the 
more rural areas of the country, is the quality and cost of the 
housing stock replacement. If you are doing a rehab on a home 
that has existing infrastructure, obviously, rehab works. We 
are talking about building housing--and it is a local decision 
in terms of when they put their application together and lay 
out what they would like to do. But the point is, in the rural 
areas, there are still homes without houses. I have visited 
your state, certainly, and spent time in the Mississippi Delta. 
We have areas--and I know this because I am from rural 
Virginia. I am from Franklin, Virginia, and I can tell you that 
you can't make a dent in that kind of poverty with a small 
amount of money. But in terms of working with other existing 
funds, States put their dollars in and we put the HUD money in 
and the locality makes the determination how to get best 
quality housing stock. I have seen homes, quite frankly, very 
recently, for which demolition would be the order of the day 
and the replacement cost in putting new housing in would be 
much cheaper.
    Mr. Mollohan. Final question. How much money do you think 
you would have had to request for this program if you were to 
fully fund all the meritorious applications that you anticipate 
coming to you?
    Mr. Cooper. That would be hard to say, but I will research 
the numbers and let you know what the requested amount was, but 
also I think we would want to add the feature that a number of 
the other activities under this $27 million, in the past $25 
million, also are offset by other CDBG and other Federal funds 
and activities that we have not addressed----
    Mr. Mollohan. You are going to get me that number?
    Mr. Cooper. Yes, sir.
    [The information follows:]

        Applications for Rural and Economic Development Program

    The total amount of funds requested under the 1999 Rural 
Housing and Economic Development competition was $212,385.497.

    Mr. Mollohan. Okay. Thank you, Mr. Chairman.
    Mr. Knollenberg. We have about 8 minutes left if--Ms. 
Kaptur, would you want to come back for a quick question? And 
we are going to reconvene at 1:30, so you do have another round 
of opportunity. Well, why don't we defer to you? Now, keep in 
mind that we both have to run at a certain point when the vote 
gets near.
    Ms. Kaptur. It is really very nice of you to do that.
    Mr. Knollenberg. You bet.

                      training for non-hud persons

    Ms. Kaptur. I wanted to just follow up and ask the 
witnesses for the record if you could provide me with a 
thorough explanation of the training and the capacity building 
that you do, where it is lodged in the various line items of 
your budget for HUD personnel, for local housing authorities, 
for community development corporations, the types of 
relationships that you have developed within the agency and 
with universities or other groups you referred to as technical 
assistance groups.
    I would just venture an opinion here that university 
training is extremely important. In my opinion in this area, 
equally and perhaps even more important, is site-based 
practitioner training.
    I would like to know to what extent HUD has worked with 
training, public housing officials, for example, and other 
public housing sites that you consider to be 100-percent 
performers. I would ask the same for community development 
corporations. To what extent are you moving people around the 
country so that those who are more junior or totally in the 
clouds have a chance to see what others are doing? If you do 
not have such initiatives, are you contemplating any? I would 
like to know that.
    The other area I am very interested in, in terms of non-HUD 
training, I should say non-HUD personnel-based training, for 
many Congresses, I have asked Secretaries about the health 
benefits issue that applies to people working in community 
development at the local level, the tremendous turnover in 
personnel that is largely due to lack of health insurance. Has 
HUD looked at a way of providing an umbrella plan that people 
working in community development in these housing 
organizations, community development-based groups, et cetera, 
could buy into? How far have you progressed in that regard? 
That could create greater stability at the local level, where 
it is so desperately needed.
    If I think about the Department of Education, I think about 
the amount of funds that they provide for teacher training or 
if I think about the Marine Corps, we know all about Quantico. 
The FBI has training academies. I really would like to see HUD 
be a little more visible in terms of what it is able to do 
around this country, not just in universities. As much respect 
as I have for them, I can tell you, in my home community, the 
university was the last place that took an interest in what was 
going on in our public housing communities, in our CDCs, in 
groups that were working at the local level. So you might have 
some bright lights around the country, but I think that they 
are exceptions, rather than the rule.
    Does my line of questioning, is it clear to you what I'm 
looking for here?
    Mr. Ramirez. Yes, ma'am.
    Mr. Kaptur. All right. I thank you very much. And, Mr. 
Chairman, I will withhold my remaining questions until the next 
round. I thank you again, Joe, really very much.
    Mr. Smith. Thank you, Ms. Kaptur.
    Mr. Walsh. At this moment, we will recess until 1:30, and 
there will be a new round of questioning at that point. Thank 
you very much.
    [Recess.]
    Mr. Walsh. The Subcommittee will come to order. Good 
afternoon.
    Mr. Ramirez. Good afternoon, sir.

                    automated underwriting standards

    Mr. Walsh. We are back at it, and we will begin with 
additional questions. We have four members here. I suspect we 
will have more.
    I would like to direct these questions to Mr. Apgar. Mr. 
Apgar, recently The Washington Post ran a story alleging that 
Fannie Mae and Freddie Mac may have discriminatory practices. 
Is HUD investigating a discrimination claim against the GSEs or 
is it reviewing their underwriting standards?
    Mr. Apgar. We have a review under way of their automated 
underwriting standards. It is part of our congressionally 
mandated requirements under the GSE legislation to look at 
theirs. It is both with Fannie Mae and Freddie Mac. Fannie Mae 
has been cooperating with that activity, and we are moving 
ahead. If you want more details on it, you will have to consult 
with Ms. Gail Laster or Eva Plaza, who are responsible for that 
review.
    Mr. Walsh. Let me just ask then, do you have any evidence 
that these GSEs discriminate against minority borrowers?
    Mr. Apgar. You should speak to Gail Laster, our General 
Counsel.
    Mr. Walsh. You have no evidence that there is 
discrimination against minorities. That is a pretty damaging 
headline to those institutions. I know you do not write the 
headlines.
    Ms. Laster. Well, I am speaking specifically about the GSE 
review of the automated underwriting, and that is based, as Mr. 
Apgar the Commissioner indicated, on our statutory obligations 
to review the underwriting guidelines to make sure that they 
comply with the Fair Housing Act. And we have not prejudged 
that outcome, and we have not prejudged that review, and we are 
doing it based on our statutory mandate.
    Mr. Walsh. Do you suspect that they are discriminating 
against minority individuals?
    Ms. Laster. No, I would not say that we suspect that. We 
are concerned, though. The article mentioned three things, Mr. 
Chairman. It mentioned the affordable housing goals that serve 
the low- and moderate-income and underserved communities. It 
mentioned the data that HUD has regarding the GSEs' activity in 
the conventional conforming market, and then it talked about 
the automated underwriting review. So, indeed, in terms of the 
automated underwriting review, we are not doing that because we 
suspect that they discriminate.
    Mr. Walsh. Is it not true that HUD is, in effect, a 
competitor of the GSEs?
    Ms. Laster. No, sir. I would rather state that, indeed, HUD 
is a Government entity. There is one issue, in particular, 
where we are developing an FHA automated underwriting system. 
In that particular instance, we are doing something along with 
the GSEs in that line. Of course, there is Ginnie Mae, which is 
also in somewhat the same business, but we would say, unlike 
Fannie and Freddie, which are private corporations, we are the 
Government, and we are their regulator.

                    fha/fnma/freddie mac competition

    Mr. Walsh. Let me direct the question to the head of the 
FHA then. Is the FHA not a competitor of Fannie Mae and Freddie 
Mac?
    Mr. Apgar. We believe there is very little overlap between 
the people that we serve and the people that Fannie Mae or 
Freddie Mac could serve. Quite frankly----
    Mr. Walsh. But you do compete.
    Mr. Apgar. Again, most of our borrowers would not be 
eligible for the types of loan products that Fannie Mae and 
Freddie Mac participate in.
    Mr. Walsh. Might some?
    Mr. Apgar. There could be some.
    Mr. Walsh. In that case, would you compete with them for 
those mortgages?
    Mr. Apgar. We would be perfectly happy for them to take 
them because our philosophy is any mortgage that the private 
sector can make at better pricing, they should have them.
    Mr. Walsh. That is not really an answer to my question, 
though. Do you or do you not compete in that sector for those 
customers?
    Mr. Apgar. No, in the sense that we do not aggressively 
pursue customers that go to the private sector.
    Mr. Walsh. Well, let me suggest this. If there is a 
situation where you may be in competition with them, how can 
you balance your role as a regulator and a competitor? You are 
sort of in the cat-bird seat there, are you not?
    Mr. Apgar. Well, the specific area where there was concerns 
about the competitive characteristics, and that would be where 
we would benefit from their proprietary software that they are 
developing in order to enhance FHA operations, that is exactly 
the reason why, in the automated underwriting review, which was 
a very detailed probing into their underwriting software, that 
was placed on the other side of the firewall. So I have no 
access to that.
    With respect to our own automated underwriting system, we 
are actually partners with Fannie Mae. We developed our 
software jointly with them, and they maintain that software on 
their platform and help us do our business.
    Mr. Walsh. Mr. Hobson provided this to me and asked me if I 
would put it into the record, and it is a quote from you, sir. 
It says, ``The absence of active involvement by Freddie Mac and 
Fannie Mae in these markets limits the opportunities for 
African-American families to get conventional mortgages.'' Do 
you stand by that?
    Mr. Apgar. Yes, relative to the conventional conforming 
market, our data suggests that Fannie Mae and Freddie Mac do 
not purchase this large a share of their business from minority 
communities in general and African-American communities in 
particular.
    Mr. Walsh. Is that discriminating against minorities?
    Mr. Apgar. Not in a formal legal sense.
    Mr. Walsh. Then why would you say it?
    Mr. Apgar. Because the fact is they do not provide as many 
mortgages as a share of their business----
    Mr. Walsh. What is the point?
    Mr. Apgar. What is the point? Well, the point is the GSE 
goal setting is to encourage these Government-Sponsored 
Enterprises that have significant public advantages. They do 
not pay taxes. They are free of Securities Exchange fees. We 
had a hearing yesterday all day on that proposition of the 
advantages they get, and the goal setting is to encourage them 
to do more, provide more funding to low- and moderate-income 
families and more funding to underserved communities. That 
funding will, in fact, increase their presence in the minority 
market.
    Chairman Raines, I believe in that same article, said that 
they plan and will do more in these areas, and we commend them 
for that statement.

              Gun Safety and Violence Reduction Initiative

    Mr. Walsh. Thank you very much. Moving to another topic, to 
Mr. Lucas, this is regarding the Public Housing Drug 
Elimination Grants Program. It is something that we have 
discussed recently and that is certainly a topic of interest. 
Included in the Drug Elimination Grant request of $245 million, 
is a $30-million set-aside for a new community gun safety and 
violence reduction initiative. As described in the budget 
estimates, the new initiative will fund public community-based 
education programs to address firearm hazards and implement a 
gun violence reduction program.
    Do you believe you have the authority to do this under 
statutory law?
    Mr. Lucas. It is my information that we do have that 
authority.
    Mr. Walsh. Well, then why in this year's budget submission 
are you requesting that authority?
    Mr. Ramirez. Let me get our General Counsel here, sir. And 
after this, if I may, Mr. Chairman, after this line of 
questioning to Mr. Lucas, he has been called back to the 
building, and I would be glad to answer general questions, and 
we will have Ms. Bacon take his place. But if he may be excused 
from the hearing, we would appreciate it, sir.
    Mr. Walsh. That is fine.
    Mr. Ramirez. After this line of questioning.
    Mr. Walsh. That is fine with me. I can certainly understand 
that. You have been here a good portion of the day.
    Either of you could comment. Based on our reading of the 
budget submission, you are requesting that authority that Mr. 
Lucas believes that you already have.
    Ms. Laster. I am sorry. I was actually still focusing on 
your last question. Which gun program are we talking about?
    Mr. Walsh. This is under the Drug Elimination Grants 
Program. There is a $30-million set-aside for a new community 
gun safety and violence reduction initiative. The initiative 
will fund public community-based education programs to address 
firearm hazards and will implement a gun violence reduction 
program. The question is do you believe you have the authority 
to do this? To run a gun buy-back program?
    Ms. Laster. Yes, we do.

                      Authority For Gun Initiative

    Mr. Walsh. My second question was then why in this budget 
submission do you request that authority?
    Mr. Ramirez. On the Safety and Gun Violation Initiative 
program for $30 million is to incorporate the rest of the 
communities' activities into the public housing activities. As 
it stands right now, the authority is limited to public 
housing, the housing authority itself. The $30-million 
initiative that is being requested in this set-aside is 
specifically aimed at getting other sectors of the community 
outside of the housing authority involved in creating gun 
safety and violence reduction programs that are communitywide 
in their efforts and not just solely focused within public 
housing authorities, Mr. Chairman.
    And I would like to add, though, that there is no position 
that has been taken by the GAO as it relates to the legality or 
illegality of us being able to use public housing funds for gun 
reduction or buy-back initiatives and other activities to 
reduce safety or to increase safety and reduce violence within 
housing authorities. And, in fact, the guns would fall under 
the definition of tools of the trade for drug dealers and such 
that we believe gives us the authority under the current 
statute to be able to pursue this line of activity, sir.
    Mr. Walsh. In the budget request, this is, as I understand 
it, brand new language, never been used in the HUD 
authorization before.
    Mr. Ramirez. Yes, sir.
    Mr. Walsh. Including, and this is the new language, 
``Including gun buy-back programs, gun tracing efforts, youth 
diversion programs that offer alternatives to crime, violence, 
counseling, et cetera, and gun violence hot lines and 
training.''
    Mr. Ramirez. Outside of the housing authority's 
jurisdiction. Right now the only effort that we can conduct in 
this regard in a community is through the authority that we 
have under the current statute.
    Mr. Walsh. So you do not have the authority, but you are 
suggesting the PHAs do have that authority.
    Mr. Ramirez. We have the authority under the legislation 
that governs public housing authorities to conduct these kind 
of authorities within the jurisdictions of those housing 
authorities. It is at a local option and initiative to pursue 
whatever efforts are necessary. The $30 million request that is 
being made is specifically targeted to be able to increase 
additional participation from a communitywide effort that right 
now cannot take place as a result of the limiting language that 
currently exists, sir.

                       Violence in Public Housing

    Mr. Walsh. At least the initial program suggests that there 
is more of this sort of violence in public housing authorities 
than outside public housing authorities; is that true?
    Mr. Ramirez. It is correct that there is a higher 
propensity of violence and gun-related violence, in particular, 
within properties that are run by housing authorities. But it 
is an issue that communities are seeking to address 
communitywide and are able to currently tap into any sort of 
effort to be able to deal with their specific initiatives.
    Mr. Walsh. I do not have the report, but there was a report 
from the PHADA Association, Public Housing Authorities, that 
they felt this was discriminatory, that it was suggesting that 
their properties are unsafe and violence prone, and they did 
not like it.
    Mr. Ramirez. We can certainly appreciate those housing 
authorities that are embroiled in the discussion as it relates 
to gun violence within housing authorities. We look at the 
national impact of gun violence throughout the entire structure 
of housing authorities. And as a result, when we refer to the 
violence that exists within housingauthorities, that is how we 
define it in our discussion, sir.
    Mr. Walsh. Are you familiar with Title 31, which makes it 
clear that any certifying officer that expends funds without 
sufficient legal authority is subject to civil and criminal 
penalties?
    Mr. Ramirez. I would certainly refer to the specific 
language of Title 31 to our General Counsel.
    Ms. Laster. Yes, Mr. Chairman. We reviewed Title 31, 
Sections 1301, 1341 and 1519, and we believe that we are in 
compliance with all of them.
    Mr. Walsh. Would you have a problem if we asked GAO for a 
clarification of your authority on this?
    Ms. Laster. No, sir.
    Mr. Walsh. You would not.
    Ms. Laster. No.
    Mr. Walsh. Thank you.
    Last question for now, is why should HUD be the lead agency 
to run a gun buy-back program and not the experts at DOJ?
    Mr. Ramirez. We are specifically focused in gun buy-back 
initiatives that are centralized and impact primarily housing 
authorities and their properties around a community.
    Mr. Walsh. But in this new language, you are asking for 
authority outside of public housing authority.
    Mr. Ramirez. That is correct, sir.
    Mr. Walsh. Your jurisdiction is expanding as we speak.
    Mr. Ramirez. Not our jurisdiction, but our funding 
availability for these kinds of local efforts is being expanded 
under the language that is being proposed. And as a former 
mayor, I can tell you that I went through several gun buy-back 
initiatives myself that were headed up by my police department 
prior to all of this taking place with resources that they 
garnered out of drug seizure money. Being that we are along the 
border, there is a higher tendency to do that. But it was not 
enough to get the kind of activity that they were looking for. 
What we are looking to create here is an additional funding 
stream to allow local efforts. Again, these are locally driven 
efforts by the law enforcement authorities of these locales, in 
conjunction with the housing authorities that reside within 
those communities, sir.
    Mr. Walsh. I am not going to argue the merits of these 
programs. I do think, however, that these funds are dear. I 
mean, these funds are used to reduce drug-related societal 
problems, and you can buy a lot of guns and spend a lot of 
money and not reduce drug abuse. That is a concern that I have 
just on the overall effect of the program, but more importantly 
we have to resolve the authorization issue.
    Mr. Ramirez. And I can appreciate that. And we spend in 
this effort combined, close to, if not, a billion dollars in 
trying to make an impact in these different activities that 
create an unsafe environment for our residents and the 
community as a whole. And we are working quite vigorously to 
try to address the issues as they are before us within the 
housing authorities and would conclude by saying that we 
believe the real answer to this is what has just recently come 
out, which is that the industry assume greater responsibility 
for the manufacturing of the kind of handguns that are 
circulating around our country and that they use the kind of 
safety measures that are out there already and into the future 
to create a safer handgun for the consuming American public to 
use. And we think that the real solution for accidental gun 
injuries or violent crimes related to guns can be substantially 
reduced if we continue to pursue those efforts. And we 
appreciate that Smith & Wesson has taken this position and has 
set the standard for hopefully the rest of the industry to 
follow, sir.
    Mr. Walsh. Mr. Mollohan?
    Mr. Mollohan. Well, it is hard to leave that issue alone 
being from West Virginia.
    Let me just say that I might support a gun buy-back program 
in public housing environments, I really do not see anything 
wrong with that once you get your authorization sorted out. I 
would encourage you to incorporate, as a part of that program, 
which would make it less or even noncontroversial and maybe 
supported in surprising quarters, a policy to return to owners 
guns that are traced to owners and to dispose, through 
legitimate firearm dealers, weapons of significant value and 
quality, handguns that are worth over some figure, $500 a 
handgun or something, something that would not get normally 
back into a street environment unless it were stolen.
    Moving on----
    Mr. Ramirez. Thank you for the suggestion, Congressman.
    Mr. Mollohan. Well, you are welcome.
    And I assume you were sincere in that.
    Mr. Ramirez. Yes, we are, sir.

                       Homeless Assistance Grants

    Mr. Mollohan. For the past 2 years in the VA HUD 
Appropriations Act, we have included language requiring 30 
percent of homeless assistance grant funds be used for 
permanent housing. The Administration proposes to delete that 
provision. I would like to ask maybe Mr. Cooper, if he is the 
appropriate person, why?
    Mr. Ramirez. Yes.
    Mr. Cooper. Congressman, the Appropriations Act called for 
at least 30 percent of money to be used to create and award 
permanent housing projects. In the aggregate for this year, 36 
percent of the 1999 homeless assistance continuum of care funds 
were awarded to permanent housing projects. This was 
accomplished with the assistance of a permanent housing 
incentive in the 1999 NOFA. It translates roughly into $349 
million. It is our belief that communities should establish 
their priorities, and obviously, with the incentive, they have 
gone above the 30-percent number. I do believe that it should 
be a local decision that drives that. If we impose and agree to 
a 30-percent set-aside, it may work for some communities but 
not for others. But for the record, at this point, 36 percent 
of the 1999 competitive funds, based upon the applications 
submitted, were awarded for permanent housing projects.
    Mr. Mollohan. But the 30-percent requirement is not a 
ceiling, it is a floor.
    Mr. Cooper. It is a floor. Our experience was 36 percent, 
we went 6 percent above the floor.
    I would ask if you have additional questions, that Mr. 
Karnas, who is our Deputy Assistant Secretary for Special Needs 
Assistance Programs, if you have any specific issues.
    Fred?
    Mr. Karnas. Mr. Mollohan, I would just add to Mr. Cooper's 
statement our philosophy related to continuum of care is to 
give as much authority as possible to local communities to 
determine what their local needs are. As Mr. Cooper said, for 
some communities, the 30 percent is an important tool, but for 
many communities they have to make a balance between their 
needs for other types of services. And I feel strongly that the 
flexibility that we give in the continuum of care is the 
important tool that communities need to meet the needs of 
homeless people.

                        SHELTER PLUS CARE GRANTS

    Mr. Mollohan. Fine. Your budget proposes to fund renewals 
of a certain category of homeless assistance grant, the Shelter 
Plus Care grants, as part of the Section 8 program instead of 
in the homeless assistance accounts. What is the reason for 
that proposal and why do you think it is important to make that 
change?
    Mr. Karnas. The Shelter Plus Care program has become an 
extremely important permanent housing program across the 
country. Many, many communities have used it to provide 
services to homeless persons with disabilities, but it is an 
expensive program. And the renewals are consuming a great deal 
of each community's fair share of their funding. These are 
programs that provide services and housing to people. In many 
cases, residents have lived in the facility for the full 5 
years of the term. They are no longer homeless. It is 
absolutely critical that these programs be continued in 
communities and provide housing. For these reasons, we feel 
strongly that it makes great public policy sense to move 
funding for Shelter Plus Care renewals into the Housing 
Certificate Fund to ensure that that infrastructure that we put 
in place is protected.
    Mr. Mollohan. You are aware that we provided $6 million in 
the Supplemental for that activity?
    Mr. Karnas. The supplemental activity is related to the 
past competition, in which there were some renewals that were 
not funded.
    Mr. Mollohan. My question is, is that adequate to make 
the----
    Mr. Karnas. That will be sufficient to cover both the 
Shelter Plus Care and the permanent housing for disabled 
persons in the past competition.

                                 HOPWA

    Mr. Mollohan. Thank you.
    The budget asks for a significant increase for the housing 
opportunities for people with AIDS programs, and the 
subcommittee has recognized the importance of this program and 
provided increases in the past. What has been happening as far 
as needs for these services and are they continuing to rise or 
not and why?
    Mr. Ramirez. We can have Mr. Karnas address that, if it is 
your pleasure, Congressman.
    Mr. Karnas. Again, this is a program that has worked 
extremely well. Ninety percent goes out by formula and 10 
percent goes out through competition to look at new ways of 
addressing this need. Obviously, we all know that the good news 
is that the new drug regimens are having a significant impact 
on reducing the deaths from AIDS, but the reality is that, 
still, there are a growing number of cases of HIV and AIDS. 
While in some way AIDS has become a chronic illness, the 
housing needs still remain. So, the HOPWA program is a critical 
piece not only for those who are more recently discovering that 
they have contracted AIDS, but for those who are perhaps 
somewhat healthier, but still struggling with the disease.
    Mr. Mollohan. I want to give you a chance to lay out your 
rationale here, and it is the reason I asked this question. 
What is the reason for having this separate program to address 
housing needs of AIDS patients rather than addressing these 
needs through the regular housing programs of the Department?
    Mr. Karnas. Well, I think that the history of the HOPWA 
program is very much tied to the epidemic itself. In the early 
days, the devastation caused by AIDS, in terms of economics, in 
terms of people not being able to work any more, the number of 
deaths that were occurring as a result of AIDS and the housing 
discrimination that was very much a part of initial reaction to 
the disease, all cried out for a program to come in and provide 
a housing opportunity.
    Mr. Mollohan. Then why are you asking to have it funded 
separately, why not out of the regular housing program?
    Mr. Karnas. We feel that there are some very distinct and 
specific needs that persons living with HIV and AIDS have. An 
infrastructure has been put in place with HOPWA funds to make 
sure that medical care, health care, and other supportive 
services are in place to assist those living with HIV/AIDS 
along with rental assistance and other housing support.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Walsh. Thank you.
    Mr. Frelinghuysen?
    Mr. Frelinghuysen. Thank you, Mr. Chairman. Sorry to be a 
late arrival.
    Gentlemen and ladies, satisfy my curiosity, how many of you 
are former mayors? I know Mr. Ramirez and Mr. Cooper from New 
Jersey. And how many of you are career HUD employees, the panel 
of nine? Somebody disappeared here. Career employees?
    I just wondered because you look like a pretty vigorous 
group to me. [Laughter.]
    I had a call last year during the budget process, the 
Secretary called up and put in a personal plea for the 
Community Builders and bemoaned the fact that he was working 
with an aging bureaucracy. [Laughter.]
    Where the average length of service was 17 years, and he 
was on his bended knee pleading with me that nothing could get 
done unless we fully embraced the Community Builders program. I 
said, ``Mr. Secretary, this is a very sad commentary. I cannot 
believe that there are not some good, active vigorous people 
with lengthy terms of service to the people that work for HUD 
that cannot get things done for you.'' So I guess you 
represent, I am not sure whether you are the A team or B team, 
but it is a pleasure to have you here.
    I have specific questions relative to individuals with 
disabilities. Who is going to step to the plate?

                              SECTION 811

    Mr. Ramirez. Is this specific to 811?
    Mr. Frelinghuysen. The 811 program.
    Mr. Ramirez. We would have Commissioner Apgar address----
    Mr. Frelinghuysen. I know Commissioner Apgar is certainly 
sure-footed today; is that right?
    Mr. Apgar. Yes, I am sharp as a tack.
    Mr. Frelinghuysen. You are from New Jersey, good.
    I am extremely concerned that HUD's fiscal year 2000 budget 
proposes to increase the percentage of Section 811 supportive 
housing program that goes towards tenant-based rental 
assistance from 25 to 50 percent, as opposed to capital 
advances and project-based assistance.
    I have the very same concerns about this proposal this year 
as I have had in the past. Adoption of this proposal would 
undermine Section 811's role in adding to the stock of 
affordable and accessible housing for people with severe 
disabilities, a need that no one can deny exists.
    This ongoing effort by your Department, one, that this 
Committee directed you to abandon last year, seems to fly in 
the face of HUD's new emphasis on what is termed to be housing 
production. Taking more funds from the traditional part of the 
Section 811 program would harm people who have intense service 
and support needs, those who have traditionally relied upon the 
project-based side of 811. Many of these people are the very 
ones waiting for housing in my State and other States of the 
members on this panel. I am, once again, going to ask this 
Committee to direct you to maintain the split in the Section 
811 program at 75 percent capital advance project-based rental 
assistance and 25-percent tenant based rental assistance. In 
addition, authorizing language that would make this split 
mandatory is in the works, as perhaps you know, Commissioner.
    In light of this, why has HUD made this request?
    Mr. Apgar. Well, both types of funding have very useful 
purposes. Of course the 811 construction dollars expands the 
supply of affordable housing in this arena, and that is 
important, but also the vouchers serve a particular need. We 
know there has been a lot of emphasis within the disability 
communities about the so-called mainstreaming notion supported 
recently by a Supreme Court case on that topic. So we are 
working to find the right balance between two legitimate needs, 
and we welcome the guidance of the committee on this.
    Mr. Frelinghuysen. We have already directed you towards 
that balance. Why have you found it a problem towards following 
our direction?
    Mr. Apgar. We did exactly what we were directed to last 
year. We still believe that there is a useful role, a value in 
expanding the share that goes into the voucher programs. It 
seems obviously a place of disagreement, and my guess is you 
will have the final word, sir.
    Mr. Frelinghuysen. I suspect we will, but sometimes we do 
not, even though we put report language in there, and we give 
you direction, sometimes we find that our direction is not 
followed, and that is really the line of questioning that I 
have here.
    You have been working with the Consortium for Citizens with 
Disabilities Housing Task Force?
    Mr. Apgar. People on my staff have, that is correct.
    Mr. Frelinghuysen. And so they have been specifically 
working on the 811 program?
    Mr. Apgar. Yes.
    Mr. Frelinghuysen. And you are satisfied that you have 
given enough time and commitment to working towards them?
    Mr. Apgar. We work with disability communities on an active 
basis--that group and others.
    Mr. Frelinghuysen. But you specifically do work with a 
consortium.
    Mr. Apgar. Yes.
    Mr. Frelinghuysen. I would strongly urge your Department 
also to take a look at the cost limits established for the 
Section 811 program. The current limits are much too low and 
are impeding the ability of nonprofits to develop needed 
housing. We have a lot of good nonprofits out there. Would you 
like to comment on that?
    Mr. Apgar. I believe you are right. We are looking at the 
cost limits in the 811 program, as well as the 202 program. 
Especially up in your area of the country, the cost limits are 
starting to become an issue, and we are reviewing them.
    Mr. Frelinghuysen. Mr. Assistant Secretary, I am extremely 
pleased--or, Commissioner, and you are both, actually, are you 
not?
    Mr. Apgar. That is right.

                        VOUCHERS FOR NONPROFITS

    Mr. Frelinghuysen. I am extremely pleased that your 
Department has followed the direction giving it to Congress 
last year, and that nonprofit disability organizations are now 
eligible applicants for Section 811 tenant-based rental 
assistance. This move by the Department has accomplished a 
number of important things. First, it is helping to restore the 
integrity of a program that was designed to be a public-private 
partnership in the first place and, secondly, when the vouchers 
get out, it should help ensure that people with disabilities 
who need a housing subsidy get it and can use it because a 
nonprofit disability group will be there to help them through 
the process.
    It is my understanding that approximately, and correct me 
if I am wrong, that approximately 700 vouchers--these are 1998 
funds--will be distributed to nonprofit disability 
organizations. This assurance of help navigating the process 
may help to ensure that these vouchers get to the right people 
and remain in the pool of disability vouchers.
    Mr. Apgar. That is correct. The effort to distribute the 
vouchers better was the Department picking up and putting 
forward a suggestion by you and your staff, and we think we set 
up a good framework for doing that.
    Mr. Frelinghuysen. Yes. It has been suggested that 811 
tenant-based rental assistance applications might be restricted 
only to nonprofit groups. While this would eliminate public 
housing authorities as applicants, I know that the capital side 
of Section 811 is already limited to nonprofits. How feasible 
is this?
    Mr. Apgar. Well, we have combined the two NOFAs to make it 
easier for applicants to apply for both types of funding, and 
we think this will, in the competitive process it is, we will 
get more nonprofit involvement in the Section 8 piece.
    Mr. Frelinghuysen. I am very pleased that the Department 
has opened up eligibility for Section 811 tenant-based rental 
assistance to nonprofit disability groups, even shared with 
PHAs. However, I am concerned that HUD did not offer technical 
assistance for these nonprofits, but did offer technical 
assistance to the PHAs on the Welfare-to-Work vouchers.
    I know that the distribution of Welfare-to-Work vouchers is 
an important goal for the Department and for all of us. I also 
know that the Department has had to beat the bushes to get the 
PHAs to apply for the Welfare-to-Work vouchers. Why will you 
not offer technical assistance to the disability nonprofits 
that receive Section 811 tenant-based rentalassistance?
    Mr. Apgar. I am not sure why we are not doing that. It 
sounds like we should, but----
    Mr. Ramirez. Yes. And we can commit to do that, sir. We 
appreciate you bringing this concern and need to our attention, 
and we can certainly direct our technical assistance dollars to 
facilitate additional training to access these vouchers to 
nonprofits----
    Mr. Apgar. I can say in our Super NOFA training we made a 
big point of identifying the differences in the application 
process because we think this is a new area of departmental 
activity, and we need to get the word out so people can apply.

                           Consolidated Plan

    Mr. Frelinghuysen. And further on access, people with 
disabilities often find that they do not have access to HUD 
mainstream programs or many HUD funds are given out under block 
grants. These funds must be spent consistent with what is 
called a Con Plan or a Consolidated Plan; is that right?
    Mr. Apgar. That is correct.
    Mr. Frelinghuysen. How much participation do people with 
disabilities have with their local communities when those 
communities develop their Con Plans?
    Mr. Apgar. I believe there is active participation, and 
certainly we look at that. Just like in the area of homeless 
assistance, where one of the criteria is to evaluate the 
quality of depth of participation of various groups, the 
Consolidated Plans are held accountable to the same standard.
    Assistant Secretary Cardell Cooper may want to comment on 
this, but I think the intent certainly is to make the Con Plan 
an open and inclusive process.
    Mr. Frelinghuysen. Maybe perhaps to former Mayor Cooper, 
should HUD guidance require communities to include 
participation of those with disabilities and are they required 
now?
    Mr. Cooper. Yes, they should be included. All of the 
Consolidated Plans, Congressman, should have in their 5-year 
plan the opportunity for groups that are representing those 
communities to weigh in. There are public hearings that are 
held. They should be able to participate in those. And from my 
previous life, you and I shared I guess 8 years or so in New 
Jersey, the public hearing process is one that we know at the 
local level has to be open particularly to people who may not 
physically be able to get to a public hearing site; so they 
should be holding hearings around those communities. And 
certainly in Secretary Apgar's area, they are in conformity 
regarding the Consolidated Plan. If any particular community 
violates the Consolidated Plan process, groups notify us. And 
the final sign-off on the Consolidated Plan has to ensure that 
all interested groups have been given an opportunity to 
participate.
    Mr. Frelinghuysen. Thank you both for your responses. I ask 
this question, and I did with Secretary Cuomo, because I do not 
want people with disabilities to get lost in the shuffle here. 
And with all due respect, at times the push and shove and the 
political pressure comes from other age groups and 
constituencies I just think at times we want to make sure that 
people with disabilities get their fair share of what is out 
there. They have paid for it as well.
    Mr. Ramirez. Absolutely.
    Mr. Apgar. I was at a facility in Boise, Idaho, an 
excellent 811 facility. And one of the project managers gave me 
a tour. These are terrific facilities, and we certainly could 
use more of them around the country.
    Mr. Frelinghuysen. Great. Thank you.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you, and thank you for your consistency 
over the years. [Laughter.]
    He is consistent. It is remarkable, and very effective, 
also.
    Mr. Ramirez. We will echo that effectiveness.
    Mr. Walsh. Ms. Kaptur?

                        HEALTH INSURANCE PROGRAM

    Ms. Kaptur. Thank you, Mr. Chairman.
    I would like to resume where I left off, and that is this 
issue of health insurance and people working at the local level 
in Community Development Corporations and not-for-profit groups 
trying to work in concert with local groups to achieve 
revitalization.
    I would like to know if HUD has done any studies or any 
studies are underway, taking a look at how an insurance program 
might be crafted that would be national in nature that 
individuals could qualify for. This would create a great deal 
of stability at the local level for sure. Have you looked at 
any type of such plan?
    Mr. Ramirez. No, ma'am. But we are prepared to work with 
others. If you can direct us to who is already working on this 
for a Governmentwide initiative to create such a program, we 
would be more than happy to participate and provide our input 
and to bring that to fruition. We agree that one of the primary 
concerns out there in these kinds of jobs is health insurance 
and its affordability. And as a result of that, there is a 
potential to create a high turnover or a retention problem to 
get the kind of qualified individuals to service the housing 
needs of a community. And so whatever we can do to contribute 
to move this process along, we would be more than glad to. And 
your direction on this would be appreciated.
    Ms. Kaptur. I guess I would like to know if you need any 
legislative authority to do that or if that is something that 
could be done through ongoing research. If you could comment 
for the record on that, we would appreciate it very, very much.
    Mr. Ramirez. I would need to work with our General Counsel 
to see what kind of legal parameters we have to work under, and 
we will get back to you, for the record, on that.

                  FINANCIAL SERVICES IN PUBLIC HOUSING

    Ms. Kaptur. Thank you very much.
    I would like to move onto another subject, if I might. 
There is a lot of talk in the submission on the 2001 budget 
about empowerment zones, and I have always supported those. But 
one of the most important empowerment zones we have are the 
actual public housing units in which people reside, and the 
dollars that flow therein from Social Security, Social Security 
Disability, veterans benefits, the basic income check that 
families receive. Many times these projects are located in 
areas in which there are no ongoing financial services.
    I asked the Secretary what had happened with proposals that 
we had made to encourage the development of financial services 
on site, perhaps working in conjunction with locally based 
credit unions, and he was able to cite a few instances where 
this had happened. I would like to ask any of you that have 
authority in administering these programs what more can be done 
to empower member-driven financial services in places where 
people are paying you serious rates for check cashing?Many 
times very dangerous walks from the local check-cashing joint back to 
the housing project. Why is this so hard to get moving in some major 
way? Do we have to negotiate some kind of agreement with the National 
Credit Union Administration for you to be more proactive here? What do 
we have to do?
    Mr. Ramirez. We believe that it would take a greater push 
to build a national framework to work under. But we do have 
under our Resident Opportunities for Self-Sufficiency (ROSS) 
program already, as an eligible activity, the establishment of 
credit unions within the housing authority properties that 
would allow us to create a venue for banking services to be 
delivered to them.
    Also, I would like to note that the PHAs can use their 
capital grant money or HOPE VI resources and operating funds to 
help establish those credit unions. And these programs do, in 
essence work, but it is spotty around the country, and it would 
take----
    Ms. Kaptur. What about the Family Self-Sufficiency program, 
anything there done on credit counseling?
    Mr. Ramirez. On credit counseling, yes, but not on services 
for credit unions and banking services. But for counseling, 
yes.
    Ms. Kaptur. I have a very different view of public housing 
developments. I look upon them as university campuses, and that 
should have residents, residential services and that should 
have a financial operation, if possible. That could be member 
run so it would not take any additional funds out of the 
restricted public housing budgets. But it is really sad to walk 
through areas, as I have done many times in my life. Chicago 
comes to mind; in particular, in these high-rise buildings, 
16,000 people living within a few-block area in these point-
block buildings, and you say, ``Where is the community 
services?'' and they take you down to a lower room with one 
sewing machine in it, and that is it.
    It just seems to me that sometimes it is more important to 
rehabilitate someone's credit than to rehabilitate the housing 
unit. And if we can help people, if these public housing 
authorities could capture the dollars going in there for income 
support, you have a tremendous flow of income into these areas. 
Look at those senior buildings. Every one of those seniors gets 
a check, and with automatic teller ability now and so forth, 
you could do something really outstanding for the country for 
millions and millions of people. The little ones growing up 
there would have a sense of what it is like to have banking 
services, financial services.
    And I would really, I would like you to respond back to the 
record, directly to me, what else I need to do to encourage 
more of this. It seems like we are limping along here. I mean, 
this is a no-brainer to me. I do not understand why it is 
taking so long.
    Mr. Ramirez. Well, as to the reason why it is taking so 
long is that the partnerships that are created at the local 
level with the credit unions that are established are just 
that, partnerships that are initiated at the local level and 
not partnerships that we take to the table already. What we do 
is provide, through the different programs we have, the 
opportunity to create the avenue to get to a partnership at the 
local level for these credit unions. But I suspect that one of 
the principal reasons for it being so slow is the lack of 
capacity building on the part of effective local partners to 
create these credit unions.
    But we are working to make sure that in our redevelopment 
efforts, like in our HOPE VI initiatives, to incorporate at the 
front-end and encourage these kinds of activities. And I would 
like for Ms. Bacon to talk about that to explain to you the 
kind of proactive things that we are doing. And I just would 
conclude by saying that through an effort that has been working 
through our multi-family operation, our Neighborhood Networks 
Initiative, we have established over 700-plus neighborhood 
networks that now has created, depending on the needs of 
particular project-based activities, whether it is bringing in 
health services, financial services, educational opportunities 
or Internet access as part of our proactive approach to try to 
encourage our existing landlords to come in and try to create 
the facilitation of additional, nontraditional services that we 
provide.
    And I would like for Ms. Bacon to respond specifically to 
HOPE VI.
    Ms. Bacon. Yes. I just wanted to add that with regard to 
HOPE VI, obviously these are laboratories for change and for 
new ideas and for actually creating programs that work. It is 
something certainly which we could put more emphasis on with 
regard to our technical assistance to housing authorities that 
are doing HOPE VI sites. I would be very happy to work further 
with you and others on this whole effort because we can, in 
fact, encourage people to form those kind of partnerships that 
would be addressing the kind of financial services you are 
talking about. In fact, in some HOPE VI sites, these have been 
established, but we could put a lot more emphasis onto that.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Ms. Kaptur. Thank you very much. And I would just encourage 
you to make this member driven; in other words, the people in 
these communities have to do it themselves. We have created 
special credit unions, such as community development credit 
unions which are ideally suited for financially underserved 
areas, and I just think it is a way of building capacity among 
local people, and we have provided the National Credit Union 
Administration with authority to use these with additional 
technical assistance, to work in many places, and HUD ought to 
be right in there with them trying to find ways of creating 
these around the country. So thank you very much for hearing 
that.

                          Conflict of Interest

    I wanted to move on and ask Mr. Apgar, as the head of FHA, 
do you see any conflict between your role as a regulator of 
Fannie Mae and Freddie Mac, as well as their competitor?
    Mr. Apgar. No. First of all, I do not believe that we 
compete in the sense that you are using the term. FHA is more 
of a lender of last resort. When people are not able to get 
credit in the private sector, they come to us. After all, we 
are more expensive and perhaps not even as fast and flexible, 
in terms of provision of services, as the private sector. So in 
that sense, we do not perceive that we are in competition with 
either of the entities. And our regulatory basis is statutory. 
The Department has an obligation to regulate these two 
entities, and that regulation is vested in HUD. The goals 
regulation, the fair housing review, new product approval and 
other issues.
    Ms. Kaptur. How would you assure this Committee that, in 
fact, you are regulating those entities fairly?
    Mr. Apgar. Because I took an oath of office to provide fair 
and honest public service.
    Ms. Kaptur. And how do you view the role of FHA differently 
in terms of the product line that you offer versus the product 
line that Freddie and Fannie might offer? And repeat again for 
us why you do not see yourself as in competition with them.
    Mr. Apgar. Right. We basically take folks that have 
significant credit flaws in their record, have very limited 
down payment, typically folks who would not be able to get 
loans from a private sector lender. In today's world of 
automated underwriting and massive information, most consumers 
know what an FHA loan is. They know what a private loan is, and 
the choice that they make is going to be in their own best 
interests, and if it is a better loan to have, they will go to 
the private sector. If they cannot get that loan, then they 
come to us. So we are one of the few competitors who will state 
publicly that we hope that anybody who can go to our so-called 
competitor does so because if they can get a better deal with 
Fannie and Freddie, God bless them. We are there for the rest.

                        Land Legacy Initiatives

    Ms. Kaptur. Thank you.
    I would like to move to some of the Administration's land 
legacy initiatives. And let me take my own State of Ohio 
relative to community development and land legacy. We have more 
urban areas in Ohio than any other State in the Nation. At the 
same time, we have agriculture is one of our leading 
industries. I represent both. In fact, I represent an area that 
has the most arable and productive land in the entire State of 
Ohio, at the same time as we are the Jeep capital of the world 
and the Cheerio capital of the world. So it is a most 
interesting job that I hold.
    But one of the issues that has repeatedly come up is 
quality of life as we see the urban area sprawl out into the 
countryside across land that is globally irreplaceable. And one 
of the facts that I have noticed over the years is that when 
housing developments are financed or utilities are extended, 
both as a result of housing developments that are privately 
financed, as well as some of the rural utility programs that 
operate and some of the CDBG dollars that go out there through 
HUD, that there is not a lot of thought given to the confluence 
of environmental and ecosystem consciousness, as well as 
housing development.
    And the question I would have of you is to what extent have 
people in the Administration been thinking about how to link 
some of the objectives of the land legacy program to 
diminishing sprawl, to trying to find ways to promote local 
land trusts, conservation easements, to not looking upon prime 
agricultural land as a residual, but rather as a precious, 
irreplaceable global resource? I know this is not something you 
probably think about every day, but in terms of the regulations 
that you administer, what encouragement do you give toward 
wise, sustainable development, long term?
    Mr. Ramirez. Thank you very much for that question, 
Congresswoman. What I would like to do is ask our Assistant 
Secretary for Community Planning and Development to speak to 
what we have got proposed to deal specifically with encouraging 
the kind of activities that you have. But we could not agree 
with you more, that we can do more to look inwards towards our 
development and redevelopment than to look out of our current 
community limits, to try to contain urban sprawl and maximize 
the opportunities that lie within the existing suburbs and the 
inner cities as well.
    Cardell?
    Mr. Cooper. Thank you, Mr. Deputy Secretary.
    Congresswoman, I think about a couple of issues. One, 
environmental reviews, whether it is HUD dollars or other 
Federal dollars, are required for all projects. In addition to 
that, the Brownfields Program, as you know, on the EPA side, 
they do clean-up. On the HUD side, we do financing and bringing 
down the cost of loans so that development can take place on 
formerly contaminated sites. This is opposed to going out, 
further out, creating sprawl, taking up green space. Quite 
frankly, this is putting brownfields back on tax rolls and 
communities.
    The Regional Connections Program, and Assistant Secretary 
Wachter and I have discussed this, and PD&R has been a partner 
with us in trying to frame out the debate and discussions of 
how this program will work, of communities coming together 
using resources to address sprawl and development that makes 
good sense. Projects under the Regional Connections program 
will be driven from the bottom up, as opposed to from the top 
down with the Federal Government saying you must do this. But 
the communities coming together to say, for example, that we 
can make good use of industrial parks that are touching borders 
and communities. If they do not have existing money that they 
can target for that, they can come together with a regional 
plan to address the issue.
    Finally, historical preservation. There are arguments on 
both sides of the coin about historical preservation. I think 
it is important to the history and to the future of our country 
that we observe and pay close attention to historical 
preservation. The obvious issue in most of the communities is 
the cost of historical preservation, and certainly we will work 
with our other Federal partners to use HUD's tools to one, help 
preserve green space; two, clean up brownfields; and, three, 
work with them on the urban sprawl issue to develop what I 
would consider a safe and secure future for land that we can 
ill afford to turn into brownfields of the future.
    Ms. Kaptur. I know my time is up, Mr. Chairman. I thought I 
might mention that one of the places in the country that has 
tried to do a good job in this regard, with enormous pressure, 
is Lancaster County, Pennsylvania, the heart of Amish country. 
They receive 5 million visitors a year. People in our country 
are longing for that rural experience, so long as we can hold 
it, but the tools to provide a local community with the 
mechanisms to put land in trust in perpetuity, to organize 
themselves to think about this, to use the legal tools that are 
available, conservation easements and so forth, are not 
necessarily easily coordinated.
    And so I would ask again, for the record, and I will end 
with this, how could we legislatively or through existing 
authorities that you have, encourage a couple of demonstrations 
around the country in communities that are absolutely 
struggling with this right now to help people develop the 
mechanisms we need to coordinate all of these different private 
sector, not for profit, as well as Government resources that 
are available? I think HUD could have a tremendous role to play 
here if she is looking at the same country that I am looking 
at.
    So I thank you very much, and we will appreciate your 
suggestions there.
    Mr. Walsh. Mr. Goode?

                          FHA Loan Portfolios

    Mr. Goode. Thank you, Mr. Chairman.
    I would like to ask Mr. Apgar to follow up on something Ms. 
Kaptur asked yesterday. On your loan portfolio with FHA, how 
many are slow pays?
    Mr. Apgar. In terms of 90-day delinquencies, I will have to 
get that number, I think it is around 3 percent.
    Mr. Goode. Two percent?
    Mr. Apgar. Ninety-day delinquencies.
    Mr. Goode. And what is your percentage that you have to go 
to foreclosure?
    Mr. Apgar. In terms of foreclosures, about 1 percent of our 
loans go to foreclosure in a typical year.
    Mr. Goode. Do you have many situations where the values of 
the properties actually go down over the course of the loans?
    Mr. Apgar. In some instances. We make loans in all areas at 
all times. Our loans, for example, in Southern California that 
we made in the early nineties, some of those loans still may 
have economic values today that are below what the mortgage is 
made for.
    Mr. Goode. I know HUD was doing a program of allowing a 
voucher. Instead of for rent, you could take your rental 
voucher and purchase. How is that program coming along?
    Mr. Apgar. Yes, that is working well. We have pilots going 
with communities across the country. There was an issue 
requiring clarification of the language, which the Congress 
gave us clear authority a year ago. And based on that, we are 
moving ahead with the voucher program.
    Mr. Goode. How many are in it, just ballpark?
    Mr. Apgar. I do not know. This program is run by people who 
run the vouchers, so that would be out of the--do we have a 
number?
    Mr. Ramirez. It is a handful. It is just beginning.
    Mr. Goode. Eight demonstrations.
    Mr. Ramirez. Eight demonstrations around the country.
    Mr. Goode. Are any of the demonstrations in Virginia?
    Mr. Ramirez. I would have to check, sir.
    Mr. Apgar. It is definitely the right idea because we have 
been talking about it for some time. But there was some glitch 
in the legislation that we had to iron out. But in a lot of 
areas, it just does not make sense to be paying rent when 
people can use the voucher to get into a home. And so getting 
authorities, housing authorities to have the comfort level of 
how to run the program, that is what the pilots are meant to 
do, and we think it will just keep growing from there.
    Mr. Goode. I know in Charlottesville, which is in my 
district, the rental voucher would have, in a number of 
instances, made a nice house payment.
    Mr. Apgar. Yes. That is true. A lot of people pay more of 
their income for rent than they would to be homeowners, and 
this sort of eases that transition for lower and moderate-
income families.

                       Local Policy for Firearms

    Mr. Goode. Let me ask, and I do not know which, it may be 
Mr. Ramirez, your policy with regard to farms and housing 
projects, is that up to the local? I remember when I was in the 
State legislature one of the cities in Virginia came in, and 
their residents wanted to be able, for their own protection, to 
have a firearm for self-protection. And we got into a real 
quandary of who was in charge, whether the local Government was 
or whether HUD was. What is--
    Mr. Ramirez. Our position is that under our authority as 
the Department to administer public housing funds, that it is 
the housing authority's prerogative to institute any sort of 
gun buy-back or firearm buy-back initiative that they feel they 
would like to pursue. But it does have to be in conjunction 
with and concurrence with local law enforcement, that it cannot 
be just a housing authority initiative on its own.
    Mr. Goode. Can a housing authority on its own say we want 
to have a no gun ownership or possession policy in all of the 
housing that it is under this authority within the 
jurisdiction, even though the jurisdiction would allow--they 
did not have a prohibition against it?
    Mr. Ramirez. I will defer the technical answer to our 
General Counsel. But certainly the Second Amendment is one that 
we all want to protect as a country. But as to the technical 
answer to that specific question, Gail?
    Ms. Laster. The answer would be no. The issue is regarding 
State law. If the State law allows for the possession of lawful 
firearms, then the public housing authority would have to abide 
by that.
    Mr. Goode. Yes, but now in some States, States leave it up 
to the locality. Are they a locality? I know in Virginia 
certain cities had grandfathered rules.
    Ms. Laster. Yes. They are bound by State and local law, 
yes.
    Mr. Goode. So any that argued that the housing authority 
had a rule against it, their rule, if it was not in concurrence 
with State law, would not be valid; is that what you are 
saying?
    Ms. Laster. That is my understanding, Congressman.

                                Hope VI

    Mr. Goode. I do not know who to direct this to, on the HOPE 
VI grants?
    Mr. Ramirez. Ms. Bacon, Elinor Bacon.
    Mr. Goode. Ms. Bacon, your total amount for your HOPE VI 
grants that you were awarded and that you spent, say, in fiscal 
year 1999? If you do not know exactly, just ballpark.
    Ms. Bacon. Just for 1999?
    Mr. Goode. No, I want it for 1999, your estimate for 2000 
and what you want for 2001.
    Ms. Bacon. It has been approximately $600 million.
    Mr. Goode. And is that for 1999?
    Ms. Bacon. $625 million.
    Mr. Goode. For 1999?
    Ms. Bacon. Yes. Six hundred twenty-five million dollars for 
1999; $575 million for 2000; and then $625 million in 2001.
    Mr. Goode. $625, okay.
    Ms. Bacon. Yes.
    Mr. Goode. Now, in 1999, what was the average HOPE VI 
grant?
    Ms. Bacon. I am afraid I cannot tell you the average. The 
maximum is $35 million, and I could certainly get you the exact 
number for 1999, the average.
    Mr. Goode. I do not want you to go to all of that trouble, 
just kind of a ballpark guess. Are most of them in the $20-
million range?
    Ms. Bacon. Yes.
    Mr. Goode. Or $15 or----
    Ms. Bacon. Probably in the $20 million range.
    Mr. Goode. In the $20 million. And I take it you anticipate 
that being the same for fiscal year 2000--
    Ms. Bacon. Yes, the size of each grant. I would say yes.
    Mr. Goode. And the same thing for 2001?
    Ms. Bacon. Yes, the same.
    [The information follows:]

                         HOPE VI Grants in 1999

    The average HOPE VI grant made in 1999 was $27.2 million.

    Mr. Goode. That is all of the questions I have, Mr. 
Chairman. Thank you.
    Mr. Walsh. Thank you, Mr. Goode.
    I have no further questions of the witness. Marcy or 
Virgil?

                        Interfaith Partnerships

    Ms. Kaptur. I wanted to just ask two short questions. 
Depending on the answers, they may be hopefully short.
    The first is on the program that is proposed for the 
interfaith-based community partnerships, could someone talk a 
little bit more about the aim of that program and how it might 
differ from your NCDI and other initiatives that HUD has 
undertaken?
    Mr. Ramirez. Sure. We would be more than glad to. And the 
director of that program will be answering that question, 
Father Joe Hacala.
    Ms. Kaptur. And could you also explain, Father--welcome to 
the Committee--what account that will be in, where that 
actually fits, if appropriated, inside HUD.
    Father Hacala. Thank you very much.
    Yes, let me back up just for a moment, if I might, and just 
say a word of context. Perhaps not everyone is familiar with 
the Center for Community and Interfaith Partnerships, out of 
which this is proposed to operate. The Center was created 2.5 
years ago by Secretary Cuomo in his Office. It is not a new 
program unit, it is not a separate funding source. We have 
operated for 2.5 years trying to partner with both faith-based 
groups and nonprofit groups. And I mention that because 
frequently the operation is referred to as the faith-based 
center at HUD. And, in fact, our outreach has been largely 
through faith-based groups, but, in fact, it includes faith-
based and nonprofit groups, and therefore the name of the 
Center, Center for Community and Interfaith Partnerships.
    This particular proposal of $20 million is proposed as a 
set-aside in CDBG. It is proposed to be used for a number of 
purposes. So it is not, in a sense, a new program. It is a 
continuation of how the Center has worked in partnering with 
groups in a number of areas across the country using primarily 
CDBG technical assistance funds. A number of examples, there 
are some examples in the chairman's district in Syracuse, of 
which he is aware.
    So it is proposed that this money would be used as 
competitive grants and targeted technical assistance. So not 
unlike the NCDI initiative with which you are familiar in which 
HUD has invested about $90 million over the last 10 years. NCDI 
is in its tenth year now. HUD joined that effort in the fifth 
year. There has been about $250 million put on the table by a 
consortium of private-public partnerships, foundations, banks, 
the Federal Government, et cetera. That money is said to have 
leveraged about $2 billion in housing and economic development 
in the 23 targeted cities across the United States where it is 
operating. They are all urban areas. So the $20 million 
proposed for the Center is not unlike that. It is leveraging 
money and targeting specific purposes.
    So the $20 million, Congresswoman Kaptur, would be 
competitive grants and some targeted technical assistance, and 
it would be eligible primarily to faith-based groups, faith-
based nonprofits who formed as a 501(c)(3). So fully in concert 
with church-State regulations.
    There are a number of ways that that money certainly could 
be accessed, and I think a number of the initiatives that you 
have spoken about today and in the past certainly would be 
eligible. It is providing another resource, in some ways--going 
back to Congressman Mollohan's question, from my own home 
State--some of the rural needs of which he spoke would be 
eligible.
    It is really an effort to reach out, in large part, as 
well, I think in the President's mind and in Secretary's 
Cuomo's intent, to groups that oftentimes cannot access those 
monies. It was brought up earlier in comments about the 
disability funding, first-time groups, et cetera, who are not 
generally sophisticated enough to access HUD's monies. And one 
of the things that the Center, a purpose that it has served, is 
working with groups and trying to bring them up to capacity. 
Some of the monies would be used for that.
    You will recall the one project that you directed the 
Center to work on in terms of providing perhaps some resources 
for training of CDCs and of personnel coming into that field in 
our meeting in Newark, et cetera. I think that particular 
proposal would be eligible under these criteria.
    I think it is a win-win situation, in many ways, from my 
experience of the Center, Congresswoman, over the last 2.5 
years. And some of the things, for instance, that came out in 
the faith-based conference that we had in Toledo last fall, 
there has been some follow-up on some of that. So I hope that 
answers your questions. If not, I am happy to follow up.
    Ms. Kaptur. Are you dealing with more fledgling groups 
then? The objective is to deal with more fledgling groups?
    Father Hacala. Yes, it is. We have done a little bit of 
that last year. I might refer, earlier in his testimony, 
Assistant Secretary Cooper talked about the outlay of technical 
assistance for this year, which was $21 million that was 
distributed for last year, was distributed a few months ago.
    There was a significant increase in first-time groups and 
first-time faith-based groups as recipients of HUD technical 
assistance, and the Center has worked very hard to try to lay 
the foundation for that and to nurture those groups. And the 
intent of this proposal would be to continue to do that.

                        International Consulting

    Ms. Kaptur. All right, Father. Thank you very much for that 
clarification.
    My final question deals on the international level. Years 
ago, HUD provided some international consulting work. Do you 
still do that? If so, where is that in the budget and what do 
you do?
    Mr. Ramirez. Yes, we still do it, primarily geared towards 
housing and housing finance mechanisms. It is currently 
targeted to a few countries, primarily in Central America, and 
Mexico. We are doing some work with China and South Africa as 
well. But it is housed under our Policy Development and 
Research arm, and I will be glad to have Assistant Secretary 
Wachter provide you additional detail, Congresswoman.
    Ms. Wachter. Thank you, Mr. Secretary.
    Thank you very much for the question. The Department has 
had an international program since the Department was created, 
in fact. And recent revitalization of that program is 
completely consistent with the Department's efforts to 
strengthen the Department overall and most importantly to help 
the U.S. have the best housing and urban development in the 
world.
    HUD imports lessons from abroad, and we exchange data and 
information with international professionals throughout the 
world. We have several binational relationships which have been 
in place, commissions, over the last 2 or 3 years that we are 
continuing to carry out. And, finally, there is a 
reconstruction effort that we have been given the funding and 
direction to undertake in the Caribbean.
    Ms. Kaptur. Thank you. I just might say, and I do not want 
to speak on behalf of my colleagues, but two of our colleagues, 
Charlie Taylor of North Carolina, and Curt Weldon of 
Pennsylvania, have been extremely interested and have spoken to 
me about a mortgage system for Russia. And it is my impression 
that, since there is no credit system there that is functional, 
it will be most interesting to try to figure out how to do 
this.
    I would like to know, I do not know if you have looked at 
Mr. Weldon's legislation or not, Congressman Weldon's 
legislation. I wish you would look at that and maybe contact 
me. I would like to help them, to the extent that I could on 
this subcommittee, and see if we could not find some sort of a 
beginning of a working relationship with Russia and see what 
that might look like. It is a very difficult circumstance in 
which to work, but there is just an extremely strong interest, 
obviously, in trying to set up some sort of credit system for 
housing.
    And we met with the mayor of Moscow when we were there last 
year, and it is interesting to think about housing with no 
mortgage system and how you would go about creating the basis 
for that. So I would just ask for further consultation on that. 
You look at the authorities that you have, you could look at 
the legislation Congressman Weldon has drawn up, and then 
perhaps have somebody give me a phone call, and we can sit down 
with them.
    Ms. Wachter. I would be pleased to do so.
    Ms. Kaptur. Thank you.
    Thank you, Mr. Chairman.
    Mr. Walsh. Thank you. Mr. Goode, do you have any more 
questions?
    Mr. Goode. Just one.
    Mr. Walsh. That would be fine with me.

                           Policy on Firearms

    Mr. Goode. Thank you. The person that I believe it was the 
lady at the end of the table, could you give me a letter 
stating that policy on ownership of firearms in a particular 
housing authority is up to State and local law? And I will tell 
you why I want it. If the issue were to come up again, I want 
to share it with my friends in the General Assembly so that the 
persons coming in testifying before that committee cannot say, 
``Well, the housing authority is making us do this policy.''
    Do you mind doing that?
    Ms. Laster. No, sir.
    Mr. Goode. That is it.
    Mr. Walsh. Thank you, Mr. Goode and Ms. Kaptur. I would 
like to thank the witnesses for their testimony today, for 
sitting through all of this. It has been a long day. I would 
like to also thank our staff for providing us with the support 
and the questions that we have asked. Any questions that are 
submitted for the record, if you could respond back as quickly 
as possible to help us to formulate our bill for the year, we 
appreciate very much your cooperation and that of the 
Secretary.
    Thank you.
    Mr. Ramirez. Thank you very much.

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                               I N D E X

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              DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                                                                   Page
1999/2000 Section 8 Voucher Awards...............................    99
Adjournment......................................................    75
Affordable Housing...............................................     3
American Housing Survey..........................................   103
Authority for Gun Initiative.....................................   127
Automated Underwriting Standards.................................   124
Best Practices Seminar...........................................   113
Brownfields......................................................    31
Budget Justification.............................................   149
Calculation of Affordable Housing Units..........................     7
Capacity Building................................................   121
CDBG.............................................................35, 90
CDBG and High-cost Areas.........................................    97
CDBG Spendout Rates..............................................    36
CDCS and Training................................................   114
Chairman's Introductory Remarks.................................. 2, 77
Community Builders...............................................    40
Community Development Work Study.................................   113
Community Empowerment Fund.......................................    31
Community Gun Safety and Violence Reduction Initiative...........    69
Conflict of Interest.............................................   140
Consolidated Plan................................................   135
DEG Rescission...................................................     3
Detroit Housing Commission.......................................   116
Enterprise Data Warehouse........................................34, 87
Expansion of Training Efforts....................................   112
Fair Housing Enforcement Efforts.................................    66
FHA Fund.........................................................    10
FHA Inventory....................................................    45
FHA Loan Portfolios..............................................   142
FHA Property Disposition--Limitations............................    44
FHA Single Family Insurance Fund.................................   101
FHA/FNMA/Freddie Mac Competition.................................   125
FHIP.............................................................    42
Financial Services in Public Housing............................49, 137
Good Neighbor Program............................................    57
Gun Buy-back.....................................................    11
Gun Manufacturers Lawsuit........................................    74
Gun Safety and Violence Reduction Initiative.....................   126
Gun Tracing......................................................    70
Gun Violence in Public Housing...................................    53
Health Insurance Program.........................................   136
Homebuyers' Mortgage Insurance...................................    43
Homeless Assistance Grants.......................................   130
Homeless Assistance in Illinois..................................    26
HOPE VI..........................................................   144
HOPE VI and Scott Homes..........................................    97
HOPE VI Transition...............................................    37
HOPWA............................................................   131
Housing Certificate Fund.........................................    45
Housing Counseling...............................................    39
Housing for Disabled Report......................................    61
Housing Fraud Initiatives........................................    67
HUD Back in Housing Business.....................................     6
HUD Training Academy.............................................   111
Impact of Welfare Reform.........................................    30
Income Verification..............................................    48
Interfaith Partnerships..........................................   145
International Consulting.........................................   146
Introduction of HUD Staff........................................ 5, 77
Land Legacy Initiatives..........................................   140
Lead-based Paint.................................................    93
Lead-based Paint Inspections.....................................    94
Local Policy for Firearms........................................   143
Mental Health Conference.........................................    52
Mentally Ill Continuum of Care...................................    50
Mississippi Delta Initiative.....................................   120
News vs. Rehab Under Rural Housing...............................   122
Non-renewals of Homeless Assistance Grants.......................    28
Operating Subsidies--DOE.........................................   102
Oversight of HOPE VI Funds.......................................    55
PHAS.............................................................    63
PGHAS Appeal Process.............................................    65
PHAS Standards...................................................    67
Pilot--Section 8 and Medicare....................................    54
Policy of Firearms...............................................   147
Pooling of Cost Effective Resources..............................    73
Predatory Lending................................................    71
Project-Based Initiatives........................................    84
Property Disposition Initiative..................................    10
Public Operating Funds...........................................   100
Puerto Rico Housing Authority....................................   117
Quality of Grant Applications....................................   120
Questions for the Record.........................................   421
Ranking Member's Opening Remarks.................................     5
Recaptures and New Vouchers......................................    80
Regional Connections.............................................    31
Rental and Health Care Assistance................................   114
Risk-based Capital Model.........................................    95
Rural Housing and Economic Development...........................   118
Rural Housing Funding Request....................................   121
Secretary Cuomo's Statement......................................    13
Section 8 Estimation Process.....................................    84
Section 8 for Persons with Disabilities..........................    59
Section 8 Recaptures.............................................    78
Section 8 Rent Estimates.........................................    85
Section 8 Vouchers...............................................38, 79
Section 811.....................................................63, 132
Shelter Plus Care................................................    73
Shelter Plus Care Grants.........................................   131
Summary of Budget Request........................................  2, 9
Super NOFA Process...............................................    25
Tenant-Based Initiatives.........................................    83
Training for Non-HUD Persons.....................................   123
Unexpended CDBG Balances.........................................    26
Units Under Payment..............................................   103
Unobligated Balances and Section 8 Renewals......................    24
Unused Section 8 Funding.........................................    48
Unused Vouchers..................................................    29
Use of Brownfields Funding.......................................    47
Use of FHIP Funding..............................................    54
Villages of Parkside.............................................   115
Violence in Public Housing.......................................   128
Voucher Success Fund.............................................    30
Vouchers for Disabled............................................    62
Vouchers for Nonprofits..........................................   134
Vouchers/Opt-outs................................................    32

                                
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