[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
HOUSING AFFORDABILITY AND AVAILABILITY
=======================================================================
HEARINGS
BEFORE THE
SUBCOMMITTEE ON
HOUSING AND COMMUNITY OPPORTUNITY
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
MAY 3, 22; JUNE 21; JULY 17, 2001
__________
Printed for the use of the Committee on Financial Services
Serial No. 107-14
_______
U.S. GOVERNMENT PRINTING OFFICE
72-406 WASHINGTON : 2002
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HOUSING AFFORDABILITY AND AVAILABILITY
HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa JOHN J. LaFALCE, New York
MARGE ROUKEMA, New Jersey, Vice BARNEY FRANK, Massachusetts
Chair PAUL E. KANJORSKI, Pennsylvania
DOUG BEREUTER, Nebraska MAXINE WATERS, California
RICHARD H. BAKER, Louisiana CAROLYN B. MALONEY, New York
SPENCER BACHUS, Alabama LUIS V. GUTIERREZ, Illinois
MICHAEL N. CASTLE, Delaware NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California GARY L. ACKERMAN, New York
FRANK D. LUCAS, Oklahoma KEN BENTSEN, Texas
ROBERT W. NEY, Ohio JAMES H. MALONEY, Connecticut
BOB BARR, Georgia DARLENE HOOLEY, Oregon
SUE W. KELLY, New York JULIA CARSON, Indiana
RON PAUL, Texas BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio MAX SANDLIN, Texas
CHRISTOPHER COX, California GREGORY W. MEEKS, New York
DAVE WELDON, Florida BARBARA LEE, California
JIM RYUN, Kansas FRANK MASCARA, Pennsylvania
BOB RILEY, Alabama JAY INSLEE, Washington
STEVEN C. LaTOURETTE, Ohio JANICE D. SCHAKOWSKY, Illinois
DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas
WALTER B. JONES, North Carolina CHARLES A. GONZALEZ, Texas
DOUG OSE, California STEPHANIE TUBBS JONES, Ohio
JUDY BIGGERT, Illinois MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin HAROLD E. FORD Jr., Tennessee
PATRICK J. TOOMEY, Pennsylvania RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut KEN LUCAS, Kentucky
JOHN B. SHADEGG, Arizona RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York JOSEPH CROWLEY, New York
GARY G. MILLER, California WILLIAM LACY CLAY, Missouri
ERIC CANTOR, Virginia STEVE ISRAEL, New York
FELIX J. GRUCCI, Jr., New York MIKE ROSS, Arizona
MELISSA A. HART, Pennsylvania
SHELLEY MOORE CAPITO, West Virginia BERNARD SANDERS, Vermont
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
PATRICK J. TIBERI, Ohio
Terry Haines, Chief Counsel and Staff Director
Subcommittee on Housing and Community Opportunity
MARGE ROUKEMA, New Jersey, Chair
MARK GREEN, Wisconsin, Vice BARNEY FRANK, Massachusetts
Chairman NYDIA M. VELAZQUEZ, New York
DOUG BEREUTER, Nebraska JULIA CARSON, Indiana
SPENCER BACHUS, Alabama BARBARA LEE, California
PETER T. KING, New York JANICE D. SCHAKOWSKY, Illinois
ROBERT W. NEY, Ohio STEPHANIE TUBBS JONES, Ohio
BOB BARR, Georgia MICHAEL E. CAPUANO, Massachusetts
SUE W. KELLY, New York MAXINE WATERS, California
BOB RILEY, Alabama BERNARD SANDERS, Vermont
GARY G. MILLER, California MELVIN L. WATT, North Carolina
ERIC CANTOR, Virginia WILLIAM LACY CLAY, Missouri
FELIX J. GRUCCI, Jr, New York STEVE ISRAEL, New York
MIKE ROGERS, Michigan
PATRICK J. TIBERI, Ohio
C O N T E N T S
Page
Hearings held on:
May 3, 2001.................................................. 1
May 22, 2001................................................. 53
June 21, 2001................................................ 105
July 17, 2001................................................ 155
Appendixes:
May 3, 2001.................................................. 193
May 22, 2001................................................. 317
June 21, 2001................................................ 372
July 17, 2001................................................ 524
------
WITNESSES
May 3, 2001
Courson, John A., Vice President, Mortgage Bankers Association of
America, on behalf of the Mortgage Bankers Association of
America........................................................ 38
Crowley, Sheila, President, National Low Income Housing Coalition 10
Menino, Hon. Thomas M., Mayor, Boston, MA; Chairman, U.S.
Conference of Mayors Advisory Board............................ 33
Nelson, Kathryn P., Economist, Office of Policy Development and
Research, U.S. Department of Housing and Urban Development..... 7
Nielsen, Robert, President, Shelter Properties, Reno, NV, on
behalf of the National Association of Home Builders............ 35
Reid, Robert J., Executive Director, National Housing Conference
and the Center for Housing Policy.............................. 9
Rubinger, Michael, President and Chief Executive Officer, Local
Initiatives Support Corporation................................ 13
Thompson, Barbara J., Director of Policy and Government Affairs,
National Council of State Housing Agencies..................... 39
APPENDIX
Prepared statements:
Roukema, Hon. Marge.......................................... 194
Oxley, Hon. Michael G........................................ 196
Grucci, Hon. Felix J......................................... 199
Kelly, Hon. Sue W............................................ 197
Miller, Hon. Gary G.......................................... 203
Courson, John A.............................................. 280
Crowley, Sheila.............................................. 231
Menino, Hon. Thomas M........................................ 260
Nelson, Kathryn P............................................ 206
Nielsen, Robert.............................................. 267
Reid, Robert J............................................... 219
Rubinger, Michael............................................ 254
Thompson, Barbara J.......................................... 274
Additional Material Submitted for the Record
Crowley, Sheila:
Low Income Housing Profile................................... 243
Courson, John A.:
Letter to Hon. Marge Roukema, May 3, 2001.................... 288
``Impact of FHA Rental Housing Shutdown,'' May 2001.......... 290
Page
Nelson, Kathryn P.:
U.S. Ownership Rates by Income and Household Type............ 218
Written response to a question from Hon. Barney Frank........ 216
Reid, Robert J.:
Written response to questions from Hon. Gary L. Ackerman..... 230
National Affordable Housing Management Association, prepared
statement...................................................... 295
National Association of Realtors, prepared statement............. 300
National Leased Housing Association, prepared statement.......... 305
------
WITNESSES
May 22, 2001
Page
DeStefano, Hon. John Jr., Mayor, New Haven, Conn., Second Vice
President, National League of Cities, on behalf of the National
League of Cities............................................... 90
Flatley, Joseph L., President and CEO, Massachusetts Housing
Investment Corporation, Boston, MA............................. 71
Hinga, William T., President, Bank One Community Development
Corporation, Columbus, OH...................................... 63
Kaiser, Mary F., President, California Community Reinvestment
Corporation, Glendale, CA...................................... 66
Patterson, Randy S., Executive Director, Lancaster County, PA
Housing and Redevelopment Authorities, on behalf of the
National Association of Counties, National Association for
County Community and Economic Development, National Association
of Local Housing Finance Agencies, National Community
Development Association, U.S. Conference of Mayors on Housing
Affordability Issues........................................... 94
Reilly, Joseph F., Senior Vice President, JP Morgan Chase
Community Development Group, New York, NY...................... 68
Skinner, Raymond A., Secretary, Maryland Department of Housing
and Community Development, on behalf of the Council of State
Community Development Agencies................................. 91
APPENDIX
Prepared statements:
Roukema, Hon. Marge.......................................... 318
Oxley, Hon. Michael G........................................ 322
Kelly, Hon. Sue W............................................ 323
Jones, Hon. Stephanie T...................................... 329
Sanders, Hon. Bernard........................................ 327
Velazquez, Hon. Nadia........................................ 325
DeStefano, Hon. John Jr...................................... 347
Flatley, Joseph L............................................ 340
Hinga, William T............................................. 344
Kaiser, Mary F............................................... 331
Patterson, Randy S........................................... 352
Reilly, Joseph F............................................. 335
Skinner, Raymond A........................................... 359
Additional Material Submitted for the Record
Roukema, Hon. Marge:
Dear Colleague letter on H.R. 1629, May 17, 2001............. 321
Letter to HUD Secretary Mel Martinez, May 17, 2001........... 320
Skinner, Raymond A.:
Written response to a question from Hon. Marge Roukema....... 367
------
WITNESSES
June 21, 2001
Page
Johnston, Michael, Director of Leasing and Occupancy, Cambridge
Housing Authority, Cambridge MA; on behalf of The Council of
Large Public Housing Authorities............................... 120
O'Hara, Ann, Associate Director, Technical Assistance
Collaborative, Boston, MA; on behalf of the Consortium for
Citizens With Disabilities Housing Task Force.................. 148
Olsen, Edgar, Professor of Economics, University of Virginia,
Charlottesville, VA............................................ 121
Poppe, Barbara, Executive Director, Community Shelter Board,
Columbus, OH................................................... 146
Renahan, Steve, Section 8 Director, Housing Authority of the City
of Los Angeles, CA; on behalf of the National Association of
Housing and Redevelopment Officials............................ 116
Roman, Nan P., President, National Alliance to End Homelessness,
Inc., Washington, DC........................................... 144
Sard, Barbara, Director, Housing Policy, Center on Budget and
Policy Priorities, Washington, DC.............................. 114
Ziegler, Roy, Assistant Director, New Jersey Department of
Community Affairs, Division of Housing and Community Resources,
Trenton, NJ; on behalf of the National Leased Housing
Association.................................................... 118
APPENDIX
Prepared statements:
Roukema, Hon. Marge.......................................... 373
Carson, Hon. Julia........................................... 375
Green, Hon. Mark............................................. 378
Kelly, Hon. Sue W............................................ 380
Johnston, Michael............................................ 433
O'Hara, Ann.................................................. 499
Olsen, Edgar................................................. 439
Poppe, Barbara............................................... 490
Renahan, Steve............................................... 410
Roman, Nan P................................................. 483
Sard, Barbara (with attachment).............................. 394
Ziegler, Roy................................................. 425
Additional Material Submitted for the Record
Israel, Hon. Steve:
``Childhood on Hold,'' Newsday............................... 382
Kelly, Hon. Sue W.:
``Housing Challenges Businesses,'' Journal News, May 25, 2001 392
Olsen, Edgar:
Written response to questions from Hon. Marge Roukema and
written clarification of testimony to Hon. Barney Frank,
with attachments, June 28, 2001............................ 448
Cambridge Housing Authority, prepared statement.................. 518
R. Carter Sanders, prepared statement............................ 510
WITNESSES
July 17, 2001
Page
Baumgarten, Jane O'Dell, Member, Board of Directors, AARP........ 166
Felgar, Lee J., Senior Vice President, Development and
Acquisitions, Volunteers of America National Services.......... 185
Monks, Janice, LSW, Executive Director, American Association of
Service Coordinators, Columbus, OH............................. 183
Slemmer, Thomas, President, National Church Residences, Columbus,
OH, on behalf of the American Association of Homes and Services
for the Aging.................................................. 164
Thomas, Harry, Executive Director, Housing Authority, City of
Seattle, WA.................................................... 181
Yoder, Robert P. Sr., Vice President, Yoder Builders and Warrior
Run Development, on behalf of the Council for Affordable and
Rural Housing.................................................. 168
APPENDIX
Prepared statements:
Roukema, Hon. Marge.......................................... 525
Oxley, Hon. Michael G........................................ 528
Israel, Hon. Steve........................................... 529
Lee, Hon. Barbara............................................ 530
Baumgarten, Jane O'Dell (with attachment).................... 541
Felgar, Lee J................................................ 582
Monks, Janice................................................ 576
Slemmer, Thomas.............................................. 531
Thomas, Harry................................................ 569
Yoder, Robert P., Jr......................................... 563
Additional Material Submitted for the Record
Healthcare Financing Study Group, prepared statement............. 606
Mutual Housing Approach to Affordable Housing Ownership and
Retention, prepared statement.................................. 603
NCB Development Corp., prepared statement........................ 593
HOUSING AFFORDABILITY AND AVAILABILITY
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THURSDAY, MAY 3, 2001
U.S. House of Representatives,
Subcommittee on Housing and Community Opportunity,
Committee on Financial Services,
Washington, DC.
The subcommittee met, pursuant to call, at 9:35 a.m., in
room 2128, Rayburn House Office Building, Hon. Marge Roukema,
[chairwoman of the subcommittee], Hon. Mark Green, [vice
chairman of the subcommittee], and Hon. Sue W. Kelly,
presiding.
Present: Chairwoman Roukema; Representatives Green, Kelly,
Ney, Miller, Cantor, Grucci, Frank, Carson, Lee, Schakowsky,
Jones, Capuano, Waters, Sanders and Watt.
Mr. Green. [Presiding.] At least for the next few minutes,
I am Marge Roukema, the Chairman of the Housing Committee. Our
Chairwoman will be delayed slightly. She is in a mark-up right
now in the Committee on Education and the Work Force. I
understand it is her amendment that is up, and she will be
there obviously for the conclusion of that, and then she will
be joining us I believe shortly.
In my capacity as Vice Chair of this subcommittee, she
asked that I begin the hearing on time so that the Members and
witnesses will have an ample opportunity to discuss this very
important issue of housing affordability.
Today is merely the first in a series of hearings that will
take place on this complex issue of affordable housing. Mrs.
Roukema and I and many others in this subcommittee have
expressed our desire to have hearings that would allow a
variety of viewpoints, observations and suggested approaches
and solutions to our housing crisis.
It is no secret that some of our most needy families,
typically defined as earning 30 percent or less of an area
median income, have the most difficult time finding suitable
and affordable housing.
I am alarmed, as I am sure many others are here today, at
some of the statistics that we have seen in today's testimony.
More than 220,000 teachers, police, and public safety officers
across the country currently spend more than half of their
income for housing; 13.7 million Americans pay more than half
their incomes for housing or still live in sub-standard
housing.
These are just a few of the statistics that I personally
find alarming. We are very fortunate today to have a number of
distinguished experts in the field of housing as witnesses.
Their testimony will begin to outline the problem among various
income sectors, and lay out some of the perceived causes.
Additionally, issues such as local barriers to development
that increase the cost of housing and other factors affecting
the supply of housing will be explored.
I also hope to hear testimony on the role of HUD's multi-
family housing programs in providing affordable housing.
On a personal note, at the State legislature back in
Wisconsin, I worked in housing issues and was instrumental in
enacting a State statute to require a review of policies and
legislation that affects the cost and supply of housing.
I am very interested in the testimony today that proposes a
housing impact statement for Federal regulations. I think it is
a first step in addressing the issue of affordable housing.
At this time, the Chair would recognize Mr. Frank, Ranking
Minority Member, for an opening statement.
Mr. Frank. Thank you, Mr. Chairman.
We face a very serious crisis in housing in much of the
country. It is one of those issues which, because of the
physical nature varies, to some extent, from region to region.
And there are, I am sure, regions where existing housing
programs make a very useful addition to the goal of helping
people find housing affordably.
But in much of the country, market forces have had the
effect of driving up housing prices. The housing area is
probably the best example of the inadequacy of the notion that
the rising tide, which is supposed to lift all boats, can't be
trusted as the way to deal with our social problems.
Some people can't afford boats. And the rising tide is not
good news for them. In fact, it is not only that some people
are not helped by the rising tide, they are damaged by it.
If you are standing on tiptoes in the water, the rising
tide is not good news. And that is what has happened. I
represent an area, the Greater Boston area, where the
combination of globalization, deregulation, technological
change, have had wonderful economic effects.
Much of the Greater Boston area, the wide Greater Boston
area is prospering as a result of these trends, but not
everybody in the region prospers. And what happens is that the
general prosperity from which most people benefit drives up the
price of housing.
And those who are not direct beneficiaries are not only
left out of the general increase, they are worse off. We have
had a problem.
The Ranking Member of the Full Committee and I and others
on the Republican side joined last year in the House, to try to
make some special provision for teachers, police officers,
firefighters.
People said ``Well, why should they get special provisions
in terms of the eligibility requirements for the Federal
Housing Administration?'' The answer is that in many
municipalities, certainly in the part of the country that I
represent, these employees are, by local ordinance, required to
live in the city where they work, but they can't afford to live
there.
That is why we singled them out. There are teachers and
firefighters and police officers who have not benefited from
the general prosperity, and in fact, where you have high
housing costs and a very tight supply of housing, the voucher
program has two effects.
One, it does add to equity. There is no question. People
who were too poor are now allowed to get into the mix to some
extent.
But it has another effect. The voucher program is, as a
result of the actions of this Congress, very strictly a year-
by-year program with the exception of those efforts where we
are taking care of expiring use contracts where there are prior
commitments.
Any new voucher comes with only an annual requirement. No
one builds housing, no one gets a loan to build housing based
on an annual stipend. Any bank which gave a developer a loan,
based on a series of 1-year Section 8s, with no assurance
whatsoever of renewal, would probably be up before another one
of our subcommittees for improvident lending.
So what we have done is this: We have added to the demand
for housing through the voucher program, but in a way that is
very, very unlikely to add to the supply.
And the free market economic answer is very simple; we
raise the price.
So the voucher program has both the good effect of adding
equity, but the negative effect of raising price. In some parts
of the country, that may not be a problem. In parts of the
country where there is relatively slack demand for housing--and
I don't think there are too many of those--it will have less of
an impact.
In the parts of the country where there is a very, very
tight situation, where housing demand already has pushed prices
up because it has outpaced supply and demand has increased in a
number of ways, and one of the ways demand is increased is,
when the incomes of a certain sector of the population go up,
they can bid up the price. Their capacity has gone up.
What we do is we exacerbate the situation to some extent.
So I think it is absolutely essential that we begin to get into
a housing production program.
I think the results of an objective study would be very
clear. That the voucher program is a useful but hardly a
sufficient nationwide solution to the problem of affordability.
Indeed, there is one production program that is still going
on, other than the limited one for housing for the elderly, and
that is the Low Income Housing Tax Credit, one which this
subcommittee does not have jurisdiction over.
And that is a very popular program. The popularity of the
Housing Tax Credit, the demand we are getting here from States
to increase the allocation of tax credits, demonstrates, I
think, the importance of a housing production program.
So that is what I will be making my goal, and I think the
goal of many of us on our side, namely, to make it clear that
we need, at least in parts of the country, a housing production
program and to move forward to shape one.
Thank you, Mr. Chairman.
Mr. Green. I thank the gentleman for his thoughtful
comments. I think there is much that we can work on together to
meet these challenges.
Without objection, all Members' opening statements will be
made part of the record. Hearing no objections, it is ordered.
I would turn at this time, to the gentleman from
California, Mr. Miller, for any opening remarks that he might
have.
Mr. Miller. Yes. Thank you very much, Mr. Chairman.
Mr. Frank said many things that I have to agree with, and
that is dealing with market forces driving up housing costs,
and dealing with the rising tide, those who are not helped by
that, and the concept of prosperity drives up the cost of
housing. Teachers and firefighters and law enforcement agencies
are not living in their local communities.
But I think the point at which we disagree and where we go
in different directions is that what we do in Government,
especially with vouchers and Section 8, is we see a sore on an
individual and we place a bandage over that sore, rather than
determining what caused the sore.
I have been a developer for over 30 years, and Government
housing is a very, very small part of the overall marketplace.
And when you are dealing with market forces, and what causes
housing prices to increase by market forces, it is not what we
think it might be; it is Government regulations and red tape in
many cases that drives up those costs, and impact the overall
marketplace.
When you have a community that is providing housing, new
housing costs directly impact the cost of resales. Whatever a
new home is selling for in an area, you will notice that in the
community around it, their housing prices tend to move up into
the same price range and price bracket of those new homes that
are being sold.
And when you consider the outrageous costs of housing, due
to the Government costs imposed upon contractors and builders,
those Government-related costs have a direct impact on the
affordability of the market overall.
And when we are talking about a rising tide, the tide is
rising because of the heavy weight of Government at the bottom
end causing it to rise. For example, if you take a glass of
water and you drop a bucket of ice in it, the water in that
glass is going to rise.
The ice in this example is the cost of Government. Yet,
Government provides options for itself that it does not
guarantee for the private sector. As an example, you can have a
piece of property in the community that can be denied the right
to develop under local ordinance and local criteria. Yet, that
individual property owner can make application to the U.S.
Department of Housing and Urban Development to build a HUD
project.
That means you are going to rent or sell to the low-income
levels that meet HUD criteria. In HUD, the Federal Government
has the authority to usurp local control and they can actually
permit a project that has been denied locally, and they will
even inspect the project, certify the project, and issue
occupancies on the project.
And yet, when we try to look at it legally and say we need
to provide some nexus between the cost of Government and the
service that is supposed to be provided based on the fees being
charged to the developer, we all say, well that is a local
issue, we should not get involved in local issues. But, yet,
through HUD, we do get involved in local issues.
The problem with housing affordability, if you are trying
to provide entry level housing that is affordable, is that it
is impossible to do if the market forces keep driving up the
overall cost of housing in other areas.
I mean, you could have an individual move into a low-income
house, and never be able to move out of that, because the price
of the next home up is so great. This example, due to the cost
of legality dealing with such States as California, Arizona,
and Nevada, it is impossible to build attached housing anymore.
In California, for the last 10 years, you have seen an
absolute exit of condominiums and town homes, because tort
reform is so out of control that if you build a condominium or
town home, you are going to end up in court, no doubt about it.
And those entry level houses that we should otherwise be
providing by building condominiums and townhomes are not being
provided and thereby we are creating, in and of itself, a
housing shortage.
We want to deal with vouchers, we want to deal with HUD
programs that are Section 8, yet we are unwilling to deal with
the base problem that is causing the housing shortage and the
crisis in housing affordability in this country, which is
Government regulation and the concept of property rights having
been thrown out the window. For example, people buy a piece of
property and they are unsure whether they can even develop that
piece of property.
I agree with Mr. Frank. We need to deal with the problem
and we need to deal with it outside of Government.
Mr. Green. Mr. Miller, if you would sum up, please. Thank
you, Mr. Miller. Thank you for your comments.
The Chair, at this time, would recognize Ms. Carson, for
any opening comments that she might have.
Ms. Carson. Yes, thank you very much, Mr. Chairman.
In the absence of the Chairman in terms of giving us an
opportunity to explore ways that perhaps we can impact the
growing demand for affordable housing among American citizens,
I think added to that, it would be wise if the subcommittee
could probably examine ways in which this crisis has been
accommodated in some parts of the country, in terms of whether
there are self-help opportunities where persons attempting to
acquire homes can use a little sweat equity in terms of
obtaining homeownership, and whether hopefully this
subcommittee would be willing to underscore, in a bipartisan
way, the need for the policymakers at our level of Government
would underscore the need for the continuation of supportive
type vouchers and supplements to enable to assist families live
in affordable and decent housing.
Of course, the challenges are myriad, and I am sure that as
time goes on, we are going to have to raise a cry on behalf of
the many families in America who seek housing opportunities,
both purchase and rental.
I know as a Member of Congress, Mr. Chairman, I am finding
it increasingly difficult to afford rental housing right here
in Washington, DC., and I have a fairly decent salary that far
outpaces that of Americans across this country. And for Members
of Congress not to be able to afford rental property here in
the Washington, DC. area, I mean, gives rise to the belief that
there is, in fact, a problem that we need to be addressing.
Thank you very much.
Mr. Green. Thank you.
The Chair at this time, would recognize Mr. Nye for any
opening comments he might have.
There is none at this time.
And the Chair then turns to Ms. Jones, please, for any
comments she wishes to make.
Ms. Jones. Good morning, Mr. Chairman, Members of the
subcommittee. I am glad to be here to discuss the issue of
housing affordability. For me, housing is probably one of the
most important issues that people in our communities across
this country face, and they have different issues based on
their geographical or regional areas.
Coming up next week, the Congressional Black Caucus
Foundation will be hosting a housing summit in New York. Last
year we hosted one in Oakland, the year before, North Carolina.
And each of the areas that we go to present different
issues for housing affordability. I hope that through the
speakers that we will have this morning, they will give us
different information to help us continue to set the policy
that will be important for developing affordable housing across
this country.
One of the things I would ask them to do is to present
matters that might help us think outside the box. Because many
times, when we start talking about housing, we think of
traditional ways of providing housing for folks.
I was talking with my colleague, Marcy Kaptur the other
day, and we began to discuss the import of housing, how it
affects children going to public schools and how the transition
of people moving from place to place may cause students not to
perform appropriately when they move from one school system to
another.
And maybe what we need to consider, in the course of
dealing with housing, is the possibility of vouchers to
families to get them to stay in a location to allow their
children to complete a year in one school system, rather than
moving around and around.
I appreciate the opportunity to be a part of this hearing,
Mr. Chairman, and look forward to the statements of the various
witnesses who will present this morning.
Thank you.
Mr. Green. For further opening statements the Chair at this
time would recognize Mr. Watt, if he would have any opening
comments?
[No response.]
Mr. Green. Thank you.
At this point, the Chair would ask unanimous consent to
submit for the hearing, statements that have been submitted by
three organizations: The National Leased Housing Association;
The National Affordable Housing Management Association; and The
National Association of Realtors.
Seeing no objections, it is done.
[The materials referred to can be found on page 295 in the
appendix.]
Mr. Green. At this point, we will move to our first panel
of witness.
Panel 1 has Ms. Kathy Nelson, an economist with the U.S.
Department of Housing and Urban Development; Mr. Robert Reid,
Executive Director of the National Housing Conference; Ms.
Sheila Crowley, President of the National Low Income Housing
Coalition; and Mr. Michael Rubinger, President and CEO, Local
Initiatives Support Corporation.
Ms. Nelson, would you care to begin, please?
STATEMENT OF KATHRYN P. NELSON, ECONOMIST, OFFICE OF POLICY
DEVELOPMENT AND RESEARCH, U.S. DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT
Ms. Nelson. Thank you. I am delighted to be here.
I am going to summarize the three main conclusions of my
written testimony in six charts. If somebody could put the
charts up, please.
Basically, I am here because I spoke on the same panel as
Clinton Jones, and he asked me to basically repeat the
testimony I gave then before the National League of Cities.
The question they posed was, what do we know about
shortages of affordable rental housing? As the press claims,
are supplies affordable to low-income renters dwindling, and
are shortages of affordable housing worsening? That is
basically my question.
The six charts summarize my three main conclusions.
First, that during the 1990s, the number of units
affordable to low-income, as is it usually defined for HUD
rental assistance programs, actually increased. But the number
of units affordable to extremely-low-income renters dropped.
Mr. Frank. What is the percentage of median income that is
low? I think it would help at the outset if you gave us what
the numbers are for low- and extremely-low.
Ms. Nelson. Right. The first chart basically has four
ranges of income that are all under the so-called low-income
cutoff which is below 80 percent of area median income.
When I talk of ``low '' income, I am talking about incomes
between 50 percent of median and 80 percent of median, and
those are the two left-most bars on the chart. As you can see,
numbers of units affordable to those incomes grew during the
1990s.
What I am talking about as ``very low'' is incomes below 50
percent of median. ``Extremely-low'' incomes are below 30
percent of median income.
When I say that the main loss was in units affordable to
extremely-low-income renters, I am referring to the right-most
bar there, where, as you see, there was a loss of almost a
million units during the decade of the 1990s.
That is my first conclusion. I will go back to it in a
minute, but I wanted to start off by summarizing my three main
conclusions.
First, that losses in affordable units were for extremely-
low-income renters, not for ``low-income'' renters.
Second, that the worst shortages of housing that are
affordable to renters come among housing affordable to
extremely-low-income renters, below 30 percent of median.
And third, that the extent of these shortages varies
greatly around the United States.
As I said, my first chart is basically the basis for my
first statement. You will see there that during the 1990s, the
fastest growth, a gain of about 600,000 rental units came in
the range between incomes of 50 percent of median and 65
percent of median.
This is the range for most housing supplied by HOME (HOME
Investment Partnerships Program) and the Low Income Housing Tax
Credit, which are our two major supply programs.
The two bars on the right show changes in housing
affordable to very-low-income renters. As I said, it is for the
housing affordable to extremely-low-income renters where there
was the sharpest decrease in the 1990s.
Now if you could turn to the second chart. So far, I have
just talked about changes in numbers of rental units. The issue
is often phrased in terms of shortages, i.e., comparing numbers
of units affordable below an income cutoff to the numbers of
renters in that income group needing them.
And this chart summarizes shortages as the relationship of
supply to demand below four different income cutoffs; 80
percent of area median income, 65 percent, 50 percent, and 30
percent of area median income.
As the two left bars show, below incomes of 80 percent of
median income and 65 percent of median income, there were, on
average, wide surpluses of affordable housing compared to
renters. The chart shows the number of affordable units per 100
renters below an income cutoff.
For incomes of 80 percent of median and 65 percent of
median across the United States, there were more than 140 units
for every 100 renters below those income levels. So rather than
a shortage, there was, at least technically as it is usually
measured, extreme surpluses of housing.
This occurs in part because almost all rental housing
stock--85 percent--is actually affordable to 80 percent of the
median.
Mr. Green. Ms. Nelson, if you could wind your testimony up,
we would appreciate it.
Ms. Nelson. OK.
Mr. Green. Thank you.
Ms. Nelson. The bar on the right shows that the only income
range in which there is a shortage of affordable housing is for
extremely-low-income, below 30 percent of median. In that
income range, there are only three affordable units for every
four renters needing them.
The next chart shows that extremely-low-income renters--on
the left--are the income group most likely to have severe
housing problems.
And the follow-up charts show that the shortage of housing
affordable to those extremely-low-income renters has been
worsening during the decade of the 1990s.
Thank you.
[The prepared statement of Kathryn P. Nelson can be found
on page 206 in the appendix.]
Mr. Green. Thank you very much for your testimony.
Next we will turn to Mr. Robert Reid. Welcome.
STATEMENT OF ROBERT J. REID, EXECUTIVE DIRECTOR,
NATIONAL HOUSING CONFERENCE AND THE CENTER FOR HOUSING POLICY
Mr. Reid. Thank you, Mr. Chairman.
I am here representing both the National Housing
Conference, commonly referred to as NHC, and its research
affiliate, the Center for Housing Policy.
Last year, NHC released a study called ``Housing America's
Working Families.'' That study tested a simple premise----
Mr. Green. Excuse me, Mr. Reid. Could you pull the
microphone a little bit closer to you?
Mr. Reid. Yes. Thank you.
That study tested a simple premise that working families
should have access to decent, affordable housing.
With the Chair's permission, I would like to submit a copy
of that report for the record.
For most of the last 20 years, Federal housing policy has
implicitly or explicitly linked the housing problems of
American families to issues of poverty and welfare dependency.
In 1997, nearly 14 million families had a critical housing
need. Either they spent more than 50 percent of their income
for housing, or they lived in substandard housing.
By 1999, that figure had grown to over 15 million families.
Twenty-two percent of those families, over three million
households, are working families earning between the minimum
wage, which is about $10,700 a year, and 120 percent of the
area median income.
These working families defy the stereotypes that too often
surround discussion of housing policy. Over half were
homeowners. More than half lived in the suburbs. This group
included police officers, firefighters, teachers, as well as
service workers.
The number of working families with critical housing needs
grew by 17 percent between 1995 and 1997, or about 440,000
households.
Between 1997 and 1999, the number of families grew another
500,000, or an additional 17 percent. So the problem continues
to grow.
Now please don't misunderstand, this is not a zero sum
game. NHC is advocating the need for more resources, not a
reallocation of current meager resources.
Let me suggest some solutions.
Programs and tools that have proven records for producing
and preserving affordable housing must be strengthened and
provided with significant additional resources. Low Income
Housing Tax Credits, private activity bonds, and HOME are
proven winners.
Better use of other proven tools which can work in
conjunction with the aforementioned programs, such project-
based Section 8 vouchers would facilitate the expansion of
mixed-income projects.
FHA must improve its programs, particularly multi-family.
The Community Reinvestment Act must be preserved and
appropriately strengthened. NHC supports stronger roles for the
Government Sponsored Enterprises. Exit tax relief for owners of
assisted properties would ensure preservation of valuable
affordable housing stock.
We should make better use of the tax code for lower income
homeowners.
NHC's recent publication ``Expanding the Dream of
Homeownership,'' examines various proposals for expanding
access to affordable homeownership opportunities.
With the Chair's permission, I would like to submit a copy
of this report for the record.
Mr. Green. Without objection.
Mr. Reid. Ultimately, it is local taxing, planning, and
zoning decisions that determine what is done or not done about
affordable housing. We must fashion Federal incentives that
will encourage communities to support the production and
preservation of affordable housing.
In conclusion, this Nation faces unprecedented affordable
housing shortages and challenges. Some would contend that
current conditions rival those faced by this Nation's leaders
over 50 years ago, when the landmark 1949 Housing Act was
passed.
After 50 years, we know what works to produce and preserve
affordable housing. We are not lacking in programs or
expertise. What we are lacking is sufficient resources. What we
are lacking is the will to meet this challenge head on.
Mr. Chairman, on April 2nd of this year, 20 of NHC's
corporate and association members, who are key players in
providing affordable housing in this Nation, and some of whom
are testifying here today, sent a letter to you and your
colleagues in the House and the Senate calling on the Congress
and the Administration to provide the necessary resources and
incentives to encourage expansion of the affordable housing
supply.
With your permission, I would like to enter a copy of that
letter in the record.
Mr. Green. Without objection.
Mr. Reid. Thank you.
[The prepared statement of Robert J. Reid can be found on
page 219 in the appendix.]
Mr. Green. Thank you for your testimony.
At this time, I would like to introduce and welcome Ms.
Sheila Crowley.
STATEMENT OF SHEILA CROWLEY, PRESIDENT, NATIONAL LOW INCOME
HOUSING COALITION
Ms. Crowley. Thank you, Mr. Chairman. I am happy to be here
today. Thanks very much for the invitation to come and talk
about what the National Low Income Housing Coalition refers to
as the problem of housing unaffordability.
Mr. Green. Please speak into the mike. I cannot hear you.
Ms. Crowley. Oh, OK.
The National Low Income Housing Coalition is dedicated
solely to ending the affordable housing crisis in America, and
we believe that this is a solvable problem.
We believe that Americans have the knowhow and the
ingenuity to do this. It is simply a matter of putting the
resources to work.
Housing policy can be unnecessarily complicated, but
housing is quite straightforward. Everyone needs a basic,
stable, safe, fair and clean place to live and the capacity to
pay for it. Some may need additional services to assure
stability. That is the social minimum.
In the absence of a national commitment to this standard,
we think it is foolhardy to expect people to succeed as
workers, as parents, as citizens, or as students, because
without attending to the social minimum in housing, we
undermine the potential to achieve other desired social
objectives, and we undermine the foundation of our housing
system.
The dimensions of the affordable housing crisis are well
documented and widely known, and each of us today will offer
our way of how we see the numbers, but at the end you will come
to the same conclusions.
I would like to place in the record, if it is possible, a
report from the National Low Income Housing Coalition called
``Out of Reach.''
Mr. Green. Without objection.
Ms. Crowley. This report documents the gap between income
and housing costs in every jurisdiction in the country and is
the source of what has become a much-cited refrain by housing
advocates and by public officials and that is, there is no
jurisdiction in the country where a full time minimum wage
worker can afford to pay the fair market rent.
We examined a variable that we call the housing wage and
that is what wage a full time worker must earn in order to
afford the fair market rent.
In Sussex County, New Jersey, where Mrs. Roukema is from,
the housing wage is $16.77 an hour. Looking at it another way,
a household in Sussex County must bring in 130 hours of minimum
wage work a week to afford a modest two-bedroom unit. That is
the equivalent of 3.25 minimum wage jobs per household.
Mr. Green, in Green Bay, Wisconsin, the housing wage is
$10.46 an hour and one must work 81 hours a week at minimum
wage work to afford the fair market rent.
In Massachusetts, the housing wage is $18.83 an hour.
The most expensive region in the country is San Francisco,
where the housing wage is $28.06 an hour.
I would like to add to Ms. Nelson's analysis about where
the housing gap shortage is with a second analysis from the
National Low Income Housing Coalition that I would also like to
place in the record.
Mr. Green. Without objection.
[The information referred to can be found on page 243 in
the appendix.]
Ms. Crowley. And these are from 1999 National Housing
Survey Data, and they don't tell the story of every community
because they are national data.
But here quickly we will run through it.
Of the 34 million renter households, 7.7 million have
extremely-low-incomes. That is 30 percent of the area median or
less, or in Sussex County, New Jersey, that is $22,000 a year.
In the aggregate, there are only 4.9 million units of
rental housing that are affordable to these households, thus an
absolute shortage of 2.8 million units.
However, only 2.3 million of these 4.9 million units are
actually occupied by households within this range. The rest are
occupied by higher income households. So therefore there is a
shortage of 5.3 million units affordable for the poorest renter
households.
Further, when we apply this analysis up the income scale,
we find that we do not lack units of rental housing that are
affordable for households in the upper tier of the definition
of low-income, that is, 50 to 80 percent of area median, or
$36,000 to $58,000 annually in Sussex County, New Jersey.
Indeed, there are 7.3 million renter households in the 50
to 80 percent of median income range, and 13.9 million units.
Nonetheless, there is an overall shortage of units affordable
to this income group of 1.2 million, again because half of the
units affordable to them are occupied by people in other income
groupings.
That is, either higher income households who pay much less
than 30 percent of their income for their housing, or lower
income households are paying a higher amount.
Mr. Green. Ms. Crowley, if we could ask you to sum up,
please.
Ms. Crowley. OK. Investment in more housing that is
affordable for the more prosperous, but nonetheless low-income
households would expand the household supply but not alleviate
the shortage of households at the lowest level.
However, if we expand housing for the lowest income
households, we can expand it for everybody.
I would like to close by saying that the National Low
Income Housing Coalition supports a multi-pronged housing
strategy that includes increasing income, expanding housing
vouchers, preservation of our existing housing stock, but also
moving into the production of new housing.
And we support the establishment of the National Housing
Trust Fund which would provide the resources to supply 1.5
million new units of housing for the lowest income people over
the next 10 years.
Thank you, Mr. Chairman.
[The prepared statement of Sheila Crowley can be found on
page 231 in the appendix.]
Mr. Green. Thank you very much for your testimony.
There is a vote on the floor, apparently a motion to
adjourn has been called. Assuming it isn't successful, we will
be back here.
Mr. Frank. But if it is successful, Mr. Chairman, we can be
back and be----
Mr. Green. That is true and perhaps serving refreshments.
But I would ask Members to return as quickly as possible.
Mr. Rubinger, my apologies. We will pick up with your
testimony at that point.
We stand in recess.
[Recess.]
Mr. Green. I thank everyone for their patience. Obviously,
we have not adjourned, and we may have votes coming up. We are
in recess subject to the call of the Chair. It is regarding the
budget resolution, so we may get called out without warning.
I appreciate the patience of the panelists.
What I would like to do is resume the testimony of panel
one, and at this time turn to Michael Rubinger for his
testimony.
Mr. Rubinger, welcome.
STATEMENT OF MICHAEL RUBINGER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, THE LOCAL INITIATIVES SUPPORT CORPORATION
Mr. Rubinger. Thank you very much, Mr. Chairman.
And I would like to thank both you and the Members of the
subcommittee for inviting me here this morning.
I do head an organization called LISC--the Local
Initiatives Support Corporation--and we are in the business
fundamentally of assisting locally based, non-profit
development organizations in their efforts to revitalize their
neighborhoods. And we do that through a variety of ways of
providing financial and technical resources.
Mr. Frank. Mr. Rubinger, I think maybe you ought to push
the mike away a little bit.
Mr. Rubinger. Oh, OK. I am just trying to learn from
experience. Obviously, I got it wrong.
I would like to make three points this morning. One you
have already heard, and that is that America's housing shortage
is getting worse.
Second, that affordable housing, while desirable in its own
right, has also been very much the driver in a great deal of
the rejuvenation of low-income communities that we have seen
throughout the 1990s.
And third, the good news is that we do know how to expand
the affordable housing supply. We just need to do more of what
works.
For the past 20 years, we at LISC have been privileged to
at least be a part of that solution. Over those two decades,
LISC has provided $4 billion in private capital to Community
Development Corporations, building over 110,000 affordable
homes, 14 million square feet of commercial and community space
of all kinds, and creating over 40,000 jobs.
Last year alone, we provided over $600 million to these
locally based, non-profit organizations to develop nearly
10,000 affordable homes.
The result is that for the first time in a generation, in
the community development world, we are not talking about
anecdotes any more, not just about a successful project here,
or a renovated block there, but rather the transformation of
entire neighborhoods.
And the impact is clearly demonstrable in physical
revitalization, and I am sure many of you have seen that in
your own cities.
But in addition, the data shows clearly that crime is down,
employment is up, property values are up, investment of all
kinds, public and private, is up.
In community after community, there is a demonstrable
improvement in the quality of life. And this, we believe, is a
powerful story of hope and accomplishment. And affordable
housing production has been very much at the core of that
story.
And yet, ironically, as you have also heard, this hot
economy has contributed to a growing housing crisis by driving
up rents and sales prices.
The good news is, on the other hand, that the Federal
budget surpluses make it possible to invest more in affordable
housing.
And let me suggest three areas of possible recommended
action.
First, we must preserve existing rental housing whose
affordability is increasingly threatened. Federal subsidy
contracts are expiring on well over a million privately owned
apartments and many other affordable apartments are aging and
need rehabilitation.
Preservation of existing stock needs to be a central
priority at the Federal and State levels, as well as the local,
in order to prevent displacement of long-term existing
residents and the rolling back of so much progress over the
past decade.
Second, we must produce more new housing to offset
worsening shortages, rising rent and price inflation, and
revitalize low-income communities.
Two programs that we believe have been particularly
effective in this regard are the Low Income Housing Tax Credit
and the Home Block Grant program, and we would recommend that
both of those be expanded.
Taken together, they have very much been at the heart of
this stunning neighborhood rebirth that I described earlier.
And third, we must expand homeownership and use it to build
individual assets and strengthen low-income communities.
We therefore enthusiastically support the Bush
Administration's proposal to create a new single-family housing
tax credit modeled on the Low Income Housing Tax Credit for
rental properties.
In short, during the past 10 years, America has learned an
historic lesson about how to help communities build back up
from abandonment, neglect, underinvestment, and decay. At the
center of that process has been the production of high quality,
affordable housing.
Today, we have both the opportunity and the responsibility
to reinforce our commitment to developing and preserving
affordable housing, both for its own sake and as a vehicle for
bringing about broader community revitalization.
Thank you very much.
[The prepared statement of Michael Rubinger can be found on
page 254 in the appendix.]
Mr. Green. Thank you, Mr. Rubinger.
The Chair will begin with questions.
Mr. Rubinger, for you, you talked about three steps that we
should, as policymakers, take, and I think certainly in the
abstract we are very supportive of them and the goals you have
outlined.
I am particularly interested in the area of housing
production. You talked about the Low Income Housing Tax Credit
and the Home Block Grant. What other ideas would you like to
see considered as we talk about a new production style program,
A; and, B, can you tell us what the scope of the need is in the
area of housing production? What kind of numbers are we talking
about?
Mr. Rubinger. Well, I think in the first instance, in terms
of numbers, I think some of the other panelists cited that.
Clearly, we are, at the moment, losing more than we are
producing. I think that is the message for me. As we look at
the expiring use issue, expiring Federal subsidies and the
like, the possibility is that we could lose as many as a
million units over the next 5 years of affordable housing.
And when you look at the total production from
organizations like ours and others working in this area, it is
considerably less than that. So I think we are talking about,
from our point of view, a considerable expansion, perhaps even
a doubling of the availability of tax credits and HOME
resources.
I think, in terms of other programs, I think this new
recommendation for a tax credit for homeownership is one of the
more interesting proposals that we have seen in the past
several years, because it moves beyond the rental into
homeownership.
And I think what we find, in terms of revitalizing
neighborhoods and the agendas of the non-profit groups that we
work with, that increasingly, as they have rebuilt the stock,
using the Low Income Housing Tax Credit, is a desire now to
bring in more mixed income and provide homeownership
opportunities for lower income people as well.
So I think in terms of a new program, that would be the one
that we would want to push for the most.
Mr. Green. You haven't spoken much about efforts to
decrease the cost of producing new homes. And the builders that
I talk to, whether it be single-family or multi-family, are
constantly complaining about the regulatory barriers, the
holding costs that they have that make it impossible for them,
in their minds, to produce affordable housing, low-income
affordable housing.
Have you taken a look at that at all? Does your
organization have any recommendations on how we might tackle
that side of it, the cost side?
Mr. Rubinger. We certainly take a look at it as an
organization. I didn't mention in my remarks that we are active
today in 38 cities and some 60 rural communities.
And on the ground--I think Bob Reid mentioned this before--
a good deal of these issues are local. And we find a large
number of the factors that drive up prices are on the local
level, like land assembly, for example, can be a very difficult
and time-consuming, heavily bureaucratic and political process
that drives up costs at the local level.
So that is an area, for example, where many of our local
staff on the ground in different cities, are working to try to
reform land disposition processes at the local level, and other
kinds of regulatory issues at the local level.
And that is where we see the real potential for bringing
prices down.
Mr. Green. Is there anything that we can do on the Federal
level to attack those costs? I mean, my concern is that unless
we get our arms around those types of costs, what we may
undertake at the Federal level may have diminished effect.
The intentions may be good coming out of Washington, but if
the costs of production remain as high as they have been, we
will fall short in meeting some of the targets that you and
other panelists have outlined.
Do you have any recommendations for what could be done at
the Federal level?
Mr. Rubinger. I don't off the top of my head, but I will
certainly look into that, and I would ask my fellow panelists
if they have any.
Mr. Green. Ms. Crowley.
Ms. Crowley. One of the ideas that has been surfacing, of
late, because this is obviously a serious concern of folks who
work on housing for the very lowest income people, because we
hear, as you said, that there is a very difficult time siting
that kind of housing.
One of the ideas that we have had, and it is in the very
beginning stage, is how is it that you link the receipt of
Federal dollars to progressive practices at the local level?
So, for example, if a community has enacted an inclusionary
zoning ordinance, which will then help move to make sure that
affordable units are included in all housing developments, then
there is some value that can be added to that.
Or other kinds of things that localities should do. I think
that from our perspective, some of the proposals that would get
at what people perceive as Federal regulatory barriers, like
environmental issues or, in some cases, civil rights issues, I
think it is a mistake to start to whittle away at those things.
But I do think that the Federal Government can incentivize
local government to do a better job.
Mr. Green. Thank you. I appreciate your comments.
At this time, Mr. Frank, questions you might have?
Mr. Frank. Thank you.
Ms. Nelson, I have had a chance to read the rest of your
testimony, and I realize you didn't get a chance to present all
of it.
When you talk about affordable units, that is based on the
notion that 30 percent of your gross income, including
utilities, is the cutoff for affordability.
So I have a couple of questions.
You talk about geographical disparities here, but you talk
about geographical disparities in your written statement
essentially with regard to extremely-low-income shortages.
And I have this concern. With regard to low-income people
particularly in the 50 to 80 range, you don't here talk about
regional variations. And my strong view, based on the knowledge
of the area I represent, and in Ms. Lee's district at her
request, and I think it is true certainly out there, I believe
we have shortages, as defined here, in the low-income as well.
Below 80 and very-low-income.
Now, what do you have about regional variations with regard
to low-income and very-low-income?
Ms. Nelson. Actually, in the very next chart----
Mr. Frank. I need you to pull the mike closer too.
Ms. Nelson. Sorry. There are regional variations in supply
versus demand as well in the higher income categories.
Mr. Frank. Excuse me. But those are extremely-low-income,
ELI. I understand that. I have read your statement.
I want to know about low-income and very-low-income.
Ms. Nelson. Yes, but in the chart the lowest bars are
extremely-low-income shortages; the intermediate bars compare
very-low-income units to renters, showing that in each region
except the west, there are more units than renters; and the
highest dark bars show that in every region there are many more
units affordable below 80 percent of median than renters with
these low incomes.
And as you see, there are regional differences in each of
the bars.
Mr. Frank. Ms. Nelson, if I could see that from here, I
could do a lot of other things too.
Ms. Nelson. Oh, I am sorry.
Mr. Frank. Unfortunately, the charts are not in with your
presentation. I recommend you add them in the future, because I
didn't get a copy in here.
Ms. Nelson. Oh, well I am sorry. They were in the
presentation I gave to the Congressional----
Mr. Frank. Yes. They didn't manage to incorporate the
change. Oh, I take it back. They are scattered within.
Ms. Nelson. Yes. The short answer is that the same patterns
of differences across regions and States tend to occur. For
instance, in Massachusetts, shortages are worse than average.
Mr. Frank. I understand that, but here I want to get to--
your testimony is basically that the only problem is with
extremely-low-income on the whole.
Ms. Nelson. My testimony's basically that those with
extermely low income have the worst problem, but it is not the
only problem.
Mr. Frank. But you know we are not here only to deal with
the worst problem. You don't characterize whether there is a
problem or not, and yes, we all agree there is a terrible
problem with extremely-low-income.
But what I find lacking is an analysis of the problem for
low- and very-low, particularly with regional variations,
because that is really the crux of the policy question we face.
I believe that there are many areas of this country where,
certainly for very-low and probably for low-income people,
vouchers aren't going to do it. And that is what I don't see
here.
So what have you got in terms of, for instance in
Massachusetts, is there some indication what is the shortage of
rental units, or what is the status of rental units for people
in low-income and very-low-income, say in the Greater Boston
area? Would I be able to find that somewhere?
Ms. Nelson. I don't have Boston with me, but in
Massachusetts, where there were only eight affordable units for
ten renters below extremely-low-income in 1990, supply and
demand were almost evenly balanced for very-low-incomes, with
104 units per 100 renters.
And there were 140 units per 100 renters below low-income.
Mr. Frank. 1990?
Ms. Nelson. Well, these data come from the decennial
census.
Mr. Frank. Are all these data from 1990?
Ms. Nelson. No. All of my regional data are from 1999.
Mr. Frank. Will I offend you if I tell you I don't much
care about 1990, it being 2001. And someone calls me up and
says, ``Geez, I haven't got a home.'' I can't tell them to move
to 1990. I don't have a time machine.
Let me be very clear. I think you are underestimating, in
your testimony, by omission, the severe pattern of shortage in
many regions for low- and very-low-income renters.
You concede there is a problem with extremely-low, and you
give a national view that says there is not a problem for low,
but I believe there are severe regional problems that I don't
see adequately discussed here.
Ms. Nelson. Problems are not as severe for households with
low- and very-low-incomes as they are among households with
extremely-low-incomes. In the longer work I have done, I have
looked at all the income levels. As Sheila Crowley correctly
said, in many cases there are problems for very-low-income.
Mr. Frank. But let me turn to Ms. Crowley. If you have got
further data, I would ask you if you could submit some data on
particularly the regional problems, because some regional
problems work out, but telling people to move isn't too easy.
So I would be interested in your analysis of the regional
problem in that regard.
[The information requested can be found on page 216 in the
appendix.]
Mr. Green. Ms. Crowley, if you could answer quickly, then
we will have to move on.
Ms. Crowley. Part of the dilemma is that we are talking
about data from the 1999 American Housing Survey, which is our
latest source, and that does not get us down to very small,
jurisdictional kinds of questions.
So that is part of the problem.
But the other piece--and go back to my testimony and the
Low Income Housing Profile that the National Low Income Housing
Coalition submitted, the other problem is that you are right,
there is a lack of units when somebody goes out to actually try
to find a place, there is a shortage.
But if you look at the number of units that actually exist
that are affordable to people within that income range, once
you get up to 50 to 80 percent of AMI, there is, in fact, a
surplus of those. They are simply not occupied by people in
that income range, they are occupied by higher income people.
And they are occupied by lower income people who are paying
much higher percentages of their income than 30 percent for
their housing.
So our thesis is that if you expand the supply, if you are
going to make strategic decisions about expanding the supply,
if you expand the supply for people at below 30 percent AMI,
then you will, in fact, expand the supply all the way up,
because that group of people is now occupying something and it
is housing that they can't afford.
So I hope that explains----
Mr. Frank. Well, the suggestion is that we should only be
worrying about expanding production for people below 30, I
think it is a seriously mistaken view socially, politically,
and economically.
Ms. Crowley. Well, we are not saying that solely, but we
are saying that if you are going to say that there is a
limitation on what you can do, and you want to move it all----
Mr. Frank. Well, from your example, you shouldn't be buying
into that too soon. We are cutting taxes by $1.3 trillion.
Mr. Green. Let us move on. Thank you, Mr. Frank. Thank you
for your testimony.
At this time, Chairwoman Roukema has joined us. She has the
dubious distinction of being in two places at once today, so
you will see her jumping back and forth, but we welcome her
back.
Mrs. Roukema. [Presiding.] Thank you. I want to especially
thank Vice Chairman Mark Green for doing this for us today and
doing it so well. And I apologize for not being here, but the
Elementary/Secondary Education Act has had some rather
remarkable high profile amendments that had to be voted on this
morning, and I will be leaving again.
I apologize for not hearing all the testimony and perhaps,
oh, Mr. Frank has just left, Barney. I am going to follow up
with perhaps questions that you have already asked, but it has
to do certainly with what the reaction is to the legislation
that Mr. Frank and I have presented, the FHA Multifamily
Housing Mortgage Loan Limit.
Mr. Frank. Would the gentlewoman yield?
Mrs. Roukema. Yes.
Mr. Frank. I appreciate that. My problem, as yours is, the
Government Affairs Committee is dealing with an FBI matter
involving Boston, and I am supposed to be there for at least a
few minutes.
So I have, I appreciate that, and I am glad that the
gentlewoman will be doing that. I will be back in about 20
minutes.
Mrs. Roukema. All right. Well, I just wanted to see if
there was any reaction that you have to that principle of
raising the loan limit, the Adjustment Act, and it would go
along with inflation, and so forth, but it is an FHA Family
Housing Mortgage Loan Limit Adjustment Act.
And, by the way, the initiative is supported by Secretary
Martinez. However, I don't think they have the capacity, either
financially or at this point, the administrative capacity to
deal with the problem.
But I was wondering if one of you, any one of you could
make a comment or an observation on that subject. And if not,
you better go and study it.
I am sorry. Is there anyone? Mr. Reid, did you have a
comment?
Mr. Reid. Well, certainly we would support the direction
that you are going on it, and so there is no question about
that.
Mrs. Roukema. Yes, go ahead.
Mr. Reid. We have a lot of concerns, currently, as far as
FHA, we have a lot of concerns on the multi-family side where
we think there is a lot more room for improvement, and
certainly their asking for a 25 percent increase in the limit
was helpful. It is not nearly enough.
And at the same time, they are also raising some fees which
I think is going to be counterproductive.
And the credit, the expiring credit, or the running out of
the credits on the FHA is a very, you know, I believe somebody
said we are out of business as of May because of lack of
credits on the FHA multi-family.
Mrs. Roukema. Did I know that? Did I know that? Did I?
Mr. Reid. I am sure some of the later, the next panel will
probably have more to say on that.
Mrs. Roukema. We know that FHA has received a focus from
our subcommittee studies and staff work and the Administration
as well, but we will have to work together on this.
But I do believe that this is a goal that we have in mind.
I don't know whether or not we have to wait until March of 2002
and review the Millennial Housing Commission Report.
Mr. Reid. I would hope not.
Mrs. Roukema. Pardon me?
Mr. Reid. I hope you don't wait for that.
Mrs. Roukema. I hope we don't wait for that, not
singularly, and that we can move ahead in some of these areas.
Anyone else have a comment to make on this, particularly
the HUD?
Ms. Nelson.
[No response.]
Mrs. Roukema. Anyone, any comment?
Ms. Nelson. I am a civil servant so I really shouldn't be
commenting on the policy issues. I believe that HUD is
supportive of it. I would like to mention though that it is my
understanding that in many locations, the higher FHA limits
would support apartments whose rents would still be below the
fair market rent.
And I think, as an analyst, I would say that it is, in
terms of Federal responses, it is very important to increase
the availability of housing that is below the existing fair
market rent because it helps keep down everything else on the
cost scale.
Mrs. Roukema. I am sorry. I have been notified that there
is a vote going on in the committee, and I will have to leave
now, but if there are further comments you would like to make,
I am sure Mr. Green would permit it, or you could put it in
writing for the record on this subject.
Thank you very much. I will be back shortly, I hope.
Mr. Green. [Presiding.] Thank you and good luck.
Next for questions, Ms. Stephanie Jones, please.
Ms. Jones. Good morning.
Ms. Nelson, how are you?
Ms. Nelson. Fine, thank you.
Ms. Jones. My question is, when you define affordable, what
do you mean by affordable?
Ms. Nelson. It isn't what I truly consider affordable, but
the rule of thumb is paying 30 percent of income for housing,
and basically that comes from the fact that in the 1981
Reconciliation Act, the expected contribution of assisted
tenants to their rent was raised from 25 percent of gross
income to 30 percent of income. And so that is the approach
that is used.
Ms. Jones. What do you really think?
Ms. Nelson. I really prefer an approach called ``shelter
poverty'' which tries to take into account how much a family
needs for all of its other expenses. That approach shows that
many extremely-low-income households, particularly large
families with children, cannot afford to pay 30 percent or even
25 percent of income for housing. Instead, for housing to be
really affordable, they should pay less than 25 percent.
The recommendations of the National Academy of Sciences
with regard to changing the poverty level try to take this
problem into account. And I think it is something that should
be pursued.
Ms. Jones. So when you make the statement that almost all
rental--something to the effect that almost all rental property
was affordable, when you factor in what you think really should
be considered, what does that do to whether all rental property
is affordable or not affordable?
I mean, that is your statement or something similar to
that, right?
Ms. Nelson. I said that almost all of the rental inventory
is affordable to the incomes of 80 percent of median. And that
means almost all of those rents are less than 30 percent of 80
percent of median.
Ms. Jones. OK. I don't want to put words in your mouth. So
what does that do to that statement if you look to what you
now--just for purposes, I am not trying to jackpot you or
anything--for purposes of our discussion about affordable
housing, and using what you said should be used to determine
what is affordable, what does that do to that statement?
Ms. Nelson. Well, the implication would be that a much
lower proportion of units with many bedrooms are affordable,
because my preferred statement is basically that since families
with children can afford only to pay less and families with
children need large units. Rents on two or three bedroom or
more units already tend to be higher, not surprisingly. There
is more pressure on that part of the rental stock.
Ms. Jones. Thank you very much, and lest I be accused of
being engaged in a tirade, I want to just cut your questions
and go to the next witness.
Thank you very much for your statement.
Mr. Rubinger, my question to you goes to the issue that I
raised with regard to schools and housing and the movement of
students or families such that students tend not to be in any
school system for any period of time, because they are moving
around.
Do you have any position, one way or the other, about what
housing vouchers might do to stabilize students in school?
I know it is a new concept I am throwing out here, but I am
just curious as we walk down this road.
Mr. Rubinger. It is not altogether that new, and I think
most people in my side of the business, which is more generally
speaking community development, as opposed to housing per se,
believe that schools, in the long run, are going to be the
answer as to whether or not these neighborhoods survive or not.
I think our position on this is that if you can--whether it
is with vouchers or whether it is with tax credits, or however
you do it, if we can increase the supply of affordable, decent
housing in these neighborhoods, and begin to deal with the
school issues as well, I mean, I guess my belief is that good
schools are the result of stable neighborhoods, not the other
way around.
And if we stabilize those neighborhoods in any way we can,
the schools are going to get better.
Ms. Jones. I would like to let all of you know that the
next Congressional Black Housing Summit in 2002 is going to be
in Cleveland, Ohio. And if you have any interest in
participating, I would like to invite you to participate.
We have a significant community development--I am almost
done with my statement--we have a significant community
development of opportunity and network in the City of Cleveland
that I would love to be able to showcase some of the things we
have done. But look to move forward to covering a lot of things
we have not accomplished in the City of Cleveland.
Thank you, Mr. Chairman.
Mr. Green. Thank you.
At this time, the Chair recognizes Mr. Miller.
Mr. Miller. Thank you, Mr. Chairman.
I really enjoy these type of hearings because we talk about
problems, we discuss numbers, and one of the last comments that
was dealt with was vouchers, not that vouchers are bad, but it
is kind of like paying the neighborhood bully not to beat you
up, and not enforcing the law and putting the neighborhood
bully in jail.
I mean, we are not dealing with the problem; we are dealing
again with the bandaid.
Mr. Rubinger, you said you are trying to reform local
regulations and practices. What did you mean by that?
Mr. Rubinger. I am sorry?
Mr. Miller. One of your previous statements was that you
are trying to reform local regulations and practices relating
to housing. What did you mean by that?
Mr. Rubinger. Well, I was talking specifically about issues
like land assembly.
Mr. Miller. How are you doing that?
Mr. Rubinger. Well, we are working with municipalities in
several instances, Detroit, for example is a good one, where we
are working directly with the city to try to find ways to make
the land disposition process more efficient because we are
talking about lowering housing prices. If we can get larger
tracts into the hands of developers, you know, in a form that
is ready for production, you are going to lower the cost down.
Mr. Miller. That is what I was hoping you were leading to,
and that is an issue I think we are not addressing federally.
Now, Ms. Nelson, you said there is an increase in rental
units and much of it was in the low- to middle-income brackets.
In the States of Colorado, Nevada, Arizona, and California,
there is a lack of attached product that is being built in
those States, because of the litigation associated with it
through tort law that requires you to be legally responsible
for a unit for 10 years.
One of the largest builders in California, who is a friend
of mine, who is the major stockholder in K&B right now
nationally, is going back into building again this coming year
and instead of building condominiums and townhomes for people
to move into, because of the tort issue, he is building
apartments.
They are getting density bonuses for low-income people
which means they can build more units. And, they plan to hold
those units for 10 years and then convert those units, filing
new CC&Rs (Covenants, Conditions and Restrictions), and forming
homeowners' associations, and sell them on the market as
condominiums and townhomes, because they cannot do it today,
they can't even buy liability insurance that covers them
against litigation associated with building attached product.
So many of the numbers you are showing up there nationally,
especially in high developed areas, are being skewed because
the lack of our willingness to attack the issue of tort reform
and defects issues that face this Nation.
So I think we are looking at numbers that are not genuine
and not realistic.
The problem we have today is that developers have become
cash cows for local government. You can't avoid that,
especially in the San Francisco area.
Mrs. Lee, you and I talked about that, the associated cost
of trying to build in these areas is outlandish. You deal with
the normal cost associated with it, and the local government
will even take the impact of the intersection three miles from
your small project and say, what is the impact of your project
on that intersection, and assess you a fee to mitigate that
impact.
And when you add those local assessments up, the costs are
absolutely outrageous. Prior to 1972, most infrastructure was
put in place by government; local cities, communities,
counties, whatever. Since 1972, infrastructure is put in by the
developer. Everything's placed on the developer and the new
homeowner is paying those fees.
I had a project I started in 1987 in the City of Rialto,
which is Congressman Joe Bachus' district, a low-income
community. I made about 3,000 units. I had probably another 500
units approved for apartments, but the fees associated with
those apartments were the same as the fees associated with the
houses.
I had to zone change those apartments. I could not build
those apartments for people of lower income levels to live in,
because the cost of Government was greater than the cost of the
land. I mean, you could buy land cheaper than you could pay the
fees to Government.
Until we address these types of local issues, nothing is
going to change. And there is going to be a crisis in
affordable housing until we realize that affordable housing
relies on the move up marketplace.
If there is noplace for people to go in lower income
housing, if they can't move up, there is going to be a crisis
in that bottom end, because people cannot afford to move out of
their lower income housing since they can't afford the higher
priced houses.
But the biggest issue we have with affordable housing is
most communities don't want it. And people in low-income
housing come in all colors, so it is not a matter of race. It
is a matter of people saying, we just don't want those people
in our community.
An example, the City of Claremont, which is a very nice
college town in Southern California, I knew a developer who had
a piece of property for 3 years, and he wanted to build
apartments that people could afford to live in in this area
because there were no apartments. He could not get the City of
Claremont to approve an apartment complex, because people did
not want those people in their neighborhood.
So what he did, he circumvented the local control, went
directly to HUD, got a HUD project approved. HUD inspected the
project, issued the certificate of occupancy, and now people
are living in affordable housing in Claremont because the
Federal Government allowed them to do that.
But all the vouchers in the world are not going to provide
housing. All the subsidies in the world are not going to change
the problems we are dealing with in most States. California is
a great example.
The Endangered Species Act. First of all, we look and say,
where are the endangered species?
Mr. Green. Gary, I am going to need you to finish your
question.
Mr. Miller. I am going to wrap up. And then we say, what
habitat do they need? Then, by the time we set aside the
habitat, it looks like a checkerboard, and if you don't have an
endangered species you have habitat.
So my question is altogether different.
MBA's (Mortgage Bankers Association) blueprint for reform,
which outlines their position on various issues relating to
houses, in its documents, MBA advocates talked about
modernizing the mortgage process through comprehensive reform.
What would MBA's purpose be in doing this, and would it
help in improving housing affordability in this Nation?
Does anybody have an idea?
[No response.]
Mr. Miller. Thank you very much.
Mr. Green. Thank you for your testimony.
Mr. Watt is recognized.
Mr. Watt. Thank you, Mr. Chairman. I want to try to get at
the two extremes here, Mr. Rubinger and Ms. Nelson.
I think I agree with both of them that certainly Mr.
Rubinger has indicated that there are a number of very
successful housing production things going on.
But Ms. Nelson has indicated that those housing production
things are not getting to the lowest income people.
And that is certainly the experience that I think we are
having in at least parts of my congressional district and at
least the Charlotte, North Carolina part of my congressional
district.
Tax credits and HOPE VI are doing some good things, but
those things are not getting housing produced at levels that
are affordable for the very-low-income people. In fact, HOPE
VI, the HOPE VI projects that have been done in my community
have reduced the number of units that are available.
Now I understand the reason is to create a more vibrant
neighborhood, create some homeownership, do neighborhood
development, and I endorse that. I am not critical of that.
The question I have though, Mr. Rubinger, is are you aware
of any patterns, any places where the problem that Ms. Nelson
has described--assuming that it is legitimate, and I understand
Representative Frank's concerns with her thesis--but assume
that her thesis is correct. Are there any programs that have
been successful that have really gotten to this lowest of the
low-income housing production? And how do we get to a policy
that addresses those very-low, what is ELI?
Ms. Nelson. Extremely-low.
Mr. Watt. Extremely-low. I am sorry.
Ms. Nelson. That is all right.
Mr. Watt. I hate to differentiate between extremely-low,
very low, low. But let me talk about the extremely-low.
Are there projects that you are aware of that have been
successful in going directly at that extremely-low population?
Mr. Rubinger. Yes. I don't mean to be glib about this, but
I think both the Low Income Housing Tax Credit, and the HOME
Program have more than 40 percent of each of those programs
ended up housing people making less than 30 percent of median
income.
Mr. Watt. Well, I am not as familiar with the Low Income
Housing Credit, but I can tell you that in the HOME program,
you don't have a HOME program unless you are decreasing income,
extremely-low-income housing density.
The whole theory was to get rid of the concentrations so
you may end up housing 40 percent of the people going back into
their community who may be extremely-low-income. But at some
point, 100 percent of the people in that neighborhood were
extremely-low-income. And it is hard for me to tell the 60
percent, whose houses have been destroyed to make a nicer
neighborhood, that HOME solves their problem. It doesn't.
I understand what you are saying.
If you disagree with me, tell me.
Mr. Rubinger. Well, I do to this degree. That the HOME
program has been very important in many cases in making the Low
Income Housing Tax Credit program work. Because in many
instances, the tax credit is not enough, there is still a gap
in the cost, and in many instances, the HOME program has filled
that gap.
Now I can't speak for Charlotte, because I am not familiar
with Charlotte. But there certainly are lots of instances of
that.
And HOPE VI, I think also it is true that HOPE VI, in many
cases, decreases the number of units. And I can't argue with
that. But in terms of who it ends up housing, I think it does
end up housing the very lowest income, and I think that the
issue in both cases is, is more.
That is the position we are taking, that both of these
programs, the Tax Credit program and the HOPE VI program do get
to very-low-income people, they just don't get to them in the
numbers that we would like to see.
Mr. Green. Thank you for your testimony, Mr. Watt. Your
time has expired.
The Chair now recognizes Mr. Grucci for questions.
Mr. Grucci. Thank you, Mr. Chairman.
I am sorry I wasn't here for our opening statements and I
would just ask that I do have a statement that I would like to
make part of the official record of today's hearings.
Let me just ask the panel their opinion on a couple of
things. I come from a region of the country where the cost of
living is higher than in most places. Home sales are higher
than in most places. The average price of a home in my
district, 1,100 to 1,300 square foot, probably about $160,000
to $180,000 with a tax burden of about $6,000 to $8,000, the
cost of land being extremely high. To try and build multi-
family units, or to build any kind of housing, could run
anywhere from $75,000 to several hundred thousand dollars an
acre. Now that is the good news about the district that I live
in.
The bad news about my district is that it is not exempted
from people who need affordable housing. Our young families
that are starting out, people who are working that are trying
to make ends meet, they can't afford those types of houses.
And affordability, I guess, is within the eye of the
beholder. What would be considered affordable in my area may
not be considered to be affordable in other areas or may be
considered to be very affordable in certain areas.
We have an enormous problem with our income levels being as
high as they are, and trying to equate that into the formula
that has been established for eligibility into affordable
housing.
For example, I believe now--it was at 80 percent of median
income--it has been cut back from that level.
What are your feelings about adjusting that level from 50
percent to some number higher, possibly as much as 120 percent
of the area's median income?
And along those same lines of trying to get people into
affordable housing and to try to make affordable housing
available, we have mandated certain things from the Federal
Government down through into local government that has to be
met in order for people to qualify for Section 8 vouchers, for
example.
One of them is the lead-based paint removal. And while I
agree 100 percent with the initiative and the need for that to
be done, do you believe that we should be making that mandate
without providing funding?
Do you believe there should be some sort of incentive for
the removal of lead-based paint to happen? So let me get your
responses to those two, and if I have time left, I would like
to ask a couple more.
Anyone can take a shot at it.
Mr. Reid. On your first comment about extending the limits,
National Housing Conference, when we did our study on Housing
America's Working Families, and this was one of the disturbing
things we found, is how far up the income scale the affordable
crisis had risen.
Our mandate basically is people between zero income and 120
percent of area median.
Now it is absolutely true that the number of families,
working families at risk up in the 100, 120 percent, are much
fewer and their plight much less than the people at the very,
very lowest. And I don't want to overstate that because the
people at the very, very lowest are, as Kathy had said earlier,
are the worst, worst, worst case.
However, I think we cannot ignore the problems in the
communities and we are talking about policemen and firemen and
a lot of municipal workers and people in incomes where it is
hard to believe that 120 percent of income, they are having
serious housing problems. They are spending 50 percent of their
income for housing.
So I think it is an area that certainly needs to be closely
examined when we are looking at our housing policies as to how
wide the net goes.
Mr. Grucci. I tend to agree with that, and it is not
specifically the firemen and the teachers, because where we
come from, they do pretty well. We have volunteer firemen out
where we are, but the paid firefighters in the city do rather
well and can probably afford it.
I am more concerned about our young families, our young
kids, our children, our grandchildren, who want to stay in our
communities, want to be part of our communities, who are not
making $60,000 and $70,000 a year, but are struggling trying to
live on $30,000 a year.
And while that may sound like a lot of money in some parts
of the country, I can assure you that that is near poverty
level where we come from to the extent that they can't afford
to live in quality homes. They live in basement apartments
where they get their electricity from an extension cord coming
down from upstairs.
That is not what I believe our housing stock should
provide, and I am eager to find out how we could be more
helpful to making those types of affordable housings available.
The last question that I would have deals with the FHA
adjustable rate mortgages. Why should Congress support HUD's
initiative to expand the FHA adjustable rate mortgage line to
include the hybrid, the ARMS, (Adjustable Rate Mortgages), I am
sorry, and how would that product encourage homeownership?
Mr. Green. We will need a quick answer to that.
Ms. Crowley. That is probably a question the second panel
can field.
Mr. Green. OK. Unless anyone would like to express a
position on that.
Ms. Crowley. Can we go back to the last question?
Mr. Grucci. Sure can.
Ms. Crowley. The lead question?
Mr. Grucci. The lead question, fine.
Ms. Crowley. It is a very serious issue, and within the
low-income housing community, we grapple with that a great deal
because obviously when you put more stringent lead safety
requirements on landlords, you can reduce the number of units
that are available for people to use with the Federal housing
vouchers. So it is a serious issue.
The position that we have ended up taking is that from a
public policy and a public health perspective, it is not
acceptable for Federal tax dollars to be spent on renting
housing that has the potential of causing serious harm to small
children. And in any event, landlords should be aware that that
is something that can limit their marketability under any
circumstances.
The new requirements that have come out are part of very
extensive work that has been done to move beyond----
Mr. Green. If you could wind up your remarks?
Ms. Crowley. ----complete lead abatement to get to
something that we now call lead safety that is a much less
expensive, a much less time-consuming way to go about trying to
manage the lead problem.
But I do think that, from a public health perspective, it
is something that we need to take very seriously.
Mr. Grucci. I agree with that. Thank you.
Mr. Green. Thank you. Thanks for those questions.
The Chair next recognizes Ms. Lee for questions.
Ms. Lee. Thank you, Mr. Chairman.
Let me ask a couple of questions, and I want to start by
just mentioning a little bit about the Bay Area, the Oakland
Bay Area which you know is one of the highest cost areas in the
country.
I notice now we have a housing wage of $28.06 an hour, and
I would say that in the Oakland Bay Area, probably $10 to $12
an hour, $30,000 to $40,000 a year is probably about--I won't
say average, but many, many people make about that amount of
money.
Yet the cost of a house, a two bedroom house, $300,000 I
think is probably on the low side, so between $300,000 to
$450,000.
The American dream of homeownership in the Bay Area is the
dream deferred, if not ever to be realized, unless we create
more affordable housing. So one of the questions I wanted to
ask you is, and we talked a little bit about this last week in
terms of housing production, the $3 billion plus that FHA and
Ginnie Mae are projected to have, either as surplus or profit
or reserves or whatever it is called, what is the problem with
using that money to create housing, land trusts, or using some
of these profits or reserves or surpluses for affordable
housing production?
That is the first question I would like to ask probably Ms.
Nelson, or any of you who could respond.
And then second, I wanted to ask you just a little bit
about the Federal Government's role in what we can do to
address the issue of gentrification. Because many people, not
only in my district, but I know in Congressman Frank's district
and many of our areas throughout the country where these
housing costs are so high, are renting houses or apartments and
are quickly, as a result of the economy, the economic boom, are
quickly being displaced as a result of landlords now seeing a
way to make more money from their property.
One area in my district, for example, is an area that is
very desirable. Eighty percent of the residents there,
primarily people of color, are renters. These properties are
owned by other people living outside of the city, but now they
see they can make a huge profit in moving these people and
selling the homes.
So I would just like to ask if there is a role for the
Federal Government in this, and if so, what you think we could
do to make sure that people who have lived in a community all
of their lives are able to stay there and not be run out.
Ms. Nelson, could you answer maybe the first question with
regard to Ginnie Mae----
Ms. Nelson. I think actually Sheila is better equipped to
answer that than I am.
Ms. Lee. Ms. Crowley, OK.
Ms. Crowley. Our position on the use of the surplus in the
FHA program and the Ginnie Mae program is that it can be
directed into other good housing uses, and we support the
establishment of a national housing trust fund with dedicated
sources of revenue, and those would be the first two that we
would see would be directed into that trust fund.
Attached to my testimony is our proposal that we would like
to see considered in the House, and we expect to see
legislation similar to that introduced in the Senate shortly.
So our position is there is no problem with doing that.
Ms. Lee. Thank you.
Now let me ask anyone to respond to the issue of
gentrification. How do we provide incentives for landlords not
to move tenants out in areas that have really benefited from
the economic boom that we have experienced in the last 8 to 10
years?
Ms. Nelson. Well, the general problem is just that there
are not enough resources for housing. I mean, I didn't mean to
sound obtuse in my answer to Representative Frank, because
higher income people do definitely have problems, particularly
in the tightest housing markets, because there is so much
demand, everyone would like a good buy.
So that a general solution that is absolutely essential is
more resources for housing in general, and production, in my
personal opinion.
Mr. Frank. When you are talking about high income, and I
appreciate your comment there, we are talking about, you know,
higher than extremely-low. We are talking still about the lower
median.
Ms. Nelson. Right, right, right.
Mr. Frank. Sometimes people walk in and haven't heard the
context, right.
Mr. Rubinger. Can I add one quick thought to that. Our
approach to this has been to get these properties in the hands
of non-profit organizations who are going to keep them
affordable in perpetuity. And so whether it is new production
that has set-asides for non-profits, or it is figuring out ways
to move properties for for-profit ownership into non-profit
ownership, in our experience, even in hot markets, that is the
way that you keep housing affordable.
Ms. Lee. So where there are areas where homes are owned by
individuals, not non-profits, though, are there recommendations
that you have that would incentivize this transaction, I mean,
so that it would be appealing for the property owner to either
sell to the tenant or to enter into some long-term reasonable
rental agreement or lease agreement?
Mr. Reid. I would think that from a Federal standpoint,
that would be pretty problematical, because we are back to
local issues here.
But I think Ms. Nelson hit on--the problem is a shortage of
affordable units. If there weren't the shortage for affordable
units, gentrification wouldn't be a problem. You know, we will
always have some gentrification and movement of housing areas
and neighborhoods.
But if there is an adequate supply of housing, the problem
takes care of itself. So the core thing is to have more
affordable housing production.
Ms. Lee. Thank you, Mr. Chairman.
Mr. Green. Thank you.
You might have noticed that we have a floating membership
in the subcommittee right now. We are all in lots of different
committees at the same time, so I appreciate everyone's
patience, and we are trying to go in order of those who first
arrived, although with coming and going, that is hard to do.
At this point, the Chair would recognize Mr. Capuano for
questions that he might have.
Mr. Capuano. Thank you, Mr. Chairman.
It is hard to come up with questions, because I kind of
agree with most of the general talk that we have had here.
I guess, Ms. Nelson, what I would like to see though--I
have tried to peruse your testimony here--honestly, when it
comes to income levels, that is all well and good, but for me,
it is more about percentages of income that go into housing
than it is about specific income levels.
And I would like to see some data, at some point, relative
to both regional and national numbers, as to who is paying how
much of their percentage of income for housing costs.
Because it is my guess that that is on the rise. That
people are paying a higher percentage of their income for
housing costs, particularly low-income people.
And I am not sure about that, and I would like, at some
point when you get a chance, if you could provide us with some
data on that matter to see if I am right or wrong, and if so,
how so.
I guess, I am not even sure I really have any questions
except to get down to some nitty gritty. I mean, we are talking
here about doing some more. And I presume that each and every
one of you have reviewed the budget proposal that is about to
be before us maybe today, maybe tomorrow, who knows when, and
what it proposes for the housing world relative to Federal
involvement, direct Federal subsidies.
And I guess I would like to hear if any of you agree that
we should be cutting out, oh, say, $700 million for capital
improvement in public housing.
By a show of hands by the panel, are there those of you who
agree that we should to that?
[Show of hands.]
Mr. Capuano. Gee, what a surprise.
I guess, along the same lines, I guess I would be
wondering, I presume that we are not just talking about a
building, because I hope that those of you who are in the
business of providing affordable housing know that a home is
more than just a building. A building is fine, you have to
start with that, but it is also a quality of life issue.
My presumption is that none of you would advocate for poor
quality housing for poor people, just because they are poor,
give them junk.
My presumption is that you don't want all poor people
living in one area with no police protection, with no social
services, so therefore, I presume, and again if you disagree
with me, I would like to see it, like to hear it, would any of
you advocate for a $70 million cut in the drug elimination
grant that goes toward public housing.
What a surprise.
I presume that none of you would advocate for a $25 million
cut in the rural housing production program that is in this
budget?
Gee, I am very, very shocked here.
And the bottom line is that it is all well and good to
advocate, and I appreciate you being here today and telling us
what you believe.
But the truth is, I mean the real decisions that we can
impact are really going to be made on the floor of that House
within the next 2 days. And all this talk is for nothing if the
budget that was submitted to us is enacted.
In my estimation, not only are they real cuts, but even the
few programs--and there are a handful that do go up--they are
not anywhere near where anybody in this room should be proud
of.
No matter how you measure it, no matter what you think, no
matter how you say it, if you believe in affordable housing,
and I would have some differences of opinion as to where it
should be targeted, I happen to think it shouldn't just be
targeted to the lowest income and that is why I would like to
see some of the other numbers. I happen to think it is a
continuum, it is a ladder or continuum of how you help.
If you only help the lowest income people, you are going to
keep them dependent on Government subsidies forever. I think
you also have to help moderate income people into
homeownership, which we haven't really discussed too much
today; it seems like we are mostly talking about rental, and
that is fine. But at the top of the rental ladder, especially
in my district, and you are going to hear from the Mayor of
Boston later on, and I have no idea what he is going to talk
about, but I have no doubt he is going to tell you how
expensive it is in Boston.
He is on top of this issue as well as any mayor I have ever
known, and having been a former mayor, I know quite a few of
them. And that is all well and good. We can subsidize people
and subsidize people and subsidize people on their rents, but
there are an awful lot of people, if they can get into a little
down payment assistance, can then buy a home.
And then, to me, if we don't talk about that level, then we
are really just talking about subsidizing people forever, which
those are the kinds of programs that there will never be enough
money for.
The ultimate goal, I think, should be trying to get people
into their own homes, especially for those people on the
borderline.
So I guess the only other issue that I would like to talk
about, I know it is not really the subject today, but is
geographic targeting.
I want to make sure, in every place I go I want to make
sure that people don't think about affordable housing as only
an urban area issue. It is not. It is a rural issue, it is a
suburban issue, and I believe it is a growing suburban issue,
and again that is why I would like to see some of those
numbers.
I grew up in a city. Most of my friends that I grew up with
moved to the suburbs, and now their kids cannot afford to buy a
home in their suburb which is why they went there because they
couldn't afford to buy a home in the city.
And that is why, again, as a percentage of income, it is
really the most important measure.
I would also like, I guess I would like to ask a question.
Mr. Green. Mr. Capuano, if you could----
Mr. Capuano. The very first paragraph of Ms. Nelson's
commentary relates to a 1981 change which, I was a mere babe in
1981, talking about changing the expected tenant contribution
toward rent will raise from 25 percent to 30 percent of income.
Would any of you argue against the notion that it should be
a national priority to reduce that percentage. That 30 percent
to me just strikes as an arbitrary figure sounding good,
probably needed the money at the time, but is there any reason
why 30 percent is some magic number that you would advocate
for?
Ms. Crowley. There is no magic to 30 percent, and as Ms.
Nelson has said, there is a better analysis that gets at
something that is much less than that.
I just would caution you about the proposal to reduce it
back to 25 percent in the absence of expanded resources,
because what will happen is that we will serve many fewer
people.
Mr. Capuano. I absolutely one million percent agree with
that.
Ms. Nelson. I would like to respond to your question about
changes over time. In the last 20 years, the main increases in
housing cost-income ratios have come among owners. Among the
group that the National Housing Conference has identified,
people who are very-low-income and low-income who are paying
more than half of their income for housing, the increase has
occurred more among owners, not in renters.
And I am sorry I didn't say this to Mr. Grucci, but even
though most of the work I do is with renters, I consider the
idea of increasing low- and moderate-income homeownership
important too.
But I think there is one very mistaken practice in some
current Federal policies and more in many State policies. And
that is that programs to increase homeownership usually use an
income limit that is not adjusted for household size.
The impact of that is to discriminate against families with
children. I have with me ownership rates by income and
household type from 1978 through 1999. The basic finding is
that in all income groups except incomes above 120 percent of
median, families with children still have lower ownership rates
than they had in 1978.
The increase in homeownership that we have heard so much
about has occurred mainly among the elderly, but second it has
occurred among unrelated singles, and families without children
who, in my opinion, don't need homeownership as much as
families with children.
Mr. Capuano. I love you, Ms. Nelson. Thank you.
Mr. Green. Thank you, Ms. Nelson. Perhaps if you could
supply that for the record, we could enter that into the
subcommittee record.
[The information requested can be found on page 218 in the
appendix.]
And at this point, the Chair would adjourn this panel. I
thank all of you for you for your testimony, your input and
your willingness to answer questions, and we will call our next
panel up.
Mr. Frank. Mr. Chairman, can I say that this was a very
useful discussion, and I thank you for a break from the norm.
[Pause.]
Mrs. Kelly. [Presiding.] I want to thank the second panel
for being here. We have the Honorable Thomas Menino, Mayor of
Boston, Massachusetts.
Mr. Capuano.
Mr. Capuano. Thank you, Madam Chairwoman. I just wanted to
welcome the mayor. I mean, I have known Mayor Menino for many
years now. I was the mayor of the city that immediately joins
Boston. I have the pleasure to represent a huge portion of
Boston, though not the mayor's home specifically. But his home-
away-from-home is close enough to me.
And as you will hear in a few minutes, Tom Menino is very
much involved with the housing issue in Boston. It is a major,
major problem in our area because we are fortunate to have so
many people that want to live there. We are unfortunate enough
to have so little land to develop and the costs there are
incredibly high.
So I welcome the mayor. I thank him for everything he has
done already, and for what he is about to do.
Mr. Frank. If the gentleman would yield to me briefly, I
also want to say I appreciate, we had arranged with the mayor
for him to testify. He is here not just as the mayor, I
believe, but in his leadership capacity in the National
Conference of Mayors, and that is entirely fitting because he
has been a real leader in trying to make our urban areas more
livable, and we are very pleased to have his testimony.
Mrs. Kelly. Thank you very much.
Mr. Mayor, my son lives up there, so you take good care of
that city.
Next, we have Mr. Robert Nielsen, President of Shelter
Properties of Reno, Nevada on behalf of the National
Association of Home Builders.
Next, we have Mr. John Courson, Vice President of the
Mortgage Bankers Association, and President of the Central
Pacific Mortgage Company in Folsom, California.
And last, but not least, Mrs. Barbara Thompson, Director of
Policy and Government Affairs, the National Council of State
Housing Agencies.
We thank all of you and we appreciate the fact that you are
willing to take your time and appear before us today.
Let us start with you, Mayor Menino.
STATEMENT OF HON. THOMAS M. MENINO, MAYOR, BOSTON, MA;
CHAIRMAN, U.S. CONFERENCE OF MAYORS ADVISORY BOARD
Mr. Menino. Thank you, Chairperson Kelly, and let me thank
my two colleagues, Congressman Capuano and Congressman Frank,
for those good words. And I will need them this year, I am up
for reelection, so they are going to have to bail me out of all
my disasters.
And I want to thank you for taking this opportunity to
speak with you about issues that dramatically affect people in
cities and towns across our country.
As Chairman of the U.S. Conference of Mayors Advisory
Board, I want to bring you the message that the comeback of our
cities will not be complete until we have a national commitment
to quality housing for everyone.
Affordable housing is an issue that I deal with on a daily
basis. Every time I visit the neighborhoods for a ribbon
cutting on a new business, the opening of a new park, or attend
a little league game, I meet constituents who are being priced
out of their homes in the neighborhoods where they hoped to
raise their children.
Each story is different. It reminds me that prosperity has
a price, and for cities like Boston, that price is high. We
risk becoming a place where only the very rich and the very
poor can afford to live.
I know that mayors across the country will agree with me
when I say that the comeback of our cities has helped our
country grow stronger and helped more Americans live better
lives.
Cities are the economic engines of our country. The new
census data shows what many city leaders already know, that our
cities are more diverse than ever and that we are gaining
strength from that.
We have to keep our cities diverse. We have to make sure
that everyone has the opportunity to share in what cities have
to offer. One way to keep our cities growing is to make housing
a top priority from Boston to Burbank.
The challenges cities face today are different from the
ones we faced 8 years ago. Back then, we had high unemployment,
high crime rates, and high interest rates were forcing many
foreclosures on family homes. But today, there are 22 million
new jobs, crime has dropped to a 25 year low, homeownership is
at the highest rate it is ever been, and foreclosures continue
to drop.
This is our chance to build on our success. We must extend
the range of choices so that everyone, not just the fortunate,
have access to a better life.
Cities like Boston are thriving in our new economy. In
Boston, we have created 120,000 new jobs in the last 8 years.
The quality of life in our neighborhoods has never been better.
One of Boston's greatest challenges is a direct result of
our new prosperity. We simply cannot produce enough housing to
meet the demand. It is hard to believe that in this time of
record surpluses and record employment, working men and women
who make a good salary are having a hard time finding an
apartment or a house they can afford.
In Boston, the median mortgage is $1,625 dollars a month,
and the median price on a two-bedroom apartment is now $1,600 a
month. When you apply the standard of using 30 percent of a
worker's income to go toward housing, here is what some
individuals have to spend:
A minimum wage earner, $322; a janitor, $456;
administrative assistant, $724; and a computer programmer,
$1588.
Those numbers show that even a computer programmer making
$63,000 a year has trouble finding an affordable place to live.
And I don't think any of us here today can imagine the anguish
of trying to find a place to live with $322 in our pocket.
Affordable housing isn't just about assisting the poor and
building more public housing. It is about working people. It is
about people who make a decent living and search the Sunday
real estate section and shake their heads and wonder how this
happened. It is about parents who wonder if their children can
afford to live in the neighborhood they grew up in.
I am proud of what we have done in our city to produce more
housing. We have set aside $30 million in city resources for
housing. Last year, we added more than 2,600 housing units. We
saved 1,400 units from being converted to market rate. We
announced a new 3-year housing strategy to increase housing
production. We will use $8 million in gap financing to renovate
and fill 1,100 units of vacant public housing. And since it was
announced, we have permitted 1,997 more units and more than
1,000 of those units are affordable.
I would like to submit to you, for the record, a copy of
our new housing strategy ``Leading the Way.''
While we have accomplished a great deal, we are approaching
the limit of what we can do. We will keep moving forward,
continue to come up with creative ideas, but our heartfelt
efforts will never be enough until the Federal Government and
statehouses across the country return to the business of
housing production.
Unfortunately, this year's budget for HUD does not show an
adequate commitment to the issue of affordable housing. It cuts
investments in public housing.
Mrs. Kelly. Excuse me, Mr. Mayor, but I am going to enforce
the 5-minute rule and I am going to ask you to sum up, please.
Mr. Menino. What I want to basically say is that we have to
get back into the business. We have walked away from housing
and it is a crisis in every city in this country.
And you know, we just can't tell we are going to give tax
cuts. Tax cuts to the rich doesn't help the poor. And cities
have to build medium income housing for working people. We are
not doing it. And cities can't do it alone anymore.
All of you must represent parts of cities, and you see the
problem we have. I see the way we are doing very creative
strategy, but we need help. We are not looking for a handout,
we are looking for a help out. We are looking for the Congress
to help us drive those issues. It is so, so important for the
future of our cities and our country.
Thank you.
[The prepared statement of Hon. Thomas M. Menino can be
found on page 260 in the appendix.]
Mrs. Kelly. Thank you very much.
Next, we have Mr. Robert Nielsen.
STATEMENT OF ROBERT NIELSEN, PRESIDENT, SHELTER PROPERTIES,
INC., ON BEHALF OF THE NATIONAL ASSOCIATION OF HOME BUILDERS
Mr. Nielsen. Good morning, Madam Chairwoman and Members of
the subcommittee.
My name is Bob Nielsen and I am a homebuilder from Reno,
Nevada. I am President of Shelter Properties, Incorporated, a
company which builds and manages affordable multi-family
properties.
I appear today on behalf of the 203,000 members of the
National Association of Home Builders (NAHB) in the hopes of
getting your support for a number of initiatives to address
critical affordable housing needs.
I commend you for initiating this hearing to raise
awareness of the housing affordability needs. The numbers speak
for themselves. 13.7 million Americans pay more than half their
incomes for housing or still live in substandard housing. That
number is too high.
I want to start by thanking the Chairman of this Committee
and the Ranking Member for introducing H.R. 1629, legislation
that would increase the statutory mortgage limits for FHA
multi-family insurance by 25 percent.
One factor contributing to the shortage of affordable
housing, especially in high cost areas, is the fact that the
mortgage limits for multi-family insurance have not been
increased since 1992.
We also hope that we can work with you, as the bill moves
through Congress, to include a provision which would allow
indexing for future inflation.
Again, this will help foster the development of affordable
housing, particularly in high cost areas like the Mayor just
talked about, and ensure that programs can continue to meet
demand without additional interruptions.
Second, and of more immediate concern facing FHA multi-
family insurance programs, is the need for credit subsidy. In
order to remain functioning, appropriations need to be set
aside for all insurance programs. Based upon projected
activities in each of these programs, it is estimated that FHA
will require about $255 million in credit subsidies to operate
the multi-family insurance programs for fiscal year 2001.
However, only $101 million was initially appropriated and
that money ran out in April. This shortfall translates to a
loss of 50,000 units of affordable rental housing that will not
be produced.
In the short term, we seek a supplemental appropriation.
Over the long term, NAHB joins many others in supporting H.R.
1481, the FHA Shutdown Prevention Act, introduced by
Representative LaFalce. H.R. 1481 would allow the negative
subsidy to be used in the event of a future shortfall in credit
subsidy.
NAHB strongly supports removing regulatory barriers that
affect housing affordability. We are working with Congressman
Green toward a legislative proposal which would require
relevant agencies to designate a staff position to monitor the
rulemaking process to determine whether a particular rule would
have a detrimental impact on housing affordability.
We commend Representative Green for his leadership on this
issue.
And now, Madam Chairwoman, another critically important
issue is an administrative obstacle which has been thrown in
the path of a very successful affordable housing program, the
Low Income Housing Tax Credit.
Since its inception, the Tax Credit has been the key part
of the financing of nearly all of the affordable rental housing
built in the last decade.
The Internal Revenue Service has issued five technical
advice memorandums, TAMS, which have been applied industry-
wide. These TAMS establish standards for determining what costs
are includable in eligible basis for the purpose of calculating
the tax credit.
They are creating a program-wide disruption in the
allocation of credits and the development of housing, for they
are changing what has become the industry-wide practice for the
last 14 years.
The TAMS have the effect of reducing the level of equity
financing available for each project making a number of
existing affordable housing properties financially infeasible
and weakening the economics of those that still pass minimum
underwriting standards.
The TAMS also have created uncertainty among investors as
to whether the credits for which they have paid will be
realized. Therefore, the TAMS threaten to reduce the amount
which investors will be willing to pay for each tax credit.
The loss of efficiency hurts both low-income tenants and
the taxpayer by further reducing the amount of housing that can
be produced from a given amount of tax credits.
Representative Nancy Johnson has agreed to introduce
legislation that would allow certain development costs which
have been included in tax credit eligible basis as generally-
accepted industry practice to continue to be includable in
basis eligible for the Low Income Housing Tax Credit.
We realize that this subcommittee does not have tax writing
authority, but we hope you can support Representative Johnson
in her efforts to move this legislation quickly.
And lastly, we need to think about a new production
proposal, multi-family housing production program that would
meet the needs of households with incomes between 60 percent
and 100 percent of median income.
This new program would serve those who are not currently
served by Federal or other publicly supported housing programs.
Mixed income projects should be encouraged and set-asides
of funds for the production of housing for elderly, small
projects and rural housing development opportunities should be
considered.
Lower or very-low-income residents could be supported
through increased fundings for vouchers, tax credits, home or
community development block grant funds.
NAHB also recommends that the new housing production
program provide a very low, 1 percent fixed interest rate. The
Section 236 program could be used as a basis for design of this
program, but the new initiative should incorporate greater
returns, especially for small projects. Greater flexibility for
commercial space. And vouchers for elderly and other special
need populations.
To assist in any financing gaps, the new program should be
compatible with existing housing----
Mrs. Kelly. Excuse me, Mr. Nielsen, but I am going to ask
you to sum up.
Mr. Nielsen. OK.
And community development programs such as CDBG, HOME, and
FHA.
Thank you for the opportunity to address the subcommittee
on the critical needs for affordable housing. NAHB stands ready
to assist the subcommittee in any way they can.
Thank you.
[The prepared statement of Robert Nielsen can be found on
page 267 in the appendix.]
Mrs. Kelly. Thank you very much.
Mr. Courson.
STATEMENT OF JOHN A. COURSON, VICE PRESIDENT, MORTGAGE BANKERS
ASSOCIATION OF AMERICA, ON BEHALF OF THE MORTGAGE BANKERS
ASSOCIATION OF AMERICA
Mr. Courson. Thank you, Madam Chairwoman.
Today, in spite of a decade of economic growth, as we
discussed, there are millions of Americans who find they are
unable to obtain decent, affordable housing. But this crisis,
as we have talked about, reaches even beyond low-income
families and is affecting even increasingly moderate and middle
income families.
While the situation is certainly worse in certain parts of
the country, the problem exists throughout our Nation.
Between 1997 and 1999, the number of moderate income
families who pay more than 50 percent of their income for
housing or who live in severely dilapidated housing, increased
by 74 percent.
There are a number of reasons for this worsening crisis I
would like to discuss. As we have heard their proposal, the
Administration proposes to increase the FHA multi-family limits
that have not been increased since 1992 by 25 percent. We
certainly support that and we applaud both Chair Roukema and
Mr. Frank's H.R. 1629, which, in fact, would support the
increase of the multi-family housing limits that are supported
also by the Secretary.
Second, Congress should expand the FHA adjustable rate
mortgage product line. One of the priorities of the
Administration and Secretary Martinez is to increase
homeownership, particularly among minorities. One way to
achieve this goal is through more flexible mortgage products.
In the fiscal year budget of 2002, HUD would authorize a
new ARM product called the hybrid ARM for FHA. These ARMS have
an initial fixed interest rate of at least 3 years and adjust
thereafter.
They carry interest rates that are lower than fixed rate
loans, and certainly are less risky than the 1-year ARM
currently authorized.
Third, Congress should take action to halt the shutdown of
the FHA multi-family project. On April 26th, HUD announced a
shutdown of the multi-family new construction and substantial
rehabilitation insurance programs. All new projects will be on
hold for the rest of the year unless Congress provides
additional credit subsidy funds.
This shutdown will stop the development of more than 50,000
desperately needed units in 33 States that total more than $3.4
billion in federally-insured mortgage loans.
These funds are critical to alleviating the current
shutdown in the multi-family new construction program.
We certainly support President Bush's and HUD Secretary
Martinez' efforts to strengthen the economy, but without these
funds, projects will not be built, and an opportunity to
provide an immediate economic stimulus and produce thousands of
construction jobs will be lost.
Specifically, we would ask that Congress take the following
actions:
Urge the Administration to release the $40 million of
already-appropriated credit subsidy that was included in the
Legislative Appropriations Act of 2001 and passed in December
of 2000.
Second, to appropriate an additional $115 million in fiscal
year 2001 to provide sufficient funding to keep the FHA
programs operational for the rest of this fiscal year.
And lastly, to support legislation that would allow the use
of profits generated from these programs to offset those who
need credit subsidy or loss reserves for their implementation.
And we certainly applaud Representative LaFalce and
Representative Frank for introducing H.R. 1481, the FHA
Shutdown Prevention Act, which leads us down the path of
solving this credit subsidy issue.
I would like to, if I may, ask permission to enter for the
record a letter, which we have submitted to the Staff, and a
chart, which will be going to Members of this subcommittee, of
the Senate Banking Committee and the House and Senate
Appropriations Committees, that deal with the impact of this
shutdown of the multi-family and substantial rehabilitation
programs.
Mrs. Kelly. So ruled.
[The material referred to can be found on page 288 in the
appendix.]
Mr. Nielsen. And I would also like to submit a list of all
the projects in the country, the $3.4 billion of projects that
would be adversely affected by this shutdown.
I thank you for providing Mortgage Bankers Association the
opportunity to share our views with the subcommittee and look
forward to working with you and other Members of the
subcommittee as we implement these solutions.
Thank you, Madam Chairwoman.
[The prepared statement of John A. Courson can be found on
page 280 in the appendix.]
Mrs. Kelly. Thank you very much.
Now we are going to move to Ms. Thompson.
STATEMENT OF BARBARA J. THOMPSON, DIRECTOR OF POLICY AND
GOVERNMENT AFFAIRS, NATIONAL COUNCIL OF STATE HOUSING AGENCIES
Ms. Thompson. Thank you.
Chairwoman Kelly, Representative Frank, and Members of this
subcommittee, I am Barbara Thompson, Director of Policy and
Government Affairs for the National Council of State Housing
Agencies.
I am testifying today on behalf of NCSHA. NCSHA represents
the housing agencies of the 50 States, the District of
Columbia, Puerto Rico, and the U.S. Virgin Islands.
I would like to begin by thanking you, Chairwoman Kelly,
Representative Frank, and the many Members of this subcommittee
who, in the last Congress, cosponsored and helped enact
legislation to increase the caps on housing bonds and the Low
Income Housing Tax Credit.
Now tens of thousands of additional lower income families
every year will have the opportunity to buy their first home,
or rent an affordable apartment.
Unfortunately, many people qualified for housing credit and
bond help still will not get it; obsolete program rules prevent
it.
Representative Frank, we especially want to thank you for
your early cosponsorship of H.R. 951 which fixes these
problems. We urge all subcommittee Members to join Mr. Frank in
co-sponsoring that bill, and we ask you to encourage your
leadership and Ways and Means Members to include it in a tax
bill this year.
With your extraordinary leadership and sustained support,
we have made some important affordable housing gains, won some
important battles in recent years. But we are still not winning
the war.
HUD's budget is half of what it was two decades ago, and
the Bond and Credit Cap increase, as I just mentioned, though
of a size no one dreamed possible, are not beginning to restore
the purchasing power of those vastly over-subscribed programs.
Meanwhile, as we have heard from many panelists this
morning, many American families, one out of every seven, in
fact, has a critical housing need, from the very poor to the
solidly middle class.
Indisputably, though, families hardest hit are those with
the least income; 80 percent of those with critical needs are
very-low-income; 60 percent, extremely-low-income.
Meanwhile, the number of rental apartments affordable to
them continues to drop. In the face of growing need among
extremely-low-income people, State HFAs (Housing Finance
Agencies) report uniformly that they are having a great deal of
difficulty housing them.
In 1997, the General Accounting Office reported that
housing credit properties were actually reaching people who
made 25 percent of area median income or less with other
subsidies, but that is the problem. Other subsidies often are
not available and they are necessary to reach lower income
families with the housing credit.
Some might suggest that we need to address rental housing
needs across the income spectrum as high as 120 percent of area
median income.
We urge you, however, while we have a scarcity of
resources, not to divert them from those who have the most
acute housing needs. We ask you to reject proposals to increase
income limits on existing programs such as HOME and the Low
Income Housing Tax Credit.
Still, existing resources clearly are not enough, and that
is why one of our highest priorities at NCSHA and among the
States is the creation of a new State-administered rental
production program targeted, in significant part, to extremely-
low-income families.
We want to work with you to design a program that builds on
the success of programs like Bonds and the Low Income Housing
Tax Credit, utilizes the existing, proven State HFA delivery
system, and is integrated with existing State allocation plans
and funding systems.
The program will only work, however, if States are given
the flexibility to tailor their housing solutions to varied
housing problems. HUD regulation must be limited.
We propose that funds be allocated by State HFAs subject to
allocation plans like the Housing Credit Allocation Plan.
States should be empowered to use funds for a wide variety
of uses.
Finally, it is essential that any new program's income,
rent, and other rules be compatible with those of other Federal
programs. It is combination with them will almost always be
necessary.
A new program, regardless of its size, is not the whole
answer. We want to work with you to continue to improve
existing programs that work through increased funding,
deregulation, and, where possible and practical, devolution of
their administration to the States.
NCSHA and our member State HFAs are very grateful to you
all for your enthusiastic and constant support of affordable
housing. We will continue to do our very best to use Federal
affordable housing funds efficiently and creatively under the
conditions unique to each State, and to earn the trust that you
have placed in the States.
Thank you.
[The prepared statement of Barbara J. Thompson can be found
on page 274 in the appendix.]
Mrs. Kelly. Thank you very much, Ms. Thompson, and thank
you for staying in your time limit.
I really am happy to hear you talk about an integrated
solution to the problem, rather than one that is demanding of
Federal intervention, because I am not convinced, from what I
have heard, that that is necessarily our answer. So I am very
happy to hear you talk about that.
I want to ask a few questions.
One is for the whole panel.
If we assume that, to some extent, some of you may not have
reviewed the existing programs. I would like to know what your
observations are about the HOME program that was created 10
years ago that was to provide housing for low-income families.
If you have visited, I would like to know why you think
that HOME isn't providing the necessary production we
originally thought that it would, or perhaps that is a
misperception and it is about housing production capacity.
There is a third part to my question.
What about the other existing programs, like the 30 percent
set-aside and the McKinney-Vento Homeless Assistance Act?
So I am asking essentially three questions here.
Do you want me to repeat them?
I want to know if you have visited the housing production
created by HOME 10 years ago.
And if you have, or even if you haven't, why HOME isn't
providing the necessary production that we originally thought
or is that a misperception about the housing production
capacity?
And I want to know what about the other existing programs,
like the 30 percent set-aside in the McKinney-Vento Homeless
Assistance Act.
So there are three parts to that question, and you can take
them, whichever, whoever wants to own them.
Mr. Nielsen, you are going to own some of it.
Mr. Nielsen. Let me start with the HOME program.
It has been my experience, and I have been building tax
credit projects since the program began, that HOME fills a gap,
a gap that is created between what is necessary and what other
programs can provide in that, at least in our States, and in
the State of California and Arizona, I can tell you that HOME
plays a critical role in filling that gap.
And I don't know what the original legislative debate
included concerning the original numbers that HOME would
generate, but I wonder if many times, we count HOME units by
the number of specific HOME units that are in a particular
property without counting the entire property which HOME may
have been critical in filling the gaps to get that property
built.
So I am not sure that that answers both sides of your
question, but I think the key is that we need HOME, we need
additional HOME funds to continue to fill those gaps in
projects that are being built today.
Mrs. Kelly. Thanks, Mr. Nielsen.
I just want to say that from my understanding of the HOME
funding, the idea was to provide for housing production for
low-incomes; it was not really a gap program, it was simply to
provide for production. Get those units up.
So your viewing it as a gap program is very important
information for us.
Mr. Menino. In the City of Boston, we use the HOME funds
also as gap financing, and then we go to the State for the tax
credits and the issue there is the State doesn't have enough
tax credits to build the affordability into the housing. We use
it as gap financing also.
Mr. Nielsen. Excuse me. If I could respond to your comment.
I really believe that HOME is critical in getting many of
these affordable housing projects built. So I think it is a
matter of counting, the way we count.
Mrs. Kelly. I am still looking for the answer to the third
part of it. What about the other existing programs? I mean, if
you are viewing HOME as a gap program, what about these other
existing programs, and why, in your estimation, are they not
there?
We have got the McKinney-Vento, the Homeless Assistance
Act. I mean, why is that not working? There are so many
possibilities here, there are so many programs.
My interest in asking this question is to establish whether
or not the existing programs should be rehabbed and whether or
not, in fact, we need new legislation.
So anybody there can have a hand at that.
Ms. Thompson. If I could respond, Chairwoman Kelly, I would
like to say a few things about the HOME program. It is an
enormously successful program, about 37 HFAs around the country
run it.
It is most frequently used as gap financing, often with Low
Income Housing Tax Credit properties. It simply isn't enough
money, doesn't provide enough subsidy to do stand-alone HOME
financed deals, unless they're small properties, usually rehab.
The problem with the HOME program is simple; there is not
enough money in it. It is $1.8 billion. That is the most
Congress has ever appropriated.
More than a decade ago, when this subcommittee and the
Senate side got together and created HOME, you thought it ought
to be funded at $2 billion. It has never reached that
authorization level. It would require that today just to make
up for the purchasing power it has lost to inflation since the
early 1990s when it was first funded.
You also have to bear in mind that the HOME funds are
divided up today among about 595 State and local jurisdictions.
It is hard to have a big bang with those bucks, because it is
not a big pot and it is so divided up, as I said, among
hundreds of communities.
And finally, there are some structural limitations to the
HOME program. We are very excited to learn your subcommittee
may be looking at the individual programs, like HOME, because
we can give you some specific recommendations for changing some
of the rules to make it work better. But HOME will not be the
whole answer unless the Congress is prepared to put several
more billion dollars into it.
Mrs. Kelly. Thank you very much. My time is up.
We will go now to Mr. Frank.
Mr. Frank. Picking up from there, I was here when we did
the HOME program. Henry Gonzalez was a major figure then, and
it was not intended to be a production program. For one thing,
as Ms. Thompson just said, it is kind of an entitlement divided
up among a lot of municipalities, which means that no one is
going to have that large amount of money, and remember you also
are talking here about annual amounts.
You don't build a project, you don't get a loan from a
bank. Once you get any bank that lent too much on this
annually, I think they would be in trouble.
So it is a valuable program, but it was not meant to be a
production program.
There is one point that has come out of this today that is
very important. And I hope, and I will be approaching Mrs.
Roukema, Mr. Oxley. One of the things that both parties have
been guilty of has been to allow a jurisdictional rift to keep
the Low Income Housing Tax Credit program too separate from the
housing programs. And they ought to be made more fully and more
easily interoperative.
And it is true that people have used the HOME program, but
I am hoping that we will be able to sit down with a kind of a
joint effort. You know, in the hopes that we might be in power,
I had been talking to Mr. Rangel about that, and the fact that
the party didn't change doesn't mean that we can't work that
out, so that is something we have to do.
The next point I want to make, though, is that, and I think
this is very clear. I am pleased to have, in the two panels
that have been speaking in favor of a housing production
program in part, a number of people in the business community,
people from the Home Builders.
We have statements from the realtors, we have the mortgage
bankers. Because one argument has been, well, Government can't
do housing right.
And I think it is time for us to confront an inaccurate,
cultural lag. It is true that when we decided, particularly in
the post-World War II period, as a society, to house poor
people cheaply, we built uninhabitable buildings called
``public housing.''
The poor never asked to live in Columbia Point, or Cabrini
Greene. They never thought it was a great idea to put about 800
of them into a small, crowded space with no facilities. We did
that because we didn't understand fully the sociology, and so
forth.
We have learned from that. The time has come for people to
stop citing these acknowledged failures, which we have learned
how to avoid, as an excuse not to go forward with a mix of
public and private sector flexible programs. We have learned
that.
There are few areas in American Government, in my
experience, in American society, where actual on-the-ground
cooperation among Federal, State, local, private sector people
has worked so well.
The Low Income Housing Tax Credit program, Assisted
Housing, there are wonderful examples of this.
Now, again, we have in people's minds old public housing
projects being demolished, but people are not fully aware of
this. So I think we are at the point now where we have the
need.
And I appreciated Ms. Nelson's acknowledging that, yes, the
real crisis was with the extremely-low-income people. But in
various parts of the country, as the mayor has pointed out, for
the very-low and the low-income people, there are also crises.
Somebody mentioned well, you know, yesterday's housing is
available for the poor people. Unfortunately, other people are
living in them.
Well, eviction is not likely to be one of our programmatic
tools here. And it is important for a city not simply to have
extremely-low-income people; yes, we want to have the low-
income people and the extremely-low-income people better
housed. We have learned that we do them no favor if we
exclusively build for them alone and segregate them.
So we want a range of buildings. We are not going to build
luxury housing. We have the need, we have the resources in this
wealthiest society in the history of the world, and I believe
this is what some people have misunderstood.
We have, in fact, the knowledge, we have the experience.
You give the resources and--one of the things, I was talking to
Congressman Green when he was here, one of the things we
probably ought to do is to recognize the regional differences
in this country, and create Federal housing programs with
increased resources that give some flexibility.
There may be areas where they want to do all vouchers.
There may be areas where they want more public housing. There
may be areas where they want to emphasize affordable housing
which is going to be a mix with public and private.
I think what we need to do is, one, increase the resources
so we don't have people resisting any flexibility because it is
coming out of their hides; we don't want to have a zero sum
game. And then give each municipality, each region of the
country in which people have learned to work together, the
flexibility.
I think, again, we have the need, we have the resources,
and we have the knowledge. The only question is whether we have
the political will, and that is what we will have to determine.
Let me just say, lastly, with regard to the FHA, I hope we
will move quickly on the bill that Chairwoman Roukema and I
have introduced. She took the lead to increase the multi-family
limits, but at the same time as part of the way of dealing with
the shutdown, we have an FHA fund that is in very good shape
financially.
We had a hearing in which the Congressional Budget Office
and OMB and everybody else came and said, GAO, every alphabet
agency you can think of that is in charge of fiscal stability,
came in and said it is in very good shape. It is inconceivable
that we would have an economic downturn so severe as to
endanger that fund.
Therefore, and, in fact, every other assumption we are
making in the U.S. Government today goes directly counter to
the view that there would be an economic downturn of that
magnitude.
So the time has come to give more flexibility to the FHA as
well, so they can use the increased revenues, the solid surplus
in some areas, to help in other areas. There is no need for
shutdown and there is no need for fee increase. Within the
FHA's pot of money, totally, fiscally, responsibly, they can
rearrange things, and we will be pushing for that as an
amendment giving them the authority to do that as part of this
FHA Multi-Family Increase.
Thank you, Madam Chairwoman.
Mrs. Kelly. Thank you, Mr. Frank.
Next we go to Mr. Watt.
Mr. Watt. Thank you, Madam Chairwoman.
Every once in a while, one of my colleagues will ask a
question and I will be tempted to raise my hand to answer it,
and then somebody will answer the question.
And I want to start by thanking Ms. Thompson for answering
the Chairlady's question.
It is absolutely apparent to me that we do not solve a
problem in this body by authorizing legislation to solve it. If
we don't put some appropriations behind the authorization, then
we can't expect, at the end of a 10-year cycle, to say ``Well,
what is the problem? Didn't we solve this problem by
authorizing the HOME program?''
And I just want to resonate the answer one more time. Yes,
the HOME program was a good program to authorize, but if we had
not appropriated a dime to implement the HOME program, none of
the results that we have gotten out of HOME would have ever
been achieved.
And if we had appropriated what we should have
appropriated, then maybe we wouldn't have a housing problem
now, or at least we would be a lot further down the road.
Now I take it the same is true for the McKinney-Vento Act.
It is an authorized piece of legislation.
Have we ever appropriated enough money to solve the problem
that it was designed to--maybe we should go one-by-one on these
programs, and finally maybe somebody will get the message that
it is not about not having programs out there; it is about not
having money out there.
And Representative Frank said, we have got the resources.
Well, we do have the resources if we appropriate them. That is
where the political will that he was talking about comes in.
What do we use the resources for.
So maybe I should ask the question: How much more money do
we need in the HOME program appropriated for the HOME program
for it to really fulfill its mission?
Maybe Ms. Thompson can help me on that.
Ms. Thompson. Well, I think we certainly need much more
money in HOME. In fact, our organization is advocating $2.25
billion for fiscal year 2002. And that is not nearly enough to
meet the need.
Mr. Watt. And how does that compare with the what the
President's budget?
Ms. Thompson. The President has proposed level funding; we
would argue the Administration has actually proposed a cut in
the HOME formula grants to State and local governments by
virtue of the fact that it proposes a set-aside of $200 million
within HOME for a special downpayment assistance program.
So we feel that is actually a reduction in funding from the
current year funding of $1.8 billion. But I do----
Mr. Watt. So, if I hear you correctly then, even if you
treated this $400 million or $200 million as appropriately in
HOME, then we would still be $400 million, $500 million short
of what you think----
Ms. Thompson. What we think ought to be achievable?
Mr. Watt. Ought to be achievable.
Ms. Thompson. And that isn't what is needed.
Mr. Watt. And that is not what's needed.
Ms. Thompson. What is needed is more.
But I do want to point out, I think this is really
important, and I didn't mention in my earlier remarks, that the
HOME program also is for single family housing.
I agree with Mr. Frank, it was never really designed to be
a rental production program. Forty percent of the money goes to
single family housing.
Mr. Watt. Well, you anticipated my next question. How much
are we short on the other programs that we need to really
address the housing shortage, affordable housing shortage in
this country?
Ms. Thompson. Billions of dollars short.
Mr. Watt. And what are the programs? I mean, what is your
funding level that we ought to be striving for for some of the
other programs?
Ms. Thompson. We believe what is needed is a new program,
Congressman. That doesn't mean that the existing programs
aren't playing a useful role. But we think it is very important
that we take the experience we have under the Low Income
Housing Tax Credit and build off of that program, which has
caused the private sector to get involved in the production of
affordable housing.
It works well, it gives the kind of regional and State
flexibility that Mr. Frank mentioned is important. The only
thing that is missing is extra resources to be coupled with it
to reach lower incomes to the extent we need to. And maybe we
need to look at the question of 60 to 80, as well.
Mr. Watt. How much extra resources are we talking about? I
am trying to give the Chairlady a picture of what----
Ms. Thompson. We are looking for a block grant to States
probably of several billion dollars in size.
Mrs. Kelly. I am extending you a little extra time.
Mr. Watt. Say that again?
Ms. Thompson. A block grant to States of several billion
dollars in size. I think we need to change the conversation
about money.
Mr. Watt. Is any of that in the President's budget?
Ms. Thompson. Is it anywhere in the President's budget.
Mr. Watt. Any of that in the President's budget?
Ms. Thompson. No, it is not.
Mr. Watt. All right, I yield back. I rest my case.
Mrs. Kelly. Thank you, Mr. Watt.
Next we go to Ms. Carson.
Ms. Carson. Thank you very much, Madam Chairwoman. I have
heard a lot of the testimony because I have been out here
meeting with constituents and all that, we are doing both.
But I was particularly interested in hearing the Mayor's
comments about the impact of rising housing costs on a
community such as yours.
Would you kind of give me your spin on that, and the impact
it has had on your community?
Mr. Menino. Let me give you an example of what the rising
housing costs are doing in our society. I met a couple out in
one of the neighborhoods of the city just recently. A year ago,
they were paying $750 a month rent. Today, they are paying
$1,500 a month rent.
The taxes in the City of Boston haven't gone up, the water
and sewer bills haven't gone up, it is just the landlord is
looking to make as much as he can out of that housing unit
because you have a housing crisis. Housing is at a premium. We
are not producing any housing when it comes to affordability.
We did 1,000 units in our city last year. That is
outstanding for any city in the country. But we need the
Federal, we need the help. We need help and the U.S. Conference
of Mayors, of which I am the Chairman of the Advisory Board,
recommends on the HOME program $2 billion for HOME and $2
billion for new housing production.
Congressman Watt asked that question, so the U.S.
Conference of Mayors is on record for $4 billion.
But how do we do it? Why do we have this problem? We have,
you know, cities are hard commodities. Everyone's come back to
cities. And we just don't have the resources.
And public housing, public housing developments are places
where people could be proud to live in, if we continue do what
we do with the HOPE VI program. We have two HOPE VIs in the
City of Boston and people are proud to live there. We give them
a back door and a front door.
We give them, you know, something that they can be proud
of. We are going to continue to do that. What is happening now
is we are putting all kinds of resources together. I am putting
$30 million of surplus disposition funds, which the city has
never done in its history, to provide for affordability.
We are selling off land in the City, you know, giving it
away for the most part to get development. But still the HOME
funds we just talked about as part of the about $50 to $1,000
per unit helps us cut down the cost, and we have to go to the
State and get tax credits.
What we need is a comprehensive plan. We need help. We do
have a housing crisis. We don't need it 5 years from now. We
need it now. We desperately need it.
You know, cities can't be just the rich and the poor. There
also has to be the middle class. And, you know, we are driving
them out. Besides housing, there are other issues out there,
but we have to continue to work hard and try to produce housing
in our city; it is not easy, but obviously we have made it a
priority, and we are doing it slow but sure, but we don't have
the subsidies that the Federal Government could supply us if
they really cared about housing.
Mrs. Kelly. Thank you very much, Ms. Carson.
We now go to Mr. Capuano.
Mr. Capuano. I guess I am going to pretty much stick to the
same tack as I had in the last.
I guess I would like to see, by a show of hands, those of
you who think it is a really good idea to cut $700 million out
of the capital improvement program for public housing?
Or $70 million out of the drug elimination grant?
Or $25 million out of the rural housing production program?
Or basically, I agree with you, Ms. Thompson, that it is a
de facto cut. I don't buy earmarks or carve outs, as they are
called here.
On the HOME program, do you think there is anywhere near
enough money in any of the HUD budgets to address any of the
real needs we have expressed here today?
Mrs. Kelly. Will the gentleman yield?
Mr. Capuano. Sure.
Mrs. Kelly. Let the record reflect the fact that no one has
raised their hands.
Mr. Capuano. Thank you, Madam Chairwoman.
I guess the other question I do want to ask, especially
since we have two people from business, we do have significant
tax cuts before the Congress at the moment, and there are some
people that think that somehow there is going to be an economic
stimulus, and I am not one of them, but that is beside the
point. I mean, I understand tax cuts are fine on some levels.
But on these issues, is there anything in the current tax
proposals that are before us that you think will help housing
production, changes in marginal rates or changes in the estate
tax?
Voice. The answer from our point of view is no.
Mr. Capuano. Thank you.
Voice. If the President has a proposal for a new, single
family housing credit program, we support that. But it is not
in the bills that are moving forward, and we doubt it will be
in the 1.35 package that is ultimately passed by the Congress.
We urge you, though, to help us get the Congress to include
this bill I mentioned earlier, because if they are going to do
a big tax bill, we hope it could contain something for housing,
such as H.R. 951 to fix the impediments in the Low Income
Housing Tax Credit Program and the Bond Program, so we get full
use of those cap increases you gave us last year is very
important.
Mr. Capuano. Many of us are going to try.
Mr. Courson. And the mortgage bankers would support that.
We certainly support H.R. 951.
Voice. That is terrific, thank you.
Mr. Nielsen. The other thing, as I mentioned in my
testimony, and we realize that this subcommittee can't do a
whole lot about it, but you as individual Congressmen certainly
can and that is the TAM issue which could cripple the Low
Income Housing Tax Credit program, so it is extremely important
to us that that get fixed too.
Mr. Capuano. I guess what my whole questioning is going
toward is really one of the members of the earlier panel said
something about there aren't enough resources, and I believe
you. Ms. Thompson, said something about a resources crisis.
I totally disagree with that. It is not a resources crisis,
it is a priorities crisis. And I will be honest that it is a
priority crisis. It is not just in the people who run the
Congress and the White House today. It is not just the
Republican Party. It is the Democratic Party as well.
As you will see if you take a look at any of our national
statements, as far as a party goes, housing is not mentioned.
Housing is not mentioned. It doesn't seem to show up on the
political radar screen.
And I guess for me, that is the most difficult thing I have
had down here. It is not so much finding people that agree with
me, but people who are willing to stand up and put it as a
priority and an important issue.
I happen to think that housing is probably one of the most
important things America can do is to help people get into
homeownership and those who can't afford it to at least give
them reasonable decent shelter.
And I guess I know you are here asking for help and I know
I will do as much as we can; I think most people here today
will. But at the same time, I am also asking for your help as
well.
Testifying in front of this subcommittee is great, and I
appreciate you coming today, but it is not enough. You know, we
need you to spread the word in Nevada and to spread the word in
other places across this country to people to understand that
this is not an urban problem, this is a national problem, and
that the Federal Government has an appropriate role to play and
that we are not doing it now.
And with that, I know the Mayor wanted to have something
else to say.
Mr. Menino. Congressman Capuano, the drug elimination money
has gone a long way in public housing over the last several
years, and to remove that money just makes us go backward in
public housing.
I don't know why we want to go backward. It doesn't make a
lot of sense to me. But to eliminate these funds, you know, it
makes good headlines, but it doesn't do anything for the human
development issue that we all care about as elected officials.
We have got to get back to human development, and let us
not talk about cut, cut, cut, because I see the progress we
have made in public housing over the last several years. And to
take the drug elimination money out of public housing will not
do any good to anyone; it will just let those public housing
tenants be treated as second class citizens once again.
Mr. Courson. Congressman, if I may, the other is, and I
talked a little bit about credit subsidy in my testimony, and
if, in fact, and we at MBA are working with OMB, if, in fact,
you look at credit subsidy in the dollars of those programs
that are profitable, and those programs that do need subsidy,
and look at those as an insurance fund, as we would in
business, you don't need an appropriation.
So there is an area where Congress is appropriating where
frankly we don't believe they need to appropriate, because the
sharing of risk, if you will, which is what FHA is, an
insurance fund, doesn't need that appropriation. So there are
dollars appropriated that aren't necessary.
Mr. Capuano. I agree. Thank you very much.
Mrs. Kelly. Thank you very much, Mr. Capuano.
We go now to Ms. Waters.
Ms. Waters. Thank you very much.
I really don't have any questions. And I am sorry I was not
here to hear the first panel. I would like to thank
Congresswoman Roukema for holding this hearing, and this is
what I would expect Barney Frank to do, and I thank you, Mrs.
Kelly, for chairing this hearing today.
I mean, I think you are very courageous. I think the
Republicans are very courageous because you are doing it in the
face of the budget cuts that are in the budget.
I mean, I don't know what else I can say about how
outrageous it is to cut the drug elimination program in housing
projects. It just speaks for itself.
I don't know what to say about the reduction in Section 8
subsidies. I mean, it just speaks for itself. We know what we
need to do.
Again, I thank you, because just by holding the hearing,
you highlighted and it points us in a direction, and I think it
sends a signal that some of you are willing to do something
about it. I just hope you can convince a few other people.
We got it over here, we know. We understand what must be
done. I am one of the spenders. I want to spend some money on
poor people and housing and a better quality of life for
people, and I just hope that the housing crisis is understood
so that we can reverse some of the potential damage of this
budget.
So I thank the panelists for being here today, and again I
thank my colleagues on the other side of the aisle for holding
this hearing. All it takes is, you know, a little will and some
money, and we can get it done.
I yield back the balance of my time.
Mrs. Kelly. Thank you, Ms. Waters.
We all know, we all know this is not a partisan thing. We
know what it takes to create good communities in this Nation.
We need good housing, we need good schools, and we need good
community support in various ways with regard to jobs and so
forth, and safe streets.
You put those things together, those four things, and we
have wonderful communities, and it is not about politics. It is
about good public policy and I think it is one of the saddest
things to witness here today that Ms. Waters feels that this is
a remarkable hearing, because this is remarkable in one sense.
We are finally trying to get our arms around a tough problem.
So thanks for your kind words.
Next we go to Mr. Sanders.
Mr. Sanders. Thank you, Madam Chairwoman.
I would not one hundred percent agree with your previous
statement in that I think this issue is one hundred percent
about politics and it is about national priorities.
And I appreciate very much you and Mrs. Roukema holding
this hearing and for highlighting the crisis in affordable
housing.
But as I think everybody who has spoken has indicated, that
one of the ways we address this crisis is to put money into
housing. We could talk theory all that we want, but by
definition, affordable housing is going to need Government
help.
And where the politics unfortunately comes in is, as a
Nation, we have got to decide whether we provide hundreds of
billions of dollars in tax breaks to the wealthiest one percent
while cutting back on affordable housing programs.
That is politics, that is national priorities.
What saddens me very much in the national discussion on
housing is that the people who are most in need of affordable
housing are very often the last people who will come to
Washington to attend $100,000-a-plate fundraisers.
In fact, in many instances, these are the people that don't
even vote. And I think in Washington, these are people who are
seen as easy targets. We can cut back, because who cares about
those people; they don't vote, they don't contribute to
political parties.
I think it is a national disgrace that millions of people
are being asked to pay 40 or 50 percent, and in some cases,
more per month for their housing. It means that they don't have
money left over to take care of other basic necessities.
I think it is absolutely right for the United States
Government to say that every person in this country is entitled
to decent, safe, and affordable housing, and I would hope that
you will join with us to fight for national priorities that say
that it is outrageous that we give tax breaks to billionaires,
and at the same time, cut back on affordable housing.
So I want to thank the panelists for their excellent
testimony without exception, and look forward to working with
you so that the day will come, sooner or later, when everybody
in this country lives in the kind of housing that they are
entitled to and that especially our children have safe and
affordable housing.
Thank you very much.
Mrs. Kelly. Thank you very much, Mr. Sanders.
No doubt you have written statements, and without
objection, your written statements will be made part of the
record.
As the Chair notes, some Members may have additional
questions for this panel, and they may wish to submit them in
writing, so without objection, the hearing record is going to
remain open for 30 days for Members to submit written questions
to the witnesses and to place their responses in the record.
I thank you very much.
This hearing is adjourned.
[Whereupon, at 12:35 p.m., the hearing was adjourned.]
HOUSING AFFORDABILITY ISSUES
----------
TUESDAY, MAY 22, 2001
U.S. House of Representatives,
Subcommittee on Housing and
Community Opportunity,
Committee on Financial Services,
Washington, DC.
The subcommittee met, pursuant to call, at 9:30 a.m., in
room 2128, Rayburn House Office Building, Hon. Marge Roukema,
[chairwoman of the subcommittee], presiding.
Present: Chairwoman Roukema; Representatives Bereuter, Ney,
Kelly, Miller, Cantor, Grucci, Tiberi, Frank, Velazquez, Lee,
Schakowsky, Jones, Capuano, Waters, Watt, Clay, and Israel.
Chairwoman Roukema. I am Congresswoman Marge Roukema. We
will call the hearing to order and open. I don't know whether
or not you heard my comment to Mr. Frank as he came in. I said
``Good morning,'' although then I facetiously said ``I don't
know what is good about it.'' But the rain is good about it,
right? We need it, and I certainly hope it is raining in New
Jersey. We desperately need that.
But it is a good morning to have you all here today, and I
appreciate your being here. It is important issues that we are
dealing with, and we are so pleased that these panelists are
willing to be here and share their time with us and their
intelligence and experience with us.
This is the second hearing planned by this subcommittee on
the issue of affordable housing. Certainly the country is
facing a growing affordable housing crisis for low- and
moderate-income families, which I believe is recognized on a
bipartisan basis. Despite the fact that more and more people
are sharing the American dream of home ownership, many working
families are finding it more difficult to find affordable
housing, whether rental or personal ownership.
Through these hearings, I hope to better define the
problems faced by many of our families and find solutions that
we may use in addressing the crisis. That may not be an easy
goal to accomplish, but we are going to try, and hopefully be
able to resolve it on a bipartisan basis.
The growing economy has created a major dilemma for an
increasing number of working class and low-income Americans. In
many areas, our better economy means higher rents and these
hard working Americans are suddenly finding they can't afford
housing and they can't even afford housing available that is
geared supposedly to their income levels.
The problem certainly is a complex one, and since the
causes may vary, depending upon the peculiarities of the
particular real estate market, local markets are highly
individualized, which we have learned recently, differing very
dramatically from Houston, Texas, to Manhattan, to Portland,
Oregon, or Detroit, Michigan. We will not belabor the issue
there.
But I can give you a specific example that relates directly
to Federal housing policy. In some areas, existing Federal
programs such as the use of Section 8 vouchers may be working
very well, but in other areas voucher utilization rates are
very low, because, as we are all becoming convinced, in order
to address the problem successfully we will need to consider a
variety of approaches and explore why not even vouchers are
helping.
We don't know whether we should develop a production
program to encourage the production, the manufacture, of the
supply of housing, whether we need to change existing Federal
programs that will help to foster production and improve the
delivery, and provide other forms of, and I hate to use the
word subsidy, but other forms of support or subsidy for housing
rental systems.
The high cost of construction and the shortage of land
force many builders to focus only on the high end of the
market, and we must look for ways to remove these barriers. I
say that with great caution, because I come from a State, the
State of New Jersey, where local zoning is of paramount
importance. But the local zoning has a lot to do with the high
cost of building because of the zoning questions.
Last week, Congressman Frank and I, the ranking Democrat on
this subcommittee, asked the Administration to release the $40
million in credit subsidy for the FHA Multifamily Housing
Program. Releasing these funds will allow us to resume lending
under the FHA Multihousing Loan Guarantee Program, while
providing Congress with the time necessary to determine the
best way to proceed in funding this important program through
to the end of this fiscal year and hopefully over the immediate
years to come.
I would like to also ask my colleagues to co-sponsor the
legislation that Congressman Frank and I have introduced, H.R.
1629, which would raise by 25 percent the existing FHA
multifamily loan limits. It is extremely expensive and
difficult to build multifamily projects that produce moderately
priced units, and the resulting rents are often higher than
many families can afford, so in the current situation it is not
really applicable and there is no reality there to the FHA
loans.
Without the assistance of FHA, builders are building fewer
and fewer multifamily projects, exacerbating the grave shortage
of affordable rental housing.
Since 1992, construction and other costs have increased
significantly and the preliminary survey by the National
Association of Homebuilders shows that land costs increased by
an average of 25 percent over the recent past 9 years. That is
pretty significant. In areas such as New York City,
Philadelphia, Boston, San Francisco, it costs more, just to
name a few, to construct or rehabilitate moderate cost housing
units than the current mortgage limits.
The FHA loan limits were never intended to exclude certain
regions of the country. We would hope that H.R. 1629 will fix
that problem, and I urge my colleagues to take it under
consideration and co-sponsor this legislation.
Finally, last year Congress passed legislation to increase
the cap in both Low Income Housing Tax Credit and private
activity bonds. Congressman Houghton and Congressman Neal have
introduced legislation to finish the modernization of these
important programs. H.R. 951, the Housing Credit and Bond
Modernization and Fairness Act, is their bill. I think we
should look at it very positively, but, unfortunately, even
with the increases outlined in this legislation, and the
increases that were enacted last year, many qualified to reach
housing help under these programs are not getting it because of
a few obsolete program provisions enacted 20 years ago.
So, that is what H.R. 951 makes, three simple low-cost non-
controversial tax changes. I will not go into that now, but
except to note that the National Governors' Association has
recognized the importance of this legislation by endorsing its
enactment, and I urge my colleagues to add their names as co-
sponsors to this important legislation.
Getting to our hearing today on the contributions that will
be made before us today, we are fortunate to have a number of
distinguished experts in the field of housing as witnesses, and
there are many organizations working together through public-
private partnerships. It is more than terminology here, it is
actual operations, public-private partnerships, which I would
like to see expanded, to provide affordable housing throughout
this country.
Today we have several of those organizations who will share
with us their experience and recommendations for addressing the
growing crisis. I am particularly interested in hearing the
ways that we can reform current programs. So I welcome you here
today. Thank you for being here.
With that, I seek the comments and observations of our
Ranking Member, Mr. Frank.
[The prepared statement of Hon. Marge Roukema can be found
on page 318 in the appendix.]
Mr. Frank. Thank you, Madam Chairwoman. I am very pleased
to note that I am in very substantial agreement with the
substantive points in your opening statement. Indeed, I think
probably the only difference in how we would have said that is
the New Jersey accent. I have one and you don't, even though I
moved away. You managed to avoid it.
Chairwoman Roukema. The accent, is that what you are
talking about?
Mr. Frank. I have a New Jersey accent and you don't.
Chairwoman Roukema. That is true. I am a true New
Jerseyite.
Mr. Frank. But we are blessed in this country with the best
economy that the world has ever seen. The United States
economy, private sector, has performed in this last decade at a
pace that really people had not thought possible. We had lower
unemployment with virtually no inflation, great productivity,
and that is a good thing.
The problem is that some people think that that is all we
need to do, and as the Chair pointed out, for some people, the
good economy is not only not good news, it can be bad news.
Because if you happen to live in an area where a large number
of people are benefiting from the new economy, if you are one
of those people for whom the world is a new market and you are
in those areas where the United States has dominated the world
in biotechnology, in software, in the provision of medical
services and a whole range of other areas, you are doing very
well.
You are doing well enough so that you can bid up real
property to the disadvantage, not that you intended to be that
way, but nonetheless to the disadvantage of teachers and
firefighters, factory workers, hospital workers, others, who
are not directly participating in this new economy.
So we have the problem of people being worse off as the
economy gets better. Now, that is an easily solvable problem,
because here we have a situation where the very cause of the
problem, the increased economy, provides us the resources if we
have the sense to use them to resolve it.
Precisely because this economy has performed so well, this
society has the money to deal with the housing problems that
are faced by people who have been disadvantaged by the
prosperity. So what we have here is a failure of will, plain
and simple. We have a decision to make as a society, will we
turn our backs on people who need housing?
Twenty years ago there would have been an argument that
said: ``Well, whenever the Government tries to help housing, it
messes it up.'' I think it is important to deal with that,
because there is this cultural lag that interferes with our
reference. People still see Pruitt-Igoe and Cabrini Green and
the Old Columbia Point in Boston, people see a hundred towers
being imploded. Yes, 40 years ago this society built housing
badly for very poor people, apparently out of a desire to do it
very cheaply.
We know now without dispute how to build housing, how to
help the private sector build housing, get the public sector
get better housing, with variety, with a great deal of
intelligence. The proof of that, by the way, is the waiting
lists that we all know about for much of the existing
subsidized housing for the elderly, for people who are
disabled.
One of the things society did years ago was to end, to some
extent, the process of automatically institutionalizing people
with mental illness. We have been trying hard to treat people
with mental illness better. The Chair has been a leader in the
effort to make sure health insurance is fair to people with
mental illness. One of the things we haven't done is to provide
the housing stock that is necessary to make the
deinstitutionalization process work humanely, because you have
a disproportionate number of people with mental illness among
the homeless, because we have shut down some of these
institutions and have not done enough to find replacement
institutions.
As I said, we know how to do this. There is a whole range
of programs. There a need for flexibility. As the Chair points
out, in some areas of the country a voucher program will work
well. In others areas, it will not work well. We have a mix of
tax credits, of public housing. There is a whole range of need
and there is a range of programs, and in area after area in
this country, we know how desirable that is.
I wanted to stress one point on the desirability, because
again we run into this myth. We know we have a need for
housing. We know we have the resources to help with it. We also
know, by the way, when you help anybody with housing, you are
helping everybody to some extent, because there is a chain
here. So as you increase the stock, you help everybody some.
Obviously you help primarily those for whom the stock is
directly aimed, but you help everybody some.
But, one of the things that the Government did in the 1960s
in particular was to do a couple of programs, Section 221(d)(3)
and Section 236s they were called, which were public-private
collaborations, whereby the public sector subsidized the cost
of multifamily rentals, and a large number of people moved into
those. For those who think the Government can't do housing
well, look at what we have been preoccupied with in the last
few years.
We have been preoccupied with meeting the demand of the
residents of those federally-subsidized housing developments to
preserve them as their homes. In other words, by the best
possible test, consumer satisfaction, this country has learned
that the housing programs of the 1960s and 1970s, while I think
the financing mechanisms were not as good as they could have
been, were, as physical and social facts, overwhelmingly
popular.
Even at a time when this Congress was cutting back on
housing funds elsewhere, we had virtual unanimity out of this
subcommittee, the committee and the floor of the House and
Senate, in preserving the housing developments built with
public funds years ago. Having done that in the 1960s and
1970s, having had the people who live in those units tell us by
their insistence that we protect and preserve the units, that
they were successful, we have the model for going forward.
So I appreciate what the Chair said, and I also
particularly want to reiterate in closing, our agreement on
getting more out of the FHA.
I do want to point out to people again, we had a very good
hearing, the Chair convened a good hearing, our first hearing
in this year, with the Office of Management and Budget, with
the Congressional Budget Office and the General Accounting
Office. There were more accountants in this room than most
people could keep track of.
The unanimous conclusion was that the FHA fund is at this
point in very solid financial shape and that it is hard to
think of an economic calamity that would call it into question.
In other words, without being reckless, being totally
actuarially sound, we can go forward and make better use of the
FHA. We ought to begin with that right away and get back to
some housing being built and go on from there.
Thank you, Madam Chairwoman.
Chairwoman Roukema. Thank you, Mr. Frank. I appreciate the
fact you underscored the point that I believe I neglected in my
opening comment about the first hearing, that the FHA is
actuarially sound, and the point was made over and over again
by both the GAO as well as other accountants in the field. I
appreciate that.
For all our Members here, I want to remind you of the
rules, and the rules are that we will hope that--well, everyone
will have to keep their opening statements to 3 minutes, and I
am going to have to enforce that, considering the number of
people we have here and how we will be going into some voting
sessions in the near future, and we do want to hear this panel
this morning. So I am going to adhere to the 3-minute
limitation. For those of you who want to simply ask unanimous
consent to have your statement included in the record, that
will be done.
Now we will hear Mr. Miller. Do you have an opening
statement?
Mr. Miller. Thank you, Madam Chairwoman.
Many things that Mr. Frank says I totally agree with. He
talked about people not participating in the economic boom and
we have the money to deal with the housing problem. The only
problem I have with that is we are dealing strictly from a
Government perspective and dealing with taxpayer funds.
He talked about the history of housing, how there used to
be affordable housing. In post-World War II there absolutely
was a boom in housing, housing was affordable, but the problem
between today and then is at that point in time, Government was
not causing the housing boom.
When I first went into the building industry a little over
30 years ago, you could submit a tentative tract map, and by
law we respected the principles of property rights, and in 58
days the Government had to say yes or no to a tentative tract
map application, and if they didn't respond in 58 days, 59 days
later it was approved by law.
But then we started the EIR (Environmental Impact Report)
process and CEQA (California Environmental Quality Act) and
other processes that Government has created for the benefit of
people. And I give you an example, I had a specific plan in a
community I started in 1989 that the local agency finally
approved in 2000; 11 years later. It has no endangered species,
has no flora, fauna and habitat that supports endangered
species. Because of the EIR process and the changes in the
concept of property rights, Government agencies can protract
the process to such a degree that unless a property owner owns
the property, a banker knows that they will foreclose 5 or 6 or
7 times on that piece of property and nothing will ever occur.
As much as I enjoy what Mr. Frank says, and I do agree with
most of it, I disagree that Government is not the resolution to
the problem. Government is the problem, and if Government would
get out of the way of the housing industry as they did in post-
World War II, we would not have a housing shortage today, we
would not have an affordable housing shortage today, in fact,
we would have a boom in move-up housing, and affordable housing
would be available, and poor people wouldn't be looking for
houses that they can't afford. In post-World War II, an
individual bought a $100,000 home, and $35,000 of it would not
be in fees to Government as it is today; then that individual
could simply buy that home for $65,000, instead of paying
$100,000.
Thank you, Madam Chairwoman.
Chairwoman Roukema. Mr. Israel. By the way, I am
acknowledging and recognizing--excuse me, excuse me, I would
hope that the Members would listen and give courtesy to our
other colleagues.
I am recognizing people in the order in which they have
arrived.
Mr. Israel.
Mr. Frank. Madam Chairwoman, I would just like to note Mr.
Israel gives his statement happily in the presence of his
Chairman, whom we are happy to welcome.
Mr. Israel. Thank you, Mr. Frank, and thank you, Madam
Chairwoman.
I represent an area where affordable housing has truly
become a crisis. A significant percentage of my constituents
are now paying over half of their incomes on housing costs. The
median price of a home in my area is now near $200,000, home
prices increased 16 percent last year alone by one estimate,
and affordable rentals are all but absent on Long Island.
Yesterday our colleague, Congressman Earl Blumenauer and I
toured areas of my district to talk about how we can make
housing more accessible, more affordable and more livable. I
look forward to hearing today how we can create more
partnerships, how we can use tax policies to encourage more
housing, and how we can solve this problem on Long Island and
throughout the country.
I thank the Chairwoman and yield back.
Chairwoman Roukema. Thank you.
With that we will recognize Mrs. Kelly from New York.
Mrs. Kelly. Thank you, Madam Chairwoman. I really want to
thank you very much for agreeing to hold the hearing on
affordable housing. It is a problem facing our Nation and it is
the lack of affordable housing that is not really, I think,
solely the matter of importance to the working poor, it is an
issue that affects every single level of the communities.
In my home county of Westchester County, the median price
of a house is $412,000. That is the median price of a house.
HUD has declared that a fair market rent for a 2-bedroom
apartment is $1,144 a month. That is higher than in New York
City. As of February 8, there are 13,207 people on the Section
8 waiting list, and there is simply no product available to
those people that is affordable to them to get into.
The county and the communities really are not able,
unfortunately, to use all of their Section 8 vouchers, because
of a combination of a lack of these housing units and the
inability of Section 8 vouchers to cover the fair market rent
for the area. One of the things I hope we are going to be
looking at is a regionalization of some of these applications.
But in looking for remedies for this situation, I don't think
we can solely look to the Government. As this is an issue of
real importance to the entire community, we have to look to
private community groups and institutions for a combination of
public-private efforts.
It has been from these initiatives that I have witnessed
some of the best work in my region that goes toward long-term
solutions. In my opinion, any legislation looking to make
serious progress toward a solution has to include public-
private partnerships. But the need to engage multiple entities
is certainly a drag on the housing market.
In addition, one of my foci is to hear what you think that
Congress might be able to do to strengthen existing programs
that are having positive results in addressing this need for
affordable housing. With most legislation, a balanced approach
is necessary. We should continue to work together to ensure
that effective programs are going to receive all the support
they possibly can get and deserve.
I want to thank the distinguished panel of witnesses for
taking time out of their busy schedules to be here to discuss
these issues with us. I look forward to working with my
colleagues on both sides of the aisle, and I yield back the
balance of my time.
Chairwoman Roukema. I thank Mrs. Kelly.
Now we have Mr. Watt of North Carolina.
Mr. Watt. Thank you, Madam Chairwoman. I doubt that it
would be an effective use of the subcommittee's time to find a
different way to express what the Chair and the Ranking Member
and Mrs. Kelly have adequately described as real problems that
exist in my congressional district. I am looking forward to
hearing the suggestions of these witnesses and witnesses on the
second panel about how to innovatively address these problems.
With that, I will yield back the balance of my time.
Chairwoman Roukema. I appreciate your consideration.
Now we have Mr. Ney of Ohio.
Mr. Ney. I will pass.
Chairwoman Roukema. Thank you.
Ms. Lee of California.
Ms. Lee. Thank you, Madam Chairwoman. I thank you for
holding these hearings and for a real focus on housing
affordability on this subcommittee.
I mentioned this a couple of times with regard to my
district and the Bay Area as being one of the most least-
affordable areas to live in the country. The Congressional
Black Caucus, along with the Congressional Black Caucus
Foundation, has sponsored three housing summits, one in North
Carolina, another one in Oakland, California, last year, and
very recently in New York. One of the issues, of course, that
keeps coming up is the gap in terms of home ownership rates
between minority families, African American families, and the
general population at large. So we are looking at how to try to
close that gap while at the same time ensuring that minority
families who want to purchase homes do not have to worry about
the predatory lenders that are out there in terms of utilizing
financing mechanisms to be able to purchase their homes.
Of course, equity in one's home has been the basis upon
which African American families have been able to send their
kids to college, start small businesses. This has been the
primary means of accumulation of wealth. So it is very
important for us to look at how the affordability issue can be
really addressed in areas where we have large numbers of
minority families.
Finally, let me just say in terms of gentrification, one of
the concerns I have always had and continue to have and see as
being very prevalent right now is gentrification. As the
economy gets better, in many areas absentee landlords own homes
and apartment buildings which now are becoming unaffordable for
tenants. I know that one of the solutions is to increase
production, but until we increase production, I would like to
hear from the panels how we mitigate against the huge numbers
of families now that are being run out of our urban areas as a
result of the ability now to make huge profits out of real
estate.
So, thank you, Madam Chairwoman, for this hearing. Rental
assistance and homelessness assistance strategies, I think, are
very important also, not only home ownership, that we need to
look at.
Thank you.
Chairwoman Roukema. I thank you.
Mr. Tiberi is the next to be recognized.
Mr. Tiberi. I yield back the balance of my time.
Chairwoman Roukema. Is there anyone else on this side who
has an opening statement?
Mr. Grucci.
Mr. Grucci. Thank you, Madam Chairwoman. Affordable housing
is a very big issue for all of us. As you heard my colleague
from Long Island, Steve Israel, talk about the high cost of
housing, it is indeed a real problem as we watch as housing
prices go higher and higher, and the affordability of being
able to own a home or being able to rent a home all but escapes
those young families that are just starting out in life.
There are plenty of opportunities for these folks to stay
with us. The job market is fairly strong, but not strong enough
to allow them the down payment or being able to carry the
carrying cost of a $200,000 to $225,000 home. I am hoping to
hear from the panel today for ways we might be able to figure
out in areas of our country where there is a higher cost of
living than in other areas, how do we go about setting the
levels of affordability? I guess affordability is kind of like
artwork, it is in the eye of the beholder. What is affordable
in one section of our country may certainly not be affordable
in another section of our country, but yet the need for that
home is very real.
We have young families earning $25,000, $30,000 a year, but
can't afford to find a home. We need to be able to place them
into those homes. I am hoping to be able to hear from you today
on ways that this panel and this Congress might be able to
figure out ways to make that happen.
Lastly, before I yield back my time, I have a couple of
ideas that I would like to run by you, and obviously this is
not the time for questions, but I hope you might be able to
address this in your presentations, if there are ways to
incentivize the process by which developers and owners are able
to make more of their properties available for affordable
housing. The market is strong, they can get better rates on the
outside, there are more burdens that Government places on them,
such as regulations, paperwork, the whole issue of lead
removal, which obviously is something we have to do and it is
very important we do. But there might be ways you might think
of that would help to defer the costs on these so that the
rents do become affordable and those properties do become
available to the people who truly, truly need them, which is
our young folks and people who are living on less than $50,000
or $60,000 a year.
I thank you for that. I hope you can incorporate some of
those thoughts into your responses today, and I yield back the
remainder of my time.
Chairwoman Roukema. Thank you.
Ms. Schakowsky of Illinois, do you have any opening
statement?
Ms. Schakowsky. Very briefly, Madam Chairwoman. Thank you.
I represent Chicago and some of the northern suburbs. We
have a crisis as well. Between 1990 and 1999 we lost about
53,000 rental units. Right now we are about 153,000 rental
units short. That was as of 1999. It is getting worse. Owners
of project-based Section 8 are opting out. We have the problem,
and I associate myself with the remarks of Ms. Lee,
gentrification is a problem in many of our communities.
I know the number one barrier to production really is
funding. I believe in public-private partnerships, but I
believe that public subsidy is needed to fill the gap between
what families can afford and the cost of development and
maintenance of housing.
I am a very strong supporter of a national housing trust
fund and look forward to hearing the panel. Thank you.
Chairwoman Roukema. Thank you. Others on this side, on the
Republican side?
Others on this side? If there are, Stephanie Tubbs Jones is
the next to be recognized.
Mrs. Jones. Thank you, Madam Chairwoman.
Chairwoman Roukema. Please restrict your comments to 3
minutes.
Mrs. Jones. OK. It will be less than that. I just want to
thank you for your leadership on the issue. I am glad we are
having the hearing on this. I would like to welcome Mr. Hinga
from Ohio to our hearing. I want to welcome all of you, but I
am from Ohio, so I am directing my welcome to him as well.
In Cleveland, we have had a great success with community
development corporations building and developing affordable
housing, but we still have a gap in the City of Cleveland as
well. I am looking forward to hearing from each one of you with
regard to ideas that you have with regard to housing
affordability, and the next Congressional Black Caucus Summit
on Housing is in Cleveland. I look forward to you having input
there.
Thank you.
Chairwoman Roukema. Mr. Capuano, do you have an opening
statement?
Mr. Capuano. Just briefly, Madam Chairwoman. Again, I would
like to add my voice to thanking you for holding these
hearings. I hope the final result of all these hearings is
actually doing something, as opposed to hearing the problems,
because many of us already know the problems.
I also want to welcome Mr. Flatley. He has done fantastic
work in the greater Boston area. He is living proof that the
public and the private entities can get together. He is well
respected on both sides, and I would heed each and every member
of this panel to listen to his wise and effective counsel.
Chairwoman Roukema. All right, thank you.
Ms. Waters.
Ms. Waters. Thank you very much, Madam Chairwoman.
I am appreciative for these hearings today. We have a
housing crisis. The economic expansion of the last years has
been accompanied by skyrocketing home prices and rents, and
there is a severe shortage of affordable housing and in many
areas any type of housing.
I just have to put on the record that in my home State of
California, about half of renter households pay more than the
recommended 30 percent of their income toward shelter. However,
91 percent of low-income renter households with annual incomes
under $15,000 spend more than 30 percent of their income toward
rent. These low-income households outnumber low-cost rental
units by a ratio of more than 2-to-1, both statewide and in Los
Angeles County. Statewide, there is a shortfall of almost
600,000 affordable units. I have a lot more information about
what is happening in California, but what I will do is place my
complete statement in the record and discontinue my comments at
this point.
Chairwoman Roukema. I thank the gentlewoman.
Now last is Ms. Velazquez from New York.
Ms. Velazquez. Thank you, Madam Chairwoman. I am very
appreciative that you are paying so much attention to this
issue. I come from New York City. I remember 10 years ago it
was crime that was driving people out of New York. Now it is
the shortage of affordable housing. We are facing a crisis in
New York when it comes to affordable housing, especially low-
income communities. I am very pleased that we are having this
hearing today, and I look forward to the presentation from our
panelists.
Chairwoman Roukema. Thank you. I thank all the Members
here, and certainly Mr. Frank.
I will say to our panelists that you should understand that
the representation here, the attendance here, I should say, is
exceptional for a subcommittee hearing, and it is a visual
demonstration of the intensity of this subject and the interest
on both sides of the aisle on this subject.
With that, I do want just for the record unanimous consent
that the two letters that Mr. Frank and I have sent on this
subject, both of May 17, regarding the FHA multifamily housing
and H.R. 1629, be included in the record.
[The information referred to can be found on page 320 in
the appendix.]
So, we welcome you here today. Our panelists, William Hinga
from Bank One Community Development Corporation. By the way,
all of you have the same background and experience, years of
experience in the field, so you are not just speaking from
theory, you are speaking from your practical experience.
Certainly Mr. Hinga has 20 years of experience with commercial
real estate, lending and investment banking. He has been with
Bank One since 1990. Certainly Bank One's Community Development
Corporation has a national reputation. So we are very eager to
hear from you, Mr. Hinga, please.
STATEMENT OF WILLIAM T. HINGA, PRESIDENT, BANK ONE COMMUNITY
DEVELOPMENT CORPORATION, COLUMBUS, OH
Mr. Hinga. Good morning, Chairwoman Roukema, and Members of
the subcommittee. I am Bill Hinga, President of the Bank One
Community Development Corporation, and I appreciate this
opportunity to appear before you and share Bank One's
involvement with affordable housing.
Bank One Corporation, headquartered in Chicago, is the
Nation's fifth largest bankholding company and has a domestic
retail banking presence in 15 States.
Our Community Development Corporation, which I run, is
based in Columbus, Ohio. It is comprised of a team of 38
professionals strategically located in seven offices across
Bank One's footprint. Our sole mission is to provide debt
financing and equity investments for affordable housing and
community development. Bank One Community Development
Corporation alone has provided over $850 million in investments
and community development loans across our markets, financing
over 15,000 units of affordable housing.
I am also here as a board member of the National
Association of Affordable Housing Lenders, or NAAHL, as we are
more commonly known. It is the association devoted to
increasing private capital investment in low- and moderate-
income communities.
The past 10 years have seen a major transformation in the
formation and delivery of capital for affordable housing. Some
history may be helpful here. As Federal subsidies declined and
FHA's share of its multifamily housing market has dwindled,
private sector organizations have had to become creative in
finding solutions. Over time, plain vanilla debt financings,
such as straight mortgages, were no longer enough to fill the
Nation's affordable housing needs. Other financing vehicles
were needed. So were other partners. What were once pioneering
partnerships among insured depository institutions, like Bank
One, and non-profit providers of affordable housing, often
involving State, Federal and local subsidies to make the
housing units economically viable, are now really the norm in
the way we do business.
Perhaps at this point several examples of the partnerships
needed and the multiple financing layers required would help
illustrate this point. I think my two examples really point out
what the Chairwoman's opening comments were about--the need for
public and private partnerships, and also the multiple layers
of financing needed today to address our needs.
My first example is a project we are doing in Steubenville,
Ohio. We are partnering with the Ohio Capital Corporation for
Housing to provide $3.7 million in equity capital for a 77-unit
low-income housing tax credit development in that market. The
balance of the capital for this project will come from other
bank financing which is utilizing the Rural Housing 538
program, and $600,000 in HOME funds through the State of Ohio.
The development entity here is a partnership of a non-
profit social service provider in the market and a for-profit
developer. There are several unique features to this
development. There has been no affordable housing in this
market for over 5 years. Everything that is already there and
is affordable is 100 percent leased. Twenty percent of the
units here will be set aside to single mothers with children.
Thirty-nine of the units at the end of the tax credit
compliance period will be offered for home ownership
opportunities at prices that will be very attractive to the
renters. So this will offer a rental option and then at the end
potential home ownership.
Another example is in Chicago, where we are partnering with
the Enterprise Social Investment Corporation in providing $4.2
million in equity capital for new construction of a 107-unit
mixed income development. This is an interesting point here,
because in this project, we are going to address this a bit
with Congressman Frank, what he was saying earlier, is this
development is going to have--25 percent of the units are going
to be public housing replacement units. The balance of the
financing of this is really multilayered. There is FHA-insured
tax exempt bonds, tax increment financing, Chicago Housing
Authority HOPE VI funds, and City of Chicago HOME and
Empowerment Zone funds. Bank One is not alone in working with
partners. Loan consortia, non-profit lenders, community-based
development corporations, secondary market players and others
are all a vital part of the affordable housing field today.
Banks finance affordable housing in a variety of ways,
depending on their geographies and the bank's own business
strategy. Many bring their underwriting expertise to the
construction lending. Some offer permanent mortgages. Others,
like Bank One, are major low-income housing tax credit equity
investors. Although data is hard to come by, bank participation
appears to have increased significantly in each of these areas.
Today, financing affordable housing and community
development requires an intricate array of financial
instruments and players. Subsidy providers like to spread their
finance resources around and obtain the greatest possible
leverage in each transaction. With a variety of subsidies
involved in any one project and the varied requirements of each
subsidy provider, the cost and fees of underwriting,
understanding and complying often reduces the actual funds
available to build units.
A streamlining of results and paperwork requirements in all
Federal and State housing programs would help put more dollars
into the housing and less into professional fees.
It is clear that if the Nation is to move forward with
providing decent affordable housing for our communities,
Congress must look at ways to increase the Federal Government's
subsidy for affordable housing. There are a range of
possibilities, such as: proposals for an affordable housing
trust fund, for increasing the FHA multifamily mortgage loan
limits, and the FHA credit subsidy, increasing HOME and other
grant programs, and for a new single family housing tax credit
program. We ask you to look at all of them.
I thank you for your time and attention today.
[The prepared statement of William T. Hinga can be found on
page 344 in the appendix.]
Chairwoman Roukema. I thank you, Mr. Hinga. I neglected to
identify you as the President of Bank One Community Development
Corporation.
I will say for all of you there is a 5-minute rule.
However, understanding the importance of your testimony, I will
try to be a little relaxed about it. We will be watching the
clock. Until I use the gavel, you won't have to worry about
your time commitment, all right?
Ms. Kaiser is President of the California Community
Reinvestment Corporation. I understand you have a 25-year
banking executive experience, and you are experienced in
delivering financial services for especially affordable
housing. You are a board member of the National Association of
Affordable Housing Lenders and President of the Board of
Trustees of the United Way of Ventura County.
I would fully expect that you have a contribution to make,
not only in private funding, but also public-private
partnership.
Mr. Frank. We have to say when you think they have a
contribution to make in private funding in this room.
Chairwoman Roukema. No, I don't apologize for that, not at
all. Do you? No, they are all shaking their heads. No.
Thank you. You see the bipartisanship here. You understand
that.
Ms. Kaiser.
STATEMENT OF MARY F. KAISER, PRESIDENT, CALIFORNIA COMMUNITY
REINVESTMENT CORPORATION, GLENDALE, CA
Ms. Kaiser. I understand that.
Thank you, Madam Chairwoman, and good morning. My name is
Mary Kaiser. As Madam Chairwoman just indicated, I am President
of the California Community Reinvestment Corporation (CCRC).
Chairwoman Roukema. Excuse me, could you pull the
microphone a little closer?
Ms. Kaiser. I am also short, so this is kind of tough.
I am also a certified community development financial
institution, which is a CDFI, and we have been doing this for
the last 11 years in the State of California.
I want to thank the Financial Services Committee this
morning for the opportunity to speak about some of the
successes we have had in meeting affordable housing challenges
and needs in the State of California, but to also make you
aware, which apparently you are very much aware, of the
challenges that lie ahead and how Congress might address those
challenges along with us. We are certainly all in agreement on
the magnitude of the problem.
By way of background, CCRC is a multi-bank funded non-
profit lending consortium. We were formed actually by the
Federal Reserve Bank of San Francisco and some senior banking
executives of California-based banks back in 1989 to address
the lack of mortgages for affordable housing developers.
The Federal Government had just created the Low Income
Housing Tax Credit Program, and permanent long-term mortgages
to finance those units subsidized by that program were all but
absent in our State. The perception of high risk in this type
of lending led to the formation of this mitigated risk pool
concept where all member banks would participate in each loan
originated by CCRC.
At the time when CCRC was launched, the world of affordable
housing was quite different than today. Eleven years ago I
think the perception of the risk of this community development
type lending was excessive. The system for financing affordable
housing in California, and I suspect elsewhere in the country,
was generally fragmented. The pooling concept that our
organization offered seemed to be a great innovation, allowing
banks to meet their CRA (Community Reinvestment Act)
requirements, and provided a much needed private capital
financing vehicle for affordable housing. CCRC's member
institutions have committed in excess of $250 million to this
cause through today.
Since 1989, at least 10 other consortia have been created
similar to the CCRC concept. In our particular business, which
is underwriting tax credit, multifamily rental units, we
pioneered ways of underwriting and developing effective
partnerships with non-profit and for-profit developers, local
municipalities and State agencies to increase the production
and rehabilitation of rental housing for low-income families.
Our deals look very much like the ones Bill just described,
multiple layers of financing, lots of different rules, lots of
different documents.
In the last 11 years, we have originated over $300 million
in mortgages secured by projects containing over 15,000 units
of affordable housing. While 100 percent of our portfolio
represents units affordable to people making 80 percent of
those around them, simply more than half of our portfolio
represents affordable housing units to those making only half
of what people around them make.
Through our willingness to create innovative loan
structures tailored to each project's needs, we succeeded in
doing what I described as the cutting edge, hard to do deals
that have helped increase the supply of affordable housing in
California, and we have proven it is not as risky as people
thought 11 years ago. Since inception, our losses have been
extremely low, less than 0.32 percent, or only $622,000 of all
loans originated.
This is comparable to the performance of a good portfolio
of investment grade bonds. I might say our member banks have
taken no losses on loans originated by this consortium.
We are proud of our contributions to affordable housing. In
fact, we recently received the Financial Supporter of the Year
Award from the Southern California Association of Nonprofit
Housing Developers. This is a group that is always keeping
banks on their toes in terms of their commitments to affordable
housing. So we have become a part of a very strong
infrastructure in which lenders, non-profit organizations,
commercial investors and State and local governments work
together.
Our experience in multifamily housing has also allowed us
to meet community needs in other ways. Ms. Lee was talking
about her concerns about low-income tenants being driven out of
communities where nobody really wanted to be 10 years ago. One
of the projects that we have developed is an acquisition rehab
lending program to inner city investors, much like the Chicago
model, where individual owners and rehabilitators are given
equity private capital to rehab and continue to provide these
units to low-income tenants at affordable rents.
We have also developed a tax exempt bond program whereby
our investors buy directly tax exempt bonds for their private
holding. This allows rural projects to have access to tax
exempt bond financing at a lower cost.
We have also done direct investments in affordable housing
projects. Mr. Frank was talking about and others were talking
about the issue of preserving what we have. I mean, let alone
what we need to build. But the preservation of expiring use
projects is a big issue in California. So CCRC has also
provided equity to preserve those expiring use Section 8
projects.
But despite this and everything else we are doing, we
simply don't have the resources to keep up with the soaring
demand for affordable rental housing. The 1999 American Housing
Study conducted for HUD, just released this month, noted that
of the 112 million year-round housing units, 30 percent are
renters. The overall vacancy rate of rental units nationwide is
8 percent, and in California it is less than 5 percent.
California accounts for seven of the eight least affordable
rental housing markets in the country, and my numbers are even
higher than Ms. Waters in the sense that I show that rental
units available to low-income, there are more than four low-
income housing renters for every one unit of housing in
California. That, coupled with the housing wage in California--
--
Chairwoman Roukema. Ms. Kaiser, excuse me, can you sum up
now, please?
Ms. Kaiser. We are only adding one housing unit for every
five jobs in California. We have got to put public and private
partnerships together. It takes your money and ours. At $12,000
a year for people earning only 30 percent of the area median
income, it is going to take a deep subsidy to make units
affordable to all in California.
[The prepared statement of Mary F. Kaiser can be found on
page 331 in the appendix.]
Chairwoman Roukema. I thank you.
Mr. Joseph Reilly is the Senior Vice President at JP Morgan
and Chase Community Development Organization and has been with
them since 1989. I believe that you manage an extensive staff
of professionals that deal with the Community Development
Corporation Real Estate Lending Group, and you can contribute
now to our understanding of how these programs work and how
effective they are.
Thank you.
STATEMENT OF JOSEPH F. REILLY, SENIOR VICE PRESIDENT, JP MORGAN
CHASE COMMUNITY DEVELOPMENT CORPORATION, NEW YORK, NY
Mr. Reilly. Thank you. Good morning. My name is Joseph
Reilly, and I am a Senior Vice President in the Community
Development Group at JP Morgan Chase. I am responsible for
managing a staff of 40 people who provide financing for
affordable housing and commercial real estate projects in areas
that are served by JP Morgan Chase.
JP Morgan Chase has been a leader in providing financing
for affordable housing and other community development projects
for many years. Over the past 5 years, JP Morgan Chase has
provided over $2.6 billion in community development financing.
We continue to seek new and innovative ways to provide
financing which will strengthen the communities we serve.
In 1988, JP Morgan Chase was one of the founding members of
NAAHL (National Association of Affordable Housing Lenders), in
an effort to accelerate the growth of a sustainable flow of
private capital to housing, small business and other community
development activities in low- and moderate-income communities.
I have been fortunate to see the issues surrounding
affordable housing development from a variety of perspectives,
as I have worked in the field of community development and
affordable housing finance for over 23 years. For the past 12
years, I have worked at JP Morgan Chase and its predecessor
institutions.
Prior to my experience with JP Morgan Chase, I worked for
the New York City Department of Housing Preservation and
Development for 6 years, where I worked on providing subsidized
financing for affordable housing development. Prior to that, I
spent 6 years working as a community organizer for the
Northwest Bronx Community and Clergy Coalition.
I am sure you have already seen the considerable data
documenting the problems American families are facing in
finding decent, affordable housing. While much has been done to
meet these needs, there remains much to be done.
Many high-cost areas like New York suffer from a profound
shortage of both rental housing and home ownership
opportunities, not only for very low-income families, but also
for low-income and moderate-income families. We have a growing
crisis that requires ongoing attention of policymakers and both
short-term and long-term measures to achieve our national goal
of a decent home in a suitable living environment for all
Americans.
Over the past 10 years what our industry has experienced is
a dramatic strengthening of the system for financing affordable
housing. We know what it takes to provide affordable housing.
We have come to work together cooperatively in new types of
partnerships. We have developed creative new tools and
techniques for financing and producing affordable housing for
low-income families and communities. We have coped with the
often conflicting requirements of Federal, State and local
programs we need to do our work. We have built the
infrastructure necessary to have a major impact on housing
needs.
``We'' includes government at all levels, for-profit and
not-for-profit developers, lenders, investors and community
leaders. The result is that we are building affordable housing
that is sustainable, that is financed with the resources of the
private market and leverages public resources effectively. Our
success has ensured that private capital is readily available
to leverage public subsidies. In addition, last year the U.S.
Treasury reported that from 1993 to 1998, the amount of
mortgage lending to low- and moderate-income communities and
borrowers by CRA-covered lenders rose 80 percent. In 1998
alone, Treasury reported at least $135 billion in mortgages to
these borrowers made by insured depository institutions.
As good as these solutions are, they come nowhere near to
meeting the need. The public non-profit and for-profit
organizations that have mobilized and partnered to provide
affordable housing face three major constraints in our ability
to deliver more decent affordable units. First, Federal funds
are often encumbered by well-meant legislative and regulatory
constraints that often limit needed flexibility to community
needs. Sometimes something gets lost in the translation of
housing policy when it is regulated into practice. For example,
Congress last year enacted legislation to encourage project-
based Section 8 rental assistance vouchers to promote mixed-
income housing. However, HUD prohibits the use of this tool in
neighborhoods with at least 20 percent poverty when local
community development strategies often call for mixed-income
housing in these neighborhoods. And inevitably the more tightly
the subsidies are targeted to the most in need, the greater the
financing gap and the harder it is to make the deal
economically viable.
Second, we could finance more affordable housing if we had
more resources. The past decade has confirmed that there is no
magic to the provision of affordable rental housing. Additional
housing can only be built if public subsidies fill the gap that
exists between what families can afford to pay and the cost
associated with the construction and maintenance of decent
affordable housing. Federal programs such as HOME, CDBG
(Community Development Block Grant) and the low-income housing
tax credit have played valuable roles in helping to fill the
gap, but rarely do it alone. For example, many housing credit
deals and low-income communities require additional subsidies
to fill financing gaps, but funding levels for all Federal
programs have failed to keep pace with the rapidly growing
need, and these programs come with complex requirements that
slow or even discourage the development of new units.
Third, in some States there is a scarcity of permanent
financing for multifamily affordable housing. These projects
often involve subordinated debt and low-income tax credits that
make these loans ``non-conforming'' for sale to the secondary
market.
In the short term, the more we can simplify the
regulations, processes and paperwork of Federal assistance, the
more we will increase the efficiency of the programs and
private sector participation. Simple, flexible funding sources
that have real impact with maximum efficiency include the old
Nehemiah Program, the Affordable Housing Program of the Federal
Home Loan Banks, and the Community Development Financial
Institutions Fund.
Chairwoman Roukema. Mr. Reilly, you will have to sum up,
please.
Mr. Reilly. OK. I think in the short term what we need to
do is simplify the regulation and in the long term look for
additional subsidies, consistent, sustainable subsidies, and
perhaps some sort of a housing trust fund, something that is
there, is available on a readily available basis to encourage
the development of a pipeline so that projects can be
developed.
[The prepared statement of Joseph F. Reilly can be found on
page 335 in the appendix.]
Chairwoman Roukema. I thank you. I am trying to be fair
about this, so each person that goes over time, I am letting
them go over time equally. Thank you.
I believe now that Mr. Frank will take the opportunity to
introduce Mr. Joseph Flatley of Boston, Massachusetts.
Mr. Frank. Thank you, Madam Chairwoman. I have had the
privilege of working with Joe Flatley for more than 20 years on
housing. He is one of the real leaders in getting housing
built. He is someone to whom I turn when we are talking about
how we can improve public policy, and I am delighted that he is
now going to share really the great wealth of knowledge and
experience he has accumulated in this field with the rest of
this committee.
Chairwoman Roukema. Mr. Flatley.
STATEMENT OF JOSEPH L. FLATLEY, PRESIDENT AND CEO,
MASSACHUSETTS HOUSING INVESTMENT CORPORATION, BOSTON, MA
Mr. Flatley. Thank you, Madam Chairwoman and Congressman
Frank. My name is Joe Flatley. I am the President and CEO of
the Massachusetts Housing Investment Corporation (MHIC). It is
a private organization that finances affordable housing and
community development in Massachusetts. MHIC was created in
1990, about 11 years ago, as a collaboration between the
State's banking industry and community leaders. Today we have
25 corporate investors including banks, insurance companies and
the Government Sponsored Enterprises. We are a Section
501(c)(3) and a certified CDFI.
I also serve as Chairman of the National Association of
Affordable Housing Lenders, from which our board members are
well represented on your panel today. We have over 200 member
organizations, and NAAHL is the premiere association devoted to
increasing private investment in low- and moderate-income
communities.
I would like to commend you, Madam Chairwoman, and the
House Financial Services Committee for holding hearings on the
Nation's affordable housing needs, and thank you for the
opportunity to give you my perspective on this issue. I have
worked in the field of affordable housing and community
development for more than 30 years. The organization I now
head, the Massachusetts Housing Investment Corporation, last
year provided over $100 million in private capital to finance
the development of 45 affordable housing projects in
Massachusetts.
Over the span of my career, I have seen both the good and
the bad in affordable housing. The good news, as Congressman
Frank noted, is that we have learned a lot. The affordable
housing industry has evolved and matured in learning how to
produce decent affordable housing for low- and moderate-income
families and communities. We have learned how to do it right,
how to build affordable housing--rental housing and home
ownership--that creates a mix of incomes, that is built with
the discipline of the private market, that uses resources
responsibly, that is of high quality and lasting value, that
consumers wants to live in, that stays affordable over the long
return, and that people are proud to call home.
It is important to make this point about the fact that the
programs work, because it is not widely recognized. The
problems and difficulties are very visible when affordable
housing doesn't work. It is an eyesore and a problem. The
eyesores of many years ago are well known. When we do it right,
it is, by definition, invisible. If you do affordable housing
to be successful, and you want it to be successful, you don't
want anybody to know that it is an affordable housing project.
Unfortunately, most of our great successes are not visible.
We have achieved these successes because in large measure we
have been able to attract substantial private capital. My
organization has raised over $500 million in private capital.
We have had zero loan losses in our 10-year history. We have
never had a loan loss, knock on wood. And we have earned a
respectable return for our investors.
In the face of all we have achieved, we have to recognize a
central and indisputable fact. The need for affordable housing
has never been greater. As has already been discussed by
Members of the subcommittee, the need for affordable housing
and the problems created by the lack of affordable housing are
enormous, so I won't go into much more detail on that, but I
would say that it effects all segments of our economy. It
effects not only the very lowest income families, but also
working families and businesses trying to attract workers in
Massachusetts.
We have learned that different solutions work in different
places. In some places like Chicago, affordable units are
produced each year by small private ``Ma and Pa'' owners, and
they can find financing from consortiums like my own and like
Mary's, a bank, or perhaps an NHS with little or no subsidy.
But in high-cost areas like Boston, the cost of new
construction and renovation remains high, and the number of
units remains low. The underlying problem is a result of a
mismatch between demand and supply. We need to recognize that
fact. That results in escalating rents and housing prices.
Demand-side subsidies, such as Section 8 certificates, will not
solve the problem on their own. Clearly we need to add to the
supply.
Even with a lot of support and with an experienced non-
profit developer, and a mortgage lender all working together,
additional units can only be provided if there are subsidies
available to fill the gap. Unfortunately, over the last decade,
funding levels for Federal housing programs have fallen short
of what is really truly needed. If we are to make progress, we
need to add new sources of subsidy to expand the supply of
available units. With only modest levels of new public
investment, you will leverage enormous investment by the
private sector and by State and local governments.
As Congress considers solutions to this affordability
crisis, the most effective long-term measure would be to
develop a new Federal financing resource with the capacity and
flexibility to at the very least double the production of
affordable rental housing if we are to have a real impact. Such
a resource should provide a stable, predictable source of
capital, ideally free from the uncertainties of the Federal
appropriation process, that would ensure providers a dependable
stream of revenue for leveraging the substantial sums of
private capital today available for lending and investing in
affordable housing.
Dependable, predictable funding is critical if we are going
to create solutions to the housing affordability crisis that
really work for the long run. These solutions depend on hard
work over many years, on community outreach and planning, and
entrepreneurs who are willing to devote themselves to a multi-
year effort with some reasonable expectation of ultimate
success in the end. This cannot be accomplished with on-again,
off-again public programs. Programs such as the proposed
National Housing Trust Fund with a dedicated revenue stream
will leverage private resources many times over. Most
importantly these programs will rekindle a sense of community
throughout America.
Similarly, expanding home ownership is a critical element
of most communities' revitalization strategies. The President's
budget this year proposes a major new single-family housing tax
credit. The ``Renewing the Dream'' tax credit would make a huge
difference for low-income families and low-income communities
by attracting nearly $2 billion of private investment annually
for the construction and rehabilitation of homes in low-income
communities. We strongly support this tax credit and urge you
to include it in any tax package enacted this year.
Thank you for the opportunity to testify and for your
interest in exploring solutions to the Nation's affordable
housing problem.
Chairwoman Roukema. Thank you. You stayed right in my time
limit.
Mr. Flatley. Thank you. I tried hard to do that.
[The prepared statement of Joseph L. Flatley can be found
on page 340 in the appendix.]
Chairwoman Roukema. I will call on Mr. Miller for our first
line of questions.
Mr. Miller. Thank you very much, Madam Chairwoman.
Ms. Kaiser, you talked about rental units and multifamily
rentals. Do you do any multifamily for sale?
Ms. Kaiser. No, we do not.
Mr. Miller. Why is that?
Ms. Kaiser. I think primarily what we have tried to do is
niche our products where there were not other products
available, sort of go somewhere no one wants to go. And the
for-sale market seemed to be heavily supported by either the
mortgage or the banking industry, so ours is primarily the
rental units, which require deep operating subsidies.
Mr. Miller. Do you know of any multiattached products for
sale even being built in your area?
Ms. Kaiser. Being built? No. We are doing rehab on a lot of
those. The economics of getting them at a per-unit cost, at a
reasonable cost to be able to put rehabilitation dollars in is
a challenge in California.
Mr. Miller. The problem with that is today not a builder in
California can get liability insurance to build an attached
product, because I don't know of one attached product in the
last 10 years built in California that has not ended up in
litigation, which is really having a dramatic impact on the
marketplace.
And also you said that we are only building one unit for
every five jobs being created out there, and you are exactly
right on that.
Mr. Reilly, you said first Federal funds are often
encumbered by well-meant legislation and regulatory constraints
that often limit needed flexibility to meet community needs.
What would you propose to do to solve that?
Mr. Reilly. I think that certainly on a local basis,
decisions can be made as to what the best needs, what the best
use of the funds could be. I think that sometimes the
restrictions that go along with the funds just sort of come
down, and those are the rules. And there is not enough local
involvement in making a decision as to how best to use those
funds locally.
Mr. Miller. And you talked about the scarcity of funds for
permanent financing or multifamily housing projects. Why is
that?
Mr. Reilly. I think in some instances, not all, but in some
instances and some locations the availability of permanent
financing is quite limited, and it is partly because affordable
housing projects typically are not what I would call cookie-
cutter deals. There are a number of subsidies. There may be Low
Income Housing Tax Credits. They may actually be better loans.
They may actually be better and more secure loans and
investments. However, since they don't fit in a particular
conduit or secondary market model, they do not necessarily end
up in those pools of loans that are sold into the secondary
market.
So, I think that is something that should be considered,
and perhaps there is a role for FHA to play in that arena going
forward.
Mr. Miller. Mr. Flatley, you said that demand-side
subsidies, such as Section 8 certificates, are not workable
solutions because certificate holders cannot find units with
rents that qualify, and that leads me to a question. I had a
project in a city called Rialto, California. I had about 2,600
units. I sold the last 50 of those last year, and I tried to
sell them to a non-profit that does mainly HUD repos,
foreclosures, and goes in and provides buyers assistance
programs, thinking that this would be a great opportunity to be
able to provide buyer assistance to the new housing market. Yet
when we figured the fees that they had to pay to the
Government, the fees were greater than the land and improvement
costs associated with building the home.
What do you see as a solution to this problem if, in fact,
you say Section 8 certificates are not a workable solution?
Mr. Flatley. I think the fundamental problem is an
imbalance between supply and demand. I think we need to add new
units. I think you have identified some obstacles to adding new
units. I think the perspective I would add is we have been most
successful when we have worked in strong partnership with
communities, with neighborhood governments, local governments
in getting housing built. Frequently that does take a lot of
time in negotiating with local governments. But, I think that
most of the issues, those restricting development, that you
raise really are with local government. It is not the Federal
Government, it is not the State government, it is the local
governments who get most involved in permitting development.
I think the only real solution to that is working
effectively to create partnerships at a local level to
demonstrate that these projects are successful, can be
successful, and getting the community's support. I think it is
only through winning their support that we are ultimately going
to achieve success.
Mr. Miller. The only thing I disagree with is that you said
it is mostly local government. I believe predominantly local
government, but as an example, and as you are familiar, in
California the Fish and Wildlife Department last October slated
2,900,000 acres just in southern California for possible
habitat for three listed endangered species, which takes
2,900,000 acres off the playing field for housing, plus the
properties next to it are thereby categorized as associate
habitat, which also takes those areas off the playing field.
But if we could get Government somehow out of the process of
inflating the prices artificially, do you believe as a panel
that the affordable housing crisis might be resolved in the
near future?
Mr. Flatley. I do not think that would work by itself. We
get free sites already zoned in cities that we work in. The
costs are still way beyond what any even median-income family
could afford. So the cost of just constructing a new unit on a
permitted free site is greater than what somebody at 100
percent of median-income could afford.
Mr. Miller. But you are strictly associating that with just
inner-city parcels dealing with specific low-income groups in
those communities. As we know, in California that is not
necessarily applicable because of the huge State and the way it
grows. Would you agree, Mary? And I thank you, Madam
Chairwoman.
Chairwoman Roukema. Yes. If any of the members of the panel
would like to submit for the record, as well as to personally
to submit to Mr. Miller, Congressman Miller, here, feel free to
do that and submit your statement for the record in response to
his final question there.
Mr. Frank.
Mr. Frank. I would like to continue that line. I gather the
gentleman was agreeing that with regard to inner cities, there
would still be that problem. Of course, as I said, the worst
housing problem does come from the poorest people in the inner
cities.
Let me ask all of the witnesses as well to answer the
question that Mr. Miller asked Mr. Flatley. What would you
think of the solution in which the Federal Government simply
got out of everything that had to do with housing? Of course,
we have no control over local zoning, and I don't assume there
was a proposal here to deal with local zoning, but do you think
we would be better off in the building of affordable housing if
the Federal Government simply withdrew from the arena as has
been suggested?
We will start with Mr. Reilly.
Mr. Reilly. I would say no. On the Federal level I think
there needs to be a readily available, sustainable source of
subsidy to bridge the gap in between construction costs and
what people can afford to pay. That will vary from location to
location. The fact of the matter is it costs more to build a
unit than people can afford to either pay to buy it or to rent
it, and there needs to be some readily available sustainable
source or subsidy in order to encourage that development.
I think it is important to keep in mind that the gestation
period for an affordable housing project can be 2, 3, 4 years.
You need to build a pipeline of these projects in order to
encourage that development to happen.
Mr. Frank. Ms. Kaiser.
Ms. Kaiser. I feel the same way as Joe. Two things. One,
you just need to do the math to know that to acquire, build and
operate the real estate for affordable housing costs the same
as market rate and sometimes higher, because of income
certifications of low-income people to comply with tax credits.
So there is obviously a gap right there. The lower the income
is, the lower the rents are.
Mr. Frank. Let me add here, we tried to avoid that. This is
how we get into problems. Originally Federal housing, we said
these are poor people. Let's build them poor housing in effect.
We tried to significantly save per unit on what we built. And
when you do that, you get real problems.
Ms. Kaiser. You get what you pay for.
And the second issue about incenting developers. We do need
to incent more developers to do these deals, which are not the
easiest deals to do, and I think incentivizing developers has
to do with streamlining programs, not only access to subsidy,
but streamlining local municipality issues with regard to
zoning requirements that keeps them out of the affordable
housing.
Mr. Frank. At the Federal level--and, Mr. Reilly, I think
you say this, too. I think we agree. We should make these
programs more easily interoperable, the tax credit and other
Federal subsidies. We should reduce some of the restrictions.
Mr. Hinga.
Mr. Hinga. Congressman, I would agree with the comments of
my fellow panelists. Without the Federal participation many of
these projects would not get done. Even the simplest project
that we might even say is plain vanilla any more may be a new
construction project targeting 60 percent of area median
income, the high end of the tax credit. It is virtually
impossible to get that done without at least some HOME dollars
or something involved, because if you don't you can't make
those numbers work. Or there is so little developer fee left
that the developer says it is not worth it, they will do
something else.
Mr. Frank. The figure $150,000 was mentioned, that these
homes were homes available for $150,000. Let me ask
particularly the two private lenders, what are the income--
somebody comes in to get a loan to buy a $150,000 house, what
income does he have to show?
Ms. Kaiser. I don't do single families.
Mr. Hinga. We are really multifamily folks. I cannot give
you an example at this time.
Mr. Frank. Joe, would you have a sense----
Mr. Reilly. I am trying to do the math in my head here.
Mr. Frank. For unsubsidized regular loan.
Mr. Reilly. It depends on what the interest rate is. Let's
say you can get a 95 percent mortgage. You get a $140,000 a
loan. It is about $1,200 per month.
Mr. Frank. And to pay $1,200 per month you would have to
have an income of?
Mr. Reilly. Multiply that by 40. About $50,000.
Mr. Frank. I think that is the problem. Even if we have
these $150,000 homes without restriction, you need $40,000 or
$50,000 to pay for them and we have people who obviously make
less than that. So I believe in this and I think the suggestion
that getting the Federal Government out of it is the answer is
simply wrong. We have local zoning problems. There is nothing
we can do about them.
But, Madam Chairwoman, and I appreciate the witness list
you have put together here. We have four witnesses in the
housing business. Two of them are from non-profit so maybe they
are a little suspect. But there are two certified, very non-
socialist witnesses here, one from Bank One and one from JP
Morgan. When we have Bank One and JP Morgan telling us we need
Federal funds to get affordable housing, I think the marxist
element and the communitarian element has certainly been
minimized. So I am glad to be here in recognizing the
importance of a public role with Bank One and JP Morgan, and I
salute his specter, Mr. Morgan, wherever he is.
Chairwoman Roukema. Is that a demonstration of how far we
have declined in private enterprise?
Mr. Frank. They are your witnesses, Madam Chairwoman.
Chairwoman Roukema. Now, Mrs. Kelly. Congresswoman Kelly,
please.
Mrs. Kelly. Thank you. I am glad the Ranking Member
recognizes the new tone in Washington.
I want to ask Mr. Flatley, you said something about the
fact that it takes 2 to 3, 3 to 4 years to get approvals
through. Do you want to go on record and talk about that? Why?
Mr. Flatley. Part of it is building the partnerships and
the relationships in the community. Part of it is getting
through a local approval process. Part of it is dealing with
the neighbors and abutters to a site. If you were living in
your community and someone was proposing a 100-unit project
next to you, you would want to have some discussions with them
about the design of that project. They typically are real
construction issues. Part of what has happened in many of the
communities we work in, these are communities where the easy
sites have all been developed over time. We are now to a point
where you are either redeveloping a site that was developed
before where there is maybe some real environmental issues, or
you are developing a site which is hard to develop. Then there
is the process of applying for funding, and part of the problem
is created by the lack of Federal resources. What happens in
terms of tax credits, for example, is typically people apply
two or three times and have to go through several rounds of tax
credit applications before the tax credits are approved,
because there is kind of a queue of projects waiting for
resources.
So it is all of these issues, and I think some of the time
you could take out by having more resources available, but some
of the time is inevitably there, because you have both
substantive site issues you need to deal with, as well as you
have legitimate neighborhood concerns which you can't rush
through. You have to deal with it in a deliberative way. You
have to have the discussions with the community. It makes for a
better project in the long run to have the community on board.
The groundbreakings we go to where projects are completed--
the neighbors are there, the community is there in support.
That has a very positive impact on the long-term success of the
project.
Mrs. Kelly. Thank you. I think it is good to clarify that.
Certainly we do not want the Federal Government going in and
subsidizing housing in neighborhoods where it is not wanted. On
the other hand, I certainly also believe that there must be
ways we can work together with localities to try to speed the
process and I appreciate your putting that on record.
Mr. Reilly, I want to next go to you and first of all I
want to complement you for the quality of your testimony. It is
one of the most concise, precisely presented ones I have seen
in a long time, and I appreciate it, because we have a lot to
read and going through it was very quick and easy and I really
do thank you very much for doing that.
I wanted to ask you, you talked about the fact that things
like Section 8 vouchers can't be used in some neighborhoods and
of three constrictions that are on the Federal monies that are
available. Can you describe some of the other problems that we
have at the Federal level that are by definition at the Federal
level preventing some of these projects from coming out of the
local level?
Mr. Reilly. I think there are certainly some. I am trying
to think of others. That particular example is one where if you
look at the challenges in New York City, certainly there are a
lot of areas where we need to work on preservation as well as
the development of new housing. It is not just how much more we
can build, how many units of for-sale housing we can build, or
rental housing we can build, but in preserving housing. And
those types of subsidies that are mentioned in testimony would
be extremely helpful in areas where we need to work on
preservation, to restrict the outside use of those to certain
neighborhoods and basically exclude them from many of the
neighborhoods where we need to work on preservation as opposed
to development.
Mrs. Kelly. Preservation and rehabilitating other units, I
see, Mary, you are nodding your head. Do you want to talk about
that also?
Ms. Kaiser. Well, certainly while we appreciate the
increase in the cap for Low Income Housing Tax Credits and tax
exempt bonds, you cannot build it fast enough when the back
door is open and we are losing to market existing low-income
rental units. So the preservation issue is huge. And having
worked with a few of those with developers, the issues working
with HUD and prepaying mortgages and all the red tape and the
notification period, it really is no wonder why some of these
folks do not want to stick with the program any more. So it
really is easier to go to market and just obliterate those.
So, I think the preservation issues and the restrictions
put on getting out of the RDA is another program. There is some
expiring use RDA programs and it requires some very interesting
financing that I don't think private capital is going to want
to be attracted to. So the more we can think about these
partnerships when we build the programs up front, knowing that
private capital can come in, I think the better chance we have
of not only getting them built, but preserving them for the
long run.
Mrs. Kelly. Thank you very much. I yield back the balance
of my time.
Mr. Miller. [Presiding.] Thank you, Mrs. Kelly.
Mr. Watt.
Mr. Watt. Thank you, Mr. Chairman.
Mr. Flatley, I am trying to determine whether I have some
organizational enterprise that is comparable to yours in North
Carolina since you seem to have been so successful.
Mr. Flatley. No, but we would love to help you start one.
Mr. Watt. You have in Massachusetts also a housing finance
agency?
Mr. Flatley. There is. Massachusetts is rich with a history
of organizations. It is sometimes confusing. There is a State
Housing Finance Agency.
Mr. Watt. That is connected to the State. You are not
connected to the State or a local government?
Mr. Flatley. That is correct. We are totally private.
Mr. Watt. OK. You say that you are a Section 501(c)(3) non-
profit, yet you also talk about a respectable return to your
investors. Those two things seem inconsistent with each other.
Can you elaborate a little bit on how you are structured?
Mr. Flatley. We manage pools of investments. We are a
Section 501(c)(3), but we have subsidiary for-profit funds
which we manage for the investors in those funds and it is both
tax credit funds and what is essentially a mortgage company
where we manage those funds and businesses for the investors in
each.
Mr. Watt. So most of your investments have been into those
subsidiary funds that are profit funds and return an
investment, a return to the investors?
Mr. Flatley. That is correct, and that is how we raise
money. We would find it hard to raise money if we could not
provide a return to our investors.
Mr. Watt. And the bulk of your $500 million over the 10-
year period has been from what sources?
Mr. Flatley. It is primarily banks. It was really started
through a collaborative effort between the State Banking
Association and community leaders in Boston. That is how we got
started in 1990, but there are two pooled insurance company
initiatives which are also investing and also Fannie and
Freddie have been investors. Those are the primary investors.
Mr. Watt. Investors in the sense that they are looking for
a return also; this is not just putting money there that they
are not expecting a financial return on?
Mr. Flatley. Correct. We do not seek any philanthropic
funds. Even though we are a Section 501(c)(3) non-profit, we
have never raised funds from philanthropic sources. Our whole
philosophy is to try to attract private capital back into these
communities and show that it can be done profitably so that
additional capital will flow into these communities.
Mr. Watt. What kind of return would you normally be talking
about when you refer in your last sentence on the first page to
a respectable return? I am not trying to put your business in
the street. I am just trying to figure out how to replicate
this.
Mr. Flatley. The returns have varied over times as
financial markets have changed. On tax credit investments which
we do, the returns probably right now are in the 7.5 percent
range. The return on our lending program is right now probably
around 5.25 percent. So those are respectable returns given
that we manage the businesses for them. And that includes all
of our costs in managing those businesses for those investors.
Mr. Watt. What are you talking about when you talk about
lending?
Mr. Flatley. We lend money to developers to develop
affordable housing, and we provide the loans. We also provide
tax credit equity capital.
Mr. Watt. Are you also a developer?
Mr. Flatley. No.
Mr. Watt. So you are not developing; you are just kind of
facilitating all of these people coming together and providing
ongoing expertise from project to project to project so that
people do not make the same mistakes over again?
Mr. Flatley. Correct, and we help people assemble the
resources and figure out how to make a project successful and
put the resources in to get a project done.
Mr. Watt. All right. I think I would like to, if I could,
get some more information about how you all are set up. That
would be very helpful to me.
Mr. Flatley. I would be glad to do that. We were started, I
would note, with help from other consortiums. New York and
Chicago came to Boston to help us get established, so I think
it is the tradition of the industry to help other places start
similar organizations. So we would love to help you.
Mr. Watt. We have plenty of resources. They say in my part
of the country, we have plenty of banks and things. But this
sounds like something maybe we could get jump started in North
Carolina. We certainly need it. Are you statewide?
Mr. Flatley. Yes, we are.
Mr. Watt. The bulk of your activity is in Boston?
Mr. Flatley. I would say about 60 percent is outside of
Boston. About 40 percent is in Boston.
Mr. Miller. Your time is concluded.
Mr. Watt. I have done as much as I can do. Thank you, Mr.
Chairman.
Mr. Miller. Mr. Grucci.
Mr. Grucci. Thank you, Mr. Chairman.
Mr. Reilly, coming from New York City and having a great,
long and rich history in that great city, and you probably know
very well the economy not only in the city, but in the
surrounding area, in order to capture more of the folks that
are in the metropolitan area that are in dire need of
affordable housing, what do you think that the eligibility
level should be as a percentage of median income?
Mr. Reilly. That is a good question. I think that I think
it is important to keep in mind that there are shortages of
what I will call affordable housing at various income points:
very-low-income, low-income, moderate-income and also in
middle-income categories, as well. I think that right now there
is a need for affordable housing for very poor people, as well
as working families. So to say at what particular points, I am
not sure that there is a particular point.
Mr. Grucci. Let's concentrate on the working families for a
moment. In that bracket that you have identified as working
families, what do you believe would be a good number to work
with? Do you think it is 50 percent of median income, 100
percent, 150 percent of median income is eligible for the
affordable housing programs?
Mr. Reilly. Now I would have to qualify this by saying I
think it varies from location to location, based on
construction costs and maintenance and operating costs, as
well. But with that in mind, if you look at some of the middle-
income housing that is being developed in New York City and
probably in some of the surrounding areas you might have a two-
wage-earner family earning somewhere in say the $50,000 to
$70,000 range. Finding decent affordable housing for people in
that income range, it can be difficult, and that is in excess
of median income. That is $100,000 to say $120,000. That is not
to say that is the only need, but that is, in fact, a need.
Mr. Grucci. Would you think that number would hold true for
out in Long Island? I am sure you know the Long Island market
as well as the New York City market.
Mr. Reilly. My recollection is the median income is about
the same on Long Island, but my guess is that the cost of
housing is a little bit less. So there might be some reduction
there.
Mr. Grucci. Second, how do you think, and I guess I could
open this up to the panel as well if we have time for
responses, what do you think this level of Government can do to
assist in making affordable housing truly affordable? And that
would cover a wide range of thought process, whether it is
paperwork reduction, whether it is incentives, whether it is
working with local municipalities. I mean as a former
supervisor I remember 30 people would walk into a town hall
meeting and drop the town board to their knees in fear of
losing an election, because the people came out and ranted over
affordable housing complexes, feeling that it was going to
degradate their community.
So I would be interested in your thoughts on how this level
of Government can facilitate affordable housing.
Mr. Hinga. Well, I think some of that, Congressman, is as
you address, that maybe the fears or anxieties is--you know,
there is quite an emphasis throughout the States really on
mixed income. I think generally when the community sees what is
going to be built, if you build a high quality project and have
a variety of income levels in that property, I think sometimes
that puts aside some of those fears. It is also good for the
project, because you do have an economic strata in there that
is good.
My example in Chicago, which I raised, is that 107 units
near the South Side of Chicago, will have 25 percent of the
units for public housing tenants. You are also going to have
what we would call tax credit tenants, and they are at 50 and
60 percent of area median income, and then you are also going
to have a portion of the project that is going to be market
rate tenants. Now this does not work in every locale. I
understand that. Particularly in metro areas it works better,
where affordable housing options are just not available at all.
But I think blending does help, versus putting all the low-
income tenants together, which we have done in the past. It
doesn't always work. I think the HOPE VI model is a good
example of how you are blending home ownership plus rental in
one revamped community and you are getting a lot of income
stratas in there. That program I think has been very good. We
have participated in that program.
Mr. Grucci. Thank you, Mr. Chairman.
Mr. Miller. Thank you.
Ms. Lee.
Ms. Lee. Thank you, Mr. Chairman. Let me ask two questions.
One is let me reference my city, Oakland, California. There is
a program right now to bring 10,000 new residents to downtown
Oakland. One of the issues of course is at what income level
and how can people afford to live now in downtown Oakland
because of the cost of housing. One of our strategies of course
has been to look at a percentage of affordable units in each
development. However, the developers with whom I have talked
with have indicated that, you know, 30 percent of affordable
units in the development would be cost prohibitive. They cannot
get the financing for it.
What percentage do you think makes sense to, I guess short
of insisting on suggesting, developers do for affordable units
in any new development where affordable housing is an issue and
how can the financial institutions work with the developers to
make the percentage, whether it is 25, 30 or 40 percent
affordable?
That is the first question. The second question I want to
just ask any of you in terms of the role of non-profits, they
seem to be able to provide more sustainable long-term
affordable housing stock in certain parts of the country, I
know certainly within my own community, and I wanted to see
what you think are--what makes that possible in terms of non-
profits versus the profit making developers. Why are non-
profits more successful in terms of the production of
affordable housing?
Ms. Kaiser. I would like to address that, Congresswoman
Lee, because I think your first and second question in your
marketplace are very related. I think some of the more
successful programs where we have seen the housing element
addressed in the low-income component is when for-profit
developers partner with non-profits and allocate a certain
percentage of the project to affordable housing and let them
work together to determine what percentage based on the size of
the project, whether it is seniors or families, unit mix, that
kind of thing. So you are right. You have a lot of strong non-
profit developers up there who have worked very closely with
market rate developers in building mixed income communities.
I think one of reasons non-profits are probably very
successful with this type of product is they can hold their
breath this long. A lot of the market rate developers may not
wait the long process that both Joes accurately explained. But
we have a lot of for-profit developers who are also motivated
to develop affordable housing. So I don't know that it is
always the non-profit versus the for-profit mission. They are
both motivated by profit. One just has a stronger mission and
perhaps knows the infrastructure of multiple layered financing
better than a market rate developer who may not put up with it.
Ms. Lee. Let me ask what percentage of affordable units is
reasonable for a for-profit developer, and I know it depends on
a lot of factors, regional factors, the income level, the
community ordinances. What seems to be standard nationwide? Is
25 percent, 30 percent, is that too much to ask?
Mr. Flatley. Are you talking about doing that without
subsidy; in other words, internally subsidized within the
project?
Ms. Lee. Right.
Mr. Flatley. I think I have seen that sort of inclusionary
zoning that was in the 10 to 20 percent range, which was pretty
broadly acceptable. I think when you go beyond that it is
really going to depend on the economics of a project. So I
think 30 percent is probably aggressive; 15, 20 percent would
probably be more standard. I guess that is my sense.
Mr. Reilly. An 80/20 split seems to work pretty well in New
York, but they work because there is a tax abatement associated
with it and that is an important part of the subsidy to the
project. That is an encouragement, an enticement for the
developer to move forward with that structure. They want the
tax abatement.
Ms. Lee. Is there anything we can do to increase from 20 to
30 percent? I think that that 10 to 15 percentage points would
help in many communities increase the availability.
Mr. Reilly. I would go back to my earlier comments. I think
you need more subsidy in order to do that.
Ms. Lee. Federal subsidy.
Mr. Reilly. Wherever it comes from. You need some cash to
offset the reduction in revenue. I mean if it is an 80/20
rental and you want to make it a 70/30 rental, somehow you have
to come up with the cash to offset the reduction in revenue,
whether it is Federal or local subsidy, or maybe the tax
abatement is sufficient to do it. Whatever it is, you need
something to bridge that gap.
Ms. Lee. Now, if a non-profit----
Mr. Miller. Ten seconds, Ms. Jones.
Ms. Lee. Thank you, Mr. Chairman. How does a non-profit,
however, bridge that gap because non-profits seem to get to 30
percent more easily than a profit making developer?
Mr. Hinga. I think many of these subsidy funds are
available to the non-profits and aren't available to the for-
profits. So they are very successful in seeking out and getting
those funds for the property.
Ms. Lee. OK. Thank you, Mr. Chairman.
Mr. Miller. I apologize for calling you Ms. Jones, Ms. Lee,
but Mrs. Jones was next. But she is no longer here. So Ms.
Waters.
Ms. Waters. Prior to any question I may have I just simply
say I came this morning because I wanted to hear us say over
and over again how bad it is and how we need Government help.
There is nothing in this budget that will help this situation,
and I don't know what the Chairlady anticipates, as the Chair
of this subcommittee. I don't know what she will do about this.
Again we are putting on the record and we are documenting how
bad it is.
I just want to perhaps find out what has happened to the
HUD subsidized units where the owners prepaid the mortgages at
the end of the expiring use period so it opted out of the
programs. I thought there was some attempt to keep some of
those units on the market, and I thought something was being
worked out so that non-profits, I guess, could manage them or
gain access to them. What has happened to those units? Do any
of you have any idea? Are any of you involved in trying to
acquire some of those units and keep them on the market for
low-income, moderate-income?
Maybe you can answer, Ms. Mary Kaiser from California.
Ms. Kaiser. I do think there are many efforts afoot,
certainly more on the non-profit or the private sector side, to
capture those. Number one, it is hard to find and identify who
owns them and who you talk to and who the decisionmakers are in
terms of prepaying the mortgage and keeping them at affordable
levels. The market issues in some markets in California or
elsewhere in the country are just too tempting not to take them
to market. The non-profits are having to find multiple layers
of subsidy to rehabilitate the projects. And so to be able to
move quickly on those projects sometimes is difficult when you
need a lot of different subsidies to make them work.
Ms. Waters. I think someone mentioned to me that some
properties were in great need of repair and rehabilitation, but
I don't think there was any Government assistance to do that.
Do you know anything about that?
Ms. Kaiser. You can certainly reapply for tax credits. That
is one of the issues of needing to make the pie bigger, not
just cut it differently. Some of these projects are going in
for tax credit financing, either tax exempt bond or 9 percent
tax credit financing, to provide the injection of capital
equity to allow for the projects to work, underwriting that
rehabilitation cost. On their own it is really hard to take
them, prepay the mortgage and keep them affordable. You have to
apply for either local subsidy, State subsidy or some sort of
tax credit program to provide that gap financing.
Ms. Waters. Just in case I missed something I would like to
hear from any or all of the panelists, do you have any magical
answers, do you have any formulas, do you have anything other
than testimony that basically concludes that we need some help
in helping to develop units for low- and moderate-income people
and that the Government could be very helpful, Federal
Government could be very helpful in doing this? Do you have any
other answers?
Mr. Reilly. I think it is important to keep in mind that we
have built an infrastructure, and the infrastructure is there
to build housing, to finance housing. The developers are there.
The lenders are there. There are many instances where we just
can't make the numbers work. So we are back to the original
thought, which is you need some sort of funding to bridge that
gap. But the infrastructure is there. I think that the capacity
is there to build the affordable housing that is needed. But
sometimes the numbers just don't work.
Ms. Waters. You need money?
Mr. Flatley. I just wanted to comment on one program that
is working pretty well, which is the Section 8 mark-to-market
program, and that program actually is being very effectively
utilized to preserve a lot of this housing where the market
rents are much higher than the rents that they are originally
underwritten at. And HUD is allowing those rents to rise up to
the current market rent. And in Massachusetts that is helping
to support either the continued ownership by a for-profit owner
or sale to a non-profit and the housing remaining affordable.
Ms. Waters. That doesn't expand much.
Mr. Flatley. I thought you were raising the question of
preserving the units that were done. You are right. Additional
expansion, as we have all said, I think you have partners ready
to work with the Federal Government as additional resources are
made available, and I think the scale of the problem demands
not just a small increase, but a very major increase in
resources.
Mr. Miller. Your time has expired, Ms. Waters.
Ms. Waters. Thank you very much.
Mr. Miller. The next would be Mrs. Jones.
Mrs. Jones. Good morning, still, I guess. I kind of missed
some of the testimony coming and going. Of all the programs
that you have worked with or programs that the Federal
Government has done with regard to affordable housing, would
you assess for us the best practices, for lack of a better
term, and I ask that to all four of you and we have 4 minutes.
So you get a minute apiece.
Mr. Hinga. I think the Low Income Housing Tax Credit has
worked very, very well. You have seen from the testimony
billions of dollars of private capital flow in and to be
managed by professionals like Joseph Flatley's group, and those
investments also made directly by banks. I think, you know,
knock on wood, there haven't been any major problems with that
program.
Mrs. Jones. Let me ask you this question, and this will cut
off on some of our time, that Low Income Housing Tax Credit
program, for what period of time does it last?
Mr. Hinga. The project has to stay, at a minimum,
affordable for at least 15 years, and then almost every State
in their allocation process makes you commit to another 15
years. So, typically it is at least 30 years of affordability.
Mrs. Jones. So I guess in 1999, that was when I first came
to Congress, there was a real dilemma about a number of those
30-year properties coming to the end of their 30 years and
going now back into market rates that gave us part of the
dilemma we have with the lack of affordable housing across the
country?
Mr. Hinga. What you are describing there is a lot of HUD
programs where the contracts are expiring and then that leads
to what are you doing with housing now? Does it go to market or
can you restructure it and keep it affordable?
Mrs. Jones. Would you suggest then that perhaps what we
need to do with the Low Income Housing Tax Credit is to have an
option for us to extend it another 10 years at the end of 30 or
not?
Mr. Hinga. You almost have that now, Congresswoman. Almost
every State is going to make you do that anyway, because it is
so competitive to get the dollars awarded to you that in their
allocation plans they are almost across the board making you
keep it another 15 years anyway.
Ms. Kaiser. In California it is 55 years of affordability.
So I think we will see a long time before those are at risk. I
think the answer really is if we increase the ability to build
new projects by increasing the cap of both of those programs
you will see more and they will have long-term affordability
with them.
Mrs. Jones. Mr. Reilly, what program for you?
Mr. Reilly. I would say the Low Income Housing Tax Credit
program has worked very well. We are a very large investor in
the program. We like it from an investment standpoint, and I
think that the quality of the housing has been generally very
good. So I think that we are meeting the need for or at least
some of the need for affordable housing and we are also
involving the corporate sector as investors and investors seem
to be interested in the returns. I think the returns are a
little bit low right now, but I think that given the increased
supply over the next couple of years they will probably go back
up.
Mrs. Jones. Mr. Flatley, let's step outside the box a
little bit. Is there something else we might do to enhance
affordable housing?
Mr. Flatley. I think the home ownership tax credit idea in
the President's budget is not a bad idea. I think that would,
in fact, expand the supply of units. I don't think there is any
magic bullet other than money.
Mrs. Jones. Or incentives.
Mr. Flatley. I think the incentives have to be
fundamentally financial if you are going to bridge the gap.
When you look to other things you are really avoiding the
fundamental responsibility, which is a financial one.
Mrs. Jones. I have a constituent, and this is my last
question, Mr. Chairman, who called me and said I have a
daughter who is 30 years old and disabled. She is finally out
and working on her own. Her dilemma is that once she leaves the
job as an established disabled person where she is working for
some minimum amount of wage and she comes past that, then she
needs to go to--if she goes to regular minimum wage that kicks
her out of the ability to have housing under housing disability
programs.
Are any of you familiar with any of those programs, and
what suggestions do you have with regard to--well, my
suggestion is they raise the dollars that they are able to make
in order to be able to stay in the facility. Do any of you have
experience with housing for the disabled in the course of
affordable housing?
Ms. Kaiser. There are a lot of non-profits who deal
specifically with special needs housing, and Shelter Plus Care,
for instance, is a program that provides operating and rental
subsidy to special needs tenants. One of the difficulties for
the private sector to deal with those kinds of fundings is they
are typically on annual contracts and you need long-term
mortgages to make this work. And so to the extent that we can
count on those programs year-in and year-out and what the rules
and requirements are I think it will make it easier for the
private sector to underwrite those federally-funded----
Mrs. Jones. To the special needs program. Thank you, Mr.
Chairman.
Mr. Miller. Ms. Velazquez.
Ms. Velazquez. Thank you, Mr. Chairman.
I want to thank all of you for being here today. This is
important, especially coming from New York City. I represent a
district in Brooklyn that is so far from Manhattan it was like
a foreign territory 10 years ago. Well, now when the market in
New York went up in New York City, so people are discovering
Brooklyn, Williamsburg Bridge, they are getting there,
gentrification is taking place.
Mr. Reilly, you spoke about the need for lawmakers to
develop a new Federal financing resource, funding--I'm sorry,
Mr. Flatley--and have you thought about how much money we need
to finance such a funding?
Mr. Flatley. Well, what I suggested in my testimony is that
with the scale of the problem, to have a real impact would
require effectively doubling the level of resources presently
available. I think I mean the problem outstrips what we are
doing by so much that if we increase only by 10 or 15 percent
what we are doing, the problem is getting worse at a rate
faster than what we are building. We are losing more units, and
we are losing more families in terms of their ability to afford
units at a rate much faster than we can respond.
Ms. Velazquez. And you spoke to such funding to be separate
from the application process.
Mr. Flatley. It would be best if it could be done outside
that process.
Ms. Velazquez. And I agree with you.
Mr. Flatley. I think the issue is dependability and getting
people motivated to spend the 2 or 3 years in order to actually
create a pipeline. And it will also create more efficiency for
the Federal Government. You will get more for your money if you
do it in a way that is dependable, so that it is not sort of on
again, off again.
Ms. Velazquez. So how would you finance such a trust fund?
Mr. Flatley. I don't think I am in a position to recommend
where the resources come from. There was a proposal last year
by Senator Kerry to create a housing trust fund financed out of
the FHA surplus and an FHA insurance fund. I think the
testimony since then has been that there really isn't much of a
surplus or maybe it should go to other purposes. I think the
question is: is there a way to provide a trust fund which
provides predictability so that people like ourselves and
developers can look at it and say, yes, the resources are going
to be there on an ongoing basis.
Ms. Velazquez. How do you feel about using the surplus from
FHA?
Mr. Flatley. That would be great if it is available. I
don't really know that much about the availability. I am not an
actuary and I don't really know whether there is, in fact, a
real surplus there, or whether people think that money should
go back as rebates to the policy holders. I think that is a
legitimate argument. I don't want to set it up as sort of
robbing Peter to pay Paul. I think you are really going to need
to find resources and inevitably it is likely to be new
resources. I think to try to somehow try to pull it out of the
little bits of money that may be in different hiding places in
the Federal Government is probably not going to be on a scale
to really address the problem.
Ms. Velazquez. Thank you.
Mr. Frank. If the gentlelady would yield, let me say, as
the Chair, Mrs. Roukema, indicated, we had a very good hearing
at her initiative in which the Congressional Budget Office, the
General Accounting Office and the Office of Management and
Budget testified specifically on the FHA fund and the unanimous
conclusion was that there is a surplus, that it is, in fact,
enough so that no foreseeable economic downturn could call it
into question. And the use to which it is being put now is to
not give a rebate to home buyers or anybody else, but to go
into the general revenue so it is available for tax cutting.
So the answer is yes, there is an FHA surplus. That does
not answer the question of whether that should or should not be
used for this, but I wanted to be clear we have a significant
FHA surplus and right now it is counted on as part of the
general governmental surplus. Thank you.
Mr. Miller. [Presiding.] Mr. Clay.
Mr. Clay. Thank you.
Let me preface my remarks by first stating that I represent
the City of St. Louis, which is an older urban center with a
housing stock somewhere between 80 and 100 years old on
average. I live in a home that is about 80 years old.
Do you see that there are quite a few problems in historic
preservation? Any of you can tackle this question. Do you see a
real need for historic rehab tax credits? Has anyone addressed
that yet?
Mr. Hinga. I can tell you, Congressman, that our direct
investment strategy, where we are doing tax credit deals
directly and not through funds, we really look and seek out
historic tax credits. Most of the time you are going to see
those in one of two fashions: They are going to be combined
with the housing component, or they are going to be a
commercial retail component. We look to make sure it is in a
designated targeted area, that it is going to really be
economic redevelopment, and so forth.
Frankly, it is a great program. The yields from an
investment standpoint are actually better than just the Low
Income Housing Tax Credit. It is really something that is out
there that is not probably utilized as much as it could be by
the investment community, and I think it has picked up lately
because it is a very attractive product, and it really can make
something, again, happen in certain areas, because it does
provide a little bit higher level of equity coming into the
deal and it is typically a 5-year compliance period.
So from an investment standpoint, it is pretty attractive.
Mr. Clay. Do you think more emphasis should be put on
helping people who are renters transition into home ownership?
Do you think that would help as far as availability of housing
units?
Mr. Hinga. Through the historic?
Mr. Clay. No, just in general, to help people transition
from rental units to owning their own homes?
Mr. Hinga. I think across the board there are always
exceptions, but generally I think that is absolutely great,
because home ownership strengthens the community; it also
provides equity buildup for that owner to eventually be able to
use that equity in their house to build private wealth for
their family, finance college. I think it is a great.
That is why Mr. Flatley mentioned earlier the proposed tax
credit for single-family housing, I think, is an interesting
opportunity. If it could end up being as successful as the Low
Income Housing Tax Credit for rental units, it may be a real
home run-type project.
Mr. Flatley. One thing I would add, quickly, is that one of
the best ways to increase home ownership is to relieve some of
the excessive affordability burdens on renters. One of the
obstacles to renters becoming homeowners is if they are paying
more than 50 percent of their income for rent, they are not
going to be able to save for a down payment. So many times you
get caught in this debate between rental versus home ownership.
Well, one of the best ways of getting more people into home
ownership is by creating programs, rental programs, which
create the mobility, so people can, in fact, save the down
payment and move on and become homeowners.
Mr. Clay. Thank you.
Let me also ask anyone on the panel about successful
models. In St. Louis, we rely a little bit on Habitat for
Humanity and another program called Youth Build, mostly sweat
equity programs.
Have you seen any models that may be worthwhile and worth
shopping around the country for? Anyone on the panel can
attempt to address that.
Mr. Reilly. I think those are two very good examples. But I
think they are part of the strategy. I think that you need to
use all of the different resources that are available to meet
the need.
I think that requires employing the private sector as it
relates to the private development community as well, to build
housing. It can't just be on a volunteer basis. I think that is
one strategy. I think it is a good strategy, but I think that
we need more than that right now.
In terms of models, I think that in New York we have the
New York City Housing Partnership, which has built thousands of
units of affordable for-sale housing, and I think that that is
one that certainly requires subsidy and certainly is replicable
if subsidy is available in other locations.
Mr. Clay. Thank you very much.
Thank you, Madam Chairwoman.
Chairwoman Roukema. Thank you. I do apologize. I believe
this now has concluded the questioning of this panel. You have
given us a lot to think about. By the way, I do apologize for
having to leave. There was an important debate on my other
committee on the floor with historic legislation, and I had to
be over there for a few minutes.
But you have been an excellent panel. You have contributed
a lot of information to us. Of course, you haven't told us how
we are going to be able to pay for these things, but we will
take that under consideration.
First we have to get our priorities straight. But I do
appreciate it, and the fact that I didn't have questions does
not reflect negatively on you, it reflects positively on you,
because I think all four of you explained yourselves very well
and gave us a lot to think about and to take under
consideration as we move toward legislation. Thank you very
much.
The next panel, if Panel II will take their positions. I
think we are in very good position to be able to hear your
testimony and question this panel without any interruptions
from voting on the floor. At least I hope we have planned that
well.
Panel II, I want to welcome you. The Honorable John
DeStefano, Mayor of New Haven, Connecticut. And Mayor DeStefano
is here on behalf of the National League of Cities,
representing them. Welcome, Mr. DeStefano.
Mr. Raymond A. Skinner is Secretary of the Maryland
Department of Housing and Community Development and is here
representing the Council of State Community Development
Agencies. We certainly welcome you.
Mr. Randy Patterson. Mr. Patterson is Executive Director of
the Lancaster County, Pennsylvania, Housing and Redevelopment
Authority.
Obviously, all three of you have considerable experience in
the field and can give us the benefit of your practical and
pragmatic understandings of the problem and what the potential
alleviation of those problems is.
I thank you, and we begin with the Honorable John
DeStefano.
STATEMENT OF HON. JOHN DeSTEFANO JR., MAYOR OF NEW HAVEN, CT;
ON BEHALF OF THE NATIONAL LEAGUE OF CITIES
Mr. DeStefano. Thank you, Madam Chairwoman. It is good to
be here with you and Members as you have patiently sat through
all of this. I have enjoyed listening to it as well.
I am the Mayor of New Haven, Connecticut. I also am Second
Vice President of the National League of Cities (NLC). The
League represents 1,700 cities and towns across America and is
the largest and oldest organization of American communities.
I want to make a distinction about how you are having this
discussion about affordable housing. I think it exists on two
levels. One is the issue of access, which is the issue of
access of anybody at low- and moderate-income levels to housing
of their choosing.
However, I think there is a second part of affordable
housing that speaks to a greater need, which is those
populations which not only do not have access to housing, but
are also characterized by joblessness, low educational
attainment, single-parent head of households, the sum of which
those characteristics create neighborhoods that have cultures
and problems that are far deeper than just housing.
Having said that, the problem that we have today in America
around affordable housing is to my point of view one that we
have chosen to have. I say we have chosen to have it, because I
believe in large measure the private sector has, for reasons
that have to do with where profit margins exist, chosen not to
go there, and Government, for reason of where there are other
priorities that exist, has chosen not to go there as well.
You all represent districts that have, to some varying
degree, these problems. I would make some specific suggestions.
First, do no harm. Do nothing to weaken CRA lending in
America. I would urge, suggest to you strongly, that if you
did, whatever private-sector investment goes into this problem
will disappear.
Second, do not walk away from public housing in America.
The budget that has been submitted to the Congress has a $700
million cut in the capital fund, which is the major
modernization fund for public housing. It is incredible to me
that this older housing stock would be subjected to further
disinvestment by our partners in Washington who encouraged us
to build this housing in localities.
Third, I would speak to flexibility. As the prior speakers
have said, this a funding issue, not a regulatory issue.
However, rules that limit placement of Section 8 certificates
in high-impact, high-poverty neighborhoods, frankly works
against rehabilitation of some of these units.
Fourth, support programs that work. CDBG and HOME are
wonderful programs that every speaker that was up here in this
last panel will tell you were part of any deal they did to do
affordable housing in their communities, and they speak
directly to the gaps in these projects that anyone who has
tried to put any of these together faces. Support what works:
HOME and CDBG.
I want to say a word about local zoning. I do not expect
the subcommittee to engage in local zoning. I would tell you,
though, as of right now, zoning on an acre of land in New Haven
is 22 units per acre. I am surrounded by communities that have
minimum building lots of 2- and 2\1/2\ acres. Often times,
local zoning is no longer used just to prevent affordable
housing, but to prevent any kind of multifamily housing. At its
root it is often caused by prejudices and ignorances. However,
seeing some of the ways we have maintained public housing, I
certainly understand some of the fears about it. The best way
to overcome those fears is to build housing that works, and we
do that by investing in it.
Finally, I would just say to you, this is a larger issue
than building decent housing. I come from a community that
tried to rebuild itself in the 1960s by massive slum clearance.
When we did slum clearance, we tore apart the fabric of
neighborhoods, relationships among neighbors and among
institutions of neighborhoods like churches and businesses.
What you are investing here as well is not just access to
decent housing, but to the strength of our neighborhoods.
Everyone who has spoken to you has spoken to you about the
need to invest. That means add money. Governance is about
making choices. Congress is about to make a choice about a tax
cut. When it makes a choice, it will also be making a choice
about affordable housing.
Thank you for listening to me.
[The prepared statement of Hon. John DeStefano Jr. can be
found on page 347 in the appendix.]
Chairwoman Roukema. Thank you. You really adhered to the 5-
minute rule. We appreciate that.
Mr. Skinner.
STATEMENT OF RAYMOND A. SKINNER, SECRETARY, MARYLAND DEPARTMENT
OF HOUSING AND COMMUNITY DEVELOPMENT, ON BEHALF OF THE COUNCIL
OF STATE COMMUNITY DEVELOPMENT AGENCIES (COSCDA)
Mr. Skinner. Good morning, Chairwoman Roukema,
Representative Frank, and Members of the subcommittee. My name
is Raymond Skinner. I am the Secretary of the Maryland
Department of Housing and Community Development. I am delighted
to be here this morning.
I am here today in my capacity as President of the Council
of State Community Development Agencies, or COSCDA. COSCDA
supports the common interests and goals of States with a major
emphasis on community development, affordable housing, local
economic development and State-local relations. COSCDA's
members administer a wide range of Federal and State programs
focused on housing and community development, many of which you
have heard about this morning, including the Low Income Housing
Tax Credit program, mortgage revenue bonds, the HOME program,
CDBG, and so forth.
Before I begin, I want to thank you for holding this
hearing and for recognizing the need to address the dramatic
problem of affordable housing in America. COSCDA's members very
much appreciate this subcommittee's efforts to expand housing
opportunities for low-income people. I am here today to discuss
with you the tremendous need for affordable housing and to
discuss our ideas for solving the affordable housing crisis as
it has already been characterized.
First, the need for affordable housing in Maryland and
around the country has been documented in newspaper articles
and many reports around the Nation. One of the most notable
such is HUD's report on Worst Case Housing Needs. HUD's Worst
Case Housing Needs study shows that the number of rental units
available for very-low-income households fell by more than 1
million units from 1997 to 1999. Even more alarming, the study
noted that the number of units available to extremely-low-
income households, households earning less than 30 percent of
the area median income, dropped by 750,000 units.
The loss of these units, coupled with the dramatic increase
in the cost of housing, has created an affordable housing
crisis throughout the country.
Although the need for affordable housing is staggering,
there is some good news, and that is that we know what works.
As you have heard from a number of witnesses this morning,
there are currently a number of programs that address the
housing needs of some American families, but we need additional
resources to more adequately address the problem.
I would like to mention just a few of the successful
programs that my agency and others like it around the country
currently administer.
First, the HOME Investment Partnership Program. The HOME
program provides a proven, successful model for the development
of affordable housing for low-income people. HOME provides
State and local governments with the flexibility to meet the
unique needs of local communities.
Nationally, the program has assisted in the development of
more than 580,000 units of affordable housing, with a
substantial number of rental units produced serving extremely-
low-income people where there is the greatest need.
Additionally, the HOME program has a proven record of
fostering successful community partnerships--again you have
heard about that this morning--leading to community support and
the leveraging of funds. In fact, for every dollar of HOME
money invested in a project, more than $3.50 of additional
financing is leveraged. This program works well, and we ask
Congress to increase appropriations for it.
In Maryland, we use 65 percent of our allocation of HOME
funds for rental housing. Forty-five percent of the tenants in
the rental developments we have financed using HOME funds earn
less than 30 percent of the median income, and all earn less
than 50 percent.
Second, the Low Income Housing Tax Credit is a tremendously
successful tool, again as you have heard from previous
witnesses this morning. The tax credit is administered by
States, and the program has made possible the development of
more than 1 million units of affordable housing. Frequently
used in conjunction with other programs, including HOME, the
tax credit serves as a major source of funds for the
development of affordable housing.
While we appreciate the increase in the tax credit passed
last year, it is still not enough to address the need or demand
for affordable housing. For example, in our latest tax credit
competitive round in Maryland, requests for funds outnumbered
funds available by 4-to-1.
Another tool generally not associated with housing, but in
fact, States and local governments are using for housing, is
the Community Development Block Grant program. CDBG has served
as a flexible resource of housing funding and housing-related
activities for low-income people for more than 25 years. While
the program provides resources for a variety of projects,
States in general spend about 20 percent of their CDBG funds
directly on housing. In Maryland, that figure is about 30
percent.
CDBG has aided in the production of hundreds of thousands
of affordable housing units and remains a vital tool for the
development of affordable housing.
Lastly I will mention the McKinney-Vento Homes Assistance
Programs, which includes two programs, Shelter Plus Care and
the Supportive Housing program, which provide for permanent
housing. These programs are effective tools for housing
homeless people; but, again, the resources are not sufficient
for meeting the need. We strongly support efforts to shift the
renewals of Shelter Plus Care program and the Supportive
Housing program into the Housing Certificate Fund.
While all of these programs are very effective and have
proven track records, we believe that there is a real need for
a new rental housing production program which focuses on
extremely-low-income households, meaning people earning less
than 30 percent of the median income.
COSCDA supports the creation of a new rental housing
production program administered by State agencies and modeled
after the highly successful HOME program. A new rental housing
production program is greatly needed to support the production
of more affordable housing.
Nationwide, production levels are far below what they have
been historically. Production in the late 1990s was less than
half of what it was in the early 1990s, despite our extremely
strong economy. The case for new production is strengthened
further by the fact that while housing vouchers are vitally
important, there are many areas around the country, including
some areas in the State of Maryland, where there simply are not
units available for people with vouchers to rent.
We believe that any new production program should primarily
serve people at 30 percent or less of the median income.
Chairwoman Roukema. Excuse me, can you conclude, Mr.
Skinner? Thank you.
Mr. Skinner. Additionally, COSCDA believes the new programs
should be compatible with existing programs, including HOME and
the Low Income Housing Tax Credit, and eligible uses for the
new program should include new construction, substantial
rehabilitation, and preservation.
In closing, the argument for more affordable housing in
this country is clear and convincing, as you have heard from
many witnesses today. The programs and policies required to
effectively and efficiently meet the needs are largely in
place. At this point, State and local governments need
additional resources to partner with housing developers and
community organizations to increase the supply of affordable
housing for extremely-low-income American families.
I appreciate the opportunity to share our views with you,
and I would be happy to answer any questions you have.
[The prepared statement of Raymond A. Skinner can be found
on page 359 in the appendix.]
Chairwoman Roukema. Thank you.
Mr. Patterson.
STATEMENT OF RANDY S. PATTERSON, EXECUTIVE DIRECTOR, LANCASTER
COUNTY, PENNSYLVANIA HOUSING AND REDEVELOPMENT AUTHORITIES
Mr. Patterson. Thank you, Madam Chairwoman and Members of
the subcommittee.
I am appearing before you today on behalf of five national
associations which represent local elected and appointed
officials. We appreciate the opportunity to share our views
with you and our recommendations on the issue of housing
affordability and the role that Federal programs may play in
addressing this issue.
I have prepared a written statement for the record, and
that statement highlights some of the national affordability
issues. I would like to describe a little bit the experience in
Lancaster County, a more rural community rather than an
urbanized area, with a central city of 55,000.
In Lancaster County, housing affordability is also a
serious issue. In order to afford a 1-bedroom rental unit
renting at fair market rents in Lancaster County of $466, a
person making just over the minimum wage of $7 an hour must
work 51 hours a week to afford that rental unit. For a 3-
bedroom unit, that same person would have to work 83 hours a
week, or earn a minimum of $14.83 an hour.
As a further illustration, we have run into issues with the
Low Income Housing Tax Credit and the affordability. The
average 3-bedroom unit in Lancaster County has a 3.5 person
occupancy. The Low Income Housing Tax Credit rent is $666 a
month, but the average family residing in these units only
earns 36 percent of the Lancaster County median income, and
they are therefore paying 45.5 percent of their income for
rent. The same lack of affordability falls to 1- and 2-bedroom
units.
In Lancaster County, a family of four earning 50 percent of
the area median could afford to purchase an $85,000 home, but
the average price of a single-family home is $127,000.
We have been asked to comment on the effectiveness of
several Federal programs to address some of these issues,
including HOME and the Community Development Block Grant
Program, to expand affordable housing opportunities and to
undertake neighborhood revitalization efforts.
The HOME program has been a catalyst in spurring new
affordable housing development since 1992. It is useful when
providing funding for housing production, particularly as gap
financing for rental projects.
The flexibility of the program allows local participating
jurisdictions to use the program funds in combination with
other funds. According to cumulative HUD data, as of the end of
March 2001, HOME has helped to develop or rehabilitate over
583,000 affordable homes for low- and very-low-income families,
including 252,000 for rental and 331,000 for ownership units.
Targeting in the program is deep. More than 82 percent of
HOME assisted rental housing was benefiting families at or
below 50 percent of area median income, while 41 percent was
helping families with incomes at or below 30 percent of median
income. For each HOME dollar, $3.87 of private and other funds
is currently being leveraged. In Lancaster County, our leverage
rate exceeds $5 per $1 of HOME money. Clearly this demonstrates
the efficient and effective use of HOME dollars by local
governments.
The Bush Administration is proposing a $200 million set-
aside within HOME for a down payment assistance program to be
administered by State housing finance agencies. We are opposed
to this set-aside. HOME funds may already be used for down
payment and/or closing cost assistance, as may Community
Development Block Grant dollars. Since 1992, $1.06 billion in
HOME dollars have been used for this purpose.
We do not believe there is a need to create a separate
program for this purpose, for it would result in a $200 million
cut in formula grants. During the 106th Congress, there were a
couple of proposals to create a new housing production program
primarily targeted to households at or below 30 percent of area
median income. Rather than this approach, local officials
proposed a housing production element be incorporated within
HOME, because the infrastructure is already in place.
Our proposal would provide grants for new construction,
substantial rehabilitation, and preservation of multifamily
housing. Mixed-income projects would be encouraged. All of the
resources made available under a proposal must benefit
households at or below 80 percent of median income, with at
least 25 percent benefiting those at or below 30 percent of
median.
Funds would be apportioned 60 percent to local
participating jurisdictions, and 40 percent to States, using
the formula that measures inadequate housing supply. We would
be pleased to work with the subcommittee on crafting a
production program.
The Community Development Block Grant program is another
Federal domestic program which is quite successful at the local
level, primarily because of its maximum flexibility to address
our local needs. Legislation has been introduced, H.R. 1191,
that we believe would fundamentally change the nature of the
program and destroy the program's current flexibility at the
local level and effectively eliminate area benefit activities.
Instead of being a program or a tool for expanding affordable
housing opportunities and encouraging neighborhood
revitalization, we believe it would be turning the program into
an anti-poverty program, something Congress never intended.
There are several refinements to both the HOME program and
the CDBG program that we have included in our statement, which
we submit for the subcommittee's consideration.
We also seek a funding level of $5 billion for the
Community Development Block Grant program and a funding level
of $2.25 billion for the basic HOME program and an additional
appropriation of $2 billion for the rental production program.
Thank you for the opportunity to address this issue.
[The prepared statement of Randy S. Patterson can be found
on page 352 in the appendix.]
Chairwoman Roukema. I thank you.
Let me first observe, as Congressman Frank commented to me
and I should have made specific reference, particularly when
Mr. Skinner mentioned the McKinney-Vento Homeless Assistance
Act, Mr. Frank and I both served on this Congress and this
subcommittee with both Mr. McKinney and Mr. Vento. They were
magnificent leaders on a bipartisan basis, and unfortunately
they died prematurely, but having left this in their memory for
all those and left a standard of accountability for us, a
standard whereby we should be reaching.
I appreciate the fact that Congressman Frank mentioned
that.
Mr. Frank. Thank you.
Chairwoman Roukema. I would say, first I have got to make a
statement here about local zoning. You are speaking favorably
about overriding local zoning, and I have just got to tell you,
not on my watch. Not only New Jersey, but I just happen to
believe that the Federal Government should not be involved in
local zoning. There are incentives there that we may want to
establish, but that should not in any way have any command over
local zoning.
Mr. DeStefano. You misunderstand me, Madam Chairwoman. I
would make an observation about local zoning, that it is often
driven by ignorance and fear, and the best way to overcome that
is to build affordable housing that anyone would welcome as a
neighbor.
Chairwoman Roukema. With the local people making that case
for either approval or disapproval at the State and local
level.
Mr. DeStefano. Right. I think at some point we have to
figure the larger issues do apply here about acting reasonable.
However, I think that people will give up their pocketbooks
before their prejudice. So I consider this as a pocketbook
discussion.
Chairwoman Roukema. I think you have to understand New
Jersey and me in order to know how absolutely opposed we are to
that. But more importantly, more directly, I did want you to
expand a little bit more on the HOME program. Perhaps it was
inferred and implied and essential to your statements on the
HOME program, but I don't understand quite why it is not
providing the necessary production that we originally thought.
Is it a deficiency in the program or is it a missed perception
about what we thought was the housing production capacity that
it embodied?
Mr. Skinner, or whoever?
Mr. Skinner. I think, first of all, I don't think the HOME
program was necessarily intended as a production program per
se. For example, there are a number of other uses for the HOME
program, some of which you heard about today.
For example, many States and local governments use HOME for
down payment assistance. They use it for single-family
rehabilitation, for direct tenant assistance and for special-
needs housing and so forth. So that really dilutes the HOME
program in terms of its availability for present rental housing
production programs.
Chairwoman Roukema. Are you finished, Mr. Skinner?
Mr. DeStefano. There is not a problem with the program. I
would just tell you in my community, and I think many of the
communities we represent at NLC, I could double-program what we
get.
Chairwoman Roukema. I am sorry, I didn't understand you.
Mr. DeStefano. If we had twice the money, we could commit
that level of funding to development of affordable housing. So
it is not a program issue, it is a resources issue.
Chairwoman Roukema. Well, we will have to go over this, and
I will study your comments. If you can, aside from the funding
question, if you can help us in any way to improve the program,
if necessary, beyond the funding question.
Mr. Patterson, did you have a comment?
Mr. Patterson. I agree. The issue is not the program
itself. In Lancaster County, we use the HOME program primarily
as a financial tool for housing production of new housing or
the conversion of vacant and underutilized facilities to
housing. But, because of the funding levels, we are still only
permitted to fund approximately one 60-unit project per year.
Our needs far outstrip that availability of funding.
That is why the project includes Low Income Housing Tax
Credits, the Federal Home Loan Bank Board, and local housing
funds from a trust fund that we have developed.
[Mr. Randy Patterson submitted this additional
information at a later date:
[Lancaster County, PA, has used 68 percent of the
$10,233,000 in HOME dollars received since 1993 to
produce 355 units of rental housing. Of these 355
units, 259 units were for family housing and 96 were
reserved for elderly housing. An additional 10 percent
of the HOME dollars were used to provide downpayment
and closing cost assistance for first-time homebuyers.
Remaining HOME dollars were used to renovate single
family homes and provide short-term rental assistance
for families. The HOME subsidy required to produce
housing at a reasonably affordable rent requires the
county to provide an average subsidy of $1,200,000 to
construct a 56-unit multi-family rental project with a
total development cost of more than $5,700,000. In
addition to the HOME dollars, an average project such
as this often requires a mortgage provided by a local
bank using Federal Home Loan Bank funds, a subordinate
mortgage through the county's housing trust fund and
Federal Low Income Housing Tax Credit.]
Chairwoman Roukema. Thank you. I appreciate your comments
and I will look into this in more detail myself. But if you
mentioned anything about faith-based groups and the
partnerships there, I didn't hear it. Now, I happen to be one
who has had a lot of experience with faith-based groups. I do
not believe that there is any problem with separation of church
and State. In the State of New Jersey, we have had some
exceptional housing programs that have been partnershiped with
faith-based groups.
Have any of you had experience or can you give us some
insights or understanding, or do you have any recommendations
to make?
Mr. Patterson. We have worked with several faith-based
organizations in Lancaster County, not only from the housing
production side, but also from the provision of services to
very-low- and extremely-low-income persons, to help them save
for that down payment that they need, or for closing costs, to
help them go through the process of pre-purchase counseling and
post-purchase counseling. We have worked with a local housing
partnership that includes bankers, developers, builders,
municipal officials, and faith-based institutions in a local
partnership to provide down payment and closing cost assistance
and the new construction of housing.
[Mr. Randy Patterson submitted this additional
information at a later date:
[Although Lancaster County has not provided HOME
dollars to faith-based organizations to rehabilitate or
produce affordable housing, the county has provided
local housing trust fund dollars to faith-based
organizations to renovate and resell properties, build
new single-family townhouses, and create transitional
housing for female heads-of-household who have been
through drug rehablitation programs.]
Chairwoman Roukema. I am glad to hear that. Any further
comments?
Mr. Skinner. Likewise in Maryland, we have worked
throughout the State with a number of faith-based
organizations, non-profit organizations, in the development of
affordable housing, both rental and for home ownership, using
both the Federal resources as well as State appropriated
dollars that we have available, and it has worked very well.
Chairwoman Roukema. Thank you.
Mr. DeStefano. CDBG and HOME funds have been used that way
for years. The faith-based organizations do just that; they
provide a level of support for these families that recognizes
this is not just a housing transaction, it is moving people
into a different kind of housing than they are used to, and
helps provide them support in becoming a member of the
community.
Chairwoman Roukema. If you can provide and submit for the
record and for me personally any recommendations you could make
as to how we can expand and improve on this kind of a
partnership based on your own experiences, I would greatly
appreciate it.
I appeared at a housing panel that was part of a program on
faith-based initiatives, what, last month--within a few weeks.
And it was amazing how many people were there from both the
private sector as well as the faith-based sector that were
endorsing it based on their own experiences, and also assuring
that in a very simple way we can keep the separation of church
and State and not be evangelized or promoting religious
factors, but actually producing housing.
I thank you.
Congressman Frank.
Mr. Frank. Thank you, Madam Chairwoman. I apologize for
being on the phone to everybody but Mayor DeStefano, because I
was talking to Rose DeLauro.
As far as faith-based groups are concerned, I think the
point is very important. I worked closely with the archdiocese
in Massachusetts, Father Mike Groden. We built some housing
there. My nominee to be the co-chair of this new commission we
have on elderly housing is Ellen Feingold, who runs Jewish
Community Housing for the Elderly.
I think the point is very clear. Under existing law, there
is no obstacle whatsoever to faith-based groups doing this. We
don't need to change the law. It does mean if they are prepared
to do this like anyone else, they can do it. We get the benefit
of that. Obviously they don't discriminate in who they let in,
and they don't proselytize. What they need, I think, is just an
expansion of the program.
But, yes, we already have this, and I think that makes the
point; there is no need to change the law to allow faith-based
groups to give us the benefit of their commitment and expertise
if they do it in the same way others do, and we have benefited
from that very much.
I appreciated all the testimony. I particularly appreciated
your reference to CRA, because if you want to have the private
sector participate, then Community Reinvestment Act strictures
are very, very helpful.
I was especially pleased to see in all three that you are
speaking, I gather, not just personally, but for the
organizations you represent. I think what we see is an
overwhelming consensus among people who are concerned with
housing availability, whether they are consumer groups, whether
they are the lenders, whether they are the municipal officials,
whether they are the people in the business, the mortgage
bankers, the homebuilders, the realtors, we need a larger
Federal role. There simply has to be if we are going to deal
with this, not all by itself, but among other things, Federal
help.
But I also appreciate having three officials who work at
the actual State and local level who administer these programs,
acknowledging, if I get it correctly, that we have achieved the
kind of flexibility on the whole we need. We can make some
improvements.
But the old image people have of inflexible programs that
you can't use, you don't believe that is true of CDBG and you
don't believe it is true of HOME. We have made progress with
the tax credit. So I do think, and I was pleased to hear this,
that the single biggest thing we need is additional resources.
I have a particular question to Mr. Skinner on this,
because we did have a legitimate dispute with Secretary
Martinez. He maintained, when he testified, that the lack of
utilization of Section 8 reflects on poor housing authority
management and that good housing authorities are able, in fact,
to utilize them.
Let me start with Mr. Skinner; and then, from the
expression on his face, I am going to go to Mr. Patterson.
Mr. Skinner.
Mr. Skinner. I think it really depends on the area of the
country. I can only speak very directly and specifically about
my experience in Maryland. But just in talking with my
colleagues around the country, I think it really depends. Part
of the problem we have in many areas of Maryland is just the
availability of rental units.
Mr. Frank. No matter how good the housing authority would
be in some places, you just couldn't use the Section 8's at the
current level.
Mr. Skinner. I don't think the housing authority is the
issue. Thanks.
Mr. Frank. That is a specific point, and that is important,
because the argument for a production program in part has to be
that the voucher program with the best efforts in the world
won't work.
Mr. Patterson, you looked like you had something?
Mr. Patterson. As the executive director of a local housing
authority, I take great exception to the statement it is the
administrative issues. Our housing authority has always been
above the 95 percent lease-up rate until the last year-and-a-
half.
There were several issues that created that, in our
opinion. One is the lack of affordable rental housing outside
of the city of Lancaster, in the county, that people can afford
when they are limited to paying 40 percent of their income and
going out and trying to find a unit that is affordable to them.
Those units simply are at a shortage in Lancaster County.
The second issue is that we have really created with the
targeting to persons with incomes 30 percent of the median
income, we have restricted the usage of vouchers. We have a
significant number of people now on our waiting list between 30
and 50 percent of median that we cannot serve because of the
targeting rule of 75 percent for those 30 percent and below.
Mr. Frank. What you said is you went from a 95 percent rate
to a lower rate?
Mr. Patterson. Our rate is currently 85 percent.
Mr. Frank. That is about in a year-and-a-half.
Mr. DeStefano. Oftentimes the problem is inflexibility
imposed by the Federal Government. We can't place Section 8
certificates in poverty high-impact neighborhoods. Well, try to
find a census tract that has multifamily housing. It doesn't.
Mr. Frank. I just want to ask all of you, and I gather you
are saying implicitly--let me make it explicit--it is not that
there has been in the past year-and-a-half a deterioration in
the quality of the work of your housing authority; that if we
are going to look for a reason it dropped, it must be something
else.
Mr. Patterson. My staff would be extremely disappointed if
I would stand here and say that it was.
Mr. Frank. I will ask all of you, because this is a very
critical question, and we had this discussion with Secretary
Martinez, and he quite explicitly said that it is up to the
housing authority and ruled out the notion that it was the kind
of problem I think you gentleman are mentioning.
If you choose to elaborate on that, I think that would be
very helpful. Again, the Section 8 voucher program in some
parts of the country is a good one, and it ought to be part of
the program wherever we do it. But the notion that it is
sufficient and you don't need a production program is really
central to the debate we are having, and I would appreciate
anything you have to say on that.
Thank you all.
Chairwoman Roukema. I believe Congressman Watt has some
questions.
Mr. Watt. Thank you, Madam Chairwoman.
I want to applaud these witnesses for coming and being
forthright in their assessment of the problem, and to help us
reinforce something we have said over and over and over again,
that even the most committed of the Members on our subcommittee
sometimes lose sight, such as the Chairman and Mrs. Kelly, for
example. You can't just authorize a program and have that solve
the problem. If you don't commit the resources to carry out
that authorization, it does not work.
I know we don't commit resources in this subcommittee. We
think once we have authorized a HOME program, the concept is
fine, that solves the problem. But when the appropriators or
the policymakers or the President chooses to use the funds in
some other way and not make the financial commitment to it,
then the problem still exists.
In fact, some of the programs that we authorize can be
counterproductive to housing, and HOPE VI in particular in my
community has resulted because of decrease in concentration. I
support the program, a great program. But when you decrease
concentrations, unless you rebuild low-income housing somewhere
else, what you have is a net loss of housing units. When you
have the problems that you have, as I do in parts of my
congressional district, not in other parts, with Section 8
vouchers, then you can't transfer those people over and allow
them to use Section 8 vouchers to solve the problem.
So some of our own authorized programs sometimes have
unintended consequences.
Let me try to reconcile, since we are trying to get
information that will help us authorize programs that work,
there seems to be a difference of opinion between Mr. Patterson
and Mr. Skinner, and maybe it is just I am reading into it.
Mr. Patterson, on page 3 of his prepared comments says:
``We note that the Bush Administration proposes a $200 million
set-aside within HOME for a down payment assistance program to
be administered by State housing finance agencies. We are
opposed to this set-aside.''
Mr. Skinner says: ``COSCDA supports the creation of a new
rental housing production program administered by State
agencies chosen by the Governor and modeled after the highly
successful HOME program.''
Are you all in conflict with each other, or can you help me
reconcile what you all are saying, so as we start to write
legislation we are clear on what it is you are saying?
Mr. Skinner. No, I don't think there is any disagreement.
What I was saying, two things: One is that we, COSCDA, believe
that we need a new housing production program. But, second, the
HOME program has been a very effective program, and I actually
agree with Mr. Patterson's view that there should not be a set-
aside within HOME. As he indicated, HOME currently can be used
for down payment assistance, and both State and local
governments do that now. I don't think there is any dispute at
all.
Mr. Watt. We are talking about authorizing a program here
that the President--or the possibility of authorizing a program
that might have an unintended consequence, if I understand what
Mr. Patterson is saying.
If you set aside $200 million of HOME money for down
payment assistance, and you don't replace that $200 million for
production of new units, am I missing something here?
Mr. Patterson. You are correct.
Mr. Watt. That is your problem with it.
Mr. Frank. You are missing $200 million.
Mr. Watt. That is right. And that is your problem with it,
Mr. Patterson. And you agree with that, Mr. Skinner?
Mr. Skinner. I agree.
Mr. Watt. You agree with it, Mr. DeStefano?
Mr. DeStefano. Why you wouldn't let us make those decisions
locally is beyond me. Let us make them locally about allocation
of HOME funds and CDBG funds.
Mr. Watt. All right. But if you are interested in
production of new low-income house----
Mr. DeStefano. Put more money into it.
Mr. Watt. That is my primary concern, and I am not always
happy with the decisions that get made on the local basis
because they think it is great, the greatest thing since sliced
bread, to do down-payment assistance and do other things. I
keep saying we have got to produce more housing, otherwise this
is not going to work.
Mr. DeStefano. But if you are paying for it by taking
resources away from, let's say, modernization from public
housing, or from our ability to rehab other units, it ends up
netting the same. I think it just comes down to a resource
allocation issue.
If you feel that strongly, then do create a new $200
billion dollar program for housing production.
Mr. Watt. I like that B as opposed to an M.
Chairwoman Roukema. Mr. Watt, have you concluded?
Mr. Watt. I am finished.
Chairwoman Roukema. OK. So, in other words, it is ``show me
the money.''
Mr. Watt. Show me the money. That is part of the problem.
Chairwoman Roukema. All right.
Now we have Congresswoman Jones from Ohio.
Mrs. Jones. Thank you, Madam Chairwoman. Again I want to
compliment you on hosting these hearings on affordable housing.
Good afternoon, gentleman. I want to go first to the mayor.
You spoke about not walking away from public housing. At a
prior hearing with our Secretary of Housing, I raised the
question of the reduction of the drug elimination program. What
impact will that have on public housing in your communities?
Mr. DeStefano. It diminishes the quality of life. It
provides less security in these developments, makes them less
attractive for people to live in, and it writes down the value.
Again, I would think a cornerstone of any affordable
housing program in America would be support of our public
housing developments.
Mrs. Jones. I agree wholeheartedly with you, but I wanted
somebody else to be on the record saying the same thing I was
accused of saying.
Mr. DeStefano. I speak for 3,000 families back in New
Haven. Absolutely.
Mrs. Jones. I hope I can frame this question. I want each
of you to respond to this. Is changing the percentage of median
income that qualifies a family for some of these programs
enough to provide for greater affordable housing in our
communities? Solely changing; I guess that is the question I
wanted to ask.
Mr. Patterson. Are you speaking short of additional
appropriations?
Mr. Jones. Short of additional appropriations.
Mr. Patterson. In my opinion, simply changing the level of
median income would not resolve the basic issue. A perfect
example, quite honestly, is the Section 8 home ownership
initiative. We really are having a difficult time finding banks
to participate, because you are really talking about a
subsidized mortgage with a Section 8 home ownership program
based on an annual appropriation, and you are looking at
putting people in homes with very varied median-income levels.
So the issue of simply raising the median income would not
resolve the issue of lack of dollars to provide additional
units.
Mrs. Jones. Hold on one second. I want to follow up. You
were saying the banks are having a problem with the subsidized
mortgages. What are they saying they need to be supportive of a
program?
Mr. Patterson. The Section 8 program is based on an annual
appropriation. You are asking a bank to commit to a 30- or 20-
year mortgage with an annual appropriation. They are having a
difficult time reconciling those two issues.
Mrs. Jones. Section 8 is supposed to be solely for down
payment assistance.
Mr. Patterson. Actually, the Section 8 rental assistance
can be used as a mortgage payment. The current proposal is to
also permit the use for down payment. But the existing
legislation permits you to use Section 8 for a mortgage
payment.
Mrs. Jones. OK.
Mr. Skinner.
Mr. Skinner. I agree. If I understand the question
correctly, it is changing the median income requirement really
doesn't help on the production side, as Mr. Patterson just
said.
Mrs. Jones. Speak to the whole problem of lack of
affordable housing for very-low-income people, just again for
the record for me, would you please? What suggestions, other
than the programs that you have, other than your statement, do
you have?
Mr. Skinner. I think all of the studies that have been done
throughout the country, including what we have seen in
Maryland, indicates that the greatest need is in families at 30
percent of median or less. Many of those families pay an
exorbitant percentage of their income, 50 percent or more, for
housing, and in many cases live in conditions that are not up
to standards. So I think that is where the need is, and that
can be met either through a new production program or expansion
of some of the existing programs that can be targeted to the
extremely-low-income.
Mrs. Jones. Lastly, Mr. Mayor, you made a statement that
the issue is a larger issue than solely building more housing.
Do you want to elaborate on that for a little bit?
Mr. DeStefano. Did you ever walk through a neighborhood
where people are poor, but they are working, and then walk
through a neighborhood where people are poor and they are not
working? There is a difference.
When you walk through a neighborhood that is characterized
by not just poor housing, but also lack of employment, lack of
ready access to retraining, lack of access to, frankly, what we
would consider middle-class role models is the only way I could
put it, you get a different kind of neighborhood and you get a
different set of expectations in that neighborhood. It just is
not a housing problem at that point.
At some level, particularly in those kinds of
neighborhoods--you mentioned drug elimination grants. Well, you
know, it doesn't take a rocket scientist to figure out what
makes for a good neighborhood, you know? It has got to be safe,
it has got to be clean, it has got to be orderly, it has to
have some social fabric, businesses and churches. That is why I
am sure we have all cut ribbons in our political careers on
housing and then come back 5 or 10 years later and say,
something misfired here.
Mrs. Jones. In the course of my work in my congressional
district, one of the things that I have said, I am for
community economic development, which is more than just
housing. When I was a kid, I could walk to the corner and there
were 25 businesses on the main street from my house, and
therefore I saw people who were at business and people had
little jobs doing different things. It doesn't exist anymore.
We need to develop communities. I agree with you and I thank
you very much, Madam Chairwoman. I am on time. OK.
Chairwoman Roukema. Thank you. Will we bring those
communities back? I don't know. That is a good goal and a good
picture, vision, a vision for us.
I would like to thank all of you for being here today. I
think this has been a very productive hearing. It is the second
hearing of our subcommittee, and I truly believe, as you have
heard or as you saw originally, there was more representation
here of Members than we have had on different subjects before
the full committee and other subcommittees, which shows the
intensity of interest in this subject.
So I fully expect we are going to be able to work toward
some sort of bipartisan agreement with legislation, hopefully
in this Congress, if not this year. I would like to think it
would be this year, but it may be delayed until next.
But in any case, you have made a valuable contribution to
this, and I do want you to know that you have, I believe, 15
days to submit for the record any additional information,
after-thoughts or expansion, because of the time limitations,
that you have not been able to expand on some of your answers
and some of the data that you presented to us. So there are 15
days open to you to submit for the permanent record so that it
will be available to each Member of the subcommittee, and it
will be part of the permanent record.
With that, I thank you, and the hearing is adjourned.
[Whereupon, at 12:25 p.m., the hearing was adjourned.]
HOUSING AFFORDABILITY
----------
THURSDAY, JUNE 21, 2001
U.S. House of Representatives,
Subcommittee on Housing and Community Opportunity,
Committee on Financial Services,
Washington, DC.
The subcommittee met, pursuant to call, at 9:35 a.m. in
room 2128, Rayburn House Office Building, Hon. Marge Roukema,
[chairwoman of the subcommittee], presiding.
Present: Chairwoman Roukema; Representatives Green, Barr,
Kelly, Miller, Grucci, Tiberi, Frank, Carson, Schakowsky,
Jones, Capuano, Waters, Watt and Israel.
Chairwoman Roukema. Thank you. I believe we will get
started. I am hopeful there will be more Members here shortly.
But I will call this hearing to order. The Subcommittee on
Housing and Community Opportunity. This discussion will of
course be the third in a continuing series on housing
affordability. I will read an opening statement and then see if
we have other opening statements from Members of the
subcommittee.
I certainly thank all of you for being here today. This is
the third, particularly for those panel members and those who
are listening today in the audience--this is the third in a
series of hearings that this Subcommittee has scheduled.
Our first hearing on May the 3rd witnesses defined the
parameters and the complexities of the problem and outlined
some potential solutions. At least they gave us some idea of
the problems. At the second hearing on May 22nd, our witnesses
testified regarding the public-private initiatives that address
housing affordability, which of course I believe that there is
a good constituency in this Congress for exploring further
public-private initiatives.
But in any case, we also want to work with community
development block grants and home investment partnership
programs, the so-called acronym of HOME. And I think those have
lots of possibilities in developing and expanding home
ownership and rental opportunities.
Today's hearing will focus on the underutilization of
Section 8 vouchers as well as the specific problems faced by
the homeless and disabled populations in finding affordable
housing. And here I'd like to acknowledge, and I think Mr.
Barney Frank will acknowledge as well, the fact that we had
worked for numbers of years and certainly I worked closely with
our deceased colleague, Bruce Vento, who was such a wonderful
leader in this area.
This country is obviously facing a growing affordable
housing crisis for low- and moderate-income families and for
those with special needs. Through these hearings, I hope to
better define the problems that are faced by many of our
families and to determine solutions, if not solutions, at least
improvements directing us down the correct path to build a
foundation for reaching those solutions.
I would hope--and we shall see how realistic it is--I would
hope that we could come up with a bipartisan approach to this,
not that we'll all agree on everything, but at least we
sometimes can agree to disagree and in the end have a
bipartisan solution which is somewhat of a compromise that
complements each other.
The Section 8 program, as we all know, provides direct
financial--I'm sorry, Federal housing assistance to low-income
Americans and it serves more than three million Americans. The
program provides subsidies in two forms: Tenant-based
assistance, which is the Section 8 vouchers, and assistance to
owners to develop and maintain Section 8 projects, those so-
called project-based assistance.
The Section 8 voucher program provides vouchers to families
to rent a residence in the private rental market. In certain
communities, voucher underutilization is a significant problem
and seems to be growing. Underutilization of vouchers has been
attributed to various causes, including the tight rental
market, poor performance of public housing authorities, and the
targeting of a large percentage of voucher to very-low-income
individuals, low Fair Market Rents, and the rent caps of 40
percent of adjusted monthly income. I think we're going to have
to go through those in detail with our panelists.
But in any case, we don't pretend to understand fully why
this has been--well, we understand why it's been a growing
problem, but how we can positively and constructively address
these different components, we shall look forward to hearing
from this panel, particularly our first panel, and trust that
their experience in the field will be more than just theory,
but will be actual proven understandings of what happens in the
field.
And so we will look for your suggestions to help us
determine, with specificity I hope, how we can improve the
voucher program.
The witnesses on the second panel will share with us
information on the problems faced by the homeless and disabled
in our country. I know that we are keenly aware of the growing
homeless crisis facing this country and it is interesting that
in some areas of the country it hasn't seemed as though it's a
growing problem, but without question, across the country it is
a growing problem, although not quite as serious I don't
believe as when we first started down this route in the mid-
1980s to correcting the problem.
It is astonishing to note that according to some estimates,
between 2.3 and 3 million people are homeless, at least some
part of the year. It seems that there are chronically homeless
of probably 200,000. It seems as though the reasons for these
are the demolition of existing units and the neglect of public
housing authorities and there doesn't seem to be the kind of
upkeep that is necessary and the high cost of housing. The
effect of a relatively good economy has been that there has
been acute shortage of moderate to low-income housing and the
dramatic rise in expensive housing.
Now the individuals that need housing are not only poor, as
we will hear from the second panel, but they also suffer from
some of the chronic health problems such as mental illness,
alcoholism, drug abuse and/or HIV/AIDS problems. Secretary
Martinez has signaled an interest in shifting responsibility
for the care of the homeless with mental health substance abuse
problems to HHS.
I don't know how realistic that is, but it has been out
there as an idea, and I look forward to working both with
Secretary Martinez and Secretary Thompson. By the way, I
haven't yet discussed this with Secretary Thompson, but I fully
intend to. But we look forward to working with both of those
cabinet members determining the appropriate way to deliver the
services so desperately needed.
Finally, I would like to take a moment to recognize the
leadership of our Vice Chairman here, Mr. Mark Green. Last
year, Congressman Green authorized a provision that was passed
by Congress as part of the Lazio bill that would expand the
Section 8 home ownership rule to make the program more
accessible to people with disabilities. His provision--I won't
go into it. Maybe he'll want to make reference to it in his
opening statement, but his provision provided a 3-year pilot
program for disabled individuals to use Section 8 housing.
And yesterday, the President announced that HUD would be
moving forward to implement Congressman Green's provision, and
we were very happy to hear that.
In any case, we look forward to this hearing. There are no
easy answers, but we will be looking for your advice and
counsel based on your experiences in the field. And with that,
I will turn to our distinguished Ranking Member, Congressman
Barney Frank.
Mr. Frank. Thank you, Madam Chairwoman.
Let me point out to the witnesses and others who are
interested that while I can't say that hearings focusing on
poor people ever have the drawing power than fights between
extremely rich people grouped in various competing businesses,
we sometimes do better than this. The problem is that we're on
a new schedule in Congress. We don't have votes before 6:00 on
Tuesday and then we have no votes after 6:00 on Thursday, which
means that the days on which Members can come together when we
have to interact have now shrunk to two. And this has caused a
severe--I think people haven't fully understood this. We used
to have three and even 4-day weeks. We now have 2-day weeks in
terms of our ability to schedule things. And I regret that for
a number of reasons. But one of them is it means that Members
are unduly squeezed, and that's why fewer Members are now at
these kind of important hearings.
This is a particularly important hearing. I'm especially
pleased that we have the people who have the commitment and
willingness to actually administer these programs. I think that
the people who serve the country by administering housing
programs in various ways are heroic. They have been doing a
very difficult job in this society with too little resources.
The resources have been shrinking, and I am glad that they are
having a chance to speak, particularly since--and my
fundamental difference that's emerged so far with the Secretary
of HUD is his insistence that the problems with the Section 8
program are virtually exclusively the fault of poor management.
He has specifically said that he just believes that a good
management can deal with it and rules out other factors. I
think that's quite wrong for a couple of reasons, and I'm glad
we have people who will be able to address that.
There were two substantive points I want to add. I notice
just leafing through some of the testimony, people quite
correctly say, well, if you were to do X then you would, within
the current context, reduce Y. And that is true. If you accept
the current budgetary allocation for housing as something that
we can't change. And I realize if you're out in the field, yes.
That's given to you. Then it is true, increasing fair market
rents could mean a decrease in the number of people who
benefit, and so forth.
What I think this demonstrates is the economic and moral
insufficiency of the current housing budget. We all agree that
we have serous housing problems. The gentlewoman from New
Jersey just talked about our increasing homeless problems.
Money doesn't solve everything. I understand that. But what
I've noticed is when people denigrate the notion that we should
increase funding for a particular program with the cliche, you
can't solve a problem by throwing money at it, they are almost
always talking about a problem with which they are not too
concerned. I have heard very few people in this institution say
that we cannot make America stronger by throwing money at the
Pentagon. Indeed, when the budget process starts, if you get
between the Congress and the Pentagon, you are likely to be hit
by projectiles as the amounts in large degree are thrown at
them.
In fact, money means resources, and resources are a
necessary but not sufficient condition. Certainly it is true
that if you spend money unwisely, you may not help the program
nearly as much, although I did note quite correctly I think, it
was in Mr. Olsen's testimony, he said look, if you've got a
problem of an insufficient utilization rate on vouchers, if you
increase the number of vouchers, you're going to increase the
number that are used. I mean, the fact is, money always helps.
It helps much more if it is used well.
And so in the richest country in the history of the world,
a society which has created wealth fortunately through our free
enterprise system which has worked so well at a greater pace
than any of us thought possible, it is simply morally
unacceptable that we do so little to help people who are in
need of basic housing.
And when we talk about helping children and leaving no
child behind, we should understand that when you insufficiently
fund public housing and other housing programs, wholly innocent
children are among the major victims. They are the ones who are
forced to live in inadequate conditions, and living in
inadequate conditions and the tensions that are thereby
generated contribute to the problems that we face when they
show up at school to be educated.
Secondly and correlated to this, I want to make things work
better, but I object very much to the double standard that we
have. People say well, you know, everything would be fine with
the money we have for housing if every housing program were
administered perfectly by paragons of absolute virtue. I will
admit that people who run the housing programs are not perfect.
Neither am I, so I don't condemn them for that. But we have
this notion where we hold people in the business of trying to
help the very poor to a very high standard. And if, in fact,
they fall short of perfection we say, see? It's their problem.
We don't apply that to NASA. We don't apply that to the
Pentagon. We certainly don't apply that to agricultural
programs. Yes, when complex human problems are being addressed,
people will do them imperfectly. But to use that as an excuse
to insufficiently fund the program is unacceptable.
And I will just add as I began, in my experience, the
people who have volunteered to work in public housing
authorities, to administer public housing, to administer the
Section 8 program, to work with people who need housing, are
dedicated and intelligent people who do a very good job. And
the notion that, because given this very hard job to do, they
aren't always able to do it perfectly, is somehow a
justification for reducing or holding back on resources is one
I reject.
I would say I think that the hearings that we have held so
far--and I thank the gentlewoman from New Jersey, the Chair,
for doing this--I have been impressed by the wide variety of
people from various points of view who have said that we need
to get into a production program and increase the resources
available for housing while at the same time making the voucher
program work better.
So I am glad to have this chance to have this hearing,
because I think those are the points that need to be
emphasized.
Chairwoman Roukema. I thank my Ranking Member. Now in order
in which they have arrived, do any of my colleagues have
opening statements?
Vice Chairman, Mr. Mark Green.
Mr. Green. Thank you, Madam Chairwoman. Let me begin by
thanking you for your kind remarks in your opening statement. I
appreciate it very much. Also I would like to commend you for
holding these hearings on housing affordability. You've
demonstrated once again your great interest in finding ways to
make housing more affordable, more accessible to people across
the spectrum.
I think the hearings that we have had on housing
affordability to date have been very productive. And I think
along with the hearing today they will provide us with some
good ideas, a good map for the direction in which we can move.
You were kind enough to make reference to legislation which
we passed last year designed to help people with disabilities
better use Section 8 dollars for housing affordability. And I
was very proud to have President Bush reference that just
recently along with his signing of the Olmsted Executive Order
which I believe will go a long way to helping people with
disabilities.
I appreciate the remarks of the gentleman from
Massachusetts when he talks about how we do need more resources
in order to meet our housing challenges. I agree with that. But
I also believe it is not just the resources that we provide. It
is making sure that how we provide them is done so in a
flexible way, in a way that makes sense and can be tailor made
to the particular problems of the people we're trying to help.
And that's part of what we did last session with respect to
people with disabilities in housing.
Right now in the general population, about 70 percent of
the general population has home ownership. And yet, as we've
all discovered, that among people with disabilities of working
age, that home ownership rate hovers around 5 percent. And so
we tried last session to look at what the barriers are that
prevent them from having that chance at the American Dream of
home ownership and tried to make slight changes to the Section
8 program to do so.
So what I'm looking forward to working on under the
leadership of our good Chairwoman in these coming months is not
just making sure that the resources are there, because they
must be there if we're going to meet our challenges, but also
making sure that we think in an innovative and creative manner
and take some of the programs that we have and adjust them and
make them flexible so they can meet local needs and the needs
of particularized sectors of the population.
I think that there are some great changes that we can make,
and I'm excited again about these hearings, and I'm very
excited about the great panels we have lined up today. I
believe it'll be an informative, productive hearing. Thank you,
Madam Chairwoman.
[The prepared statement of Hon. Mark Green can be found on
page 378 in the appendix.]
Chairwoman Roukema. Thank you.
I will remind our Subcommittee Members that we have a 3-
minute rule for opening statements and you will see the yellow
light kind of warn you at the speakers' table, the panelists'
table that your time is almost up.
Thank you. Mr. Watt, do you have a 3-minute opening
statement?
Mr. Watt. Thank you, Madam Chairwoman. And I'll try to take
less than 3 minutes.
I think I have made to everybody on the Subcommittee,
probably not the panelists, but everybody on the Subcommittee
is aware of my concerns about some of the problems that Section
8s are having in my congressional district. And the unique
thing is that in some parts of my congressional district,
Section 8 vouchers are working as they were intended to work
and serving a very, very important purpose.
The problem is that we tend to think of Section 8 vouchers
as being the greatest thing since sliced bread, and that they
will solve all problems. And in some parts of my congressional
district, they simply are not working. They are not working
because demand is so much higher than supply that rents have
been driven up well beyond the Section 8 voucher limits, and
there's just no space available to use the Section 8 vouchers.
They're not working in those parts of my district because
what tends to happen is the Section 8 vouchers are used
primarily in vulnerable, primarily African-American
neighborhoods that themselves are in transition and the people
coming out of public housing using Section 8 vouchers make the
communities more vulnerable. In some parts of my congressional
district, you can't use a Section 8 voucher in what is a
``white neighborhood.'' So Section 8 vouchers tend to further
segregate an already segregated housing situation in parts of
my congressional district.
So I'm anxious to get some good ideas about how we solve
some of these problems and retain the value that Section 8
vouchers are having in lower demand, lower cost sections of my
congressional district, but also solve the problems that they
are presenting in the higher cost, higher demand parts of my
congressional district.
And with that, Madam Chairwoman, I'm sorry I did take 3
minutes, but not much more. I yield back.
Chairwoman Roukema. Thank you. We'll forgive you for that.
Let me now call on--I'm calling on Members in the order in
which they've arrived. Congressman Grucci. But may I also say I
neglected to say at the beginning that the record will be kept
open for all Members' opening statements to be inserted into
the record if you so choose.
Congressman Grucci.
Mr. Grucci. Thank you, Madam Chairwoman. It's a pleasure to
be here again and to listen to this panel. It's going to be
very enlightening. Certainly affordable housing and access to
it, whether it's affordable housing or affordable rentals, is a
very important issue for all of us throughout the country, and
specifically in the region that I come from, where the cost of
living is higher and therefore the access to affordable housing
becomes even more difficult, because sometimes they don't meet
the parameters that have been set out as far as accessibility
to the program goes. And I'm hoping that we'll hear a little
bit about that today.
And one of the things about our Section 8 program that I
remember from being a supervisor of a town that administers the
program is simply the enormous waiting lists of people who need
the help and the limited amount of help that's available to
those Section 8 programs. And I'm encouraged by this panel, and
I see some of them are prepared to talk about that today.
So I look forward to the discussion. I'm going to have to
step out of the hearing for a short period of time.
Unfortunately, there is a scheduled Science Committee hearing
that I'm a Member of as well, and I'd like to hear the briefing
from the Secretary of Energy on the energy problems, but I will
be back, Madam Chairwoman, and I thank you for giving me this
opportunity to speak this morning. And I yield back the
remainder of my time.
Chairwoman Roukema. Thank you very much.
Mr. Israel, Congressman.
Mr. Israel. Thank you, Madam Chairwoman. I would like to
submit into the record a series of Newsday articles that
appeared this week on the issue of homelessness and children on
Long Island.
[The information referred to can be found on page 382 in
the appendix.]
Mr. Israel. I'd like the subcommittee to note that there
are nearly 1,500 homeless children in Nassau and Suffolk
Counties, 1,100 in Suffolk County alone. Over the past 4 years,
Nassau and Suffolk social services departments recorded a 93
percent increase in the number of homeless children.
As we continue to look at housing affordability issues, we
must look at the devastating impact that this crisis is having
on our children and our families. Because fair market rent on
Long Island for a two-bedroom apartment is $1,200 a month, a
family would need to earn an annual income of $46,000 a year or
more than four times the minimum wage to meet their rental
costs. Many people just can't afford their rent, causing
immediately homelessness with many living day-to-day out of
motels.
I thank the subcommittee, the Chairwoman and the Ranking
Member for exploring these issues, and I look forward to
hearing today's testimony. And I yield back.
Chairwoman Roukema. Thank you very much.
Congressman Miller.
Mr. Miller. Thank you, Madam Chairwoman. I agree with Mr.
Frank on one thing, that we are here a few days a week. But I'm
also convinced that if we were here 7 days a week and just
continued to talk about a problem rather than addressing the
problem, it wouldn't make any difference at all, and all we
tend to do is talk about the problem on the surface and yet
never deal with the cause of the problem.
We talk about Section 8 vouchers, and that's good. There's
a place for Section 8 vouchers. But many of the problems we
have in housing are the result of Government red tape. Until
we're willing to address that, nothing is going to change. Many
problems in housing availability are related to the loss of
property rights. I mean, courts have changed what the law
really was intended to be on property rights where it's such
that if a property owner is denied the use of his property, as
long as there is some value left in the property, the court has
ruled that that's not a taking. And if a property owner
disagrees with that, it takes 8 years to get into Federal court
for him to have his hearing, and most people can't even afford
to get into Federal court.
We need to consider issues of fish and wildlife that we've
never addressed. We tend to focus on inner city housing and
inner city housing is good and there is a need for it. But we
also need to understand that property within inner cities is
very expensive, and in most cases, to utilize property within
inner cities takes redevelopment agencies to put tax dollars
into it and Federal dollars also have to follow that in order
to be able to build a product that individuals can live in
within an inner city area that is affordable.
We have never attempted to address the concept--we've
talked about it--that in order to have an affordable housing
market, you have to have a move-up housing market. I mean,
people have to have someplace to move to in order to be able to
find housing that's affordable in some areas. And yet we have
done nothing from the Federal perspective to reestablish the
principles of property rights and enable builders who want to
provide housing at affordable rates to be able to build those
homes. But you can't have a situation where a property owner
makes application with a tract map and he waits 8-, 10-, 12- or
15 years to get approval. And then we sit back and say ``why
are houses so expensive to buy?''
And until we address the true cause of the lack of
affordable housing and the crisis we face, we're never going to
do anything except put Government bandaids over the problem and
try to give Section 8 vouchers to put people in housing that
they just can't afford without other than Federal help or local
help from the redevelopment agencies. So Madam Chairwoman, I'm
looking forward to getting to the day when we debate the real
issues.
Mr. Frank. Would the gentleman yield?
Mr. Miller. My time is up or I would.
Mr. Frank. I doubt that.
Chairwoman Roukema. That having been said, I think there
will be a lot of time after the panel testifies for that
continuing dialogue.
Mr. Frank. The gentleman had 20 seconds left, I may note.
Chairwoman Roukema. May I now call on Congresswoman Kelly.
Mrs. Kelly. Thank you very much. I appreciate the fact that
we're holding the hearing today, and I appreciate the fact that
the panel is willing to spend their time.
In my home county, the median price of a house is $412,000.
That's up 32 percent from $313,000 in the first quarter of
1999. HUD has declared that a fair market rent in my home
county for a two-bedroom apartment is $1,144. That's higher
than New York City. As of February 8th, there are 13,207 people
on the Section 8 waiting list, yet the county and communities
aren't able to use all of their Section 8 vouchers because of a
combination of a lack of available housing units and the
inability of the Section 8 vouchers to cover the fair market
rent for the area.
I can't help but feel frustrated when I think about that
problem. We have a program in place with extra vouchers to
assist families, and we have a very long list of families who
have applied for the assistance, but they're not able to use it
because they're priced out of the market. The dilemma poses a
very real problem for the working poor and the businesses in my
area.
I have an article here from one of my local papers, the
Journal News, from May 25th. I'm going to ask unanimous consent
to have this made part of the record.
[The information referred to can be found on page 392 in
the appendix.]
Mrs. Kelly. The headline of this article is, and I'm
quoting: ``Housing Challenges Businesses.'' In the article, it
quotes a real estate person as saying that housing prices deter
some companies from even considering relocation in this county.
The article goes into detail about the lack of affordable
housing.
One of my foci today is to look at what else Congress could
be able to do to strengthen existing programs that are having
positive results in addressing the need for affordable housing
and especially the need for veterans' affordable housing. With
most legislation, I believe a balanced approach is necessary. I
think we've got to continue to ensure that effective programs
receive all the support they deserve. But I really do think
we've got to make sure that those programs are focused in a
more regional way.
I thank you very much, Madam Chairwoman, for holding this
hearing and I yield back the balance of my time.
[The prepared statement of Hon. Sue W. Kelly can be found
on page 380 in the appendix.]
Chairwoman Roukema. Thank you. I appreciate everyone has
been quite cognizant of our time limitations here.
And now we are ready to hear from our first panel. I am
going to introduce you each individually as it is your turn to
testify, but I would like to remind you of the rules of
engagement here. Your written statements will be made part of
the record, your full written statements. But you will be
recognized for a 5-minute summary of your testimony. And then
of course there will be questions from our Members to the total
panel after each one of you has testified.
And with that as introduction, I would like to recognize
Barbara Sard who has requested that she be the first to testify
because she has another engagement. Barbara Sard is the
Director of Housing Policy for the Center of Budget and Policy
Priorities. The Center's housing work focuses primarily on the
intersection of housing and welfare reform and the voucher
program. Ms. Sard, you are an attorney, as I understand, and
represent Greater Boston Legal Services.
Ms. Sard. That was my prior job.
Chairwoman Roukema. So maybe you're acquainted with Mr.
Frank here. All right.
Ms. Sard. He's my Congressman.
Chairwoman Roukema. Thank you. Ms. Sard, you have the floor
for 5 minutes.
STATEMENT OF BARBARA SARD, DIRECTOR, HOUSING POLICY, CENTER ON
BUDGET AND POLICY PRIORITIES
Ms. Sard. Thank you very much. And thank you very much for
holding this hearing. I think it is remarkable and encouraging
that this subcommittee is looking into what can actually be
done to improve the effectiveness of the voucher program rather
than everyone just complaining about it.
It is important to recognize that the increased
difficulties that families are having in some areas, as many of
you have addressed, in using vouchers, particularly in better
neighborhoods, as Representative Watt mentioned, have a number
of different causes that require a range of solutions. This is
not a one-size-fits-all kind of problem or solution.
In some areas if one looked at the data, it looks like
there are enough units that people with vouchers could afford
so that vouchers should be able to be more effective. But the
problem is that families are not able to find efficiently the
units that are available or there are not enough owners who are
willing to participate in the program. Owners in certain
neighborhoods may hold their units out of the program for
reasons that may have to do with how they think the program
operates and in some cases for reasons that really may be a
cover for racial or other discrimination.
In other areas, again, there are units, but they're too
expensive. Many of you mentioned that there have been
escalating prices, and the voucher program has not kept pace.
And I will talk a little about what some of those rules are and
what some of the solutions might be.
And in still other areas where there are such low vacancy
rates that paying any amount for a voucher is not going to get
someone a unit, we simply need to produce more housing, as some
of you have mentioned.
My written testimony contains a wide range of proposals
designed to address these four really quite different
situations and many things HUD could do within the existing
statutory framework. HUD may need a prod from this
subcommittee. It may be important for the subcommittee to
encourage HUD to take certain steps or to require them. Other
measures can only be accomplished by some statutory changes.
What I'd like to focus on in my few minutes remaining is to
illustrate that the problems can be solved by making more
housing available to poor families. It is not necessary to try
to solve the problem by making families pay more when they use
a voucher or by redirecting the program to serve higher income
families. And I'm afraid that we didn't quite blow this chart
up enough, but we've given each of you copies.
Chairwoman Roukema. Yes. We each have them. Go ahead.
Continue.
Ms. Sard. What I've done is develop an example based on the
Trenton metropolitan area in New Jersey, which is the median
cost area in terms of rents under HUD data for New Jersey. It
has the fair market rent set at the 40th percentile. You'll
hear some of my colleagues address that. For a two-bedroom
unit, that fair market rent is $862 a month. You can see that a
family making $13,000 a year--that is an extremely-low-income
family--can rent a $900 unit under the program, though they
have to pay a little more out-of-pocket than the standard 30
percent. They have to pay 34 percent of their income. But they
are not allowed to rent the $1,000 unit because of the effect
of what's called the 40 percent cap: that a family is not
allowed to pay more when they first rent a unit than 40 percent
of their adjusted income.
Now if the word ``adjusted'' in the statute were just
changed to ``gross'' so that that rent cap was measured by
gross income rather than adjusted, this $1,000 unit would be
within the family's reach. And in general, more of those $900
units even would become available to families if agencies were
able to do more to help families search and to bring more
owners into the program.
But, if the agency raised its payment standard to 110
percent--which is allowed under current law, but only about a
third of the agencies are at 110 percent or more--then the
$1,000 unit would be available to them, and even the $1,100
unit would come within their reach if the 40 percent cap was
changed from adjusted to gross income.
Most significantly, if the law were changed or HUD policies
were changed so that the agency could set its payment standard
at 120 percent of FMR, all of these units would be available to
this poor family. I'm about to run out of time, so I won't take
you through the example with the family with double the income.
But if you look at Chart B, if the family has $26,000 of
income instead of $13,000, it can reach a few more units. But
the important point is, you don't have to go there. You can
keep the program targeted at the families with the greatest
housing needs if you give agencies the ability to increase the
amount that is paid by a voucher. Thank you.
[The prepared statement of Barbara Sard can be found on
page 394 in the appendix.]
Chairwoman Roukema. Thank you. Thank you very much. You
made your point very directly and within the 5-minute time
limit.
Our next panelist is Steve Renahan. Mr. Renahan has worked
for the Housing Authority of the City of Los Angeles and he is
testifying before us today in his capacity as the Vice
President for Housing for the National Association of Housing
and Redevelopment Officials. He has extensive experience with
the national low-income housing issues as a member of the
Crisis Task Force and the Housing Coalition Section 8 Task
Force. Mr. Renahan.
STATEMENT OF STEVE RENAHAN, SECTION 8 DIRECTOR, HOUSING
AUTHORITY OF THE CITY OF LOS ANGELES ON BEHALF OF THE NATIONAL
ASSOCIATION OF HOUSING AND REDEVELOPMENT OFFICIALS
Mr. Renahan. Thank you, Madam Chairwoman.
Good morning. My name is Steve Renahan and I administer the
Section 8 program in Los Angeles, California.
Chairwoman Roukema. Excuse me. Could you speak a little
closer to the microphone?
Mr. Renahan. We administer over 40,000 Section 8 vouchers
in Los Angeles, California. I am testifying today in my
capacity as the NAHRO Vice President for Housing. NAHRO members
administer over 93 percent of housing vouchers in the country.
Thank you for this opportunity to offer our remarks
regarding Section 8 utilization. Section 8 is a market program,
and it needs to respond to market changes.And I'd like to focus
on two initiatives that would go a long way to achieving full
utilization of Section 8 in the country.
First of all, we've been through a major change in Los
Angeles in the rental market in just the last 3 years. Three
years ago we had a 10 percent vacancy rate and Section 8 was
very popular with landlords. Now we're down to a 3 percent
vacancy rate, which means there are fewer units available, and
landlords have a lot of other choices. What that's meant for
Section 8 voucher holders is that 3 years ago, 90 percent of
the families we issued vouchers to successfully used them. Now
only 45 percent of the families we issue vouchers are able to
access units and get a Section 8 subsidy.
What has changed is not a lot of program rules, not the
Administration, not the need of the voucher holders. What's
changed is the market. And the program needs to respond to
those market changes. Now fortunately, we do have examples of
efforts that work. We administer a lot of special-purpose
versions of Section 8. Section 8 vouchers for homeless
families, for families whose children are in the foster care
system and can be reunited, an after care program for persons
with disabilities. And what we do with those programs is
partner with non-profits and other Government agencies who can
provide supportive services to help the families who receive
those vouchers overcome the barriers to using those vouchers.
What the families will need will vary, and often it is
landlord outreach and negotiation with landlords. We may need
to do some credit repair. May need to motivate the family to
keep searching even though they have heard no over and over and
over again. We may need to help with security deposits, with
moving expenses, with transportation, with child care while the
family is searching.
What's needed will vary family to family, but what is clear
is that it works. While the success rate on our regular Section
8 program where families don't have access to those kind of
services is down to 45 percent, in our special programs where
the families have the toughest barriers to overcome, our
success rate remains close to 90 percent. So it is clear that
when those kind of services are provided, Section 8
utilization, high utilization results.
Now NAHRO recommends that you don't need a new
appropriation to fund those kinds of services. In instances
where housing authorities are underutilized, that means that
housing authorities have housing assistance payments money that
they're not using because they're not fully utilized. If
housing authorities who are operating at less than 100 percent
utilization were allowed to convert some of that housing
assistance payments money into services money, whether provided
directly by the authority or in partnership with non-profits
and faith-based organizations, you will see a major dramatic
increase in Section 8 utilization, even in tough markets.
But tough markets and rising markets are the areas where
Section 8 utilization is the most difficult. And the fair
market rent is crucial in making the Section 8 program work.
The fair market rent is supposed to in most areas calculate the
40th percentile for non-luxury housing. It is a difficult
calculation for HUD to do. I believe that in general what it
does is calculate the 40th percentile on average for rental
units in the area.
But voucher holders are not looking for an average rented
unit. They're looking for a unit that's available for rental
today. And in up markets what that means is that what the
landlords are demanding for a unit will be far above what the
average is for units in the market. And we've seen historically
that the fair market rent changes that HUD publishes lag behind
increasing markets.
So a simple, straightforward fix for this that NAHRO
recommends is changing nationwide the calculation from the 40th
percentile to the 50th percentile. That does not mean that the
cost of every Section 8 voucher will go up. Housing authorities
do a rent reasonableness test, a comparability test for every
voucher contract we do so that we are not paying the landlord
more than the landlord could get in the open market, and we
will continue to do that. What that increase will do is allow
voucher holders access to more units and allow the program to
work better in changing markets.
Thank you for the opportunity to testify, and I welcome any
questions.
[The prepared statement of Steve Renahan can be found on
page 410 in the appendix.]
Chairwoman Roukema. Thank you very much, Mr. Renahan. I
appreciate your compliance with the time limitations, and
you've given us a number of things to think about.
Now we have Mr. Roy Ziegler. As a Member from the State of
New Jersey, since Mr. Ziegler is from the New Jersey Department
of Community Affairs, I want to welcome him particularly here
today.
Mr. Ziegler is the Assistant Director of the Division of
Housing and Community Resources in the New Jersey Department of
Community Affairs, and certainly he has a wealth of knowledge.
With my own experience in the State of New Jersey, I know of
his wealth of knowledge on this subject of Section 8 vouchers.
Welcome, Mr. Ziegler.
STATEMENT OF ROY ZIEGLER, ASSISTANT DIRECTOR, NEW JERSEY
DEPARTMENT OF COMMUNITY AFFAIRS, DIVISION OF HOUSING AND
COMMUNITY RESOURCES ON BEHALF OF THE NATIONAL LEASED HOUSING
ASSOCIATION
Mr. Ziegler. Thank you, Chairwoman Roukema. And good
morning Ranking Member Frank and distinguished Members of the
subcommittee. I really appreciate this opportunity to speak
with you on behalf of the National Leased Housing Association
today about the Section 8 housing voucher program.
My name is Roy Ziegler, and I am Vice President of the
National Leased Housing Association and presently Assistant
Director of the Division of Housing and Community Resources at
the New Jersey Department of Community Affairs. I am
accompanied today by NLHA counsel Charles Edson who is behind
me.
The Section 8 voucher program is really a critical part of
our overall housing policy for the country, and it allows low-
income families the opportunity to use a portable subsidy to
rent decent, safe and sanitary housing, either an apartment or
a single-family home. And nationally over 1.5 million families
are currently benefiting from this participation in the
program.
In New Jersey, our Department of Community Affairs
administers 18,000 housing vouchers. Over the years, the
Section 8 tenant-based programs have improved dramatically. We
have had your assistance in consolidating regulations, removing
barriers to landlord participation, and also adding flexibility
to enable voucher holders to find apartments with the aid of
the program, and also to use family self-sufficiency programs
and home ownership opportunities recently to provide additional
housing for families.
For example, in New Jersey, the Department of Community
Affairs currently has 1,200 families in our family self-
sufficiency program. Over half of those families have already
obtained employment and have established escrow savings
accounts totaling $3.2 million. An additional 150 families have
already successfully completed that program, and astonishingly,
90 of those families have purchased their first time home buyer
situations. They are currently owners of their own homes for
the first time. What is remarkable about this is that with the
aid of the self-sufficiency program, the Section 8 program and
network agencies, half of those families were homeless when
they entered the Section 8 program and are now homeowners.
NLHA's members really appreciate your interest, the
interest in this Subcommittee in helping us to sustain and
improve this voucher program. And we really are seeking high
utilization rates and top rate efficient programs. But as has
been mentioned earlier, there continue to be a number of
barriers which we hope you can help us with.
PHAs and other administering agencies in many communities
are faced with outpaced rents that Steve Renahan had mentioned
earlier. As a result, there are more vouchers out there in some
cases than there are landlords who are interested in accepting
those vouchers. And consequently, many agencies have had to
issue three or four vouchers to get one successful family
placed in a Section 8 program anticipating turnbacks.
Theoretically in reality, you can have 95 percent success
rate in Section 8 as a program of utilization, but still have a
75 percent success rate overall in your program. And this is
frustrating to families who are waiting for assistance. Not
only frustrating for families, but it raises the cost of this
program because it creates additional burdens and workload for
PHA administrators.
You have already taken the important step of raising some
of the rents in the country to the 50th percentile. What we are
asking you to do is to really urge HUD to expand its 50th
percentile authority to all the PMSAs in the Nation.
And Congress can also take steps to improve the ability of
families to successfully use their vouchers by amending the
statutory provisions of the payment standard.
Generally, PHAs set the payment standard at anywhere from
90 to 110 percent of the FMR. And we can go up to 110 percent
of the FMR without HUD approval. What we are asking is the
additional flexibility to do a statutory amendment here to
allow administering PHAs to increase that 110 percent to 120
percent of the FMR that we currently have. This would
significantly increase the number of units available in our
communities.
Also the 40 percent cap has been mentioned, and I believe
the 40 percent cap is another barrier to families in this
Section 8 program. Take, for example, an elderly couple where
one of them is deceased and the other remaining member suddenly
has an incredible decrease in their annual income. That
particular person would qualify for the Section 8 voucher, but
under the 40 percent cap, if they are paying 41 percent of
their income for rent. And after that income decreases, that
family would not be eligible for Section 8.
And as a result, try to explain to somebody who has been
living in an apartment for many years that they can't afford
this apartment because they are paying 41 or 42 percent of
their income for rent with a voucher, then they lose their
voucher and wind up paying 60 to 70 percent of their income for
rent. Now this is really a barrier to many families in the
program.
Also the 40 percent has been mentioned as far as the
income. And our solution is to calculate the 40 percent using
gross income instead of adjusted income, as Barbara Sard had
said. This would also open a number of opportunities for
families who cannot afford the program at the 40th percent
rate.
The current fee structure for administering the agencies is
often inadequate to allow intensive tenant counseling, landlord
outreach, addressing special populations. All these things that
could be done with the current administrative fees. Formerly
HUD had allowed us a preliminary fee. And we are asking that
HUD restore this preliminary fee to allow us to do counseling
and referral to get families into a better market and to expand
the landlord base.
This has been proven with the Regional Opportunity
Counseling Program in New Jersey which with this counseling
under the Regional Opportunity Counseling Program, our success
rate has increased to 95 percent.
Thank you very much.
[The prepared statement of Roy Ziegler can be found on page
425 in the appendix.]
Chairwoman Baker. Thank you, Mr. Ziegler.
Now we have Mr. Michael Johnston, who is today testifying
on behalf of the Council of Large Public Housing Authorities
and is Director of the Cambridge Housing Authority Office of
Leasing and Occupancy. He is an attorney and former CEO of a
property management and real estate development company, and so
you bring to this panel a little private sector understanding
of the problems. I thank you very much for being here, and
please adhere to the time limits. We are most anxious to hear
you.
STATEMENT OF MICHAEL JOHNSTON, DIRECTOR OF LEASING AND
OCCUPANCY, CAMBRIDGE, MASSACHUSETTS HOUSING AUTHORITY ON BEHALF
OF THE COUNCIL OF LARGE PUBLIC HOUSING AUTHORITIES
Mr. Johnston. Thank you, Madam Chairwoman, and I would like
to thank the panel for having these hearings on behalf of us in
the industry. I would like to thank also Congressman Frank for
his remarks regarding public housing authorities in general and
the support of our programs. It is much appreciated.
We, just like my colleagues here on this panel, are faced
with the same problems. We have escalating rents. We have kind
of a unique situation in the fact that we've recently lost rent
control approximately 5 years ago. And our vacancy rate right
now is about 2 percent. Individuals receiving Section 8
vouchers from our agency face the task of going out and trying
to find units in a market where market rents right now average
for a two-bedroom apartment approximately $1,800 a month.
HUD defines in our area, as far as what they consider the
Fair Market Rent, they define it in our area at $979. We have
an exception rent from HUD. We can actually go to $1,175 for a
two-bedroom apartment in the city of Cambridge. But obviously,
$1,175 does not make to the $1,800 level. Our contention is
that the 40th percentile, the numbers that HUD is currently
using, are not real. Certainly 40 percent of the units that
come on the market are not available to individuals at a rent
of $979. We would agree that a move to the 50th percentile
would be certainly needed. But beyond that, there needs to be a
look at how these numbers are calculated. How is HUD coming up
with the numbers, the actual number of the 40th percentile, the
50th percentile? Why is there a necessity to go to 110 or 120
percent? There needs to be some thought in how to come up with
these numbers.
In the fall we have actually seen proposed new FMRs for
this coming fall. In our area we are seeing about a 7 percent
jump in Fair Market Rents. But when you factor in the fact that
rising utility costs are going to eat up about half of that
increase, we're really only going to see about a 3 percent
increase in Fair Market Rents. And it's certainly not going to
be enough to cover what we need in our area.
We are, as a high-performing housing authority, we're
actually a participant in what's called the MTW deregulation
demonstration program with HUD. And in this program, we're
actually allowed to kind of redesign the program to try to make
it work, to make it more flexible for our area to meet our
local needs. We have worked very hard in the past couple of
years to try to find out how to make this program work in our
area.
We've actually surveyed landlords, we've surveyed
participants. We've asked them, why did you find a unit? Why
did you not find a unit? And the bottom line is, whether it's a
landlord, whether it's a participant, the bottom line is Fair
Market Rents. You're not paying enough for the units in todays'
market. Flexibility, you need to be more flexible. You need to
be less burdened with regulations and bureaucracy.
We've tried to develop our program to rebuild our program
to kind of cover some of this. In my written testimony we've
covered some of these issues. But we actually have the ability
to go over 120 percent of FMR when we need to. We still need to
do rent reasonableness calculations, and we use this ability
very sparingly. We do allow tenants to pay more than 40 percent
of their income toward rent. And the rationale behind that is
so that a family can preserve their current housing. We
actually have situations where, because of the loss of rent
control, families come to us paying 60 or 70 percent of their
income to rent and after getting a voucher, it actually drops
to 45 percent of their income to rent. But they can stay in
their home. They can stay in their home where they've been for
many years.
Just to sum up, as a Moving to Work authority, we found
that the flexibility under that particular program has been
very beneficial to us. In the past year we've actually added
108 new units onto our program through landlord retention and
basically landlord outreach.
Thank you.
[The prepared statement of Michael Johnston can be found on
page 433 in the appendix.]
Chairwoman Roukema. Thank you. Thank you very much.
Mr. Ed Olsen is the final panelist here today. Mr. Olsen is
a Professor of Economics at the University of Virginia, but has
an extensive background, bipartisan background I might note, in
housing policy. During the Nixon Administration, Professor
Olsen was an analyst at the Housing Policy Review Task Force,
as I understand it, and led an investigation into Section 8
certificate program. But he also worked as a visiting scholar
at HUD during the Carter Administration, and he helped to
evaluate and review the Section 8 program.
We welcome you, Mr. Olsen.
STATEMENT OF EDGAR OLSEN, PROFESSOR OF ECONOMICS, UNIVERSITY OF
VIRGINIA, CHARLOTTESVILLE, VA
Mr. Olsen. Thank you, Madam Chairwoman. I welcome this
opportunity to talk with you and Members of your Subcommittee
about housing voucher policy. I speak from the perspective of a
taxpayer who wants to help low-income households, albeit a
taxpayer who has spent the last 30 years studying the effects
of low-income housing programs.
My oral testimony will focus on three questions: Should the
policies for determining Fair Market Rents be changed? Should
the current targeting of assistance to extremely-low-income
households be modified? And what role should housing vouchers
play in the system of housing subsidies?
Changing the policies for determining Fair Market Rents
requiring 75 percent of vouchers to be targeted to households
with extremely-low-income and limiting tenants to paying no
more than 40 percent of their income on rent will affect
voucher success rates and hence the workload of housing
authorities. This may justify a change in the level of
administrative fees.
However, if housing authorities respond appropriately to
changes in the program's regulations by altering the extent to
which they overissue vouchers, the changes will have no effect
on voucher usage rates. The changes in regulations will also
affect other important aspects of program performance, and
these effects should be the primary bases for judging the
desirability of changes.
For example, increasing Fair Market Rents would reduce the
number of households that could be served with a given budget.
Since the available evidence indicates that Fair Market Rents
are considerably higher than necessary to rent units meeting
the program's standards, and 70 percent of households below the
poverty line are not currently offered housing assistance, and
more than a million of our poorest households are in seriously
inadequate housing, homeless shelters or on the streets, we
should not be considering changes in the Section 8 voucher
program that reduce the number of recipients. Indeed, we should
move in the opposite direction, namely, decrease Fair Market
Rents and use the money saved to serve the poorest unassisted
households.
If Congress decides to make more money available for
housing assistance, and I am not at all averse to that, it
should be used to provide additional vouchers rather than
larger subsidies to current recipients.
In 1998, Congress required housing authorities to target 75
percent of vouchers to households with extremely-low-income.
The available evidence suggests that this rule will increase
the program's success rate. But even if this is not true in
every locality, it will have no effect on the voucher usage
rate if housing authorities respond appropriately. Since I
favor focusing limited housing assistance on the poorest of the
poor, I urge you to retain this provision or even strengthen
it.
The most important evidence concerning housing vouchers
relates to their role in a system of housing subsidies. Many
argue that we should use a mix of vouchers and production
programs to deliver housing subsidies to low-income households.
Currently there are calls for a new HUD production program. The
systematic evidence comparing the effects of different housing
programs lends no support to this view or this proposal.
Five major studies have estimated the cost-per-unit and the
mean market rent of units provided by housing vouchers and
certificates and important production programs, namely public
housing, Section 236 and Section 8 new construction. They are
unanimous in finding that housing certificates and vouchers
provide equally desirable housing at a much lower total cost
than any project-based assistance that has been studied.
We do not need production programs to increase the supply
of units meeting minimum housing standards. The Experimental
Housing Allowance Program demonstrated without any doubt that
the supply of units meeting minimum housing standards can be
increased rapidly by upgrading the existing stock even in tight
markets. This happened without any rehabilitation grants to
suppliers. It happened entirely in response to tenant-based
assistance that required households to live in units meeting
the program standards in order to receive the subsidy.
The available evidence also shows that housing vouchers
enable us to move eligible households into adequate housing
faster than any construction program under any market
conditions. The consequences of using costly construction and
substantial rehab programs has been that several million of the
poorest households who could have been provided with adequate
housing at an affordable rent with the money appropriated for
housing assistance have continued to live in deplorable
housing. We should learn from our past mistakes and not heed
the call for a new HUD production program.
I appreciate the willingness of Members of the subcommittee
to listen to the views of an ordinary taxpayer whose only
interest in these matters is to see the tax revenues are
effectively and efficiently used to help low-income households.
[The prepared statement of Edgar Olsen can be found on page
439 in the appendix.]
Chairwoman Roukema. All right. Thank you. Thank you, Mr.
Olsen. You went to the subject that I had in mind, and I'm not
quite sure whether or not we can get anyone else on the panel
to either agree or disagree with what has been said here. But
my point to the other panelists before you made the explicit
assertion was how are we going to pay for this?
Now your assertion is that we really don't have to do this,
raise these FMRs. You are stating that the units are there. I
don't know where they would come from, but your implication is
that if you upgrade existing stock. So I hear you. I don't know
if you want to talk more about the production side of it or the
existing stock for just a moment, and then I'll go on and ask
our other panelists related questions.
Mr. Olsen. One thing I can say about that relates to
experience from the housing allowance experiment.
Chairwoman Roukema. Excuse me. The what?
Mr. Olsen. The Experimental Housing Allowance Program was
conducted from the early 1970s to 1981. In current dollars, it
cost a half a billion dollars. About 40 percent of that was for
research. The program was an entitlement housing program
operated in two moderate size metropolitan areas, the Green Bay
area and the South Bend area. About 20 percent of the
population in each of those areas was made eligible for the
program and any eligible person who came in would get the
subsidy. It was just like food stamps.
One of the reasons that we had these full-scale programs
operating in two markets was to determine whether there would
be a rent inflation from them. The answer is definitive: No.
What did happen was that many units which were slightly below
the standards were very rapidly upgraded to meet the standards.
That's why even with low vacancy rate it works. You can get
these units upgraded. Even under the current Section 8 program,
about 30 percent of the people qualify in place, many of them
by upgrading the units.
Chairwoman Roukema. Let me give you the opportunity for the
permanent record to respond to my observation. You're
referencing a time and place and a housing market that is very
different from the existing housing market. But if you can
substantiate that. We don't have any more time now. But please
substantiate it and direct your data response to me.
Mr. Olsen. Fine.
Chairwoman Roukema. Will you do that?
Mr. Olsen. You mean not now verbally, but in writing?
Chairwoman Roukema. In writing, yes. Yes. Not only for my
own information, but I will include it in the permanent record.
Mr. Olsen. These two places were chosen to have different
vacancy rates. One was 4 percent and one was 7 percent. So 4
percent is pretty low, but I'll do that.
Chairwoman Roukema. All right.
Now I have questions for Mr. Renahan. I was very interested
in your testimony, and certainly Mr. Ziegler. I don't know how
you necessarily can substantiate your statements, but I hope
you're right.
What can we do or how do we get Mr. Martinez and our own
budgeting process to give us the new appropriations which I
believe would be necessary, Mr. Renahan? Or are you denying
that there would be new appropriations necessary in order to
meet the vacancy rate requirements under your testimony? I
didn't hear any reference to the new costs involved.
Mr. Renahan. Madam Chairwoman, clearly there would be an
increased cost when the Fair Market Rents are increased or if
you use the approach that Barbara Sard proposed and giving
housing authorities more flexibility to go to 120 percent of
the 40th percentile. There would be a cost associated with
that.
What I am suggesting is that the way to calculate that cost
is not to take the percentage increase and multiply it by every
Section 8 voucher in the country. Because that cost would occur
only in those areas where the housing authority and tenants
need access to those higher amounts in order to be able to
successfully use their vouchers.
Even within the city of Los Angeles, that's not all of my
voucher holders, it wouldn't even be most of my voucher
holders. Because housing authorities do a rent reasonableness
test, a comparability test before we enter into Section 8
contracts with landlords. And most of the contracts that we do
on behalf of Section 8 voucher holders come in below the
current payment standard. We need the increase to make it
possible for more of our voucher holders to be able to move to
lower poverty neighborhoods, to access units with a larger
number of bedrooms and so forth.
Chairwoman Roukema. Can you document that for the record? I
mean in actual numbers and not just generalities, but with
specificity.
Mr. Renahan. I would be happy to document that.
Chairwoman Roukema. And also you made a reference--and I
guess my time is up, but you did make a reference and I want to
acknowledge it if you have just a brief response--about how we
can control these costs with partnerships with non-profits and
faith-based. I don't think we've explored that nearly enough,
and I would appreciate your experience in this and your
recommendations in that regard.
Mr. Renahan. Well, what we've been able to do in Los
Angeles is with limited numbers, been able to partner with non-
profits that have other funding sources and are helping
families with an array of needs and issues to use vouchers
successfully. And it works. What we're suggesting is that
without an additional appropriation, if housing authorities
that are underutilized, which means they're not spending all
the money they've been appropriated and are under contract with
HUD to spend, to use a portion of the unused money to provide
those kinds of services that are proven to work. And that alone
without an additional appropriation----
Chairwoman Roukema. Through the non-profits and the faith-
based organizations?
Mr. Renahan. In Los Angeles we do it partly with non-profit
and faith-based and partly directly with housing authority
staff. So you would want to provide the flexibility for the
local needs.
Chairwoman Roukema. Any further information you can give us
on that for the permanent record, please direct it to me and we
will see to it that it gets in the record. Thank you very much.
Mr. Frank.
Mr. Frank. Mr. Olsen, you were talking about your
opposition to production programs. I would assume that logic
would lead us also then to end existing production programs?
Mr. Olsen. Existing production programs?
Mr. Frank. Yes. Should we stop funding Section 202 and
repeal the Low Income Housing Tax Credit?
Mr. Olsen. I think you should--when the term of the use
agreement comes to an end on these various projects.
Mr. Frank. No, I'm talking about building new ones.
Mr. Olsen. Yes, we should stop funding them.
Mr. Frank. So you would no longer fund the Section 202
housing for the elderly?
Mr. Olsen. I don't think I've given that enough thought.
Mr. Frank. Well, it seems to me you have.
Mr. Olsen. I'm not sure. It hasn't been studied carefully.
That's what I'm telling you.
Mr. Frank. But Mr. Olsen, here's the point. I mean, if
production is not the answer, it just does not seem to me
intellectually valid to say well, we shouldn't increase it. I
mean, I don't understand where the logic is. We just happened
by luck I guess to pick the right number. I mean, given your
argument that it's much more expensive per unit to do
production, it doesn't seem to me--it seems to me you have
given that a lot of thought and that your conclusion has to be
get rid of the Low Income Housing Tax Credit and stop the
Section 202 production program. I mean, how can that not be the
case?
Mr. Olsen. Certainly, I agree that we should get rid of the
Low Income Housing Tax Credit. Absolutely.
Mr. Frank. I wasn't just asking you if you agree with me. I
was asking you if you agree with you.
Mr. Olsen. What?
Mr. Frank. I was suggesting that you agree with you in
being against the program. I'm not for that.
[Laughter.]
Mr. Olsen. Oh, OK.
Mr. Frank. But you would abolish the Low Income Housing Tax
Credit?
Mr. Olsen. I would.
Mr. Frank. OK. Now what about Section 202? How do you
justify supporting an existing Section 202, which is a housing
production program?
Mr. Olsen. I'm just not quite sure how well the private
sector would respond to housing disabled people.
Mr. Frank. Oh, I'm sorry. So Section 202 is for the
elderly, not disabled. You would abolish the Section 202
housing program?
Mr. Olsen. No.
Mr. Frank. OK, the disabled, I understand. All right.
Mr. Olsen. The program for the elderly is now called 811.
Mr. Frank. All right. Thank you. Last question. You
mentioned the programs in South Bend and Green Bay. And you
said the current cost would be half a billion. Would that be if
you nationalized this and made it a national entitlement? I
mean, I gather from what you said----
Mr. Olsen. I'm telling you if you take the cost of the
experiment at the time and you increased it by the inflation
that has occurred since----
Mr. Frank. All right. That would be just for Green Bay and
South Bend?
Mr. Olsen. For those two cities.
Mr. Frank. So it would cost a half-a-billion dollars a year
for Green Bay and South Bend. If we, in fact, used that as the
model for a national housing program and made it I gather an
entitlement. You told me it was an entitlement if you lived in
Green Bay or South Bend.
Mr. Olsen. It was an entitlement, but for a much lower
fraction of the population that are currently eligible for HUD
assistance.
Mr. Frank. But I thought you were saying----
Mr. Olsen. It's the poorest 20 percent. Whereas, almost 40
percent of the population are currently eligible for HUD
assistance.
Mr. Frank. Your proposal is that housing policy, we get rid
of the Low Income Housing Tax Credit, we get rid of housing for
the elderly production, and we take this and make it an
entitlement to that kind of help for the lowest 20 percent of
the population. What would that cost roughly nationally right
now? I might be for that.
Mr. Olsen. I don't know the answer to that.
Mr. Frank. But it would cost a half a billion if you did it
just in Green Bay and South Bend.
Mr. Olsen. Well, 40 percent of that was for research. The
rest of it was for allowance payments.
Mr. Frank. So $300 million, it would cost us $300 million
to do it for South Bend. It sounds like a great idea, but I----
[Further clarification on this matter from Mr. Olsen can be
found on page 448 in the appendix.]
Mr. Frank. That's enough. I have to get to some other
questions. But I am skeptical about its economic feasibility.
Let me go now to the others. Secretary Martinez has been very
clear that the problem with low utilization rate in Section 8
is you guys. What's your answer? I mean, he says it's not
affordability, it's not the market situation. He said
explicitly, a good housing authority can use all the Section
8's. He said that on the record. So are you guys not good
housing authorities? What's your problem?
Mr. Renahan. The vast majority of housing authorities are
well managed and well run. There are of course exceptions.
There are a lot of housing authorities around the country, and
there are some that need to do a little bit better
administering their programs.
I think the response that I would give is the Los Angeles
experience that we've had in the last 3 years. The market has
gone from a 10 percent vacancy rate to a 3 percent vacancy
rate. That's had a devastating impact on the success rate of
Section 8 voucher holders. We're the same administrators. I'm
the same guy. The rules are essentially the same. What's
changed is the market.
Mr. Frank. That's a very good point. Let me ask Mr.
Johnston now. You heard Mr. Olsen suggested the voucher program
by itself without any production program will be not only able
to house people, but will be an incentive for a significant
upgrade in the quality of the housing stock. What's your
experience in Cambridge, a pretty tight housing market, in
terms of the incentive effect of offering people Section 8's?
Mr. Johnston. Someone with a Section 8, they have a very
difficult time in Cambridge obviously finding units.
Mr. Frank. I'm talking about the owners. Have you found--
because what Mr. Olsen said was that these Section 8s, properly
administered, are a great incentive for improving the property.
Mr. Johnston. It's a disincentive. I mean, the bottom line
is that the Section 8 program is a regulated program. It
requires things that are much different than a market rate
tenant. If I went to a landlord and a Section 8 tenant went to
a landlord, there's more of a disincentive to rent to the
Section 8 tenant, simply because----
Mr. Frank. Should we do away with those things that are
disincentives?
Mr. Johnston. We're doing that in Cambridge. To answer your
prior question, we are a high rated housing authority. Because
of our rating, we actually became an MTW participant.
Mr. Frank. Let me ask a question. Do you see a way that we
could administer the Section 8 program? My problem is the
Section 8 program is a year-by-year program. We don't have this
kind of entitlement that we had in the thriving, teeming
metropoli of South Bend and Green Bay, but we were in Boston
and New York and Chicago and these similar municipalities.
Would it be an incentive for people to upgrade their property
if we gave them an annual contract for Section 8?
Mr. Johnston. No.
Mr. Frank. Thank you.
Chairwoman Roukema. All right. Thank you. Mr. Little. I'm
sorry. I'm sorry. Mr. Miller.
Mr. Miller. I'll change my name, Madam Chairwoman. Thank
you very much.
Chairwoman Roukema. Sorry about that.
Mr. Miller. I want to clearly state that I am not opposed
to the concept of Section 8 vouchers. I'm not opposed to the
concept that some people need help in life, but we have a
welfare system that deals with that. But I am absolutely
opposed to creating any system that creates a situation where
people have to rely on Government day after day, year after
year, decade after decade to exist in this country. And that's
the problem we have.
Ms. Sard, you stated that voucher assistance has not kept
pace with housing costs. And then you said we need to produce
more housing for poor families. And I'm going to come back to
that. I want you to think about who ``we'' is and how
production occurs.
Mr. Renahan, you talked of providing various expenses,
moving expenses and many other options for people to help them
to get into houses. And you stated that landlords demand more
for rent than renters can afford, and you said that vouchers
should be increased and you said that we are down to 3 percent
vacancy in apartments in the L.A. Basin, which means we're 100
percent rented out, because 3 percent of 100 units is going to
be recarpeted or refinished or painted or under repairs waiting
for somebody else to move in while somebody moves out.
And Mr. Ziegler, you mentioned that there are more vouchers
than landlords are accepting.
And my concern here is in the Los Angeles Basin area. We
have created an environment in local government where we have
allowed the concept of property rights to be usurped, allowed
radical environmentalists to put pressure on local city council
members by threatening them with recall, threatening to oppose
them in their next election. Many city council members--and I
have a lot of good friends who are on city councils--are afraid
to approve housing projects in the community, because they're
afraid they're going to be thrown out of office by a few people
who create rumors and stories that are untrue about them in
order to get them thrown out of office.
We need to reinforce the principles of property rights in
this Nation to generate new housing construction for people,
and remove the pressure applied by radical environmentalists on
people who are trying to address local needs by serving on city
councils. Barney Frank and I agree on many things. I think he
has the historical perspective that it's been tried in the past
and he supported it in the past to enforce zoning rules and
regulations and there wasn't support here in Congress to deal
with it. And my frustration is more directed at us in our
inability and unwillingness to do what's right to resolve this
problem. And instead of doing that, we just increase Section 8
vouchers and try to get people by from day-to-day, rather than
addressing the cause of the problem.
But Ms. Sard, you said we need to produce more housing. Who
are ``we'' and who is doing the production?
Chairwoman Roukema. Excuse me.
Mr. Miller. Oh, she's gone now?
Chairwoman Roukema. Yes.
Mr. Miller. Mr. Renahan, you talked about the 3 percent
vacancies and landlords demanding more rent than people can
afford. What do you propose doing about it?
Mr. Renahan. Well, NAHRO does support a production program,
because clearly there are markets in the country where there
just aren't enough available units.
Mr. Miller. Do you not agree with the idea that the private
sector is far more capable of producing reasonable, low-rent
units than the Government is without subsidies?
Mr. Renahan. I believe the problem in high-cost areas is
that it just doesn't pencil out for a private-sector developer
to produce housing that's affordable for families working at or
above minimum wage.
In Los Angeles, the wage that would be needed by a family
to afford decent housing that's not overcrowded is $17 an hour.
So that means that that family would need at least three full-
time minimum wage earners in order to be able to afford an
apartment without a subsidy.
Mr. Miller. You're right. But I'll give you an example. I
live in the city of Diamond Bar, California, and you know where
that's at. People at church last Sunday came up to me and said
they lived in the Daisy Apartments on Grand Avenue right up the
street from the church and their rent is being increased to
$1,200, and just a few years ago it was $800. And the reason
for the increase in their rent is there is not an apartment
being built in our area, because nobody will approve the
construction of new rental units.
And no matter what we do, no matter how we increase the
Section 8 vouchers, no matter how much we make people more
reliant on Government to have a place to live, until we address
the core problem that we're facing, and that's reasonable use
of their property by property owners and a reasonable timeframe
in which the process must occur for approvals, we are never
ever going to solve the problem of housing affordability and
availability. All we're going to do is charge taxpayers taxes
who work very hard so that Government can give it to people who
need it, and that's socialism, and I'm absolutely opposed to
it.
We need to address the needs of communities by addressing
issues that will lead to the production of new housing for the
people you are trying to help. And until we do our job here in
Congress and we're willing to take the burden and the onslaught
that we're going to receive by doing our job, this Nation is
never going to help low-income people get into affordable
housing, because the requisite housing units will never be
built. And my time is up, Madam Chairwoman, I believe. Thank
you very much for your patience, because you are a most patient
Chairwoman.
Chairwoman Roukema. I'll give you 20 more seconds if you'd
like.
Mr. Miller. There are so many things we're not addressing
here. Mr. Olsen, you were exactly correct in many things you
stated. We Representatives considered and acted upon the intent
of the Founding Fathers for this Nation and for Government, we
would not have this problem. And if we could get the California
Department of Fish and Game to read an EIR in California,
rather than drafting letters that say that you did not address
this issue, which is in part clearly laid out in the EIR--if we
could get them to do their job--we could produce much more
housing in California. Thank you, Madam Chairwoman.
Chairwoman Roukema. All right. Thank you.
Congressman Watt.
Mr. Watt. Thank you, Madam Chairwoman.
Members of the panel, I regret that Ms. Sard left, because
I had some questions for her. She seems to think that--in her
testimony she says, in fact, I agree with Secretary Martinez'
statement that a central cause of the current underutilization
of vouchers is inadequate administration of the program by some
PHAs.
I'm not going to get you to comment on that part, but I do
want the two gentlemen, Mr. Johnston and Mr. Renahan, who are
actively directly involved with administering these programs to
get your comments on some of what she has suggested.
One thing she suggests is that the number of administrative
agencies is too high so that you have an average of more than
50 administering agencies per state. Texas has more than 400
according to her. The number of administrators who need to
learn complex program rules and policy interactions is
multiplied, economies of scale are not obtained, dah, dah, dah,
dah, dah. And then in her recommendations she said program
reforms should be designed to reduce the number of
administering agencies. Can we do that at the Federal level? If
local communities have housing authorities, does HUD now or
should HUD have the authority to say we're going to contract--
we're going to deal only with a regional concept as opposed to
a city-by-city or housing authority-by-housing authority
process? Does HUD have that authority now?
Mr. Renahan. Congressman, I believe HUD has that authority
when housing authorities are not performing to standard. I
agree with Barbara Sard and NAHRO agrees with Barbara Sard on
much of her analysis, but on this one she's a little bit off.
There are a lot of advantages to having locally based
housing authorities administering the Section 8 program. The
Section 8 program enjoys local support throughout the country
in large measure because it is administered locally. And the
statute does allow some flexibility in the local administration
of the program. It makes it possible for us to make the kinds
of partnerships I described earlier with non-profits and other
organizations to address the special needs of Section 8 voucher
holders. In particular, it's made it possible for housing
authorities across the country to administer successful family
self-sufficiency programs.
Mr. Watt. Sir, I understand you're talking about the
advantages of local. She's talking about the disadvantages of
this localized system. I'm talking about something between
those two things, and that's the practicality of it. Can we,
should we as a Federal Government be saying to local
communities, we won't allow Section 8 vouchers to be
administered by small housing authorities because we don't
think you have the expertise? Maybe we should set up one per
state, an administering body state-by-state or one for each
SMSA. I don't know. Is that practical? I'm not criticizing what
she's saying. I'm trying to decide whether this something that
we ought to be looking at as a practical possibility in this
subcommittee.
Mr. Johnston. Congressman, I guess my response to that
would be in our area we actually have various regional housing
authorities in addition to the PHAs, the public housing
agencies. And we actually--you run into problems when you start
having large regional housing authorities because you're
dealing with a much larger bureaucracy.
Individuals coming up on the waiting lists. It's harder for
them to get through the system. It's harder for them to get
access to the services which they're supposed to get. It's
harder for them to be mobile. I mean, if you're dealing with a
regional housing authority that's located, for instance, in our
State in Boston, and someone is coming from North Adams which
is completely on the other side of the state, you would run
into problems.
The Section 8 program works well because it does meet the
local needs of the community. It houses the people that are in
that community that need the services from the housing
authority, and that housing authority builds a rapport with the
community. We've built a rapport with our landlords. We've done
outreach. We know our community.
Chairwoman Roukema. All right.
Mr. Watt. Thank you, Madam Chairwoman.
Chairwoman Roukema. I believe that Congressman Frank has a
comment in this context.
Mr. Frank. Yes. I think that's a very important line of
questioning. And one thing I've found because I have--I don't
represent the city of Boston. I represent a number of
communities. And we know we have difficulty sometimes in
getting landlords to participate. The local housing authorities
are often better at getting local landlords who after all can
say yes or no to participate. There would be a reluctance to
deal with a large metropolitan authority. And you've got some
very good local housing authorities that are local people. And
I have found that that's a help in trying to get the voluntary
participation we need.
Chairwoman Roukema. I might also comment that I'm sure New
Jersey is not alone in this respect, but in New Jersey, for
example, local control, zoning ordinance control, is
extraordinarily important. And if we took that away, I believe
that we'd eliminate--I mean, it would be a minus for any public
housing or any voucher program. So it would have a reverse
effect, an unintended consequence.
Mr. Watt. Madam Chairwoman, I just wanted to make clear
that I'm----
Chairwoman Roukema. But it's an important issue to be
raised.
Mr. Watt. I wasn't being critical of any of this. I think
the reason we have these hearings is to try to figure out
whether there is some approach that can be a better approach.
Chairwoman Roukema. Exactly.
Mr. Watt. But when somebody just represents that you can--
--
Chairwoman Roukema. It was a very important question to
ask. And if there's an ambiguity in the statute, we should
address that. But I don't believe there is. But it is something
we should investigate. Thank you very much, Mr. Watt. Mr. Barr?
Mr. Barr. Thank you, Madam Chairwoman.
Mr. Johnston, I apologize. I got in here late because of
some other hearings. And I didn't get to hear your testimony,
your initial testimony. But I was looking through your
testimony. Your written testimony happened to be the first one
I picked up here. And I'm just leafing through it. I have to
tell you, it's right on point on a number of areas. When I meet
with public housing officials in the 7th District of Georgia,
the points that you mention in here are those that I hear from
them and they're the same points that I hear not just from the
public housing authority officials, but also from local
investors who want to participate in the program, but the
oppressive paperwork and regulations drives them away.
So even though there are a lot of landlords out there that
would like to--or investors out there that would like to invest
in housing and make them available for Section 8, they can't.
We had a series of meetings just a couple of weeks ago in our
District, and the one specific aspect of all this regulation
and the lack of flexibility that I heard about more than any
other was the lead-based paint regulations. If you could--and I
apologize if this is repetitive. Could you just talk a little
bit--I don't know how much detail you went into in your
prepared remarks--about some of the regulations that we could
be looking at to provide a little more of the flexibility? Or
is there any way of doing this short of, as you say, is
necessary, a complete overhaul of the program?
Mr. Johnston. Well, thank you for your comments,
Congressman. But I guess to answer your question, we have
redesigned the program in our housing authority. Because we've
been given the flexibility by HUD under this demonstration
program in which we participate. And the flexibility allows us
to alter the length of time of our leases. It allows us to pay
over 120 percent if absolutely necessary to save a unit.
Typically we tie that into a longer lease.
What we do is we actually front-end load annual adjustment
factors to give a landlord more of an incentive to basically
take a Section 8 participant. We've shortened the amount of
time that it takes to get inspections done. We have reduced the
amount of paperwork for owners. We've actually redrafted
leases. We've made the whole process much easier.
I mean, the lead paint issue is a touchy issue, because I
think everyone agrees that lead paint is a very serious
concern, and we certainly don't want to get back into the
problems we've had with lead paint in the past. But I guess my
problem----
Mr. Barr. The context that I heard about it on the latest
round of meetings that we had is with regard to senior housing,
affordable housing for seniors. That's a serious problem in
many of our communities and probably in other parts of the
country as well. The presence of some lead-based paint in some
of these older homes would not seem to present the same safety
hazard to senior citizens who need those affordable housing as
it would to affordable housing that's made available with
children. Yet there doesn't seem to be any flexibility that
would allow for a different standard based on the circumstances
that don't present the same sort of danger. Is that something
that could be looked at or should be looked at?
Mr. Johnston. It should be looked at. I guess in general,
for instance, the State of Massachusetts has a very stringent
lead paint law. And our real concern is that we're now putting
owners through an additional burden to go with Section 8 that
they don't have taking a market rate person, whether it's an
elder or a family. And it's only going to hurt utilization.
Utilization will be impacted. You know, other states may not
have as stringent lead paint laws as we do. And I think it's a
State issue. I think it's an issue that needs to be looked at
by each individual State versus the Government in general.
Mr. Barr. What I'd like to do, if you don't mind, is
correspond with you, write you. And I'd like to get if you have
some additional material with some additional details on what
you've done within the framework of the existing restrictions
to make a program work a lot better than it has been, if you
have some material. I'd like to receive that so I could look at
it and also share it with some of our folks down in Georgia.
Mr. Johnston. I'd like to share that with you.
Mr. Barr. Thank you. Thank you, Madam Chairwoman.
Chairwoman Roukema. Thank you.
Next Mr. Capuano.
Mr. Capuano. Thank you, Madam Chairwoman. I guess I'd like
to just start off by first of all thanking the panel for coming
today. But at least three of you I think will go away unhappy,
because I can pretty much guarantee you there will be no
housing production program this year.
Just yesterday, this House decided to rescind authorization
for over $100 million worth of Section 8 certificates. So
that's not a great record to begin on. But, Mr. Olsen, you will
go home happy. You're getting what you want.
I guess some of the questions that have been asked--I mean,
I got here late because on many of these issues, I was the
mayor of my city beforehand, and I have pretty firm opinions on
these things, though I respect your opinions, you're probably
not going to change mine too much just because I've lived
through it. But I do want to ask a few questions as a follow-up
to what Mr. Miller asked.
Mr. Johnston, I live in the next town to where you work.
You know that. Cambridge has produced an awful lot of housing
in the last 20 years. They have produced thousands of units at
North Point--hundreds of units at North Point, thousands of
units in East Cambridge, a couple of thousand units around
Harvard Square. During any of that construction, have rents
gone down?
Mr. Johnston. No.
Mr. Capuano. I knew that answer, but I just thought I'd
ask. Have housing prices gone down?
Mr. Johnston. No.
Mr. Capuano. I'm not going to ask, because I'm not going to
put you on the spot. But I know the answer. I don't know if you
realize that Cambridge and its surrounding area is probably one
of the most densely populated areas in the country. Right now
Cambridge is around 14,000 people per square mile. Somerville
was about 18,000. Boston is around 14,000. Belmont, right next
to the west of you, is about 10,000 people per square mile. Are
there are lots of open tracts of land somewhere in the Greater
Boston area that I've missed?
Mr. Johnston. No.
Mr. Capuano. Do we have an opportunity to build a whole lot
of new housing, though we'd like to? I mean, where are we going
to put it?
Mr. Johnston. No, we don't.
Mr. Capuano. Except to build high rises. And there are
those people in the world, a few of us, who may not want to
live in high rises. We don't mind two- and three-family homes,
which is by far the bulk of our housing stock, but there's
certain limits to what we want, and it goes back to what the
Chairwoman said earlier, that some people want some control
over what happens next door to them. I think that's fair.
So I don't buy all this nonsense in some areas. And again,
I don't speak to every neighborhood. And I actually think that
the argument that we need to break this down, these rules and
these regulations down on a much more localized level, because
even with the SMSA, our housing issues in the Greater Boston
area are not the same as some of the areas just outside of
Boston, 20 miles out. The SMSA is pretty big.
So it's not the same. And it should be different. And in
some levels, HUD has started to go in that direction. But I was
actually most interested in some of your written testimony--I
don't know if you did it verbally--on the actual rents. Even
with HUD bending over backward and giving Cambridge and a
couple of the other communities in that area the opportunity to
go above the Fair Market Rent numbers to the tune of 20 percent
above, we're still $700 a month below what an average two-
bedroom apartment is.
Now I don't know why the rents are all that high. It's
actually kind of nice on one level that everybody seems to want
to live in my District.
[Laughter.]
Mr. Capuano. That's great. But that drives housing prices
up. And I guess, you know, Professor Olsen, it's nice to hear
you say that you're an average American, but though I come from
a place that has 31 degree-granting colleges and universities,
still my average constituent is not a professor of economics.
So I don't mean to be disrespectful, but you're not the average
taxpayer. The average taxpayer is a truck driver or a bus
driver or a cop or a firefighter or a teacher or a tenant in
public housing, not a professor of economics at a university.
And I guess--I'll put a little challenge out to you and to
any one of your professors--full blown, I don't know--I assume
you're a full blown professor, a tenured professor at the
University of Virginia. I would ask that on your--whatever it
is you get paid, I'm sure it's above the average pay of my
constituent, I would ask you, I would challenge you to come to
my District and whatever house you're living in, whatever
apartment you're renting in Charlottesville or its
neighborhood, to come to my district and find anything near
comparable for whatever it is you're paying. And if you can do
that, you might change my opinion. Until that time, the rents
in the real world are a lot different than in the ivory tower.
And I strongly challenge you to get out of it and go see the
people that these people service. Go talk to my mother, who
lives in subsidized housing. And you explain to her and to the
seniors across this country why they haven't deserved the
opportunity to live in decent, affordable housing when they did
everything they were asked to do by society. To say that to me
is--and I know you don't mean to be--but it's very offensive to
me.
I think this Congress has not paid enough attention to the
needs for affordable housing. I think we need to make the right
to decent, affordable housing a top priority in this country.
We haven't done it. And to say anything less than that I find
offensive to most of my constituents and to the people who care
about their well being and the well being of their children and
their mothers. Thank you, Madam Chairwoman.
Chairwoman Roukema. Congressman Capuano, I see that you
understand you time is up. You do not have a specific response
in mind here. Is that correct?
Mr. Olsen. Was that a question?
Mr. Frank. But don't register to vote there.
[Laughter.]
Chairwoman Roukema. I didn't hear that, but----
Mr. Olsen. I favor serving more low-income people.
Chairwoman Roukema. We've opened the record for any
specific response that any of the panel members would like to
make for the written record. But I would like to point out to
all those who have just recently arrived and did not hear the
rules that I outlined at the beginning of the hearing that
we'll try very desperately to limit our questioning period to 5
minutes apiece, and I've been trying to enforce that
regulation, especially since we hope to be able to conclude
this hearing today before we are interrupted on a regular basis
with votes on the floor. So let's try to get not only through
this panel, but the next panel that is waiting to be heard.
And with that having been said, Congresswoman Schakowsky is
the next.
Ms. Schakowsky. Thank you, Madam Chairwoman.
I'd like to associate myself with the comments made by
Congressman Capuano and feel also very strongly that the United
States Government does have an important role to play. And I
think that there is not a family in the United States that
would declare themselves to have a surplus if they didn't have
a good roof over their head. And this American family has done
just that and has not made providing or even helping in a
public-private partnership sufficient housing for millions of
Americans. Many of those Americans live in Chicago.
We have a 4.2 percent vacancy rate in Chicago below HUD's 6
percent vacancy tight housing market definition. And in my
district we face rising real estate prices, as many communities
do, and you've talked about that in your testimony. And a
number of project-based Section 8 units that are talking about
opting out right now.
I wanted to ask you about a specific proposal. When a
building opts out, the tenants receive vouchers. And as long as
the building stays a rental unit, we now have enhanced vouchers
in parts of our community. But if the building goes condo, the
tenant will still get the voucher, but it won't maintain its
enhanced status. So they have to often be looking for places
outside the community. And let me just put as a footnote, we're
short about 150,000 affordable housing units in the Chicago
area. And it is really a crisis.
I wanted your reaction to a proposal that these enhanced
vouchers be extended to the wider community so that a person in
that building that goes condo would be able to take an enhanced
voucher in a broader area to shop around for housing. Anyone?
Mr. Renahan. That is a big issue for housing authorities
across the country. In Los Angeles we've assisted over 1,000
families who've been in the situation where the owner prepays
or otherwise opts out and we administer then the tenant-based
Section 8 voucher. It works when the building owner or new
building owner wants to continue in the rental business. The
enhancement has been crucial because the buildings where owners
opt out are the ones that are in appreciating markets that are
normally beyond the reach of Section 8.
And what that means for tenants who have to move, either
because the building has gone condo or for any other reason is
that even though they've gotten a voucher, they will be moving
to a higher poverty neighborhood in all likelihood. Their
accommodations will not be the same as what they had before the
owner opted out or prepaid. And that's just the economics of
it. Because owners of buildings that aren't in such good shape
that are in lower income neighborhoods don't opt out. They
don't prepay. It's only the properties that will do better on
the open market.
So in those cases where tenants are forced to move, it's
very, very difficult. And I should point out that a majority of
the tenants that we've dealt with in this situation are senior
citizens. And it's a very traumatic experience for them.
So allowing the enhancement to be used outside of the
subject building makes a lot of sense to me as a human gesture
to the families who thought their affordable housing situation
had been remedied for life, particularly the senior citizens
thought that they--one aspect of their life they didn't have to
worry about was their affordable housing. And then they go
through this upheaval.
Ms. Schakowsky. I am going to propose legislation to that
effect. I know that this has been----
Chairwoman Roukema. Excuse me.
Ms. Schakowsky. Oh, am I done? I'm sorry.
Chairwoman Roukema. Go ahead. You have a few more seconds.
Ms. Schakowsky. OK. Well, one of the things that I'd also
like to explore, in Chicago we have the Chicago Affordable
Housing Trust Fund. We just this week had the 11th annual
meeting of that. And one of the comments made by landlords, by
tenants, by lenders, is that it's so easy to access. That
there's none of the bureaucratic hurdles. And it seems to me
that what I hear from landlords--it's just that it's not--that
it's so hard to deal with HUD. That it's just a hassle. That
even, all other things being equal, that they might consider
opting out because they've done their 20 years and they have
had it already. And it seems to me that if we could sit down
and figure out and I think that others on the panel have been
asked--and Members, if we could figure out ways to at least
diminish if not eliminate those bureaucratic hurdles that we'd
step forward.
I guess that's a comment. I'm done.
Chairwoman Roukema. Perhaps the panel could feel free to
address that particular question and submit it in writing for
the record, please, not only for Ms. Schakowsky, but certainly
to my attention as well.
Chairwoman Roukema. Congresswoman Kelly.
Mrs. Kelly. Thank you, Madam Chairwoman.
I'd like to ask this panel what suggestions they have for
increasing the number of property owners that will accept
Section 8 in their housing, particularly in a really tight
market like Westchester County. When landlords really are able
to find tenants easily, they are not--they are seemingly
unwilling to open some of those units. I'd like to ask what
your suggestions would be to get those units open.
Mr. Renahan. Well, Congresswoman, one thing that has to be
there is an adequate Fair Market Rent that will allow us to pay
a fair amount to the landlord so they don't take a financial
loss for participating in the program.
Mrs. Kelly. Excuse me, sir. But having been very familiar
with the rental market in that county that I'm referring to, I
also know that in some areas Section 8 drove up the cost of
housing when it went in, and it can still occur. So I'm not so
sure that we're talking Fair Market Value here. So can you--
every single person that I heard on this panel simply said the
answer is more money. I'm wanting something beyond asking for
money.
Mr. Renahan. What also is necessary and works is the kinds
of creative approaches that I had described that we used with
our special needs households. An important component of that is
outreach to landlords. There are landlords in Los Angeles who
are wiling to participate in Section 8 for a family for a
family with a person with a disability. There are other
landlords who participate in the Housing Opportunity for
Persons with AIDS Program. There are others who have helped
when we administered the welfare-to-work program.
Landlords can respond to a human approach, to a request
that they offer one unit or two units in a large apartment
complex for a family that strikes a chord.
Mrs. Kelly. So you feel that outreach is going to answer--I
don't mean to interrupt you, sir, but I don't have a whole lot
of time and I need to get to the meat of this. In other words,
you feel that landlord outreach is going to resolve this
problem?
Mr. Renahan. It's part of the solution. It's part of the
solution.
Mrs. Kelly. Mr. Ziegler, do you have anything you want to
say to that?
Mr. Ziegler. Yes. I think the answer is to treat the
landlord in a Section 8 program like the landlord would be
treated by anybody else who is not in a Section 8 program,
which means you need to look at the rent structure, but you
also need to look at service to landlord. In New Jersey, for
example, we established a Landlord Liaison Office that will
troubleshoot problems with landlords with regard to paperwork,
inspections, and so forth.
I think when you do this kind of thing the owners
understand that you're working with them, not against them. I
think that's a real important part of this. And it's increased
the number of--we have 17,000 families in our Section 8 and
14,000 landlords. And with the Regional Opportunity Counseling
Program that I mentioned earlier with even educating landlords
as to what kind of assistance is available to them.
We have tons of mom-and-pop owners in New Jersey who have
two-family houses and rent one of the units out. And a lot of
them don't even understand landlord-tenant law. So getting
education to landlords with regard to State services, landlord-
tenant issues, lead-based paint. The New Jersey Supreme Court,
for example, has ruled that it's illegal in New Jersey to
refuse a Section 8 voucher. And working with the New Jersey
Apartment Association has been very important in showing them
that we are there working with them, and it has produced a
tremendous amount of benefits and increased the numbers of
landlords in the program.
Mrs. Kelly. What about building? I mean, is there any
impetus to try to get landlords to when they build new
apartment buildings to include with the idea of having mixed
housing so we have some Section 8 people mixed in with other
people that are paying full rent? Is there any kind of an
outreach in that direction?
Mr. Renahan. There is a statutory provision that allows a
portion of Section 8 vouchers to be project-based. And HUD
right now is working on a new rule that will make that a little
more flexible and make it possible for localities to do exactly
what you're describing.
Mr. Ziegler. And on the project-based issue, if I may add,
there's a large number of non-profit organizations who are very
interested in working with the project-based program. They have
services, they provide services. But they need operating costs.
And the assurance of Section 8 voucher for their particular
buildings will increase the number of families they can serve.
And they're serving essentially the homeless and very-low-
income families.
Mrs. Kelly. I would also like to ask what extent the
current regulatory scheme contributes to the housing
affordability and availability. Do you feel that the
regulations are actually a chill factor?
Mr. Ziegler. I don't understand the question. I'm sorry.
Mrs. Kelly. There are regulations controlling what you do
with Section 8. Are the regulations a chill factor in your
ability to deliver Section 8 housing to the people who need it?
Mr. Ziegler. Yes, in some situations they are. And I think
we mentioned them earlier. Certainly the ability to address the
rent structure that's set in the community and to deal with
owners on a one-to-one basis, to do inspections in the units
carefully, to allow some flexibility in repairs with the units,
if we're in the 30-day period of time. To make the Section 8
program essentially work like the other non-Section 8 rental
units in the community. Those regulations that we can strip
away that would do that would certainly help the program work
better.
Mrs. Kelly. Thank you very much. I'm out of time. Thank
you, Madam Chairwoman.
Chairwoman Roukema. I thank you.
Now we have Congresswoman Carson.
Ms. Carson. Thank you very much. A lot of the Members of
Congress have already raised some of the issues that I have. In
my particular city of Indianapolis, Indiana, we find myriad
problems with persons who are Section 8 eligible getting
placed. And I think a lot of it is perception. Landlords don't
want Section 8 people, because there is some perception that
they're criminals, that they will destroy your property and all
of that.
And I was wondering if any of you have some process in your
communities that sort of allay some of those fears that would
enhance the possibilities of persons with Section 8 being
placed, and whether you know of any creative kinds of things
that are underway in your community that will elevate the
opportunities for low- and middle-income people in terms of
getting placed in housing that they can afford.
In Indianapolis we went to a major historic preservation
kind of effort. And the consequence of that was devastating for
low-income people. People that had been living in low-income
communities woke up and found that their blocks had been put on
the landmark and historic places, and the consequence of that
was devastating for low-income people. I mean, they couldn't
afford the right paint. They couldn't afford the right design
on a new door that they needed on their house, and the tax rate
just skyrocketed. And it caused all kinds of problems just
overnight. And these people were here minding their own
business.
But in my neighborhood, which, you know, I always declare
that the only historic part about my neighborhood is me, and I
don't want to be on the landmark and historic places.
[Laughter.]
Ms. Carson. In deference to the neighbors in my particular
neighborhood, the home that I live in--I've been there 35
years. I bought it for $6,000. And over the years, we fixed it
up and painted it and my house, the one that I bought for
$6,000 35 years ago, is now appraised at $300,000. And the tax
rates, of course, skyrocketed as a result of it. That's why I
hang around Congress so I can afford it. Since there are only
435 of us, not everybody can come to Congress to afford to live
in most neighborhoods around this country.
Do you know of any creative efforts in your local
communities that accommodate--that have been started up that
accommodate the people with this kind of need in terms of--
well, they've already talked about living in a place that
turned into a condominium. But in neighborhoods where you can
enhance the supply of affordable housing. What do you do to
reach that mark?
Mr. Ziegler. What has really worked for us in our State is
openness to the community, openness to landlords. Just about
every complaint that we get about a Section 8 situation, when
we investigate it, it turns out to be not a Section 8 family.
Section 8 families are painted with a very wide brush. And we
are open to community organizations, homeowners associations
who question, who criticize and say your Section 8 families are
the worst families in our development. And when we go out and
actually look at the address they give us, they're not Section
8 families in more than 95 percent of the time.
I think when owners understand how the program works and
how the families are selected for the program. For example, we
prioritize persons with disabilities for our program, persons
who have $6,000 income, for example, at a maximum, and will
have that probably for life, because they have severe
disabilities or chronic mental illness. These are people who
will never be able to live without some kind of support. We
also prioritize families in self-sufficiency programs.
So if you look at the overall scope of 18,000 families,
roughly about 20, a little less than 20 percent of those
families are families who have welfare or tenant's assistance.
The rest are disabled persons. The rest are working poor
families. Some who are working their way out of the program
with self-sufficiency benefits, and some who will need the
services on an ongoing basis. And when owners understand the
kind of families that we're assisting, they're much more
acceptable to working with the program. When the understand the
entire picture.
We have monthly meetings in our offices with landlords. We
bring the landlords in and answer any questions and resolve any
problems. And with an ongoing to liaison to work just with
landlord issues that arise, we have been able to develop the
number of owners that we have in the program, which now exceeds
14,000 landlords.
This is something that I'm seeing other housing authorities
duplicate, and I think as that happens, we're going to get much
more acceptance of the program.
Mr. Johnston. If I could continue. I agree with the
landlord side of outreach, because we certainly do the same
thing. But at the same time, you need to look at how is the
participant marketing themselves? How are they going out and
portraying themselves to the landlords?
We found that we actually have an allocation of vouchers
strictly for individuals with disabilities. And for those
individuals we actually supply housing search services. We've
contracted with a non-profit to assist those individuals in
going out and finding units. And the success rate for those
individuals--and these are individuals with some type of a
disability and low-income--the success rate is actually higher
for these individuals than it is for our family participants
that are going out without any assistance.
So it has to do not only with how you're approaching your
landlords as an agency and how you're selling the program as an
agency, but it really has to do with how is the participant
approaching the landlord? How is the participant selling the
program? And I think that's where housing search services are
important.
Ms. Carson. Yes, but I think there's just such a bad image
of Section 8 because people misunderstand who it is that's
causing the problem. They're not Section 8 recipients. My aunt
is 85 years old. She still sings in the choir. I don't know how
well, but she still sings in the choir. She can't get any
housing in Indianapolis with a Section 8 voucher and she's 85
years old, because people don't want Section 8.
Mrs. Kelly. [Presiding.] Thank you very much, Ms. Carson.
Next we have Ms. Jones.
Ms. Jones. Thank you, Madam Chairwoman.
To the panel, I was talking to State legislators and mayors
before at a session this morning and I missed what you all had
to say, but we were talking about housing and affordable
housing at the session we were in as well.
My first question is to Mr. Johnston. How are you, sir?
Mr. Johnston. Good.
Ms. Jones. Good. Totally different subject, but has to do
with housing. I'm just curious. What impact did the reduction
of or elimination or what impact will the elimination of the
drug elimination program have on your housing authority? Is
that something over which you have some jurisdiction?
Mr. Johnston. Yes. It's more going to impact public
housing.
Ms. Jones. You don't do public housing, sir?
Mr. Johnston. Well, I do. I do tenant selection for public
housing.
Ms. Jones. OK.
Mr. Johnston. And certainly I think our agency has worked
very close with the local police department in putting together
police details. We actually have a security force that handles
complaints and issues that happen in public housing. And the
elimination will certainly have an impact on the housing
authority in how we can protect the residents and of our
developments.
Ms. Jones. Thank you. I don't know what I did I with my
list of where you guys come from. I apologize. What about the
impact on New Jersey, Mr. Ziegler? If you're familiar. If
you're not, you can say no.
Mr. Ziegler. We operate only a Section 8 program, so it
doesn't have any direct impact.
Ms. Jones. OK. Great.
Was it you, Mr. Ziegler, that said that the New Jersey or
some court just found it to be illegal to refuse a Section 8
voucher?
Mr. Ziegler. Yes. In New Jersey, like Massachusetts, the
Supreme Court has ruled that it's contrary to the Fair Housing
Act for a landlord to refuse to accept a Section 8 voucher
solely because it's a Section 8 voucher. I mean, the owners are
still able to refuse families if they don't pass the regular
application standards that owners normally accept. But in cases
where it's just that I don't accept Section 8, it is illegal
for most owners in the State to do that.
Ms. Jones. Do you remember what the facts were in that
particular case?
Mr. Ziegler. It's a source of income act, Chuck tells me.
Mrs. Kelly. Excuse me, could you speak up a little louder
on the last point that you made? I didn't quite hear that.
Mr. Ziegler. Yes. The Supreme Court ruled that it's
contrary to the source of income, discrimination as a result of
a source of income whereby the owner cannot refuse a Section 8
voucher.
Ms. Jones. OK. Thank you.
Mr. Edson. I would like to add something.
Mrs. Kelly. Excuse me, yes.
Ms. Jones. I don't mind.
Mrs. Kelly. Excuse me. I think in response to your question
there is another point to be made here.
Ms. Jones. Please come forward and tell us your name.
Mr. Edson. Madam Chairwoman, I'm Charles Edson, counsel to
Leased Housing Association, and I did participate in that New
Jersey case so I'm quite familiar with it. Many states have
what is called a source of income law which says you cannot
discriminate against a potential tenant because of the source
of income. New Jersey had such a law. There was a real question
of interpretation of whether it also meant to include Section 8
vouchers. It originally was intended to deal with alimony
payments, welfare payments and the like. The New Jersey Supreme
Court extended that to Section 8 payments. So in New Jersey,
you in effect have a take none/take all. In other words, every
owner in effect is obligated to accept vouchers. I believe
several other states have reached that conclusion. Some courts
have taken an opposite view.
Chairwoman Roukema. Ms. Jones, I'm very glad that you asked
that question. I feel as though I was derelict in my own
responsibility being from New Jersey that we didn't observe
that earlier. So I appreciate your questioning.
Ms. Jones. Not a problem, Madam Chairwoman. The only
further thing I would say is I don't want to be repetitive in
the responses or in my questions that my other colleagues
haven't asked, but I am a supporter of affordable housing. I
come from the city of Cleveland, Ohio. We've done a pretty good
job with our community development corporations developing
housing, but we need a lot more.
And I just would thank you for coming, encourage you to
continue to work on providing affordable housing, because I
believe that having a safe house and a decent house is the
beginning of having a decent lifestyle and making a decent
living. And I would just encourage you to continue to do the
work that you do. And on another occasion I might ask you some
more questions. Thank you. I yield the balance of my time,
Madam.
Chairwoman Roukema. I thank you.
Congresswoman Waters, I believe you were next.
Mr. Tiberi does not have a question.
Ms. Waters. Thank you very much, Madam Chairwoman. I don't
know what else can be said. The fact of the matter is, this
budget eliminated the drug elimination program, cut the capital
fund, cut the HOME program, cut CDBG and reduced Section 8
reserves from 2 months to 1 month. Everybody knows that.
We also know there is a housing crunch. We also know that
the vouchers are buying less and less. The message is clear. We
could have 100 more hearings. It's documented that we have a
real crisis, and this budget exacerbates that crisis, and we
need to get on with the business of trying to do something
about this problem and this housing crisis.
Let me just ask about the reduction of Section 8 reserve
from 2 months to 1 month. Can somebody tell me what that means?
Mr. Renahan. What that means is that housing authorities
who are trying to lease to 100 percent to assist as many
families as possible who are faced with changes in their
average housing assistance payment, which can occur because
rents are going up in their area so that their contract rents
are coming in higher, or if the family incomes are decreasing
so the family portion gets smaller and the housing assistance
payment gets higher, will have to be more concerned that if
they aim for 100 percent lease up that they will run out of
money at the end of the year and not be able to make payments
to landlord and be in violation of their contract with HUD.
So what it will mean is that the utilization rate across
the country will be adversely affected by a cut and the program
will work less well and serve fewer families in precisely the
housing markets where families need it the most, the housing
markets where rents are accelerating and it's tougher to use
Section 8 vouchers.
Ms. Waters. So in addition to all of the other problems
that you have, this reserve, as you are describing it,
significantly impacts your ability to utilize what you already
have? You have to live in fear that if you utilize your Section
8 to the max that you could run into trouble and not be able to
pay the landlord?
Mr. Renahan. That's precisely it, Congresswoman. And the 2-
month figure was arrived at under a negotiated rulemaking which
involved HUD and housing authorities and advocates and others
interested in the program. And initially going into that, to be
frank, I was arguing for a 6-month reserve. But HUD hired an
accounting firm. They went through the numbers nationwide
looking at the possible impacts on urban authorities, suburban/
rural authorities, big authorities, small authorities, and it
turns out that 2 months is adequate to make it possible for
housing authorities to shoot for 100 percent utilization
without living in fear that they're going to be in violation of
their HUD contract and we really didn't need more than a 2-
month reserve. But less than a 2-month reserve will result in a
lot of housing authorities either getting in trouble or not
utilizing as much money as they could and not assisting as many
families as they could to avoid getting in trouble.
Ms. Waters. Thank you very much. Let me just say that to
those of you who are managing these large public housing
authorities, I salute you. You have a lot of problems, and many
of you are doing a very good job despite the fact that the
resources are not there. Someone asked today how can we solve
these problems without money? You can't. It costs money to
manage these housing authorities and deal with all of the
problems.
I am still of the opinion that we need to have social
service agencies inside all of these large public housing
authorities that deal with not only people representing public
welfare and probation, parole, health, all of that. Some of
these large public housing developments are like little cities.
And all of the problems that any city would have that is
basically a city of poor people of limited income folks, and
you're expected to manage them, keep them going, keep down the
crime, keep the renovations up, keep the place looking decent
when you're faced with all these cuts and all of these
problems, I don't know when we're going come to grips with what
it takes to provide housing and to deal with this crisis.
I salute you. And we're going to do everything that we can
to help you. We don't think we have an ear in the White House.
We think that some of the Members on the other side of the
aisle are sympathetic and they would like to do something. We
want to work with them to try and get something done. But just
keep championing the cause and keep your voices out there.
Hopefully, we'll be able to undo some of the cuts that have
been wreaked upon you with this wrongheaded policy. Thank you.
Chairwoman Roukema. [Presiding.] Thank you. I do want to
express my appreciation for this panel. And not that we're
trying to get rid of you quickly, not at all. However, I'm
looking at the clock and I've been advised that there will be a
series of votes up in the near future and hopefully we can get
to the second panel.
But again, I ask that you submit in writing your additional
responses if you haven't had a chance to elucidate and amplify
on your answers. And obviously we're going to be going through
these issues again as we go through the appropriations process
this year I'm quite confident.
Again, I'd like to have our member of the panel who is very
sensitive to the cost effectiveness and to the budget
priorities as well as those here on the panel who are concerned
about the implementation, the proper implementation of the law
under existing financial circumstances and whatever
improvements we can make for greater functioning, greater
efficient functioning in the future.
I thank you very much. We'll stay in close dialogue and
communication.
The next panel, please. I will take the opportunity to
introduce each of the panel members as I did on the previous
panel individually when it is your turn to testify. I would
also like to remind you I believe you were here when we opened
the hearing, but remind you that we'll try to limit each
introductory statement to 5 minutes The Members then will have
5 minutes in which to question you. And hopefully, we'll
complete this before there are any interruptions from the
floor.
Now this panel is representative of a good number of
consumer groups and public interest groups, and we're happy to
have you today. Nan Roman is the President and CEO of the
National Alliance to End Homelessness and a leading national
voice on the issues connected with homelessness. Certainly the
Alliance, as I understand it, the National Alliance is the
country's largest non-profit, non-partisan membership
organization. And so we're very anxious to hear from you,
particularly with charitable work that you're doing, as well as
your on-the-ground, in-the-field operations. Thank you very
much.
STATEMENT OF NAN P. ROMAN, PRESIDENT, NATIONAL ALLIANCE TO END
HOMELESSNESS
Ms. Roman. Thank you so much, Madam Chairwoman. I want to
thank you for your concern about housing affordability and for
holding these hearings and also I want to thank you for the
subcommittee's past leadership on the issue of homelessness.
I've been asked today to address the extent to which
homelessness is a housing issue. And the answer there is
simple. Homelessness is caused by the lack of affordable
housing, notwithstanding all of the other problems or illnesses
or disadvantages that homeless people might have. They are
homeless because they can't afford a place to live. If there
was housing that they could afford, there wouldn't be
widespread homelessness.
Is there some special type of housing homeless people
require? The answer to that question is yes and no. There are
two major groups of homeless people, and I think it's important
to recognize that when we're assessing the impact of housing
affordability on homelessness. Eighty percent of people who
become homeless enter and exit the homeless assistance system
relatively quickly and don't come back. These are people who
are having a housing crisis.
It can be said that the homeless assistance system in one
way is managing the churn in the bottom of the housing market.
This 80 percent of people are largely indistinguishable from
other poor housed households in terms of their mental health,
their substance abuse, their education levels, numbers of
children and so forth. But they are families and individuals
who have had a housing crisis, and they need somewhere to go
while they are resolving that crisis.
The homeless assistance system is providing such a place.
Taken as a whole, this group, 80 percent of the homeless
population, does not need any special type of housing. They
just need housing that's affordable. The remaining 20 percent
of people who become homeless in the course of a year--and I
should say about 3.5 million people become homeless in the
course of a year--have a different experience and have
different needs. This group tends to be homeless for a much
longer period of time, living in the homeless assistance
system, sometimes interspersed with stays in hospitals, jails,
prisons or on the streets. They virtually all have chronic
disabilities: mental illness, chronic substance abuse
disorders, physical ailments or HIV and AIDs are the
predominant ones. Because of their illnesses, permanent
supportive housing, housing that is affordable and also linked
with services, is the most cost-effective and successful
housing model for them. And as you mentioned in your opening
statement, we estimate that there are 200,000 to 250,000 units
of such housing needed to essentially end chronic homelessness.
In summary homelessness is a housing affordability issue
and notwithstanding all of the other problems that homeless
people might have if there were an adequate supply of
appropriate affordable housing, there would not be widespread
homelessness.
Based on this, the following are our recommendations. First
we recommend that we need a housing production program that
will significantly address local shortages of affordable
housing units.
Second, if there are not enough resources to meet the
housing needs of all people up to 120 percent of area median
income, as has been recommended by many previous witnesses in
your housing affordability hearings, we must respectfully
request that there be substantial targeting of housing
assistance to meet the needs of people who are most severely
impacted by this affordability crisis, even to the point of
becoming homeless.
Third, we believe that 200,000 units of permanent
supportive housing could end chronic homelessness. Resources
are available to provide this housing via the HUD Homeless
Assistance Grant Program, but only if two things are done. The
first is to ensure that 30 percent of these funds are spent on
permanent supportive housing for chronically homeless people.
The second is to renew such housing from a source other than
the Homeless Assistance programs.
This subcommittee has in various ways and on a bipartisan
basis, over the past few years recommended these steps. Based
on your approach, the appropriators have included provisions
that address these issues in the last several appropriations
bills. But it would be preferable to have these provisions
authorized.
Finally, much media attention has been given recently to
Secretary Martinez's suggestion that homeless people are the
responsibility of HHS. We concur that, for the disabled group
in particular and for other homeless and very poor people,
services are best delivered by HHS using HHS resources.
Housing, however, is the root of the problem for homeless
people, and housing is best delivered by HUD. We support
getting HHS to assume its proper responsibility to pay for
services with its funding, freeing up the Homeless Assistance
Grant Program money to pay for housing for the 3.5 million
people who have become homeless because they don't have it.
We do not support transferring the HUD money to HHS to pay
for services. HHS is not the only agency responsible for
homeless people.
Madam Chairwoman and Members of the subcommittee, we are
grateful for your concern and your leadership and we are
anxious to work with you to make progress on this issue.
[The prepared statement of Nan Roman can be found on page
483 in the appendix.]
Chairwoman Roukema. Thank you very much.
The next panelist is Barbara Poppe. Ms. Poppe has been the
Executive Director of the Community Shelter Board in Columbus,
Ohio since 1995. That gives you considerable experience. The
Community Shelter Board is a nationally-recognized non-profit
organization charged with funding and planning coordinated
access to shelter and essential services. And evidently you
have been an advocate for the homeless since 1985. So you have
some experience up and down and up again. Thank you very much,
Ms. Poppe.
STATEMENT OF BARBARA POPPE, EXECUTIVE DIRECTOR, COMMUNITY
SHELTER BOARD, COLUMBUS, OHIO
Ms. Poppe. Thank you, Madam Chairwoman, Members of the
subcommittee. I am pleased to be here today. I wanted to let
you know about our experience in Columbus and Franklin County,
Ohio where we operate as a true public-private partnership to
provide a collaboration of funding, services and coordination
to assist anyone who has a housing crisis resolve that.
We are the Community Shelter Board committed to ending
homelessness in our community, and we work toward that end. My
Board of Trustees includes corporate executives from banking,
insurance, retail, manufacturing and the home building
industry. So we have a strong business presence.
Along with our partner agencies and our public funders we
have created an infrastructure in Columbus and Franklin County
that meets the immediate needs of homeless people, providing a
roof over their head, food and health care. Our efforts have
been successful. We do believe it is unacceptable to turn any
family or single adult away from our sheltering system, and we
continue to work toward that end each day.
But unfortunately, as hard as we have worked, the Franklin
County homeless system cannot end homelessness. Why? Well, the
system doesn't control the number of people who become
homeless. And second, while most people exit the homeless
system quickly, others virtually live in it. And for people who
are chronically disabled and very poor, emergency shelters have
unfortunately become their home. We concur with the assessment
of the National Alliance to End Homelessness that so far we
have accomplished much, but the end is not yet in sight.
Homelessness is a major problem in Columbus and Franklin
County. I want to report to you that since 1990, more than
100,000 different households have been homeless in our
community. We did a random telephone survey and we found that
10 percent of all people in Franklin County had experienced
homelessness. Another 18 percent had a family member who had
experienced homelessness. The annual number that we've
sheltered in the last 5 years I am happy to report is finally
on the decline. Since 1995 to 1999, we decreased family
homelessness by 50 percent. That decrease was possible, though,
because we put substantial resources into our Homeless
Prevention Initiative.
The number of single homeless women has remained relatively
constant, and we've been able to decrease the number of single
homeless men by about 3.5 percent in our community. However,
there is still much to be done. Our system works well for those
85 percent who have a short-term homeless problem, but there
are 15 percent of our homeless people who have chronic
entrenched problems that our system is simply not resolving.
Toward that end, we have committed that our community will
be targeting for priority expansion, the strengthening of
permanent housing options with services for the hardest to
service populations in our community, those persons with
chronic disabilities.
Some of the innovative features in our Franklin County
community are, as I mentioned, our Comprehensive Homeless
Prevention Program which annually serves 1,100 households
preventing them from becoming homeless. We also have worked to
improve our emergency shelter safety net so that people who
have short-term needs can get back on their feet and out of it.
What we've done is to disperse our facilities throughout the
community. Not all are located concentrated downtown. We've put
in place rigorous shelter certification standards and a
requirement for good neighbor agreements. We also are providing
on-site employment resource centers.
As part of a new initiative, we are developing 800 new
units of permanent supportive housing for long-term homeless
people. And finally for families, we're focusing on a direct
housing initiative that quickly moves families out of shelter
into permanent housing but provides transitional services. That
program has been 95 percent successful in working with all
families, and none of the families in our 2-year operation have
ever returned to shelter.
But despite this impressive and innovative continuum of
services, we still lack the most important component to end
homelessness. That is accessible and affordable housing.
Homeless families and individuals are a subset of very poor
households in Franklin County who cannot afford decent, safe
housing. A typical homeless family, while more are working than
ever before, still has an average income of only $630 a month.
They need an apartment that rents for less than $200 a month,
and that does not exist in our community.
We are a model community in terms of the level of
cooperation and coordination among providers and funders both
public and private. We know what works. We can document
success. We are committed to ending, not just managing
homelessness. But we really do need a strong Federal
partnership so that we can be successful.
We believe that what we need is affordable housing
production. We also need subsidies. This is not an either/or
circumstance for Franklin County. We need to both produce
affordable housing and to have the subsidies to make it
possible. Homeless people are earning around 15 percent of the
area median income in our community. So without the type of
operating support available through the Section 8 program, we
simply won't be able to move forward.
We do believe strongly in these public-private
partnerships. There's no deal in Columbus that gets done
without investment from our private community as well as the
Federal, the State and the local governments being partners. We
would like to work with you in any way that we can to solve
homelessness across the Nation and also in our community in
Ohio. Thank you.
[The prepared statement of Barbara Poppe can be found on
page 490 in the appendix.]
Chairwoman Roukema. Thank you very much.
Now, Ms. Ann O'Hara, a co-founder and now the Associate
Director of the Technical Assistance Collaborative, Inc. She
has over 23 years of experience in the development and
administration of affordable housing programs at both the
national, State and local level.
I believe also, Ms. O'Hara that you have a national
reputation for working with affordable housing opportunities
for those people with disabilities, whether physical or mental
disabilities if I understand it. We're very interested in
hearing of your experience and your recommendations for us.
Thank you.
STATEMENT OF ANN O'HARA, ASSOCIATE DIRECTOR, TECHNICAL
ASSISTANCE COLLABORATIVE, BOSTON, MA; ON BEHALF OF THE
CONSORTIUM FOR CITIZENS WITH DISABILITIES HOUSING TASK FORCE
Ms. O'Hara. Thank you, Madam Chairwoman and Members of the
subcommittee. I would also like to thank you very much for
holding this very important hearing on the critical housing
affordability problems that people with disabilities, including
homeless people with disabilities, face today in the United
States.
I'm here today to testify on behalf of the Consortium for
Citizens with Disabilities Housing Task Force. They are a
Washington-based coalition of over 100 consumer advocacy
provider and professional organizations who work for and on
behalf of people with disabilities of all ages and their
families. The CCD Housing Task Force includes the Alliance for
the Mentally Ill, Paralyzed Veterans of America, Easter Seals
and many other groups.
I want to mention a few key points from my written
testimony, including data on housing affordability that we are
just coincidentally publishing today, some discussion of the
need, and then some critical housing policy issues.
Today the Technical Assistance Collaborative, and the CCD
Housing Task Force are releasing findings from a new study
entitled ``Priced Out in 2000.'' It's a comprehensive analysis
of housing affordability for the poorest of our Nation's
citizens, those people with severe disabilities who are
receiving SSI benefits. In 2000, these Federal benefits were
equal to $512 a month. Today, over 3 million adults with
disabilities are receiving SSI benefits.
This study compares SSI to HUD's Fair Market Rents in all
housing markets of the United States and shows that the housing
problems, the affordability problems of people with
disabilities have never been worse than they are today. People
with disabilities receiving SSI benefits continue to be the
poorest people in the Nation and on average across the country
have an income equal to only 18.5 percent of the one-person
median household income.
As a national average, people with disabilities receiving
SSI have to pay 98 percent of their monthly SSI benefit in
order to rent a modest one bedroom apartment which is priced at
the HUD Fair Market Rent. That leaves $11 a month left for all
other essentials like food, clothing, transportation and over-
the-counter medications.
In the year 2000 there was not one single housing market
area in the United States where a person with a disability
receiving SSI could afford to rent a modest studio or one
bedroom apartment and pay 30 percent of their income toward
that rent.
So I will echo the comments of my two colleagues here to
say that it is absolutely essential that for the poorest
people, people with incomes below 30 percent and particularly
below 20 percent of median that we need operating subsidy funds
or project-based assistance or vouchers in order to make the
housing affordable.
Just before Secretary Cuomo left office, he released the
latest worst-case housing needs report. That housing needs
report showed that while housing needs had declined by 8
percent from 1997 to 1999, that decline occurred in elderly and
family households. It did not occur in households representing
people with disabilities. HUD's data show that housing need
among people with disabilities actually went up between 1997
and 1999.
So in line with those needs figures, what we need to do is
look at what the critical policy issues are and make
recommendations. One problem we have is that the supply of
subsidized housing, housing with an operating subsidy or a
project-based subsidy for people with disabilities continues to
decline. That decline began in 1994 with elderly only policies
and continues to this day. Each year housing authorities
designate thousands of units for elders, and that means that
people with disabilities no longer can access that housing.
We estimate that as many as 200,000 units have been lost
and only 40,000 Section 8 vouchers have been created to make up
that loss.
Another problem we have is the public housing authorities,
not all, but many public housing authorities are not applying
for new Section 8 vouchers to help people with disabilities get
into housing. PHAs also have difficulty knowing how to modify
their programs and their policies so that the Section 8 program
can be effective for people with disabilities.
It's difficult to use Section 8 to find accessible units.
It's also difficult to get exceptions from HUD on these
policies. There are some housing authorities doing a good job.
We need to export their practices, such as the State housing
authority in New Jersey, and the housing authority in
Cambridge, Massachusetts. We need to take what they have done
for people with disabilities and make that information
available to other housing authorities.
I want to speak also just briefly about the Section 811
program. As the need for housing for people with disabilities
has increased, the appropriations for Section 811 have gone
down by almost 50 percent. The program also needs reform so
that lower density and more integrated housing can be
developed. Currently, the Section 811 program is full of red
tape and bureaucracy. It has components such as the single-
purpose corporation requirement that really are a disincentive
for non-profit organizations to work with the program.
I also want to mention briefly that the HOME and CDBG
programs typically do not target people with disabilities.
Again, that's because neither of those programs is used in
connection with an operating subsidy or project-based subsidy
in most cases.
We support the National Low Income Housing Coalition's
production program with very-low-income targeting. We also
support the National Alliance to End Homelessness
recommendations to put at least 30 percent--and ideally much
more than 30 percent, of the McKinney Homeless Assistance
funding at HUD into permanent supportive housing to resolve
homelessness for people with disabilities.
[The prepared statement of Ann O'Hara can be found on page
499 in the appendix.]
Chairwoman Roukema. All right. I thank you very much. I
don't quite know how to begin this except to make an
observation, and you do not have to be compelled to answer me.
But we'll have to work on this together because I have a
background where I've worked directly not only on homelessness,
but also on all kinds of disabilities, particularly mental
health disabilities, alcohol and drug abuse disabilities. And
it seems to me as though you're all pointing in the direction
as though there's no difference in needs here. In fact, I
believe Ms. Roman said we do not need special housing.
And then of course you reference, Ms. O'Hara, the 811 and
I'm not quite sure exactly how that gets defined in the real
world of the local community. But I'm just saying that I
believe it is much more, much different from low-income housing
needs, much different. Because if these people were able to
deal with their disabilities--I'm not talking about the
physical disabilities. I'm talking about drug abuse, alcohol
abuse and mental health problems. They wouldn't be in such dire
financial straits, of course. So I think it's a combination of
things. But I also believe that there's a requirement here to,
as I said in my opening statement, to work with HHS as well as
HUD to get the kinds of service needs and the treatment needs
that are necessary. We can't ignore it. And that's where I want
to direct my attention in terms of this component of our
problem. If you have a quick response, particularly Ms. Roman,
since I used your name, we shall do that. But then we'll turn
to our Ranking Member here. Yes, Ms. Roman?
Ms. Roman. I just wanted to clarify that I said that 80
percent of people who become homeless essentially are just poor
people who are having housing crisis. But 20 percent of the
homeless population is disabled with mental health and
substance abuse disorders for example, and is chronically
homeless. They do need a special kind of housing, and that is
supportive housing that's connected with services.
Chairwoman Roukema. Then I totally misunderstood you.
Ms. Roman. I'm sorry.
Chairwoman Roukema. I took your statement out of context
evidently. Go ahead. Continue.
Ms. Roman. And they also need low threshold entry points
into that system because most people are not going to go from
the street into housing, so there have to be low threshold
shelters or safe haven models where people can enter into the
system.
Chairwoman Roukema. Thank you. I appreciate that.
Ms. O'Hara, very briefly.
Ms. O'Hara. I think we're all starting from the same point
in terms of how the housing resources work. And the issue of
how you link services I think is very different depending on
the extent of the disability as well as the nature of the
disability. But service provision is an overlay to the basic
issue of can you afford the housing. And I think that's where
we're having the difficulty. The services are actually easier
to--well, some people may disagree with that.
Chairwoman Roukema. And I note that Ms. Poppe has nodded
her head in agreement. All right. Thank you very much.
Our Ranking Member, Mr. Frank.
Mr. Frank. Thank you. I apologize for my absence. I had a
previously scheduled commitment to address the constituents of
our colleague, Ms. Capps, on housing issues. This is very
useful testimony.
First of all, I welcome what seems to me the unanimity that
one of the things we have to do, by no means the only, though,
but one of the most important things is simply to increase
housing production programs for low-income people. And as you
know, there have been people who have argued that the voucher
program will take care of it, and I think you helped make the
point the voucher program is almost irrelevant for many of the
people you're here worried about. And, yes, we clearly have to
increase the production program, and this very wealthy country
has the resources to do it.
I do have some specific issues, though. Intellectually
that's an easy one. Politically it's harder. So I do want to
talk, and I appreciated, Ms. O'Hara, the question of
disability. And I was very concerned. There was an unstoppable
tide for taking people with disabilities out of elderly
housing. And frankly I think, yes, it is hard to justify that
people who have got emotional or other kinds of problems should
be housed among part of the population probably least able to
cope. That's why we created at that time that separate program
for the Section 8 disabilities. Now I am hoping that Secretary
Martinez is going to reconsider the zero funding of that. And
that's of course a minimum.
But I appreciate your pointing out some problems with that.
And I hadn't fully realized this. One of the things it seems to
me you were suggesting on page 6 is some PHAs don't take
advantage of it. Have we not made it, or if we haven't it seems
to me we should, make it a condition that if you, in fact, are
going to designate some of your elderly housing to exclude the
disabled, then you must as a condition of that be willing to
apply for and administer the Section 8's. Is that not the case?
Ms. O'Hara. No, it's not the case at the moment. It's an
option, but it's not a requirement.
Mr. Frank. Well, I am prepared to insist. And I will try to
do that legislatively. That's an oversight on our part. We
should have done that. Maybe I thought we were doing it. I
don't remember. But yes, I do think that ought to be a
condition of a housing authority designating units as elderly
only. They then have to agree to provide this.
I also was impressed with your argument, and presume the
others agree, that the 811 program ought to be pumped up. And I
was struck when you note that in the CDGB and HOME and other
programs, people don't do enough for the disabled. And I'm
wondering, you know, there is this tendency to want to get the
biggest bang for your buck. Doing the disabled programs right,
as you point out, might be more expensive per unit. For
example, the elderly like living together, the disabled don't.
One of the legislative ways to deal with that might be to give
a bonus so that in effect there is now a disincentive to use
some of these programs for the disabled because the per unit
cost is higher and you would at a given level have fewer units.
And I am prepared if you'd like to work with us to suggest
some--I don't know whether we're going to get this done right
away or what the situation is--but I would be prepared to offer
a bonus to communities who incurred a higher per cost unit
program to the extent that they had a higher per cost unit
program because they were adequately housing disabled people
that they be held harmless against that in their allocation.
Does that seem to you?
Ms. O'Hara. Yes. I think that's an excellent suggestion.
And I also think that communities that have agreed to target
the lowest income people, including homeless people, like
Boston, they've created set-asides in their HOME programs, and
they find developers are very willing.
Mr. Frank. And I guess they ought to be doing that for the
homeless in general. But as I think you've all pointed out,
there's a subset of the homeless population that is the
disabled homeless population. The general homeless population
should be taken care of by appropriate targeting and proper
funding of a production program. The disabled population has
special needs in this case, literally. There is where I thought
you might want to give some kind of incentive.
Let me just ask in terms of the people who have been
homeless, one of the things we changed a few years, and I'm
wondering how well this has worked and whether they have to do
more, it turned out that you couldn't get into family public
housing unless you were more than one person as a family. And I
do remember that we changed that, I mean in the bizarre way in
which legislative counsel referred to it, we decided that one
person was a family.
Because obviously one of the real problems for those who
think that economic progress in the gross domestic product is
an undifferentiated blessing for all, I started my political
career representing the Back Bay and Beacon Hill of Boston in
1972 and my staff director for us on this side, Kay Gibbs, was
in the South End, and we have seen in those neighborhoods
economic progress drive out what was a very important housing
source for people who are now homeless in many ways, the single
room occupancies, a very appropriate form of housing for some
people who weren't either ready or willing or able to live in
more than that. The single room occupancy. The loss of that has
been a terrible downside of progress.
Now one of the things we then found was that these people
were excluded from public housing if they lived alone, and we
did change the law so they would be eligible for family public
housing. I'm wondering if that's something that was worth
doing? Is it something we should be improving on? In some cases
you have some waiting lists. In some cases we had vacancies in
the family public housing. Let me just ask for a response to
that last question if I could.
Ms. O'Hara. Briefly, Congressman Frank, the biggest
problem----
Chairwoman Roukema. There is a vote on the floor, so we'll
quickly get this response.
Ms. O'Hara. The biggest problem is that most of the units
in family public housing are two-bedroom and three-bedroom
units. So that to have one person----
Mr. Frank. And you can't deny that to a family, I agree.
Ms. O'Hara. That's a problem.
Ms. Poppe. Our experience in Columbus was that was a very
positive change because we had senior high rise public housing
that was not being fully utilized. We've now been able to
convert some of that into mixed population housing that has
both working households as well as disabled folks living
together under a good rent structure.
Mr. Frank. Well, I thank you. Let's work on those other
issues. I would be glad to do that, particularly, and I would
welcome your support in changing the law so that you have to
apply for those disabled Section 8's, if we can get the
Secretary to reinstate them, if you're going to segregate the
housing.
Chairwoman Roukema. All right. Now let me ask Mr. Frank and
your colleagues on your side of the aisle here. We have no more
questions on this side. Do you want to return after this vote?
Mr. Watt. Madam Chairwoman, I'm perfectly willing to pass
in the interest of allowing our witnesses not to have to sit
here and wait on us.
Chairwoman Roukema. All right. Thank you. Yes?
Ms. Jones. Just for the record, Madam Chairwoman, I'd like
to welcome Ms. Barbara Poppe to the Hill. We were scheduled to
have a meeting after this. And unfortunately, I'm not going to
be able to do that. But my staffer is here and this is the area
that I'm particularly interested in. Angela over here will be
talking with you. And thank you so much for coming up. It's an
important issue for Cleveland as well. Thanks.
Chairwoman Roukema. Thank you. I think you can tell by the
level of questioning we have here that you have met with a lot
of approval and a lot of sympathy and understanding and empathy
for what you have to deal with and what we'll all have to deal
with in trying to improve this program, so that we will
conclude this hearing, but also invite you if you have
subsequent additions to make based on any of these questions or
perhaps any misunderstandings you think there have been or
additional recommendations, please direct them to Mr. Frank and
myself and we'll include them in the record for all the
Members. We greatly appreciate it. We're not dismissing you,
but this happens all the time in the Congress and we're just
fortunate that we were able to hear you in full before the bell
rang. Thank you very much.
[Whereupon, at 12:15 p.m., the hearing was adjourned.]
HOUSING AND AFFORDABILITY ISSUES
----------
TUESDAY, JULY 17, 2001
U.S. House of Representatives,
Subcommittee on Housing and Community Opportunity,
Committee on Financial Services,
Washington, DC.
The subcommittee met, pursuant to call, at 9:35 a.m., in
room 2128, Rayburn House Office Building, Hon. Marge Roukema,
[chairwoman of the subcommittee], presiding.
Present: Chairwoman Roukema; Representatives Miller,
Grucci, Frank, Carson, Lee, Schakowsky, Jones, Watt, and
Israel.
Also present: Representative Jim McDermott.
Chairwoman Roukema. Good morning. I will officially call
this hearing to order. I'm Congresswoman Marge Roukema, the
Chairwoman of this subcommittee. And I must acknowledge the
fact that scheduling it so early on a Tuesday when we haven't
had any votes as yet has diminished the number of Members here
at the hearing. But I do want you to know that all the
statements will be made part of the record and certainly will
be widely distributed to Members.
I am sure that they will, because they are Members of the
sibcommittee and have an intense interest in senior issues,
they will brief themselves and become familiar with the record,
and we will not diminish in any way the importance and the
significance and the contribution of those who are here today.
But in any case, I will make an opening statement and we
will hear from other subcommittee Members. And without
objection, all Members, either present or those that are not
yet present, all Members will have their opening statements
made as part of the record of this hearing, without objection.
Now I thank everyone for coming this morning, and certainly
my colleague Mr. Frank and our colleague, Congressman
McDermott, from whom we'll hear very shortly. But in any case,
this is a panel, a fourth in a series of hearings that this
panel is scheduled on the subject of affordable housing and a
whole panoply of issues related to housing.
At the first hearing which we held which was in May, early
May, May 3rd, witnesses defined the parameters and the
complexities of the problem and outlined a wide range of
potential or possible solutions. At the second hearing in the
latter part of May, the 22nd, witnesses testified regarding--
and I thought this was especially close to my interest level--
regarding public-private initiatives that address affordable
housing and community development block grants in the HOME
investment--HOME the acronym--investment partnership programs.
They I believe are particularly constructive in leading us into
the future here, and I would hope that we would have more
emphasis on public-private initiatives.
The third hearing focused on the underutilization of
Section 8 vouchers as well as the specific problems faced by
the homeless and the disabled populations in fighting
affordable housing.
I might also interject here that the first hearing that we
held really in the committee was with Secretary Martinez where
we discussed the budget questions that are connected with the
housing issues, and Secretary of HUD Martinez did stress some
of his priorities in the context of the budget hearings, and so
we will continue to keep in close communication with him.
Now today's hearing is, as you know, focusing on elderly
housing and the difficult problems faced not only in finding
suitable, affordable housing, but also coordinating with the
services that are so urgently needed. According to the
Department of Commerce and the Bureau of the Census, the
statistics document what we all know through our own family and
community experiences, and that is that the aging population,
that is, the number of 65 and over, is growing exponentially.
And although it's 35.5 million now, we fully expect it to be at
least, in the next 30 years, well over 70 million. People are
living longer and really healthier than ever before in history,
but that gives us an added responsibility here.
The HUD statistics also indicate that only one-third of the
low-income citizens who are in need of affordable housing
actually receive it. Furthermore, the high cost of housing is
the most widespread housing problem for older Americans.
Now we talk loosely about partaking in the American Dream.
Well, that is not only for young families, but it is also, in
my opinion, the American Dream of affordable housing for senior
citizens as well, and all Americans. But along with decent
housing, seniors need the supportive services and the lack of
options such as assisted living for low-income seniors who want
to age in place in their communities, which I think is a
positive goal for all of us, but this is a real and obvious
problem and one that we want to focus on today and in the near
future.
Clearly, legislation in this area is inadequate, although
over the years non-profits and faith-based organizations have
worked with HUD to develop creative ways to meet the needs of
the vulnerable in our society.
But our population continues to age exponentially as we
said, and we need to develop new ways of meeting those needs.
There's no doubt that we must do more to increase
production and to preserve existing elderly housing stock,
renovation, and so forth. But the solution to this fundamental
goal will not be easy, and it deserves our deliberate
consideration. It's not only cost, it's a number of policy
questions that we have to deal with, the whole range.
First, we must look at the existing HUD programs, as is
very obvious, and this panel today will help us with that. And
I believe we need to have greater flexibility in the programs
in order to maximize their utilization. We'll ask our people
here today for some advice and counsel based on their own
experience in that regard.
We need to make sure that HUD has the trained staff and
tools to properly administer the programs. I'm going to repeat
something here that has been talked about a lot, particularly
by Members on my side of the aisle, and that is the question of
bureaucratic red tape that often slows the process and
frustrates the recipients. And I know that Secretary Martinez,
because we have discussed this, is committed to this goal, and
certainly we here stand ready to work with him and really
inspire him and give him incentive to accelerate the process of
reducing the bureaucracy and red tape.
We know that it's more cost effective to provide services
such as meals, transportation, personal care and health care to
the elderly in their homes rather than moving them into costly
nursing facilities. So it's not only good for them mentally,
but it's good for them physically as well as being economically
sound.
Now, last year, the committee recognized the need to
address the crisis and it created--and I want to stress here--
it created the Commission on Affordable Housing and Health Care
Facility Needs in the 21st Century. This commission was very
well devised for the purpose to provide an estimate of the need
for affordable housing, assisted living facilities, and so
forth, as I've already outlined, that whole range of issues.
But it was also to identify methods of encouraging private
sector participation and investment in affordable housing for
the elderly.
Unfortunately, the commission, which was scheduled to
submit a report to Congress on its findings this June I
believe, unfortunately, the commission members were not
appointed until just recently, and 2 weeks ago this committee
approved legislation to extend the life of the commission so
that they could complete their important work.
I know all of us look forward to receiving that report when
it is completed, and I speaking for myself now and I'm sure
other Members of this Subcommittee and full Committee will be
doing everything we can to help them expedite an in-depth study
and make that report to us.
Well, I don't know what happened to my friend, Mr. Frank,
but--all right. Mr. Frank, the Ranking Minority Member,
Democrat on the Committee I understand has yielded to
Congressman McDermott, our colleague and friend who has a
constituent of his from Washington--Seattle--here, and so I
will yield to Mr. McDermott, Congressman McDermott.
[The prepared statement of Hon. Marge Roukema can be found
on page 525 in the appendix.]
Mr. McDermott. Thank you, Madam Chairwoman. I walked into
this room today and felt reminiscent of when I used to sit down
in that chair way down there in the third row.
Chairwoman Roukema. You remember that well.
Mr. McDermott. You are to be commended on having this
hearing. I think it's an issue that's going to grow and grow
and grow.
As members of the public look at this congressional panel
up here, anybody who looks about my age has been struggling
with this problem. It used to be that when you got to be 60 or
65 or something, you didn't have to worry about your parents.
My mother and father--my father died just a year or so ago at
93, and my mother is 91. And I have been through the search in
Seattle for housing. So the issue that you are raising here is
extraordinarily important to Members of Congress as well as to
everybody else. And I think you couldn't have anybody better
here to talk about that than Harry Thomas.
Harry has been--I was one of many who suggested that he be
the head of--the Executive Director of the Seattle Housing
Authority back in 1987. And with the exception of 4 years that
he spent in the Governor's office, when Mike Lowry was
Governor, as the housing expert, he has been the Director of
the Seattle Housing Authority. At the same time, he has also
been on the Board of the Federal Home Loan Bank, was Chairman
from' 95 to' 99, and still is on the Board.
He has been the recipient of the 1995 Distinguished Alumnus
Award from the University of Washington and the 1999 National
Institute of Senior Housing Sidney Spector Award. So he has
been recognized nationally for what he is, which is a strong
and very powerful advocate for senior citizens. And if the rest
of your panel is up to that level, you've got a really strong
panel here, and it is my great pleasure to introduce Harry to
the subcommittee. Thank you.
Chairwoman Roukema. Yes. It is my understanding that you
couldn't remain for the second panel, Congressman McDermott,
but we do appreciate your introduction and appreciate the fact
that you have helped us get this kind of informed witness here
today.
Yes, Mr. Frank.
Mr. Frank. Mr. McDermott has to leave to get back to Ways
and Means in the hopes of trying to retain some money in the
Federal Treasury so that we can build housing, although the
odds are against him in that regard in the current context.
I thank you, Madam Chairwoman, for convening this latest
series. I think what we have had under your direction is a very
important series of hearings that are I think constructing a
very useful record. I have been struck time and again by the
great degree of agreement among the witnesses; namely that
increased production efforts must be a part of an effort to
deal with the housing crisis.
There has been an acknowledgement that the very prosperity
which has been of such great benefit to the country as a whole
and to so many individuals has exacerbated the housing crisis
in many ways, because it has driven up the price. And second,
that a production program is an important part of it. So I look
forward to hearing further testimony along these lines, and I
look forward to our then working together to come up with a
program.
And I do have to say, I was particularly pleased to note
that testifying on behalf of the Association of Homes and
Services for the Aging, a very important group, and as Mr.
McDermott pointed out, one of the things we need to do is to
develop a better range of services for people who are somewhere
between a nursing home and complete independence. But I was
very pleased to see that the spokesperson for that is the
president of the National Church Residences. Because there are
people who have argued that until and unless we pass the faith-
based initiative, churches wouldn't be able to participate in
social services. And I'm glad to have strong evidence that
under existing law and existing practices, there is a very
vital role for faith-based institutions. And I'm delighted that
a representative of a faith-based institution association is
here speaking before us today. Thank you.
Chairwoman Roukema. Thank you. I'm glad you made that
point, because I am one of those who do not--because of the
experience we've already had with faith-based organizations in
a whole range of issues, particularly in housing--do not
understand why the question is now being raised as to whether
or not this is Constitutional. But we won't go into that now.
Mr. Frank. Well, not Constitutional, but you just did raise
it, and I do have to respond. And the answer is, what we object
to is not funding faith-based institutions, which is being
faced, but empowering them to ignore anti-discrimination
policies. And if that can be resolved, then this is a non-
controversial issue.
Chairwoman Roukema. I don't think--well, that's the point.
But that was not raised initially. It was a comprehensive.
Mr. Frank. Well, no, excuse me, Madam Chairwoman. No,
excuse me. I have a procedural----
Chairwoman Roukema. I'm sorry. Excuse me----
Mr. Frank. No, I'm sorry, Madam Chairwoman. I am sorry. You
cannot use the privilege of the Chair to raise a debating point
and then shut off debate. There's nothing in the rules that
allows you to do that. You can't make unilateral interventions
and then announce that they're not to be discussed further. The
fact is that the bill introduced does empower people to
discriminate, and that's what we're going to be debating.
Chairwoman Roukema. Mr. Miller, please.
Mr. Miller. Thank you, Madam Chairwoman. I'm glad to see my
good friend Mr. Frank is just as calm as ever, and not
passionate about any of these issues. He talked about
increasing production efforts, and I absolutely agree with him.
I think many of the problems we face today in production of
housing units are directly associated with the Government. In
fact, I am firmly convinced that the problems today we have
with production are Government.
And we need to be more creative. The creative use of
Section 8 vouchers is a great opportunity for us. There are
people who qualify for Section 8 vouchers and who are going to
use Section 8 vouchers, yet we limit those to rental housing.
And I think we need to be broader in concept. Why shouldn't
such people be able to use a Section 8 voucher to buy a home?
We have, for some reason, determined that we are going to lock
people into the rental housing market when there should be more
creativity on Section 8 vouchers that are used so that in 3 to
5 years an individual or family will become an active
participant in the housing market and become empowered by that
involvement.
I know in the 1980s in the early stages of the congregate
care concept, I was doing a lot of work in that area and I
developed for over 30 years. And the thing I found in housing
that most merchant builders, as you would call them, have is
entitlement. And I seem to be very good at entitlement working
with Government agencies. So most of my work through the 1980s
and 1990s was basically getting entitlements on projects so
merchant builders could go out and build affordable housing.
But senior housing has changed dramatically from when I was
a child. When I was a kid, you thought of people in their
sixties as old. I'm 52. People in their 60s today are not old,
and when I was involved in congregate care in the 1980s, you
had to design a product for individuals who did not necessarily
want to own their own home anymore, but were very mobile. And
basically, we were designing cruise ships on the land that
provided all the services that people would receive on a cruise
ship, but they received such services as part of their
lifestyle. They were active, yet they did not want to live
independently, but they were completely ambulatory.
And we have a huge growing crisis, I believe, in the
housing market. There is a huge crisis in affordability, and
much of that crisis is directly due to the impact Government
places on property owners wanting to develop their property,
such as habitat set-asides. I have some friends in Southern
California that want to develop 640 acres in an area that
should result in affordable housing, but for them to develop
the acres, they have to set aside 5,000 acres in some other
location as habitat.
It's very difficult to go out and purchase 5,000 acres to
develop 640 acres and then at the same time produce affordable
housing. And that's something we're going to have to deal with.
And with an aging senior population, the demands are growing,
and we're going to have to be able to address that proactively,
and we're doing a very poor job being reactive to the crisis I
believe Government has caused and allowed to exacerbate over
the years. And I'm encouraged by some of my friends and
colleagues on the other side of the aisle, on the other side of
the Chairwoman here. Is my time up, Madam Chairwoman?
Chairwoman Roukema. Yes. I'm afraid it is.
Mr. Miller. You are so patient with me, but I thank you
very much for that patience.
Chairwoman Roukema. Thank you. And by the way, I will
simply repeat that for those that weren't here at the beginning
that I have unanimous consent that the opening statements of
all Members will be included in the record.
In order of your appearance, Congresswoman Schakowsky is
next.
Ms. Schakowsky. Thank you, Madam Chairwoman. First I would
like to associate myself with the remarks of Ranking Member,
Mr. Frank, particularly in regard to the need for production of
affordable housing. Production, production, production.
And Madam Chairwoman, I would like to say to you that I
would very much like to work with you on the issue of
bureaucracy. Many of the developers that I talk to, people in
the private sector, are very concerned about this, and I've
been promising them and would like to fulfill that promise to
work on the issue of reducing some of the paperwork involved.
So I hope I can participate with you on that.
A couple of things I wanted to say. Seniors all across the
country and in my district too are asking the very same
questions: Will I able to stay in my home? In my district we
have the expiration of project-based Section 8 contracts, and
people are wondering where they're going to go, will there be
affordable and safe housing in my community? Will I be able to
get the services I need to remain independent? Will I be able
to get home-based services or access to a quality assisted
living facility if necessary?
For senior citizens and their families, these are not
problems to be solved in the future. They are today's problems
and they need immediate and effective answers.
I hope this hearing and the activities of the Subcommittee
and the dedication of housing advocates around the country will
help us get to those answers.
As the Chairwoman has already pointed out, today more than
one in four households that receive Federal housing assistance
is headed by an older person, yet only one in three low-income
seniors in need of affordable housing is getting assistance.
Older women are particularly hard hit, not only because they
live longer, but because their median income continues to lag
behind that of older men and the rest of the population. Even
those older women who own their own homes face enormous
challenges just to hang onto those homes, to avoid the trap of
scam artists and predatory lenders, to cover expenses such as
maintenance, property taxes, and any physical modifications
they need as they age in place.
As the older population grows, in particular the number of
persons over 85 years of age, this problem will only get worse.
We need to recognize that the older population is not
monolithic. That a healthy 65-year-old has different housing
and support needs than a frail 90-year-old. That's why I'm glad
that we're looking at a continuum of housing and support needs
today. We need to make sure that financial assistance, services
and protections are in place to allow senior citizens to remain
in their homes and in their communities. As we move toward
greater emphasis in naturally occurring retirement communities
and assisted living, we need to promote resident rights and
guard against potential abuses.
Meeting the housing needs of older Americans is a multi-
level challenge that starts, but clearly does not end with the
need for creating additional housing stock that is affordable,
safe and accessible. Expanded information and financial
counseling, transportation, housing, nutrition and other needs
must be part of the mix. We need a national commitment to
implement an affordable housing policy, and I look forward to
hearing from the witnesses on how to meet that goal.
Thank you, Madam Chairwoman.
Chairwoman Roukema. All right. I thank you.
Now Congresswoman Carson, please.
Ms. Carson. Thank you very much, Madam Chairwoman. I would
like to thank you for convening the hearing today. I would like
to thank all the witnesses and welcome them for their input.
Since we began this series of hearings earlier this year,
virtually everyone agrees that we face an affordable housing
crisis nationally in every region of the country. Similarly, we
are aware of HUD's annual reports that have shown a steady rise
in worst-case housing needs.
While Social Security and other programs have done a great
deal to alleviate poverty among the elderly, the elderly remain
more likely than any other adults to be poor or near poor. In
addition, the proportion of the elderly in the population is
increasing, creating a need for a more comprehensive approach
to housing and caring for the elderly. We need to focus on
affordable options to keep seniors in their own homes or in
enriched housing such as in assisted living. This helps seniors
maintain independence and avoid the lower quality of life and
higher costs that are often associated with nursing home care.
For seniors, housing is much more than just a roof over
their head. It allows them the dignity and respect that they
deserve.
Perhaps the most powerful lesson I learned, Madam
Chairwoman and Members of the subcommittee, was before I was
elected to Congress is I served in the Office of Senate Housing
Trustee in Indianapolis, which handled poverty for that
particular township. We learned poverty can truly happen to
anyone. One person in particular comes to mind, an elderly
person now, well educated, white, male, once rich and very
powerful lobbyist. I remember him giving lavish parties that
impressed even the leaders of the community's political and
financial institutions. But tragically, this young man had a
stroke, lost his job, his house, his cars, and all of his fancy
friends left as a result. He now lives in Government-subsidized
housing which I acquired for him, and on occasion he still
calls me and asks for money to enable him to survive for
another few weeks because he is too embarrassed to ask anyone
else.
If the people who feel that poverty only happens to unwed
mothers could have seen the embarrassment in his face or heard
the humiliation in his voice as he asked for a few dollars to
help him get through the month, they wold have realized that a
social safety net is important for all members of our society.
We never know when we ourselves may become the least of these.
It is for this reason that I have fought and will continue
to fight to ensure that affordable housing is available to all,
especially the elderly And as my dear friend Jan Schakowsky
pointed out earlier, women, and particularly minority women,
face a crucial situation in terms of their poverty levels and
their lack of affordable housing accommodations.
Last year we passed a number of innovative policy
provisions to give us more tools to meet the growing challenge.
Yet the proposed Administration funding level for elderly
housing is apparently static. With the rising costs of
construction, this means fewer affordable housing units will be
built under Section 202, with the same being true for Section
811 disabled housing programs. As rental prices increase, Madam
Chairwoman, as our elderly population grows, we should be
expanding not contracting our efforts.
I appreciate again, Madam Chairwoman, the time that you are
taking today, the interest that you have demonstrated in this
very crucial issue that faces our Nation's elderly, and trust
that we as a committee and as a Congress will be able to
counteract the growing shortage of affordable housing for our
elderly.
Thank you very much, Madam Chairwoman. I yield back the
balance of my time.
Chairwoman Roukema. Thank you very much.
Congressman Watt.
Mr. Watt. Thank you, Madam Chairwoman. I will be very
brief. I really hadn't intended to make an opening statement on
the issues before us. I did, however, walk into the middle of
your discussion with Ranking Member Frank about the faith-based
initiative. And I hope that the Chairman will aggressively look
at the proposal that is being advanced I think this week on the
floor. The faith-based initiative debate is not about whether
the Government will be involved in or whether religious
institutions will be involved in providing services that the
Government provides. Religious institutions do that now, and
they do it without impediment, other than having to set up a
501(c)(3).
This debate is not about that. If that were what the debate
was about, there wouldn't be a debate. There would be a 435-to-
0 slam dunk. This debate is solely about whether religious
institutions will be allowed to discriminate in employment in
the delivery of the Government services. And there are some of
us who feel strongly that we should not be called upon to vote
to allow religious institutions or anybody, any institution, to
use Government funds to discriminate in employment.
And so I hope the Chairlady will look very carefully at the
proposal that is being advanced and look beyond the rhetoric.
The rhetoric is where you and Mr. Frank were engaged in the
debate. But the substance of the bill is not about whether
religious institutions deliver services. They already do that.
The substance of the bill is about whether religious
institutions will be allowed to discriminate in the delivery of
those services in their employment practices.
I yield back the balance of my time.
Chairwoman Roukema. That debate will take place at the
appropriate time in the appropriate venue. Congresswoman
Barbara Lee.
Ms. Lee. Good morning. Thank you, Madam Chairwoman. And I
would like to welcome our panelists today. The problem that we
are discussing is very, very critical. The fastest-growing
segment of our population, the elderly, actually pitted against
a severe housing crisis throughout the country, and
particularly in urban areas like for instance in my district,
the City of Oakland and Berkeley in California.
From the testimony submitted, I understand that one-third
of the 1.3 million people living in public housing are elderly
or disabled. This is another reason why of course some of us
were outraged when the Administration cut funding for the
Public Housing Drug Elimination Program, which really does
directly impact the safety of our elderly and the disabled.
The housing crisis is terrible for everyone in my district
in the Bay Area, and it is more devastating for the elderly who
are on fixed incomes, burdened with of course as you know
increased energy costs, and are really less able to move about
and deal with transient housing options.
So I look forward to your testimony today so that we can
hear what your opinion is on how effectively our Federal
housing programs are working for the elderly and how we can
improve them.
Now I know that there are many model communities around
here with regard to affordable housing for our senior citizens.
One community, for example, which I have the privilege to visit
quite often is Sun City, Arizona. But in Sun City, Arizona, of
course, there are many--or the majority of senior citizens,
they can afford to live there, and so they have these options.
But they do have wonderful affordable housing actually in that
area. Some of the housing is intergenerational, which I think
makes a heck of a lot of sense as we look at how we develop
affordable housing for senior citizens.
One thing actually rings clear from every one of our
hearings on affordable housing, and that is the need for
subsidized programs of housing production. Now funding of
course is critical for housing production. So I support using
the excess FHA and Ginnie Mae funds as well as increased
appropriations to address this issue which is really crippling
our communities.
I urge this Subcommittee to really look at viable and well-
funded housing production plans that are very creative, as I
mentioned earlier, some that we know that are working in our
country, as we move forward to ensure that our elderly have
decent and affordable housing.
I thank the Chair for conducting this hearing, and I look
forward to the testimony.
Chairwoman Roukema. I thank you.
Now it is my understanding there are no other Members who
wish to be heard. And with that, we will welcome our first
panel, and they are at the table. But first I would like
unanimous consent to insert into the record written statements
submitted to us by the Health Care Financing Study Group who
are not here today to testify, but they have submitted a
statement, as well as the National Association of Housing
Cooperatives. Without objection, their testimony will be
submitted to the record.
I welcome the panelists here today. I will not spend the
time giving lengthy introductions. But I do want to acknowledge
that in each case we have members--panelists here who are
experienced and highly knowledgeable on these subjects from a
very practical, in-the-field experience.
Mr. Thomas Slemmer has been with the National Church
Residences for the past 25 years, a long experience, and served
as its President and Chief Executive Officer and has been the
Chief Executive Officer since 1989, as I understand. He s a
member of the Board of Trustees of the National Affordable
Housing Trust and is very active with the American Association
of Homes and Services. And you are testifying for them today.
Mr. Slemmer, will you please continue, and understand that
the full text of your testimony will be in the record. However,
if you can, please limit your oral statement to 5 minutes.
Thank you.
STATEMENT OF THOMAS SLEMMER, PRESIDENT, NATIONAL CHURCH
RESIDENCES; ON BEHALF OF THE AMERICAN ASSOCIATION OF HOMES AND
SERVICES FOR THE AGING
Mr. Slemmer. Madam Chairwoman, Members of the subcommittee,
thank you very much for inviting us. I am here today
representing the American Association of Homes and Services for
the Aging. I might say that I am on the Board of Trustees and
Chair of the Housing committee this year.
Mr. Watt. Madam Chairwoman, could you get him to pull the
mike a little bit closer to him?
Mr. Slemmer. AAHSA's members, as you may know, operate
300,000 units of housing, mostly federally assisted. Over 50
percent of our members are faith-based, and we're proud of the
record that we have of basically being the organization that
serves most of the Section 202 sponsors in this country. It has
been a very successful program working with AAHSA members. We
think not-for-profit housing sponsorship really makes a
difference.
We represent members that represent seniors in their
communities and are really an enduring presence in their
communities for housing needs.
We have a lengthy written testimony that I'll just refer
to. But after listening to the opening remarks, I think the
mathematics are simple. There is doubling of the senior
population that's going to happen in the next 30 years. There
is low production. The Section 202 program is only funded at
around 5,000 units a year. We're really disappointed in last
week's mark of the appropriations bill where they kind of
leveled the funding for Section 202 again next year. We're
concerned about that.
But more importantly, there's a loss of senior housing
units going out of the system. We don't have exact breakdown on
this, but there are estimated to be about 300,000 affordable
housing units that have been lost in the last 2 or 3 years due
to opt-outs and cancellations of contracts.
This is a crisis. You talk about production. I'm not sure
production is the biggest issue. The loss of this kind of
housing is very, very significant and very discouraging. If you
think about what's going to happen in the next 30 years in this
country where we've talked about the largest demographic shift
in any country in history.
The AARP has just conducted a study about the Section 202
program alone, and I believe that they are showing nine people
on the waiting list for every Section 202 unit. I can tell you
from my 25 years' history, that's the largest waiting list that
we've ever seen. It's getting worse, and we really urge your
attention to that.
So the solutions? Well, again, we're disappointed with the
appropriation levels on Section 202. We really encourage you to
look at that. How can we double the population of seniors and
not do something about production?
In 1995, there was $1.2 billion allocated for Section 202,
and it's down now, I think down to 679. We're really
encouraging you to consider a 10 percent increase. Let's get on
with more housing production. And also redoing all the Section
8 contracts. That's been something that you've been doing. We
certainly need to not take our eyes off that very important
piece of legislation.
Not only production, but the modernization is really
important. Think of the number of housing facility units out
there for seniors that are getting older. You expand that out
for the next 30 years and you've got some really serious
situation. The low income elderly 236 portfolio is in dire need
of renovation and retrofit and rehab. AAHSA is recommending
let's get started with this. Let's recognize this is a problem,
and let's allocate at least $250 million this year toward that
effort.
I think one of the most critical issues, however, and
perhaps maybe the quiet issue facing us is preservation of
affordable housing. There are again a loss of significant
number of affordable housing. We worked in California last
year, Congresswoman Lee and Congressman Miller. The city of
Pacifica, California, City Manager Dave Carmody came to us and
asked whether we would participate in trying to preserve his
senior housing facility that was built in a prominent location
in Pacifica that has been serving low income seniors for 20
years. That community experienced a new owner buying that
facility, issuing eviction notices at 3:00 a.m. in the morning
to the senior residents there. And that city, to their credit,
decided to really fight that. They took the property through
eminent domain, spent over $300,000 in legal fees, and we were
able to participate with the county and the city and the State
to preserve that as affordable housing for seniors. Where would
those seniors have gone? In California, it could be 60, 100
miles away before you could find other affordable housing.
So the preservation is a really important issue that's
affecting senior housing right now. We have to get HUD
concentrating on preservation. We've got to make sure our
legislation focuses on preservation. In many ways, it may be
the bigger issue than production even this year.
We also worked with the city of Manhattan, Kansas on a
similar project. Twenty-year-old senior citizen building
downtown Manhattan, Kansas, owner opting out. And the city is
really concerned about the loss of that housing.
We heard a disturbing report out of Michigan 3 days ago
that in the midst of all of the housing production issues,
there are over 500 units of affordable senior housing that were
just foreclosed on by HUD, lost forever to the low-income
portfolio.
We urge you to consider production, modernization,
preservation as well as the social service coordination. We
think those four components really make a big difference in
doing what we need to do to provide quality housing for our
seniors in the next 30 years.
Thank you.
[The prepared statement of Thomas Slemmer can be found on
page 531 in the appendix.]
Chairwoman Roukema. Thank you.
Now we have Ms. Jane O'Dell Baumgarten. Ms. Baumgarten is
here from North Bend, Oregon and is a member of the Board of
Directors of the AARP, for whom she is testifying today. She
has also formerly served on the Governor's Commission for
Senior Services and was a delegate in 1995 to the White House
conference on aging. We do appreciate your being here today and
look forward to your testimony.
STATEMENT OF JANE O'DELL BAUMGARTEN, MEMBER, BOARD OF
DIRECTORS, AARP
Ms. Baumgarten. Good morning, Chairwoman Roukema, Ranking
Member Frank and Members of the Subcommittee on Housing and
Community Opportunity.
In addition to serving on AARP's Board, I am also
privileged to serve on the Commission on Affordable Housing and
Health Facility Needs for Seniors in the 21st Century.
Today, my remarks will represent only the views of AARP.
AARP appreciates the tradition of strong, bipartisan support
for housing programs serving older Americans that has
characterized this Subcommittee's work. We hope that the same
bipartisan spirit will extend into the future as the
Subcommittee examines and prepares to address issues associated
with housing affordability and availability.
There are powerful demographic forces at work in our
Nation. Projections by the U.S. Census Bureau estimate that by
the year 2020, the number of persons aged 65 and older will
grow to over 53 million people, up from 34 million estimated
for 1998. Changes in the age distribution of the Nation's older
population are also occurring. Presently, the age of the older
population is driven by large increases in the number of
persons age 75 and older.
Housing affordability and availability are major problems
for many older Americans, and especially for those who rent.
AARP's analysis of the 1999 American Housing Survey indicates
that approximately 25 million households were headed by a
person age 62 or older. Of these, nearly 5 million or 20
percent were renters. The same survey analysis indicates that
57 percent of the older rental households paid 30 percent or
more of their income on housing, compared to 39 percent of
younger renter households who paid 30 percent or more on their
housing.
And many of these older persons, especially those who live
alone, eventually will need some supportive services to remain
independent in their homes. The availability of these services
varies widely due to the residential distribution patterns of
older Americans. Such dispersion presents formidable challenges
to the efficient delivery of services such as transportation,
in-home health care, home-delivered meals, and other necessary
services.
It is especially relevant for the purposes of today's
hearing to recognize that as the elder population increases,
the proportion who have difficulty performing one or more basic
activities of daily living, such as bathing, dressing or
eating, will also be increasing. The Census Bureau's 1995
Survey of Income and Program Participation indicates that
approximately 40 percent of persons age 62 or older live in
subsidized rental housing units and have at least one activity
of daily living limitation, such as moving around the room,
transferring from a bed or chair, bathing, eating, dressing,
and using the toilet. Or they have one instrumental activity of
daily living limitation such as telephone, using the telephone,
keeping track of bills, preparing meals, taking medicine, and
getting outside the home. This compares with 28 percent of
older persons in unsubsidized rental property and 19 percent of
older persons in owned homes.
These figures capture the essence of the challenge before
us. The experience of the Section 202 supportive housing
program for the elderly helps to illuminate issues, challenges,
and most importantly, the need for supportive services. It also
helps to demonstrate the importance of viewing housing as the
effective point-of-service delivery.
I would like to briefly summarize several key findings from
a recently released extensive AARP-sponsored study of the
Section 202 program. Comparisons of the 1998 Section 202 survey
findings with those of the 1988 survey document that:
Section 202 units for older persons continue to be in high
demand, as suggested by low vacancy rates--1 percent for one-
bedroom units--and have long waiting lists--9 applicants
waiting for each vacancy that occurs in a given year.
Residents are older and frailer than was indicated in the
earlier research. The average resident age increased from 72 in
1983 to 75 in 1999. And 39 percent of those residents were over
the age of 80.
Capital reserves were generally viewed by managers as
inadequate----
Chairwoman Roukema. Ms. Baumgarten, can you summarize your
remarks?
Ms. Baumgarten. I'm going to.
Chairwoman Roukema. Yes. Thank you.
Ms. Baumgarten. If you would just let me finish this one,
two sentences?
Capital reserves are generally viewed by managers as
inadequate for retrofitting projects to meet the changing needs
of aging residents.
Section 202 housing needs to meet the changing needs of
residents, because for them, the critical difference is
remaining in their apartment, in a supportive community, with
their belongings or admission to more expensive nursing home
care.
And I thank you for this opportunity to testify, and we
look forward to working with the subcommittee.
[The prepared statement of Jane O'Dell Baumgarten can be
found on page 541 in the appendix.]
Chairwoman Roukema. Thank you, Ms. Baumgarten. May I just
ask you, you held up that report. Do you want that submitted
for the record?
Ms. Baumgarten. I believe we have submitted this.
Chairwoman Roukema. All right.
Ms. Baumgarten. And if not, we will see that it is
submitted.
Chairwoman Roukema. With unanimous consent, that will be
included in the record.
Mr. Robert Yoder is with us today, and he has had extensive
experience for the Warrior Run Development Corporation, right?
Where you have developed and managed more than 1,400 low- and
moderate-income rental housing units in Pennsylvania.
You are testifying here today as a representative of the
Council for Affordable and Rural Housing. And I believe you
were Past President of the Council for Affordable and Rural
Housing, and that's a component of this discussion that we must
hear from. Thank you very much, and we yield.
STATEMENT OF ROBERT P. YODER, SR., VICE PRESIDENT OF YODER
BUILDERS AND WARRIOR RUN DEVELOPMENT ON BEHALF OF THE COUNCIL
FOR AFFORDABLE AND RURAL HOUSING
Mr. Yoder. Madam Chairwoman and Members of the
subcommittee, the Council for Affordable and Rural Housing,
CARH, C-A-R-H, and I thank you for the opportunity to speak and
for the subcommittee's interest in the needs of rural America
and our elderly citizens.
The real issue that faces America is how to facilitate
efforts to provide decent, safe and affordable housing. We
believe that this an ongoing process that requires us to
adequately maintain the existing affordable housing stock,
provide for development of new housing in areas that need it,
and provide services for elderly people typically in need.
As a rural developer myself, a lot of my portfolio has in
the past been financed by the Rural Housing Service or the U.S.
Department of Agriculture, the past Farmer's Home
Administration.
First of all, the Rural Housing Service in the early 1990s,
had a budget of $972 million, to this year which has declined
to $114 million. And what that relates to in what housing can
be produced is that in 1990, that money produced about 16
projects in Pennsylvania for housing for both low-income
families and elderly. Today it produces less than one.
The problem is--and as a matter of fact, this year it
produced zero in Pennsylvania. The competition--there will be
no Rural Housing Service projects in Pennsylvania. One of our
concerns is is that the money be, at least some of the money be
restored to the rural areas. Because the Rural Housing Service
is the entity that finances projects in areas that are below
20,000 population.
Second, in light of the shortage of funding, we have
analyzed ways to utilize Federal funds to achieve maximum
financial leverage. Our best suggestion, outside of restoring
the budget funds, is to leverage Federal appropriations through
new programs under the Federal Home Loan Bank System.
The banks and their members are an appealing source for
financing, because members are largely located in or near rural
areas. In our experience, members also tend to be familiar with
the development of rural housing.
Third, making the tax credit program more compatible with
the Rural Housing Service program and more flexible to meet
rural housing needs.
Fourth, provide targeted Section 8 vouchers to rural areas
to actually produce housing.
Number five, restore unified standards to the Rural Housing
Service. Today the Rural Housing Service States operate as a
separate entity. The State directors answer to the
Undersecretary and not to the Administrator. We are asking that
at least it be looked at as HUD does as it has a chain of
command where the Administrator actually can be Administrator
to the States rather than the Undersecretary, which we lose
communications in that chain.
And remove the financial barriers such as exist today, as
you heard other panelists talk about, the transfer, which is
the exit taxes from private investors under the IRS Code. Exit
taxes are extremely high. And also the prepayment restriction
that was levied in the early 1980s for owners that are seeking
to continue affordability. Those two really go together,
because if you can't refinance it to take out the people that
are there, the problem is is that we end up with a project that
keeps going downhill.
I appreciate the opportunity to present our concerns, and I
would be happy to answer any questions. Thank you.
[The prepared statement of Robert P. Yoder Sr. can be found
on page 563 in the appendix.]
Chairwoman Roukema. I thank you, Mr. Yoder. I don't have a
specific question, but I do want to make an observation here.
Certainly you've made a case on the rural housing, something we
will have to look into. And I will personally be looking into
what the implications are of your recommendation with respect
to the Federal Home Loan Bank Board. I will observe that and
look into it and see about those regulations that were changed
during the Clinton Administration, as you have identified them
in the last year or two.
But I would also like to point out that in any way we
cannot look forward to a huge burst in spending, but we've
obviously have got to recognize the cost effective case that
has been made very definitively here, and that it is very cost
effective if we are to meet the housing needs of the elderly as
well as the incentives for not only production and
modernization, but also for treatment in the homes and living
assistance that is highly cost effective. There's no question
about that.
So I will simply observe that I'll be more than happy to
work with you. I don't know how we make the case in terms of
not only the authorizing of new programs, but also the
appropriation of money to--the funding of that money. But we'll
try. The case is there, and our hearts and souls are with you.
Now we have to put our minds to work on getting the money and
proving the cost effectiveness of the programs. And with that
I'll yield to Mr. Frank.
Mr. Frank. Thank you, Madam Chairwoman. And let me pick up
where you left off, because I agree we have an obligation, all
of us, to do the best we can within the current budget. And I
salute the ingenuity and determination of the people who are
represented here to do that.
But it is also clear from this hearing as in the previous
ones that we achieved what we called a surplus to be able to
afford a tax cut that we put through in part by squeezing
housing programs. We've heard this kind of testimony about the
reductions, rural housing down from, what, 600 million to 100
million at a time when inflation alone would have sent you in
the other direction. Section 202 being cut back.
The preservation program. Mr. Slemmer correctly pointed out
that one of the problems has been that we've been losing
affordable housing, and we've been losing it partly because of
budget constraints that were imposed on the preservation
program. I wish they hadn't designed those programs the way
they did years ago that allowed developers to opt out.
The courts have made it very clear that the rights that
developers acquired to opt out and to change were basic legal
rights that couldn't be simply abrogated, they had to be paid
for if we were going to get them to change them. And this
Congress did, and this Subcommittee took the lead in putting
into place programs that would have minimized displacement and
prepayment, and then those were changed when control of
Congress changed, and money was withheld.
So I think we should be very clear. Yes, we want to spend
this money thoughtfully. But the single biggest problem we face
here is a national decision to withdraw resources from the
production and rehabilitation and preservation of housing for
the elderly, and that's what has exacerbated this crisis.
Now it's fashionable for some people to blame the Federal
Government and say, ``Well, what we need to do is let's just
cut back and free up the resources.'' In some cases, that works
well. In the area of housing production for older people, I
think it has not worked well. And that doesn't mean everything
should be 100 percent Government. It means the private-public
cooperation. But you can't have private-public cooperation if
there is not on the part of the public sector some money
brought to the table.
And housing for older people is an especially important
point in the debate we have philosophically over the role of
the Federal Government. Those who talk about the Federal
Government is always making things worse. People who believe,
as Ronald Reagan said in his first Inaugural, that Government
was not the answer to our problem, but the problem. People who
like to point to Government's failures have a real problem when
it comes to housing for older people. Because the Government
has, the Federal Government has helped build a good deal of
housing for older people over the years, some directly through
public housing, through Government, Federal-local. Some through
Federal-private. A whole range of things.
And judging by consumer satisfaction, the Federal
Government's efforts in the field of housing for older people
are one of the most successful things in our society. Someone
gave the figure out, nine people on the waiting list for every
unit. Who gave that? Somebody had that figure. Who had that?
Ms. Baumgarten, you had that figure? Would you repeat that?
Ms. Baumgarten. Which figure are you talking about,
Senator?
Mr. Frank. There was a figure about 9 people on the waiting
list for every unit.
Ms. Baumgarten. Yes.
Mr. Frank. Would you repeat that for me?
Ms. Baumgarten. Yes, of course. It was in the summary. I'll
read the statement again if it's OK with you.
Mr. Frank. Fine.
Chairwoman Roukema. Could you speak into the microphone,
please?
Ms. Baumgarten. Oh, yes. I'm sorry.
Chairwoman Roukema. We're running out of time here, so go
ahead.
Mr. Frank. The one thing you never have to apologize for in
these halls is repetition. Please go ahead.
[Laughter.]
Ms. Baumgarten. The Section 202 units for older persons
continue to be in high demand, as suggested by low vacancy
rates, and that was 1 percent for one-bedroom units, and long
waiting lists. Nine applicants waiting for every vacancy that
occurs in a given year.
Mr. Frank. Thank you. That's all I needed. Because
remember, we are talking now about a Federal program funded
with Federal dollars. And I think that is the most direct
repudiation of people who assume that the Federal Government
can't be helpful, that it is possible to get--consumer demand
tells us that there is a great deal of satisfaction with this
program.
So we have a need, a need that's going to get worse with
the demographics. We have the resources in this wealthy Nation
to do it. We have a track record of the Federal Government
doing it well. And the only thing that stands in the way is the
political refusal of the executive branch and the legislative
branch to make the resources available, and I hope that people
will continue to insist that we reverse this policy and in fact
make the resources available with great success. Thanks to the
panel.
Chairwoman Roukema. Congressman Miller please.
Mr. Miller. Thank you, Madam Chairwoman.
I think some of the Government programs we are implementing
currently are working because we are absolutely unwilling, as a
Government, to deal with the problem. So when we're talking
about placing a bandaid over a sore rather than addressing the
problem that caused the sore. Yes, you can say that some
Government programs are certainly very successful and
Government can continue to subsidize housing programs, thereby
creating more affordability. And in essence, you can say that
Government is successful in what it is doing. But we are
unwilling and have been unwilling to deal with the source of
the problem.
You, Ms. Baumgarten, talked about housing affordability and
the problems we face with that. One of the speakers talked
about the City of Oakland getting involved in a project to
guarantee affordable housing.
Mr. Slemmer, were you the one that we talked about it?
Mr. Slemmer. Pacifica.
Mr. Miller. I've done projects in the San Francisco Bay
Area and the fees are the most outrageous and the costs are the
most outrageous in the State of California. And you cannot go
out as an independent builder and build affordable housing in
the San Francisco Bay Area, because it's impossible based on
the fees they charge you to build in those areas.
So, yes, you can come in and we can say, Government can
subsidize and Government can help create affordable housing,
and that will create affordable housing for people, and I'm not
arguing that Government has to do it, because Government has
created such a disproportionate field for the building industry
to work within that they cannot produce affordable housing.
Now, Mr. Yoder, you said targeted Section 8 vouchers are
necessary to produce housing. You don't produce housing with
Section 8 vouchers, you create demand with Section 8 vouchers.
Not a dime of Section 8 vouchers goes to produce housing, so
your verbal statement was incorrect and I think you made a
mistake that Section 8 vouchers are necessary to be able to put
people into affordable housing.
But it takes Government subsidies to rectify the problem
created by Government. For example, I had a 500-unit apartment
project in the San Bernadino County area. I wanted to build
low- to moderate housing units for people. I could not do it,
because the local government there charges the same fee for an
apartment as they did for a single family residential home.
I could not build 500 affordable housing units in a
community that needed those housing units, because Government
fees were so outlandish that you could not afford to build
them. Yet, we continue to put a bandaid over the problem.
I support the Section 8 voucher program, because there's no
resolution to the current housing availability crisis until we
deal with the problem, and that is the unreasonable demand
placed on property owners by Government, such as the Endangered
Species Act--you see what it's done to California and many
other States.
You can't build on your property, because in order to
develop 600 hundred acres, they want you to buy 5,000 acres
somewhere else to set aside for habitat. You cannot purchase
5,000 acres for habitat and build on 640 acres, and then create
affordable housing. It's impossible.
Yet, through Government enforcement of the Endangered
Species Act, we've eliminated a huge sector of property out
there that we could use for affordable housing. I support
programs we have today to help people who cannot help
themselves, but the problem we have is that Government has
created the demand and the need in the affordable housing
sector, because they place such outrageous regulation on
property owners who cannot create affordable housing.
Until we are willing to look at the causes of the problem,
and understand that the cause of the problem is Government--and
I will sit with any Member of this subcommittee with a group of
property owners and developers and show them exactly what
Government has done to create the problem.
Until we are willing to address that, yes, we have to move
forward with the Section 8 vouchers, but we need to be creative
with those vouchers so people can use vouchers as an incentive
to buy houses. But the problem needs to be addressed in this
Nation, and part of the problem is that builders and property
owners have become cash cows for Government, like it or not.
In many cases, there's no nexus between the fee charged to
the builder and what the builder is doing. Until we are willing
to face the fact that property rights no longer exist, because
you can't prove a taking in Federal court, if you leave any
value to the property, and you, as a property owner, know that
Government can say, ``Well, you can graze cattle on your
property, so your property's still worth something even though
you can't build on your property.'' That's outrageous, it's
criminal, and we need to resolve the problem we have allowed to
occur. And until Government's willing to do that, we are going
to sit here year after year and listen to the needs of people
who need help, and we need to help, but we are unwilling to be
proactive and deal with the causes of the problem. We're just
being reactive to a situation we have allowed to occur.
And God bless each of you who are trying to create
affordable housing for people who need it, because seniors and
young people are facing a crisis today, and that is, where do
they live?
Thank you, Madam Chairwoman.
Chairwoman Roukema. Thank you.
Mr. Slemmer, did you want to react or comment on the
specific concern expressed by Mr. Miller, and keep it brief.
Mr. Slemmer. Yes, I wouldn't mind saying a few words. There
are several concerns there. Part of it is bad Government can
escalate the cost of housing, but good Government can do a lot
to solve it.
The City of Pacifica, for example, saw the need. Developing
Pacifica is not a matter of governmental problems, it's a
matter of the really high price of real estate. High-priced
real estate drives out low income folks. That happens not only
in California, but along both coasts. That's the reason good
Government needs to step in and really help out.
Madam Chairwoman, you talked about the cost problems, that
you couldn't spend money, a lot of money on this. And I would
suggest that it doesn't cost a lot of money to direct HUD to
really participate in this preservation effort. It doesn't cost
a lot of money to modernize your existing housing stock. It's a
lot less expensive than new production. I'd really encourage
you to look there.
Chairwoman Roukema. I want to explain the only reason I
called on Mr. Slemmer in reaction to Mr. Miller, who took his
full 5 minutes and more, was the fact that Mr. Slemmer was
addressed by name.
Mr. Miller. I had a lot of questions, but I ran out of
time, Madam Chairwoman.
Chairwoman Roukema. I know, and isn't that too bad. Five
minutes goes awfully fast when you're having fun.
Thank you.
Now, Congresswoman Schakowsky.
Mr. Frank. Would the gentlewoman yield to me for just ten
seconds? I just want to say with regard to the gentleman from
California, that the Endangered Species Act is, of course, a
Federal program, but in order to be clear, as he talked about
these problems, the fees, and I would assume zoning, most of
the problems in the area I represent are local, not Federal. So
the question then is, when we talk about intervention, is the
Federal Government going to step in and further regulate local
affairs.
I'm for it, but I'm not sure exactly how much support we're
going to have because, as I said, while the Endangered Species
Act can be a contributing factor in some cases, overwhelmingly,
the problem I hear from developers has to do with local zoning
and the question of fees. That's entirely local. So the problem
as to what extent is the Federal Government going to step in
and overrule some local activity, I'm not sure he and I are
going to be the most popular people in the world when we
propose that.
Chairwoman Roukema. Reclaiming my time.
Ms. Schakowsky. I just wanted to comment on the surplus
question. There's not an American family who would say they, in
their family budget, have a surplus if their parents or
grandparents have no place to live. Yet, as an American family
we have said that. We haven't acknowledged this basic need
before we've declared ourselves as having surplus money that we
can return to people who need it, who need it least.
The issue of preservation I would agree with you production
and preservation are important. And in that regard, I wanted to
ask both of you, Mr. Slemmer and Ms. Baumgarten, you talked
about the study that for every available housing unit, there
are nine people on the waiting list.
Mr. Slemmer, you advocated a $760 million increase in
Section 202. Would that reduce the waiting list, or would it
merely help us keep pace and maintain it, or how much would it
reduce the number of people that are waiting for that
affordable housing?
Mr. Slemmer. What we're recommending I believe is a ten
percent increase in the Section 202 production to get started
with what we see as a tremendous problem that's going to be
facing this country as we look out 30 years with housing stock
coming out of production and with the escalation in the senior
housing population.
So it would increase production, but frankly it's a drop in
the bucket. It's the right drop to get started in this problem.
Ms. Schakowsky. So there might be a ten percent reduction
in the number of people on waiting lists. Is that what you're
saying?
Mr. Slemmer. No, it would be much, much less than that.
That would produce a few more units and----
Ms. Schakowsky. What would it take to eliminate that
waiting list?
Mr. Slemmer. I guess if you multiplied nine times the
Section 202 portfolio, which is about 300,000 units, you would
get a couple of million housing units. Obviously, that's not
going to happen in the near future. That's why we're suggesting
that we really increase incrementally, that we look at keeping
a good, solid production program going; at the same time really
looking at preserving this housing stock so we don't lose it.
You can lose it a lot faster than you're building it, and you
can preserve it at a lot less cost than it costs to produce
new.
Ms. Schakowsky. One other question about preservation. I've
been very involved in the issue of predatory lending and I'm
wondering if AARP has looked into this issue on how the elderly
are impacted by this growing problem, really exploding problem,
of predatory lenders that are forcing some people, particularly
older, more low income people, into foreclosure.
Ms. Baumgarten. AARP has done quite a bit of work on
predatory lending. And we are very, very concerned about
consumer protections in that area. If you wish, I can have the
people on our staff who work directly with that issue contact
you and fill you in.
Ms. Schakowsky. I would appreciate it. Today, I'm going to
introduce the Save Our Homes Act that deals with predatory
lenders. I would appreciate it if you would do that so we
perhaps could work together on that.
And finally, the Older Women's League, we're talking about
regulations that Mr. Miller and Mr. Frank were talking about.
The Older Women's League has identified local zoning laws as
possible obstacles for innovative approaches, such as
manufactured housing, and so forth. Have you found--looked at
that at all and found that some of the zoning laws themselves
are a problem and have any recommendations on how to deal with
that?
Ms. Baumgarten. At this point, AARP is not making any
recommendations, because you have several things happening at
the same time. You have two housing commissions, the Senior
Housing Commission and the Millennium Commission, you have this
subcommittee that's working, and this is the time to look at
all of the issues and with the task force hearings that will be
going on with the Senior Housing Commission, to find out what's
happening out there and get the issues and the ideas and look
at everything that's possible.
It's rather premature at this point to say one thing or
another thing would be the solution to the problem, because
many of these things are interrelated--and certainly,
manufactured housing is something that would need to be looked
into also.
Ms. Schakowsky. Thank you, Madam Chairwoman.
Chairwoman Roukema. Thank you.
Congressman Grucci.
Mr. Miller. Would the gentleman yield, please?
Mr. Grucci. Yes, I would. I have no questions, Madam
Chairwoman. I yield to Congressman Miller.
Mr. Miller. Mr. Frank and I agree on I think the concept of
property rights, and I want to be more specific on what I was
talking about relating to the Endangered Species Act.
In California, specifically, we used to have the
Subdivision Map Act, which gave you 50 days to respond to an
application for a tract map. Then, because the State decided
that Government needed oversight, just as the private sector
needs oversight, they created CEQA, which is the California
Environmental Quality Act.
Then the Sierra Club sued in court, with the position that
if it's good for Government, it should apply to the private
sector too. And now in California, because of the EIR process
and CEQA, an application process can last 12, 15, 20 years on a
piece of property for development, and the applicant can do
nothing except wait for Government to act.
That's causing a huge crisis in California. I was a
developer for 30 years. I know most of the major builders in
this country, and specifically in California. The problem they
are having, if they make application for a project, when they
get through with the EIR application process, and they finish
with Fish and Wildlife, and finish with all the locals, if they
get that approved, then the Sierra Club or some other
environmental group is going to challenge them in court, and
they do it repeatedly. In fact, they all know it's going to
happen.
All of these things are adding to the cost and
affordability and availability of housing.
As a developer, I recently hired a zoologist, a person who
majored in zoology. Why would you do that? Because he wrote his
thesis on the gnat catcher. The gnat catcher is a huge problem
in California. Yet, if you go down to South America, there's
countless millions of these critters, but the environmentalists
say, ``Well, those are only cousins to the California gnat
catcher.''
Well, my cousin's still a human being. And I think the gnat
catchers are lost in California. We need to put them in little
cages and ship them back where they came from in South America
and preserve those puppies.
But, if you look at last year's Fish and Wildlife proposal
for habitat preservation for three species, a rat, a fly, and a
longhorn sheep, it's 2.9 million acres in California. That does
not mean that the species are on the property. It only means
that the habitat on the property could sustain that species.
And it looked like a checkerboard. And if you didn't own
habitat, you owned associated habitat, and does that have an
impact in housing in California and this Nation? Absolutely.
And anybody who's unwilling to address this issue is being
unreasonable if they are serious about doing something about
the current crisis in housing availability and affordability.
I have two specific plans I've been working on for 12
years. I have no habitat for endangered species, I have no
endangered species, I have no endangered flora and fauna on the
property.
Yet, because of the process one must go through, and the
EIR process, the city never has to address a project. One
continues day after day, and the costs increase day after day,
and a developer cannot produce affordable housing. We have to
address this, and we have to stop blaming local government and
we have to enact laws that guarantee individuals the right to
due process on an application whereby the burden is taken off
the locals.
Local officials should not have to worry about being
recalled for approving a few houses in the community or being
voted out of office, because a bunch of radical
environmentalists go out and tell all these terrible stories
about them.
Until we remove that burden from local elected officials,
they're going to be forced to do the wrong thing time and time
and time again, because of pressure from a few people that do
not understand the needs of people to have a place to live.
Mr. Frank. Would the gentleman yield, from New York yield?
Mr. Grucci. Yes, I'll yield.
Mr. Frank. I'd like to ask my friend from California--
that's very interesting--is he proposing then, he says that the
problem is the local governments exercising their current
authority are too pressured and we need to pass a law to take
the burden from them.
Is he proposing a Federal law that then regulates what the
local zoning people do and take some authority away from the
local zoning people so they don't have to face local political
pressures?
Is that a Federal law he's calling for.
Chairwoman Roukema. Excuse me, you have 43 more seconds.
Mr. Miller. James Madison, in the Bill of Rights, said that
individuals should have the right to own and exercise the use
and benefit from their property.
Mr. Frank. So it's a Federal law overriding local zoning.
Mr. Miller. We have allowed the rights of property rights
to be diminished----
Mr. Frank. Answer the question, Gary. A Federal law to
override local zoning?
Mr. Miller. A Federal law guaranteeing the rights of
property owners to the use of their property, yes.
Mr. Frank. Overriding local zoning?
Mr. Miller. No, it doesn't override local zoning.
Chairwoman Roukema. All right. Now Congresswoman Julia
Carson.
Ms. Carson. I need to know whether, I'm still concerned
about these Section 8 vouchers. Is there a reticence among
landlords to even accept them for fear that they'll be left
holding the monetary responsibility of the unit? Do you know
what I'm saying?
Mr. Slemmer. I've heard that. I'm not sure how true it is,
but I certainly have heard that. I think the bigger issue with
landlords is that they don't get as much rent out of the
Section 8 vouchers as they can get in the open marketplace.
Ms. Carson. They don't get as much rent?
Mr. Slemmer. Right. More red tape, less rent. Why bother?
Ms. Carson. Guaranteed money. Thank you.
Chairwoman Roukema. I believe now Congresswoman Lee is
next.
Ms. Lee. Thank you, Madam Chair.
First let me just say, in response to my colleague from
California, I personally believe that the Federal Government
should be the safety net for the most vulnerable in our
country. And yes, I believe we should look at some kind of law
that guarantees the fact that vulnerable individuals,
especially low income and the elderly, have a right to
affordable and decent housing, whatever that means.
If that means looking at local ordinances and fees that
prohibit that, then maybe we ought to do that. I also want to
say that in my area, in the Bay Area, the problem with the cost
of housing is quite frankly the high priced real estate and the
fact that in the last few years, private property owners have
been able to make huge profits as a result of either selling
their property at huge enormous rates of return, or increasing
the rental because of the fact that there is a tight market and
not enough production.
Where we have our non-profits in partnership with
developers we're able to build affordable and decent housing,
and keep the rents at a reasonable level or the purchase prices
at a reasonable sales price, but that's because quite frankly
huge profits aren't being made. Reasonable rates of returns are
being made, but not huge profits for private property owners.
So there are strategies that can be used, I think, and I've
seen this occurring in the Bay Area where senior citizen
housing is developed and remains affordable.
I wanted to just ask one of our witnesses, I guess Mr.
Slemmer, what you think in terms of strategies we should look
to with regard to Section 8 housing once landlords decide to
convert Section 8 housing for the elderly to market rate
housing, because you noted that in your testimony.
I have seen senior citizens being forced out of their
rentals because the rent quite frankly has doubled because the
market dictates that the rent can be doubled, and there are
individuals with money who can pay that rent.
The basic bottom line is what do we need to do to ensure
that if in fact landlords do double the rent, which they have a
right to do I guess, given the nature of property ownership in
this country, how do we ensure that elderly aren't kicked out
of their places.
Mr. Slemmer. I think there are several things that you can
do. First of all, to encourage transfer to stable not-for-
profit environments is what you want to do. I'm not sure it
costs a lot of money. We are recommending that you look at
eliminating the exit tax so that when a for-profit decides to
transfer to a not-for-profit, they don't have the exit tax
problems which is really often time the barrier to that
transfer.
The other thing is HR 425 establishes a matching grant
program that helps encourage that transfer into a stable
environment. So you incentivize the for-profit owner to
transfer. That can be helpful.
The other thing you certainly have to do is we have to keep
pace with the vouchers so that when somebody does double the
rent that there are vouchers in place that will help at least
on a temporary basis.
In Pacifica, that was the enormous problem. The voucher-
holders could not pay the rents that were going to be charged,
so they really would have been displaced. And as you know, in
the Bay Area, there's tremendous demand for affordable housing.
You could be displaced for ten, 20, 50 miles before you could
find other affordable housing. So HR 425 and that exit tax
strategy really helps to stabilize that.
I really encourage a proactive stance from HUD to really
get behind preservation efforts with all the vehicles they have
available to them, because I think that's a lot less expensive
than new production, especially in the high-priced areas like
California.
Chairwoman Roukema. Thank you, I appreciate that.
Now we have Congresswoman Tubbs Jones.
Ms. Tubbs Jones. Madam Chairwoman, good morning. I come
from the City of Cleveland where we have what we believe is one
of the greatest community development corporation networks
going on for housing, and we build a lot of housing, but we
still need a lot of housing, particularly affordable housing
for seniors.
There's an organization in the City of Cleveland called the
First Suburbs Consortium, and it's made up of all the entering
suburbs, the older suburbs with the older housing. And one of
the things that they recently did was to hire a consultant to
see if they could retrofit some of--Cleveland has much more
housing than apartments, as compared to New York or Chicago--
but, retrofit some of these small bungalows that were built
back in the 1930s and 1940s for senior citizen housing because
they are no longer large enough for families with small
children.
So they've hired a consultant to see, one of two reasons,
to try and keep people living in the first suburbs or the
entering suburbs, but second also to hopefully provide for
affordable housing for senior citizens. So I'm hoping that
works out to be able help us deal with the shortage of housing,
affordable housing for senior citizens in my congressional
district.
The second thing that I wanted to raise, in conjunction
from AARP, I'm sorry, Ms. Baumgarten, in my community, as well,
I had a discussion with someone from the Jewish Family Services
who has submitted an application for rent that had been funded
to provide for a social service person to come into this
apartment dwelling to assist senior citizens to stay
independent. If someone maybe comes in and coordinates their
doctors visits, coordinates the food services and the like.
And what she said was that the owners of the building were
happy to have someone who came in to assist them because it
took away from the responsibility of the landlord to try and
assist seniors in being involved in independent living.
Is that some of the dollars that might well come from the
Section 202 dollars that you were speaking about earlier for
elderly housing or not?
Are you familiar with that program at all?
Ms. Baumgarten. What I was going to say was, in 1990 and
1992, legislation, payment for service coordinators, was
possible for housing, and now I think you have about 37 percent
of the units that have service coordinators. That was a step
that was made earlier that has really helped, because service
coordination is extremely important.
Sometimes it's done with the service coordinator there in
the complex; sometimes it's done by utilizing the services that
are in the community, but either way, putting the residents in
touch with it.
There's a variety of ways it can be done, but the
recognized need is that services need to be coordinated. You
need to provide services. Housing, as a part of those services,
is important because your citizens are older, more frail, and
they're going to get older and they want to age in place.
Ms. Tubbs Jones. Thank you very much.
Mr. Yoder, any comments on what I raised or anything else
you would like to say? I don't think I heard you say anything
other than your opening statement since I came in the room.
Mr. Yoder. Thank you. One of the issues that you just
raised about the supportive services under the Rural Housing
Service, which takes care of a lot of the very rural areas,
small towns with less than 20,000, the Rural Housing Service,
in their budget, will not allow for supportive services.
They tell us it's against the regulations to spend money
out of the operating budget to either hire supportive services
or even to use it to coordinate supportive services which, in
rural areas, we have found in larger cities that there is the
ability to hire a service group that will provide the services.
In rural areas the services are there, but they are scattered
and you need to have somebody to coordinate the services, not
to actually supply them, but to coordinate them.
Ms. Tubbs Jones. So you're suggesting that there needs to
be some amendment to whatever legislation or regulation that
exists to allow them to be able to do that type of thing?
Mr. Yoder. Yes. In my written testimony, that's one of the
things that we talked about under rural housing services
amendments.
Ms. Tubbs Jones. I would be supportive of that. There's no
much rural stuff in Cleveland, but I would be supportive
because it's important for all the elderly to be able to access
services.
I see my time is up, Madam Chairwoman. Thank you very much.
Chairwoman Roukema. Thank you.
I would just observe that I'm going to be looking into that
certainly with a number of us, but I don't know whether that's
a discretionary decision that's been made within the
department, or whether that's compelling by the legislation.
You were not clear on that, or did I not hear you?
Mr. Yoder. We are being told that it's legislative.
Chairwoman Roukema. Is that right? We'll look into that,
thank you.
I believe that concludes the questioning for this panel. We
appreciate your patience and your forthcoming and beneficial
testimony. We shall take it under advisement and get back to
you if there are further questions.
Thank you very much.
Now, if the next panel will come forward. Hopefully, we'll
be successful enough--if the next panel will come forward, I'll
be here to call us to order in 2 minutes.
[Recess.]
Chairwoman Roukema. Thank you, I appreciate your patience.
It is my understanding that Congressman Frank will be back
within a short while, and we will continue with this hearing.
I appreciate the second panel being here. I'll introduce
you as you are ready to testify.
Mr. Harry Thomas here is currently the Executive Director
of the Seattle Housing Authority, which we heard about earlier
with Congressman McDermott giving you a warm welcome, and of
course he has served as the Executive Director of the
Neighborhood Housing Incorporated, which is a non-profit social
service agency.
Actually, you have a lot of experience with Seattle garden
communities through the HOPE program, as I understand it. Mr.
Thomas is currently serving as a member of the Commission on
Affordable Housing and Health Care Facility Needs of Senior
Citizens in the 21st Century, the Commission that I originally
referred to.
Unfortunately, I'm sorry that you're not going to be giving
a report to us sooner than December 2002. Hopefully, Mr.
Thomas, with your help, we can expedite that Commission report.
Thank you. We appreciate your being here.
If you'll take your 5 minutes, please be sensitive to the
time commitments.
STATEMENT OF HARRY THOMAS, EXECUTIVE DIRECTOR, HOUSING
AUTHORITY, CITY OF SEATTLE, WA
Mr. Thomas. Thank you Madam Chairwoman, Members of the
subcommittee. I really thank you for inviting me to share some
of my experiences.
I offer my thoughts today around two main issues:
The importance of maintaining public housing as a part of
the existing supply of housing for the elderly and strategies
for meeting the special needs of elderly residents so they can
remain in their housing as they get older, as it outlined in
the ``Elderly Plus'' plan.
The Federal Government plays an important role in housing
low income older Americans. Nearly 3.7 million Americans, aged
62 and older, receive some form of housing assistance.
You're quite familiar with the Section 202 program, but
what we sometimes overlook is that about one-third of the 1.3
million public housing units in the country house elderly or
disabled people.
Unfortunately, the need for elderly housing has grown
rapidly while the resources for modernizing and maintaining
this housing stock are really shrinking. You know about the
needs and the increasing population of elderly people. We've
talked to that.
So in the face of this, Madam Chairwoman, we must be good
stewards of our existing public housing stock, which you may
know is now valued at over $90 billion. We must continue to
invest in the long-term maintenance and the capital needs of
this valuable asset.
I know that many of you have heard this theme recently in
discussions on the VA/HUD Appropriations Bill. However, I must
still call attention to its importance.
For so many of our seniors, capital improvements are not
about fresh paint. Let me try to give you one real life example
from the City of Seattle.
Mr. Don Williams is an elderly resident of Jefferson
Terrace. This is a 34-year-old building. He uses a wheelchair
and he lives on the seventh floor. When the building's outdated
elevators were broken recently, the fire department had to come
every day and carry him down and then back up the stairs,
because he had to go to ElderHealth. This is the adult day
program in the building where he eats his daily meals, so it is
essential for his well being.
Due to limited mobility, the elevators in our buildings are
really his lifeline. Elevator repair and replacement is a key
item in our capital budget. And that may have to be postponed
if the Public Housing Capital Fund is actually cut, as is
recommended by the White House.
Approximately 70 percent of the elderly residents in public
housing live in buildings that are between 30 and 50 years old.
Many buildings do not conform to ADA standards, so we must
preserve the existing stock of low income housing and modernize
it to better meet the needs of seniors and the disabled.
The Elderly Plus program can do this. We want to keep our
older residents living independently as long as possible. A
minor injury which sends a resident to the emergency room may
eventually land them in a nursing home because of the lack of
in-home services available in public housing.
Subsidizing low-income residents in a nursing home is much
more costly than bringing needed services to them in public
housing.
A number of housing authorities are pioneering innovative
models to serve the needs of the elderly in our developments.
The most successful of these combine resources across Federal
programs. They bring in local resources and assemble a
patchwork of services to create the wraparound care that is
necessary.
I'd like to tell you about one program in Seattle. As a
part of our HOPE VI redevelopment, we are building the Elder
Village. This is a 318-unit campus that's being built in
partnership with Providence Health Systems and the Retirement
Housing Foundation. These are well-known, non-profit agencies
that specialize in housing and care for the elderly.
The facility will be close to services, it will consist of
three apartment buildings plus a common area which will feature
a large dining room, community facilities, and offices, all
centered around an atrium with a skylight.
How do we achieve this kind of integrated model nationwide?
With continued imagination and flexibility and with a
commitment from the Federal Government to explore ways of
facilitating innovation as outlined in the Elderly Plus
proposal.
Last year, the House considered HR 4664. That's a bill to
implement Elderly Plus. It combines the upgrading of existing
buildings with health-related and congregate care services that
address the needs of the elderly.
In closing, I do want to stress that public housing has
played an important role in housing our low income residents.
We need to continue to support those successes. Our inventory
is a very valuable asset which we cannot afford to neglect or
abandon. I think if we do this, we'll be much better off and
our people will be much better off, so I thank you.
[The prepared statement of Harry Thomas can be found on
page 569 in the appendix.]
Chairwoman Roukema. Thank you very much for that articulate
and concise statement.
Now we have Ms. Janice Monks, who is founder and Executive
Director of the American Association of Service Coordinators.
I'm most anxious to hear from you, Ms. Monks. You have had
extensive experience in designing coordinated service programs,
and that is our focus not only on this panel, but integrated,
as you've already heard, with the physical needs of housing
projects, so we're most anxious to hear from you and your
experience.
Thank you very much.
STATEMENT OF JANICE MONKS, EXECUTIVE DIRECTOR, AMERICAN
ASSOCIATION OF SERVICE COORDINATORS, (AASC), COLUMBUS, OH
Ms. Monks. Thank you very much, Madam Chairwoman, and
Members of the subcommittee. It's quite an honor to be here and
to represent our more than 700 members.
Before I get started, I want to mention the fact that
service coordination provides much more than a quality of life
issue, it's an economic issue. I am very pleased that this
subcommittee is interested in investigating other areas in
addition to the quality of life areas of service.
Every day AASC members serve literally hundreds of
thousands of low-income residents. Our members represent not
only Section 8 housing, but also public housing and tax credit
funded developments. More than 20 percent of our members come
from the private market housing industry, and recognize that
service coordination is part of doing good business, and that
it saves money for the owners as well as provide residents with
a longer stay in their apartments.
While service coordinators shoulder a wide variety of
responsibilities and duties, their work mainly is focused on
helping our most vulnerable Americans, maintaining their
independence. They also assist them in avoiding costly and
often premature higher levels of care, linking them with
appropriate and sometimes lifesaving health, social and other
services, locating child and adult care, and other family and
intergenerational services, as well as cross generational
services, implementing job training, employment, and
transportation programs, and developing a wide range of
educational opportunities for residents' families and staff.
Service coordination goes beyond assisting elderls, which
we believe is also part of the future we should consider
supporting, such as intergenerational as well as cross-
generational programs that provide people the opportunity to
stay longer in their homes.
Service coordinators do much, much more than was originally
anticipated. We thank you, Congress, for your wisdom in passing
the Cranston-Gonzalez Act of 1990 which initiated this vitally
important program.
It is estimated that there are as many as 4,000 service
coordinators in the country today. It is a consumer interest to
remain independent for as long as possible.
I think everybody here would probably agree to that. But
also, service coordination is about doing good business in that
it reduces tenant turnover, it reduces damage to apartments, it
reduces evictions, it lessens the amount of stress on staff,
and provides training to staff which can reduce the cost of
staff turnover. It also reduces the number of off-hour
emergency room and paramedic runs, and could influence lowering
the number of hospital stays of elders.
There is no national study that identifies these issues,
but we do have anecdotal information to assist us in showing
that this is the case. Overall, management is pleased to have a
service coordinator on staff, and if we are going to continue
to assist residents to maintain independence, self-sufficiency
and empowerment, because we must consider that service
coordination is about helping people serve themselves.
In order to maintain the integrity and affordability of
Section 8 housing, public housing, and tax credit housing, then
we must invest our time and efforts into providing more service
coordination in order to keep people more independent and to
keep them out of costly, premature institutionalization.
We recommend that the cost of service coordination, or I
should say, the funding for service coordination, be increased
to allow owners to apply for grants, and reduce the regulatory
concerns or issues that limit owners from being able to put the
position in the operational budget.
We request the 120 percent FMR requirement be eliminated
and allow service coordination to be put into the older
facilities.
Also, to provice a set-aside within public housing funding
specifically for service coordination that is not linked with
the FSS program or the Ross program.
It would be best to appropriate funds in the amount of
anywhere from $50 to $75 million to increase the number of
service coordinators overall. Also to allow the tax credit
programs to apply for service coordinator grants.
One of the problems for the tax credit-funded facilities is
that in the first 3 years, the operational OPM budget of tax
credit programs is that they do not have the money to provide
services. But you could have owners provide in-kind resources
to contribute to the implementation of the program.
Chairwoman Roukema. Ms. Monks, can you summarize, please.
Thank you.
Ms. Monks. Finally, we ask that the Section 811 program be
included in applying for service coordinator grants.
In conclusion, AASC urges Congress to seriously consider
these very few cost-effective, but vital steps that can be
taken now to improve our Nation's service enhanced housing
efforts. We're asking that the same investments you made in
1990 be extended with the Cranston-Gonzalez Act to provide
additional funds to make this a viable and growing program for
the future of elderly housing as well as family housing.
Thank you.
[The prepared statement of Janice Monks can be found on
page 576 in the appendix.]
Chairwoman Roukema. Thank you very much. We will go over in
detail your extensive testimony that you submitted here with
recommendations.
The next panelist, Mr. Felgar, we welcome you here today,
as the representative from the Volunteers of America National
Services. As Senior Vice President, you have been responsible
for an extensive quantity and quality of activities in housing
facilities, multi-family housing, senior and long-term care
facilities, and we appreciate all that you've done extensively
across the country with 220 housing facilities which that's
extensive. So we appreciate your experience here and look
forward to your advice and counsel.
STATEMENT OF LEE J. FELGAR, SENIOR VICE PRESIDENT, DEVELOPMENT
AND ACQUISITIONS, VOLUNTEERS OF AMERICA NATIONAL SERVICES
Mr. Felgar. Thank you very much, Madam Chairwoman, Members
of the subcommittee. I'm Lee Felgar, Senior Vice President of
Development and Acquisitions for Volunteers of America National
Services.
The Chair has mentioned that we do have 220 health care
senior housing and family facilities across the United States.
We've been in that particular sector since 1968.
Clearly, as a Nation we have a problem here of
extraordinary scale and urgency as the housing programs and
social service programs we have in place today will not keep
pace with the situation. Somehow this elder housing and long-
term care crisis must come from a comprehensive policy that
cost-effectively integrates programs, then calls for some
reasonable programs for the sharing of costs from the
individual adult children, along with State and national
governments.
The needs of elders are many and persons of lower income
have an even more challenging environment. We at Volunteers of
America sponsor an elderly housing development. We must not
only build the structure, we must find a way to create or bring
social service support programs to our developments.
Our typical resident of a HUD Section 202 property is a 75-
year-old female living on some very modest savings and Social
Security income. For this person, a $20 emergency is
problematic. These elders are living at the economic edge, even
with the HUD Section 202 housing assistance. Accordingly, they
simply cannot afford any type of assistance with their daily
living as they age in place.
Accordingly, we've worked to find no cost or very low cost
programs to provide meals, transportation, medical screening
and the like. Each development is unique as each town or city
has its own resources and programs.
Typically, our residents fare better in larger cities that
have economic power and commitment to helping others. However,
most of the communities we serve do not have these programs in
place, and we try our best with our limited resources that we
have to make some programs a reality.
Elders in rural communities face even more challenging
circumstances. We at Volunteers of America encourage this
subcommittee to consider the following issues that we've laid
out in our testimony with a series of recommendations to help
solve this problem.
We start out by fully endorsing the HUD Section 202
program. It's one of the finest programs we've seen developed
by Government. It is fair, it's administered well. We think
that the number of housing units should be doubled and soon.
Our second recommendation to the subcommittee is that we
believe that within the existing stock of HUD Section 202s,
there are many that have the capacity to provide some measure
of assisted living services.
Congress and HUD have previously provided some
demonstration of program funds for the physical conversion of
some of the units for physical asset changes only. We
appreciate that effort and would ask the subcommittee to seek
to expand the funding for both physical asset conversion and
for services, as the residents simply cannot pay for them
themselves.
Our third recommendation, we continue to ask your support
for those programs and initiatives that preserve project-based
rental assistance for affordable housing and low and moderate
income persons.
Recommendation number four. We at Volunteers of America
recommend and thank you for your support of the increase in the
amount of tax credits. We applaud this subcommittee's work as
it relates to mixing tax credits with Section 202s, but there
are some things in the capital markets that we need to let you
know of that are working against further production.
We are now seeing the capital markets come to non-profit
sponsors asking for significant guarantees for the completion
of the construction, and also for financial guarantees for the
life of the project.
In my testimony, I state an example of what we're doing in
St. Louis with the HOPE VI property developing only 40 units.
That one 40-unit project requires Volunteers of America to
place up to $600,000 guarantees for its life.
We feel that we can handle that as a sizable, non-profit,
but we can't continue to have those kinds of guarantees imposed
on us. So we want you to be mindful that the capital markets
are asking for those kinds of guarantees, and although there
are more tax credits available, those guarantees work against
further production.
Across the country also we see qualified allocation plans
that allocate tax credits on a state-by-state basis have a real
bias against elderly housing. Few really endorse and promote
elderly housing. Most of them are geared toward multi-family.
We'd like to see that changed.
We also see a narrowing number of tax credit investors and
we see a demand for higher investment yields. Again, this works
against more production of elderly housing.
Our fifth recommendation. We believe that HUD should
consider the merits of allowing project-based social service
programs to be an allowable project expense, particularly as it
reviews rent and debt levels and the portfolio re-engineering
and refinancing programs.
Recommendation number six. We believe the subcommittee
should create a new set of Government agency expectations and
directives that require agencies to work collaboratively to
develop arrangements to provide resources for protective and
supportive services.
Recommendation number seven. We ask the subcommittee to
support personal incentives for the purchase of long-term care
insurance and that includes assisted living as part of its
coverage.
Our eighth recommendation to you is that we would like to
see greatly improved coordination between Medicare and Medicaid
with a blanket allowance for use of Medicaid funds in homebound
and assisted living settings.
Recommendation number nine. We see a need for better
enforcement of laws that protect consumers against housing
discrimination such as the Fair Housing Act and the Americans
With Disabilities Act.
Recommendation number ten. We would also ask this
subcommittee to ask HUD and the USDA to find ways to greatly
simplify the process whereby non-profits make application for
the transfer of ownership of housing developments from for-
profit owners to non-profit owners.
Right now, it is an overly administratively challenging
process.
In summary, let me state that America's non-profits cannot
meet these demographic changes with the resources and programs
that are in place today. Today's funding levels, capital market
conditions and program parameters are inadequate to the task we
face as a Nation in providing affordable housing and social
services for our aging population.
We'd encourage this subcommittee to examine the scope of
the elder housing and social support situation in its entirety
and that it direct Government agencies to work collaboratively
to create simplified and standardized housing and health care
programs that can be implemented successfully in all States and
all locations whereby non-profit housing and service providers
can develop housing and provide the services without undue
administrative and financial hardship.
Thank you.
[The prepared statement of Lee J. Felgar can be found on
page 582 in the appendix.]
Chairwoman Roukema. Thank you. I appreciate this panel's
contribution to our understanding of the complexities of the
problems that we're facing here. Obviously it's been apparent
to all of us, with the testimony here today and what we've seen
leading up to this, that we have to do a lot of catching up. If
we can't catch up quickly, we're going to have an enormous
expansion problem that would be a disgrace for our American
democracy and a country as rich and diverse as we are here.
So I want to pledge my intention--not that I can wave a
magic wand here and find all the answers or all the money that
we need--but I particularly appreciate your contribution, and I
have no specific questions for any of you, but I do want to
especially thank Mr. Felgar for the fact that he has opened up
the question of the financial concerns, particularly tax
credits, and whether or not there should be other investment
incentives and the capital markets guarantees that you alluded
to.
Obviously, I think we should be reaching out to some people
on the Ways and Means Committee and integrating our thinking
with theirs as far as investment concerns and investment
incentives, and to integrate them into our own approach.
Obviously, they've been neglected.
I particularly paid attention, aside from the capital
markets question and the investment incentives and tax credits,
I particularly observed your comment regarding long-term care
insurance.
Now I'm not too familiar with that, but it's something we
definitely should integrate into our whole study of the
question. I thank you.
Any comments?
Mr. Frank.
Mr. Frank. Thank you, Madam Chair. I apologize that a
conference called me away briefly, but I had a chance to review
the testimony.
Mr. Thomas, I'm particularly indebted to you. I hadn't
really known for sure that more older people are housed in
public housing than in any other housing program. That's
important, not to the denigration of the other programs, but
because one of the great myths that we face is this notion that
public housing is all Cabrini Green and it's all unattractive
and dangerous.
And in fact, it's certainly been my experience that public
housing for the elderly is a highly prized resource for the
people who live there and for the people who would like to live
there, and this is very important.
In that regard, let me ask you, there's reference in your
testimony to the Public Housing Capital Fund. The budget that
has been proposed for this year, that was unfortunately just
voted out of the Appropriations Subcommittee, reduces that.
Could you comment a little bit about the effect that will
have on public housing?
Mr. Thomas. Thank you very much, Congressman Frank.
The proposed reduction in the Public Housing Capital Fund
would really be disastrous for us. As you correctly point out,
there are over 3400 housing authorities in the country. Yet,
when the Administration cut back the Public Housing Capital
Program, it used a series of unfortunate examples and described
what they felt were delays in actually using those funds and
contracting for those funds.
There may be a handful of authorities who have that
difficulty, but the vast majority of housing authorities are
very well run. They serve large cities, small cities, and rural
areas. And to take a 30 percent cut in our capital budget
against already known and well-known backlog of several billion
dollars is really going to be disastrous.
I understand that the Secretary feels that, in fact, he may
have said that not a roof will go unrepaired, and so forth.
But, we plan several years in advance. All of our buildings
have life cycles. We plan very carefully and we would suffer
dramatically.
Mr. Frank. I think this is a case of victimizing the
victim, and then blaming the victim, because when you put that
kind of a shortfall and you make planning very difficult, then
you blame people for its absence.
Again, it's very clear as I read this that the biggest
problem is that this very rich country has decided not to spend
the money that we can well afford here, and the question is,
where are the resources?
Well, we know where they are, they're in the tax cut.
They're in parts of the tax cut unfortunately that haven't yet
taken effect. They're in the parts of the tax cut that will be
very helpful to very wealthy people, and I think will
exacerbate our ability to do something about this situation.
Mr. Thomas, I'm not sure this is one of your subjects, but
you come so highly regarded by Mr. McDermott that I'm figuring
that you'll be able to tell me this.
One of the big issues we've had is Section 8 not just for
the elderly, but Section 8 in general. One of the arguments
we've had is that some of us have felt that the Section 8 rents
have been too low in certain areas where housing costs have
spiked upward. The response from HUD has been, no, the only
problem with Section 8s is the poor administration by many
housing authorities.
I wonder if you would like to address that issue?
Mr. Thomas. Yes, thank you very much.
The effectiveness of the Section 8 program is highly local;
that is to say, in areas where there are relatively few units
available in a market place, it makes it even more difficult.
But again our experience, particularly in Seattle, is that even
with a low vacancy rate, we've been quite successful in being
able to utilize those. But our biggest burden again comes in
the payment standards.
I think other people have addressed that as well. We are
simply trying to find available units in a very hot marketplace
in many areas of the country. And the payment standards and the
way that HUD calculates them and the speed with which HUD gets
around to making those adjustments really keeps us three or 4
or 5 years behind.
Mr. Frank. One of my colleagues suggested that the real
problem is not a lack of Federal funding, but the Endangered
Species Act and other things.
I'm just wondering if we were in fact to increase Section
202 funds and made some public housing construction funds
available, would the Endangered Species Act keep you from being
able to use them, Mr. Felgar?
Mr. Felgar. I think in isolated areas, but not nationally.
Mr. Frank. In general, you'd be able to put the money to
use?
Mr. Felgar. Yes.
Mr. Frank. Mr. Thomas, do you have endangered species
problems in Seattle?
Mr. Thomas. The most endangered species we deal with are
the elderly people struggling to find a place to live. We in
fact own all of our properties so we don't have to--we would
like to redevelop them or expand them, we don't have to acquire
new sites. So we would go a long way before we were impacted by
the Endangered Species Act.
Mr. Frank. Thank you. I am pleased, though not surprised,
by your responses.
Thank you, Madam Chairwoman.
Chairwoman Roukema. Thank you. I don't know whether that
was planned----
Mr. Frank. It's serendipitous.
[Laughter.]
Chairwoman Roukema. Thank you.
Yes, Congresswoman Schakowsky.
Ms. Schakowsky. Thank you, Madam Chairwoman.
I really appreciate very much the testimony, particularly
the detailed recommendations, all of which we will carefully
scrutinize.
Mr. Thomas, we just had a discussion. It would seem to me
that first our mission ought to be to do no harm, and as you've
just talked about, the proposed budget actually makes the
situation worse and not better. So even as we look to
correcting some of the problems, I hope that we could also look
at making sure that we aren't exacerbating it by short-changing
the programs that we now have.
And I thought that this example of this elderly resident
Don Williams and his inability, I mean, the fact that he has to
be carried up and down seven flights, is so unacceptable that
we have to address this kind of crisis.
I wanted to tell you, one of the bills I introduced when I
was in the State legislature, we keep coming back to the issue
of having to retrofit housing so that people can age in place.
And I think there's a program in Atlanta. And I had introduced
legislation in Illinois that got out of committee, but that's
as far as it went, that said that new spec housing had to have
some accessibility features built in.
There's no magic to the size of a doorway right now, a door
frame, you know. Why it's smaller, rather than larger, as we
build housing, but we could make grab bars or at least the
possibility of grab bars reinforcing walls so that they could
be there if they were needed.
There's no magic about the place that light switches are
put. They could be lowered easily when we build in public
housing and in affordable housing. As we build it, are there
requirements now to have these accessibility features? If not,
wouldn't that be an obvious thing to do so we don't have to go
back and spend money later on? Question to anybody.
Mr. Thomas. Yes. I need to jump in because I represent
public housing in the areas where we are redeveloping, and HOPE
VI is a good example of that. Yes, ma'am, we do. Where we build
new units, we find that it's only marginally more expensive to
bring those units to the contemporary standards.
So if you're building a new house, putting a grab bar in
only costs the cost of the material. But if you have to go back
and retrofit, then you have to tear out work. Yes, we do that
now.
Having said that, there are not that many public housing
authorities around the country that are actually participating
in the HOPE VI program because of the limitations. So wherever
we have those capital dollars, we can make those investments.
And they are, in my judgment, ma'am, sound investments.
Ms. Schakowsky. Is it required, when you build new, to have
those accessibility features?
Mr. Thomas. We do have local building codes. The State
building code applies to us as well, but we find it advisable.
Ms. Schakowsky. What about the ADA?
Mr. Thomas. Our units that have family housing, we try to
go to what we call visitable standards. Even though there might
not be a person using a wheelchair in that immediate family, we
try to build our rental housing for the long term, so sometime
over the next 30, 40, 50 years, there's likely to be a family
that will need a wheelchair. So we make sure our doorways are
accessible, the bathrooms are accessible, all of that of course
in our new construction.
So if we're talking about a production program, then we can
build those things in. It is more difficult to go back and
retrofit.
Mr. Felgar. All of our new Section 202s are accessible and
complying with ADA. The problem that the new construction of
Section 202s represents is that there is no allowance there for
features that are more closely aligned to assisted living.
There's no commercial kitchen allowed in a Section 202
building, or we think that makes a lot of sense to put in some
kind of kitchen facility that could prepare meals there over
time.
We don't think it's a huge design change or a huge cost
increment, but we really believe the Section 202s should be
built with this assisted living option available to them
downstream, because we think that makes the most economic
sense.
Ms. Schakowsky. With the demographic changes, it just makes
sense for us to be thinking ahead as we get into production or
even retrofitting, that we make these changes now rather than
have to spend even more money down the road.
Mr. Felgar. The Section 202 paradigm has been independent
living with a modest amount of services. And what we are
suggesting to the subcommittee is that that vision has to be
broadened to include the possibility of doing more in that
setting than has historically been done.
Ms. Schakowsky. Thank you very much, all of you, for your
recommendations. I look forward to working with you to
implement them.
Chairwoman Roukema. I thank you. Unless the members of the
panel--do you have any summary statements that you want to
leave us with?
Ms. Monks. I'd just like to mention the fact that if you
look at service coordination, there's been questions about HUD
being a bricks-and-mortar department of Government, and if you
would consider that the service coordinator is the mortar that
holds the bricks and sticks together.
Chairwoman Roukema. A very good point. I appreciate that.
This has been very helpful today. I think that we have a
bipartisan intention here of moving ahead aggressively. We may
not agree on all the elements of the program, but we certainly
agree with the fact that both panels have more than adequately
outlined the intense need that's a growing need and it will be
getting if not fast out-of-hand already, it will be growing and
intensively necessary for us to act now in a realistic way.
By realistic, I mean, understanding that there are certain
financial limitations, but at least we can get our priorities
set up and move in the right direction, whether it's through
the actual housing authorities and the HOPE program, the
existing programs or through creation of new programs and
financing.
Particularly, I'm going to be interested in looking at
creative financing through tax credits, and so forth. So we
thank you very much. Again, please feel free to contact us and
give us again the benefit of your advice and counsel.
With that, the hearing is adjourned.
[Whereupon, at 11:45 a.m., the hearing was adjourned.]
A P P E N D I X
May 3, 2001
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