[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]


 
                       THE PROPOSED BUDGET OF THE

                    DEPARTMENT OF HOUSING AND URBAN

                    DEVELOPMENT FOR FISCAL YEAR 2003
=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   HOUSING AND COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 13, 2002

                               __________

       Printed for the use of the Committee on Financial Services



                           Serial No. 107-54

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78-126                        WASHINGTON : 2002
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                 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
Hearing held on:
    February 13, 2002............................................     1
Appendix:
    February 13, 2002............................................    33

                               WITNESSES
                      Wednesday, February 13, 2002

Martinez, Hon. Mel, Secretary, U.S. Department of Housing and 
  Urban 
  Development....................................................     6

                                APPENDIX

Prepared statements:
    Green, Hon. Mark.............................................    34
    Oxley, Hon. Michael G........................................    37
    Carson, Hon. Julia...........................................    39
    Jones, Hon. Stephanie T......................................    41
    Lee, Hon. Barbara............................................    43
    Maloney, Hon. Carolyn B......................................    44
    Miller, Hon. Gary G..........................................    45
    Schakowsky, Hon. Janice......................................    47
    Velazquez, Hon. Nydia M......................................    49
    Martinez, Hon. Mel...........................................    52

              Additional Material Submitted for the Record

Martinez, Hon. Mel:
    Written response to questions from Hon. Sue Kelly............    99
    Written response to questions from Hon. Robert W. Ney........   105
    Written response to questions from Hon. Barney Frank.........    71
    Written response to questions from Hon. Julia Carson.........    56
    Written response to questions from Hon. Steve Israel.........    93
    Written response to questions from Hon. Barbara Lee..........   102
    Written response to questions from Hon. Janice Schakowsky....   110
    Written response to questions from Hon. Stephanie Tubbs-Jones    97
    Written response to questions from Hon. Nydia Velazquez......   128
    Written response to questions from Hon. Melvin Watt..........   134




                       THE PROPOSED BUDGET OF THE



                    DEPARTMENT OF HOUSING AND URBAN


 
                    DEVELOPMENT FOR FISCAL YEAR 2003

                              ----------                              


                      WEDNESDAY, FEBRUARY 13, 2002

             U.S. House of Representatives,
                       Subcommittee on Housing and 
                             Community Opportunity,
                           Committee on Financial Services,
                                                    Washington, DC.
    The subcommittee met, pursuant to call at 1:35 p.m., in 
room 210, Cannon House Office Building, Hon. Mark Green, [vice 
chairman of the subcommittee], presiding.
    Present: Vice Chairman Green; Representatives Tiberi, 
Miller, Baker, Frank, Velazquez, Carson, Lee, Schakowsky, 
Jones, Capuano, Sanders, Clay, Israel, Crowley, and LaFalce.
    Chairman Green. The hearing will come to order.
    Today marks the first hearing of this session. And we are 
honored to have the Honorable Mel Martinez, Secretary of the 
Department of Housing and Urban Development to discuss the 
Administration's Fiscal Year 2003 proposed budget.
    Thank you, Mr. Secretary for appearing before this 
subcommittee.
    I am chairing this hearing today in the place of Chairwoman 
Marge Roukema who is unable to be here today. However, we will 
insert her opening statement into the record and look forward 
to her continued leadership on housing issues.
    During the first session, the Housing Subcommittee 
conducted a series of seven hearings to identify the 
contemporary housing issues facing this Nation. As a result of 
those hearings I expect to work with Chairwoman Roukema to 
introduce an omnibus housing bill designed to address many of 
these housing issues.
    During those hearings last session it was evident that 
housing was not a Republican or a Democratic issue, in fact, 
there were as many Members of both parties actively engaged in 
our hearings. Through the hearings we understood the growing 
housing affordability and availability crisis confronting this 
Nation, particularly in high-cost areas.
    While we may have various opinions on how to address 
housing problems, it is clear that we all agree that we can do 
a better job. The housing budget the President proposes, I 
believe, is a good start. You in the Administration are to be 
commended for crafting a housing budget that makes 
homeownership housing affordability for all Americans a 
priority.
    Certainly not everyone will agree with the funding levels 
and program changes outlined in this budget, but we can agree 
on the goals of increasing homeownership for all and providing 
affordable housing to more Americans.
    Our country is obviously fighting two battles; one against 
terrorism, and the other to overcome a slow weakening economy. 
In the midst of all the negative economic news over the last 
year, the housing market has been one of the few bright spots. 
Housing posted its best year in history last year. There is no 
doubt that housing can be a significant catalyst on the road to 
economic recovery.
    The budget contains a number of provisions designed to 
create opportunities for homeownership, revitalize communities 
and to create incentives to build new, affordable housing.
    I know I speak for Chairwoman Roukema and others on the 
subcommittee when I say that we are anxious to work with you, 
to enact initiatives that will expand affordable housing to 
meet the needs of low- and moderate-income Americans.
    For example, the budget provides for an increase in 34,000 
new incremental rental subsidy vouchers. This is great. 
However, we should ensure that the vouchers can be utilized and 
that hard-to-house families can find shelter. The budget 
provides for a threefold increase in funding for the Self-Help 
Homeownership Opportunity Program or SHOP. A perfect example of 
leveraging private and non-profit resources with limited 
Government funds to create homeownership opportunities.
    I am particularly interested in the President's American 
Dream Downpayment Fund which will provide an additional $200 
million in funding for downpayment assistance to first-time, 
low-income home buyers. Coupled with that assistance, the 
Administration is proposing that Section 8 funds be used to 
assist low-income families moving into homeownership.
    We know that homeownership strengthens communities and 
these initiatives will begin that process.
    This HUD 2003 budget represents a 7 percent increase, 
however, Mr. Secretary, I would like to measure housing policy 
success not by mere increases in budget authority, but by the 
success stories we can document at the end of this term.
    I am concerned that rental housing vouchers are 
underutilized in both high-cost and average rental markets. We 
should provide those local administrators with the flexibility 
necessary to achieve higher utilization levels.
    I am concerned that the Department is unable to reimburse 
non-profit organizations for technical assistance provided and 
authorized by law. We can do better to efficiently manage our 
housing programs.
    As you may know, Mr. Secretary, I have a strong interest in 
promoting faith-based organizations because of the tremendous 
success stories and records that they have in the area of 
assisting very difficult and challenging populations. In that 
regard, I applaud the Administration's acknowledgement that HUD 
will have to comprehensively reform its rules and regulations 
to establish a level playing field for faith-based and 
community organizations that seek to partner with the Federal 
Government.
    I look forward to working to eliminate those regulations 
and handbook policies that preclude what I believe could be a 
great relationship.
    Mr. Secretary, this Administration has a great opportunity 
to turn around this agency and to lead the way to an innovative 
housing policy that understands the value of partnering with 
the public sector and our local and State governments. Your 
good will, integrity, and willingness to work with Congress, as 
well as your great background in the housing area is 
appreciated, and I am sure will move us to higher homeownership 
and rental opportunities.
    At this time I would yield to our Ranking Member, Mr. 
Barney Frank for his opening statement.
    [The prepared statement of Hon. Mark Green can be found on 
page 34 in the appendix.]
    Mr. Frank. Mr. Chairman, I'll yield the first 4 minutes to 
Mr. LaFalce.
    Mr. LaFalce. I thank the gentleman very much.
    Secretary Martinez, it's great to see you.
    First of all I want to express publicly what a delight it 
has been to work with you and so many of your assistants, Mr. 
Bernardi, Mr. Weicher, and so forth. It's been a great working 
relationship and I'm appreciative for it. I was about to say, 
there could be certain improvements in this area, and certain 
areas. I understand Senator Sarbanes mentioned difficulties in 
getting responses. Actually, my staff tells me that sometimes 
we could receive phone calls from Congressional Affairs a bit 
more quickly just giving us a status update.
    Secretary Martinez. We're going to work on it.
    Mr. LaFalce. I am sure that will improve after today. Yes, 
good; good.
    Look, I'm not going to go into the specifics of this 
budget, I know that Mr. Frank will in great, great detail as 
the Ranking Member. But in short, and I don't think this is 
your fault, I think this is OMB's fault, it's inadequate. It's 
inadequate from this year's perspective, but it's inadequate 
from a historical perspective.
    And I just want to give you a little bit of a historical 
perspective before you came here. You know, going back to 1994 
and 1995 when we had the revolution. And things have changed. 
We don't have the same anti-government rhetoric. We don't have 
people calling for the abolition of HUD today. But they were 
then. And upon taking control of Congress, Speaker Gingrich led 
the effort to slash the HUD budget by 25 percent. It was a cut 
of over $6 billion. And so when we measure today's budget, we 
just can't measure it against last year's and say we're 
treading water. We have to measure it against where we were and 
what we experienced. And that was that huge cut. And we've 
never caught up. We are still down and we are still down 
significantly.
    We were not spending too much on the homeless in those 
days. We were not spending too much on urban and rural housing 
in those days. Not to say we couldn't be spending it better. We 
could have spent it better then and we can spend it better 
today. We've got to do that. And that's one of the things I'm 
working with you on; trying to get some evaluation of how 
effectively we're spending our money so that we could do it 
better in the future, and I understand that.
    But compared to the levels approved in the fiscal 1995 
spending bill, funding for Section 202 is down 50 percent in 
real terms. And funding for Section 811, disabled housing, is 
down 44 percent. And public housing is taking a big hit. Over 
the last 8 years, funding for public housing is down 31 percent 
in real terms. And I'll take you to any of the housing units in 
my Congressional district, whether it's Buffalo, or Niagara 
Falls, or Lockport, and we need that money desperately.
    And the money we're getting does not say we couldn't spend 
it better and more wisely to accomplish our goals, to be sure. 
We need to talk about that. We need to talk about how we mesh 
public housing with the concept of integration so that we don't 
have segregated enclaves. You know, I mean, that's something 
that I want to work on with you.
    The CDBG and homeless programs are down 15 percent in real 
terms from that time period, 1994-1995. So I appreciate the job 
that you have done in trying to juggle priorities and use the 
dollars that you have as effectively as you can. I want to work 
with you on that in the future. But I want to get--you know, if 
we want to have a good economic stimulus bill, boy, there's no 
better way to provide an economic stimulus to our economy, you 
know, the ripple effect of money spent and housing and 
community development and the good that it has accomplished--
not for a day, but for permanently--is fantastic.
    Mr. Frank. Your time is up.
    Mr. LaFalce. I yield back the balance of my time.
    Mr. Frank. I thank the gentleman. I will take the rest of 
it to say that the gentleman from New York is absolutely 
correct about the inadequacy of the budget. In some areas of 
the economy, it's easy for people to say that as we enjoy 
prosperity--even if we're in a temporary recession--but this 
economy remains a very strong one, and we've had great 
prosperity and will have again. And prosperity does take care 
of a lot of things. It's the best anti-welfare program. It 
deals with unemployment, obviously, by definition. But given 
the unevenness of prosperity, and the nature of our society, 
prosperity in some ways exacerbates the housing crisis for 
those who are most disadvantaged. Because in those urban areas 
where people are not fully mobile, where people don't have the 
job opportunities to let them move across the country, where 
people are tied to a great extent to a local job market in the 
near term, the prosperity we have had in area after area has 
driven up hosing prices and left a significant segment of the 
working population unable to afford decent housing.
    So we have to do more rather than less. As prosperity 
creates more resources for the society, we ought to be using 
some of those resources to alleviate a housing crisis that is 
made worse rather than better. I know there is this popular 
saying that the rising tide gets all boats. But we're talking 
about the people who can't afford a boat. And if you can't 
afford a boat, the rising tide goes up your nose.
    The fact is that we have people who are disadvantaged by 
prosperity, not advantaged.
    That's particularly relevant, Mr. Secretary, because 
homeownership is a very good thing and I want us to encourage 
it. It is a grave error to make that the central focus of 
housing policy from the standpoint of the Government. Of 
course, we do have a significant aid to homeownership in the 
tax code. The ownership of housing is very much advantaged by 
the tax code. You get a significant advantage there.
    There was an article by Ken Harney in The Washington Post 
documenting to what extent that exists. And I am in favor of 
trying to help lower income people get the advantages of 
homeownership. Although, as we should note, if you are taking 
the standard deduction, the tax advantages of homeownership are 
not nearly so great for you. But almost by definition, the 
large majority of poor people are going to need rental housing. 
And we will never alleviate the terrible housing crisis that 
affects so many people in this country if we do not do a much 
better job of building decent, affordable rental housing.
    It's true that 40 and 50 years ago, this society built 
rental housing for the poor in the public housing area in very 
anti-social ways. But we ought to be very clear, the poor 
people never asked that we house them by building large sterile 
concrete towers with no services. That wasn't their idea. That 
was society's decision that that was the cheapest way to handle 
it. We've learned from that. We haven't built those kind of bad 
buildings. We've torn some of them down. We know how to build 
better rental housing.
    And I finally have to say, Mr. Secretary, I see a 
disconnect between the hearings that were held all last year. 
This subcommittee had hearings and the witnesses were 
overwhelmingly chosen by the Majority. And with one or two 
exceptions, the witnesses that were chosen both by the Majority 
and by the Minority said, ``You need to get back in the 
business of producing rental housing.''
    So homeownership is a useful thing and I want to work with 
it. But until we begin to take some of the resources of this 
very wealthy country and dedicate them to adequate production 
of rental housing as part of an overall mix, we're going to 
continue to condemn hardworking people to homelessness in some 
cases, because there are working people who can't afford 
anyplace at all, and even more inadequate housing and a 
situation where they have to pay far too much of their income 
for the housing they have.
    And, again, we ought to be clear, as has been made clear by 
various studies recently, we are talking about people who work 
hard and make, $20-, $25-, $30,000, and even more in some 
municipalities, people who do basic essential services and 
cannot afford housing and will not be able to house themselves 
and their families decently at a reasonable price until we get 
back in the business of improving the stock of rental housing.
    Chairman Green. Members are notified, we will likely have a 
vote in the next half hour. Under the rules of this 
subcommittee, opening statements have been allocated 8 minutes 
for each side. That time has been used up. So I would invite 
the rest of the Members to submit opening statements for the 
record.
    And with that, we will turn to and formally welcome our 
guest. Secretary Martinez, welcome. And we look forward to your 
testimony.

 STATEMENT OF HON. MEL MARTINEZ, SECRETARY, U.S. DEPARTMENT OF 
                 HOUSING AND URBAN DEVELOPMENT

    Secretary Martinez. Thank you, Vice Chairman Green and 
Ranking Member Frank and distinguished Members of the 
subcommittee. It's a pleasure to be back with you and talk 
about the 2003 Budget for the Department of Housing and Urban 
Development.
    The $31.5 billion HUD budget represents a funding level 
increase of 7 percent over fiscal year 2002. By helping 
Americans reach the dream of homeownership, ensuring affordable 
housing opportunities for those who rent, strengthening and 
renewing communities, and preserving a safety net for the most 
vulnerable, this budget will enable HUD to make a tremendous 
difference in the lives of millions of Americans.
    The housing market in 2001 was extremely vigorous, and we 
entered the new year with homeownership at a record high. 
Because we know that homeownership gives families a stake in 
their communities and creates wealth, the HUD budget makes 
owning a home a viable option for even more Americans. In his 
State of the Union Address, President Bush acknowledged our 
commitment to expanding homeownership, especially among 
minorities.
    As a first step, we have quadrupled the American Dream 
Downpayment Fund, to $200 million. This Presidential initiative 
will help an estimated 40,000 first-time homebuyers overcome 
the high down payment and closing costs that are significant 
obstacles to homeownership.
    A tax credit for developers of single-family affordable 
housing will promote homeownership opportunities among low-
income households by supporting the rehabilitation or new 
construction of homes in low-income urban and rural 
neighborhoods.
    We are tripling funding for the Self-Help Homeownership 
Opportunity Program--SHOP--to $65 million, as committed to by 
the President last spring. That, and a lot of sweat equity, 
will make possible the construction of an additional 3,800 
homes for disadvantaged Americans. SHOP is an excellent example 
of Government maximizing its resources by working with private-
sector partners like Habitat for Humanity.
    Another exciting homeownership initiative targeted at low-
income families will allow them to put up to a year's worth of 
their Section 8 rental voucher assistance toward a home down 
payment. And, because we consider it an invaluable tool for 
prospective homebuyers and renters, we have proposed making 
housing counseling a separate program. The increase in sub-
prime lending has made financial literacy more important than 
ever; armed with the facts, a consumer is far less likely to be 
victimized by predatory lending. We are funding the counseling 
program at $35 million, which represents a $15 million increase 
over the previous fiscal year.
    While we consider homeownership to be an important goal, we 
recognize that it is not an option for everyone; therefore, our 
budget preserves HUD's commitment to expanding the availability 
of affordable housing for the millions of Americans who rent 
their homes.
    The Section 8 tenant-based program today assists nearly two 
million families; our budget provides an additional 34,000 
housing vouchers. The budget also dedicates $16.9 billion to 
protect current residents by renewing all expiring Section 8 
contracts.
    To encourage the production of moderate-income rental 
housing in underserved areas, we plan to reduce the mortgage 
insurance premium for Federal Housing Administration 
multifamily insurance.
    Three times over the last 8 years, HUD has been forced to 
shut down our multifamily mortgage insurance programs, because 
of lack of credit subsidy. Last year, the shutdown stopped the 
construction of some 30,000 rental units throughout the country 
and clouded developers in uncertainty.
    We made a commitment at HUD to a comprehensive review of 
the credit subsidy program. We examined the statistical 
techniques that were used to analyze loan performance. We 
thoroughly updated and refined FHA's data and incorporated the 
major tax law changes in the 1980s that affected the 
profitability of multifamily housing. Through our review, we 
were able to lower premiums, create a self-sustaining program, 
provide the industry with stable financing at a much lower 
cost, and provide thousands of new opportunities for rental 
housing across the country.
    In fact, the program made firm commitments to insure $1.25 
billion worth of new rental housing in just the first 4 months 
of the fiscal year. Reducing the premiums in fiscal year 2003 
will lower the cost of building over 50,000 affordable rental 
apartments each year.
    The 2003 budget gives HUD new resources to further our 
mission of supporting the Nation's most vulnerable. This 
includes low-income families, homeless men and women, the 
elderly, individuals with HIV/AIDS, victims of predatory 
lending practices, and families living in housing contaminated 
by lead-based paint.
    Let me highlight just a few of our proposals.
    To better coordinate the work of the many Federal agencies 
that reach out and provide a continuum of care to homeless men, 
women, and families, the budget calls for doubling HUD's 
funding for the newly reactivated Interagency Council on the 
Homeless. Additionally, converting three competitive homeless 
assistance programs into a consolidated grant will eliminate 
the workload and expense of administering three separate 
programs.
    But, more importantly, it will give local jurisdictions new 
discretion in how those dollars are spent, while at the same 
time expediting the payout rate to the recipients by at least a 
third.
    HUD's Lead Hazard Control program is the central element of 
the President's effort to eradicate childhood lead poisoning in 
10 years or less. The HUD budget will fund the program at $126 
million, a substantial increase over the previous year.
    The budget also proposes spending $251 million under HUD's 
Section 811 program to improve access to affordable housing for 
persons with disabilities. And many of the additional 34,000 
Section 8 vouchers will aid non-elderly, disabled individuals.
    In addition to addressing the Nation's critical housing 
needs, programs such as the HOME Investment Partnerships 
Program and the Community Development Block Grant program 
stimulate economic development and job growth. Combined, these 
two programs will distribute an additional $200 million in 
formula funding to State and local governments. We have 
proposed changing the distribution of CDBG formula funds by 
reducing the size of grants going to the wealthiest 
communities. This will help bring dollars into those areas 
where they can do the most good.
    We are excited about a brand-new concept to address the 
large backlog of repair and modernization projects in public 
housing. The Public Housing Reinvestment Initiative represents 
a new way to leverage the value of public housing by allowing 
public housing authorities to borrow funds to make needed 
capital improvements. This project unlocks the value of public 
housing assets by allowing PHAs to convert public housing units 
to project-based vouchers. The PHAs can obtain loans by 
borrowing against individual properties, similar to private-
sector real estate financing.
    Innovative thinking like this represents a departure from 
the way things were done so often in the past, but being 
effective does not have to mean spending more money. Government 
works best when Government serves as steward and facilitator 
and measures success through results. By facilitating the 
involvement of new local partners, the Public Housing 
Reinvestment Initiative will breathe new life into public 
housing communities.
    I am proud of our budget and the way it reflects HUD's 
renewed commitment to efficiency, accountability, and the 
principles of excellence expressed through the President's 
management scorecard. When Government spends efficiently, the 
funds go much further, we reach more citizens, and we help to 
change more lives.
    The people of HUD know that the American Dream is not some 
unattainable goal, because we see it achieved every day, so 
often by families who never imagined owning their own home or 
reaching economic self-sufficiency. I am confident that through 
our budget, and the continued commitment of President Bush, HUD 
will be better able to offer citizens the tools that they can 
put to work in improving their lives, and strengthening their 
communities and their country.
    I would like to thank each of you, the Members of this 
subcommittee, for your support in our efforts, and for our 
working partnership as we seek to go forward on behalf of the 
American people. Thank you very much, Mr. Vice Chairman.
    [The prepared statement of Hon. Mel Martinez can be found 
on page 52 in the appendix.]
    Chairman Green. Thank you, Mr. Secretary for your 
testimony.
    In the budget, you proposed decoupling the Brownfields 
program from the Section 108 Loan Guarantee program to attract 
more participants. Can you explain how that works and why 
that's necessary in your view?
    Secretary Martinez. The BEDI, Brownfields Economic 
Development and Initiative program, is a good financing tool 
along with the Section 108 program for addressing the lack of 
investment in urban areas resulting from real or perceived 
environmental contamination. So the reduction in the 108 
funding level will not affect the ability of communities to 
leverage the BEDI funding, because it is anticipated that more 
communities may apply for BEDI grants now that the Section 108 
guarantees are not required with a pledge of their CDBG funds 
as collateral.
    So, in other words, what we're doing is opening up this way 
of financing urban redevelopment by making it more flexible and 
more appealing to the communities. The BEDI program has been 
tremendously underutilized. So our hope is that by doing this, 
we will enhance this program and encourage more participation.
    Chairman Green. Obviously, with much of the budget it isn't 
so much the monies that are allocated, but how efficiently they 
get spent and utilized.
    Secretary Martinez. The coupling with the 108 made it 
undesirable for communities. They didn't want to pledge their 
CDBG funds. So this way we're breaking it up.
    Chairman Green. And hoping that those dollars will actually 
get utilized?
    Secretary Martinez. Exactly.
    Chairman Green. Switching gears, but on the subject of 
effective utilization of dollars, the report that the 
Administration produced some months ago called the ``Unlevel 
Playing Field'' identified a number of regulations within HUD 
that the report believes impeded the ability of faith-based 
organizations to access and utilize some of the HUD grant 
programs, and particularly in the HOME VI and CDBG programs, 
disabled and elderly housing.
    Could you address what efforts the department is planning 
to try to break down some of those restrictions?
    Secretary Martinez. Well, the President, in his Executive 
Order on the faith-based initiative, which is something that we 
have embraced wholeheartedly at HUD, asked us to do a survey of 
impediments. And what we found was a very uneven playing field. 
We found that there were very inconsistent requirements of 
agencies and we also found that the amount of paperwork and 
administrative red tape they had to go through was really quite 
discouraging, particularly to small faith-based charitable 
organizations who found it difficult to wade their way through 
the bureaucracy.
    We are now in the process of developing amended 
regulations. So we will clean this up, level the playing field, 
create a set of rules that are standard, that are easy to 
understand and that are evenly applied so that more and more 
opportunities will be made available to community-based and 
faith-based organizations to partner in our HUD programs. We 
think they can have a very transforming effect and impact on 
our communities.
    You know, when we're talking about $15 million new dollars 
for a total of $35 million in homeownership education and 
assistance, teaching families how to make themselves 
homeowners, how to bring themselves out of non-ownership and 
into ownership, this is an area where I think faith-based 
organizations in our inner cities could have a tremendous 
impact in working with people.
    Chairman Green. I know you personally have had a long 
relationship with faith-based organizations back in your home 
State, so I know it's a priority of yours.
    One of the areas that I am most concerned about right now 
in the area of housing policy is what is being done to expand 
the stock of new, affordable housing? And one of the ideas 
that's floating around is the creation of some kind of housing 
impact statement. Some sort of mechanism by which agencies like 
HUD would be directed to perform regulatory reviews to examine 
how regulations may be impacting the cost and availability of 
affordable housing. And I was wondering your thoughts on such a 
proposal, whether you would support that or think it's a good 
idea?
    Secretary Martinez. I think it's a terrific idea. And I 
think that, frankly, a lot of it is also at the local level. I 
think it's amazing how much Government has imposed upon the 
cost of housing by regulations and by different requirements 
that, you know, sometimes have been rooted in good intentions, 
but not always in good results. And so I believe it would be 
very, very helpful to engage in that kind of a review.
    Many years ago, the mayor of the City of Orlando, my home 
town, asked me to head an affordable housing task force and it 
was incredible the kinds of things we were able to find in 
regulations that no thought had been given to the impact that 
they would have on the cost of housing. So I think much can be 
done to alleviate those kinds of problems.
    And, frankly, I also believe that RESPA reform, which we're 
engaged in, the Real Estate Settlement and Procedures Act, this 
is a terribly important opportunity for more people to make 
housing more affordable for purchasers. The fact is that for 
many people, a lot of cost is added to the cost of buying a 
home by the Real Estate Settlement Act and the requirements 
that it has. So thinning that out, cleaning that out, making it 
more transparent, these are all the things that can help make 
housing more affordable.
    Chairman Green. Well, Mr. Secretary, I share your 
enthusiasm and look forward to working with you.
    The Ranking Member, Representative Frank, is recognized for 
5 minutes.
    Mr. Frank. Mr. Secretary, I have to say at the beginning 
that communication has been a problem. At the last hearing, 
which I think was April, Members submitted questions, the 
answers came a couple of weeks ago, to those questions. And, 
frankly, they weren't much in the way of answers. And we've had 
similar problems. I know it takes a while, but the responses 
should be better. You know, we're supposed to learn from our 
mistakes.
    Secretary Martinez. May I just briefly say, Senator, I 
appreciate the comment, and I will assure you that we will do 
better.
    Mr. Frank. Maybe you sent them over to the Senate, maybe 
that was the problem.
    Secretary Martinez. Well, I'm not sure they're any happier.
    Mr. Frank. I know you said ``Senator'' I thought maybe you 
sent the answers to the wrong place.
    Secretary Martinez. I'm sorry. You know, I was down here 
this morning, so I'm sorry. I was trying to give you a 
promotion, but anyway--or demotion, whichever way, I'm not 
sure.
    Mr. Frank. Mr. Secretary, from your department I'll take 
motion whether it's de or pro.
    The next question I have really has to do with a mistake. 
And we have to learn from our mistakes and I have to say, your 
department made a very serious, very time consuming, very 
disturbing mistake. I understand that you said this morning, my 
Assistant Ms. Gibbs heard you testify that you're going to be 
able to rectify it. But we have to learn how it happened and 
how we can prevent it.
    Obviously, I'm talking about the grants known as ITAG and 
OTAG. The agencies that were set up to help, you know, and we 
all pay great lip service to an ocean of community involvement, 
tenant involvement, and so forth. And these were--we're talking 
about a small amount of money, $11 million in this budget for 
next year. We're talking about a million-and-a-half that was 
owed, and it's still owed, unfortunately, to help community 
groups. And we were told last year by your department that 
there was a violation of the Antideficiency Act and these 
community groups who are scraping along on very low dollars--
these are very low budget operations, trying to employ very 
lower income people in many cases--that they were not going to 
get the money because there had been some problem that the 
Antideficiency Act had been violated.
    We put some language in the budget in the Defense 
Appropriations Bill, because that was the last train out of the 
station and directed the department to clean it up and to have 
a report by January 15th. As of yesterday we were still being 
told that the Department couldn't pay and didn't even know how 
much was owed.
    Now, something appeared magically to somebody during the 
night, and I am all happy about that, because this morning you 
announced, contrary to what we had been told yesterday 
afternoon, that this was going to be resolved. But how did this 
happen? I mean, apparently now the ruling is that there was no 
violation. Well, what made everybody think there was a 
violation and the mistaken notion that there was a violation 
caused great havoc for a lot of low-income groups.
    Secretary Martinez. Well, the first thing that I need to 
say is that I am sorry about that and it is a tragic situation 
and it is terrible to people who had nothing to do with it. I 
mean, they are blameless. These are victims of a set of 
circumstances not of their own making. And I understand that 
these are people who are working on margins. So it is 
unfortunate and I really do regret it.
    I have to tell you that there is a significant problem in 
the way that--and you're talking about how we fix it for the 
future as well, which I think is very important. OMHAR, which 
is the agency in charge of administering these grant programs, 
was not a part of HUD, was of HUD, but not directly under HUD. 
We have now brought OMHAR under HUD.
    Mr. Frank. And we voted for that.
    Secretary Martinez. And you did and it was a great thing to 
do. And I don't think you'll see this kind of situation in the 
future.
    Mr. Frank. Well, why did someone decide until yesterday 
that there was a violation of the Antideficiency Act to the 
great discomfort and damage of these groups?
    Secretary Martinez. Let me say, we thought there was a 
violation of the Antideficiency Act.
    Mr. Frank. Who thought that?
    Secretary Martinez. Our office of CFO office.
    Mr. Frank. And at what point did they unthink it?
    Secretary Martinez. Well, they had been unthinking it when 
they asked the IG to conduct an investigation and the IG's 
investigation went into all of these records which we didn't 
have, because OMHAR had them. We had to actually go to some 
other grantees to get the records and now in reviewing all of 
the records, it appears that there was not a violation.
    Mr. Frank. Well, when did the IG tell you that?
    Secretary Martinez. The IG has, in the last couple of days, 
has concluded that that was the case. But let me say--let me 
finish.
    Mr. Frank. We were begging you before to do this and--
because these people were held hostage while you were 
arbitrating this question.
    Secretary Martinez. Well, and I understand that. But there 
was no way not to compound what----
    Mr. Frank. Well, there was. There was this. But, because 
the Congress and the Defense Appropriation instructed you to 
pay them.
    Secretary Martinez. But--but--
    Mr. Frank. ----waited--I mean, the IG somehow----
    Secretary Martinez. But, it has----
    Mr. Frank. Excuse me, but can I tell Senator Byrd that 
according to you, the IG outranks the Appropriations 
Committees?
    Secretary Martinez. No, sir. I think that would be--I don't 
want that said.
    [Laughter.]
    Mr. Frank. But that's what you're telling me, Mr. 
Secretary.
    Secretary Martinez. My grandmother did have an outhouse, 
but I don't want to get into that today.
    [Laughter.]
    Secretary Martinez. Anyway, no, here's the thing. Mr. 
Frank, here's the problem. We thought there was an 
Antideficiency Act violation. We had to stop payment in order 
not to compound the problem.
    Mr. Frank. Why didn't the December appropriations ever pay 
them the money regardless of the Antideficiency Act. Let's work 
that out among ourselves don't--and you've held these people 
up.
    Secretary Martinez. Two reasons why that has not happened. 
We, on the 12th of January, immediately after the signing of 
the bill, we asked OMB to allow us to disburse the funds. That 
authority has not come yet. In order to utilize those funds it 
typically takes 30 days and that is about the timeframe where 
we are now.
    Mr. Frank. This is the first I heard that it was OMB 
holding up. I wish you would have told us that.
    Secretary Martinez. Well, OMB might tell you that it was us 
holding it up. The bottom line is that the funds have not been 
available. We now have a way of paying it, even without 
utilizing the $11 million, because the fact is that we----
    Mr. Frank. Well, can you pay them tomorrow? This afternoon?
    Secretary Martinez. On the 27th of February we are going to 
start making payments.
    Mr. Frank. Why the 27th?
    Secretary Martinez. Because between now and then we have to 
ascertain how much each of these groups is owed. And we have 
had to reconstruct records. I know this all sounds like a lot 
of bureaucratic gobblygook. I know what it's like to be out in 
the field and have the need to make payroll. I mean, you know, 
I used to be a small businessman myself and I know that's a 
terrible problem. We are doing the best we can. Good-meaning, 
well-meaning people have been working tirelessly to fix this 
problem.
    Mr. Frank. But I would have told you this, but it is these 
people were further victimized by an error, because someone at 
HUD found an Antideficiency Act violation that did not exist 
and it terribly disadvantaged these people and we just have to 
figure out a way not to have that happen again.
    Secretary Martinez. Understood.
    Chairman Green. The gentleman's time is expired.
    The Chair recognizes the gentleman from Ohio, Mr. Tiberi.
    Mr. Tiberi. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary for coming today.
    This is kind of following on the lines of what Mr. Frank 
said. You may be aware that in central Ohio, in fact, 
Congresswoman Pryce and I sent a letter to the Chairman of the 
Full Committee expressing some concerns about OMHAR. And I 
would just like to give you an opportunity to--I think you were 
starting to answer the question and weren't able to finish with 
respect to where do you see this going?
    Secretary Martinez. Well, going forward in the future OMHAR 
is now a part of HUD and all of their financial transactions 
will be a part of the way HUD does business. Their grant 
administration will be a part of HUD. It will allow us to have 
access to the records that we did not have and had a problem 
getting access to. So in the future I really do believe that 
these problems will be alleviated.
    HUD does not have a problem in knowing how it is funding 
out and how to administer grants. This has not been a typical 
situation that we have seen in other HUD programs. So I have 
great comfort that going forward that this is not something 
that is going to be repeated. It is, indeed, a terrible 
situation for the people involved and they are totally 
blameless in this. But sometimes these things happen.
    The problem is, too, an Antideficiency Act violation is a 
darned serious piece of business. People go to jail for that. 
And when our office of General Counsel and others at HUD 
decided that there was a potential for such a violation, the 
prudent thing to do was to stop making more payments which 
would have compounded the problem. So it is unfortunate that 
now as it turns out there may have not been one. But I think 
you cannot fault HUD for using caution in a situation where I 
think caution was warranted.
    Mr. Tiberi. Mr. Chairman, Mr. Secretary, what timeline 
should we give our constituents who are impacted by this as to 
what are they looking at?
    Secretary Martinez. We will be able to pay $550,000 in 
outstanding obligations by the first week in March.
    Mr. Tiberi. And final question, Mr. Chairman. Mr. 
Secretary, can we work with your office then rather than OMHAR 
in terms of finding out exactly what the payout would be?
    Secretary Martinez. Yes, sir. In this situation if you need 
to know a specific group, just call my office and we will make 
this a priority. And, you know, let me assure you that I have 
been involved in this in the last couple of days and I am going 
to stay involved in it, because we need to get it to finality 
and get this taken care of.
    Mr. Tiberi. Great. And just switching the subjects, Mr. 
Chairman, and Mr. Secretary, you mentioned RESPA and you are 
down-the-road on RESPA requirements. Can you give us a timeline 
on what your goal is to come out with recommendations?
    Secretary Martinez. My hope is sometime in 90 days or so we 
will be in a position to come out with some recommendations. We 
are seeking input from consumer groups, from the industry 
groups and from members as well so that we can come out with 
something that is as comprehensive as we can make it, and I 
believe quite revolutionary. You know, RESPA is an area where 
if Social Security is a third rail, this is a third rail of 
HUD. Nobody has wanted to touch it.
    But from 1972 until now, an awful lot has changed in the 
financial world and the world of technology and everything 
else. And I think it's time that we take a good look at the 
amount of clarity that has not been available to people who are 
closing on a home and the amount of knowledge about what 
they're paying and why they're paying it. So I think it's time 
for a new day and I am really very aggressively pursuing that.
    Mr. Tiberi. Thank you, Mr. Secretary. As a former realtor, 
I encourage you to continue to keep the consumer in mind with 
respect to disclosure as well.
    Secretary Martinez. Absolutely. That is the key, 
disclosure.
    Mr. Tiberi. Thank you.
    Secretary Martinez. Transparency in the transaction really 
means disclosing all of the information so that the consumer 
can make informed choices.
    Mr. Tiberi. I agree. Thank you.
    Chairman Green. The Chair recognizes Ms. Lee for 5 minutes.
    Ms. Lee. Thank you very much, Mr. Chairman.
    Hello, Mr. Secretary.
    Secretary Martinez. Yes, ma'am.
    Ms. Lee. Let me ask you a couple of questions with regard 
to the funding for homeless initiatives. Now, your budget 
indicates that there are about, well, somewhere between 100,000 
and 200,000 persons without a home for long periods of time, 
making chronic homelessness in the decade a top priority.
    Let me just ask you about how that translates into your 
budget, because it's estimated that it will cost some $95 
million more in 2003 than last year in terms of funding for the 
Shelter Plus program grants, but yet your budget doesn't 
reflect any increase in that. And you indicated you're 
consolidating the programs and also funding the interagency 
task force.
    Secretary Martinez. Right.
    Ms. Lee. But how does all of this translate to addressing 
the problems of chronic homelessness? HUD's budget, I guess, is 
what, $1.1 billion? Is that what you are----
    Secretary Martinez. The total budget for homelessness is 
approximately that, $1.1 billion.
    Ms. Lee. OK.
    Secretary Martinez. But let me address the problem of 
Shelter Plus, because I think there is a little bit of a 
misunderstanding.
    The Shelter Plus program was advance funded in the 2002 
budget, so it means that the 2003 appropriations that we will 
make were funded in last year's budget. And we can keep all the 
current level of funding without a new appropriation in this 
2003 budget. We will need to appropriate again in 2004, but the 
2002 appropriations were appropriating for 2002 and 2003 fiscal 
years. So we will be in a position this year to fund all of the 
programs of the Shelter Plus program. They are fully covered in 
the 2002 Appropriations Act.
    Ms. Lee. So what does that mean for this year? Then what 
was the amount from last year? What was that? How did that 
translate for the program?
    Secretary Martinez. What it will mean is that in the year 
2004, we will need about $190 million in order to fully fund, 
going forward, the Shelter Plus program. But that in this 
current budget year that we are considering today, there was no 
need to do additional funding because it had been taken care of 
in the 2002 fiscal year budget.
    Ms. Lee. Then----
    Secretary Martinez. Does that answer your question?
    Ms. Lee. Well, it does, but it doesn't in terms of the need 
that's there, given the need of addressing the 150,000, 200,000 
chronic homeless population. Whatever that number was, was too 
low. I remember from last year and this year with the $1.1 
billion, what does that include? I mean, it is just homeless 
assistance programs. Are these grants to shelters?
    Secretary Martinez. We have supportive housing programs, 
Shelter Plus Care Program, the Section 8 Modernization 
Rehabilitation Program, and the Emergency Shelter Grants 
Program. So all of those are the HUD programs that address the 
needs of the homeless.
    But what we are doing beyond that is by reactivating the 
Interagency Task Force, the Interagency Council on the 
Homeless, and doubling the funding for that. We now have an 
executive director that's coming on board, we will now bring 
the resources of all the agencies of the Federal Government to 
bear on this problem. HHS has an awful lot that they can do 
with homeless populations, particularly the chronically 
homeless who often have additional health issues that are 
afflicting them which is sometimes the cause of their 
homelessness and we need to make sure that these people, these 
populations are accessing all that is available to them through 
these other agencies which today we are not necessarily always 
doing.
    Ms. Lee. So in an ideal world, Mr. Secretary, what do you 
think we need? Because we all, including yourself, have been 
struggling to try to really deal with the problems of the 
chronic homelessness. What do you think the funding level 
should be that would begin to provide not only shelter, but 
transitional housing, the supportive services, all of those 
kinds of efforts to help people move from homelessness into 
housing?
    Secretary Martinez. I believe that the programs that we 
have currently available are adequate and helpful to the 
population that we are dealing with. The problem is not that 
they are not accessing the opportunities for help. The problem 
is that we have a segment of the population particularly that 
is chronically homeless and we need to find a way that we can 
get better treatment options to those people so we can move 
them out of homelessness.
    So it isn't necessarily, in my view, necessarily a funding 
issue. It's about how we administer these programs and how we 
get all of the agencies of the departments of the Federal 
Government working together to try to address this problem.
    Ms. Lee. So you think that for drug treatment, for 
substance abuse, for children who are homeless, for----
    Secretary Martinez. Well, drug treatment and substance 
abuse are things that are covered under other parts of the 
budget that are not necessarily under HUD, although we do some 
things like that in our continuum of care programs. But we do 
need to address these problems in a comprehensive way. And I 
think that this Interagency Council is going to be a tremendous 
resource for us in doing so. So I look forward to continuing 
the dialogue, because I know you care about the issue. I do too 
and our agency is tasked with dealing with it. So we intend to 
forcefully pursue it and this interagency task force is going 
to help us get it done.
    Ms. Lee. Thank you, Mr. Secretary. Thank you, Mr. Chairman.
    Chairman Green. Thank you.
    The Chair recognizes Mr. Miller of California for 5 
minutes.
    Mr. Miller. Thank you, Mr. Chairman. Mr. Secretary, it is 
good to have you here today.
    Secretary Martinez. Thank you, sir.
    Mr. Miller. You have been a pleasure to work with over the 
last year on Brownfields as it applies to HUD and I believe the 
Chairman is going to mark that bill up possibly in March. And I 
am looking forward to that being implemented. I am also glad to 
see in the budget that HUD received a 7 percent increase in 
funding. I think that's long overdue.
    I think it's impossible though to look at one sector of the 
housing market and completely understand the housing problem we 
are facing in this country. We talk about the chronically 
homeless. But there's a new generation of homeless that's 
developing also and those are individuals who can't afford to 
live within the community in which they work. We are worried 
about air quality, we're worried about transportation, but 
there are so many people who have good jobs who just can't 
afford to live in the community or the county within which they 
work.
    In Orange County the median home price is $338,500, which 
means you have to have an income of about $112,833 to qualify 
for a home. And the average rental price is over $1,000. And 
last year we had Los Angeles County in here, which is probably 
the largest housing market in the Nation. They said that their 
affordable housing rental units had a vacancy factor of 3 
percent, which means they are totally occupied, because 3 
percent of all the units are always under refurbishing in some 
form.
    But, in order to provide low-income housing for those at 
the lowest levels, you have to have an affordable move-up 
market. You can't have one without having the other, because 
people are not going to move out of the low-income housing into 
the next level if there's no place for them to go. Yet, if you 
look at the average sales price of a home in this Nation, 30 
percent of that sales price is directly attributed to 
Government; 30 percent alone. And that's not indirect cost. If 
you figure the Endangered Species Act on top of that.
    I know Congressman Baca, from San Bernadino County, who is 
in the district adjacent to mine, there's a project called 
Liddell Creek that is next to a wash. And this entire project 
is zoned for quarry. And there happens to be a San Bernadino 
kangaroo rat that lives in this wash. Now, you have to 
understand, the kangaroo rat is endangered, because the 
kangaroo rat only lives in washes and every time you have a 
rain storm, they get washed out and they die.
    And yet, every study about wildlife and every biologist has 
been out there said, they will never live uphill from that 
wash, they will only live in the wash, and there's a project on 
335 acres that they want to build affordable housing. Because 
of that rat, they spent 5 years trying to get approvals. Now 
that the county has approved them, they're being sued by the 
Friends of the Sage and other environmental groups to make sure 
they can't build affordable housing, because they said it's 
zoned for a quarry, it should be used for a quarry.
    And we all know what happens to a quarry for sand and 
gravel, they dig a hole and destroy the entire environment. 
But, I mean, it's just an attempt to stop providing housing. 
Where do you think we have to go in this Nation to deal with, 
yes, the people who are homeless, but also to deal with the 
marketplace that moves up so the rest of society can afford to 
live in this Nation?
    Secretary Martinez. Well, I think you speak of the problem, 
again, that's at the heart of the issue which is how do we get 
this continuum of people allowing them to move out of 
homelessness into affordable rental, then from rental into 
perhaps homeownership. And this is something that is a very 
difficult problem.
    Orange County, Florida, where I come from, has similar 
problems to what you speak of. It's not nearly at the same 
price levels, but they exist. People who have an ordinary job 
working in a service industry find it difficult to find an 
affordable place to rent.
    The issue of Government adding costs to the cost of housing 
is a very serious problem. That can only be addressed though at 
the State and local level, for the most part. I think the 
Federal Government may play a role in that, but it's a very, 
very small role compared to the local and State roles in these 
types of regulations.
    The things you're describing make me realize how happy I am 
that I'm not in local government anymore, you know, because it 
is a difficult set of issues to deal with.
    The problem is that we have got to find ways in which we 
can continue to erode the regulatory costs while at the same 
time finding more innovative ways of creating housing 
opportunities. I mean, I know that there would be some members 
who would just want to have a Federal program worth billions 
and billions of dollars for housing production. But that's not 
really answering the problem either.
    Mr. Miller. See, I support the concept, and I talked to Mr. 
Frank about it repeatedly in the Section 8 vouchers. But then 
we come back and say there's a huge shortage of supply, so we 
need to increase Section 8 vouchers, but all we're doing is 
increasing demand for a product that is in shortage.
    So, no matter how high you increase Section 8 vouchers, 
there's still no place to spend them. And yet we don't look at 
the concept of maybe we take a Section 8 voucher and allow that 
to be applicable to purchasing a home.
    And then maybe in 5 or 6 years, those people on Section 8 
vouchers won't need Section 8 vouchers, because they've built 
up equity in the homes. But this housing crisis we're facing, 
and it's a crisis, is so complex we sit here in Congress and we 
come up with some good ideas on how to try to deal with it, but 
unless we have some mandate that says, things must be done, 
there's nothing in the world we're going to do to solve the 
crisis that's confronting us.
    Could you please try to address that?
    Secretary Martinez. I'm not sure that I can provide you 
with a set of scripted answers to the problem you pose. I think 
it's a very serious problem.
    Some of the things we're doing are through our FHA program. 
We are finding that in reassessing how we did the premium 
calculation we found that we now have a tremendous interest in 
this program and that it is being utilized. In our FHA 
multifamily program, we increased the loan limit by 25 percent. 
It is now being utilized in high-priced communities like those 
you mentioned.
    So this is going to allow for--I mean, we're seeing 
applications coming in from communities that we hadn't seen in 
many, many years. So I'm hoping that's going to have an effect.
    We may even raise that FHA limit even higher. The bottom 
line is that in doing so we've been able to create some 
opportunities.
    That's not a total answer, but it is a partial answer.
    Mr. Miller. Well, in closing, I want to thank you. Your 
office has been extremely cooperative and responsive to issues 
we believed important in Brownfields and important to people 
who need housing.
    Secretary Martinez. Thank you.
    Mr. Miller. And I want to commend you for that.
    Secretary Martinez. Thank you.
    Chairman Green. OK. We have a vote on. We're going to 
adjourn temporarily for the vote--a recess.
    Mr. Secretary, you can stick around, I hope?
    Secretary Martinez. Mr. Vice Chairman, I have a commitment 
with the President that I have to be at 4:00 and that's my only 
constraint. Until then, I'm yours.
    Ms. Schakowsky. Mr. Chairman.
    Chairman Green. We have but one vote so we'll come back 
immediately after the vote and we'll reconvene.
    Secretary Martinez. I'll be here.
    Chairman Green. So we stand in recess until the vote is 
conducted. Thank you.
    Secretary Martinez. Thank you.
    [Recess.]
    Chairman Green. If everyone will take their seats, we will 
get back started again given the sensitivity to the Secretary's 
schedule.
    At this time I would recognize Ms. Stephanie Jones for 
questions she may have.
    Mrs. Jones. Thank you, Mr. Chairman.
    Chairman Green. Good afternoon.
    Mrs. Jones. Mr. Secretary, how are you?
    Secretary Martinez. Good, thank you.
    Mrs. Jones. Good. You know what? This is a grand 
opportunity. I get to play Ranking Member on a subcommittee. So 
I'm really having a good time sitting here in Barney Frank's 
seat. Ignore his name.
    Secretary Martinez. I won't call you Mr. Frank.
    Mrs. Jones. Thank you.
    [Laughter.]
    Mrs. Jones. I want to pick up on some of the questioning 
that has already been asked of you. In my State, the great 
State of Ohio, with regard to the OTAG programs, I've heard 
from many, many organizations and I promised them I would go on 
record with regard to their complaints, though I will accept 
your representation that they will be paid by February 27th or 
March 1st. I'm going to send them letters today, in fact, so 
they'll be real happy.
    But the Cleveland Tenants Organization was a recipient and 
their money was used to send local tenants to training 
opportunities. They have approximately $20,000 coming back to 
their organization.
    The Volunteers of American in Cincinnati was the recipient 
of $70,000 for a pre-development grant for acquisition and 
preservation of the Parkway Towers, a 100-unit elderly and 
disabled building in Columbus. Mount Vernon Plaza, they were 
using their dollars and they represent that they're out 
$20,000.
    Then there's an organization called COHIO, as the OTAG 
recipient for the State, they've been forced to lay off their 
part-time staffers, suspend their contract with the Cleveland 
Tenant's Organization, and delay filing three Vista positions 
in Dayton, Columbus, and Cincinnati. And they have not been 
reimbursed approximately $70,000. So it's really coming down to 
the rubber meets the road and I would appreciate you giving 
immediate attention to those particular programs.
    Secretary Martinez. Ms. Jones, you're absolutely right and 
I understand the depth of the problem. We, as I stated earlier, 
are in the process of getting payments out and we hope this is 
something that will never be repeated.
    Mrs. Jones. Because we only have 5 minutes, I have to rush 
through all my questioning. Let me ask you, what do you 
anticipate being the composition of this interagency council on 
the homeless and who will actually have, if we want to call and 
say, OK, you're responsible for this, who is that person?
    Secretary Martinez. There will be an executive director 
hired who begins the job on the first day of March or right 
around the first of March. There is statutory language that 
created the council and the members are prescribed by that, but 
it is the secretaries of HUD, VA, HHS, Labor--that's the 
composition of it and there will be----
    Mrs. Jones. Well, that poor executive director has many 
bosses, huh?
    Secretary Martinez. Well, his ultimate boss is really the 
President. It's actually out of the White House, but that's the 
composition of it and that's how it will work.
    Mrs. Jones. Well, they've figured that out already. I'm 
kidding. Go ahead.
    Secretary Martinez. So that's who you would address. And 
the person will be housed at HUD. So you can direct your 
inquiries to HUD.
    Mrs. Jones. Let me also go back to an issue that was raised 
with regard to, we're working with ownership wealth which is a 
program that the Congressional Black Caucus Housing Foundation 
is working on, but I want to voice my concern as well with 
regard to the whole issue of affordable rental housing. Can you 
tell me--and I lost the question that I really want to ask, 
Rodney, help me out real quick. With regard to the allocation 
of costs--tell me where real quick. That's what we get when we 
get a break. OK.
    In spite of the recent loss of the portion of affordable 
housing stock and the demonstrated need for more affordable 
housing, don't you think that you could use additional funding 
for the production of affordable housing?
    Secretary Martinez. I believe that there are many ways to 
attack the problem. One of them would be to just provide 
additional funding through the Government. I don't think that 
is likely to happen. I think we need to look for a multiplicity 
of ways of doing it. One of the ways is increasing the 
multifamily loan limits of FHA. Another is the revising of the 
subsidy program at FHA which we've done. Both of which are 
having a very, very positive effect in the production of 
multifamily housing.
    The Millennial Housing Commission, instituted by the 
Congress, has been studying the affordability problem for a 
year-and-a-half now and their report is going to be out in May, 
and I would look forward to what they have to say. It's been a 
bipartisan group of people.
    Mrs. Jones. OK. I want to raise two more issues with you 
and maybe I won't get a chance to ask them both, but maybe I 
can get a response later, real quick.
    Secretary Martinez. Sure.
    Chairman Green. You won't, but you can get one of them in 
probably.
    Mrs. Jones. OK. Can I just raise two questions? I can get 
an answer back later. OK.
    With regard to converting public housing units to project-
based units, tell me what your position on whether private 
lenders are going to really be acceptable?
    Second question is, it appears to me that in this colonias 
program that you're really just moving rural housing dollars by 
raising the colonias program and cutting rural housing dollars.
    Chairman Green. Is this a question?
    Mrs. Jones. No, but, yes. And I want to get an answer too.
    Secretary Martinez. Well, the quick answer to the first one 
is, in terms of what--I'm sorry, I've got the colonias in my 
head now. I forgot the first question. What did it have to do 
with?
    Mrs. Jones. With regard to Section 8 and private lenders.
    Secretary Martinez. Oh. I do believe the private lenders 
will be interested in that. I think that is a viable market and 
I think that the research that HUD has done indicates that they 
will be interested in making loans to public housing 
authorities.
    The second question is, the colonias are a very much 
neglected part of American life. These are people who live in 
the border States. And I believe that the very small amount of 
directed funding that we're going to apply to them in this 
budget, if it's the will of the Congress to enact it, will be a 
significant help to these people to community centers and other 
intermediary organizations that are working with these people 
to provide infrastructure assistance to help these folks.
    Mrs. Jones. Thank you.
    Chairman Green. Thank you.
    The Chair recognizes Mr. Baker from Louisiana for 5 
minutes.
    Mr. Baker. Thank you, Mr. Chairman.
    First, I appreciate your courtesy in calling this hearing. 
And, Mr. Secretary, I do appreciate your appearance here today 
and want to compliment you on your effort and initiative to 
change the course of direction for the enterprise to provide 
more effective utilization of taxpayer dollars for the benefit 
of those in need of housing.
    I really wanted to raise two issues, both of which are not 
new to you. We have had prior conversations, but on the 
subcommittee record, relative first to HANO, the Housing 
Authority of New Orleans, and my longstanding concerns about 
the disastrous conditions in which many low-income individuals 
find themselves within the city. The clear record of the 
authority being unable to meet the minimal standards for 
conduct in whatever scoring methodologies have been used and my 
interest in seeing the current administration be terminated and 
the creation of a judicial receivership to bring about the most 
independent manner for reconstruction of services within that 
city.
    I understand that after careful review, the Administration 
did determine that an administrative receivership was the most 
appropriate way to proceed given the current body of law. 
However, I was surprised to learn that the city itself didn't 
file suit against the administrative receivership and is now 
demanding the implementation of a judicial receivership. My 
point being that the political difficulties over the many years 
to proceeding with real world improvements for the people who 
are trapped in the walls of that deteriorated housing may 
continue to be so trapped unless there is some immediate remedy 
to this crisis.
    Since 1992, the Congress has appropriated in excess of $800 
million to the Housing Authority of New Orleans and I can 
honestly tell you, having walked the streets and talked to the 
individuals that the conditions for people living there today 
are at least no better, and perhaps worse, than they were 
before the $800 million was provided. I think it's a tragedy, 
speaking from the State. I think the only housing authority in 
the Nation are in the purview of Congressional assistance is 
probably Puerto Rico which might be worse. And I think that 
would be a close call.
    So I want to express my deep interest in assisting you and 
the Administration in whatever steps can be taken to get people 
in safe, decent housing, within the next 12 to 15 months, if 
not sooner.
    There have been kids born, grown up, and died fighting drug 
wars on the steps of this deplorable condition. And it's really 
intolerable that we as the Nation's largest slum landlord 
continue to fail in our ability to bring about safe housing 
conditions.
    Second, and even more parochial of interest than HANO is 
the distribution of HOPE-VI grants across the Nation. 
Approximately 13 of the largest cities get almost half of all 
the funds made available, and not to get all 13 angry with me, 
I would suspect that on careful review we would find that the 
utilization of those dollars within those very large and 
enormous housing projects has not been particularly successful 
for the quality of life for people who reside in them.
    And, in fact, it is the smaller, well-managed housing 
authorities across the country that do provide a measure of 
quality for elderly and handicapped particularly, but for all 
those who need it. And that smaller housing units, diversified 
into communities appears to be the way that gives the most 
benefit to the taxpayer dollar.
    I am going to be very much interested in working with the 
Administration, I hope, in a revision of the HOME VI formula to 
ensure that well-run, well-managed, smaller housing authorities 
get access to the capital they need to provide the services 
that are increasingly obvious across many States of the Nation. 
Those are my two points, Mr. Chairman. I just wanted to put 
them on the record.
    I have deep concerns and I hope we can see some progress on 
both fronts.
    Thank you, Mr. Secretary.
    Secretary Martinez. Thank you, Mr. Baker. And if may just 
quickly respond, I share your concern. HANO, as you know, we've 
talked about it and I think that very, very soon we will get a 
ruling from the court on the wishes of the court on judicial or 
administrative. We're prepared to go either way. We think it 
will work either way. We just had a preference for 
administrative. We thought that we had an agreement from the 
City, but that apparently wasn't the case. The bottom line is, 
the living conditions for those people has got to get better, 
there are no two ways about that. And I appreciate your concern 
on that and look forward to working with you as we go forward 
to make those people's lives better, no question.
    Chairman Green. Thank you.
    Ms. Schakowsky is recognized for 5 minutes.
    Ms. Schakowsky. Thank you, Mr. Secretary. I appreciate your 
being here. I just wanted to tell you that last week I had a 
very good meeting with Mr. Galvon who is the Director in the 
Chicago area and I look forward to working with him on the many 
issues that we face.
    I want to associate myself with our Ranking Member's 
comments and with his opening comments, and particularly the 
question he was asking about the payment to non-profit 
organizations. I also wanted to associate myself with Mr. 
Baker's characterization of us. I had never really thought 
about that, as the largest slumlord. We have that situation in 
Chicago as well.
    And as we try and address the problem of the Chicago 
Housing Authority, get rid of some of those bad buildings, we 
have an enormous lack of affordable rental housing as a 
replacement and would really hope that we can effectively 
address that, mainly, I think by production, as does Mr. Frank.
    A couple of questions that I wanted to ask. I want to be 
sure that I got you right, that I could tell Tenants United for 
Housing which was owed money has--actually will go out of 
business in a couple of months, if they don't get it--has laid 
off the majority of its staff already. So it's not true that 
they're stumbling along, most of them are crawling along, if at 
all, and have actually suffered enormously, because this money 
has not come. If they are scheduled to get it, they are going 
to get it by the beginning of March? I can call them this 
afternoon and tell them that?
    Secretary Martinez. That is correct.
    Ms. Schakowsky. OK. Great.
    I wanted to ask you about transitional housing. Over 100 
Members of Congress are co-sponsors of a bill that I have that 
would allocate $50 million to victims of domestic violence to 
provide transitional housing to them. Last time we actually 
authorized $25 million, none of that money was ever 
appropriated; 75 Members of Congress in early January sent a 
letter to you and to the President, both sides of the aisle, 
bipartisan, asking that we put some of that money--that we put 
$50 million into transitional housing.
    You know, we're fighting terror around the world and we 
have so many people here at home who face terror every day in 
their homes because of domestic violence. It is not a lot to 
ask, I think, to begin, at least, to address the problem to say 
that we put some money into transitional housing, help these 
women and their children get their lives together and move on.
    I want to know if this is or is not a priority for you if 
you can take another look at the budget and see if we can't 
find some room to address these women, preferably with the full 
$50 million which I believe is a drop in the bucket for a 
critical issue facing us.
    Secretary Martinez. Well, we prepared the board that we 
thought was appropriate and I'm afraid that was not part of it. 
I do believe that there are--I know from my own local 
experience--a number of very effective programs at the local 
level that are run and that usually address these kinds of 
problems. I don't know that every problem that society faces 
cries for a Federal solution, necessarily.
    So I guess what I'm saying to you is, no, that was not part 
of what we put into our budget and I'll be happy to discuss it 
further with you and see if there is some way that we can 
provide some assistance or find a way that it would be 
possible. But, you know, what I have learned in my experience 
is that many, many times these are very serious problems, but 
that often local government and not-for-profits work together 
at the local level to provide answers to some of these 
problems.
    Ms. Schakowsky. Women are being turned away every single 
day at shelters, because there just is not enough room for all 
the women who are actually making the move to leave, plus the 
probably millions of others who would like to. I would 
appreciate the opportunity to talk to you. I think this does 
cry out for a Federal solution and I think the least--if we are 
going to worry about terror, then we ought to worry about 
terror. There are terrorists in homes right now terrorizing 
women and their children and we should do something about that. 
I would like to talk to you more about that.
    There are several housing developers in my district who 
have been involved in affordable housing who have told me that 
high exit taxes are the things that prevent them from selling 
their properties to affordable housing developers. And that if 
there were some relief for them from these high exit taxes that 
we might be able to see to prevent the loss of affordable 
units, I'm just wondering if you would support an initiative to 
provide tax relief for developers who sell their buildings to 
developers of affordable housing?
    Secretary Martinez. That's probably an issue emanating from 
the 1986 tax laws, and it is something that I don't believe HUD 
would have the authority to commit to do. I think it's 
something that the Department of the Treasury would probably 
have to address since it is a matter of tax law and not of 
something that HUD would have the authority to do in the way we 
currently are configured.
    Ms. Schakowsky. I realize my time--but, if it would help to 
achieve your goals, maybe we could work together to try and 
move that idea along.
    Secretary Martinez. I would be happy to--absolutely. It 
would be my pleasure to talk to you further and learn more 
about it and maybe we could work together.
    Ms. Schakowsky. Thank you.
    Chairman Green. Mr. Capuano, I understand you're going to 
be shifting up here? Would you bring your nameplate with you?
    Subcommittee Members know, we are following standard 
subcommittee practice and recognizing Members in order of their 
first appearance here. So, Mr. Capuano, it's your turn, 5 
minutes for questions.
    Mr. Capuano. Mr. Secretary, I give you all the credit for 
my recent promotion and I appreciate that.
    Secretary Martinez. Yes, sir.
    Mr. Capuano. Mr. Secretary, I guess I have some questions, 
but I want to make it very clear, though I have some 
disagreements and I still have some serious policy differences, 
I want to commend you on what I think was a budget that was 
much better than I anticipated.
    Oh, you want me to change that? They don't want me to be 
Mrs. Jones anymore. The staff doesn't mind.
    So on some levels I don't like some of the things that are 
here, but on another level I really expected to really not like 
it and I want to commend you for what I expect was probably 
some difficult negotiations within the Administration and thank 
you.
    Secretary Martinez. But may I thank you for not being 
nearly as ugly as you thought I'd be.
    [Laughter.]
    Mr. Capuano. Well, OK.
    I guess the questions I have really--there's a bunch of 
them, but I want to just talk about three of them, the 
empowerment zones, the CDBG earmarks and public housing. The 
empowerment zones, having one in my district and knowing how 
well it works and how well it matches up private funding, I 
actually think it's a pretty good program. I think it could be 
improved and I don't have any problem with doing different 
programs to get the money in the same place.
    But I guess I was a little surprised, very surprised to see 
it zeroed out particularly when the Administration just added 
nine new ones. If the Administration was saying it's a bad 
program, we're going to zero it out and end it, well, OK, we 
would have a difference of opinion. But you can't have it both 
ways. The way I look at it, if you're going to create new ones, 
and then not fund the existing ones, the only thing I can draw 
from that is that you have drawn the conclusion that the 
existing ones are finished. That they have accomplished their 
goals, that it's a good program that we should continue and 
that is just not even close to the case. I guess I'd like some 
explanation as to why that--what appears to me to be an 
internal inconsistency.
    Secretary Martinez. Help me with which empowerment zone is 
in your district and----
    Mr. Capuano. Boston. I don't know.
    Secretary Martinez. Cambridge?
    Mr. Capuano. Boston.
    Secretary Martinez. Cambridge.
    Mr. Capuano. No, Boston.
    Secretary Martinez. OK. Boston. OK.
    Mr. Capuano. It's a round two.
    Secretary Martinez. I couldn't find the exact. A round two, 
OK.
    Boston is a good example of the problem we're facing. 
Boston has been granted, so far, authorized $18,972,866, of 
which they've utilized so far, $1,166,000. They have utilized 6 
percent of what's been appropriated so far.
    Mr. Capuano. Right.
    Secretary Martinez. This is a 10-year program. We are 50 
percent of the way through the program. So our prediction is 
that in the next 5 years at the utilization rate there's 
sufficient funds available which is approximately 80 percent of 
the appropriated funds that they can draw down as they go 
forward.
    And, in addition to that, it has been our experience in 
some of the studies we've seen that the most successful part of 
these programs is not the grants, but is the tax credits. And 
so that's the part of the program that makes them really work 
and we feel like that is the right way to go.
    Mr. Capuano. I don't dispute that last part, but the first 
part, the reason that they hadn't been able to utilize it is 
because this particular round two has been fits and starts. You 
can't make a plan, you can't make partnerships, you can't make 
deals if you're not sure where the funding is going to come 
from.
    And the problem with this round two, as I've seen it, is 
that one year they get funding, the next year they don't, then 
they do, and now they're up for grabs again. How do you make a 
plan? How do you make a development? How does any developer 
want to come in and be a partner to a program that he is not 
even sure is going to be existing next year? That has been the 
problem that we've seen in Boston.
    So, I don't know about others, but I will tell you without 
question that's been our problem. If it were reduced amounts of 
money, which it was.
    Secretary Martinez. They've got $17,800,000 to make----
    Mr. Capuano. Almost all of that came in the last year-and-
a-half and that's been the problem--the inconsistency.
    Secretary Martinez. But it's there.
    Mr. Capuano. I understand that. But without the 
consistency, there's no guarantees that the next round is going 
to come, or the next round is going to come, or the next round 
is going to come. And that's the problem that I have with this 
kind of budgeting.
    I would rather, for planning purposes have a low--if that's 
what it's going to be, we'll fight about the amounts of money, 
but have a definitive amount of money that is there from start 
to finish of the program so that the people doing this can plan 
it and go out and make their deals, can get business people in, 
can talk to bankers, and say, we're going to make our share.
    Since my time is running out, I do want to hit two other 
things. Public housing. I understand the concerns about public 
housing. I don't think anybody is going to debate the general 
concerns that public housing is not been where we want it to 
be. But the answer to that is not to cut back capital funding.
    I understand some of the concerns and some of the concepts 
of changing over to project-based Section 8. I'm not so sure 
I'm totally--I am not close-minded on that at all, but in the 
meantime you cannot just walk away from it. And if we are going 
to get to project-based Section 8, which is fine, we can talk 
about that, we still have to have a plan and you still cannot 
let the existing plant deteriorate until that program gets 
done. And that has been my big fantasy, last year and this 
year, particularly when you add that on top of the drug grant, 
and we heard Mr. Baker talk about what some of his problems 
were and some of his issues--not ``his''--but, his district's.
    [Laughter.]
    Mr. Capuano. I know. I clarified that.
    [Laughter.]
    Secretary Martinez. Let me say that we believe that $120 
million from the Capital Fund, which would be available to 
generate this other private financing, could lead up to $500 
million this first year in refurbishments and renovations. So 
our hope is that not only is it not going to diminish, but it's 
going to increase the amount of money available to fix the 
current stock of public housing.
    You know, that's really the best answer I can give you. I 
think it's something we're trying and want to see how it works. 
I think it's worth pursuing, because frankly for more than my 
lifetime as a Secretary, and more than my lifetime probably 
living, there has been a backlog of public housing, capital 
fund needs. You know, the backlog of $20 billion is like a 
revolving fund. It never seems to be drawn down, it never seems 
to get lower.
    So I think this is an innovative way that we can get 
project-by-project improvements that I hope will improve the 
lives of the people who live in public housing.
    Mr. Capuano. Mr. Secretary, my time is up, but I don't 
disagree with some of the ideas to experiment, but you don't 
experiment by cutting off your arm. You experiment, and if it 
works, then you can change the monies as opposed to cutting off 
before you have the experiment. And my time is up and thank 
you.
    Chairman Green. The Chair recognizes Mr. Clay for 5 
minutes.
    Mr. Clay. Thank you, Mr. Green.
    Mr. Secretary, good to see you again.
    Secretary Martinez. Yes, sir.
    Mr. Clay. In your opening statement you talk about a tax 
credit for developers for single-family, affordable housing. 
Would that require legislation? Help me out here.
    Secretary Martinez. Let me----
    Mr. Clay. Or do you have the authority now to issue the----
    Secretary Martinez. No, no, this would be a program that 
would be under the Department of the Treasury, and it would be 
new legislation that would be required; yes, sir.
    Mr. Clay. It would be new legislation and do you know if 
it's been introduced yet?
    Secretary Martinez. It will be shortly.
    Mr. Clay. It will be shortly. Thank you. I am interested in 
that.
    You also talk about reconfiguring the community development 
block grant program and you want to ensure that the funding 
actually goes to those communities who need it the most, and I 
couldn't agree more with you on that program. Do you have an 
idea of how this will work?
    Secretary Martinez. The idea is that there are a number of 
communities that really under anyone's analysis of them they 
are really not poverty communities. So we are trying to take a 
little bit of their money--50 percent--and try to focus that 
money on communities that need it more. So basically the money 
will be redistributed according to the formula, so there won't 
be any targeting of those funds, but it will give less CDBG 
monies to those communities who frankly, they're more than 200 
percent of median income.
    Mr. Clay. How about in a city such as St. Louis, which has 
some wealthy neighborhoods and other poverty stricken 
neighborhoods; will there be a formula or method of ensuring 
that those neighborhoods who have the severest need actually 
get the funds?
    Secretary Martinez. Unfortunately, this is not reaching 
that far. We are now dealing with communities who on the whole 
are viewed as very wealthy communities. A place like St. Louis, 
that's going to be a local battle and, you know, at the local 
level to decide where the CDBG funds get spent.
    Mr. Clay. I see. OK. Now, about in your budget, you know, 
you acknowledge that there are some five million families with 
the worst case housing needs. Do you believe that your request 
for 34,000 incremental vouchers is adequate to address this 
need?
    Secretary Martinez. It's more than adequate in terms of the 
utilization. We find that the recapture on vouchers is about $2 
billion a year. And therefore, we're not currently seeing all 
of the vouchers utilized. What we are seeking to do as well is 
hoping that we can transfer vouchers from those communities 
that don't find it possible to use them to those that 
desperately need them and have a waiting list.
    Mr. Clay. The last Congress, one of the biggest issues in 
this subcommittee was the concern about Section 8 opt outs. 
Approximately how many Section 8 units have opted out of the 
Section 8 system in the last 2 years? And how many units have 
participated in HUD's mark-to-market preservation programs, 
would you know?
    Secretary Martinez. Well, let me give you one answer and 
offer you a second one that will have to come to you. I don't 
know how many is on your first question, but the mark-to-market 
has been working well and we have been able to preserve an 
awful lot of the Section 8 housing as Section 8 housing. So 
mark-to-market is working, it is having success. It was renewed 
and we look forward to that continuing to be successful. But I 
would have to get back to you on the specifics of the other 
question.
    Mr. Clay. Just one more issue. I don't know if you have 
reviewed the proposed legislation for Ginnie Mae Choice. And if 
you have, would you have an opinion on it?
    Secretary Martinez. I have begun to review it, but I do not 
yet have an opinion on it, sir.
    Mr. Clay. Would you share that with us?
    Secretary Martinez. The Administration has not taken a 
position.
    Mr. Clay. I thank you for that.
    Secretary Martinez. You'll hear.
    Mr. Clay. Thank you very much. Thank you, Mr. Chairman.
    Chairman Green. The Chair recognizes Mr. Sanders for 5 
minutes.
    Mr. Sanders. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary.
    Mr. Secretary, you will allow me to respectfully disagree 
with some of my colleagues. I happen to believe, and I think 
you have acknowledged yourself that this country faces a 
terrible housing crisis.
    In my State it is not only a question of homelessness which 
exists all over America, it is a question nationally, and in 
Vermont, of millions of people who are working at low-wage 
jobs. You can do the arithmetic as well as I can, the minimum 
wage now is $5.15 an hour and perhaps you will tell me how you 
think somebody can afford housing at $5.15 an hour. People 
making seven bucks and hour, eight bucks an hour who are 
paying, 40, 50, 60, and in some cases 70 percent of their very 
limited incomes for housing. This is unconscionable, this is 
wrong.
    And the budget that the Administration brought forth is 
totally, absolutely inadequate. And it speaks to the moral 
question as to how we can give hundreds of billions of dollars 
in tax breaks to the richest 1 percent, folks who do not have a 
housing problem, yet not have adequate funding to make sure 
that working families can keep their kids in safe and decent 
housing.
    My question for you to begin with, I have been working with 
the National Low Income Housing Coalition on a piece of 
legislation called ``The National Affordable Housing Trust 
Fund.'' And this is tripartisan. It has 164 co-sponsors. And I 
know earlier you talked about faith-based initiatives. It has 
many religious organizations, including the Catholic Charities 
are in support of it. This is serious about dealing with the 
housing crisis.
    This would build over a million units of affordable housing 
in the next 10 years and in the process put a heck of a lot of 
workers to work doing meaningful work and earning decent wages.
    As I mentioned earlier, we have 1,800 organizations 
including business groups in California who understand they 
can't attract workers because the cost of housing is so 
expensive. We have church groups, we have unions, we have low-
income organizations who say that the time is now to be serious 
about addressing the national housing crisis.
    I just have a couple of questions. Number one, would you be 
interested in speaking with me and some of the groups who are 
sponsoring this legislation so that we can explain to you what 
this legislation would do? Can we meet with you to do that?
    Secretary Martinez. Absolutely. Would be delighted.
    Mr. Sanders. I appreciate that very much.
    Secretary Martinez. I look forward to hearing it.
    Mr. Sanders. My second question I will get in touch with 
you to see if we can work out a time.
    Secretary Martinez. Sure.
    Mr. Sanders. The second issue is, do you believe, in fact, 
do you agree with me that this country is facing a serious 
national housing crisis?
    Secretary Martinez. I believe that the problem you cite 
about the inability of some people who work at low-wage jobs to 
find affordable rental housing is a serious problem.
    Mr. Sanders. No, I'm not talking about some people. I'm 
talking about millions of people.
    Secretary Martinez. A definable number of people that we 
call----
    Mr. Sanders. Not a definable number of people.
    Secretary Martinez. Well----
    Mr. Sanders. In other words, I don't want you to pass this 
off as, well, it's a problem that the guy across the street 
has. I am suggesting that this is a national crisis affecting 
millions of people. Do you agree with me?
    Secretary Martinez. It is a national problem affecting 
millions of people.
    Mr. Sanders. OK. I would use the word ``crisis'' I gather 
you do not.
    Secretary Martinez. I do not use the word ``crisis''; but I 
think it is a serious problem.
    Mr. Sanders. OK.
    Secretary Martinez. And it is one that merits addressing 
and discussing seriously as to how we might approach it.
    Mr. Sanders. Can you tell us with a straight face--and I 
don't blame you for preparing the budget, I know that the 
President has lots of needs out there and so forth, but can you 
tell us with a straight face that you think that this budget 
addresses the seriousness of the housing crisis that this 
country faces?
    Secretary Martinez. Congressman Sanders, I think that this 
is a budget that's serious and responsible. I think it's a 
budget that addresses an awful lot of the problems that our 
country faces. We could be just as passionate.
    Mr. Sanders. Housing.
    Secretary Martinez. Well, it is obviously about housing 
which is what the budget addresses. I think at a time of a 
national recession, I think at a time that we are at war, and I 
think at a time when this----
    Mr. Sanders. We have given hundreds of billions of dollars 
in tax breaks. Do you want to add that to your statement?
    Secretary Martinez. What I prefer to say to you is, that I 
look forward to working with you to find what we might disagree 
on the solutions, but at least to discuss what solutions we 
might find to what we both have agreed is a problem.
    The bottom line is that your solution to it and mine might 
be different. The depth of your concern, I think, speaks to 
your commitment to finding a solution and I welcome the 
opportunity to work with you toward that.
    We may have different alternatives that we consider as 
positives in terms of what outcomes we come to. The Millennial 
Housing Commission I know has been addressing this very issue. 
And I look forward to hearing what they have to say. They've 
spent 18 months studying the problem and some of the people 
that you've mentioned I know have been represented at this 
Millennial Housing Commission. So I look forward to hearing 
what proposals they might make and I look forward to meeting 
with the groups that you've identified and hearing what 
proposals they might make.
    Mr. Sanders. I appreciate that, because I've been involved 
in politics for a few years. I have never seen 1,800 different 
organizations, business groups, labor unions, everybody in 
between speaking about the need to address this crisis coming 
together around a piece of legislation. So, Mr. Secretary, I'll 
give you a ring. Let's see if we can get together.
    Secretary Martinez. Absolutely.
    Mr. Sanders. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Green. The Chair recognizes Mr. Israel for 5 
minutes and thanks him for his patience.
    Mr. Israel. Thank you, Mr. Chairman. It's my pleasure. And 
it's a privilege to be here with you, Mr. Secretary.
    In the interest of time I'll be brief. I have a bunch of 
questions that I will submit in writing.
    First, Mr. Secretary, I'm from Long Island which is a high 
cost of living area. And I can't tell you how many veterans 
come to my office who are homeless, in search of housing, just 
barely hanging on. I'm wondering whether you would be willing 
to have a dialogue with me and try and develop some ways of 
providing some additional Section 8 help for those veterans on 
a priority basis within the constraints of the law? Is your 
department willing to work with us and attempt to help veterans 
who are just barely hanging onto their homes or don't have 
homes?
    Secretary Martinez. Yes, sir. And I want to tell you that 
we have been doing some things in working with the veterans, 
the Department of Veterans Affairs and the Supportive Housing 
Program for veterans is something that we have been addressing 
and I agree with you that this is a problem that needs also to 
be addressed and I'll be happy to meet with you.
    Mr. Israel. Great. I would appreciate that and we'll be in 
touch.
    Second, just to pick up on something that my colleague from 
Missouri mentioned with respect to CDBG funding that had been 
removed from counties at 200 percent of median income. His 
point was St. Louis has wealthy areas and pockets of poverty. 
And certainly so does Long Island. We have extremely wealthy 
areas, but in my district we have some very troubled 
underserved communities.
    In Long Island we have an organization called the Long 
Island Housing Partnership and many of your predecessors and 
Democratic Administrations and Republican Administrations have 
been kind enough to visit Long Island. And I can assure you 
when they got on the plane to head to Long Island, they 
couldn't understand why they were going to this rich area. And 
as soon as they landed and toured some of the projects that the 
department worked on with the Long Island Housing Partnership 
they understood that this is an area that has poverty, has 
homelessness, and needs help.
    You had mentioned to Congressman Clay that haven't quite 
reached that far with respect to fine tuning the formulas in 
dealing with wealthy areas that have pockets of poverty. Is 
there a way that we can discuss fine tuning those numbers?
    Secretary Martinez. Well, you know, this is an apropos 
time--opportune time--we are in the midst of a Census year, so 
the report from the Census comes out, the CDBG formula has been 
discussed in the Congress before and I think it ought to be 
discussed again and how it might be tweaked in order to make it 
applicable to problems like you mentioned.
    Mr. Israel. So you're open to that dialogue as well?
    Secretary Martinez. Absolutely
    Mr. Israel. Terrific. Final question, Mr. Secretary. I've 
been told by members of the Native American community that 
black mold has become a dire health problem to them and other 
throughout the countries in HUD projects. It's been linked to 
skin rashes, fever, inflammation of the respiratory tract, 
neurological problems, depression; can you tell us what HUD is 
doing with respect to some of the studies that have been issued 
on black mold and what your plans are in order to deal with 
that?
    Secretary Martinez. We've had a very aggressive program in 
trying to deal with the health risks associated with housing 
and the lead-based paint initiative also includes asthma and 
mold as part of what we are addressing. So we are looking at 
the problem. There is funding available to deal with it and we 
are, in this budget, I can't tell you off the top of my head 
now the increase, but there is an increased amount of money. I 
believe it's going to be $126 million altogether with a very 
significant increase for that area of health-related issues.
    Mr. Israel. Would you be kind enough to contact my office 
and give us an approximate timeframe for the studies that are 
dealing specifically with black mold?
    Secretary Martinez. There are no ongoing studies that I'm 
aware of, but we are dealing with how to get housing that is 
afflicted with the problem, how to fix the problem so that 
people don't have to live in those conditions.
    Mr. Israel. OK. If possible I would like to follow-up with 
you at another time.
    Secretary Martinez. Our office, you know, we have a very 
active program in this area working in partnership with EPA in 
some instances and we would be happy to bring you up to date.
    Mr. Israel. Just so I understand, no study but funding and 
programs to remediate?
    Secretary Martinez. Right.
    Mr. Israel. OK.
    Secretary Martinez. And there may be some study associated 
with some of this, but it's an ongoing program of remediation.
    Mr. Israel. Great. We'll follow up with you and I thank the 
Chairman for my time. I yield back.
    Chairman Green. Thank you, Mr. Israel.
    The Chair notes that some Members may have additional 
questions for this panel which they may wish to submit in 
writing. Without objection the hearing record will remain open 
for 30 days for Members to submit written questions to the 
witness and to place the responses in the record.
    The hearing is adjourned.
    Thank you, Mr. Secretary.
    [Whereupon, the hearing was adjourned.]
                            A P P E N D I X


 
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